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AKIN GUMP STRAUSS HAUER & FELD LLP One Bryant Park New York, New York 10036 Tel: 212.872.1000 Facsimile: 212.872.1002 / akingump.com
Nile Leatham (NV Bar No. 002838) KOLESAR & LEATHAM Wells Fargo Financial Center 3320 W. Sahara Ave. Las Vegas, NV 89102 Telephone: 702.979.2357 Facsimile: 702.362.9472 E-Mail: nleatham@klnevada.com Philip C. Dublin (NY Bar No. 2959344) Abid Qureshi (NY Bar No. 2684637) AKIN GUMP STRAUSS HAUER & FELD LLP One Bryant Park New York, NY 10036 Telephone: 212.872.1000 Facsimile: 212.872.1002 E-Mail: pdublin@akingump.com aqureshi@akingump.com Counsel for the First Lien Steering Committee
Electronically Filed November 12, 2009
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UNITED STATES BANKRUPTCY COURT DISTRICT OF NEVADA In re: THE RHODES COMPANIES, LLC, aka Rhodes Homes, et al.,1 Debtors. Affects: All Debtors
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Case No.: BK-S-09-14814-LBR (Jointly Administered) Chapter 11
Hearing Date: November 16, 2009 Hearing Time: 1:30 p.m.
The Debtors in these cases, along with their case numbers are: Heritage Land Company, LLC (Case No. 09-14778); The Rhodes Companies, LLC (Case No. 09-14814); Tribes Holdings, LLC (Case No. 09-14817); Apache Framing, LLC (Case No. 09-14818); Geronimo Plumbing LLC (Case No. 09-14820); Gung-Ho Concrete LLC (Case No. 09-14822); Bravo, Inc. (Case No. 09-14825); Elkhorn Partners, A Nevada Limited Partnership (Case No. 09-14828); Six Feathers Holdings, LLC (Case No. 09-14833); Elkhorn Investments, Inc. (Case No. 09-14837); Jarupa, LLC (Case No. 09-14839); Rhodes Realty, Inc. (Case No. 09-14841); C & J Holdings, Inc. (Case No. 09-14843); Rhodes Ranch General Partnership (Case No. 09-14844); Rhodes Design and Development Corporation (Case No. 09-14846); Parcel 20, LLC (Case No. 09-14848); Tuscany Acquisitions IV, LLC (Case No. 09-14849); Tuscany Acquisitions III, LLC (Case No. 09-14850); Tuscany Acquisitions II, LLC (Case No. 09-14852); Tuscany Acquisitions, LLC (Case No. 09-14853); Rhodes Ranch Golf Country Club, LLC (Case No. 09-14854); Overflow, LP (Case No. 09-14856); Wallboard, LP (Case No. 09-14858); Jackknife, LP (Case No. 09-14860); Batcave, LP (Case No. 09-14861); Chalkline, LP (Case No. 09-14862); Glynda, LP (Case No. 09-14865); Tick, LP (Case No. 09-14866); Rhodes Arizona Properties, LLC (Case No. 09-14868); Rhodes Homes Arizona, L.L.C. (Case No. 09-14882); Tuscany Golf Country Club, LLC (Case No. 09-14884); and Pinnacle Grading, LLC (Case No. 09-14887).
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Affects the following Debtor(s)
Courtroom 1 SECOND AMENDED DISCLOSURE STATEMENT FOR THE SECOND AMENDED PLAN OF REORGANIZATION PURSUANT TO CHAPTER 11 OF THE UNITED STATES BANKRUPTCY CODE FOR THE RHODES COMPANIES, LLC, ET AL.
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THIS DISCLOSURE STATEMENT (THE DISCLOSURE STATEMENT) CONTAINS SUMMARIES OF CERTAIN PROVISIONS OF THE SECOND AMENDED PLAN OF REORGANIZATION PURSUANT TO CHAPTER 11 OF THE UNITED STATES BANKRUPTCY CODE FOR THE RHODES COMPANIES, LLC, ET AL. (THE PLAN), CERTAIN STATUTORY PROVISIONS, CERTAIN DOCUMENTS RELATED TO THE PLAN, CERTAIN EVENTS IN THE DEBTORS CHAPTER 11 CASES AND CERTAIN FINANCIAL INFORMATION. ALTHOUGH THE FIRST LIEN STEERING COMMITTEE BELIEVES THAT THESE SUMMARIES ARE FAIR AND ACCURATE, THESE SUMMARIES ARE QUALIFIED IN THEIR ENTIRETY TO THE EXTENT THAT THEY DO NOT SET FORTH THE ENTIRE TEXT OF SUCH DOCUMENTS OR STATUTORY PROVISIONS. THE INFORMATION INCLUDED HEREIN IS FOR PURPOSES OF SOLICITING ACCEPTANCE OF THE PLAN AND SHOULD NOT BE RELIED UPON FOR ANY PURPOSE OTHER THAN TO DETERMINE WHETHER AND HOW TO VOTE ON THE PLAN. THE SUMMARIES OF THE FINANCIAL INFORMATION AND THE DOCUMENTS THAT ARE ATTACHED HERETO OR INCORPORATED BY REFERENCE HEREIN ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO SUCH INFORMATION AND DOCUMENTS. IN THE EVENT OF ANY INCONSISTENCY OR DISCREPANCY BETWEEN A DESCRIPTION IN THE DISCLOSURE STATEMENT AND THE TERMS AND PROVISIONS OF THE PLAN OR THE OTHER DOCUMENTS AND FINANCIAL INFORMATION INCORPORATED HEREIN BY REFERENCE, THE PLAN OR THE OTHER DOCUMENTS AND FINANCIAL INFORMATION, AS THE CASE MAY BE, SHALL GOVERN FOR ALL PURPOSES. FACTUAL INFORMATION CONTAINED IN THE DISCLOSURE STATEMENT HAS BEEN PROVIDED BY THE DEBTORS MANAGEMENT EXCEPT WHERE OTHERWISE SPECIFICALLY NOTED. THE FIRST LIEN STEERING COMMITTEE DOES NOT WARRANT OR REPRESENT THAT THE INFORMATION CONTAINED HEREIN, INCLUDING THE FINANCIAL INFORMATION, IS WITHOUT ANY MATERIAL INACCURACY OR OMISSION. THE STATEMENTS AND FINANCIAL INFORMATION CONTAINED HEREIN ARE MADE AS OF THE DATE HEREOF UNLESS OTHERWISE SPECIFIED. HOLDERS OF CLAIMS AND INTERESTS REVIEWING THE DISCLOSURE STATEMENT SHOULD NOT INFER THAT THERE HAVE BEEN NO CHANGES IN THE FACTS SET FORTH HEREIN BETWEEN THE DATE HEREOF AND THE TIME OF SUCH REVIEW. EACH HOLDER OF A CLAIM ENTITLED TO VOTE ON THE
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PLAN SHOULD CAREFULLY REVIEW THE PLAN, THE DISCLOSURE STATEMENT, AND EXHIBITS TO THE PLAN AND DISCLOSURE STATEMENT IN THEIR ENTIRETY BEFORE CASTING A BALLOT. THE DISCLOSURE STATEMENT DOES NOT CONSTITUTE LEGAL, BUSINESS, FINANCIAL OR TAX ADVICE. ANY PERSONS DESIRING ANY SUCH ADVICE OR OTHER ADVICE SHOULD CONSULT WITH THEIR OWN ADVISORS. NO PARTY IS AUTHORIZED TO GIVE ANY INFORMATION WITH RESPECT TO THE PLAN OTHER THAN THAT WHICH IS CONTAINED IN THE DISCLOSURE STATEMENT. NO REPRESENTATIONS CONCERNING THE DEBTORS OR THE VALUE OF THEIR PROPERTY HAVE BEEN AUTHORIZED BY THE FIRST LIEN STEERING COMMITTEE OTHER THAN AS SET FORTH IN THE DISCLOSURE STATEMENT. ANY INFORMATION, REPRESENTATIONS OR INDUCEMENTS MADE TO OBTAIN AN ACCEPTANCE OF THE PLAN THAT ARE OTHER THAN, OR INCONSISTENT WITH, THE INFORMATION CONTAINED HEREIN AND IN THE PLAN SHOULD NOT BE RELIED UPON BY ANY HOLDER OF A CLAIM OR INTEREST. WITH RESPECT TO CONTESTED MATTERS, ADVERSARY PROCEEDINGS AND OTHER PENDING, THREATENED OR POTENTIAL LITIGATION OR ACTIONS, THE DISCLOSURE STATEMENT DOES NOT CONSTITUTE AND MAY NOT BE CONSTRUED AS AN ADMISSION OF FACT, LIABILITY, STIPULATION OR WAIVER, BUT RATHER AS A STATEMENT MADE IN SETTLEMENT NEGOTIATIONS AND PROTECTED BY RULE 408 OF THE FEDERAL RULES OF EVIDENCE. THE DISCLOSURE STATEMENT HAS NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE SEC), NOR HAS THE SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE STATEMENTS CONTAINED HEREIN. ALTHOUGH THE FIRST LIEN STEERING COMMITTEE HAS USED ITS BEST EFFORTS TO ENSURE THE ACCURACY OF THE FINANCIAL INFORMATION PROVIDED IN THE DISCLOSURE STATEMENT, THE FINANCIAL INFORMATION CONTAINED IN, OR INCORPORATED BY REFERENCE INTO, THE DISCLOSURE STATEMENT HAS NOT BEEN AUDITED. THE PROJECTIONS CONTAINED IN EXHIBITS D AND E TO THE DISCLOSURE STATEMENT AND REFERENCED IN ARTICLE V OF THE DISCLOSURE STATEMENT HAVE BEEN PREPARED BY THE FIRST LIEN STEERING COMMITTEE WITH THE ASSISTANCE OF ITS ADVISORS. THESE PROJECTIONS, WHILE PRESENTED WITH NUMERICAL SPECIFICITY, ARE NECESSARILY BASED ON A VARIETY OF ESTIMATES AND ASSUMPTIONS THAT, THOUGH CONSIDERED REASONABLE BY THE FIRST LIEN STEERING COMMITTEE, MAY NOT BE REALIZED AND ARE INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC, COMPETITIVE, INDUSTRY, REGULATORY,
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MARKET AND FINANCIAL UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND THE FIRST LIEN STEERING COMMITTEES CONTROL. THE FIRST LIEN STEERING COMMITTEE CAUTIONS THAT NO REPRESENTATIONS CAN BE MADE AS TO THE ACCURACY OF THESE PROJECTIONS OR TO THE ABILITY TO ACHIEVE THE PROJECTED RESULTS. SOME ASSUMPTIONS INEVITABLY WILL NOT MATERIALIZE. FURTHER, EVENTS AND CIRCUMSTANCES OCCURRING SUBSEQUENT TO THE DATE ON WHICH THESE PROJECTIONS WERE PREPARED MAY BE DIFFERENT FROM THOSE ASSUMED OR, ALTERNATIVELY, MAY HAVE BEEN UNANTICIPATED, AND THUS THE OCCURRENCE OF THESE EVENTS MAY AFFECT FINANCIAL RESULTS IN A MATERIALLY ADVERSE OR MATERIALLY BENEFICIAL MANNER. THE PROJECTIONS, THEREFORE, MAY NOT BE RELIED UPON AS A GUARANTY OR OTHER ASSURANCE OF THE ACTUAL RESULTS THAT WILL OCCUR. SEE ARTICLE VI OF THE DISCLOSURE STATEMENT, ENTITLED CERTAIN FACTORS TO BE CONSIDERED PRIOR TO VOTING, FOR A DISCUSSION OF CERTAIN CONSIDERATIONS IN CONNECTION WITH A DECISION BY A HOLDER OF AN IMPAIRED CLAIM TO ACCEPT OR REJECT THE PLAN. THE DISCLOSURE STATEMENT HAS BEEN DETERMINED BY THE BANKRUPTCY COURT TO CONTAIN ADEQUATE INFORMATION AS REQUIRED BY SECTION 1125 OF TITLE 11 OF THE UNITED STATES CODE, 11 U.S.C. 101 1532 (THE BANKRUPTCY CODE), WHICH DETERMINATION DOES NOT CONSTITUTE A RECOMMENDATION OR APPROVAL OF THE PLAN. UNLESS OTHERWISE STATED, ANY CAPITALIZED TERM USED HEREIN SHALL HAVE THE MEANING ASSIGNED TO SUCH TERM HEREIN OR, IF NO MEANING IS SO ASSIGNED, THE MEANING ASSIGNED TO SUCH TERM IN THE PLAN. THE BANKRUPTCY COURT HAS SCHEDULED THE CONFIRMATION HEARING TO COMMENCE ON [JANUARY 5], 2010 AT [9:00 a.m.] PREVAILING PACIFIC TIME BEFORE THE HONORABLE LINDA B. RIEGLE, UNITED STATES BANKRUPTCY JUDGE, IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF NEVADA, IN COURTROOM 1 IN THE FOLEY FEDERAL BUILDING LOCATED AT 300 LAS VEGAS BOULEVARD SOUTH, LAS VEGAS, NEVADA 89101. THE CONFIRMATION HEARING MAY BE ADJOURNED FROM TIME TO TIME BY THE BANKRUPTCY COURT WITHOUT FURTHER NOTICE OTHER THAN AN ANNOUNCEMENT OF THE ADJOURNED DATE MADE AT THE CONFIRMATION HEARING OR ANY ADJOURNMENT THEREOF. OBJECTIONS TO CONFIRMATION OF THE PLAN MUST BE FILED AND SERVED ON OR BEFORE [DECEMBER 18], 2009, IN ACCORDANCE WITH THE SOLICITATION NOTICE THAT THE FIRST LIEN STEERING COMMITTEE FILED AND SERVED ON HOLDERS OF CLAIMS, HOLDERS OF INTERESTS AND OTHER PARTIES IN INTEREST. IF OBJECTIONS TO CONFIRMATION ARE
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NOT TIMELY SERVED AND FILED IN COMPLIANCE WITH THE SOLICITATION NOTICE, THEY MAY NOT BE CONSIDERED BY THE BANKRUPTCY COURT.
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TABLE OF CONTENTS Article I. SUMMARY 1 A. Plan Overview..........................................................................................................1 B. Settlement Overview................................................................................................2 C. Potential Claims Against the Rhodes Entities..........................................................4 D. The Debtors Principal Assets and Indebtedness .....................................................5 E. Treatment of Claims and Interests ...........................................................................5 F. Claims Estimates......................................................................................................9 G. Questions and Answers Regarding this Disclosure Statement and the Plan..........10 H. Voting and Confirmation........................................................................................18 I. Consummation of the Plan.....................................................................................19 Article II. BACKGROUND...........................................................................................................20 A. Description of the Debtors Business Operations ..................................................20 B. Pending Significant Litigation ...............................................................................24 Article III. THE CHAPTER 11 CASES .......................................................................................25 A. Events Leading to the Chapter 11 Cases................................................................25 B. Initiation of the Chapter 11 Cases..........................................................................26 C. Stabilization of Operations ....................................................................................26 D. Appointment of the Creditors Committee ............................................................28 E. Claims Bar Dates ...................................................................................................28 Article IV. SUMMARY OF THE PLAN .......................................................................................29 A. Overview of a Chapter 11 Plan ..............................................................................29 B. Administrative and Priority Claims .......................................................................30 C. Classification and Treatment of Claims.................................................................31 D. Bankruptcy Code Section 1111(b) Election...........................................................34 E. Cramdown..............................................................................................................35 F. Means for Implementation of the Plan...................................................................35 G. Treatment of Executory Contracts and Unexpired Leases.....................................50 H. Procedures for Resolving Disputed Claims ...........................................................54 I. Provisions Governing Distributions.......................................................................56 J. Effect of Confirmation of the Plan.........................................................................66 K. Allowance and Payment of Certain Administrative Claims ..................................74 L. Conditions Precedent to Confirmation and Consummation of the Plan ................75 M. Modification, Revocation, Or Withdrawal of the Plan ..........................................78 N. Retention of Jurisdiction ........................................................................................80 Article V. STATUTORY REQUIREMENTS FOR CONFIRMATION OF THE PLAN ..............80 A. The Confirmation Hearing.....................................................................................80 B. Confirmation Standards .........................................................................................80 C. Financial Feasibility...............................................................................................82 D. Best Interests of Creditors Test ..............................................................................82 E. Acceptance by Impaired Classes ...........................................................................84 F. Confirmation Without Acceptance by All Impaired Classes .................................85
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Article VI. CERTAIN FACTORS TO BE CONSIDERED PRIOR TO VOTING ........................86 A. Certain Bankruptcy Considerations .......................................................................87 B. Other Considerations .............................................................................................89 C. Plan Risk Factors ...................................................................................................90 Article VII. CERTAIN FEDERAL INCOME TAX CONSEQUENCES ......................................93 A. Certain U.S. Federal Income Tax Consequences to Reorganized Debtors ............94 B. Certain Federal Income Tax Consequences to Holders of Claims.........................97 C. Other Tax Matters ................................................................................................106 Article VIII. RECOMMENDATION...........................................................................................107 Article IX. CONCLUSION .........................................................................................................108
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Article I. SUMMARY
The following summary is qualified in its entirety by the more detailed information 3 contained in the Plan and elsewhere in the Disclosure Statement. On either March 31, 2009 or April, 1, 2009 (collectively, the Petition Date), The Rhodes Companies, LLC and certain of its affiliates and subsidiaries (collectively, the 5 Debtors) each filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code 6 in the Bankruptcy Court. Prior to and after the Petition Date, the Debtors operated one of the largest independent homebuilding businesses in Las Vegas and Nevada. 7 The Disclosure Statement is being furnished by the First Lien Steering Committee 8 pursuant to section 1125 of the Bankruptcy Code in connection with: (a) the solicitation of votes for the acceptance or rejection of the Plan and (b) the confirmation hearing (the 9 Confirmation Hearing), which is scheduled for [January 5], 2010 at [9:00 a.m.] Pacific Time (the Confirmation Hearing Date). A copy of the Plan is annexed hereto as Exhibit A and 10 incorporated by reference herein. 11 The Disclosure Statement describes certain aspects of the Plan, including the treatment 12 of Claims and Interests, and describes certain aspects of the Debtors operations, projections 13 and other related matters. 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 A. Plan Overview 4
The Plan is the product of extensive negotiations and a settlement reached among the First Lien Steering Committee, the Debtors, James Rhodes and his non-Debtor affiliates (collectively, with James Rhodes, the Rhodes Entities), the Creditors Committee and the Second Lien Agent. The settlement was reached following a three day mediation session held on August 17, 24 and 25, 2009 before the Honorable Richard Neiter, United States Bankruptcy Court, Central District of California (the Mediation Settlement). The First Lien Agent also attended the mediation session but is not a party to the Mediation Settlement. As a result of this Mediation Settlement, the Plan contemplates that, upon the Debtors emergence from chapter 11, the Debtors will continue to operate as a going concern homebuilder primarily in the Las Vegas market. The owners of the Debtors after they emerge from chapter 11 will be the First Lien Lenders. Holders of general unsecured claims (including the First Lien Lenders and Second Lien Lenders on account of their deficiency claims) will receive interests in a litigation trust unless their claims are listed on Exhibit H to the Disclosure Statement, in which case their claims may be purchased for up to 100 cents on the dollar for a full cash recovery to the extent those claims are not disputed and become Allowed. The litigation trust will analyze and, if appropriate, pursue claims and causes of action belonging to the Debtors that were not part of the collateral securing the Debtors prepetition secured debt, which claims and causes of action shall be transferred to the litigation trust on the effective date of the Plan. The First Lien Steering Committee believes that these claims and causes of action include claims against the Rhodes Entities that are not expressly released under the Plan.
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The Plan contemplates and is predicated upon the substantive consolidation of the Debtors chapter 11 cases into a single proceeding solely for the purposes of the chapter 11 cases and all actions with respect to confirmation, consummation and implementation of the Plan as set forth in more detail in Article IV below. The First Lien Steering Committee believes that the Plan provides the basis for the maximum recoveries possible for all constituents and that if the Plan is not confirmed, unsecured creditors will receive little to no recovery on account of their claims. B. Settlement Overview
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The primary terms of the Mediation Settlement include the following (the terms of the settlement are set forth in greater detail on the Mediation Term Sheet attached as Exhibit 1 to the Plan): Upon the Debtors emergence from chapter 11, the Debtors, as reorganized (the Reorganized Debtors), will be owned by the First Lien Lenders. In addition to receiving the equity of the Reorganized Debtors, the First Lien Lenders will receive their pro rata share of (i) $50 million in new secured notes, (ii) $1.5 million in cash from the proceeds of their collateral and (iii) interests in the litigation trust on account of their unsecured deficiency claims. The Debtors Second Lien Lenders will receive their pro rata share of the following on account of their claims if they vote in favor of the Plan: (i) 50% of the net proceeds of the Stanley Engineering Litigation and (ii) litigation trust interests on account of their unsecured deficiency claims. In addition, if the Second Lien Lenders vote in favor of the Plan, the Reorganized Debtors will pay the reasonable fees and expenses of counsel to the agent for the Second Lien Lenders in an amount not to exceed $500,000. If the Second Lien Lenders do not vote in favor of the Plan, they will receive only litigation trust interests on account of their unsecured deficiency claims. The First Lien Lenders will use the $1.5 million cash payment referenced above to purchase the claims of the unsecured creditors listed on Exhibit H to this Disclosure Statement to the extent that such claims are not disputed and are Allowed, which will result in such creditors receiving a cash payment of 100 cents on account of their allowed claims against the Debtors. If the Plan is not confirmed, the claim purchases will not happen and unsecured creditors listed on Exhibit H to this Disclosure Statement will likely receive little to no recovery on account of their claims. Unsecured creditors whose claims are not purchased by the First Lien Lenders will receive interests in the litigation trust on account of their allowed claims. The terms of the litigation trust are set forth in the draft Litigation Trust Agreement which is attached as Exhibit I to this Disclosure Statement. The number of interests in the litigation trust to be received by unsecured creditors, First Lien Lenders and Second Lien Lenders will be determined by the amount of each applicable creditors unsecured claim as compared to the total amount of unsecured claims.
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The litigation trust will be funded initially with $100,000 by the Reorganized Debtors. The litigation trust will analyze and, if deemed appropriate by the Litigation Trustee, pursue claims and causes of action that have been transferred to the litigation trust under the Plan. These potential claims and causes of action include those claims and causes of action belonging to the Debtors against any third party not specifically released under the Plan and that are not part of the First Lien Lenders collateral. For a list of categories of claims and potential causes of action, see Article I.C. of this Disclosure Statement regarding potential claims and causes of action against the Rhodes Entities and Exhibit G to the Disclosure Statement for a list of potential claims and causes of action against third parties, including service providers and vendors. If a claim is purchased by the First Lien Lenders pursuant to the Plan, however, the Debtors will waive any claims for preference recovery under section 547 of the Bankruptcy Code on account of those claims that are purchased at the request of the Creditors Committee. As stated in more detail below, the recovery on account of these potential claims and causes of action are highly speculative. The First Lien Lenders estimate that recovery by the General Unsecured Claims will be approximately 3.2% under the Plan, but there can be no guarantee that the recovery will be that high. The Rhodes Entities will transfer the Rhodes Ranch Golf Course (through the equity of the non-Debtor Rhodes Entities that own the Rhodes Ranch Golf Course) to the Reorganized Debtors. The most recent appraisal for the Rhodes Ranch Golf Course valued the Golf Course at approximately $7.9 million. The Reorganized Debtors will assume any debt on the Rhodes Ranch Golf Course, up to a maximum amount of $5.9 million. The Reorganized Debtors may, under certain circumstances, require Rhodes to purchase the Rhodes Ranch Golf Course any time between four (4) and eight (8) years from the Effective Date for $5.9 million in cash. The Rhodes Entities will have the right to repurchase the Rhodes Ranch Golf Course for $5.9 million after eight (8) years subject to certain terms and conditions. The Rhodes Entities will pay $3.5 million in cash to the Reorganized Debtors, which will be used to fund distributions under the Plan and provide working capital to the extent of any excess. The Rhodes Entities will cooperate with the Reorganized Debtors in connection with certain matters related to the Reorganized Debtors continued home-building operations including, without limitation, matters pertinent to (i) HOA boards, (ii) contractor licenses, and (iii) the maintenance of performance bonds. The Rhodes Entities will receive a limited release under the Plan. The release will be limited to claims and causes of action arising under chapter 5 of the Bankruptcy Code (i.e., preferential transfers and fraudulent transfers) solely to the extent that the transactions to which such claims and causes of action relate have been expressly disclosed in either the statements of financial affairs filed by the Debtors with the Bankruptcy Court or Schedule B to the settlement term sheet which is attached as Exhibit 1 to the Plan. Any claims or causes of action against the Rhodes Entities that belong to the Debtors estates that are not expressly released under the Plan will be transferred to the litigation trust.
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Any allowed claims that the Rhodes Entities have against the Debtors Estates will be treated as general unsecured claims and will not be subject to subordination. The Rhodes Entities will also be permitted to assert that they have the right to setoff any allowed claims they have against the Debtors Estates against any claims that the Debtors Estates have against the Rhodes Entities. The Rhodes Entities will also receive the Debtors non-core assets located in Arizona solely to the extent set forth on Attachment D to Exhibit 1 to the Plan, which assets are not necessary for the Debtors reorganization plan and are completely landlocked by holdings of the Rhodes Entities. These assets will be transferred free and clear of any third party creditor claims (which third party creditor claims will remain assertable against the Debtors Estates). All of these Arizona assets constitute collateral securing the Debtors obligations to the First Lien Lenders and Second Lien Lenders. The First Lien Steering Committee believes that these assets are worth approximately $1 million. The First Lien Steering Committee and the Rhodes Entities will structure the Plan in a manner that is tax advantageous for the Rhodes Entities; provided, that, such structure does not create any tax liabilities for the Debtors or the First Lien Lenders. Potential Claims Against the Rhodes Entities
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On April 7, 2009, the First Lien Steering Committee moved for the appointment of a chapter 11 trustee (the Trustee Motion). The Trustee Motion was based, in part, on allegations of questionable and unlawful business dealings, and suspicions concerning the propriety of Mr. Rhodes conduct as the Debtors President, as detailed in a report prepared by a nationally recognized firm retained by the First Lien Agent to conduct an investigation into the Debtors business operations (the Rhodes Report). In light of the allegations contained in the Rhodes Report, and as a result of Mr. Rhodes conduct during the prepetition negotiations, the First Lien Steering Committee did not believe that Mr. Rhodes had been acting in accordance with his fiduciary duties. Thus, the First Lien Steering Committee Filed the Trustee Motion. The Rhodes Entities and the Debtors opposed the Trustee Motion and objected to the Rhodes Report as containing unsubstantiated allegations and hearsay. The Debtors provided extensive discovery and a deposition at the request of the First Lien Steering Committee. Prior to the hearing on this matter, the First Lien Steering Committee took the Trustee Motion off calendar in light of the discovery produced and the progress the parties were making on negotiations over the plan of reorganization. The allegations contained in the Trustee and Rhodes Report form the basis of potential claims against the Rhodes Entities. Among the potential claims are the following: Claims for beach of fiduciary duty; Claims for misappropriation of Debtor assets for personal use;
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Claims for usurping corporate opportunity for the benefit of competing interests; Claims for mismanagement of the Debtors operations; Claims for fraudulent transfers (to the extent not expressly released under the Plan); Claims for the diversion of corporate resources for the benefit of competing interests.
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Additional discovery and analysis will be required to be performed by the Litigation Trustee before any determination can be made whether the foregoing claims or any other claims are colorable and should be pursued by the litigation trust against the Rhodes Entities. The litigation trust will undertake a detailed analysis of any potential claims before making a determination on whether to pursue any litigation against the Rhodes Entities. While it is impossible at this time to predict with any certainty whether the foregoing claims or any other claims will be prosecuted and, if they are prosecuted, whether they will be successful, the First Lien Steering Committee believes that prosecution of claims against the Rhodes Entities may yield up to $10 million or more in judgments in favor of the litigation trust. However, such claims could also yield no proceeds if they are unsuccessful, or if the Rhodes Entities approximately $10.6 million in asserted claims are determined to be valid claims and are permitted to be used as offsets against any liabilities that the Rhodes Entities may be determined to have against the Debtors. The Rhodes Entities do not believe that viable claims or causes of action exist against them and they will vigorously defend any litigation based on the allegations contained in the Trustee Motion or otherwise, which allegations the Rhodes Entities assert are baseless and premised on inadmissible hearsay. D. The Debtors Principal Assets and Indebtedness
The principal assets of the Debtors include their homebuilding assets, which include inventory of undeveloped land and developed lots, and constructed homes (sold and unsold). The Debtors principal indebtedness includes: (1) First Lien Lender Secured Claims; (2) Second Lien Lender Secured Claims; (3) Other Secured Claims; (4) Priority Non-Tax Claims; (5) General Unsecured Claims; (6) Rhodes Entities Claims; (7) First Lien Lender Deficiency Claims; (8) Second Lien Lender Deficiency Claims; (9) Insured Claims; (10) Subordinated Claims; and (11) Intercompany Claims. E. Treatment of Claims and Interests
Except for unclassified Administrative Claims and Priority Tax Claims, the Plan divides all Claims against the Debtors into various Classes. The table set forth below summarizes the Classes of Claims and Interests under the Plan, the treatment of Claims and Interests and projected recovery for Holders of Allowed Claims in such Classes and the entitlement of Holders of Claims in such Classes to vote to accept or reject the Plan.
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The allowance, classification and treatment of all Allowed Claims and Interests and the respective distributions and treatments under the Plan take into account and conform to the relative priority and rights of the Claims and Interests in each Class in connection with any contractual, legal and equitable subordination rights relating thereto, whether arising under general principles of equitable subordination, section 510 of the Bankruptcy Code or otherwise. Pursuant to section 510 of the Bankruptcy Code, the Reorganized Debtors reserve the right to reclassify any Allowed Claim or Interest in accordance with any contractual, legal or equitable subordination relating thereto. 1. Summary and Treatment of Allowed Unclassified Claims
ESTIMATED AMOUNT OR VALUE OF CLAIMS (CONSOLIDATED BASIS) $750,000
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CLASS NO. A-1 Priority Tax Claims DESCRIPTION Administrative Claims
TREATMENT FOR ALLOWED CLAIMS Each Allowed Administrative Claim shall be paid in full, in Cash. Allowed Administrative Claims include costs incurred in the operation of the Debtors businesses after the Petition Date, the allowed fees and expenses of Professionals retained by the Debtors and the Creditors Committee and the fees due to the United States Trustee pursuant to 28 U.S.C. 1930. Allowed Priority Tax Claims shall be paid in full, in Cash.
$125,000
2.
Summary and Treatment of Allowed Classified Claims

ESTIMATED AMOUNT OR VALUE OF CLAIMS (CONSOLIDATED BASIS) $325,947,566
DESCRIPTION First Lien Lender Secured Claims
TREATMENT FOR ALLOWED CLAIMS/PROJECTED RECOVERY/STATUS/VOTING RIGHTS Each of the First Lien Lenders (or its Permitted Nominee) shall receive on account of its Secured Claims, (w) its pro rata share of $1.5 million in Cash from the proceeds of the First Lien Lenders Collateral, (x) its pro rata share of 100% of the New First Lien Notes, and (y) its pro rata share of 100% of the Newco Equity Interests (subject to dilution for any Newco Equity Interests issued pursuant to a Management and Director Equity Incentive Plan). The $1.5 million payment to the First Lien Lenders shall be allocated and deemed paid to the First Lien Lenders in accordance with Article VII.F. of the Plan.
Projected Recovery on Account of Secured Claims:
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AKIN GUMP STRAUSS HAUER & FELD LLP One Bryant Park New York, New York 10036 Tel: 212.872.1000 Facsimile: 212.872.1002 / akingump.com A-2 Second Lien Lender Secured Claims CLASS NO. DESCRIPTION
ESTIMATED AMOUNT OR VALUE OF CLAIMS (CONSOLIDATED BASIS)
TREATMENT FOR ALLOWED CLAIMS/PROJECTED RECOVERY/STATUS/VOTING RIGHTS 28.9% Status: Impaired Voting: Entitled to Vote If the Class of Second Lien Lender Secured Claims votes in favor of the Plan, each of the Second Lien Lenders (or its Permitted Nominee) shall receive its pro rata share of 50% of the net proceeds of the Stanley Engineering Litigation on account of its Secured Claims without a reduction on account of the reasonable fees and expenses of Ropes & Gray LLP and local counsel for the Second Lien Agent, subject to an aggregate cap of $500,000, each of which such fees shall be paid in Cash to the Second Lien Agent on the Effective Date. If the Class of Second Lien Lender Secured Claims votes against the Plan, each of the Second Lien Lenders shall receive no recovery on account of such Secured Claims. Projected Recovery on Account of Secured Claims: 2.8% Status: Impaired Voting: Entitled to Vote
$72,848,357.65
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B Priority Non-Tax Claims $0 A-3 Other Secured Claims $2.3 million
To the extent not satisfied by the Debtors prior to the Effective Date, Holders of Other Secured Claims shall either (i) have such Claims reinstated and rendered Unimpaired, (ii) receive Cash in an amount equal to such Claims, including any interest required to be paid, (iii) receive the Collateral securing such Claim and any interest required to be paid, or (iv) receive such treatment as to which such Holder and the Reorganized Debtors or the Debtors, with the consent of the First Lien Steering Committee (and in consultation with the First Lien Agent and Second Lien Agent), otherwise agree. Projected Recovery: 100% Status: Unimpaired Voting: Deemed to Accept Each Holder of an Allowed Priority Non-Tax Claim shall be paid in full, in Cash unless the Holder of an Allowed Priority Non-Tax Claim and the Reorganized Debtors or the Debtors, with the consent of the First Lien Steering Committee (and in consultation with the First Lien Agent and Second Lien Agent), otherwise agree. Projected Recovery: N/A
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C-1 General Unsecured Claims CLASS NO. DESCRIPTION
TREATMENT FOR ALLOWED CLAIMS/PROJECTED RECOVERY/STATUS/VOTING RIGHTS Status: Unimpaired Voting: Deemed to Accept On the Effective Date, each Holder of an Allowed General Unsecured Claim (including any Allowed Rhodes Entities Claims) shall receive its pro rata share of the Litigation Trust Interests allocable to the Holders of General Unsecured Claims on account of its Allowed Claim. Projected Recovery: 3.2% Status: Impaired Voting: Entitled to Vote
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Estimated asserted amount $15 million +
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D Old Equity Interests C-4 Subordinated Claims $0 C-3 Second Lien Lender Deficiency Claims $70,348,357.65 C-2 First Lien Lender Deficiency Claims $231,649,680
On the Effective Date, each Holder of an Allowed First Lien Lender Deficiency Claim shall receive its pro rata share of the Litigation Trust Interests allocable to the Holders of First Lien Lender Deficiency Claims on account of its Allowed Claim. Projected Recovery 3.2% Status: Impaired Voting: Entitled to Vote On the Effective Date, each Holder of an Allowed Second Lien Lender Deficiency Claim shall receive its pro rata share of the Litigation Trust Interests allocable to the Holders of Second Lien Lender Deficiency Claims on account of its Allowed Claim. If the Class of Second Lien Lender Secured Claims votes against the Plan, the distribution of Litigation Trust Interests allocable to the Holders of Second Lien Lender Deficiency Claims shall be subject to the reasonable fees and expenses of Ropes & Gray LLP and local counsel for the Second Lien Agent. Projected Recovery: 3.2% Status: Impaired Voting: Entitled to Vote Claims subordinated under applicable law shall not receive any recovery on account of their Claims. Projected Recovery: N/A Status: Impaired Voting: Deemed to Reject Each holder of an Old Equity Interest shall not be entitled to, and shall not receive or retain any property or interest in property on account of such
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AKIN GUMP STRAUSS HAUER & FELD LLP One Bryant Park New York, New York 10036 Tel: 212.872.1000 Facsimile: 212.872.1002 / akingump.com E Intercompany Claims CLASS NO. DESCRIPTION
TREATMENT FOR ALLOWED CLAIMS/PROJECTED RECOVERY/STATUS/VOTING RIGHTS Old Equity Interest. Projected Recovery: 0% Status: Impaired Voting: Deemed to Reject
$500,000,000
8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 F. Claims Estimates
At the election of the Reorganized Debtors, Intercompany Claims will be (i) reinstated, in full or in part, (ii) resolved through set-off, distribution, or contribution, in full or in part, or (iii) cancelled and discharged, in full or in part, in which case such discharged and satisfied portion shall be eliminated and the Holders thereof shall not be entitled to, and shall not receive or retain, any property or interest in property on account of such portion under the Plan. Projected Recovery: 0% Status: Impaired Voting: Deemed to Reject
Upon information and belief, as of September 18, 2009, the Claims and Solicitation Agent had received approximately 461 Proofs of Claim and the total amount of Claims Filed against one or more of the Debtors was over $12.7 billion, of which $12 billion are duplicate Claims that will be automatically deemed to be eliminated upon the Effective Date. Additionally, the First Lien Steering Committee believes that many of the Filed Proofs of Claim are invalid, untimely, and/or overstated. Therefore, the Debtors, the Reorganized Debtors and/or the First Lien Steering Committee will object to such Claims. The First Lien Steering Committee estimates that, at the conclusion of the Claims objection, reconciliation and resolution process, the aggregate amount of Claims will be as set forth on the charts in Article I.E. The Claims Register, which reflects all Claims Filed against each Debtor Entity, is available for inspection at www.omnimgt.com/rhodes. The Claims estimates are approximate and based upon numerous assumptions and represent significant reductions in the aggregate face amount of Claims Filed. There is no guarantee that the ultimate amount of each category of Claims will conform to the estimates stated herein, and the majority of Claims underlying such estimates are subject to challenge. A number of Claims have been asserted in unliquidated amounts. The First Lien Steering Committee believes that certain Claims are without merit, and the Debtors, the Reorganized Debtors and/or the First Lien Steering Committee will object to all such Claims. There can be no assurance, however, that Claim objections will achieve the significant reductions in Claims
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set forth above. Moreover, additional Claims may be Filed or identified during the Claims objection, reconciliation and resolution process that may materially affect the foregoing estimates. G. Questions and Answers Regarding this Disclosure Statement and the Plan 1. What is Chapter 11?
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Chapter 11 is the principal business reorganization chapter of the Bankruptcy Code. Under chapter 11, a debtor can reorganize or wind-down its business for the benefit of itself and holders of claims against and interests in the debtor. Chapter 11 also is designed to promote equality of treatment for similarly situated holders of claims against the debtor and similarly situated holders of interests in the debtor with respect to the distribution of the debtors assets. The commencement of a chapter 11 case creates an estate that is comprised of all of the legal and equitable interests of the debtor as of the filing date. The Bankruptcy Code provides that the debtor may continue to operate its business and remain in possession of its property as a debtor in possession. The consummation of a chapter 11 plan is the principal objective of a chapter 11 case. A chapter 11 plan sets forth the means for satisfying claims against, and interests in, a debtor. Confirmation of a chapter 11 plan by a bankruptcy court makes the plan binding upon the debtor, any person or entity acquiring property under the plan and any holder of claims against or interests in the debtor, whether or not such holder of claims or interests (1) is impaired under or has accepted the plan or (2) receives or retains any property under the plan. Subject to certain limited exceptions and other than as provided in the plan itself or the confirmation order, a confirmation order discharges the debtor from any debt that arose prior to the date of confirmation of the plan and substitutes therewith the obligations specified under the confirmed plan. 2. Why is the First Lien Steering Committee sending me this Disclosure Statement?
The Disclosure Statement is being furnished by the First Lien Steering Committee in connection with: (a) the solicitation of votes for the acceptance or rejection of the Plan; and (b) the confirmation hearing (the Confirmation Hearing), which is scheduled for [January 5, 2009 at 9:00 a.m.] Pacific Time (the Confirmation Hearing Date). Before soliciting votes for the acceptance or rejection of the Plan, Bankruptcy Code section 1125 requires the First Lien Steering Committee to prepare a Disclosure Statement containing adequate information of a kind, and in sufficient detail, to enable a hypothetical reasonable investor to make an informed judgment regarding acceptance of the Plan. 3. Am I entitled to vote on the Plan? What will I receive from the Debtors if the Plan is consummated?
Your ability to vote and your distribution under the Plan, if any, depend on what kind of Claim or Interest you hold. A summary of the Classes of Claims and Interests (each, a
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category of Holders of Claims or Interests as set forth in Article IV of this Disclosure Statement and Article III of the Plan pursuant to section 1122(a) of the Bankruptcy Code, which we refer to as a Class) and their respective voting statuses is set forth below. You should refer to this entire Disclosure Statement and the Plan for a complete description of the classification and treatment of Allowed Claims and Interests in each of the Classes below.
Class A-1 A-2 A-3 B C-1 C-2 C-3 C-4 D E Claim First Lien Lender Secured Claims Second Lien Lender Secured Claims Other Secured Claims Priority Non-Tax Claims General Unsecured Claims First Lien Lender Deficiency Claims Second Lien Lender Deficiency Claims Subordinated Claims Old Equity Interests Intercompany Claims Status Impaired Impaired Unimpaired Unimpaired Impaired Impaired Impaired Impaired Impaired Impaired Voting Rights Entitled to Vote Entitled to Vote Deemed to Accept Deemed to Accept Entitled to Vote Entitled to Vote Entitled to Vote Deemed to Reject Deemed to Reject Deemed to Reject
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For more information about the treatment of Claims and Interests see Classification and Treatment of Claims, which begins on page 31 of this Disclosure Statement. 4. What happens to my recovery if the Plan is not confirmed, or does not go effective?
In the event that the Plan is not confirmed, there is no assurance that the Debtors will be able to reorganize their business. If the Plan is not confirmed in a timely manner, it is unclear whether the transactions contemplated by the Plan and the Mediation Settlement could be implemented and what Holders of Claims would ultimately receive in respect of their Claims. It is possible that any alternative plan would result in substantially less favorable treatment for Holders of Claims than such Holders would receive under the Plan. Moreover, non-Confirmation of the Plan may result in an extended chapter 11 proceeding. For a more detailed description of the consequences of the Plan or of a liquidation scenario, see Best Interests of Creditors Test, which begins on page 82 of this Disclosure Statement, and the Going Concern Analysis and Liquidation Analysis attached as Exhibits D and Exhibit E to this Disclosure Statement. 5. If the Plan provides that I get a distribution, do I get it upon Confirmation or when the Plan goes effective, and what do you mean when you refer to Confirmation, Effective Date and Consummation?
Confirmation of the Plan refers to approval of the Plan by the Bankruptcy Court. Confirmation of the Plan does not guarantee that you will receive the distribution indicated under the Plan. After Confirmation of the Plan by the Bankruptcy Court, there are conditions that need to be satisfied or waived so that the Plan can be consummated and go effective. References to the Effective Date mean the date that all conditions to the Plan have been satisfied or waived and the Plan has been fully consummated. Distributions will only be made
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on the Effective Date or as soon as practicable thereafter. See Conditions Precedent to Confirmation and Consummation of the Plan, which begins on page 75 of this Disclosure Statement, for a discussion of the conditions to Confirmation and the Effective Date. 6. Where is the cash required to fund the Plan coming from?
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Although the Plan provides for the option of obtaining exit financing, the Plan contemplates that the Reorganized Debtors will fund distributions under the Plan with Cash on hand, existing assets, and the issuance of the New First Lien Notes and Newco Equity Interests. In addition, the Plan provides that the Rhodes Entities will pay $3.5 million in Cash to the Reorganized Debtors, which will be used to fund distributions under the Plan and provide working capital to the extent of any excess. Finally, the Reorganized Debtors will provide funding for the Litigation Trust in the initial amount of $100,000 (the Litigation Trust Funding Amount). The Litigation Trust Funding Amount will be repaid to the Reorganized Debtors from the first proceeds received by the Litigation Trust. 7. Is there potential litigation related to the Plan?
Yes. In the event that any Impaired Class of Claims does not accept the Plan, the First Lien Steering Committee may seek Confirmation of the Plan notwithstanding the dissent of such Class of Claims. The Bankruptcy Court may confirm the Plan pursuant to the cramdown provisions of the Bankruptcy Code, which allow the Bankruptcy Court to confirm a plan that has been rejected by an Impaired Class of Claims if it determines that the Plan satisfies the requirements of Bankruptcy Code section 1129(b). There can be no assurance, however, that the Bankruptcy Court will order that the Plan be confirmed over the objection of an Impaired Class of Claims. In addition, the First Lien Steering Committee is aware of the possibility that Stanley Consultants, Inc. may object to the Plan based upon arguments previously raised in connection with Stanley Consultants, Inc.s objection to the Disclosure Statement. See Certain Bankruptcy Considerations, which begins on page 87 of this Disclosure Statement. 8. What are the Claims and Causes of Action that will be transferred to the Litigation Trust?
Pursuant to the terms of the Litigation Trust Agreement, the Debtors will transfer to the Litigation Trust all Claims and Causes of Action on which the First Lien Lenders do not have a lien and that have not been released pursuant to the Plan or by order of the Bankruptcy Court. Such Claims and Causes of Action include those Claims and Causes of Action belonging to the Debtors against the Rhodes Entities (other than any claims released against the Rhodes Entities pursuant to the Plan) and those Claims and Causes of Action listed on Exhibit G hereto. Although the First Lien Steering Committee is still in the process of analyzing and reviewing potential Claims and Causes of Action against the Rhodes Entities, the First Lien Steering Committee believes that such Claims and Causes of Action may potentially include (i) Claims for breach of fiduciary duty, (ii) Claims for misappropriation of Debtors assets for personal use, (iii) Claims for usurping corporate opportunities for the benefit of competing interests, (iv) Claims for mismanagement of the Debtors operations, (v) Claims for fraudulent transfers (to the extent not expressly released by the Plan), and (vi)
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Claims for the diversion of corporate resources for the benefit of competing interests. For additional information regarding the Claims and Causes of Action to be transferred to the Litigation Trust, please see Exhibit G to this Disclosure Statement. For additional details regarding Claims and Causes of Action against the Rhodes Entities, see Potential Claims Against the Rhodes Entities, which begins on page 4 of this Disclosure Statement. 9. What is the process by which the First Lien Lenders will purchase certain general unsecured claims?
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Under the terms of the Plan, the First Lien Lenders will receive $1.5 million in Cash from the proceeds of the First Lien Lenders collateral. The First Lien Lenders have agreed to use the $1.5 million Cash payment provided to them under the Plan to purchase the General Unsecured Claims of Creditors who are listed on the Claims Purchase Schedule attached to this Disclosure Statement as Exhibit H to the extent such Claims are outstanding as of the Effective Date and subject to certain other limitations and conditions. Pursuant to the Plan, the First Lien Lenders will be paid the $1.5 million in Cash through a series of payments made over the course of eighteen months. Payments on account of the purchased Claims will be made on the same time frame as the First Lien Lenders receive Cash payments from the Reorganized Debtors under the Plan. The First Lien Steering Committee may add Claims to the Claim Purchase Schedule at any time so long as the amount to be paid for all Claims listed on the Claim Purchase Schedule does not exceed $1.5 million. No Creditor listed on the Claim Purchase Schedule will receive an amount in excess of the full amount of its Claim. For additional details regarding the purchase of Claims by the First Lien Lenders, see General Unsecured Claims Purchase, which begins on page 63 of this Disclosure Statement. 10. Why does the Plan provide for substantive consolidation?
As discussed in more detail in this Disclosure Statement, the First Lien Steering Committee believes that substantive consolidation of the Debtors Estates is warranted based on several factors and will provide the greatest recovery for unsecured creditors. Among other things, these factors include that the Debtors (i) operate as a single business enterprise under a single name, (ii) operate on a centralized basis with a centralized cash management system, (iii) share common parent companies, (iv) rely on a single corporate office for operational and other support services, (v) regularly conduct business with each other such that the flow of funds and transactions would be difficult to entangle, and (vi) are all obligated on the First Lien Lender Claims and the Second Lien Lender Claims. Moreover, as the First Lien Lenders and Second Lien Lenders can assert the full amount of their claims at every Debtor and general unsecured creditors can only assert claims against the specific Debtor against which such creditor has a claim, substantive consolidation will result in greater potential recoveries to unsecured creditors. In addition, a large amount of intercompany claims were owed between the various Debtors as of the Petition Date, and numerous Proofs of Claim were Filed against the incorrect Debtor entity. For additional information regarding the substantive consolidation of the Debtors Estates, see Substantive Consolidation, which begins on page 35 of this Disclosure Statement.
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11.
What are the contents of the solicitation packages to be sent to creditors who are eligible to vote on the Plan?
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All Creditors who are eligible to vote on the Plan will receive a solicitation package containing (a) a cover letter: (i) describing the contents of the Solicitation Package and instructions on how paper copies of any materials that may be provided in CD-ROM format can be obtained at no charge; and (ii) urging the Holders in each of the Voting Classes (as defined below) to vote to accept the Plan, (b) the Solicitation Procedures Order, (c) a copy of the solicitation procedures, (d) an appropriate form of Ballot, (e) a copy of a letter signed by the Mediation Parties in support of the Plan, (f) a copy of a letter signed by the Creditors Committee in support of the Plan, (g) this Disclosure Statement (together with the Plan, which is Exhibit A thereto) in either paper or CD-ROM format; and (h) such other materials as the Bankruptcy Court may direct. The notices sent to parties in interest will indicate that this Disclosure Statement, the Plan and all of the exhibits thereto are available for viewing by any party at: www.omnimgt.com/rhodes. 12. Will there be releases granted to parties in interest under the plan?
Yes. The Plan provides for the Debtors estates to grant releases to (a) the First Lien Lenders in their capacity as such, (b) the First Lien Steering Committee, (c) the Second Lien Lenders in their capacity as such, (d) with respect to each of the foregoing Entities in clauses (a) through (c), such Entities predecessors, successors and assigns, (e) the Creditors Committee and the members thereof in their capacity as such, (f) with respect to each of the foregoing Entities in clauses (a) through (e), such Entities subsidiaries, affiliates, officers, members, directors, principals, employees, agents, financial advisors, attorneys, accountants, investment bankers, consultants, representatives, and other Professionals, (g) the Debtors officers, employees (including Thomas Robinson and Joseph Schramm) and Professionals, as of the Petition Date, and (h) Paul Huygens; provided, however, that clause (g) shall not include (i) the Rhodes Entities or their affiliates, (ii) insiders of any of the Rhodes Entities (except as to Thomas Robinson and Joseph Schramm), or (iii) relatives of Rhodes. In addition, the Plan provides that the Rhodes Entities shall be deemed released from any and all Claims, obligations, rights, suits, damages, Causes of Action, remedies, and liabilities whatsoever arising under chapter 5 of the Bankruptcy Code with respect to transfers made by the Debtors to the Rhodes Entities during the 2 years prior to the Petition Date; provided, however, that such release shall only apply to transfers expressly set forth in the Schedules as Filed with the Bankruptcy Court as of August 1, 2009 or as disclosed in Attachment B to the Mediation Term Sheet. Finally, the Plan provides that, pursuant to Bankruptcy Rule 9019, and except as otherwise specifically provided in the Plan, to the extent a First Lien Lender elects on its Ballot to release the First Lien Lenders in accordance with this Section VIII.F. of the Plan, each of the First Lien Lenders electing to grant such a release, shall be deemed to release each of the other First Lien Lenders that has elected to grant such a release; provided, however, that Claims or liabilities arising out of or relating to any act or omission of any First Lien Lender
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or any of its affiliates that constitutes gross negligence or willful misconduct shall not be released. 13. What is the deadline to vote on the Plan?
[4:00 p.m.] (prevailing Pacific Time) on [December 18], 2009. 14. How do I vote for or against the Plan?
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This Disclosure Statement, accompanied by a Ballot or Ballots to be used for voting on the Plan, is being distributed to the Holders of Claims entitled to vote on the Plan. If you are a Holder of a Claim in the following Classes, you may vote for or against the Plan by completing the Ballot and returning in the manner provided on the Ballot: Class A-1 (First Lien Lender Secured Claims) Class A-2 (Second Lien Lender Secured Claims) Class C-1 (General Unsecured Claims) Class C-2 (First Lien Lender Deficiency Claims) Class C-3 (Second Lien Lender Deficiency Claims)
The Debtors, with the approval of the Bankruptcy Court, have engaged Omni Management Group, LLC, Attn: Brian Osborne, 16161 Ventura Blvd. Suite C, PMB 477, Encino, CA 91436, to serve as the Claims and Solicitation Agent. The Claims and Solicitation Agent will process and tabulate Ballots for each Class entitled to vote to accept or reject the Plan. The deadline to vote on the Plan is [4:00 p.m.], (prevailing Pacific Time), on [December 18], 2009.
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BALLOTS Ballots must be actually received by the Claims and Solicitation Agent by [4:00 p.m.] (prevailing Pacific Time) on [December 18], 2009. Ballots can be sent by hand delivery, mail, fax or email to the following addresses: Hand Delivery/Mail: The Rhodes Companies, LLC Omni Management Group Attn: Brian Osborne 16161 Ventura Blvd. Suite C, PMB 477 Encino, CA 91436 Fax: (818) 783-2737 Email: Nova@omnimgt.com If you have any questions on the procedure for voting on the Plan, please contact the Claims and Solicitation Agent by telephone at (866) 989-6144 or contact Brian Osborne at bosborne@omnimgmt.com. More detailed instructions regarding how to vote on the Plan are contained on the Ballots distributed to Holders of Claims that are entitled to vote on the Plan. For your vote to be counted, your ballot must be completed, signed and received by [4:00 p.m.] (prevailing Pacific Time), on [December 18], 2009. It is important to follow the specific instructions provided on each Ballot. Each Ballot must be completed and returned in the manner indicated on the Ballot. 15. Why is the Bankruptcy Court holding a Confirmation Hearing?
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Section 1128(a) of the Bankruptcy Code requires the Bankruptcy Court to hold a hearing on Confirmation of the Plan. Section 1128(b) of the Bankruptcy Code provides that any party in interest may object to Confirmation of the Plan. 16. When is the Confirmation Hearing set to occur?
The Bankruptcy Court has scheduled the Confirmation Hearing for [January 5], 2010 to take place at [9:00 a.m.] (prevailing Pacific Time) before the Honorable Linda B. Riegle, United States Bankruptcy Judge, in the United States Bankruptcy Court for the District of
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Nevada, located at 300 Las Vegas Boulevard South, Las Vegas, Nevada 89101. The Confirmation Hearing may be continued from time to time by announcing such continuance in open court or otherwise, without further notice to parties in interest. The Bankruptcy Court, in its discretion and prior to the Confirmation Hearing, may put in place additional procedures governing the Confirmation Hearing. The Plan may be modified, if necessary, prior to, during, or as a result of the Confirmation Hearing, without further notice to interested parties. Objections to Confirmation of the Plan must be filed and served on the First Lien Steering Committee, and certain other parties, by no later than [December 18], 2009 at [4:00 p.m.] (prevailing Pacific Time). Any objections to the Plan must be (i) in writing, (ii) conform to the Bankruptcy Rules and the Local Rules, (iii) state the name and address of the objecting party and the amount and nature of the Claim of such Entity, (iv) state with particularity the basis and nature of any objection to the Plan and, if practicable, a proposed modification to the Plan that would resolve such objection, (v) and be actually received by no later than [December 18], 2009 at 4:00 P.M. 17. What is the purpose of the Confirmation Hearing?
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The consummation of a chapter 11 plan is the principal objective of a chapter 11 case. A chapter 11 plan sets forth the means for satisfying claims against, and interests in, a debtor. Confirmation of a chapter 11 plan by a bankruptcy court makes the plan binding upon the debtor, any person or entity acquiring property under the plan and any holder of claims against or interests in the debtor, whether or not such holder of claims or interests (1) is impaired under or has accepted the plan or (2) receives or retains any property under the plan. Subject to certain limited exceptions and other than as provided in the plan itself or the confirmation order, a confirmation order discharges the debtor from any debt that arose prior to the date of confirmation of the plan and substitutes therewith the obligations specified under the confirmed plan. 18. What role does the Bankruptcy Court play after the Confirmation Hearing?
After the Confirmation of the Plan and the occurrence of the Effective Date, the Bankruptcy Court will retain exclusive jurisdiction over all matters arising out of, or related to, the Chapter 11 Cases and the Plan pursuant to sections 105(a) and 1142 of the Bankruptcy Code and as otherwise set forth in the Plan. 19. What is the effect of the Plan on the Debtors ongoing business?
The Debtors are reorganizing pursuant to chapter 11 of the Bankruptcy Code. As a result, the Confirmation of the Plan means that the Debtors will not be liquidated or forced to go out of business. As a result of the Mediation Settlement, the Plan contemplates that, upon the Debtors emergence from chapter 11, the Debtors will continue to operate as a going concern homebuilder primarily in the Las Vegas market. For additional details on the Plan, see Plan Overview beginning on page 1 of this Disclosure Statement. Additional details regarding the Mediation Settlement can be found in the section entitled Settlement Overview beginning on page 2 of this Disclosure Statement.
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20.
Will any party have significant influence over the corporate governance and operations of the Reorganized Debtors?
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The Plan contemplates that the First Lien Lenders will be the owners of the Reorganized Debtors. Pursuant to the Plan, a new parent company for the Debtors will be formed (Newco) and each of the First Lien Lenders will receive their pro rata share of 100% of the equity interests in Newco on account of its First Lien Lender Secured Claim. As a result of certain transactions to be undertaken in connection with the Plan, Newco will control the Reorganized Debtors upon their emergence from bankruptcy. The boards of directors of the Reorganized Debtors will consist of one or more members appointed by the First Lien Steering Committee. The First Lien Steering Committee will also appoint a chief executive officer or other similar officer to manage the Reorganized Debtors. The First Lien Steering Committee is in the process of selecting such officers and directors. The identity of such officers and directors will be publicly disclosed prior to the Confirmation Hearing, which is scheduled to take place on [January 5], 2010 at 9:00 a.m. 21. Does the First Lien Steering Committee recommend voting in favor of the Plan?
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Yes. In the opinion of the First Lien Steering Committee, the Plan is preferable to the alternatives described in this Disclosure Statement because it provides for a larger distribution to the Holders of Claims than would otherwise result in a liquidation under chapter 7 of the Bankruptcy Code. In addition, any alternative other than Confirmation could result in extensive delays and increased Administrative Claims, which would result in smaller distributions to the Holders of Claims. Accordingly, the First Lien Steering Committee recommends that Holders of Claims entitled to vote on the Plan support Confirmation and vote to accept the Plan. Voting and Confirmation
The Classes entitled to vote will have accepted the Plan if (1) the Holders of at least two thirds in dollar amount of the Allowed Claims actually voting in each such Class, as applicable, have voted to accept the Plan and (2) the Holders of more than one half in number of the Allowed Claims actually voting in each such Class, as applicable, have voted to accept the Plan. Assuming the requisite acceptances are obtained, the First Lien Steering Committee intends to seek Confirmation of the Plan at the Confirmation Hearing scheduled to commence on [January 5], 2010 at [9:00 a.m.] prevailing Pacific Time, before the Bankruptcy Court. Section 1129(a)(10) of the Bankruptcy Code will be satisfied for purposes of Confirmation by acceptance of the Plan by at least one Class of Claims that is Impaired under the Plan. To the extent a Holder of one or more First Lien Lender Claims also holds one or more Second Lien Lender Claims, if such Holder votes in favor of the Plan on account of its First Lien Lender Claim(s), the Holder shall be deemed to vote in favor of the Plan on account of its Second Lien Lender Claim(s) regardless of whether the Holder actually votes its Second Lien Lender Claim(s) in favor of the Plan.
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THE FIRST LIEN STEERING COMMITTEE WILL SEEK CONFIRMATION OF THE PLAN UNDER SECTION 1129(B) OF THE BANKRUPTCY CODE WITH RESPECT TO ANY IMPAIRED CLASSES PRESUMED TO REJECT THE PLAN, AND THE FIRST LIEN STEERING COMMITTEE RESERVES THE RIGHT TO DO SO WITH RESPECT TO ANY OTHER REJECTING CLASS OR TO MODIFY THE PLAN. The Bankruptcy Court has established [November 16], 2009 (the Record Date), as the date for determining which Holders of Claims are eligible to vote on the Plan. Ballots, along with this Disclosure Statement, the Plan and the Solicitation Procedures Order, will be mailed to all registered Holders of Claims as of the Record Date that are entitled to vote. A return envelope will be included with Ballots, as appropriate. The Claims and Solicitation Agent will answer questions regarding the procedures and requirements for voting to accept or reject the Plan and for objecting to the Plan, provide additional copies of all materials and oversee the voting tabulation. The Claims and Solicitation Agent will also process and tabulate Ballots for each Class entitled to vote to accept or reject the Plan. The address for the Claims and Solicitation Agent is: Omni Management Group Attn: Rhodes Homes Claims Agent 16501 Ventura Boulevard, Suite 440 Encino, CA 91436 Or if by email to scott@omnimgt.com or by fax to 818-783-2737. If you have any questions on voting procedures, please call the Claims and Solicitation Agent at the following toll free number: (818) 906-8300. TO BE COUNTED, BALLOTS (OR MASTER BALLOTS OF THE RESPECTIVE NOMINEE HOLDER, IF APPLICABLE) INDICATING ACCEPTANCE OR REJECTION OF THE PLAN MUST BE RECEIVED BY THE CLAIMS AND SOLICITATION AGENT NO LATER THAN 4:00 P.M. PREVAILING PACIFIC TIME ON [DECEMBER 18], 2009 (THE VOTING DEADLINE). ANY BALLOT RECEIVED AFTER THE VOTING DEADLINE SHALL NOT BE COUNTED. THE FIRST LIEN STEERING COMMITTEE BELIEVES THAT THE PLAN IS IN THE BEST INTEREST OF ALL CREDITORS. THE FIRST LIEN STEERING COMMITTEE RECOMMENDS THAT ALL HOLDERS OF CLAIMS AGAINST THE DEBTORS WHOSE VOTES ARE BEING SOLICITED SUBMIT BALLOTS TO ACCEPT THE PLAN. I. Consummation of the Plan
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It will be a condition to Confirmation of the Plan that all provisions, terms, and conditions of the Plan are approved in the Confirmation Order unless otherwise satisfied or waived pursuant to the provisions of Article X of the Plan. Following Confirmation, the Plan will be consummated on the Effective Date, which will be no earlier than the eleventh day following entry of an order, in form and substance acceptable to the First Lien Steering Committee, by the Bankruptcy Court confirming the Plan and satisfaction of all conditions to
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Confirmation and the Effective Date having been satisfied or waived in accordance with the terms of the Plan. Article II. BACKGROUND2 A. Description of the Debtors Business Operations 1. Organizational Structure
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The Debtors organizational chart is attached hereto as Exhibit B. In addition to the Debtor entities below, the Debtors are affiliated with several other companies that are not Debtors in these Chapter 11 Cases. Rhodes Ranch GP is the primary holder of land associated with the Rhodes Ranch master-planned community and also owns some commercial properties outside of the Rhodes Ranch master-planned community. The Rhodes Ranch master-planned community consists of several developments, including developments built by non-Debtor affiliated developers. Rhodes Design and Development Corp. holds the Debtors contractors license in Nevada along with holding some land. Previously, Rhodes Ranch Golf and Country Club was the owner and operator of the golf course and club house in the Rhodes Ranch development, but on December 22, 2008, as required by the First Lien Credit Agreement, its assets were sold to non-Debtor Rhodes Ranch Golf, Inc. The Rhodes Companies, LLC is a real estate development holding company. The following Debtors hold parcels of land associated with the Tuscany development: Rhodes Design and Development; Tuscany Acquisitions, LLC; Tuscany Acquisitions II, LLC; Tuscany Acquisitions III, LLC; and Tuscany Acquisitions IV, LLC. Tuscany Golf Country Club, LLC owns and operates the golf club located at the Tuscany development. The following Debtors own land in Arizona: Rhodes Homes Arizona, LLC; Rhodes Arizona Properties, LLC; and Elkhorn Investments. Rhodes Homes Arizona, LLC also holds the Debtors Arizona contractors license. Heritage Land Company, LLC is the land management company for its subsidiaries and does not hold any real estate directly. The following Debtors are subsidiaries of Heritage Land Company, LLC and hold various parcels of land primarily located in Nevada: Tick, LP; Glynda, LP; Chalkline, LP; Batcave, LP; Jacknife, LP; Wallboard, LP; and Overflow LP. The Debtors are also involved in land acquisition, development, and some utility and design work. Exterior and interior design is provided by Rhodes Design & Development Corporation. Rhodes Realty, Inc. is the Debtor that provides sales and marketing services for
Article II is based primarily on representations made by the Debtors.
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the Debtors. C & J Holdings, Inc. is the homeowners association management company for Rhodes Ranch, Tuscany, and three other smaller communities. Pinnacle Grading, LLC provides grading and excavation services to the Debtors. Previously, the following Debtors also provided specific services to the Debtors, but have ceased operations: Bravo Inc.; Gung-Ho Concrete, LLC; Geronimo Plumbing, LLC; Arapahoe Cleaning, LLC; Apache Framing, LLC; Six Feathers Holding, LLC; and Tribes Holding LLC. Elkhorn Investments, Inc. is a holding company for Elkhorn Partners, LP. Elkhorn Partners, LP is a limited partnership that was formed for the construction and sale of several communities in Northwest Las Vegas. As of the Petition Date, only one home remained unsold. 2. History and Projects
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The Debtors are engaged primarily in the business of detached home building and sales in Nevada and Arizona. Collectively, the Debtors developed 40 communities since their founding in 1988, generating over $2.4 billion in total revenues. The Debtors have built more than 6,000 homes in the Las Vegas Valley during the past two decades. In 2008, the Debtors sold 390 homes, generating revenue of $118.3 million, or $54.6 million in gross profit. Currently, the Debtors have two signature master planned communities under development, Rhodes Ranch and Tuscany Residential Village. Both communities are recognized for their accessible location to employment centers and the Las Vegas Strip, for their community amenities, country club lifestyle, and for the quality and value of home design and construction. Rhodes Ranch is located in southwestern Las Vegas and opened in 1997. It has a gated entry and 24-hour security detail with patrols. The development is built around a Ted Robinson-designed 18-hole championship golf course. The development features a multimillion dollar community center with swimming pool, gymnasium, multiple basketball courts, fitness center, and card/club rooms. The community also has a community park and sports complex. There are 314 available finished lots remaining to be sold as of March 31, 2009, and approximately 1,993 lots to be developed. The First Lien Steering Committee estimates the value of the Rhodes Ranch development on a going concern basis to be approximately $65.4 million. Tuscany Residential Village is located in southeast Las Vegas and opened in 2005. The development is also built around a Ted-Robinson designed 18-hole championship golf course. It has gated entry and 24-hour security detail (with patrols), an existing 35,000 square foot community center similar to Rhodes Ranch, and a planned Tuscan-themed retail center. As of March 31, 2009, Tuscany had 350 finished lots remaining to be sold and 559 partially developed lots. The First Lien Steering Committee estimates the value of Tuscany Residential Village on a going concern basis to be approximately $48.1 million. Spanish Hills is a high-end development located in southwest Las Vegas. The community is built on over 100 acres and features many custom homes in excess of 5,400
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square feet of living space. As of March 31, 2009, it had 2 partially developed single family estate lots and 2 finished lots remaining to be sold. It also had 10 acres of undeveloped land. The First Lien Steering Committee estimates value of the Spanish Hills development on a going concern basis to be approximately $1 million. The Debtors did not operate their developments by legal entity, so for purposes of estimating Claims against each of these developments, the Debtors would need to conduct a Claim-by-Claim analysis. In several cases, the Claims filed by Creditors were asserted against The Rhodes Companies, LLC, which is the lead Debtor for purposes of the Chapter 11 Cases, but not necessarily the contracting party with whom the such Creditors may have conducted business. There is, however, approximately $390 million of Secured First Lien Lender debt and Second Lien Lender debt filed against each Debtor. For a more complete discussion of the total Claims asserted against all the Debtors, see Article I.F hereof. The Debtors homebuilding operations in Arizona (Arizona) will be transferred to the Rhodes Entities on the Effective Date pursuant to the Plan. Arizona consists of all of the real and personal property of three of the Debtors: Rhodes Homes Arizona Properties, LLC, Rhodes Homes Arizona, LLC, and Elkhorn Investments, Inc. Included within the Arizona Assets is Pravada, which is a Rhodes Homes development located in Mohave County (vicinity of Kingman, Arizona) on approximately 1,312 acres, which has 3,591 partially developed lots. Also included in Arizona, which is located within and around Pravada, are 4 model homes, 4 standing inventory homes, and 327 acres of land. The full list of Arizona Assets being transferred to the Rhodes Entities is set forth on Attachment D to the Mediation Term Sheet. The Arizona Assets do not include any assets owned by Pinnacle Grading located in Arizona, except for Pinnacle Grading office equipment, furniture, computers located in Arizona, which is set forth on Attachment D to the Mediation Term Sheet. The Debtors own a number of additional lots and commercial-zoned properties in various stages of development in Nevada and Arizona. As of the first quarter of 2009, development on all projects except Rhodes Ranch and Tuscany has ceased pending improvement in the real estate market. 3. Principal Debt and Capital Structure
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The Debtors are party to a Credit Agreement dated as of November 21, 2005 among Heritage Land Company, LLC, The Rhodes Companies, LLC, and Rhodes Ranch General Partnership, as the Borrowers, the Lenders Listed Therein as the Lenders, and Credit Suisse, Cayman Islands Branch, as Administrative Agent, Collateral Agent, Syndication Agent, Sole Bookrunner and Sole Lead Arranger (the First Lien Credit Agreement). As of the Petition Date, there was approximately $302 million in principal amount outstanding under the First Lien Credit Agreement. The First Lien Steering Committee is comprised of certain lenders under the First Lien Credit Agreement that hold, in the aggregate, approximately 70% of the
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outstanding first lien debt.3 Three of the Debtors are primary obligors under the First Lien Credit Agreement. The remaining Debtors executed guarantees under the same facility. The First Lien Credit Agreement is secured by a blanket first lien on substantially all of the Debtors property. The First Lien Lenders assert that the Stanley Engineering Litigation is among the assets included in their collateral package. In addition, the Debtors are party to a Credit Agreement dated as of November 21, 2005 among Heritage Land Company, LLC, The Rhodes Companies, LLC, and Rhodes Ranch General Partnership, as the Borrowers, the Lenders Listed Therein, as the Lenders, and Credit Suisse, Cayman Islands Branch, as Administrative Agent, Collateral Agent, Syndication Agent, Sole Bookrunner and Sole Lead Arranger (the Second Lien Credit Agreement). As of the Petition Date, there was approximately $70.7 million in principal amount outstanding under the Second Lien Credit Agreement. The Second Lien Credit Agreement is secured by a blanket second lien on substantially all of the Debtors property. The Second Lien Lenders also assert that the Stanley Engineering Litigation is among the assets included in their collateral package. The First Lien Lenders and the Second Lien Lenders are party to an intercreditor agreement that, among other things, prohibits the Second Lien Lenders from receiving a recovery from the collateral securing the first lien and second lien debt unless the First Lien Lenders are repaid in full. Moreover, to the extent the Second Lien Agent receives Collateral or the proceeds thereof prior to the discharge of the first lien indebtedness, the Second Lien Agent must pay over such Collateral or proceeds to the First Lien Agent for the benefit of First Lien Lenders. Absent the consent of the First Lien Lenders, the Second Lien Lenders would not be entitled to a recovery in these cases. The intercreditor agreement does not, however, prevent the Second Lien Lenders from voting against the Plan. Notwithstanding the foregoing provisions, the First Lien Lenders have agreed to gift a 50% interest in the Stanley Engineering Litigation to the Second Lien Lenders on account of the Second Lien Lenders Secured Claims if the Class of Second Lien Lender Secured Claims votes in favor of the Plan. Proceeds from the first lien indebtedness and the second lien indebtedness were used as follows: (i) approximately $240 million was used to pay off other secured loan debt of the Debtors; (ii) approximately $50 million was placed in an interest reserve for both the first lien credit facility and the second lien credit facility; (iii) approximately $70 million was paid to equity, and (iv) the remainder was used by the Debtors to fund operating expenses. The Debtors are also party to a swap transaction, pursuant to which there was approximately $20.2 million outstanding on the Petition Date. The swap is an interest rate hedging arrangement with an affiliate of the First Lien Agent to hedge against the floating interest rate applicable to amounts outstanding under the First Lien Credit Agreement. The swap involves the payment by the Debtors of fixed amounts to the affiliate of the First Lien Agent, and the payment of variable amounts (based on agreed upon floating interest rates) by
The members of the First Lien Steering Committee are Credit Suisse Asset Management, Candlewood Special Situations Master Fund, Credit Suisse Loan Funding LLC, CypressTree Investment Management LLP, General Electric Capital Corporation, Highland Capital Management, L.P., and Sorin Capital Management.
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the affiliate to the Debtors. Obligations outstanding under the swap transaction are equal in priority with obligations outstanding under the First Lien Credit Agreement. The Debtors are also obligated to approximately nine equipment lenders who hold purchase money security interests in various office equipment and equipment used in the Debtors operations. As of the Petition Date, the Debtors estimate that they are obligated to these equipment lenders in the approximate amount of $2.5 million. In the ordinary course of business, the Debtors are required to post bonds, either on an unsecured or partially secured basis backed by collateral, as support for the Debtors completion of certain performance and/or payment obligations for the benefit of various third party beneficiaries, generally governmental entities, agencies, jurisdictions or homeowners associations with which they conduct business. The Debtors rely on bonding companies to post the bonds and have issued indemnities in favor of the bonding companies in the event that the bonds come due. The Debtors estimate that they currently have approximately $31 million in outstanding bonds, none of which amounts have been called. The First Lien Steering Committee anticipates the existing performance bonds will continue in effect upon the Debtors emergence from chapter 11. 4. The Rhodes Entities Claims
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The Debtors are affiliated with several non-Debtor entities that are not obligors or guarantors under the First Lien Credit Agreement or the Second Lien Credit Agreement. The non-Debtor entity affiliates, (the Rhodes Entities) are directly or indirectly owned by James M. Rhodes, the founder and President of the Debtors. The Rhodes Entities have alleged prepetition Claims on an aggregate basis against the Debtors for approximately $10.598 million consisting primarily of tax payments allegedly made by the Rhodes Entities on behalf of the Debtors. The First Lien Steering Committee is in the process of analyzing the Rhodes Entities Claims and any and all claims that the Debtors estates may hold against the Rhodes Entities. 5. Management of the Debtors
James Rhodes leads the management team of the Debtors. Upon the Effective Date, it is contemplated that James Rhodes will not have a management role with the Reorganized Debtors. B. Pending Significant Litigation
Rhodes Homes Arizona, LLC filed suit against Stanley Consultants, Inc. (Stanley), an Iowa corporation, in August, 2006 in the Superior Court of Arizona, Maricopa County. An amended complaint was filed on October, 23 2007. The amended complaint seeks recovery against Stanley for breach of contract, bad faith, declaratory relief, fraud, punitive damages, and professional negligence arising out of approximately $7 million worth of charges for work that was substantially unusable. Damages have been itemized to counsel for Stanley in the amount of $25,140,595.96, which amount does not include exemplary damages. Stanley has filed a counterclaim to recover approximately $2 million in unpaid charges. A significant portion of discovery has been completed in connection with the lawsuit. Upon information and belief, no trial date has been set.
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Stanley Filed Proofs of Claim against Rhodes Homes Arizona, LLC, Rhodes Design and Development Corporation and Rhodes Ranch General Partnership asserting Claims in the total aggregate amount of $4,609,249.00 on account of prepetition services allegedly rendered pursuant to agreements entered into with (i) Rhodes Homes Arizona, LLC and (ii) Rhodes Design and Development Corporation and Rhodes Ranch General Partnership. The Reorganized Debtors will evaluate and, if appropriate, file objections to such Claims prior to the Claims Objection Deadline. The Reorganized Debtors also intend to pursue the Stanley Engineering Litigation post-emergence. Stanley disputes the Debtors ability to transfer any intellectual property created by Stanley to the Rhodes Entities. Article III.4 THE CHAPTER 11 CASES The following is a general summary of the Chapter 11 Cases, including the events leading up to the chapter 11 filings, the stabilization of the Debtors operations following the chapter 11 filings, certain administrative matters addressed during the Chapter 11 Cases and the Debtors restructuring initiatives since the chapter 11 filings. A. Events Leading to the Chapter 11 Cases
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At the end of the fourth quarter of 2008, sales in the Las Vegas market of new, detached homes were down 93% (to 522 net sales) from the peak (7,731 quarterly net sales) that occurred in the second quarter of 2005. The median base price for a detached single family home dropped 39% from the peak achieved in the fourth quarter of 2005. Although the Debtors had made cost reductions in general overhead and other areas, including employee layoffs, many factors, including the severe downturn of the Las Vegas market, significant supply overhang, and general economic malaise combined to create an environment where the Debtors were unable to meet their March 2009 debt and amortization payments. The First Lien Steering Committee was formed in early March 2009 to negotiate the terms of a forbearance agreement and consensual restructuring with the Debtors after it became apparent that the Debtors would not be able to make their regularly scheduled interest and amortization payments on the first lien debt. On March 31, 2009, an interest payment in the amount of approximately $9 million and a principal payment in the amount of $10.75 million was due and owing on the First Lien Credit Agreement and an interest payment in the amount of approximately $2.4 million was due and owing on the Second Lien Credit Agreement. Despite extended and intensive negotiations between the First Lien Lenders and the Debtors, when no agreement was reached by March 31, 2009, the Debtors commenced these Chapter 11 Cases on March 31, 2009 and April 1, 2009 to avail themselves of the protections of the Bankruptcy Code.
Article III includes information that is based on representations made by the Debtors.
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B.
Initiation of the Chapter 11 Cases
On either March 31, 2009 or April 1, 2009, each of the Debtors Filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code. The Debtors continue to operate their business and manage their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. On April 13, 2009, the Bankruptcy Court entered an order jointly administering the Chapter 11 Cases pursuant to Bankruptcy Rule 1015(b). No trustee or examiner has been appointed in the Chapter 11 Cases. C. Stabilization of Operations
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After commencing the Chapter 11 Cases, the Debtors sought and obtained a number of orders from the Bankruptcy Court to minimize disruption to their operations and facilitate the administration of the Chapter 11 Cases. Several of these orders are briefly summarized below. 1. Cash Collateral Motion
The Debtors Filed a motion (the Cash Collateral Motion) seeking entry of interim and final orders (i) authorizing the Debtors to use cash collateral, (ii) granting adequate protection to the Debtors prepetition secured creditors, and (iii) scheduling a final hearing on the Cash Collateral Motion [Heritage Docket No. 15]. Subsequent to the filing of the Cash Collateral Motion, the Court entered a series of stipulated orders authorizing the Debtors to use cash collateral with the consent of the First Lien Steering Committee. On April 10, 2009, the Court entered a stipulated interim order (the First Stipulated Cash Collateral Order) authorizing the Debtors to use cash collateral through April 17, 2009 [Heritage Docket No. 125]. On April 17, 2009, the Court entered a second stipulated interim order (the Second Stipulated Cash Collateral Order), which extended the Debtors authorization to use cash collateral through April 28, 2009 [Rhodes Docket No. 73] on similar terms to the First Stipulated Cash Collateral Order. On April 30, 2009, the Court entered a final stipulated order authorizing the Debtors to use cash collateral through June 28, 2009 [Rhodes Docket No. 126]. In response to further requests for extension of the Debtors authority to use cash collateral, the First Lien Steering Committee has consented to periodic continuances of the Debtors use of cash collateral. A copy of the current cash collateral budget is attached hereto as Exhibit C. 2. Cash Management Motion
22 23 24 25 26 27 28 The Debtors Filed a motion (the Cash Management Motion) seeking entry of interim and final orders (i) authorizing the Debtors to continue to use their existing, centralized cash management system, bank accounts and business forms; (ii) granting administrative expense priority status to intercompany claims arising on and after the Petition Date; (iii) waiving the investment and deposit requirements under section 345 of the Bankruptcy Code; and (iv) granting related relief [Rhodes Docket No. 13]. On April 17, 2009, the Bankruptcy Court granted the Cash Management Motion on an interim basis with certain modifications [Rhodes Docket No. 78]. On April 30, 2009, the Bankruptcy Court entered a final order granting the Cash Management Motion on a final basis [Rhodes Docket No. 123].
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3.
Home Sale Motion
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The Debtors Filed a motion (the Home Sale Motion) for authority to, among other things, (i) continue the construction, sale and closing of homes to customers in the ordinary course of business, (ii) honor certain prepetition contract obligations to homebuyers, including, where appropriate in the Debtors business judgment and not inconsistent with past business practices, to refund deposits or provide other customer incentives, (iii) provide that the sale of homes to the Debtors customers shall be free and clear of all liens, claims, encumbrances and other interests, (iv) pay claims secured by liens out of the proceeds of home sales, (v) establish procedures for resolving disputed lien claims, (vi) proceed immediately with the sale of homes and establishment of the lien procedures, and (vii) permit financial institutions to receive, process, honor and pay all checks presented for payment and electronic payment requests relating to the foregoing [Rhodes Docket No. 14]. As set forth in the Home Sale Motion, the Debtors ability to, among other things, satisfy their contractual obligations to their customers and continue to contract for and complete the construction and sale of homes, free and clear of liens, is critical to the Debtors operations. On April 10, 2009 the Bankruptcy Court entered an interim order granting the Home Sale Motion [Rhodes Docket No. 20], and subsequently entered a final order, with certain modifications, on April 17, 2009 (the Final Home Sale Order) [Rhodes Docket No. 77]. Among other things, the Final Home Sale Order established that the construction and sale of homes was required to be consistent with any cash collateral orders and provided the Debtors prepetition lenders with rights to receive certain information and object to certain lien payments. 4. Insider Compensation Motion
As required by the Wages Orders, the Debtors Filed a motion for an order authorizing the Debtors to pay the salary of the Debtors president, James M. Rhodes, through June 26, 2009, the time period of the Debtors 13 week budget, or any such further time period as authorized by the Court or agreed upon by the First Lien Lenders pursuant to any cash collateral order entered in these cases [Rhodes Docket Number 94]. The United States Trustee filed an objection, which was resolved in the order approving the motion on July 21, 2009. 5. Retention of Debtors Professionals
Throughout the Chapter 11 Cases, the Debtors retained certain Professionals to assist them in carrying out their duties as debtors in possession and to otherwise represent their interests in the Chapter 11 Cases. These Professionals included: (a) Pachulski Stang Ziehl & Jones LLP, as general bankruptcy counsel; (b) Larson & Stephens, LLC, as local counsel; (c) Acceleron Group, LLC, as valuation advisor; and (d) Sullivan Group Real Estate Advisors, as market research consultant. The Bankruptcy Court entered an order approving certain procedures for the interim compensation and reimbursement of retained Professionals in the Chapter 11 Cases. 6. Ordinary Course Professionals
The Debtors desired to continue to employ certain professionals such as attorneys and accountants not involved in the administration of the Debtors cases (the Ordinary Course
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Professionals) for the same purposes as such services were provided prior to the Petition Date. Accordingly, pursuant to sections 105(a), 327, 328 and 330 of the Bankruptcy Code and Bankruptcy Rule 2014(a), the Debtors Filed a motion (the OCP Motion) seeking entry of an order authorizing them to retain, employ, and pay Ordinary Course Professionals in the ordinary course of the Debtors businesses, on the terms and conditions set forth in the OCP Motion, and subject to certain monthly payment caps [Rhodes Docket No. 141]. The Bankruptcy Court entered an order approving the OCP Motion on May 19, 2009 [Rhodes Docket No. 187]. D. Appointment of the Creditors Committee
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On May 26, 2009, the United States Trustee appointed the Creditors Committee. The members of the Creditors Committee are: G.C. Wallace, Inc., Interstate Plumbing & Air Conditioning, M&M Electric, Inc. and Southwest Iron Works, LLC. The Creditors Committee retained the law firm of Parsons Behle & Latimer as counsel. E. Claims Bar Dates
On April 30, 2009, each of the Debtors Filed their schedules of assets and liabilities and statement of financial affairs as amended from time to time (collectively, the Schedules) with the Bankruptcy Court. Interested parties may review the Schedules at the office of the Clerk of the United States Bankruptcy Court for the District of Nevada, Southern Division, 300 Las Vegas Boulevard South, Las Vegas, NV 89101 or by visiting www.omnimgt.com/rhodes. By notice dated March 31, 2009, the Court set the claims bar date for 90 days after the date first set for the meeting of creditors, or August 5, 2009 (the Bar Date Notice) [Heritage Docket No. 3]. The Bar Date Notice was served on the Debtors master mailing lists on April 17, 2009. Accordingly, the following Bar Dates have been established: (i) Debtors; August 5, 2009 for all Holders of General Unsecured Claims against all
(ii) September 28, 2009 for all Holders of Claims of Governmental Units for all Debtors except the following three Debtors: Rhodes Homes Arizona, L.L.C. (Case No. 09-14882); Tuscany Golf Country Club, LLC (Case No. 09-14884); and Pinnacle Grading, LLC (Case No. 09-14887); (iii) September 29, 2009 for all Holders of Claims of Governmental Units for the following three Debtors: Rhodes Homes Arizona, L.L.C. (Case No. 09-14882); Tuscany Golf Country Club, LLC (Case No. 09-14884); and Pinnacle Grading, LLC (Case No. 09-14887). On May 27, 2009, the Debtors Filed the Motion of Debtors for Entry of an Order Authorizing the Debtors to Publish Notice of the Bar Dates and Approving the Form of the Publication Notice Pursuant to FRBP 2002(l). The Bankruptcy Court entered an order (the Bar Date Publication Order) granting the motion on July 9, 2009 [Rhodes Docket Number 305]. The Bar Date Publication Order authorized the Debtors to publish notice of the Bar
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Dates in the Las Vegas Review-Journal, the Kingman Daily Miner and such other local publications as the Debtors deemed appropriate within ten days of the entry of the Bar Date Publication Order. The First Lien Steering Committee and the Debtors have been reviewing various Proofs of Claim and will continue to review and evaluate each Proof of Claim Filed prior to the applicable Bar Date to determine whether grounds exist to object to the allowance of such Claims. The First Lien Steering Committee believes that the Claims asserted against the Debtors will likely be resolved and/or reduced to aggregate amounts that approximate the estimates for Allowed Claims set forth herein. However, the actual aggregate amounts of the Allowed Claims in any Class may differ significantly from the First Lien Steering Committees estimates thereof and any variance from such estimates may affect distributions in certain Classes. Article IV. SUMMARY OF THE PLAN THIS SECTION PROVIDES A SUMMARY OF THE STRUCTURE AND MEANS FOR IMPLEMENTATION OF THE PLAN AND THE CLASSIFICATION AND TREATMENT OF CLAIMS AND INTERESTS UNDER THE PLAN, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE PLAN (AS WELL AS THE EXHIBITS THERETO AND DEFINITIONS THEREIN). THE STATEMENTS CONTAINED IN THE DISCLOSURE STATEMENT INCLUDE SUMMARIES OF THE PROVISIONS CONTAINED IN THE PLAN AND IN THE DOCUMENTS REFERRED TO IN THE PLAN. THE STATEMENTS CONTAINED IN THE DISCLOSURE STATEMENT DO NOT PURPORT TO BE PRECISE OR COMPLETE STATEMENTS OF ALL THE TERMS AND PROVISIONS OF THE PLAN OR DOCUMENTS REFERRED TO IN THE PLAN, AND REFERENCE IS MADE TO THE PLAN AND TO SUCH DOCUMENTS FOR THE FULL AND COMPLETE STATEMENT OF SUCH TERMS AND PROVISIONS OF THE PLAN OR DOCUMENTS REFERRED TO IN THE PLAN. THE PLAN ITSELF AND THE DOCUMENTS IN THE PLAN CONTROL THE ACTUAL TREATMENT OF CLAIMS AND INTERESTS UNDER THE PLAN AND WILL, UPON THE OCCURRENCE OF THE EFFECTIVE DATE, BE BINDING UPON ALL HOLDERS OF CLAIMS AND INTERESTS, THE ESTATES, ALL PARTIES RECEIVING PROPERTY UNDER THE PLAN AND OTHER PARTIES IN INTEREST. IN THE EVENT OF ANY CONFLICT BETWEEN THE DISCLOSURE STATEMENT AND THE PLAN OR ANY OTHER OPERATIVE DOCUMENT, THE TERMS OF THE PLAN AND/OR SUCH OTHER OPERATIVE DOCUMENT SHALL CONTROL. A. Overview of a Chapter 11 Plan
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The consummation of a chapter 11 plan is the principal objective of a chapter 11 case. A chapter 11 plan sets forth the means for satisfying claims against, and interests in, a debtor. Confirmation of a chapter 11 plan by a bankruptcy court makes the plan binding upon the
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debtor, any person or entity acquiring property under the plan and any holder of claims against or interests in the debtor, whether or not such holder of claims or interests (1) is impaired under or has accepted the plan or (2) receives or retains any property under the plan. Subject to certain limited exceptions and other than as provided in the plan itself or the confirmation order, a confirmation order discharges the debtor from any debt that arose prior to the date of confirmation of the plan and substitutes therewith the obligations specified under the confirmed plan. A chapter 11 plan may specify that the legal, contractual and equitable rights of the holders of claims or interests in certain classes are to remain unaltered by provisions of the plan. Such classes are referred to as unimpaired and, because of such favorable treatment, are deemed to accept the plan. Accordingly, the Debtors need not solicit votes from the Holders of Claims or Interests in such Classes. A chapter 11 plan also may specify that certain classes will not receive any distribution of property or retain any claim against a debtor. Such classes are deemed not to accept the plan and, therefore, need not be solicited to vote to accept or reject the plan. Any classes that are receiving a distribution of property under the plan but are not unimpaired will be solicited to vote to accept or reject the plan. Section 1123 of the Bankruptcy Code provides that a chapter 11 plan shall classify claims against and interests in the debtor. In compliance therewith, the Plan divides Claims and Interests into various Classes and sets forth the treatment for each Class. The Plan Proponent is also required, as discussed above, under section 1122 of the Bankruptcy Code, to classify Claims and Interests into Classes that contain Claims and Interests that are substantially similar to the other Claims and Interests in such Classes. The First Lien Steering Committee believes that the Plan has classified all Claims and Interests in compliance with the provisions of section 1122 of the Bankruptcy Code, but it is possible that a Holder of a Claim or Interest may challenge the classification of Claims and Interests and that the Bankruptcy Court may find that a different classification is required for the Plan to be confirmed. In such event, the First Lien Steering Committee intends, to the extent permitted by the Bankruptcy Court and the Plan, to make such reasonable modifications of the classifications under the Plan to permit Confirmation and to use the Plan acceptances received in this solicitation for the purpose of obtaining the approval of the reconstituted Class or Classes of which the accepting Holder is ultimately deemed to be a member. Any such reclassification could adversely affect the Class in which such Holder was initially a member, or any other Class under the Plan, by changing the composition of such Class and the vote required of that Class for approval of the Plan. B. Administrative and Priority Claims
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In accordance with section 1123(a)(1) of the Bankruptcy Code, Administrative Claims and Priority Tax Claims have not been classified and thus are excluded from the Classes of Claims set forth in Article III of the Plan. 1. Administrative Claims
Each Allowed Administrative Claim shall be paid in full, in Cash, (i) on the later of (a) the Effective Date, (b) the date on which the Bankruptcy Court enters an order allowing such
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Allowed Administrative Claim, or (c) the date on which the Reorganized Debtors or the Debtors, with the consent of the First Lien Steering Committee (and in consultation with the First Lien Agent and Second Lien Agent) and the Holder of such Allowed Administrative Claim otherwise agree, and (ii) in such amounts as (a) are incurred in the ordinary course of business by the Debtors, (b) are Allowed by the Bankruptcy Court, (c) may be agreed upon between the Holder of such Allowed Administrative Claim and the Reorganized Debtors or the Debtors, with the consent of the First Lien Steering Committee (and in consultation with the First Lien Agent and Second Lien Agent), or (d) may otherwise be required under applicable law. Such Allowed Administrative Claims shall include costs incurred in the operation of the Debtors businesses after the Petition Date, the allowed fees and expenses of Professionals retained by the Debtors and the Creditors Committee and the fees due to the United States Trustee pursuant to 28 U.S.C. 1930. 2. Priority Tax Claims
Allowed Priority Tax Claims shall be paid in full, in Cash, upon the later of (a) the Effective Date, (b) the date upon which there is a Final Order allowing such Claim as an Allowed Priority Tax Claim, (c) the date that such Allowed Priority Tax Claim would have been due if the Chapter 11 Cases had not been commenced, or (d) upon such other terms as may be agreed to between the Reorganized Debtors or the Debtors, with the consent of the First Lien Steering Committee (and in consultation with the First Lien Agent and Second Lien Agent), and any Holder of an Allowed Priority Tax Claim; provided, however, that the Reorganized Debtors or Debtors, with the consent of the First Lien Steering Committee (and in consultation with the First Lien Agent and Second Lien Agent), in lieu of payment in full of Allowed Priority Tax Claims on the Effective Date, may make Cash payments respecting Allowed Priority Tax Claims deferred to the extent permitted by Section 1129(a)(9) of the Bankruptcy Code and, in such event, unless otherwise provided herein, interest shall be paid on the unpaid portion of such Allowed Priority Tax Claim at the Federal statutory rate; provided, further, that deferred Cash payments on account of an Allowed Priority Tax Claim shall be paid quarterly over a period of six years commencing with the quarter after which such Priority Tax Claim has been Allowed. C. Classification and Treatment of Claims
All Claims and Interests, except Administrative Claims and Priority Tax Claims, are classified in the Classes set forth below. A Claim or Interest is classified in a particular Class only to the extent that the Claim or Interest qualifies within the description of that Class and is classified in other Classes to the extent that any portion of the Claim or Interest qualifies within the description of such other Classes. A Claim is also classified in a particular Class for the purpose of receiving distributions pursuant to the Plan only to the extent that such Claim is an Allowed Claim in that Class and has not been paid, released, or otherwise satisfied prior to the Effective Date. 1. Class A-1 First Lien Lender Secured Claims
First Lien Lender Secured Claims include any Secured Claim on account of the First Lien Credit Agreement.
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Class A-1 is Impaired and entitled to vote to accept or reject the Plan. On the Effective Date or such other date as set forth herein, each of the First Lien Lenders (or its Permitted Nominee) shall receive on account of its Secured Claims, (w) its pro rata share of $1.5 million in Cash from the proceeds of the First Lien Lenders Collateral, (x) its pro rata share of 100% of the New First Lien Notes, and (y) its pro rata share of 100% of the Newco Equity Interests (subject to dilution for any Newco Equity Interests issued pursuant to a Management and Director Equity Incentive Plan). The $1.5 million payment to the First Lien Lenders shall be allocated and deemed paid to the First Lien Lenders in accordance with Article VII.F. of the Plan. 2. Class A-2 Second Lien Lender Secured Claims
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Second Lien Lender Secured Claims include any Secured Claim on account of the Second Lien Credit Agreement. Class A-2 is Impaired and entitled to vote to accept or reject the Plan. On the Effective Date, only if the Class of Second Lien Lender Secured Claims votes in favor of the Plan, each of the Second Lien Lenders (or its Permitted Nominee) shall receive its pro rata share of 50% of the net proceeds of the Stanley Engineering Litigation, without a reduction on account of the reasonable fees and expenses of Ropes & Gray LLP and local counsel for the Second Lien Agent, subject to an aggregate cap of $500,000, each of which such fees shall be paid in Cash to the Second Lien Agent on the Effective Date. If the Class of Second Lien Lender Secured Claims votes against the Plan, each of the Second Lien Lenders shall receive no recovery on account of such Secured Claims. 3. Class A-3 Other Secured Claims
Other Secured Claims include any Secured Claim other than a: (a) First Lien Lender Secured Claim; or (b) Second Lien Lender Secured Claim. Class A-3 is Unimpaired and deemed to accept the Plan. To the extent not satisfied by the Debtors, pursuant to Bankruptcy Court order, in the ordinary course of business prior to the Effective Date, at the option of the Reorganized Debtors on or after the Effective Date (i) an Allowed Other Secured Claim shall be Reinstated and rendered Unimpaired in accordance with section 1124(2) of the Bankruptcy Code, (ii) a Holder of an Allowed Other Secured Claim shall receive Cash in an amount equal to such Allowed Other Secured Claim, including any interest on such Allowed Other Secured Claim required to be paid pursuant to section 506(b) of the Bankruptcy Code, on the later of the Effective Date and the date such Other Secured Claim becomes an Allowed Other Secured Claim, or as soon thereafter as is practicable, (iii) a Holder of an Allowed Other Secured Claim shall receive the Collateral securing both its Allowed Other Secured Claim and any interest on such Allowed Other Secured Claim required to be paid pursuant to section 506(b) of the Bankruptcy Code, or (iv) a Holder of an Allowed Other Secured Claim shall receive such treatment as to which such Holder and the Reorganized Debtors or the Debtors, with the consent of the First Lien Steering Committee (and in consultation with the First Lien Agent and Second Lien Agent), otherwise agree.
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4.
Class B Priority Non-Tax Claims
Priority Non-Tax Claims include any Claim accorded priority in right of payment pursuant to section 507(a) of the Bankruptcy Code, other than a Priority Tax Claim or an Administrative Claim. Class B is Unimpaired and deemed to accept the Plan. Each Holder of an Allowed Priority Non-Tax Claim shall receive Cash in an amount equal to such Allowed Priority NonTax Claim on the later of the Effective Date and the date such Priority Non-Tax Claim becomes an Allowed Priority Non-Tax Claim, or as soon thereafter as is practicable, unless the Holder of an Allowed Priority Non-Tax Claim and the Reorganized Debtors or the Debtors, with the consent of the First Lien Steering Committee (and in consultation with the First Lien Agent and Second Lien Agent), otherwise agree. 5. Class C-1 General Unsecured Claims (including any Allowed Rhodes Entities Claims)
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General Unsecured Claims include any Claim (including any Allowed Rhodes Entities Claims) against any of the Debtors that is not a/n (a) Administrative Claim, (b) Priority Tax Claim, (c) Priority Non-Tax Claim, (d) First Lien Lender Secured Claim, (e) Second Lien Lender Secured Claim, (f) Other Secured Claim, (g) First Lien Lender Deficiency Claim, (h) Second Lien Lender Deficiency Claim, (i) Subordinated Claim, or (j) Intercompany Claim. Class C-1 is Impaired and entitled to vote to accept or reject the Plan. On the Effective Date, each Holder of an Allowed General Unsecured Claim (including any Allowed Rhodes Entities Claims) shall receive its pro rata share of the Litigation Trust Interests allocable to the Holders of General Unsecured Claims on account of its Allowed Claim. 6. Class C-2 First Lien Lender Deficiency Claims
First Lien Lender Deficiency Claims include any deficiency Claim arising under the First Lien Credit Agreement. Class C-2 is Impaired and entitled to vote to accept or reject the Plan. On the Effective Date, each Holder of a First Lien Lender Deficiency Claim shall receive its pro rata share of the Litigation Trust Interests allocable to the Holders of First Lien Lender Deficiency Claims on account of its Allowed Claim. 7. Class C-3 Second Lien Lender Deficiency Claims
Second Lien Lender Deficiency Claims include any deficiency Claims arising under the Second Lien Credit Agreement. Class C-3 is Impaired and entitled to vote to accept or reject the Plan. On the Effective Date, each Holder of an Allowed Second Lien Lender Deficiency Claim shall receive its pro rata share of the Litigation Trust Interests allocable to the Holders of Second Lien Lender Deficiency Claims on account of its Allowed Claim. If the Class of Second Lien Lender Secured Claims votes against the Plan, the distribution of Litigation Trust Interests
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allocable to the Holders of Second Lien Lender Deficiency Claims shall be subject to the reasonable fees and expenses of Ropes & Gray LLP and local counsel for the Second Lien Agent. 8. Class C-4 Subordinated Claims
Subordinated Claims include all Claims subject to subordination under Bankruptcy Code section 510. The First Lien Steering Committee does not believe there are any Subordinated Claims but has created such Class out of an abundance of caution. Class C-4 is Impaired and deemed to have rejected the Plan. Claims subordinated under applicable law shall not receive any recovery on account of their Claims. 9. Class D Old Equity Interests
8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 D. Bankruptcy Code Section 1111(b) Election Bankruptcy Code section 1111(b)(1)(A) authorizes a class of secured claims to elect, by at least two-thirds in amount and more than half in number, to waive any deficiency claim otherwise assertable against the debtor and instead require the debtor to make payments equal to the total amount of the claims, with such payment obligation having a present value equal to the current value of the creditors collateral. A section 1111(b) election must be made by a class of secured creditors at or prior to the conclusion of the hearing on the Disclosure Statement. No class of Secured Claims made a section 1111(b) election at or prior to the conclusion of the hearing on the Disclosure Statement. Accordingly, Bankruptcy Code section 1111(b) is not applicable to the Plan. Class E is Impaired and deemed to reject the Plan. At the election of the Reorganized Debtors, Intercompany Claims will be (i) reinstated, in full or in part, (ii) resolved through set-off, distribution, or contribution, in full or in part, or (iii) cancelled and discharged, in full or in part, in which case such discharged and satisfied portion shall be eliminated and the Holders thereof shall not be entitled to, and shall not receive or retain, any property or interest in property on account of such portion under the Plan. Old Equity Interests include all of the Interests in any of the Debtors and any rights, options, warrants, calls, subscriptions or other similar rights or agreements, commitments or outstanding securities obligating the Debtors to issue, transfer or sell any Interests. Class D is Impaired and deemed to reject the Plan. Each holder of an Old Equity Interest shall not be entitled to, and shall not receive or retain any property or interest in property on account of such Old Equity Interest. 10. Class E Intercompany Claims
Intercompany Claims include any Claim held by a Debtor against another Debtor.
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E.
Cramdown
The First Lien Steering Committee will request Confirmation of the Plan under section 1129(b) of the Bankruptcy Code with respect to any Impaired Class that does not accept the Plan pursuant to section 1126 of the Bankruptcy Code. The First Lien Steering Committee reserves the right to modify the Plan to the extent, if any, that Confirmation pursuant to section 1129(b) of the Bankruptcy Code requires modification. F. Means for Implementation of the Plan 1. Substantive Consolidation
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The Plan shall serve as a motion by the First Lien Steering Committee seeking entry of a Bankruptcy Court order substantively consolidating all of the Estates into a single consolidated Estate for all purposes associated with Confirmation and distributions to be made under the Plan. The effect of substantive consolidation is that on the Effective Date: (a) solely for the purposes of the Plan and the distributions and transactions contemplated thereunder, all assets and liabilities of the Debtors Estates shall be deemed consolidated into a single estate; (b) all cross-corporate guarantees made by the Debtors prepetition shall be deemed eliminated (regardless of whether such guaranty is secured, unsecured, liquidated, unliquidated, contingent, or disputed); (c) any obligation of any Debtor and all guarantees thereof executed by one or more of the Debtors shall be deemed to be a single obligation of the consolidated Debtors; (d) any Claims Filed or to be Filed in connection with any such obligation and such guarantees referenced in subsection (c) hereof shall be deemed to be a single Claim against the consolidated Debtors; (e) each and every Claim Filed in the individual Chapter 11 Case of any of the Debtors shall be deemed to be a single obligation of all of the Debtors under the Plan; (f) all duplicative Claims (identical in both amount and subject matter) Filed against more than one of the Debtors shall be automatically expunged so that only one Claim survives against the consolidated Debtors (but in no way shall such surviving Claim be deemed Allowed by reason of this Section); and (g) the Intercompany Claims will be automatically eliminated. All Claims based upon guarantees of collection, payment or performance made by the Debtors as to the obligations of another Debtor or of any other Person shall be discharged, released and of no further force and effect; provided, however, that nothing in the Plan shall affect the obligations of each of the Debtors under the Plan. Notwithstanding the substantive consolidation of these Cases for purposes of the Plan, each of the Debtors shall, as Reorganized Debtors, continue to exist after the Effective Date as separate corporate entities. Substantive consolidation causes no harm to creditors and the benefits of substantive consolidation are numerous. First, over $12 billion in duplicate secured debt claims will be eliminated because the First Lien Lender Claims and the Second Lien Lender Claims each will be allowed only once against the consolidated Estate. Second, over $500 million in Intercompany Claims will be deemed eliminated because the multiple Debtors will be deemed only one Debtor. Third, over $4.6 million of other duplicate Unsecured Claims that have been filed in multiple Chapter 11 Cases will be automatically eliminated. Fourth, approximately 35% of the Claims that have been Filed are asserted incorrectly against the wrong Debtor. Substantive consolidation will eliminate the need for the objection to such Claims.
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Accordingly, the Plan Proponent submits that substantive consolidation is warranted in the Chapter 11 Cases. The following additional factors support substantive consolidation: The Debtors operate as a single business enterprise called Rhodes Homes rather than along distinct legal entities. The Debtors operate on a centralized basis with a central cash management system. All of the Debtors operating expenses are paid for by one Debtor entity on behalf of the other Debtors. Likewise, all funds received by the Debtors are automatically remitted to the central cash management account as required by the First Lien Credit Agreement. The Debtors financial reporting is also on a consolidated basis and the Debtors file consolidated tax returns. The Debtors share common parent companies. The Debtors have overlapping directors or managing members and officers among parent and subsidiaries. Because the Debtors all have the same director/managing member and principal shareholder, Mr. Rhodes, there were no regular meetings of the subsidiaries boards of directors. Also, for most of the Debtors who are LLCs, no board meetings are required. Rather, all corporate actions are done by written consent of the sole shareholder and director/ managing member. All of the Debtors corporate activities are characterized by centralized decision making, including the filing of the bankruptcies. All of the Debtors rely on the corporate office for their accounting, legal, human resources, administrative support. In addition to shared corporate support, all of the Debtors also share common insurance policies. The Debtors regularly conduct business with each other such that the flow of funds is numerous and would be extraordinarily difficult and time consuming to disentangle. As of the Petition Date, the Debtors estimate that approximately $500 million in intercompany claims were owed between the Debtors. The Debtors are all obligated, either as obligors or guarantors, under the First Lien Credit Agreement and the Second Lien Credit Agreement. Based on the 461 Proofs of Claims Filed, at least 160 claimants have Filed Claims against the wrong Debtor entity. Therefore, there is confusion amongst the Creditor body as to which Debtor is the Debtor that is legally obligated on the Claim.
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2.
Sources of Consideration for Plan Distributions
The Reorganized Debtors shall fund distributions under the Plan with Cash on hand, proceeds from the Mediation Settlement, existing assets, and the issuance of the New First Lien Notes and Newco Equity Interests. a. Newco Equity Interests
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On the Effective Date, but not more than thirty days after the Effective Date for initial distributions on account of Allowed Claims, Newco shall issue Newco Equity Interests (based upon the Newco Total Enterprise Value) to the Holders of First Lien Lender Secured Claims. Each share of Class A-2 Equity Interest will be convertible at the option of the holder, exercisable at any time, into one Class A-1 Equity Interest. The economic rights of the Class A-1 Equity Interests and Class A-2 Equity Interests shall be identical. The Class A-2 Equity Interests will not be entitled to general voting rights, but will be entitled to vote on an as converted basis (together with the holders of the Class A-1 Equity Interests, as a single class) on certain non-ordinary course transactions, including (i) any authorization of, or increase in the number of authorized shares of, any class of capital stock ranking equal or senior to the Newco Equity Interests as to dividends or liquidation preference, including additional Newco Equity Interests, (ii) any amendment to the Newcos certificate of incorporation or by-laws, (iii) any amendment to any shareholders agreement, (iv) any sale, lease or other disposition of all or substantially all of the assets of the Reorganized Debtors through one or more transactions, (v) any recapitalization, reorganization, consolidation or merger of the Reorganized Debtors, (vi) to the extent that holders of Class A-1 Equity Interests have the right to vote thereon, any issuance or entry into an agreement for the issuance of capital stock (or any options or other securities convertible into capital stock) of the Reorganized Debtors, except as may be provided for under any management incentive plan, and (vii) to the extent that holders of Class A-1 Equity Interests have the right to vote thereon, any redemption, purchase or other acquisition by the Newco of any of its capital stock (except for purchases from employees upon termination of employment). The Class A-2 Equity Interests will be entitled to a separate class vote on any amendment or modification of any rights or privileges of the Class A-2 Equity Interests that does not equally affect the Class A-1 Equity Interests. In any liquidation, dissolution or winding up of the Reorganized Debtors, all assets will be distributed to holders of the Newco Equity Interests on a pro rata basis. (i) Section 1145 Exemption
Pursuant to section 1145 of the Bankruptcy Code, the offering, issuance, and distribution of any Securities contemplated by the Plan and any and all settlement agreements incorporated therein, including the Newco Equity Interests, shall, to the fullest extent permitted by applicable law, be exempt from, among other things, the registration requirements of section 5 of the Securities Act and any other applicable law requiring registration prior to the offering, issuance, distribution, or sale of Securities. In addition,
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under section 1145 of the Bankruptcy Code any Securities contemplated by the Plan, including the Newco Equity Interests and New First Lien Notes, will be freely tradable and transferable by the recipients thereof, subject to (i) the provisions of section 1145(b)(1) of the Bankruptcy Code relating to the definition of an underwriter in section 2(a)(11) of the Securities Act, and compliance with any rules and regulations of the Securities and Exchange Commission, if any, applicable at the time of any future transfer of such Securities or instruments; (ii) the restrictions, if any, on the transferability of such Securities and instruments set forth in the Newco LLC Operating Agreement, a draft of which is attached hereto as Exhibit J; and (iii) applicable regulatory approval. (ii) Issuance and Distribution of the Newco Equity Interests
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The Newco Equity Interests, when issued or distributed as provided in the Plan, will be duly authorized, validly issued, and, if applicable, fully paid and nonassessable. Each distribution and issuance shall be governed by the terms and conditions set forth in the Plan applicable to such distribution or issuance and by the terms and conditions of the instruments evidencing or relating to such distribution or issuance, which terms and conditions shall bind each Entity receiving such distribution or issuance. b. New First Lien Notes
On the Effective Date or as soon as reasonably practicable thereafter, Newco shall issue the New First Lien Notes. The Reorganized Debtors shall be co-borrowers and guarantors under the New First Lien Notes. The New First Lien Notes shall have the terms set forth on Exhibit 2 to the Plan and as otherwise provided in the terms of the documents governing the New First Lien Notes. A draft of the New First Lien Notes credit agreement is attached hereto as Exhibit K. c. Exit Financing
To the extent the board of directors of Newco (or such other governing body) determines that additional financing is necessary for the operation of the Reorganized Debtors businesses, Newco and/or the Reorganized Debtors may obtain additional financing. The First Lien Steering Committee does not anticipate that additional sources of funding in addition to Cash on hand, the Newco Equity Interests and the New First Lien Notes will be necessary to fund distributions under the Plan on the Effective Date. 3. Corporate Existence
Except as otherwise provided in the Plan, each Debtor shall continue to exist after the Effective Date as a separate corporate entity, limited liability company, partnership, or other form, as the case may be, with all the powers of a corporation, limited liability company, partnership, or other form, as the case may be, pursuant to the applicable law in the jurisdiction in which each applicable Debtor is incorporated or formed and pursuant to the respective certificate of incorporation and bylaws (or other formation documents) in effect prior to the Effective Date, except to the extent such certificate of incorporation and bylaws (or other formation documents) are amended by the Plan or otherwise, and to the extent such
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documents are amended, such documents are deemed to be pursuant to the Plan and require no further action or approval. 4. Vesting of Assets in the Reorganized Debtors
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Except for any Claims or Causes of Action transferred to the Litigation Trust and unless otherwise provided in the Plan or any agreement, instrument, or other document incorporated therein, on the Effective Date, all property in each Estate, all Causes of Action, and any property acquired by any of the Debtors pursuant to the Plan shall vest in each respective Reorganized Debtor, free and clear of all Liens, Claims, charges, or other encumbrances. On and after the Effective Date, except as otherwise provided in the Plan, each Reorganized Debtor may operate its business and may use, acquire, or dispose of property and compromise or settle any Claims, Interests, or Causes of Action without supervision or approval by the Bankruptcy Court and free of any restrictions of the Bankruptcy Code or Bankruptcy Rules. 5. Cancellation of Equity Securities and Related Obligations
On the Effective Date, except as otherwise specifically provided for in the Plan: (1) the Old Equity Interests and any other Certificate, note, bond, indenture, purchase right, option, warrant, or other instrument or document directly or indirectly evidencing or creating any indebtedness or obligation of or ownership interest in the Debtors giving rise to any Claim or Interest (except such Certificates, notes, other instruments or documents evidencing indebtedness or obligations of the Debtors that are Reinstated pursuant to the Plan), shall be cancelled solely as to the Debtors, and the Reorganized Debtors shall not have any continuing obligations thereunder and (2) the obligations of the Debtors pursuant, relating, or pertaining to any agreements, indentures, certificates of designation, bylaws, or certificate or articles of incorporation or similar documents governing the Old Equity Interests and any other Certificates, notes, bonds, indentures, purchase rights, options, warrants, or other instruments or documents evidencing or creating any indebtedness or obligation of the Debtors (except such agreements or Certificates, notes or other instruments evidencing indebtedness or obligations of the Debtors that are specifically Reinstated pursuant to the Plan) shall be released and discharged; provided, however, that notwithstanding Confirmation, any such indenture or agreement that governs the rights of the Holder of a Claim shall continue in effect solely for purposes of: (w) allowing Holders to receive distributions under the Plan; (x) allowing a Servicer to make distributions on account of such Claims as provided in the applicable governing agreement; (y) permitting such Servicer to maintain any rights and Liens it may have against property other than the Reorganized Debtors property for fees, costs, and expenses pursuant to such indenture or other agreement; and (z) governing the rights and obligations of non-Debtor parties to such agreements vis--vis each other (including, without limitation, the rights and obligations of non-Debtor parties under the First Lien Credit Agreement and the Second Lien Credit Agreement, which, for the avoidance of doubt, shall not be affected by the Plan except as otherwise expressly provided in the Plan); provided, further, however, that the preceding proviso shall not affect the discharge of Claims or Interests pursuant to the Bankruptcy Code, the Confirmation Order, or the Plan, or result in any expense or liability to the Reorganized Debtors. The Reorganized Debtors shall not have
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any obligations to any Servicer for any fees, costs, or expenses, except as expressly otherwise provided in the Plan. 6. Restructuring Steps and Transfer of Certain Interests to Newco
In the event the Rhodes Entities comply with all of their obligations pursuant to the Mediation Settlement and the Plan, on the Effective Date or, in the case of step (d) below, effective the next day, the following transactions shall be deemed to have occurred in the order set forth below. a. Newco shall be formed as a new limited liability company. The First Lien Lender Secured Claims shall be deemed to have been exchanged for the membership interests in Newco. Newco shall be deemed to hold all of the First Lien Lender Secured Claims. At the option of a holder, membership interests in Newco may be transferred to a corporation prior to step (b). Newco shall purchase all of the Heritage Equity Securities for $10.00. The Heritage Equity Securities have negligible value and are being purchased for $10 by Newco as part of the Mediation Settlement. Contemporaneous with or subsequent to Newcos purchase of the Heritage Equity Securities, The Rhodes Companies, LLC - the general partner of each of Tick, LP; Glynda, LP; Jackknife, LP; LP; Batcave, LP; Overflow, LP; Wallboard, LP; and Chalkline, LP, --shall sell its general partnership interests in such entities to Newco for $1.00. Alternatively, the membership interest in The Rhodes Companies, LLC may be acquired from its sole member Sagebrush Enterprises, Inc. in consideration for release of its obligations under the First Lien Lender Secured Claims. Newcos members may agree to continue Newco as an LLC, file a check the box election effective the day after the Effective Date to treat Newco as a corporation for tax purposes, or convert into a corporation as of the day after the Effective Date.
8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 d. c. b.
In any event, to the extent any cancellation of indebtedness is derived from the foregoing transactions under the Internal Revenue Code, it shall be allocable to the holders of the Old Equity Interests as required by the Internal Revenue Code. To be clear, Newcos purchase of the Heritage Equity Securities shall occur (a) contemporaneously with or immediately before the membership interests of those entities described in Article IV.F.6.c, immediately above, are acquired; (b) before any debt or obligations of the Debtors are canceled or forgiven; (d) before any new notes are issued or existing debt is modified by the Reorganized Debtors; and (e) before any of the other acts or events contemplated in Article III.B, et seq., of the Plan. The holders of the Heritage Equity Securities and Newco will report the sale and purchase of the Heritage Equity Securities in accordance with revenue ruling 996, 1991-1 CB 432.
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7.
Restructuring Transactions
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On the Effective Date or as soon as reasonably practicable thereafter, the Reorganized Debtors may take all actions as may be necessary or appropriate to effect any transaction described in, approved by, contemplated by, or necessary to effectuate the Plan, including: (1) the execution and delivery of appropriate agreements or other documents of merger, consolidation, or reorganization containing terms that are consistent with the terms of the Plan and that satisfy the requirements of applicable law; (2) the execution and delivery of appropriate instruments of transfer, assignment, assumption, or delegation of any property, right, liability, duty, or obligation on terms consistent with the terms of the Plan; (3) the filing of appropriate certificates of incorporation, merger, or consolidation with the appropriate governmental authorities pursuant to applicable law; (4) the Roll-Up Transactions; (5) the establishment of a liquidation trust or other appropriate vehicle to hold assets for sale that will not be utilized in the business of the Reorganized Debtors; and (6) all other actions that the Reorganized Debtors determine are necessary or appropriate, including the making of filings or recordings in connection with the relevant Roll-Up Transactions. The form of each RollUp Transaction shall be determined by the Reorganized Debtor that is party to such Roll-Up Transaction. Implementation of the Roll-Up Transactions shall not affect any distributions, discharges, exculpations, releases, or injunctions set forth in the Plan. 8. Corporate Action
Each of the matters provided for by the Plan involving the corporate structure of the Debtors or corporate or related actions to be taken by or required of the Reorganized Debtors shall, as of the Effective Date, be deemed to have occurred and be effective as provided in the Plan (except to the extent otherwise indicated), and shall be authorized, approved, and, to the extent taken prior to the Effective Date, ratified in all respects without any requirement of further action by Holders of Claims or Interests, directors of the Debtors, or any other Entity. Without limiting the foregoing, such actions may include: the adoption and filing of the Newco LLC Operating Agreement; the adoption and filing of organization documents of the other Reorganized Debtors; the appointment of directors and officers for the Reorganized Debtors; and the adoption, implementation, and amendment of the Management and Director Equity Incentive Plan. 9. Post-Confirmation Property Sales
To the extent the Reorganized Debtors sell any of their property prior to or including the date that is one year after Confirmation, the Reorganized Debtors may elect to sell such property pursuant to sections 363, 1123, and 1146(a) of the Bankruptcy Code. 10. Organizational Documents
25 26 27 28 The certificates of incorporation and bylaws (or other formation documents relating to limited liability companies, limited partnerships or other forms of Entity) of the Debtors shall be in form and substance acceptable to the First Lien Steering Committee and shall be consistent with the provisions of the Plan and the Bankruptcy Code. The Newco LLC Operating Agreement shall be in form and substance acceptable to the First Lien Steering
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Committee. The organizational documents for Newco shall, among other things: (1) authorize issuance of the Newco Equity Interests; and (2) pursuant to and only to the extent required by section 1123(a)(6) of the Bankruptcy Code, include a provision prohibiting the issuance of non-voting Equity Securities. On or as soon as reasonably practicable after the Effective Date, to the extent required, each of the Reorganized Debtors shall file new certificates of incorporation (or other formation documents relating to limited liability companies limited partnerships, or other forms of Entity) in form and substance acceptable to First Lien Steering Committee, with the secretary (or equivalent state officer or Entity) of the state under which each such Reorganized Debtor is or is to be incorporated or organized. On or as soon as reasonably practicable after the Effective Date, to the extent required, Newco shall file the applicable organizational documents with the secretary (or equivalent state officer or Entity) of the state under which Newco is to be incorporated or organized. After the Effective Date, each Reorganized Debtor may amend and restate its new certificate of incorporation and other constituent documents as permitted by the relevant state corporate law. 11. Effectuating Documents, Further Transactions
On and after the Effective Date, the Reorganized Debtors, and the officers and members of the boards of directors (or other governing bodies) thereof, are authorized to and may issue, execute, deliver, file, or record such contracts, Securities, instruments, releases, and other agreements or documents and take such actions as may be necessary or appropriate to effectuate, implement, and further evidence the terms and conditions of the Plan and the Securities issued pursuant to the Plan in the name of and on behalf of the Reorganized Debtors, without the need for any approvals, authorizations, or consents except for those expressly required pursuant to the Plan. 12. Exemption from Certain Transfer Taxes and Recording Fees
Pursuant to section 1146(a) of the Bankruptcy Code, any transfer from a Debtor to a Reorganized Debtor or to any Entity pursuant to, in contemplation of, or in connection with the Plan or pursuant to: (1) the issuance, distribution, transfer, or exchange of any debt, equity security, or other interest in the Debtors or the Reorganized Debtors; (2) the creation, modification, consolidation, or recording of any mortgage, deed of trust, or other security interest, or the securing of additional indebtedness by such or other means; (3) the making, assignment, or recording of any lease or sublease; or (4) the making, delivery, or recording of any deed or other instrument of transfer under, in furtherance of, or in connection with, the Plan, including any deeds, bills of sale, assignments, or other instrument of transfer executed in connection with any transaction arising out of, contemplated by, or in any way related to the Plan, shall not be subject to any document recording tax, stamp tax, conveyance fee, intangibles or similar tax, mortgage tax, real estate transfer tax, mortgage recording tax, Uniform Commercial Code filing or recording fee, or recording fee, or other similar tax or governmental assessment, and the appropriate state or local governmental officials or agents shall forego the collection of any such tax or governmental assessment and to accept for filing and recordation any of the foregoing instruments or other documents without the payment of any such tax or governmental assessment.
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13.
Directors and Officers of the Reorganized Debtors
On the Effective Date, the board of directors of the Reorganized Debtors or similar governing entities shall be composed of one or more members appointed by the First Lien Steering Committee. On the Effective Date, a chief executive officer or similar officer selected by the board of directors of the Reorganized Debtors shall be appointed. The identity of such officers and directors shall be disclosed at or prior to the Confirmation Hearing. 14. Management and Director Equity Incentive Plan
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The Reorganized Debtors reserve the right to implement a Management and Director Equity Incentive Plan. The terms and conditions of any Management and Director Equity Incentive Plan shall be determined by the Board of Directors of Newco. 15. The Litigation Trust
On the Effective Date, the Litigation Trust will be implemented pursuant to the terms of the Litigation Trust Agreement. A draft of the Litigation Trust Agreement is attached hereto as Exhibit I. On the Effective Date, pursuant to the terms of the Litigation Trust Agreement, the Debtors will transfer the Litigation Trust Assets for and on behalf of the Litigation Trust Beneficiaries, which will be the Holders of Allowed Claims in Classes C-1, C-2 and C-3. For all federal income tax purposes, the beneficiaries of the Litigation Trust shall be treated as grantors and owners thereof and it is intended that the Litigation Trust be classified as a liquidating trust under Section 301.7701-4 of the Treasury Regulations and that such trust is owned by its beneficiaries. Accordingly, for federal income tax purposes, it is intended that the Litigation Trust Beneficiaries be treated as if they had received a distribution of an undivided interest in the Litigation Trust Assets and then contributed such interests to the Litigation Trust. The Litigation Trust will initially be funded with $100,000, which amount will be transferred to the Litigation Trust on the Effective Date and which will be repaid to the Reorganized Debtors from the first proceeds received by the Litigation Trust. The Litigation Trust shall issue non-transferable interests to Holders of Allowed First Lien Lender Deficiency Claims, Allowed Second Lien Lender Deficiency Claims, and Allowed General Unsecured Claims (including any Allowed Rhodes Entities Claims) with each Holder of an Allowed Claim in each of the foregoing Classes of Claims receiving its pro rata share of the Litigation Trust Interests allocable to each such Class of Claims. A list of Litigation Trust Assets is attached hereto as Exhibit G. The Litigation Trust Assets shall include all claims existing against the Rhodes Entities that are not expressly released under the Plan. The claims include the following claims, among others: Claims for beach of fiduciary duty; Claims for misappropriation of Debtor assets for personal use; Claims for usurping corporate opportunity for the benefit of competing interests; Claims for mismanagement of the Debtors operations;
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Claims for fraudulent transfers (to the extent not expressly released under the Plan); Claims for the diversion of corporate resources for the benefit of competing interests.
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Additional discovery and analysis will be required to be performed by the Litigation Trustee before any determination can be made whether the foregoing claims or any other claims are colorable and should be pursued by the Litigation Trust against the Rhodes Entities. The Litigation Trust will undertake a detailed analysis of any potential claims before making a determination on whether to pursue any litigation against the Rhodes Entities. While it is impossible at this time to predict with any certainty whether the foregoing claims or any other claims will be prosecuted and, if they are prosecuted, whether they will be successful, the First Lien Steering Committee believes that prosecution of claims against the Rhodes Entities may yield up to $10 million or more in judgments in favor of the Litigation Trust. However, such claims could also yield no proceeds if they are unsuccessful, or if the Rhodes Entities have valid claims that are permitted to be used as offsets against any liabilities that the Rhodes Entities may be determined to have to the Debtors. The Rhodes Entities do not believe that viable claims or causes of action exist against them and they will vigorously defend any litigation based on the allegations contained in the Trustee Motion or otherwise, which allegations the Rhodes Entities assert are baseless and premised on inadmissible hearsay. 16. Preservation of Causes of Action
In accordance with section 1123(b) of the Bankruptcy Code, except as otherwise provided in the Plan, the Reorganized Debtors and the Litigation Trust shall retain and may enforce all rights to commence and pursue, as appropriate, any and all Causes of Action, whether arising before or after the Petition Date, including any actions specifically enumerated on Exhibit L, and the Reorganized Debtors rights to commence, prosecute, or settle such Causes of Action shall be preserved notwithstanding the occurrence of the Effective Date. The Reorganized Debtors and the Litigation Trust, as applicable, may pursue such Causes of Action, as appropriate, in accordance with the best interests of the Reorganized Debtors and the Litigation Trust, as applicable. No Entity may rely on the absence of a specific reference in the Plan or the Disclosure Statement to any Cause of Action against them as any indication that the Debtors, Reorganized Debtors or the Litigation Trust, as applicable, will not pursue any and all available Causes of Action against them. The Reorganized Debtors and the Litigation Trust, as applicable, expressly reserve all rights to prosecute any and all Causes of Action against any Entity, except as otherwise expressly provided in the Plan. Unless any Causes of Action against an Entity are expressly waived, relinquished, exculpated, released, compromised, or settled in the Plan or a Bankruptcy Court order, the Reorganized Debtors and the Litigation Trust, as applicable, expressly reserve all Causes of Action for later adjudication and, therefore, no preclusion doctrine, including the doctrines of res judicata, collateral estoppel, issue preclusion, claim preclusion, estoppel (judicial, equitable or otherwise), or laches, shall apply to such Causes of
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Action upon, after, or as a consequence of Confirmation or the occurrence of the Effective Date. The Reorganized Debtors and the Litigation Trust, as applicable, reserve and shall retain the foregoing Causes of Action notwithstanding the rejection or repudiation of any executory contract or unexpired lease during the Chapter 11 Cases or pursuant to the Plan. In accordance with section 1123(b)(3) of the Bankruptcy Code, any Causes of Action that a Debtor may hold against any Entity shall vest in the Reorganized Debtors and the Litigation Trust, as the case may be, on the Effective Date. The applicable Reorganized Debtor and the Litigation Trust, as applicable, through its authorized agents or representatives, shall retain and may exclusively enforce any and all such Causes of Action belonging to it. The Reorganized Debtors and the Litigation Trust, as applicable, shall have the exclusive right, authority, and discretion to determine and to initiate, file, prosecute, enforce, abandon, settle, compromise, release, withdraw, or litigate to judgment any such Causes of Action and to decline to do any of the foregoing without the consent or approval of any third party or further notice to or action, order, or approval of the Bankruptcy Court. Neither the Litigation Trust nor the Reorganized Debtors shall commence any litigation against the Rhodes Entities until the Bankruptcy Court rules on the allowance of the Rhodes Entities Claims set forth in Proofs of Claim, included in the Debtors Schedules or otherwise set forth in the Mediation Term Sheet. To the extent any statute of limitations to pursue any claims belonging to the Debtors against the Rhodes Entities would lapse from the execution date of the Mediation Term Sheet through the Bankruptcy Courts resolution of the allowance of the Rhodes Entities Claims, the Rhodes Entities shall be deemed to have consented to an extension of the applicable statute of limitations until sixty days following the Bankruptcy Courts ruling on the allowance of the Rhodes Entities Claims. The Litigation Trust shall have no liability to any entity for any Claims or Causes of Action it determines not to pursue. 17. HOA Board Seats
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The Rhodes Entities shall ensure that designees identified by the Reorganized Debtors shall replace the Rhodes Entities on any HOA boards that in any way are related to the Debtors, Reorganized Debtors or their businesses and Declarant rights or the like shall be transferred to the Reorganized Debtors or their designee(s). 18. Licensing
The Rhodes Entities shall take commercially reasonable steps and/or enter into any agreements or similar documentation reasonably necessary to ensure the Reorganized Debtors' continued use of all of the Debtors applicable professional licenses at no cost to the Rhodes Entities for a period of up to twelve months following the Effective Date. To the extent, Sagebrush Enterprises, Inc. shall have rescinded by September 25, 2009 its revocation of its indemnity of the Nevada contractors license held by Rhodes Design & Development Corporation and such rescission did not negatively affect the general contractors license held by Rhodes Design & Development Corporation, Sagebrush shall be entitled to file an Administrative Claim on behalf of any and all claims asserted against Sagebrush as a result of Sagebrush being the indemnitor that arose from and after the effectiveness of Sagebrushs recission of its indemnity through the Effective Date, provided that the allowance of such
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Administrative Claim shall be subject to resolution by the Bankruptcy Court and/or such other court(s) of competent jurisdiction. Sagebrush has not asserted any Administrative Claims against the Estates as of the date hereof, and the First Lien Steering Committee believes that no such Claims will be made by Sagebrush. The Reorganized Debtors shall indemnify Sagebrush for any and all claims asserted against Sagebrush as a result of Sagebrush being the indemnitor that arise from and after the Effective Date. Professional licenses include, but are not limited to the Nevada State Contractors Board license, and any other general business or similar licenses in any county, state, municipality or other jurisdiction in which the Reorganized Debtors conduct business or own assets as of the Effective Date. The Rhodes Entities shall use commercially reasonable efforts to maintain third party agreements with their real estate brokers and sales agents. 19. Transfer of Rhodes Ranch Golf Course
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Under the terms of the First Lien Credit Agreement, certain of the Rhodes Entities were required to either sell the Rhodes Ranch Golf Course, or if no seller could be found, to buy the Rhodes Ranch Golf Course from the Debtors for a guaranteed purchase price of $8 million. Because the Rhodes Entities could not find a buyer given the state of the economy in December 2008, the Rhodes Entities were forced to purchase the Rhodes Ranch Golf Course for $8 million as required under the First Lien Credit Agreement. The purchase price was based on an appraisal from an independent third party, which appraised the value of the Rhodes Ranch Golf Course at approximately $8.0 million. The Rhodes Entities financed $5.9 million of the purchase price and paid $2.1 million in cash for the Rhodes Ranch Golf Course. Because the purchase of the Rhodes Ranch Golf Course was based on a fair market value appraisal, the Debtors received reasonably equivalent value for the Rhodes Ranch Golf Course such that the transaction could not be avoided as a fraudulent transfer. The Rhodes Ranch Golf Course is the centerpiece of the Debtors Rhodes Ranch development, which is the most valuable asset of the Debtors estates. Given that there is no operating agreement between the Rhodes Entities and the Debtors, the Reorganized Debtors desire to own the Rhodes Ranch Golf Course in order to manage the Rhodes Ranch Golf Course to maximize the value of the Debtors assets. After much negotiation, the Rhodes Entities agreed to transfer the Rhodes Ranch Golf Course to the Reorganized Debtors upon certain terms and conditions set forth in more detail below. On the Effective Date, the applicable Rhodes Entities shall transfer their equity interests in the entity that owns the Rhodes Ranch Golf Course to the Reorganized Debtors (together with any equipment, golf carts, contracts or other assets determined by the First Lien Steering Committee to be necessary for the operation of the Rhodes Ranch Golf Course) pursuant to the terms of a stock transfer agreement in form and substance acceptable to the First Lien Steering Committee and Rhodes, subject to any outstanding debt on the Rhodes Ranch Golf Course. The stock transfer agreement shall contain representations by the Rhodes Entities that the entity that owns the Rhodes Ranch Golf Course does not have any liabilities other than ordinary course liabilities related to the Rhodes Ranch Golf Course and
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indemnification provisions in favor of the Reorganized Debtors by the Rhodes Entities for any non-ordinary course liabilities. In addition, prior to the deadline for filing objections to the Disclosure Statement, the Rhodes Entities shall provide the First Lien Steering Committee with a list of all liabilities of the entity that owns the Rhodes Ranch Golf Course, a lien analysis and copies of all contracts related to the Rhodes Ranch Golf Course and to which the entity that owns the Rhodes Ranch Golf Course is a party, each of which must be acceptable to the First Lien Steering Committee. Other than the $5.9 million loan used to originally purchase the Rhodes Ranch Golf Course from the Debtors, the First Lien Steering Committee does not believe that there have been any additional obligations placed on the Rhodes Ranch Golf Course other than ordinary course liabilities. The existing debt outstanding on the Rhodes Ranch Golf Course shall be refinanced on or before the Effective Date, for a period of no less than twelve (12) months from the Effective Date, on terms and conditions acceptable to Rhodes and the First Lien Steering Committee. The parties will work together in good faith to refinance the existing debt and have been actively working since August on the refinancing and are talking to multiple lending sources. The First Lien Steering Committee believes that the refinancing will be accomplished prior to the Effective Date and, indeed, one of the conditions precedent to the occurrence of the Effective Date is that the refinancing has occurred. As of the date hereof, new financing has not been obtained for the Rhodes Ranch Golf Course. The Rhodes Entities and the First Lien Steering Committee, however, have been engaged in discussions with potential lenders for the Rhodes Ranch Golf Course and are optimistic that favorable financing will be obtained. The potential terms of such financing have not been provided in this Disclosure Statement to ensure that potential lenders do not obtain an unfair negotiating advantage with respect to such terms. Upon obtaining a final commitment for refinancing for the Rhodes Ranch Golf Course, the First Lien Steering Committee will disclose such terms in a filing with the Bankruptcy Court. The Reorganized Debtors shall pay the reasonable costs and expenses associated with the refinancing; provided, that the terms of such refinancing are acceptable to the First Lien Steering Committee. The First Lien Steering Committee acknowledges that the loan documentation may provide that, upon the transfer of the Rhodes Ranch Golf Course to the Reorganized Debtors on the Effective Date, additional collateral from the Reorganized Debtors may be required. The Rhodes Entities shall transfer to the Reorganized Debtors on the Effective Debt any contracts related to the operation of and revenue generated by any cell towers located on the property of the Rhodes Ranch Golf Course. Any funds received after July 31, 2009 from the Las Vegas Valley Water District or other similar entity as an incentive for converting the golf course from a green course to a desert course shall be used for operating expenses associated with the Rhodes Ranch Golf Course, with any excess to become property of the Reorganized Debtors on the Effective Date. The golf course is beneficial to the preservation of the Reorganized Debtors' Rhodes Ranch assets and, as part of the Mediation Settlement, the Reorganized Debtors will obtain title to the Rhodes Ranch Golf Course (through the assumption of the debt on such course not to exceed $5.9 million).
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Rhodes and/or his designee shall have the absolute right to repurchase the Rhodes Ranch Golf Course from the Reorganized Debtors at eight (8) years from the Effective Date for $5.9 million in cash. The Reorganized Debtors may require Rhodes to purchase the Rhodes Ranch Golf Course any time between four (4) and eight (8) years from the Effective Date for $5.9 million in cash provided that the Reorganized Debtors shall provide Rhodes with at least one year advance notice of its intent to sell the Rhodes Ranch Golf Course back to Rhodes. Such transfer shall occur on the applicable anniversary date of the Effective Date. For the avoidance of doubt, if the Reorganized Debtors put the Rhodes Ranch Golf Course to Rhodes in accordance with the terms hereof and Rhodes fails to comply with his obligation to purchase the Rhodes Ranch Golf Course, Rhodes shall be deemed to have forfeited his option to purchase the Rhodes Ranch Golf Course. On the Effective Date, Rhodess obligations to comply with the repurchase shall be secured by either (i) $500,000 in cash in an escrow account or (ii) property worth at least $2 million (the Golf Course Security Property), with the value of such property to be agreed to by Rhodes and the First Lien Steering Committee or otherwise valued by an independent third party appraisal firm acceptable to both Rhodes and the First Lien Steering Committee (except Cushman Wakefield). In the event that Rhodes does not meet the repurchase request, provided that the Rhodes Ranch Golf Course is in the standard condition (defined below), then the Reorganized Debtors shall be entitled to liquidated damages in the form of security pledged (i.e., the $500,000 or the Golf Course Security Property). So long as Rhodes has not defaulted on his obligation to repurchase the Rhodes Ranch Golf Course, Rhodes shall have the absolute and sole discretion to replace the Golf Course Security Property with $500,000 in cash on 30 days written notice to the Reorganized Debtors. Upon deposit of the $500,000 in cash, the Golf Course Security Property shall be released to Rhodes or his designee. Notwithstanding anything to the contrary contained herein, if the Rhodes Ranch Golf Course is not maintained with substantially the same performance and rating criteria at the time of the repurchase request as verified by an independent third party rating agency as it was on the Effective Date (Standard Condition), James Rhodes can (i) require the Reorganized Debtors to cure any conditions to return the Rhodes Ranch Golf Course to its Standard Condition (provided, that the cost of such cure does not exceed $500,000), or (ii) choose not to purchase the Rhodes Ranch Golf Course. Upon either the repurchase of the Rhodes Ranch Golf Course or the written decision to not repurchase the Rhodes Ranch Golf Course (in accordance with the preceding sentence), the Golf Course Security Property or the $500,000 Cash (if not applied to the repurchase of the Rhodes Ranch Golf Course) shall be returned to Rhodes within 30 days. On the Effective Date, the Reorganized Debtors shall record a memorandum of agreement against the Rhodes Ranch Golf Course to evidence the above. 20. Cash Payment
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The Rhodes Entities shall make a cash payment to the Reorganized Debtors of $3.5 million in Cash on the Effective Date. The $3.5 million cash payment shall be used to fund distributions under the Plan and provide working capital to the extent of any excess.
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21.
Transfer of Arizona Assets
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On the Effective Date, pursuant to the asset transfer agreement attached hereto as Exhibit M, the Debtors shall transfer Pravada and the other Arizona Assets set forth on Attachment D to the Mediation Term Sheet, plus the Golden Valley Ranch tradename to the Rhodes Entities free and clear of all liens, claims and encumbrances pursuant to section 363(f) of the Bankruptcy Code; provided, that the non-First Lien Lender/Second Lien Lender liens do not exceed $60,000; provided, further, that such assets shall not include assets owned by Pinnacle Grading located in Arizona and related contracts associated with the assets. All Claims asserted against the Arizona Assets shall be deemed asserted against the Estates and shall be classified in accordance with Article III of the Plan for distribution purposes. The Debtors shall provide James Rhodes notice of any proposed sale of the Pinnacle assets, and James Rhodes shall be granted a right to bid on the sale of such assets within 10 days of such notice. The Rhodes Entities shall permit storage of Pinnacle Grading equipment at current locations at no cost to the Reorganized Debtors for a period through six months following the Effective Date. All executory contracts and unexpired leases associated solely with Arizona shall be assumed and assigned to the Rhodes Entities (or their designee), at no cost to the Debtors or the Reorganized Debtors and all cure costs associated therewith shall be borne by the Rhodes Entities. 22. Trademark and Trade Names
Within the earlier of thirty (30) days following: (i) upon completion of the buildout of all of the Reorganized Debtors homebuilding assets and inventory (regardless of when such assets and inventory were acquired), or (ii) bulk sale of the remaining inventory of the Reorganized Debtors, the Reorganized Debtors shall transfer to James Rhodes (or his designee) the trademarks and tradenames set forth on Attachment E to the Mediation Term Sheet. 23. Self Insured Retention Obligations
The Reorganized Debtors shall indemnify subcontractors that are obligated under any of the Reorganized Debtors existing insurance policies for any post-Effective Date self insured retention obligations paid and/or to be paid by such subcontractors pursuant to such existing insurance policies. 24. Bond Replacement or Indemnification
Those performance bonds guaranteed by the Rhodes Entities in favor of the Debtors shall be replaced on a renewal date by new performance bonds. In the alternative, subject to the Rhodes Entities being reasonably satisfied with the creditworthiness of the Reorganized Debtors, which shall be satisfied solely as of the Effective Date by the Court finding that the Plan is feasible, the existing performance bonds guaranteed by the Rhodes Entities and such guarantees shall remain in place. The applicable Rhodes Entitys agreement to remain a
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guarantor under the existing performance bonds as such performance bonds may be renewed shall be at no cost to the Rhodes Entities (including, but not limited to, the payment of bond premiums). In the event the Reorganized Debtors fail to perform their obligations underlying such renewed performance bonds after the Effective Date, the Reorganized Debtors will indemnify the Rhodes Entities under such outstanding performance bonds for damages incurred by the Rhodes Entities on account of their guarantee of such performance bonds solely as a result of the Reorganized Debtors failure to perform such obligations subsequent to the Effective Date. The Reorganized Debtors shall use commercially reasonable efforts to replace all outstanding performance bonds backstopped by Rhodes Entities within 30 months of the Effective Date. The Bankruptcy Court shall retain jurisdiction to resolve any disputes arising out of this paragraph. Contingent Bond Indemnity Claims will be released in the ordinary course of business as time passes or as work on the underlying project is completed. To the extent that a Contingent Bond Indemnity Claim becomes an Allowed or estimated Claim, such Contingent Bond Indemnity Claim shall be treated as a General Unsecured Claim. 25. Stanley Engineering Litigation
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In the event the Stanley Engineering Litigation is resolved either by judgment or settlement in a manner favorable to the Reorganized Debtors and such resolution does not provide for Cash consideration to be received by the Reorganized Debtors and Second Lien Lenders, the Reorganized Debtors and the Second Lien Agent, assuming the Class of Second Lien Lender Secured Claims votes in favor of the Plan, shall engage in good faith negotiations to ensure that the Second Lien Lenders receive consideration equivalent to 50% of the net value of such resolution and to determine the timing of payment of any such consideration. In the event the Reorganized Debtors and the Second Lien Agent are unable to agree on the amount or form of such consideration, the parties will submit the matter to binding arbitration with the costs thereof to be split evenly among the Reorganized Debtors and the Second Lien Agent (with the costs of the Second Lien Agent to be reimbursed from the consideration to be distributed to the Second Lien Lenders on account of the Stanley Engineering Litigation). G. Treatment of Executory Contracts and Unexpired Leases 1. Assumption and Rejection of Executory Contracts and Unexpired Leases
Except as otherwise provided in the Plan, the Debtors executory contracts or unexpired leases not assumed or rejected pursuant to a Bankruptcy Court order prior to the Effective Date shall be deemed rejected pursuant to sections 365 and 1123 of the Bankruptcy Code, except for those executory contracts or unexpired leases: (1) listed on the schedule of Assumed Executory Contracts and Unexpired Leases attached hereto as Exhibit N; (2) that are Intercompany Contracts, in which case such Intercompany Contracts are deemed automatically assumed by the applicable Debtor as of the Effective Date, unless such Intercompany Contract previously was rejected by the Debtors pursuant to a Bankruptcy Court order, is the subject of a motion to reject pending on the Effective Date; (3) that are the subject of a motion to assume or reject pending on the Effective Date (in which case such assumption or rejection and the effective date thereof shall remain subject to a Bankruptcy
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Court order); (4) that are subject to a motion to reject with a requested effective date of rejection after the Effective Date; or (5) that are otherwise expressly assumed or rejected pursuant to the Plan. Entry of the Confirmation Order shall constitute a Bankruptcy Court order approving the assumptions or rejections of such executory contracts or unexpired leases as set forth in the Plan, all pursuant to sections 365(a) and 1123 of the Bankruptcy Code. Unless otherwise indicated, all assumptions or rejections of such executory contracts and unexpired leases in the Plan are effective as of the Effective Date. Each such executory contract and unexpired lease assumed pursuant to the Plan or by Bankruptcy Court order but not assigned to a third party prior to the Effective Date shall revest in and be fully enforceable by the applicable contracting Reorganized Debtor in accordance with its terms, except as such terms may have been modified by such order. Notwithstanding anything to the contrary in the Plan, the Plan Proponent and the Reorganized Debtors, as applicable, reserve the right to alter, amend, modify, or supplement the schedules of executory contracts or unexpired leases identified in Exhibit N hereto at any time through and including fifteen days after the Effective Date. All executory contracts and unexpired leases associated solely with the Arizona Assets shall be assumed and assigned to the Rhodes Entities (or their designee) to the extent set forth on the schedule of Assumed Executory Contracts and Unexpired Leases attached hereto as Exhibit N, at no cost to the Debtors or the Reorganized Debtors and all Cure costs associated with such scheduled Arizona contracts or leases shall be borne by the Rhodes Entities. 2. Cure of Defaults for Assumed Executory Contracts and Unexpired Leases
With respect to each of the Debtors executory contracts or unexpired leases listed on the schedule of Assumed Executory Contracts and Unexpired Leases, the Plan Proponent shall have designated a proposed Cure, and the assumption of such executory contract or unexpired lease may be conditioned upon the disposition of all issues with respect to Cure. Any provisions or terms of the Debtors executory contracts or unexpired leases to be assumed pursuant to the Plan that are, or may be, alleged to be in default, shall be satisfied solely by Cure, or by an agreed-upon waiver of Cure. Except with respect to executory contracts and unexpired leases in which the Plan Proponent or the Debtors, with the consent of the First Lien Steering Committee, and the applicable counterparties have stipulated in writing to payment of Cure, all requests for payment of Cure that differ from the amounts proposed by the Debtors must be Filed with the Court on or before the Cure Bar Date. Any request for payment of Cure that is not timely Filed shall be disallowed automatically and forever barred from assertion and shall not be enforceable against any Reorganized Debtor, without the need for any objection by the Reorganized Debtors or further notice to or action, order, or approval of the Bankruptcy Court, and any Claim for Cure shall be deemed fully satisfied, released, and discharged upon payment by the Debtors of the amounts listed on the proposed Cure schedule, notwithstanding anything included in the Schedules or in any Proof of Claim to the contrary; provided, however, that nothing shall prevent the Reorganized Debtors from paying any Cure despite the failure of the relevant counterparty to File such request for payment of such Cure. The Reorganized Debtors also may settle any Cure without further notice to or action, order, or approval of the Bankruptcy Court. If the Debtors or Reorganized Debtors, as applicable, or First Lien Steering Committee object to any Cure or any other matter related to assumption, the Bankruptcy Court shall
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determine the Allowed amount of such Cure and any related issues. If there is a dispute regarding such Cure, the ability of the Reorganized Debtors or any assignee to provide adequate assurance of future performance within the meaning of section 365 of the Bankruptcy Code, or any other matter pertaining to assumption, then Cure shall occur as soon as reasonably practicable after entry of a Final Order resolving such dispute, approving such assumption (and, if applicable, assignment), or as may be agreed upon by the Debtors with the consent of the First Lien Steering Committee, or the Reorganized Debtors and the counterparty to the executory contract or unexpired lease. Any counterparty to an executory contract and unexpired lease that fails to object timely to the proposed assumption of any executory contract or unexpired lease will be deemed to have consented to such assumption. The Debtors, with the consent of the First Lien Steering Committee, or the Reorganized Debtors, as applicable, reserve the right either to reject or nullify the assumption of any executory contract or unexpired lease no later than thirty days after a Final Order determining the Cure or any request for adequate assurance of future performance required to assume such executory contract or unexpired lease. Assumption of any executory contract or unexpired lease pursuant to the Plan or otherwise shall result in the full release and satisfaction of any Claims or defaults, whether monetary or nonmonetary, including defaults of provisions restricting the change in control or ownership interest composition or other bankruptcy-related defaults, arising under any assumed executory contract or unexpired lease at any time prior to the effective date of assumption. Any Proofs of Claim Filed with respect to an executory contract or unexpired lease that has been assumed shall be deemed disallowed and expunged, without further notice to or action, order, or approval of the Bankruptcy Court. All Cure costs associated with Executory Contracts related to the Arizona Assets shall be borne by the Rhodes Entities. 3. Preexisting Obligations to the Debtors Under Executory Contracts and Unexpired Leases
Rejection or repudiation of any executory contract or unexpired lease pursuant to the Plan or otherwise shall not constitute a termination of pre-existing obligations owed to the Debtors under such contracts or leases. In particular, notwithstanding any nonbankruptcy law to the contrary, the Reorganized Debtors expressly reserve and do not waive any right to receive, or any continuing obligation of a counterparty to provide, insurance coverage, utilitiy services, warranties, indemnity, guarantee of workmanship, or continued maintenance obligations on goods or services previously purchased by the contracting Debtors or Reorganized Debtors, as applicable, from counterparties to rejected or repudiated executory contracts. The Reorganized Debtors expressly reserve and do not waive the right to receive coverage under any past insurance policy to extent that coverage has not expired under the terms of the insurance policy, regardless of whether such insurance policy is listed as an assumed contract. Similarly, the Reorganized Debtors expressly reserve and do not waive the right to receive services under any contract with a utility provider, regardless of whether such agreement with a utility provider is listed as an assumed contract.
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4.
Claims Based on Rejection or Repudiation of Executory Contracts and Unexpired Leases
8 9 10 11 12 13 14 15 16 17 18
Unless otherwise provided by a Bankruptcy Court order, any Proofs of Claim asserting Claims arising from the rejection or repudiation of the Debtors executory contracts and unexpired leases pursuant to the Plan or otherwise must be Filed with the Claims and Solicitation Agent no later than the Rejection Damages Claim Deadline. Any Proofs of Claim arising from the rejection or repudiation of the Debtors executory contracts or unexpired leases that are not timely Filed by the Rejection Damages Claim Deadline shall be disallowed automatically, forever barred from assertion, and shall not be enforceable against any Reorganized Debtor without the need for any objection by the Reorganized Debtors or further notice to or action, order, or approval of the Bankruptcy Court, and any Claim arising out of the rejection or repudiation of the executory contract or unexpired lease shall be deemed fully satisfied, released, and discharged, notwithstanding anything in the Schedules or a Proof of Claim to the contrary. All Allowed Claims arising from the rejection or repudiation of the Debtors executory contracts and unexpired leases shall be classified as General Unsecured Claims. 5. Intercompany Contracts, Contracts, and Leases Entered Into After the Petition Date
Intercompany Contracts, contracts, and leases entered into after the Petition Date by any Debtor, and any executory contracts and unexpired leases assumed by any Debtor, may be performed by the applicable Reorganized Debtor in the ordinary course of business. 6. Debtor. 7. Warranties Home Sales
All pending home sale contracts shall be assumed by the applicable Reorganized
19 20 21 22 23 24 25 26 27 28 All eligible prepetition home sale contracts with one-year warranty obligations shall be performed in the ordinary course of business of the Reorganized Debtors. Upon the Effective Date, any remaining warranty obligations that are to be assumed by the Reorganized Debtors, which shall only be assumed with the consent of the First Lien Steering Committee, shall be transferred to the Reorganized Debtors. Warranty obligations that are not expressly assumed shall be rejected and treated as General Unsecured Claims. 8. Modification of Executory Contracts and Unexpired Leases Containing Equity Ownership Restrictions
All executory contracts and unexpired leases to be assumed, or conditionally assumed, under the Plan pursuant to sections 365 and 1123 of the Bankruptcy Code shall be deemed so assumed, or so conditionally assumed, without giving effect to any provisions contained in such executory contracts or unexpired leases restricting the change in control or ownership interest composition of any or all of the Debtors, and upon the Effective Date (1) any such restrictions shall be deemed of no further force and effect and (2) any breaches that may arise
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thereunder as a result of Confirmation or Consummation shall be deemed waived by the applicable non-Debtor counterparty. 9. Modifications, Amendments, Supplements, Restatements, or Other Agreements
Unless otherwise provided in the Plan, each executory contract or unexpired lease that is assumed shall include all modifications, amendments, supplements, restatements, or other agreements that in any manner affect such executory contract or unexpired lease, and all executory contracts and unexpired leases related thereto, if any, including all easements, licenses, permits, rights, privileges, immunities, options, rights of first refusal, and any other interests, unless any of the foregoing agreements has been previously rejected or repudiated or is rejected or repudiated under the Plan. Modifications, amendments, supplements, and restatements to prepetition executory contracts and unexpired leases that have been executed by the Debtors during the Chapter 11 Cases shall not be deemed to alter the prepetition nature of the executory contract or unexpired lease, or the validity, priority, or amount of any Claims that may arise in connection therewith. 10. Reservation of Rights
8 9 10 11 12 13 14 15 16 17 18 11. 19 20 21 22 23 24 25 26 2. 27 28 Except as otherwise specifically provided in the Plan, after the Effective Date, the Reorganized Debtors shall have the sole authority: (1) to File, withdraw, or litigate to Claims Administration Responsibilities In the event that the Effective Date does not occur, the Bankruptcy Court shall retain jurisdiction with respect to any consensual request to extend the deadline for assuming or rejecting unexpired leases pursuant to section 365(d)(4) of the Bankruptcy Code. H. Procedures for Resolving Disputed Claims 1. Allowance of Claims Nonoccurrence of Effective Date
Neither the exclusion nor inclusion of any contract or lease on Exhibit N hereto, nor anything contained in the Plan, shall constitute an admission by the Debtors or the First Lien Steering Committee that any such contract or lease is in fact an executory contract or unexpired lease or that any Reorganized Debtor has any liability thereunder. If there is a dispute regarding whether a contract or lease is or was executory or unexpired at the time of assumption or rejection, the Debtors, with the consent of the First Lien Steering Committee, or Reorganized Debtors shall have thirty days following entry of a Final Order resolving such dispute to alter their treatment of such contract or lease.
After the Effective Date, each Reorganized Debtor shall have and retain any and all rights and defenses such Debtor had with respect to any Claim immediately prior to the Effective Date, including the Causes of Action referenced in Article IV of the Plan.
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judgment, objections to Claims; (2) to settle or compromise any Disputed Claim without any further notice to or action, order, or approval by the Bankruptcy Court; and (3) to administer and adjust the Claims Register to reflect any such settlements or compromises without any further notice to or action, order, or approval by the Bankruptcy Court. 3. Estimation of Claims
8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
Before or after the Effective Date, the First Lien Steering Committee or the Reorganized Debtors, as applicable, may (but are not required to) at any time request that the Bankruptcy Court estimate any Disputed Claim that is contingent or unliquidated pursuant to section 502(c) of the Bankruptcy Code for any reason, regardless of whether any party previously has objected to such Claim or whether the Bankruptcy Court has ruled on any such objection, and the Bankruptcy Court shall retain jurisdiction to estimate any such Claim, including during the litigation of any objection to any Claim or during the appeal relating to such objection. Notwithstanding any provision otherwise in the Plan, a Claim that has been expunged from the Claims Register, but that either is subject to appeal or has not been the subject of a Final Order, shall be deemed to be estimated at zero dollars, unless otherwise ordered by the Bankruptcy Court. In the event that the Bankruptcy Court estimates any contingent or unliquidated Claim, that estimated amount shall constitute a maximum limitation on such Claim for all purposes under the Plan (including for purposes of distributions), and the relevant Reorganized Debtor may elect to pursue any supplemental proceedings to object to any ultimate distribution on such Claim. Notwithstanding section 502(j) of the Bankruptcy Code, in no event shall any Holder of a Claim that has been estimated pursuant to section 502(c) of the Bankruptcy Code or otherwise be entitled to seek reconsideration of such estimation unless such Holder has Filed a motion requesting the right to seek such reconsideration on or before twenty days after the date on which such Claim is estimated. 4. Adjustment to Claims Without Objection
Any Claim that has been paid or satisfied, or any Claim that has been amended or superseded, may be adjusted or expunged on the Claims Register by the Reorganized Debtors without a Claims objection having to be Filed and without any further notice to or action, order, or approval of the Bankruptcy Court. Beginning on the end of the first full calendar quarter that is at least ninety days after the Effective Date, the Reorganized Debtors shall publish and File every calendar quarter a list of all Claims that have been paid, satisfied, amended, or superseded during such prior calendar quarter. 5. Time to File Objections to Claims
Any objections to Claims shall be Filed on or before the later of (1) the applicable Claims Objection Deadline and (2) such date as may be fixed by the Bankruptcy Court, after notice and a hearing, whether fixed before or after the date that is one year after the Effective Date. Notwithstanding the foregoing, the First Lien Steering Committee, any First Lien Lender and/or the Reorganized Debtors shall have until sixty days following the Effective Date to object to the Proofs of Claim filed by the Rhodes Entities in the Debtors chapter 11
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cases (provided, that, such objections shall not seek to subordinate the Rhodes Entities Claims, if Allowed). 6. Disallowance of Claims
8 9 10 11 12 13 14
Except as otherwise set forth in the Plan, any Claims held by an Entity from which property is recoverable under section 542, 543, 550, or 553 of the Bankruptcy Code or that is a transferee of a transfer avoidable under section 522(f), 522(h), 544, 545, 547, 548, 549, or 724(a) of the Bankruptcy Code, shall be deemed disallowed pursuant to section 502(d) of the Bankruptcy Code, and Holders of such Claims may not receive any distributions on account of such Claims until such time as such Causes of Action against that Entity have been settled or a Bankruptcy Court order with respect thereto has been entered and all sums due, if any, to the Debtors by that Entity have been turned over or paid to the Reorganized Debtors or the Litigation Trust, as applicable. EXCEPT AS OTHERWISE AGREED, ANY AND ALL PROOFS OF CLAIM FILED AFTER THE BAR DATE SHALL BE DEEMED DISALLOWED AND EXPUNGED AS OF THE EFFECTIVE DATE WITHOUT ANY FURTHER NOTICE TO OR ACTION, ORDER, OR APPROVAL OF THE BANKRUPTCY COURT, AND HOLDERS OF SUCH CLAIMS MAY NOT RECEIVE ANY DISTRIBUTIONS ON ACCOUNT OF SUCH CLAIMS, UNLESS ON OR BEFORE THE CONFIRMATION HEARING SUCH LATE CLAIM HAS BEEN DEEMED TIMELY FILED BY A BANKRUPTCY COURT ORDER. 7. Offer of Judgment
15 16 17 18 19 20 21 22 23 24 25 26 27 28 Distributions of Newco Equity Interests to Holders of Allowed First Lien Lender Secured Claims shall be based upon, among other things, the Newco Total Enterprise Value of $99.6 million. For purposes of distribution, the Newco Equity Interests shall be deemed to The Reorganized Debtors shall be authorized to serve upon a Holder of a Claim an offer to allow judgment to be taken on account of such Claim, and, pursuant to Bankruptcy Rules 7068 and 9014, Federal Rule of Civil Procedure 68 shall apply to such offer of judgment. To the extent the Holder of a Claim must pay the costs incurred by the Reorganized Debtors after the making of such offer, the Reorganized Debtors shall be entitled to setoff such amounts against the amount of any distribution to be paid to such Holder without any further notice to or action, order, or approval of the Bankruptcy Court. 8. Amendments to Claims
On or after the Effective Date, except as expressly authorized in the Plan, a Claim may not be Filed or amended without the prior authorization of the Bankruptcy Court or the Reorganized Debtors, and any such new or amended Claim Filed shall be deemed disallowed in full and expunged without any further action. I. Provisions Governing Distributions 1. Total Enterprise Value for Purposes of Distributions Under the Plan
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have the value assigned to them based upon, among other things, the Newco Total Enterprise Value, regardless of the date of distribution. 2. Distributions on Account of Claims Allowed as of the Effective Date
8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
Except as otherwise provided in the Plan, a Final Order, or as agreed to by the First Lien Steering Committee, initial distributions under the Plan on account of Claims Allowed on or before the Effective Date shall be made on the Distribution Date; provided, however, that (1) Allowed Administrative Claims with respect to liabilities incurred by the Debtors in the ordinary course of business during the Chapter 11 Cases or assumed by the Debtors prior to the Effective Date shall be paid or performed in the ordinary course of business in accordance with the terms and conditions of any controlling agreements, course of dealing, course of business, or industry practice and (2) Allowed Priority Tax Claims, unless otherwise agreed, shall be paid in full in Cash on the Distribution Date or over a five-year period as provided in section 1129(a)(9)(C) of the Bankruptcy Code with annual interest provided by applicable non-bankruptcy law. 3. Distributions on Account of Claims Allowed After the Effective Date a. Payments and Distributions on Disputed Claims
Except as otherwise provided in the Plan, a Final Order, or as agreed to by the First Lien Steering Committee prior to the Effective Date or the Reorganized Debtors after the Effective Date, distributions under the Plan on account of Disputed Claims that become Allowed after the Effective Date shall be made on the Periodic Distribution Date that is at least thirty days after the Disputed Claim becomes an Allowed Claim; provided, however, that (a) Disputed Administrative Claims with respect to liabilities incurred by the Debtors in the ordinary course of business during the Chapter 11 Cases or assumed by the Debtors on or before the Effective Date that become Allowed after the Effective Date shall be paid or performed in the ordinary course of business in accordance with the terms and conditions of any controlling agreements, course of dealing, course of business, or industry practice and (b) Disputed Priority Tax Claims that become Allowed Priority Tax Claims after the Effective Date, unless otherwise agreed, shall be paid in full in Cash on the Periodic Distribution Date that is at least thirty days after the Disputed Claim becomes an Allowed Claim or over a fiveyear period as provided in section 1129(a)(9)(C) of the Bankruptcy Code with annual interest provided by applicable non-bankruptcy law. b. Special Rules for Distributions to Holders of Disputed Claims
Notwithstanding any provision otherwise in the Plan and except as otherwise agreed by the relevant parties: (a) no partial payments and no partial distributions shall be made with respect to a Disputed Claim until all such disputes in connection with such Disputed Claim have been resolved by settlement or Final Order and (b) any Entity that holds both an Allowed Claim and a Disputed Claim shall not receive any distribution on the Allowed Claim unless and until all objections to the Disputed Claim have been resolved by settlement or Final Order and the Claim has been Allowed. In the event that there are Disputed Claims requiring adjudication and resolution, the Reorganized Debtors shall establish appropriate reserves for
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potential payment of such Claims or Interests pursuant to Article VII.C.3 of the Plan. Subject to Article IX.A.5 of the Plan, all distributions made pursuant to the Plan on account of an Allowed Claim shall be made together with any dividends, payments, or other distributions made on account of, as well as any obligations arising from, the distributed property as if such Allowed Claim had been an Allowed Claim on the dates distributions were previously made to Holders of Allowed Claims included in the applicable Class. c. Reserve of Litigation Trust Interests
8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
On the Effective Date, the Reorganized Debtors shall maintain in reserve Litigation Trust Interests for distribution to Holders of Disputed Claims that become Allowed after the Effective Date. As Disputed Claims are Allowed, the Distribution Agent shall distribute, in accordance with the terms of the Plan, Litigation Trust Interests to Holders of Allowed Claims, and the Disputed Claims Reserve shall be adjusted. The Distribution Agent shall withhold in the Disputed Claims Reserve any payments or other distributions made on account of, as well as any obligations arising from, the Litigation Trust Interests initially withheld in the Disputed Claims Reserve, to the extent that such Litigation Trust Interests continue to be withheld in the Disputed Claims Reserve at the time such distributions are made or such obligations arise, and such payments or other distributions shall be held for the benefit of Holders of Disputed Claims whose Claims, if Allowed, are entitled to distributions under the Plan. The Reorganized Debtors may (but are not required to) request estimation for any Disputed Claim that is contingent or unliquidated. Notwithstanding anything in the applicable Holders Proof of Claim or otherwise to the contrary, the Holder of a Claim shall not be entitled to receive or recover a distribution under the Plan on account of a Claim in excess of the lesser of the amount: (a) stated in the Holders Proof of Claim, if any, as of the Distribution Record Date, plus interest thereon to the extent provided for by the Plan; (b) if the Claim is denominated as contingent or unliquidated as of the Distribution Record Date, the amount that the Reorganized Debtors elect to withhold on account of such Claim in the Disputed Claims Reserve, or such other amount as may be estimated by the Bankruptcy Court prior to the Confirmation Hearing; or (c) if a Claim has been estimated, the amount deposited in the Disputed Claim Reserve to satisfy such Claim after such estimation. 4. Delivery of Distributions a. Record Date for Distributions
On the Distribution Record Date, the Claims Register shall be closed and any party responsible for making distributions shall be authorized and entitled to recognize only those record Holders listed on the Claims Register as of the close of business on the Distribution Record Date. Notwithstanding the foregoing, if a Claim is transferred twenty or fewer days before the Distribution Record Date, the Distribution Agent shall make distributions to the transferee only to the extent practical and in any event only if the relevant transfer form contains an unconditional and explicit certification and waiver of any objection to the transfer by the transferor.
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b.
Distribution Agent
The Distribution Agent shall make all distributions required under the Plan, except that distributions to Holders of Allowed Claims governed by a separate agreement and administered by a Servicer shall be deposited with the appropriate Servicer, at which time such distributions shall be deemed complete, and the Servicer shall deliver such distributions in accordance with the Plan and the terms of the governing agreement. c. Delivery of Distributions in General
8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
Except as otherwise provided in the Plan, and notwithstanding any authority to the contrary, distributions to Holders of Allowed Claims shall be made to Holders of record as of the Distribution Record Date by the Distribution Agent or a Servicer, as appropriate: (a) in accordance with Federal Rule of Civil Procedure 4, as modified and made applicable by Bankruptcy Rule 7004; (b) to the signatory set forth on any of the Proofs of Claim Filed by such Holder or other representative identified therein (or at the last known addresses of such Holder if no Proof of Claim is Filed or if the Debtors have been notified in writing of a change of address); (c) at the addresses set forth in any written notices of address changes delivered to the Distribution Agent after the date of any related Proof of Claim; (d) at the addresses reflected in the Schedules if no Proof of Claim has been Filed and the Distribution Agent has not received a written notice of a change of address; or (e) on any counsel that has appeared in the Chapter 11 Cases on the Holders behalf. Except as otherwise provided in the Plan, distributions under the Plan on account of Allowed Claims shall not be subject to levy, garnishment, attachment, or like legal process, so that each Holder of an Allowed Claim shall have and receive the benefit of the distributions in the manner set forth in the Plan. The Debtors, the First Lien Steering Committee, the Reorganized Debtors, and the Distribution Agent, as applicable, shall not incur any liability whatsoever on account of any distributions under the Plan. d. Accrual of Distributions and Other Rights
For purposes of determining the accrual of distributions or other rights after the Effective Date, the Newco Equity Interests and the Litigation Trust Interests, as applicable, shall be deemed distributed as of the Effective Date regardless of the date on which they are actually issued, dated, authenticated, or distributed even though the Reorganized Debtors shall not make any such distributions or distribute such other rights until distributions of the Newco Equity Interests and the Litigation Trust Interests, as applicable, actually take place. e. Allocation Between Principal and Accrued Interest
Except as otherwise provided in the Plan, distributions on account of Allowed Claims shall be treated as allocated first to principal and thereafter to any interest. f. Compliance Matters
In connection with the Plan, to the extent applicable, the Reorganized Debtors and the Distribution Agent shall comply with all tax withholding and reporting requirements imposed on them by any Governmental Unit, and all distributions pursuant to the Plan shall be subject
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to such withholding and reporting requirements. Notwithstanding any provision in the Plan to the contrary, the Reorganized Debtors and the Distribution Agent shall be authorized to take all actions necessary or appropriate to comply with such withholding and reporting requirements, including liquidating a portion of the distribution to be made under the Plan to generate sufficient funds to pay applicable withholding taxes, withholding distributions pending receipt of information necessary to facilitate such distributions, or establishing any other mechanisms they believe are reasonable and appropriate. The Reorganized Debtors reserve the right to allocate all distributions made under the Plan in compliance with all applicable wage garnishments, alimony, child support, and other spousal awards, liens, and encumbrances. g. Fractional, De Minimis, Undeliverable, and Unclaimed Distributions (i) Fractional Distributions
8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
Notwithstanding any other provision of the Plan to the contrary, payments of fractions of shares of Newco Equity Interests or fractions of Litigation Trust Interests shall not be made. The Distribution Agent shall not be required to make distributions or payments of fractions of Newco Equity Interests, Litigation Trust Interests or dollars. Whenever any payment of Cash of a fraction of a dollar or payment of a fraction of Newco Equity Interests or fraction of Litigation Trust Interests pursuant to the Plan would otherwise be required, the actual payment shall reflect a rounding of such fraction to the nearest whole dollar (up or down), with half dollars, half Newco Equity Interests or half Litigation Trust Interests or less being rounded down. (ii) Undeliverable Distributions
If any distribution to a Holder of an Allowed Claim is returned to a Distribution Agent as undeliverable, no further distributions shall be made to such Holder unless and until such Distribution Agent is notified in writing of such Holders then-current address, at which time all currently due missed distributions shall be made to such Holder on the next Periodic Distribution Date. Undeliverable distributions shall remain in the possession of the Reorganized Debtors until such time as a distribution becomes deliverable, or such distribution reverts to the Reorganized Debtors pursuant to Article VII.D.7.c of the Plan, and shall not be supplemented with any interest, dividends, or other accruals of any kind. (iii) Reversion
Any distribution under the Plan that is an Unclaimed Distribution for a period of six months after distribution shall be deemed unclaimed property under section 347(b) of the Bankruptcy Code and such Unclaimed Distribution shall revest in the Reorganized Debtors and, to the extent such Unclaimed Distribution is a distribution of Newco Equity Interests, such Newco Equity Interests shall be deemed cancelled. Upon such revesting, the Claim of any Holder or its successors with respect to such property shall be cancelled, discharged, and forever barred notwithstanding any applicable federal or state escheat, abandoned, or unclaimed property laws to the contrary. The provisions of the Plan regarding undeliverable distributions and Unclaimed Distributions shall apply with equal force to distributions that are
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issued by the Debtors, made pursuant to any indenture or Certificate (but only with respect to the initial distribution by the Servicer to Holders that are entitled to be recognized under the relevant indenture or Certificate and not with respect to Entities to whom those recognized Holders distribute), notwithstanding any provision in such indenture or Certificate to the contrary and notwithstanding any otherwise applicable federal or state escheat, abandoned, or unclaimed property law. h. Manner of Payment Pursuant to the Plan
8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
Any payment in Cash to be made pursuant to the Plan shall be made at the election of the Reorganized Debtors by check or by wire transfer. Checks issued by the Distribution Agent or applicable Servicer on account of Allowed Claims shall be null and void if not presented within 120 days after issuance, but may be requested to be reissued until the distribution revests in the Reorganized Debtors pursuant to Article VII.D.7.c of the Plan. i. Surrender of Cancelled Instruments or Securities
On the Effective Date or as soon as reasonably practicable thereafter, each Holder of a Certificate shall surrender such Certificate to the Distribution Agent or a Servicer (to the extent the relevant Claim or Interest is governed by an agreement and administered by a Servicer). Such Certificate shall be cancelled solely with respect to the Debtors, and such cancellation shall not alter the obligations or rights of any non-Debtor third parties vis--vis one another with respect to such Certificate. No distribution of property pursuant to the Plan shall be made to or on behalf of any such Holder that is a Holder of a Claim unless and until such Certificate is received by the Distribution Agent or the Servicer or the unavailability of such Certificate is reasonably established to the satisfaction of the Distribution Agent or the Servicer. Any Holder of a Claim who fails to surrender or cause to be surrendered such Certificate or fails to execute and deliver an affidavit of loss and indemnity acceptable to the Distribution Agent or the Servicer prior to the first anniversary of the Effective Date, shall have its Claim discharged with no further action, be forever barred from asserting any such Claim against the relevant Reorganized Debtor or its property, be deemed to have forfeited all rights and Claims with respect to such Certificate, and not participate in any distribution under the Plan; furthermore, all property with respect to such forfeited distributions, including any dividends or interest attributable thereto, shall revert to the Reorganized Debtors, notwithstanding any federal or state escheat, abandoned, or unclaimed property law to the contrary. 5. Claims Paid or Payable by Third Parties a. Claims Paid by Third Parties
The Claims and Solicitation Agent shall reduce in full a Claim, and such Claim shall be disallowed without a Claims objection having to be Filed and without any further notice to or action, order, or approval of the Bankruptcy Court, to the extent that the Holder of such Claim receives payment in full on account of such Claim from a party that is not a Debtor or Reorganized Debtor. Further, to the extent a Holder of a Claim receives a distribution on account of such Claim and receives payment from a party that is not a Debtor or a
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Reorganized Debtor on account of such Claim, such Holder shall, within two weeks of receipt thereof, repay or return the distribution to the applicable Reorganized Debtor, to the extent the Holders total recovery on account of such Claim from the third party and under the Plan exceeds the amount of such Claim as of the date of any such distribution under the Plan. The failure of such Holder to timely repay or return such distribution shall result in the Holder owing the applicable Reorganized Debtor annualized interest at the Federal Judgment Rate on such amount owed for each Business Day after the two-week grace period specified above until the amount is repaid. b. Claims Payable by Insurance
8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
Holders of Insured Claims that are covered by the Debtors insurance policies shall seek payment of such Claims from applicable insurance policies, provided that the Reorganized Debtors shall have no obligation to pay any amounts in respect of pre-petition deductibles or self insured retention amounts. Allowed Insured Claim amounts in excess of available insurance shall be treated as General Unsecured Claims. No distributions under the Plan shall be made on account of an Allowed Claim that is payable pursuant to one of the Debtors' insurance policies until the Holder of such Allowed Claim has exhausted all remedies with respect to such insurance policy. To the extent that one or more of the Debtors insurers agrees to satisfy in full a Claim (if and to the extent adjudicated by a court of competent jurisdiction), then immediately upon such insurers agreement, such Claim may be expunged to the extent of any agreed upon satisfaction on the Claims Register by the Claims and Solicitation Agent without a Claims objection having to be Filed and without any further notice to or action, order, or approval of the Bankruptcy Court. c. Applicability of Insurance Policies
Distributions to Holders of Allowed Claims shall be in accordance with the provisions of any applicable insurance policy. Except for Claims and Causes of Action released under the Plan to the Released Parties and Exculpated Parties, nothing contained in the Plan shall constitute or be deemed a waiver of any Cause of Action that the Debtors or any Entity may hold against any other Entity, including insurers under any policies of insurance, nor shall anything contained herein constitute or be deemed a waiver by such insurers of any defenses, including coverage defenses, held by such insurers. 6. Payment of $1.5 Million to First Lien Lenders
The $1,500,000 in Cash payable to the Holders of First Lien Lender Secured Claims from the proceeds of their Collateral pursuant to Article III.B.1. shall be paid as follows: (i) $400,000 on the Effective Date and (ii) the remaining up to $1,100,000 in five quarterly installments of $220,000 beginning on the first day of the fourth month following the Effective Date; provided, that the Reorganized Debtors shall have the right to defer up to two quarterly payments, with such deferred amount(s) to be paid on the next quarterly payment date (and the amount scheduled to be paid on such quarterly payment date deferred for another quarter; provided that the full $1.5 million payment shall be made to the Holders of First Lien Lender Secured Claims within eighteen months of the Effective Date). Notwithstanding the foregoing, in the event that, as of the Effective Date, the debt on the
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Rhodes Ranch Golf Course has been refinanced on terms and conditions acceptable to the First Lien Steering Committee and the Reorganized Debtors have unrestricted cash of at least $3.5 million (after taking into account any amounts required to be paid to reduce the amount of debt on the Rhodes Ranch Golf Course below $5.9 million and without taking into consideration amounts that may have been borrowed under any exit facility unless such amounts were used to pay-down debt on the Rhodes Ranch Golf Course, in which case any amounts used to pay-down debt on the Rhodes Ranch Golf Course will be deemed to reduce unrestricted cash on a dollar for dollar basis), then the initial $400,000 payment to the First Lien Lenders will be increased as follows: (i) if unrestricted cash (as calculated above) is equal to or greater than $3.5 million but less than $4.5 million, the $400,000 payment shall be increased to $700,000; (ii) if unrestricted cash (as calculated above) is equal to or greater than $4.5 million but less than $5.5 million, the $400,000 payment shall be increased to $1,000,000; and (iii) if unrestricted cash (as calculated above) is equal to or greater than $5.5 million, the $400,000 payment shall be increased to $1.5 million, in each case with the subsequent quarterly installments reduced by a corresponding amount to provide for equal payments over the payout periods discussed above. In no event shall the aggregate Cash payments to the First Lien Lenders exceed $1.5 million. 7. General Unsecured Claims Purchase
The First Lien Lenders have agreed to use the aggregate $1.5 million Cash payment provided to them under the Plan to acquire those General Unsecured Claims of the Creditors listed on the schedule attached hereto as Exhibit H (the Claim Purchase Schedule) to the extent such Claims remain outstanding as of the Effective Date; provided that (i) each Holder of a Claim so listed is the original Holder of such Claim and (ii) such Claim(s) is ultimately Allowed. The Claim Purchase Schedule shall delineate whether such Claims are Allowed or Disputed and Claims may be purchased only to the extent ultimately Allowed. Claims included on the Claim Purchase Schedule shall be purchased (subject to the conditions contained in Article VII.G of the Plan) for the amounts listed for such Claims under the heading Allowed Amount (Claim Purchase Amount) on the Claim Purchase Schedule. Payments on account of the purchased Allowed Claims listed on the Claim Purchase Schedule shall be made on the same time frame as the First Lien Lenders receive their allocable Cash payments under Article VII.F of the Plan, with the First Lien Steering Committee determining the order in which Claims are purchased (which, in the first instance, shall be the order in which they are listed on the Claim Purchase Schedule). For the avoidance of doubt, any claim listed on the Claim Purchase Schedule that is disputed, will not be purchased until allowed and only to the extent the aggregate purchase price for all claims purchased inclusive of such newly allowed claims are equal to or less than $1.5 million. Claims subsequently allowed will be purchased in the order in which they are allowed. The First Lien Lenders reserve the right to modify the Claim Purchase Schedule prior to or subsequent to the Effective Date without further Court order; provided, that a Creditor may be removed from the Claim Purchase Schedule only to the extent that (i) its Claims are not ultimately Allowed, (ii) its Claims are subject to setoff (other than under section 547 of the Bankruptcy Code); (iii) such Creditor sells its Claim to a party other than the First Lien Lenders pursuant to Article VII.G of the Plan or (iv) the full $1.5 million has
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been used to purchase other Allowed Claims on the Claim Purchase Schedule before such Creditors Claim is Allowed. The First Lien Lenders shall be subrogated to the rights of Creditors whose Claims are purchased hereunder and any distributions otherwise allocable to the Holders of Claims purchased by the First Lien Lenders shall be distributed pro rata to the Holders of First Lien Lender Secured Claims. The Reorganized Debtors shall be authorized to make the foregoing payments to the Creditors on the Claim Purchase Schedule on behalf of the First Lien Lenders with a corresponding reduction in the $1.5 million payable to the First Lien Lenders. Under no circumstances shall the First Lien Lenders (either directly or through the Reorganized Debtors) pay in excess of $1.5 million in the aggregate for the Claims on the Claim Purchase Schedule. The First Lien Steering Committee may, in its sole discretion (but after consultation with the Debtors and the Creditors Committee), add Claims to the Claim Purchase Schedule at any time; provided that the amount to be paid for all such Claims listed on the Claim Purchase Schedule does not exceed $1.5 million in the aggregate regardless of the total amount of Allowed Claims reflected on the Claim Purchase Schedule. In the event that Allowed Claims in excess of $1.5 million are listed on the Claim Purchase Schedule, Holders of Claims listed on the Claim Purchase Schedule shall have the right to accept or decline payment of less than 100 cents on account of their Claims from the First Lien Lenders. No Creditor listed on the Claim Purchase Schedule shall receive in excess of 100 cents on the dollar for its Claim, and the Reorganized Debtors shall not pursue Claims under Bankruptcy Code section 547 against any Creditor whose Claim is purchased in accordance with Article VII.G. of the Plan. The Plan shall serve as the notice of transfer of Claim required under Bankruptcy Rule 3001(e). If no objections are received by the Voting Deadline, the First Lien Lenders shall be authorized upon the Effective Date to effectuate the foregoing Claim purchase transactions. 8. Claims Trading and Gifting are Authorized Under Applicable Law
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As described in Article VII.G. of the Plan, the Plan provides that Holders of First Lien Lender Secured Claims will receive, among other things, $1.5 million in Cash from the proceeds of their Collateral to be used to purchase those General Unsecured Claims listed on the Claim Purchase Schedule. The First Lien Steering Committee believes that the purchase of Claims listed on the Claim Purchase Schedule constitutes permissible claims trading under the Bankruptcy Code, the Bankruptcy Rules and applicable case law. As a general rule, neither the Bankruptcy Code nor the Bankruptcy Rules prohibit the purchase or sale of claims. See Official Unsecured Creditors Comm. v. Stern (In re SPM Mfg. Corp.), 984 F.2d 1305, 1314 (1st Cir. 1993) (noting that neither the [Bankruptcy Code] nor the [Bankruptcy Rules] prohibit or discourage creditors from receiving cash from non-debtors in exchange for their claims). In addition, Bankruptcy Rule 3001(e)(2) limits the role of bankruptcy courts in the claims transfer process to resolving disputes regarding transfers of claims. See Resurgent Capital Servs. v. Burnett (In re Burnett), 306 B.R. 313, 319 (B.A.P. 9th Cir. 2004) (explaining that Bankruptcy Rule 3001(e)(2) was amended to limit the bankruptcy courts role to adjudicating disputes over transfers of claims); Viking Assocs., L.L.C. v. Drewes (In re Olson), 120 F.3d 98, 102 (8th Cir. 1997) (noting that [w]here there is no dispute [with respect to a claims transfer], there is no longer any role for the court). For purposes of Bankruptcy Rule 3001(e)(2), a dispute regarding a transfer of a claim exists only if the alleged transferor files
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an objection to the transfer. See In re Olson, 120 F.3d at 102. Bankruptcy Rule 3001(e)(2) does not require the parties to a claims transfer to disclose the terms of such transfer to the bankruptcy court. See In re Burnett, 306 B.R. at 318. Finally, there is no requirement in the Bankruptcy Code or the Bankruptcy Rules that a non-debtor that purchases claims from one member of a class of creditors must seek to purchase the claims of all of the members of that class. Based on the foregoing, the First Lien Steering Committee believes that the purchase of the Claims listed on the Claim Purchase Schedule by the Holders of First Lien Lender Secured Claims is permissible under the Bankruptcy Code and the Bankruptcy Rules. Moreover, the First Lien Steering Committee believes that the First Lien Lenders have the discretion to purchase only a portion of the total number of General Unsecured Claims. Finally, absent an objection to the purchase of a Claim, the First Lien Steering Committee submits that the Claim purchase procedures contemplated by the Plan do not require Bankruptcy Court approval and that the First Lien Lenders are authorized to implement the Claim purchase procedures in accordance with Article VII.G. of the Plan. In the alternative, the First Lien Steering Committee believes that the purchase of General Unsecured Claims described in Article VII.F. and VII.G of the Plan is consistent with the Bankruptcy Code and applicable case law because the Holders of First Lien Lender Secured Claims are permitted to share the distributions they receive under the Plan with Holders of junior Claims if they wish to do so. Courts have recognized that holders of secured claims are free to grant all or a portion of the distribution they receive under a plan of reorganization on account of their secured claims to holders of junior claims. See In re SPM Mfg. Co., 984 F.2d at 1313; In re Union Fin. Servs. Group, Inc., 303 B.R. 390, 422 (Bankr. E.D. Mo. 2003); In re Genesis Health Ventures, Inc., 266 B.R. 591, 602 (Bankr. D. Del. 2001). In addition, courts have concluded that there is no unfair discrimination under the Bankruptcy Code where holders of secured claims share the distribution they receive under a plan of reorganization with members of a junior class but not other holders of claims that are equal in priority to such junior class of claims. See In re Union Fin. Servs. Group, Inc., 303 B.R. at 422; In re Genesis Health Ventures, Inc., 266 B.R. at 602. This is particularly true where continued relations with certain junior creditors are important to the future business of a reorganized debtor. See In re Union Fin. Servs., Inc. 303 B.R. at 422. In light of the foregoing, the First Lien Steering Committee believes that the Holders of First Lien Lender Secured Claims should be authorized to gift the $1.5 million in Cash they will receive under the Plan to Holders of those General Unsecured Claims listed on the Claim Purchase Schedule. As the Plan provides for all General Unsecured Claims to receive the same treatment under the Plan, the First Lien Lenders are authorized under applicable law to purchase any one or more Claims without Bankruptcy Court approval. In the alternative, the purchase of those Claims listed on the Claim Purchase Schedule constitutes a permissible gift and should be authorized by the Bankruptcy Court. In addition, the payment of the Second Lien Agents legal fees similarly constitutes a permissible gift from the First Lien Lenders to the Second Lien Lenders and should be authorized by the Bankruptcy Court.
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J.
Effect of Confirmation of the Plan 1. Discharge of Claims and Termination of Interests
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Pursuant to section 1141(d) of the Bankruptcy Code, and except as otherwise specifically provided in the Plan, the distributions, rights, and treatment that are provided in the Plan shall be in complete satisfaction, discharge, and release, effective as of the Effective Date, of Claims, Interests, and Causes of Action of any nature whatsoever, including any interest accrued on Claims or Interests from and after the Petition Date, whether known or unknown, against, liabilities of, Liens on, obligations of, rights against, and Interests in, the Debtors or any of their assets or properties, regardless of whether any property shall have been distributed or retained pursuant to the Plan on account of such Claims and Interests, including demands, liabilities, and Causes of Action that arose before the Effective Date, any liability (including withdrawal liability) to the extent such Claims or Interests relate to services performed by employees of the Debtors prior to the Effective Date and that arise from a termination of any employee, regardless of whether such termination occurred prior to or after the Effective Date, any contingent or non-contingent liability on account of representations or warranties issued on or before the Effective Date, and all debts of the kind specified in sections 502(g), 502(h), or 502(i) of the Bankruptcy Code, in each case whether or not: (1) a Proof of Claim or Interest based upon such debt, right, or Interest is Filed or deemed Filed pursuant to section 501 of the Bankruptcy Code; (2) a Claim or Interest based upon such debt, right, or Interest is Allowed pursuant to section 502 of the Bankruptcy Code; or (3) the Holder of such a Claim or Interest has accepted the Plan. Any default by the Debtors with respect to any Claim or Interest that existed immediately prior to or on account of the filing of the Chapter 11 Cases shall be deemed Cured on the Effective Date. The Confirmation Order shall be a judicial determination of the discharge of all Claims and Interests subject to the Effective Date occurring. 2. Subordinated Claims
The allowance, classification, and treatment of all Allowed Claims and Interests and the respective distributions and treatments under the Plan take into account and conform to the relative priority and rights of the Claims and Interests in each Class in connection with any contractual, legal, and equitable subordination rights relating thereto, whether arising under general principles of equitable subordination, section 510(b) of the Bankruptcy Code, or otherwise. Pursuant to section 510 of the Bankruptcy Code, the Plan Proponent or Reorganized Debtors, as applicable, reserve the right to re-classify any Allowed Claim or Interest in accordance with any contractual, legal, or equitable subordination relating thereto. 3. Compromise and Settlement of Claims and Controversies
Pursuant to section 363 of the Bankruptcy Code and Bankruptcy Rule 9019 and in consideration for the distributions and other benefits provided pursuant to the Plan, the provisions of the Plan shall constitute a good faith compromise of all Claims, Interests, and controversies relating to the contractual, legal, and subordination rights that a Holder of a Claim may have with respect to any Allowed Claim or Interest, or any distribution to be made on account of such an Allowed Claim or Interest. The entry of the Confirmation Order shall
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constitute the Bankruptcy Courts approval of the compromise or settlement of all such Claims, Interests, and controversies, as well as a finding by the Bankruptcy Court that such compromise or settlement is in the best interests of the Debtors, their Estates, and Holders of Claims and Interests and is fair, equitable, and reasonable. In accordance with the provisions of the Plan, pursuant to section 363 of the Bankruptcy Code and Bankruptcy Rule 9019(a), without any further notice to or action, order, or approval of the Bankruptcy Court, after the Effective Date, the Reorganized Debtors may compromise and settle Claims against them and Causes of Action against other Entities. The First Lien Steering Committee believes that the Mediation Settlement is reasonable and should be approved under Bankruptcy Rule 9019. In order to determine whether a compromise may be approved under Bankruptcy Rule 9019, the Bankruptcy Court must consider four factors: (i) the probability of success of the litigation; (ii) the difficulties, if any, to be encountered in the matter of collection; (iii) the complexity of the litigation involved, and the expense, inconvenience and delay necessarily attending it; and (iv) the paramount interest of the creditors and a proper deference to their reasonable views in the premises. See, e.g., In re A&C Properties, 784 F.2d 1377, 1381 (9th Cir. 1986). A compromise may be approved even if all four of the factors do not favor the compromise so long as the factors weigh in favor of the compromise when taken as a whole. See In re Pac. Gas and Elec. Co., 304 B.R. 395, 416 (Bankr. N.D. Cal. 2004). In addition, a compromise does not have to be the best compromise that could have possibly been obtained but, instead, must only fall within a reasonable range of possible outcomes. In re WCI Cable, Inc., 282 B.R. 457, 473-74 (Bankr. D. Or. 2002). Based on the foregoing, the First Lien Steering Committee believes that the compromise embodied in the Plan and the Mediation Settlement is fair and equitable. Specifically, the Mediation Settlement represents a global resolution of, among other things, potential preference actions held by the Debtors Estates relating to the transfer of funds to certain Rhodes Entities within the one year period prior to the Petition Date, issues related to operation of the Reorganized Debtors' businesses and the ownership of the Rhodes Ranch Golf Course. The First Lien Steering Committee estimates that the total amount of all payments made by the Debtors to the Rhodes Entities within the year prior to the Petition Date is in excess of $9 million. With respect to the first factor articulated by the A&C Properties Court, litigation over the potential preference payments identified herein would have been contentious and hard fought. The Rhodes Entities would likely have asserted a number of defenses to the preference claims, including that such payments were received in the ordinary course of business. Moreover, based on the First Lien Steering Committees review of all payments made to insiders within the one year period prior to the Petition Date as reflected in the Debtors Schedules and Schedule B to the Mediation Settlement Term Sheet, and on subsequent conversations with Debtors counsel, the First Lien Steering Committee believes that the Rhodes Entities may have had valid defenses to certain of these transfers. The Mediation Settlement also reflects a resolution of potential fraudulent conveyance actions held by the Estates against the Rhodes Entities. The First Lien Steering Committee believes that these claims would also have been heavily litigated in the absence of a settlement and, while the First Lien Steering Committee believes that it would have ultimately prevailed on certain
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of such claims, there can be no guarantee that a successful result would have been obtained for the Estates. In addition, the prosecution of both the fraudulent conveyance claims and the preference claims would have resulted in substantial expense for the Estates, while at the same time likely delaying the Debtors emergence from chapter 11. Therefore, the First Lien Steering Committee believes that the third factor of the A&C Properties test also weighs in favor of the approval of the Mediation Settlement.5 The fourth factor of the A&C Properties test requires the Bankruptcy Court to consider the paramount interest of creditors. The creditors of the Estates will derive a material benefit from the approval of the Mediation Settlement because, among other things, the Mediation Settlement (i) contemplates a $3.5 million cash payment from the Rhodes Entities to the Reorganized Debtors, which payment will be used to fund working capital needs and distributions contemplated by the Plan, (ii) provides for the transfer of the Arizona Assets, which were non-core assets to the Reorganized Debtors that likely would have required significant additional funding for development, to the Rhodes Entities, (iii) provides for the transfer of the Rhodes Ranch Golf Course, the maintenance and continued operation of which is paramount to maximizing the valu`e of the Reorganized Debtors' assets, to the Reorganized Debtors, (iv) avoids the significant expense and time delay associated with litigating the claims released under the Plan, which would have yielded uncertain results, and (v) enables the Debtors to emerge from bankruptcy expeditiously and consensually, without any unnecessary eradication of value through a prolonged stay in chapter 11. In addition, all claims and causes of action against the Rhodes Entities that are not covered by the limited release provided for in the Mediation Settlement will be transferred to the Litigation Trust for the benefit of all Creditors, to be prosecuted and/or settled post-emergence. In addition to the material benefits listed above, the First Lien Steering Committee believes that the Mediation Settlement will also ensure a smooth transition to new ownership under the Plan. The Mediation Settlement contemplates that stringent bond and licensing requirements will be maintained through the cooperation of the Rhodes Entities, thus allowing the Reorganized Debtors to continue operations without interruption upon emergence. The Mediation Settlement also contemplates that new Qualified Employees and HOA board representatives will be elected by the Reorganized Debtors to ensure a unified and organized post-Effective Date management team. On balance, the First Lien Steering Committee believes that the Estates and their creditors will be obtaining value far in excess of the consideration to be given to the Rhodes Entities if the Mediation Settlement is approved. Given the range of issues involved, and the nature and character of the disputes between the First Lien Steering Committee, the Debtors and Rhodes, the First Lien Steering Committee believes that approval of the Mediation Settlement is appropriate. In addition, as set forth
The second factor to be considered by the Bankruptcy Court in evaluating a settlement proposal is the difficulties, if any, to be encountered in the matter of collection. The First Lien Steering Committee has not completed a detailed review of the financial information of each Rhodes Entity that may have been liable in connection with the claims released under the Plan, and cannot therefore make a determination as to whether each such entity could have satisfied its obligations in connection with any judgment entered by the Bankruptcy Court. The First Lien Steering Committee does, however, believe that the Rhodes Entities may not have been able to comply financially with the terms of judgments received in connection with successful litigation regarding the claims being released under the Plan.
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above, the Mediation Statement satisfies the fair and reasonable standards articulated by courts in this circuit. The entry of the Confirmation Order shall therefore constitute the Bankruptcy Courts approval of the compromise and settlement of the matters subject to the Mediation Settlement as well as a finding by the Bankruptcy Court that such compromise and settlement is in the best interests of the Debtors, their Estates, and holders of claims and interests and is fair, equitable, and reasonable. 4. Releases by the Debtors of the Released Parties
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As described in greater detail below, the Plan contemplates that the Released Parties will receive a release of all Claims and Causes of Action other than Claims and Causes of Action for gross negligence or willful misconduct. The Released Parties include each of: (a) the First Lien Lenders in their capacity as such; (b) the First Lien Steering Committee; (c) the Second Lien Lenders in their capacity as such; (d) with respect to each of the foregoing Entities in clauses (a) through (c), such Entities predecessors, successors and assigns; (e) the Creditors Committee and the members thereof in their capacity as such; (f) with respect to each of the foregoing Entities in clauses (a) through (e), such Entities subsidiaries, affiliates, officers, members, directors, principals, employees, agents, financial advisors, attorneys, accountants, investment bankers, consultants, representatives, and other Professionals; (g) the Debtors officers, employees (including Thomas Robinson and Joseph Schramm) and Professionals, as of the Petition Date; and (h) Paul Huygens; provided, however, that clause (g) shall not include (i) the Rhodes Entities or their affiliates; (ii) insiders of any of the Rhodes Entities (except as to Thomas Robinson and Joseph Schramm); or (iii) relatives of Rhodes. The Plan provides the First Lien Lenders and the Second Lien Lenders with the releases described below as consideration for the First Lien Lenders and Second Lien Lenders good faith participation in the mediation session described in Article I.A and Article I.B hereof. Moreover, the First Lien Lenders are being released in exchange for their agreement to accept equity in Newco on account of the Secured portion of their Claims rather then exercising their contractual right to foreclose on their Collateral, and the First Lien Lenders willingness to provide junior classes with a recovery in the form of the Claims purchase procedures outlined in Article VII.G of the Plan and the payment of the Second Lien Agents legal fees. Pursuant to section 1123(b) of the Bankruptcy Code and except as otherwise specifically provided in the Plan, for good and valuable consideration, including the service of the Released Parties to facilitate the expeditious reorganization of the Debtors and the implementation of the restructuring contemplated by the Plan, and as part of the global settlement described in Article I.B. hereof, on and after the Effective Date, the Released Parties are deemed released by the Debtors, the Reorganized Debtors, and the Estates from any and all Claims, obligations, rights, suits, damages, Causes of Action, remedies, and liabilities whatsoever, including any derivative Claims asserted on behalf of the Debtors, taking place on or before the Effective Date, whether known or unknown, foreseen or unforeseen, existing or hereinafter arising, in law, equity, or otherwise, that the Debtors, the Reorganized Debtors or the Estates would have been legally entitled to
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assert in their own right (whether individually or collectively) or on behalf of the Holder of any Claim or Interest or other Entity, based on or relating to, or in any manner arising from, in whole or in part, the Debtors, the Chapter 11 Cases, the purchase, sale, or rescission of the purchase or sale of any Security of the Debtors, the subject matter of, or the transactions or events giving rise to, any Claim or Interest that is treated in the Plan, the business or contractual arrangements between any Debtor and any of the Released Parties, the restructuring of Claims and Interests prior to or in the Chapter 11 Cases, the negotiation, formulation, or preparation of the Plan and Disclosure Statement, or related agreements, instruments, or other documents, upon any other act or omission, transaction, agreement, event, or other occurrence taking place on or before the Effective Date. 5. Releases by the Debtors of the Rhodes Entities
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The Rhodes Entities shall be deemed released from any and all Claims, obligations, rights, suits, damages, Causes of Action, remedies, and liabilities whatsoever arising under chapter 5 of the Bankruptcy Code with respect to transfers made by the Debtors to the Rhodes Entities during the 2 years prior to the Petition Date; provided, however, that such release shall only apply to transfers expressly set forth in the Schedules as Filed with the Bankruptcy Court as of August 1, 2009 or as disclosed in Attachment B to the Mediation Term Sheet. 6. Releases by First Lien Lenders of First Lien Lenders
As described in greater detail below, the Plan contemplates that each First Lien Lender can elect to release all other First Lien Lenders for all Claims and Causes of Action other than Claims and Causes of action for gross negligence or willful misconduct. Pursuant to Bankruptcy Rule 9019, and except as otherwise specifically provided in the Plan, to the extent a First Lien Lender elects on its Ballot to release the First Lien Lenders in accordance with Section VIII.F. of the Plan, for good and valuable consideration, on and after the Effective Date, to the extent permitted under applicable law, each of the First Lien Lenders electing to grant this release, shall be deemed to release each of the other First Lien Lenders that has elected to grant this release and each of their affiliates from any and all Claims, obligations, rights, suits, damages, Causes of Action, remedies, and liabilities whatsoever, whether known or unknown, foreseen or unforeseen, existing or hereinafter arising, in law, equity, or otherwise, that such First Lien Lender would have been legally entitled to assert against any other First Lien Lender that elected to grant this release, based on or relating to, or in any manner arising from, in whole or in part, the First Lien Credit Agreement, the First Lien Lender Claims, any other claims arising under or related to the First Lien Credit Agreement, the Debtors, the Chapter 11 Cases, the subject matter of, or the transactions or events giving rise to any First Lien Lender Claim, the restructuring of the First Lien Lender Claims prior to or during the Chapter 11 Cases, the negotiation, formulation, or preparation of the Plan and Disclosure Statement, or related agreements, instruments, or other documents, upon any other act or omission, transaction, agreement, event, or other
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occurrence taking place on or before the Effective Date; with such releases constituting an express waiver and relinquishment by each First Lien Lender electing to grant this release of any claims, whether known or unknown that such First Lien Lender may have under Section 1542 of the California Civil code or other analogous state or federal law related to the matters being released; provided, however, that Claims or liabilities arising out of or relating to any act or omission of any First Lien Lender or any of its affiliates that constitutes gross negligence or willful misconduct shall not be released. 7. Exculpation
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Except as otherwise specifically provided in the Plan, no Exculpated Party shall have or incur, and each Exculpated Party is hereby released and exculpated from any Claim, obligation, Cause of Action, or liability to one another or to any Exculpating Party for any Exculpated Claim, except for gross negligence, willful misconduct or fraud but in all respects such Entities shall be entitled to reasonably rely upon the advice of counsel with respect to their duties and responsibilities pursuant to the Plan. The Debtors, the First Lien Steering Committee and the Reorganized Debtors (and each of their respective agents, members, directors, officers, employees, advisors, and attorneys) have, and upon Confirmation of the Plan shall be deemed to have, participated in good faith and in compliance with the applicable provisions of the Bankruptcy Code with regard to the distributions of the Securities pursuant to the Plan, and therefore are not, and on account of such distributions shall not be, liable at any time for the violation of any applicable law, rule, or regulation governing the solicitation of acceptances or rejections of the Plan or such distributions made pursuant to the Plan. 8. Injunction
Except as otherwise expressly provided in the Plan or for obligations issued pursuant to the Plan, all Entities who have held, hold, or may hold Claims against the Debtors, and all Entities holding Interests, are permanently enjoined, from and after the Effective Date, from: (1) commencing or continuing in any manner any action or other proceeding of any kind against the Debtors or Reorganized Debtors on account of or in connection with or with respect to any such Claims or Interests; (2) enforcing, attaching, collecting, or recovering by any manner or means any judgment, award, decree or order against the Debtors or Reorganized Debtors on account of or in connection with or with respect to any such Claims or Interests; (3) creating, perfecting, or enforcing any encumbrance of any kind against the Debtors or Reorganized Debtors or the property or estates of the Debtors or Reorganized Debtors on account of or in connection with or with respect to any such Claims or Interests; (4) asserting any right of setoff, subrogation, or recoupment of any kind against any obligation due from the Debtors or Reorganized Debtors or against the property or Estates of the Debtors or Reorganized Debtors on account of or in connection with or with respect to any such Claims or Interests unless such Holder has Filed a motion requesting the right to perform such setoff on or before the Confirmation Date, and notwithstanding an indication in a Proof of Claim or Interest or otherwise that such Holder asserts, has, or intends to preserve any right of setoff pursuant to section 553 of the Bankruptcy Code or otherwise (provided, that, to the extent the Rhodes Entities Claims are Allowed, the Rhodes
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Entities, without the need to file any such motion, shall retain the right to assert a setoff against any Claims or Causes of Action that the Reorganized Debtors or Litigation Trust may assert against the Rhodes Entities, with the Reorganized Debtors and Litigation Trust, as applicable, reserving the right to challenge the propriety of any such attempted setoff, with any such challenge to be resolved by the Bankruptcy Court); and (5) commencing or continuing in any manner any action or other proceeding of any kind on account of or in connection with or with respect to any such Claims or Interests released or settled pursuant to the Plan. 9. Protection Against Discriminatory Treatment
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Consistent with section 525 of the Bankruptcy Code and the Supremacy Clause of the U.S. Constitution, all Entities, including Governmental Units, shall not discriminate against the Reorganized Debtors or deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise, or other similar grant to, condition such a grant to, discriminate with respect to such a grant against, the Reorganized Debtors, or another Entity with whom such Reorganized Debtors have been associated, solely because one of the Debtors has been a debtor under chapter 11, has been insolvent before the commencement of the Chapter 11 Cases (or during the Chapter 11 Cases but before the Debtor is granted or denied a discharge) or has not paid a debt that is dischargeable in the Chapter 11 Cases. 10. Setoffs
Except as otherwise expressly provided for in the Plan, each Reorganized Debtor, pursuant to the Bankruptcy Code (including section 553 of the Bankruptcy Code), applicable non-bankruptcy law, or as may be agreed to by the Holder of a Claim, may setoff against any Allowed Claim and the distributions to be made pursuant to the Plan on account of such Allowed Claim (before any distribution is made on account of such Allowed Claim), any Claims, rights, and Causes of Action of any nature that such Debtor, Reorganized Debtor or the Litigation Trust, as applicable, may hold against the Holder of such Allowed Claim, to the extent such Claims, rights, or Causes of Action against such Holder have not been otherwise compromised or settled on or prior to the Effective Date (whether pursuant to the Plan or otherwise); provided, however, that neither the failure to effect such a setoff nor the allowance of any Claim pursuant to the Plan shall constitute a waiver or release by such Reorganized Debtor or the Litigation Trust of any such Claims, rights, and Causes of Action that such Reorganized Debtor or the Litigation Trust may possess against such Holder. In no event shall any Holder of Claims be entitled to setoff any Claim against any Claim, right, or Cause of Action of the Debtor or Reorganized Debtor, as applicable, unless such Holder has Filed a motion with the Bankruptcy Court requesting the authority to perform such setoff on or before the Confirmation Date, and notwithstanding any indication in any Proof of Claim or otherwise that such Holder asserts, has, or intends to preserve any right of setoff pursuant to section 553 or otherwise; provided, however, that, to the extent the Rhodes Entities Claims are Allowed, the Rhodes Entities, without the need to file any such motion, shall retain the right to assert a setoff against any Claims or Causes of Action that the Reorganized Debtors or Litigation Trust may assert against the Rhodes Entities, with the Reorganized Debtors and Litigation Trust, as applicable, reserving the right to
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challenge the propriety of any such attempted setoff, with any such challenge to be resolved by the Bankruptcy Court). 11. Recoupment
In no event shall any Holder of Claims or Interests be entitled to recoup any Claim or Interest against any Claim, right, or Cause of Action of the Debtors or the Reorganized Debtors, as applicable, unless such Holder actually has performed such recoupment and provided notice thereof in writing to the Debtors and the First Lien Steering Committee on or before the Confirmation Date, notwithstanding any indication in any Proof of Claim or Interest or otherwise that such Holder asserts, has, or intends to preserve any right of recoupment. 12. Release of Liens
8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 If the Bankruptcy Court disallows a Claim for reimbursement or contribution of an Entity pursuant to section 502(e)(1)(B) of the Bankruptcy Code, then to the extent that such Claim is contingent as of the time of allowance or disallowance, such Claim shall be forever disallowed notwithstanding section 502(j) of the Bankruptcy Code, unless prior to the Effective Date: (1) such Claim has been adjudicated as noncontingent or (2) the relevant Except as otherwise provided in the Plan or in any contract, instrument, release, or other agreement or document created pursuant to the Plan, on the Effective Date and concurrently with the applicable distributions made pursuant to the Plan, all mortgages, deeds of trust, Liens, pledges, or other security interests against any property of the Estates shall be fully released, and discharged, and all of the right, title, and interest of any Holder of such mortgages, deeds of trust, Liens, pledges, or other security interests shall revert to the Reorganized Debtors and their successors and assigns. Upon the Effective Date, the Confirmation Order shall be binding upon and govern the acts of all entities, including, without limitation, all filing agents, filing officers, title agents, title companies, recorders of mortgages, recorders of deeds, registrars of deeds, administrative agencies, governmental departments, secretaries of state, federal and local officials, and all other persons and entities who may be required by operation of law, the duties of their office, or contract, to release any mortgages, deeds of trust, Liens, pledges or other security interests against any property of the Estates; and each of the foregoing persons and entities is hereby directed to accept for filing the Confirmation Order any and all of the documents and instruments necessary and appropriate to effectuate the discharge. 13. Document Retention
On and after the Effective Date, the Reorganized Debtors may maintain documents in accordance with their current document retention policy, as may be altered, amended, modified, or supplemented by the Reorganized Debtors in the ordinary course of business. Copies of all Debtors books and records shall be delivered to the Rhodes Entities at no cost to the Rhodes Entities on or prior to the Effective Date. 14. Reimbursement or Contribution
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Holder of a Claim has Filed a noncontingent Proof of Claim on account of such Claim and a Final Order has been entered determining such Claim as no longer contingent. K. Allowance and Payment of Certain Administrative Claims 1. Professional Claims a. Final Fee Applications
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All final requests for payment of Claims of a Professional shall be Filed no later than forty-five days after the Effective Date. After notice and a hearing in accordance with the procedures established by the Bankruptcy Code and prior Bankruptcy Court orders, the Allowed amounts of such Professional Claims shall be determined by the Bankruptcy Court. b. Payment of Interim Amounts
Except as otherwise provided in the Plan, Professionals shall be paid pursuant to the Interim Compensation Order. c. Reimbursable Expenses
The reasonable fees and expenses incurred by (i) the First Lien Agent, including its professionals, to the extent provided by the First Lien Credit Agreement, (ii) the Second Lien Agent, including its professionals, to the extent provided by the Second Lien Credit Agreement (only to the extent the Class of Second Lien Lender Secured Claims votes in favor of the Plan, and (iii) the First Lien Steering Committee, including its professionals, in connection with the Chapter 11 Cases shall be paid by the Debtors or Reorganized Debtors, as applicable, within 15 days of receipt of an invoice from such parties or their advisors. d. Post-Effective Date Fees and Expenses
Except as otherwise specifically provided in the Plan, from and after the Effective Date, the Reorganized Debtors shall, in the ordinary course of business and without any further notice to or action, order, or approval of the Bankruptcy Court, pay in Cash the reasonable legal, professional, or other fees and expenses related to implementation and Consummation incurred by the Reorganized Debtors and First Lien Steering Committee. Upon the Effective Date, any requirement that Professionals comply with sections 327 through 331 and 1103 of the Bankruptcy Code in seeking retention or compensation for services rendered after such date shall terminate, and the Reorganized Debtors may employ and pay any Professional in the ordinary course of business without any further notice to or action, order, or approval of the Bankruptcy Court. e. Substantial Contribution Compensation and Expenses
Except as otherwise specifically provided in the Plan, any Entity who requests compensation or expense reimbursement for making a substantial contribution in the Chapter 11 Cases pursuant to sections 503(b)(3), (4), and (5) of the Bankruptcy Code must File an application and serve such application on counsel for the Debtors or Reorganized Debtors, as
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applicable, and the First Lien Steering Committee and the Creditors Committee, and as otherwise required by the Bankruptcy Court and the Bankruptcy Code on or before the Administrative Claim Bar Date or be forever barred from seeking such compensation or expense reimbursement. 2. Other Administrative Claims
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All requests for payment of an Administrative Claim must be Filed with the Claims and Solicitation Agent and served upon counsel to the Debtors or Reorganized Debtors, as applicable, and the First Lien Steering Committee on or before the Administrative Claim Bar Date. Any request for payment of an Administrative Claim that is not timely Filed and served shall be disallowed automatically without the need for any objection by the Debtors, Reorganized Debtors, or the First Lien Steering Committee. The Reorganized Debtors may settle and pay any Administrative Claim in the ordinary course of business without any further notice to or action, order, or approval of the Bankruptcy Court. In the event that any party with standing objects to an Administrative Claim, the Bankruptcy Court shall determine the Allowed amount of such Administrative Claim. Notwithstanding the foregoing, no request for payment of an Administrative Claim need be Filed with respect to an Administrative Claim previously Allowed by Final Order. L. Conditions Precedent to Confirmation and Consummation of the Plan 1. Conditions to Confirmation
The following are conditions precedent to Confirmation that must be satisfied or waived in accordance with Article X.C of the Plan: A. The Bankruptcy Court shall have approved the Disclosure Statement, in a manner acceptable to the Plan Proponent, as containing adequate information with respect to the Plan within the meaning of section 1125 of the Bankruptcy Code. The Confirmation Order shall be in form and substance acceptable to the Plan Proponent. The terms and conditions of employment or retention of any Persons proposed to serve as officers or directors of Newco, including, without limitation, as to compensation, shall be acceptable to the Plan Proponent and shall be disclosed at or prior to the Confirmation Hearing. Any disclosures made pursuant to 11 U.S.C. 1129(a)(5) shall be acceptable to the Plan Proponent. All of the schedules, documents, and exhibits ancillary to the Plan and Disclosure Statement including, but not limited to, (i) the Claim Purchase Schedule, (ii) the Litigation Trust Agreement, (iii) the Newco LLC Operating Agreement, (iv) the New First Lien Notes credit
B. C.
D. E.
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agreement, (v) the Schedule of Causes of Action, (vi) the Asset and Stock Transfer Agreement, and (vii) the Schedule of Assumed Executory Contracts and Unexpired Leases shall be in form and substance acceptable to the Plan Proponent. 2. Conditions Precedent to the Effective Date
The following are conditions precedent to Consummation that must be satisfied or waived in accordance with Article X.C of the Plan: A. The Bankruptcy Court shall have authorized the assumption and rejection of executory contracts and unexpired leases by the Debtors as contemplated by Article V of the Plan. All of the schedules, documents, and exhibits ancillary to the Plan and Disclosure Statement including, but not limited to, (i) the Claim Purchase Schedule, (ii) the Litigation Trust Agreement, (iii) the Newco LLC Operating Agreement, (iv) the New First Lien Notes credit agreement, (v) the Schedule of Causes of Action, (vi) the Asset and Stock Transfer Agreement, and (vii) the Schedule of Assumed Executory Contracts and Unexpired Leases shall be in form and substance acceptable to the Plan Proponent. The Confirmation Order shall have become a Final Order in form and substance acceptable to the Plan Proponent. The documents governing the New First Lien Notes and the Newco LLC Operating Agreement shall be in form and substance acceptable to the Plan Proponent. The Confirmation Date shall have occurred. The First Lien Steering Committee shall have designated and replaced each existing Qualified Employee of the Debtors with a new Qualified Employee for the Reorganized Debtors. The debt outstanding on the Rhodes Ranch Golf Course shall be refinanced on terms and conditions acceptable to Rhodes and the First Lien Steering Committee. Copies of all Debtors books and records shall have been delivered to the Rhodes Entities at no cost to the Rhodes Entities. The Arizona Assets shall have been transferred to the Rhodes Entities (or their designee) free and clear of all liens and claims pursuant to section 363(f) of the Bankruptcy Code on the Effective Date; provided, that the non-First Lien Lender/Second Lien Lender liens do not exceed $60,000.
8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 I. H. G. F. E. D. C. B.
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J.
The Debtors shall have assumed and assigned all executory contracts and unexpired leases related solely to the Arizona Assets to the Rhodes Entities (or their designee), at no cost to the Debtors or the Reorganized Debtors, with all Cure costs associated therewith to be borne by the Rhodes Entities. The tax structure set forth in Article IV.F of the Plan shall be implemented. The Rhodes Entities and First Lien Steering Committee shall have agreed on the Golf Course Security Property. The Rhodes Entities shall have performed all of their obligations under the Plan including, without limitation, depositing $3.5 million in Cash in an account designated by the Debtors, with the consent of the First Lien Steering Committee, and transferred the Rhodes Ranch Golf Course and related contracts and assets as required by Article IV.S. of the Plan to the Reorganized Debtors.
K. L. M.
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Waiver of Conditions Precedent
The First Lien Steering Committee may waive any of the conditions to the Effective Date at any time, without any notice to parties in interest and without any further notice to or action, order, or approval of the Bankruptcy Court, and without any formal action other than proceeding to confirm or consummate the Plan; provided, that the First Lien Steering Committee will not waive the conditions precedent in items X.B.6 through 12 of the Plan if the Rhodes Entities shall have complied with all of their obligations hereunder and in the Plan by the Effective Date (or such earlier date specifically set forth herein). In the event the Rhodes Entities fail to comply with any of their obligations under the Mediation Term Sheet or under the Plan by the Effective Date (or such earlier date specifically set forth herein) and fail to cure such alleged breach within ten (10) days written notice to the Rhodes Entities, then the First Lien Steering Committee shall be entitled to file a motion on at least seven (7) days notice to (i) determine that a breach has occurred (except that the failure of the parties to agree on the refinancing of the Rhodes Ranch Golf Course solely as a result of the First Lien Steering Committee acting unreasonably or in bad faith shall not be deemed a failure of the Rhodes Entities to comply with their obligations hereunder or under the Plan), and the Rhodes Entities reserve their right to object to such motion; (ii) modify the Plan to remove any provisions hereof that were included for the benefit of the Rhodes Entities; and (iii) consummate the Plan, as modified. Upon entry of an order of the Bankruptcy Court finding a breach by the Rhodes Entities and authorizing the modifications to the Plan to remove any provisions that were included for the benefit of the Rhodes Entities, the First Lien Steering shall be authorized to make such modifications and consummate the Plan. 4. Effect of Non-Occurrence of Conditions to Consummation
Each of the conditions to Consummation must be satisfied or duly waived pursuant to Article X.C. of the Plan, and Consummation must occur within 180 days of Confirmation, or
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by such later date established by Bankruptcy Court order. If Consummation has not occurred within 180 days of Confirmation, then upon motion by a party in interest made before Consummation and a hearing, the Confirmation Order may be vacated by the Bankruptcy Court; provided, however, that notwithstanding the Filing of such motion to vacate, the Confirmation Order may not be vacated if Consummation occurs before the Bankruptcy Court enters an order granting such motion. If the Confirmation Order is vacated pursuant to Article X.D of the Plan or otherwise, then except as provided in any order of the Bankruptcy Court vacating the Confirmation Order, the Plan will be null and void in all respects, including the discharge of Claims and termination of Interests pursuant to the Plan and section 1141 of the Bankruptcy Code and the assumptions, assignments, or rejections of executory contracts or unexpired leases pursuant to Article V of the Plan, and nothing contained in the Plan or Disclosure Statement shall: (1) constitute a waiver or release of any Claims, Interests, or Causes of Action; (2) prejudice in any manner the rights of the Debtors, the First Lien Steering Committee or any other Entity; or (3) constitute an admission, acknowledgment, offer, or undertaking of any sort by the Debtors, the First Lien Steering Committee or any other Entity. 5. Satisfaction of Conditions Precedent to Confirmation
Upon entry of a Confirmation Order acceptable to the Plan Proponent, each of the conditions precedent to Confirmation, as set forth in Article X.A of the Plan, shall be deemed to have been satisfied or waived in accordance with the Plan. M. Modification, Revocation, Or Withdrawal of the Plan 1. Modification and Amendments
The Plan Proponent shall not modify materially the terms of the Plan without the prior consent of the parties to the Mediation Term Sheet; provided, that in the event the Rhodes Entities fail to comply with any of their obligations under the Mediation Term Sheet and under the Plan by the Effective Date (or such other date set forth in the Plan) and fail to cure such alleged breach within ten (10) days written notice to the Rhodes Entities, then the First Lien Steering Committee shall be entitled to file a motion on at least seven (7) days notice to (i) determine that a breach has occurred (except that the failure of the parties to agree on the refinancing of the Rhodes Ranch Golf Course solely as a result of the First Lien Steering Committee acting unreasonably or in bad faith shall not be deemed a failure of the Rhodes Entities to comply with their obligations hereunder or under the Plan), and the Rhodes Entities reserve their right to object to such motion; (ii) modify the Plan to remove any provisions hereof that were included for the benefit of the Rhodes Entities; and (iii) consummate the Plan, as modified. Upon entry of an order of the Bankruptcy Court finding a breach by the Rhodes Entities and authorizing the modifications to the Plan to remove any provisions that were included for the benefit of the Rhodes Entities, the First Lien Steering shall be authorized to make such modifications and consummate the Plan. Except as otherwise specifically provided in the Plan, the Plan Proponent reserves the right to modify the Plan and seek Confirmation consistent with the Bankruptcy Code. Subject to certain restrictions and requirements set forth in section 1127 of the Bankruptcy Code and Bankruptcy Rule 3019 and those restrictions on modifications set forth in the Plan, the Plan Proponent expressly reserves
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its rights to revoke, withdraw, alter, amend, or modify materially the Plan with respect to any Debtor, one or more times, after Confirmation, and, to the extent necessary, may initiate proceedings in the Bankruptcy Court to so alter, amend, or modify the Plan, or remedy any defect or omission, or reconcile any inconsistencies in the Plan, the Disclosure Statement, or the Confirmation Order, in such matters as may be necessary to carry out the purposes and intent of the Plan. Any such modification or supplement shall be considered a modification of the Plan and shall be made in accordance with Article XI.A of the Plan. The Plan, Disclosure Statement and all ancillary documents may be inspected in the office of the clerk of the Bankruptcy Court or its designee during normal business hours, at the Bankruptcy Courts website at http://www.nvb.uscourts.gov. All documents to be entered into in connection with the consummation of the Plan as described in the Plan and/or Disclosure Statement are integral to the Plan and shall be approved by the Bankruptcy Court pursuant to the Confirmation Order. 2. Effect of Confirmation on Modifications
Entry of a Confirmation Order shall mean that all modifications or amendments to the Plan since the solicitation thereof are approved pursuant to section 1127(a) of the Bankruptcy Code and do not require additional disclosure or resolicitation under Bankruptcy Rule 3019. 3. Revocation or Withdrawal of Plan
The Plan Proponent reserves the right to revoke or withdraw the Plan prior to the Confirmation Date and to File subsequent plans of reorganization; provided, that, any subsequently filed plan shall be consistent with the Mediation Settlement unless the Rhodes Entities fail to comply with any of their obligations under the Mediation Term Sheet or the Plan by the Effective Date (or such other date set forth herein) and fail to cure such alleged breach within ten (10) days written notice to the Rhodes Entities, in which case the First Lien Steering Committee shall be entitled to file a motion on at least seven (7) days notice to (i) determine that a breach has occurred (except that the failure of the parties to agree on the refinancing of the Rhodes Ranch Golf Course solely as a result of the First Lien Steering Committee acting unreasonably or in bad faith shall not be deemed a failure of the Rhodes Entities to comply with their obligations hereunder or under the Plan), and the Rhodes Entities reserve their right to object to such motion; (ii) revoke or withdraw the Plan as a result of such breach; and (iii) file a subsequent plan that removes the benefits provided to the Rhodes Entities pursuant to the Mediation Term Sheet. If the Plan Proponent revokes or withdraws the Plan, or if Confirmation or Consummation does not occur, then: (1) the Plan shall be null and void in all respects; (2) any settlement or compromise embodied in the Plan (including the fixing or limiting to an amount certain of any Claim or Class of Claims), assumption or rejection of executory contracts or unexpired leases effected by the Plan, and any document or agreement executed pursuant to the Plan, shall be deemed null and void; and (3) nothing contained in the Plan shall: (a) constitute a waiver or release of any Claims or Interests; (b) prejudice in any manner the rights of the Plan Proponent or any other Entity; or (c) constitute an admission, acknowledgement, offer, or undertaking of any sort by the Plan Proponent or any other Entity.
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N.
Retention of Jurisdiction
Notwithstanding the entry of the Confirmation Order and the occurrence of the Effective Date, the Bankruptcy Court shall retain exclusive jurisdiction over all matters arising out of, or related to, the Chapter 11 Cases and the Plan pursuant to sections 105(a) and 1142 of the Bankruptcy Code and as otherwise set forth in the Plan. Article V. STATUTORY REQUIREMENTS FOR CONFIRMATION OF THE PLAN The following is a brief summary of the Plan Confirmation process. Holders of Claims and Interests are encouraged to review the relevant provisions of the Bankruptcy Code and to consult their own attorneys. A. The Confirmation Hearing
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Section 1128(a) of the Bankruptcy Code requires the Bankruptcy Court, after notice, to hold a hearing on Confirmation (the Confirmation Hearing). Section 1128(b) of the Bankruptcy Code provides that any party in interest may object to Confirmation. THE BANKRUPTCY COURT HAS SCHEDULED THE CONFIRMATION HEARING TO COMMENCE ON [JANUARY 5], 2010 AT [9:00 a.m.] PREVAILING PACIFIC TIME BEFORE THE HONORABLE LINDA B. RIEGLE, UNITED STATES BANKRUPTCY JUDGE, IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF NEVADA, IN COURTROOM 1 IN THE FOLEY FEDERAL BUILDING LOCATED AT 300 LAS VEGAS BOULEVARD SOUTH, LAS VEGAS, NEVADA 89101. THE CONFIRMATION HEARING MAY BE ADJOURNED FROM TIME TO TIME BY THE BANKRUPTCY COURT WITHOUT FURTHER NOTICE EXCEPT FOR AN ANNOUNCEMENT OF THE ADJOURNED DATE MADE AT THE CONFIRMATION HEARING OR ANY ADJOURNMENT THEREOF. OBJECTIONS TO CONFIRMATION OF THE PLAN MUST BE FILED AND SERVED ON OR BEFORE [DECEMBER 18], 2009, IN ACCORDANCE WITH THE SOLICITATION PROCEDURES ORDER FILED AND SERVED ON HOLDERS OF CLAIMS AND INTERESTS AND OTHER PARTIES IN INTEREST. UNLESS OBJECTIONS TO CONFIRMATION ARE TIMELY SERVED AND FILED IN COMPLIANCE WITH THE SOLICITATION PROCEDURES ORDER, THEY MAY NOT BE CONSIDERED BY THE BANKRUPTCY COURT. B. Confirmation Standards
To confirm the Plan, the Bankruptcy Court must find, among other things, that the requirements of section 1129 of the Bankruptcy Code have been satisfied. The requirements of section 1129 of the Bankruptcy Code are listed below: 1. the Plan complies with the applicable provisions of the Bankruptcy Code;
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2. 3. 4.
the First Lien Steering Committee, as Plan Proponent, will have complied with the applicable provisions of the Bankruptcy Code; the Plan has been proposed in good faith and not by any means forbidden by law; any payment made or promised under the Plan for services or for costs and expenses in, or in connection with, the Chapter 11 Cases, or in connection with the Plan and incident to the cases, has been disclosed to the Bankruptcy Court, and any such payment made before the Confirmation is reasonable, or if such payment is to be fixed after the Confirmation, such payment is subject to the approval of the Bankruptcy Court as reasonable; with respect to each Class of Impaired Claims or Interests, either each Holder of a Claim or Interest of such Class has accepted the Plan or will receive or retain under the Plan on account of such Claim or Interest property of a value, as of the Effective Date of the Plan, that is not less than the amount that such Holder would receive or retain if the Debtors were liquidated on such date under chapter 7 of the Bankruptcy Code; each Class of Claims that is entitled to vote on the Plan either has accepted the Plan or is not Impaired under the Plan, or the Plan can be confirmed without the approval of each voting Class pursuant to section 1129(b) of the Bankruptcy Code; except to the extent that the Holder of a particular Claim will agree to a different treatment of such Claim, the Plan provides that Allowed Administrative and Allowed Priority Non-Tax Claims will be paid in full on the Effective Date, or as soon as reasonably practicable thereafter; at least one Class of Impaired Claims or Interests will accept the Plan, determined without including any acceptance of the Plan by any insider holding a Claim or Interest of such Class; Confirmation is not likely to be followed by the liquidation, or the need for further financial reorganization, of the Debtors or any successor to the Debtors under the Plan, unless such liquidation or reorganization is proposed in the Plan; all fees of the type described in 28 U.S.C. 1930, including the fees of the United States Trustee, will be paid as of the Effective Date; and the Plan addresses payment of retiree benefits, if any, in accordance with section 1114 of the Bankruptcy Code.
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5.
6.
7.
8.
9.
10. 11.
The First Lien Steering Committee believes that the Plan satisfies the requirements of section 1129 of the Bankruptcy Code, including that (1) the Plan satisfies or will satisfy all of the statutory requirements of chapter 11 of the Bankruptcy Code, (2) the First Lien Steering Committee has complied or will have complied with all of the requirements of chapter 11 and (3) the Plan has been proposed in good faith.
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C.
Financial Feasibility
Section 1129(a)(11) of the Bankruptcy Code requires that the Bankruptcy Court find, as a condition to Confirmation, that Confirmation is not likely to be followed by the liquidation of the Debtors, unless such liquidation is proposed in the Plan, or the need for further financial reorganization. To determine whether the Plan meets this requirement, the First Lien Steering Committee has analyzed the ability of the Debtors to meet their obligations under the Plan. With respect to the Reorganized Debtors, based on the analyses set forth in Exhibit D to the Disclosure Statement and the operational, business and other assumptions set forth therein, the First Lien Steering Committee believes that the Reorganized Debtors will have the financial capability to satisfy their obligations following the Effective Date pursuant to the Plan, including the payment of all Cash distributions contemplated by the Plan. Based on the analysis and related information set forth in Exhibit D to the Disclosure Statement, the First Lien Steering Committee will seek a ruling that the Plan is feasible in connection with the Confirmation of the Plan. D. Best Interests of Creditors Test
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Often called the best interests test, section 1129(a)(7) of the Bankruptcy Code requires that the Bankruptcy Court find, as a condition to Confirmation, that each Holder of a Claim or Interest in each Impaired Class: (1) has accepted the Plan or (2) will receive or retain under the Plan property of a value, as of the Effective Date, that is not less than the amount that such Person would receive if the Debtors were liquidated under chapter 7 of the Bankruptcy Code. To make these findings, the Bankruptcy Court must: (a) estimate the Cash proceeds (the Liquidation Proceeds) that a chapter 7 trustee would generate if each Chapter 11 Case were converted to a chapter 7 case and the assets of such Estate were liquidated; (b) determine the distribution (Liquidation Distribution) that each non-accepting Holder of a Claim or Interest would receive from the Liquidation Proceeds under the priority scheme dictated in chapter 7; and (c) compare each Holders Liquidation Distribution to the distribution under the Plan (Plan Distribution) that such Holder would receive if the Plan were Confirmed and consummated. To assist the Bankruptcy Court in making the findings required under section 1129(a)(7), the First Lien Steering Committee, through its financial advisor, Winchester Carlisle Partners (WCP), and it valuation consultant, Robert Charles Lesser & Co, (RCLCO), has prepared a liquidation analysis (the Liquidation Analysis) and a going concern analysis (the Going Concern Analysis). The Liquidation Analysis and Going Concern Analysis compare the proceeds to be realized if the Debtors were to be liquidated in hypothetical cases under chapter 7 of the Bankruptcy Code against the proceeds to be realized under the Plan as a going concern. These analyses employ a discounted cash flow (DCF) methodology to arrive at a range of values for the Debtors real estate assets as of December 31, 2009, and incorporate various estimates and assumptions, including a hypothetical conversion to chapter 7 liquidation as of January 1, 2010. Further, each analysis is subject to potential material changes including with respect to economic and business conditions and legal rulings. Therefore, the actual liquidation and going concern values of the Debtors could
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vary materially from the estimates provided in the Liquidation and Going Concern Analyses, respectively. 1. Liquidation Analysis
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Under chapter 7 liquidation, certain distinctive factors would limit recovery from the sale of the Debtors homebuilding operations and other land assets. RCLCO and WCP assumed that an orderly liquidation would be performed over a period of twelve months commencing as of January 1, 2010, the projected date of conversion to a hypothetical chapter 7 liquidation. Given the current depressed state of homebuliding and real estate markets, as well as the limited availability of credit, this expedited sale process could materially reduce recovery from the Debtors land assets. In addition, RCLCO and WCP assumed that a potential buyer of the Debtors assets will expect a higher risk premium and lower achievable home sale prices relative to a going concern valuation due to the stigma attached to a community and/or company that is in a liquidation mode. The Liquidation Analysis, attached hereto as Exhibit E, presents both High and Low estimates of the value of the Debtors real estate assets under liquidation, representing a range of assumptions relating to the risk and costs incurred during a liquidation. The DCF analysis derives an estimated value of the Debtors real estate assets by discounting the unlevered projected free cash flows a buyer or buyers of the Debtors assets could expect to achieve, based on market projections, to a net present value as of the effective date. RCLCO used a discount rate range of 25% - 30% in the Liquidation Analysis, reflecting the higher risk premium required by investors under this scenario. Based on the methodologies described above, and after further review, discussions, considerations, and assumptions, RCLCO and WCP estimate that the liquidation value of the Debtors real estate assets as of January 1, 2010, ranges from $44.2 million dollars to $55.0 million dollars, with a midpoint of $49.3 million dollars. As reflected on Exhibit E hereto, RCLCO and WCP performed the Liquidation Analysis on a consolidated basis and did not provide a liquidation value for each individual Debtor entity. The first lien indebtedness and second lien indebtedness total nearly $400 million, which indebtedness is secured by first and second liens, respectively, on substantially all of the Debtors assets at each Debtor entity. Given that the Liquidation Analysis reflects a midpoint value of $49.3 million, the First Lien Steering Committee believes that there is no value available for claims beyond the first lien indebtedness at any Debtor entity on either a liquidation or going concern basis. The First Lien Steering Committee therefore does not believe that an entity by entity liquidation analysis is necessary or appropriate on the facts of these Chapter 11 Cases. 2. Going Concern Analysis
In preparing the Going Concern Analysis, RCLCO and WCP, among other things: reviewed certain internal financial and operating data of the Debtors made available by the Debtors and WCP; reviewed certain operating and financial forecasts; performed DCF analyses; considered sales transaction for properties comparable to certain of the Debtors
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assets; considered information from qualified third party sources relating to revenue and cost assumptions, and conducted such other analyses as deemed necessary to complete the analysis. The Going Concern Analysis assumes that various documents and data provided by the Debtors, including cost information, are reliable and accurate. In addition to the foregoing, RCLCO assumed in preparing the Going Concern Analysis that the Effective Date occurs on January 1, 2010. The Projections used also assume that general economic, financial, and market conditions as of the Effective Date will not differ materially from those conditions prevailing as of the date of the Going Concern Analysis. Although subsequent developments may affect the conclusions, neither RCLCO, WCP nor the First Lien Steering Committee have any obligation to update, revise, or reaffirm its analysis following the Confirmation Hearing. The DCF methodology was used to arrive at a value for the Debtors real estate assets. The DCF analysis derives an estimated value of the Debtors real estate assets by discounting their unlevered projected free cash flows based on market projections to a net present value as of the Effective Date. Revenue is derived from the construction and sale of single family homes on all single-family lots currently in inventory, as well as on certain multifamily and commercial parcels where it was determined that single-family homes were the highest and best use. Pricing and sales velocity for these homes were projected to recover from their currently depressed levels, as determined by an analysis of recent and historical sales data, to more sustainable level of growth by 2011. Additional revenue is derived from the sale of certain land parcels at prices and dates supportable by market conditions, as well as the operation and sale of the Tuscany Golf Course. RCLCO used a discount rate range of 20% 25% in the Going Concern Analysis, reflecting the prevailing capital market requirements of similar transactions. Based on the methodologies described above, and after further review, discussions, considerations, and assumptions, RCLCO and WCP have estimated that the going concern value of the Debtors real estate assets as of January 1, 2010, ranges from $89.2 million to $111.5 million, with a midpoint of $99.6 million. E. Acceptance by Impaired Classes
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The Bankruptcy Code also requires, as a condition to confirmation, that each class of claims or interests that is impaired under a plan accept the plan, with the exception described in the following section. A class that is not impaired under a plan of reorganization is deemed to have accepted the plan and, therefore, solicitation of acceptances with respect to such class is not required. A class is impaired unless the plan (1) leaves unaltered the legal, equitable and contractual rights to which the claim or interest entitles the holder of such claim or interest or (2) cures any default and reinstates the original terms of the obligation. Section 1126(c) of the Bankruptcy Code defines acceptance of a plan by a class of impaired claims as acceptance by holders of at least two thirds in dollar amount and more than one half in number of claims in that class, but for that purpose counts only those who actually
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vote to accept or to reject the plan. Thus, a class of claims will have voted to accept the plan only if two thirds in amount and a majority in number actually voting cast their ballots in favor of acceptance. Under section 1126(d) of the Bankruptcy Code, a class of interests has accepted the plan if holders of such interests holding at least two thirds in amount actually voting have voted to accept the plan. F. Confirmation Without Acceptance by All Impaired Classes
Section 1129(b) of the Bankruptcy Code allows a bankruptcy court to confirm a plan, even if such plan has not been accepted by all impaired classes entitled to vote on such plan; provided that such plan has been accepted by at least one impaired class. Section 1129(b) of the Bankruptcy Code states that notwithstanding the failure of an impaired class to accept a plan of reorganization, the plan will be confirmed, on request of the proponent of the plan, in a procedure commonly known as cram down, so long as the plan does not discriminate unfairly and is fair and equitable with respect to each class of claims or interests that is impaired under, and has not accepted, the plan. In general, a plan does not discriminate unfairly if it provides a treatment to the class that is substantially equivalent to the treatment that is provided to other classes that have equal rank. In determining whether a plan discriminates unfairly, courts will take into account a number of factors. Accordingly, two classes of unsecured claims could be treated differently without unfairly discriminating against either class. The condition that a plan be fair and equitable with respect to a non-accepting class of secured claims includes the requirements that: (1) the holders of such secured claims retain the liens securing such claims to the extent of the allowed amount of the secured claims, whether the property subject to the liens is retained by the debtor or transferred to another entity under the plan and (2) each holder of a secured claim in the class receives deferred cash payments totaling at least the allowed amount of such claim with a present value, as of the effective date of the plan, at least equivalent to the value of the secured claimants interest in the debtors property subject to the liens. The condition that a plan be fair and equitable with respect to a non-accepting class of unsecured claims includes the requirement that either: (1) the plan provides that each holder of a claim of such class receive or retain on account of such claim property of a value, as of the Effective Date, equal to the allowed amount of such claim; or (2) the holder of any claim or interest that is junior to the claims of such class will not receive or retain any property under the plan on account of such junior claim or interest. The condition that a plan be fair and equitable with respect to a non-accepting class of interests includes the requirements that either: (1) the plan provide that each holder of an interest in such class receive or retain under the plan, on account of such interest, property of a value, as of the effective date of the plan, equal to the greater of (a) the allowed amount of any fixed liquidation preference to which such holder is entitled, (b) any fixed redemption price to which such holder is entitled or (c) the value of such interest; or (2) if the class does not
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receive such an amount as required under (1), no class of interests junior to the non-accepting class may receive a distribution under the plan. The First Lien Steering Committee shall seek Confirmation of the Plan pursuant to section 1129(b) of the Bankruptcy Code with respect to any Impaired Class, as applicable, presumed to reject the Plan, and the First Lien Steering Committee reserves the right to do so with respect to any other rejecting Class of Claims or Interests, as applicable, or to modify the Plan. Section 1129(a)(10) of the Bankruptcy Code shall be satisfied for purposes of Confirmation by acceptance of the Plan by at least one Class that is Impaired under the Plan. The First Lien Steering Committee submits that if the First Lien Steering Committee crams down the Plan pursuant to section 1129(b) of the Bankruptcy Code, the Plan will be structured such that it does not discriminate unfairly and satisfies the fair and equitable requirement. With respect to the unfair discrimination requirement, all Classes under the Plan are provided treatment that is substantially equivalent to the treatment that is provided to other Classes that have equal rank. If the First Lien Steering Committee seeks to cram down the Plan on Holders of Secured Claims, all such Holders shall receive a distribution that satisfies the fair and equitable requirement. The Plan also satisfies the fair and equitable requirement with respect to Holders of Unsecured Claims because even though such Holders will not receive payment in full on account of the Allowed amount of their Claims, no junior Claim or Interest receives any distribution under the Plan. Holders of Interests will receive no distribution under the Plan, but there is no junior Claim or Interest that will receive any distribution under the Plan either. Therefore, the requirements of section 1129(b) of the Bankruptcy Code would be satisfied in the event that the First Lien Steering Committee is required to cram down. Article VI. CERTAIN FACTORS TO BE CONSIDERED PRIOR TO VOTING HOLDERS OF CLAIMS ENTITLED TO VOTE ON THE PLAN SHOULD READ AND CONSIDER CAREFULLY THE FACTORS SET FORTH BELOW, AS WELL AS THE OTHER INFORMATION SET FORTH IN THE DISCLOSURE STATEMENT AND RELATED DOCUMENTS, REFERRED TO OR INCORPORATED BY REFERENCE IN THE DISCLOSURE STATEMENT, PRIOR TO VOTING TO ACCEPT OR REJECT THE PLAN. THIS ARTICLE PROVIDES INFORMATION REGARDING POTENTIAL RISKS IN CONNECTION WITH THE PLAN AND THE FINANCIAL PROJECTIONS INCLUDED AS EXHIBITS D AND E TO THE DISCLOSURE STATEMENT. THESE FACTORS SHOULD NOT, HOWEVER, BE REGARDED AS CONSTITUTING THE ONLY RISKS INVOLVED IN CONNECTION WITH THE PLAN AND ITS IMPLEMENTATION.
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A.
Certain Bankruptcy Considerations 1. The First Lien Steering Committee May Not Be Able to Obtain Confirmation of the Plan.
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The First Lien Steering Committee cannot ensure that they will receive the requisite acceptances to confirm the Plan. Even if the First Lien Steering Committee receives the requisite acceptances, the First Lien Steering Committee cannot ensure that the Bankruptcy Court will confirm the Plan. A non-accepting Holder of Claims and Interests might challenge the adequacy of the Disclosure Statement or the balloting procedures and results as not being in compliance with the Bankruptcy Code or Bankruptcy Rules. Even if the Bankruptcy Court determined that the Disclosure Statement and the balloting procedures and results were appropriate, the Bankruptcy Court could still decline to confirm the Plan if it found that any of the statutory requirements for Confirmation had not been met, including that the terms of the Plan are fair and equitable to non-accepting Classes. As discussed in further detail in Article V herein, section 1129 of the Bankruptcy Code sets forth the requirements for confirmation and requires, among other things: (a) a finding by the Bankruptcy Court that the plan does not unfairly discriminate and is fair and equitable with respect to any non-accepting classes; (b) confirmation of the plan is not likely to be followed by a liquidation or a need for further financial reorganization; and (c) the value of distributions to non-accepting holders of claims and interests within a particular class under the plan will not be less than the value of distributions such holders would receive if the debtors were liquidated under chapter 7 of the Bankruptcy Code. While there can be no assurance that these requirements will be met, the First Lien Steering Committee believes that the Plan complies with section 1129 of the Bankruptcy Code. Confirmation and Consummation also are subject to certain conditions described in Article V herein. If the Plan is not confirmed, it is unclear what distributions Holders of Claims or Interests ultimately would receive and it is possible that an alternative plan would result in substantially less favorable treatment for Holders of Claims or Interests than such Holders would receive under the Plan. 2. The Bankruptcy Court May Not Approve the Compromise and Settlement Contemplated By the Plan
As described in more detail in Article Article IV.J.3 herein, the Plan constitutes a settlement, compromise and release of rights arising from or relating to the allowance, classification and treatment of all Allowed Claims and Allowed Interests and their respect distributions and treatments under the Plan and takes into account, and conforms to, the relative priority and rights of the Claims and Interests in each Class in connection with any contractual, legal and equitable subordination rights relating thereto whether arising under general principles of equitable subordination or section 510(b) or (c) of the Bankruptcy Code. This settlement, compromise and release requires approval by the Bankruptcy Court in the Confirmation Order. The First Lien Steering Committee cannot ensure that the Bankruptcy Court will approve the settlement described in Article VIII.C. of the Plan.
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3.
Parties in Interest May Object to the First Lien Steering Committees Classification of Claims
Section 1122 of the Bankruptcy Code provides that a chapter 11 plan may classify a claim or an interest in a particular class only if such claim or interest is substantially similar to the other claims or interests in such class. The First Lien Steering Committee believes that the classification of Claims and Interests under the Plan complies with the requirements set forth in the Bankruptcy Code. However, there is no assurance that the Bankruptcy Court will hold that the Plans classification of Claims and Interests complies with the Bankruptcy Code. 4. Failure to Satisfy Vote Requirement
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If votes are received in number and amount sufficient to enable the Bankruptcy Court to confirm the Plan, the First Lien Steering Committee intends to seek Confirmation as promptly as practicable thereafter. In the event that sufficient votes are not received, the First Lien Steering Committee may propose an alternative chapter 11 plan. There can be no assurance that the terms of any such alternative chapter 11 plan would be similar to or as favorable to the Holders of Allowed Claims as those proposed in the Plan. 5. The First Lien Steering Committee, the Debtors or the Reorganized Debtors May Object to the Amount or Secured or Priority Status of a Claim
The Debtors, the Reorganized Debtors and the First Lien Steering Committee reserve the right to object to the amount or the secured or priority status of any Claim or Interest. The estimates set forth in the Disclosure Statement cannot be relied on by any Holder of a Claim or Interest whose Claim or Interest is subject to an objection. Any such Holder of a Claim or Interest may not receive its specified share of the estimated distributions described in the Disclosure Statement. 6. Procedures for Contingent and Unliquidated Claims
Notwithstanding any language in any Proof of Claim or otherwise, the Holder of a contingent or unliquidated Claim shall not be entitled to receive or recover any amount in excess of the amount: (a) stated in the Holders Proof of Claim, if any, as of the Distribution Record Date; or (b) if the Proof of Claim does not ascribe a monetary value to such Holders Claim on the Distribution Record Date, the amount the First Lien Steering Committee elects to withhold on account of such Claim. 7. Nonconsensual Confirmation
In the event that any impaired class of claims or interests does not accept a chapter 11 plan, a bankruptcy court may nevertheless confirm such plan at the plan proponents request if at least one impaired class has accepted the plan (with such acceptance being determined without including the vote of any insider in such class), and as to each impaired class that has not accepted the plan, the bankruptcy court determines that the plan does not discriminate unfairly and is fair and equitable with respect to the dissenting impaired classes. The First Lien Steering Committee believes that the Plan satisfies these requirements, and the First Lien Steering Committee may request such nonconsensual Confirmation in
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accordance with section 1129(b) of the Bankruptcy Code. Nevertheless, there can be no assurance that the Bankruptcy Court will reach this conclusion. B. Other Considerations 1. Avoidance Action Analysis
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The First Lien Steering Committee has not yet comprehensively evaluated all of the preference and fraudulent transfer claims that the Debtors may have against third parties. The Debtors Filed their Schedules listing all transfers that the Debtors made within ninety days of the Petition Date and all transfers to insiders made by the Debtors within one year of the Petition Date. All such transfers listed in the Schedules may be the subject of an Avoidance Action to set aside the transfer if the transfer is avoidable under Bankruptcy Code sections 544, 545, 547, 548, 549, or 550, or otherwise except as expressly released by the Plan. Accordingly, the Reorganized Debtors or Litigation Trust, as applicable, will retain rights to seek to avoid any transfer made within ninety days of the Petition Date and one year of the Petition Date (as to Insiders) or such longer periods as may be available under applicable nonbankruptcy law. The listing of transfers made by the Debtors within ninety days (for non-insiders) and one year (for Insiders) that may be potentially avoidable as preferences is not included in this Disclosure Statement. Copies of the Schedules (which include the identification of transfers made by the Debtors within ninety days (for non-insiders) and one year (for Insiders)) are on file with the Bankruptcy Court and also available for review on the Claims and Solicitation Agents website, www.omnimgmt/rhodes. Creditors and interested parties are encouraged to review such Schedules to determine if any transfers made to a particular Creditor are included thereon. Any such transfers listed in the Schedules may be the subject of an Avoidance Action to set aside the transfer if the transfer is avoidable. However, with respect to such transfers listed on the Debtors Schedules, the First Lien Steering Committee has not yet determined whether the transferees of those transfers would have defenses to an avoidance action. 2. Other Potential Litigation Recoveries
In addition to Avoidance Actions, the First Lien Steering Committee has been reviewing available information regarding potential Causes of Action against third parties and, possibly, Affiliates and/or Insiders of the Debtors, which review is ongoing and which will continue to be conducted by the First Lien Steering Committee, the Reorganized Debtors and/or their respective successors or representatives after the Effective Date. Due to the size and scope of the business operations of the Debtors and the multitude of business transactions therein, there may be various Causes of Action that currently exist or may subsequently arise in addition to any matters identified in the Plan. The potential net proceeds from the potential Causes of Action identified herein or that may subsequently arise or be pursued are speculative and uncertain. Prepetition, the Debtors were party to numerous lawsuits. A list of the pending litigation in which the Debtors were a party as of the Petition Date is attached to the Disclosure Statement as Exhibit F.
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Except as expressly released through the Plan, existing or potential Causes of Action that may be pursued by the Debtors and/or their respective successors or representatives (as applicable) include, without implied limitation, the following: (a) any and all Avoidance Actions; (b) any and all litigation against Affiliates and Insiders; (c) all other Causes of Action and Defenses identified on Exhibit L to the Disclosure Statement; (d) any other Causes of Action against current or former officers, directors, and/or employees of the Debtors, including without implied limitation, any pending or potential claims with respect to directors and officers insurance coverage for the Debtors current or former officers and directors; (e) any and all Causes of Action relating to the matters listed on the Debtors Schedules; (f) any other litigation, whether legal, equitable or statutory in nature, arising out of, or in connection with the Debtors businesses or operations, including, without limitation: disputes with suppliers and customers, overpayments, any amounts owed by any creditor, vendor or other entity, employee, management, or operational matters, disputes with current or former employees, financial reporting, environmental matters, insurance matters, accounts receivable, warranties, contractual obligations, or tort claims that may exist or subsequently arise; and (g) any Causes of Action not expressly identified herein or in the Plan. 3. Estimation of Claims
Before or after the Effective Date, the Debtors, the First Lien Steering Committee, or the Reorganized Debtors, as applicable, may (but are not required to) at any time request that the Bankruptcy Court estimate any Disputed Claim that is contingent or unliquidated pursuant to section 502(c) of the Bankruptcy Code for any reason, regardless of whether any party previously has objected to such Claim or whether the Bankruptcy Court has ruled on any such objection, and the Bankruptcy Court shall retain jurisdiction to estimate any such Claim, including during the litigation of any objection to any Claim or during the appeal relating to such objection. Notwithstanding any provision otherwise in the Plan, a Claim that has been expunged from the Claims Register, but that either is subject to appeal or has not been the subject of a Final Order, shall be deemed to be estimated at zero dollars, unless otherwise ordered by the Bankruptcy Court. In the event that the Bankruptcy Court estimates any contingent or unliquidated Claim, that estimated amount shall constitute a maximum limitation on such Claim for all purposes under the Plan (including for purposes of distributions), and the relevant Reorganized Debtor may elect to pursue any supplemental proceedings to object to any ultimate distribution on such Claim. Notwithstanding section 502(j) of the Bankruptcy Code, in no event shall any Holder of a Claim that has been estimated pursuant to section 502(c) of the Bankruptcy Code or otherwise be entitled to seek reconsideration of such estimation unless such Holder has Filed a motion requesting the right to seek such reconsideration on or before twenty days after the date on which such Claim is estimated. C. Plan Risk Factors
Although the First Lien Steering Committee believes that the Plan is confirmable, there are some risks to the performance of the Plan. Certain specific risks to performance of the Plan are described below. In particular, distributions to Holders of First Lien Lender Secured Claims are driven by the success of the Reorganized Debtors in, among other things, the development and completion of their real property assets and sale or other disposition
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thereof. Additionally, because of the significant issues that must be addressed with respect to the allowance of Claims, there may be significant delay before any distribution is made on account of Allowed Claims. However, the First Lien Steering Committee believes the very same risks described herein are present in, and significantly greater to Creditors in, chapter 7 cases. 1. The Chapter 7 Liquidation Analysis and Going Concern Analysis Are Based on Estimates and Numerous Assumptions
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Underlying the chapter 7 Liquidation Analysis and Going Concern Analysis are a number of estimates and assumptions that, although developed and considered reasonable by RCLCO, are inherently subject to economic, business and competitive uncertainties and contingencies beyond the First Lien Steering Committees or RCLCOs control. Accordingly, there can be no assurance that the values assumed in the chapter 7 Liquidation Analysis or Going Concern Analysis will be realized. 2. The Reorganized Debtors May Lose the Services of Critical Employees with Extensive Knowledge of Operations
The First Lien Steering Committee believes that the Reorganized Debtors ability to maximize the value of the Debtors estates pursuant to the Plan will depend to a large extent on the efforts of certain employees currently working for the Debtors, which personnel have substantial experience with and knowledge of the Debtors businesses, operations and assets. While the Reorganized Debtors hope to retain such employees services after the Effective Date, to the extent needed, it is possible that some or many of said employees may resign or otherwise leave the employ of the Reorganized Debtors. In such case, the business related efforts undertaken pursuant to the Plan may be negatively affected, resulting in potentially less recovery for Creditors under the Plan. 3. The Reorganized Debtors May Not Be Successful With Respect to Contested Claims
If the First Lien Steering Committee, the Reorganized Debtors, and/or their successors or representatives under the Plan are unsuccessful in their objections to contested and contingent Claims that have been Filed against the Estates or their Avoidance Actions, the Estates total liabilities will be greater than expected, and there may be less Cash available for distribution to Holders of unsecured non-priority Claims. The First Lien Steering Committee intends to vigorously oppose the allowance of all Claims that it believes are either entirely or in part without merit and prosecute Avoidance Actions and other Causes of Action. However, if the First Lien Steering Committees objections and actions are not upheld by the Bankruptcy Court, and the applicable Claims are Allowed in amounts in excess of the amounts that have been accrued by the Debtors, the total liabilities of the Debtors will be greater than expected, and there will be less Cash than expected available for distribution to Creditors.
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4.
Litigation Recoveries and Results Are Highly Speculative and Uncertain
The success of the Litigation Trust, Reorganized Debtors and/or their respective successors or representatives under the Plan in pursuing Avoidance Actions and/or other Causes of Action and defenses, is speculative and uncertain. Litigation may be complex and involve significant expense and delay. Furthermore, even if successful in the Causes of Action, in some cases, the Litigation Trust, Reorganized Debtors and/or their respective successors or representatives under the Plan may encounter difficulty in collection. Although potential litigation recoveries are not included in the First Lien Steering Committees Plan Distribution Analysis or chapter 7 Liquidation Analysis, such recoveries may have a significant impact upon the distributions that may be made to Creditors. THESE CONSIDERATIONS CONTAIN CERTAIN STATEMENTS THAT ARE FORWARDLOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. WORDS SUCH AS EXPECT, PLANS, ANTICIPATES, INDICATES, BELIEVES, FORECAST, GUIDANCE, OUTLOOK AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD LOOKING STATEMENTS. ADDITIONALLY, FORWARD LOOKING STATEMENTS INCLUDE STATEMENTS WHICH DO NOT RELATE SOLELY TO HISTORICAL FACTS, SUCH AS STATEMENTS WHICH IDENTIFY UNCERTAINTIES OR TRENDS, DISCUSS THE POSSIBLE FUTURE EFFECTS OF CURRENT KNOWN TRENDS OR UNCERTAINTIES OR WHICH INDICATE THAT THE FUTURE EFFECTS OF KNOWN TRENDS OR UNCERTAINTIES CANNOT BE PREDICTED, GUARANTEED OR ASSURED. THESE STATEMENTS ARE SUBJECT TO A NUMBER OF ASSUMPTIONS, RISKS AND UNCERTAINTIES, MANY OF WHICH ARE BEYOND THE CONTROL OF THE DEBTORS, THE REORGANIZED DEBTORS OR THE FIRST LIEN STEERING COMMITTEE INCLUDING, WITHOUT LIMITATION, THOSE DESCRIBED ELSEWHERE IN THIS DISCLOSURE STATEMENT, THE IMPLEMENTATION OF THE PLAN, THE CONTINUING AVAILABILITY OF SUFFICIENT BORROWING CAPACITY OR OTHER FINANCING TO FUND OPERATIONS, NATURAL DISASTERS AND UNUSUAL WEATHER CONDITIONS, TERRORIST ACTIONS OR ACTS OF WAR, ACTIONS OF GOVERNMENTAL BODIES AND OTHER MARKET AND COMPETITIVE CONDITIONS. HOLDERS OF CLAIMS AND INTERESTS ARE CAUTIONED THAT THE FORWARD LOOKING STATEMENTS SPEAK AS OF THE DATE MADE AND ARE NOT GUARANTEES OF FUTURE PERFORMANCE. ACTUAL RESULTS OR DEVELOPMENTS MAY DIFFER MATERIALLY FROM THE EXPECTATIONS EXPRESSED OR IMPLIED IN THE FORWARD LOOKING STATEMENTS, AND NONE OF THE DEBTORS, THE REORGANIZED DEBTORS OR THE FIRST LIEN STEERING COMMITTEE SHALL BE REQUIRED TO UNDERTAKE OR HAVE ANY OBLIGATION TO UPDATE ANY SUCH STATEMENTS. ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY KNOWN TO THE FIRST LIEN STEERING COMMITTEE OR THAT THE FIRST LIEN STEERING COMMITTEE CURRENTLY BELIEVES TO BE IMMATERIAL MAY ALSO IMPAIR THE DEBTORS BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND THE VALUE OF THE DEBTORS ESTATES. IF ANY OF THE RISKS OCCUR, THE DEBTORS BUSINESS, FINANCIAL CONDITION, OPERATING RESULTS AND THE VALUE OF THE DEBTORS ESTATES, AS WELL AS THE FIRST
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LIEN STEERING COMMITTEES ABILITY TO CONSUMMATE THE PLAN, COULD BE MATERIALLY ADVERSELY AFFECTED. Article VII. CERTAIN FEDERAL INCOME TAX CONSEQUENCES The following discussion summarizes certain federal income tax consequences of the implementation of the Plan to the Debtors and certain Holders of Claims. Tax consequences for the Reorganized Debtors are addressed in Article VII.A. below. The following summary is based on the Internal Revenue Code of 1986, as amended (the Internal Revenue Code or IRC), Treasury Regulations promulgated thereunder (the Regulations), judicial decisions and published administrative rules and pronouncements of the Internal Revenue Service as in effect on the date hereof. Changes in such rules or new interpretations thereof may have retroactive effect and could significantly affect the federal income tax consequences described below. The federal income tax consequences of the Plan are complex and are subject to significant uncertainties. The First Lien Steering Committee has not requested and will not request a ruling from the Internal Revenue Service or an opinion of counsel with respect to any of the tax aspects of the Plan. Thus, no assurance can be given as to the interpretation that the Internal Revenue Service will adopt. In addition, this summary does not address foreign, state or local tax consequences of the Plan, nor does it purport to address the federal income tax consequences of the Plan to special classes of taxpayers (such as Persons who are related to the Debtors within the meaning of the Internal Revenue Code, foreign taxpayers, broker dealers, banks, mutual funds, insurance companies, financial institutions, small business investment companies, regulated investment companies, tax exempt organizations, investors in pass through entities and Holders of Claims who are themselves in bankruptcy). Furthermore, this discussion assumes that Holders of Claims hold only Claims in a single Class. Holders of Claims should consult their own tax advisors as to the effect such ownership may have on the federal income tax consequences described below. This discussion assumes that, except as recharacterized by a Final Order of the Bankruptcy Court, the various debt and other arrangements to which the Debtors are a party will be respected for federal income tax purposes in accordance with their form. ACCORDINGLY, THE FOLLOWING SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT A SUBSTITUTE FOR CAREFUL TAX PLANNING AND ADVICE BASED UPON THE INDIVIDUAL CIRCUMSTANCES PERTAINING TO A HOLDER OF A CLAIM. ALL HOLDERS OF CLAIMS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS FOR THE FEDERAL, STATE, LOCAL AND OTHER TAX CONSEQUENCES APPLICABLE UNDER THE PLAN. INTERNAL REVENUE SERVICE CIRCULAR 230 DISCLOSURE: TO ENSURE COMPLIANCE WITH REQUIREMENTS IMPOSED BY THE UNITED STATES INTERNAL REVENUE SERVICE, ANY TAX ADVICE CONTAINED IN THIS DISCLOSURE STATEMENT (INCLUDING ANY ATTACHMENTS) IS NOT INTENDED
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OR WRITTEN TO BE USED, AND CANNOT BE USED, BY ANY TAXPAYER FOR THE PURPOSE OF AVOIDING TAX RELATED PENALTIES UNDER THE INTERNAL REVENUE CODE. TAX ADVICE CONTAINED IN THIS DISCLOSURE STATEMENT (INCLUDING ANY ATTACHMENTS) IS NOT WRITTEN TO SUPPORT THE PROMOTION, MARKETING OR RECOMMENDATION TO ANOTHER PARTY OF THE TRANSACTIONS OR MATTERS ADDRESSED BY THIS DISCLOSURE STATEMENT. EACH TAXPAYER SHOULD SEEK ADVICE BASED ON THE TAXPAYERS PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR. A. Certain U.S. Federal Income Tax Consequences to Reorganized Debtors 1. Introduction
8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 The majority of the Debtors are either partnerships (general or limited) or LLCs. For U.S. federal income tax purposes, the single member limited liability companies have not elected to be treated as associations taxable as corporations. Debtors that are multi-member LLCs are taxed as partnerships for U.S. federal income tax purposes. The First Lien Steering Committee does not believe that the Debtors will suffer any adverse tax consequences as a result of the consummation of the Plan. 2. Partnership
A partnership is not itself a taxpaying entity for U.S. federal income tax purposes, and a partnerships income or loss (and items thereof) for each taxable period during which it is in existence is allocated among its partners, who are required to report the income or loss (and items thereof) allocated to them on their own tax returns. Generally, a partner is not allowed to deduct his or her share of partnership losses for the year in excess of the adjusted tax basis of his or her interest in the partnership, determined as of the end of the partnerships taxable year in which the loss occurs. Any excess is allowed in any subsequent year in which the adjusted tax basis increases. A partners tax basis is initially equal to the amount of cash and the adjusted tax basis of property contributed to the partnership. Thereafter, tax basis increases for such items as additional contributions and the partners share of taxable and tax-exempt income and gain, and tax basis decreases for such items as distributions and the partners share of losses. An increase in a partners share of partnership liabilities or a partners assumption of partnership liabilities is treated as a cash contribution to the partnership that increases tax basis, and a decrease in a partners share of partnership liabilities or the assumption by the partnership of a partners liabilities decreases tax basis, but not below zero. (Cash distributions, including a decrease in a partners share of partnership liabilities, in excess of tax basis is taxable and generally treated as gain from the sale of a partnership interest.) A partner shares partnership recourse liabilities to the extent the partner bears the economic risk of loss with respect to the liabilities, i.e., based on a hypothetical partnership liquidation at a time when the partnership has no assets, after taking into account any rights of contribution or reimbursement from other partners or third parties that are related to other partners. A partner also shares partnership nonrecourse liabilities.
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3.
Cancellation of Indebtedness Income
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Under the Internal Revenue Code, cancellation of indebtedness (COD) income is recognized by a partnership to the extent, and at the time, that certain debts are discharged for less than full payment. The COD income recognized at the partnership level is then allocated among the partners pursuant to the allocation provisions of the partnership agreement, if such provisions comply with the requirements of the Internal Revenue Code regarding allocations, or, if not, in accordance with the partners interests in the partnership. The amount of COD income, in general, is the excess of (a) the adjusted issue price of the indebtedness satisfied, over (b) the sum of (x) the amount of cash paid, (y) the issue price of debt that is not publicly traded nor deemed exchanged for publicly traded property and (z) the fair market value of any new consideration (including partnership interests) given in satisfaction of such indebtedness at the time of the exchange. COD income also includes any interest that the taxpayer deducted under the accrual method of accounting but remains unpaid at the time the indebtedness is discharged. COD income generally does not include the discharge of indebtedness to the extent the payment of the liability would have given rise to a deduction. The Plan currently contemplates that Newco will hold the assets of some and the equity of at least one of the Reorganized Debtors, which ordinarily would result in COD income upon the discharge of the debts. Based on Revenue Ruling 99-6, however, the purchase of the membership interests in Heritage Land Company, LLC, however, may be treated as a taxable exchange of their membership interests by its members resulting in the recognition of gain or loss to the members based on a sales price of $10 plus the amount of the First Lien Lender Secured Claims, and as a purchase of assets for their then fair market value by Newco, with any cancellation of debt attributable to the former members of Heritage. Because the Plan provides that Holders of certain Allowed Claims will receive Newco Equity Interests, the sales price and/or the amount of COD income will depend on the fair market value of the Newco Equity Interests exchanged therefor. This value cannot be known with certainty until after the Effective Date. The Plan provides that any cancellation of indebtedness that may be derived from the foregoing transactions be allocable to the holders of the Old Equity Interests. However, it is unclear whether this provision will be binding on the Internal Revenue Service. Because most of the Debtors indebtedness is owed by entities that are partnerships or disregarded entities for U.S. federal income tax purposes, virtually all of the Debtors COD income that will be generated from the Plan will be allocated to the members of Heritage Land Company LLC or other Reorganized Debtor based on their respective percentage ownership interests in Heritage Land Company LLC or other Reorganized Debtor. Under the U.S. federal income tax rules dealing with COD income, the tax treatment of that income will be determined with respect to each member at the member level. A member of Heritage Land Company LLC or other Reorganized Debtor will not be required to include any amount of COD income in gross income if the member is (i) under the jurisdiction of a court in a case under chapter 11 of the Bankruptcy Code and the discharge of debt occurs pursuant to that proceeding or (ii) insolvent before the Effective Date (in which, the COD income may be excluded to the extent of the insolvency). As a consequence of such exclusion, a member must reduce its tax attributes by the amount of COD income that it
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excluded from gross income pursuant to section 108 of the IRC. In general, tax attributes will be reduced in the following order: (a) net operating losses (NOLs); (b) most tax credits and capital loss carryovers; (c) tax basis in assets; and (d) foreign tax credits. A member with COD income may elect first to reduce the basis of its depreciable assets pursuant to section 108(b)(5) of the IRC. Nonetheless, any attribute reduction will be applied as of the first day following the taxable year in which a member recognizes COD income. If a member has a suspended loss with respect to its membership interest in Heritage Land Company LLC, the allocation of COD income may allow some or all of such suspended losses to be used to offset the COD income. A recently enacted amendment to the COD income rules provides that taxpayers that recognize COD income in 2009 or 2010 may elect to forgo the COD income exclusion and attribute reduction rules described above. Instead, the taxpayer may elect to take into taxable income the COD income with respect to such debt in equal installments in 2014 through 2018 (i.e., the taxpayer would report 20% of the COD income in each such year). This election to defer COD income is made separately with respect to each debt instrument on which COD income is realized, must be made on the taxpayers tax return for the year that includes the transaction that creates the COD income, and, in the case of debt of a partnership, is made at the partnership level, but recent IRS guidance allows taxpayers to make partial elections and permits partnerships to choose which partners defer which amount, if any. The guidance also provides that a taxpayer is not required to make an election for the same COD income portion arising from each reacquired applicable debt instrument, though he or she may make an election for different portions of such income arising from different applicable debt instruments. The Debtors have not yet determined whether such an election will be made with respect to the COD income generated in connection with the consummation of the Plan. 4. Recent Tax Amendments
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The law governing net operating loss (NOL) carrybacks was amended November 6, 2009. It permits taxpayers to elect to carry back either their 2008 or 2009 operating losses for 3, 4 or even 5 years, rather than the normal 2 years. Losses may be carried back 3 or 4 years to offset all income generated in those years. Losses carried back the 5th year can only offset half of the income in that year. In addition, this law suspends the application of the normal year that NOLs can only offset 90% of alternative minimum taxable income for losses for the carrybacks covered by this provision. Taxpayers may file an irrevocable election to carry back 2008 or 2009 losses (but not both 2008 and 2009 losses) for this extended period at any time up to the due date of their 2009 returns (including extensions). In the case of a partnership (or LLC treated as a partnership for tax purposes), these rules apply at the partner level, with the partner including its allocable share of the entity's losses. In the case of an S corporation, similar rules apply, albeit with different limitations on the ability to use such losses due to different basis rules. Since the Debtors businesses were not carried on by a corporation, but were carried on through pass-through entities (i.e., partnerships, LLCs taxable as partnerships, an S corporation, and LLCs disregarded for tax purposes), this legislation will not result in any recoveries to the Debtors from carrying back NOLs the additional three years.
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B.
Certain Federal Income Tax Consequences to Holders of Claims 1. Consequences to Holders of Allowed Class A-1 First Lien Lender Secured Claims
On the Effective Date, each of the First Lien Lenders shall receive (i) its pro rata share of $1.5 million in Cash from the proceeds of the First Lien Lenders Collateral, (ii) its pro rata share of 100% of the New First Lien Notes, and (iii) its pro rata share of 100% of the Newco Equity Interests on account of its Allowed Secured Claim. a. New First Lien Notes (i) Significant Modification
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The U.S. federal income tax consequences of the exchange of an Allowed First Lien Lender Secured Claim for an interest in the New First Lien Notes will depend on whether the exchange results in a significant modification of the Allowed First Lien Lender Secured Claims (i.e., whether the terms of the New First Lien Notes are significantly different from the terms of the First Lien Lender Secured Claims exchanged therefor). The Treasury Regulations under section 1001 of the IRC provide specific rules for determining whether certain modifications are significant. One such rule provides that a change in the annual yield of an instrument will be considered significant if the modified rate varies from the original rate by more than the greater of (a) 25 basis points and (b) 5 percent of the annual yield of the unmodified instrument. Another rule provides that the deferral of a scheduled payment will be considered significant unless the deferred payments are unconditionally payable during the period that begins on the initial due date for such payment and extends for the lesser of five years or 50% of the original term of the debt instrument. The exchange should result in a significant modification of the First Lien Lender Secured Claims because the terms of the New First Lien Notes, including the issuer, the interest rate and maturity date, are significantly different from the terms of the First Lien Lender Secured Claims. Therefore, the exchange of Allowed First Lien Lender Secured Claims for New First Lien Notes should be a taxable exchange under section 1001 of the IRC. (ii) Recognition of Gain or Loss
A Holder who receives New First Lien Notes with respect to an Allowed First Lien Lender Secured Claim will generally recognize income, gain or loss for U.S. federal income tax purposes in an amount equal to the difference between (a) the issue price (as described below) of any New First Lien Notes received and (b) the Holders adjusted basis in its Allowed First Lien Lender Secured Claim. Such gain or loss may be capital in nature (subject to the market discount rules described below) and may be long-term capital gain or loss if the First Lien Lender Secured Claims were held for more than one year. To the extent that a portion of the New First Lien Notes received represents accrued but unpaid interest that the Holder has not already included in income, the Holder may recognize ordinary interest income (as described below). A Holders tax basis in any New First Lien Notes received should equal the issue price of the New First Lien Notes as of the date distributed to the
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Holder, and a Holders holding period for the New First Lien Notes should begin on the day following the exchange. (iii) Stated Interest and Original Issue Discount
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A Holder of the New First Lien Notes will be required to include stated interest on the New First Lien Notes in income in accordance with the Holders regular method of accounting to the extent such stated interest is qualified stated interest. All stated interest on the New First Lien Notes that is unconditionally payable in Cash or property (other than debt instruments of the issuer, such as PIK interest (discussed below)) at least annually will be generally treated as qualified stated interest. The amount of qualified stated interest and the amount of original issue discount (OID), if any, that accrues during an accrual period on a New First Lien Note will be calculated by assuming that LIBOR is a fixed rate equal to the value of LIBOR as of the issue date. The qualified stated interest allocable to an accrual period is increased (or decreased) if the interest actually paid during an accrual period exceeds (or is less than) the interest assumed to be paid during the accrual period pursuant to the foregoing rules. Because the New First Lien Notes provide for the payment of PIK interest in lieu of paying Cash interest, the New First Lien Notes will be treated as issued with OID. The payment of PIK interest will generally not be treated as a payment of interest for federal income tax purposes. Instead, a New First Lien Note and any PIK interest will be treated as a single debt instrument under the OID rules. For U.S. federal income tax purposes, increasing the principal amount of the New First Lien Notes will generally be treated the same as the payment of PIK interest. Each Creditor will generally be required to include OID in its gross income as such OID accrues over the term of the New First Lien Notes without regard to the Creditors regular method of accounting for U.S. federal income tax purposes and in advance of the receipt of Cash payments attributable to that income. Accordingly, a Holder could be treated as receiving interest income in advance of a corresponding receipt of Cash. The rules regarding OID are complex and the rules described above may not apply in all cases. Accordingly, Holders should consult their own tax advisors regarding their application. b. Newco Equity Interests (i) Exchange Treatment
For U.S. federal income tax purposes, the treatment of the exchange of Allowed First Lien Lender Secured Claims for Newco Equity Interests is unclear. Such exchange may be treated (i) as a tax-free contribution of property to Heritage Land Company LLC or other Reorganized Debtor under section 721 of the Internal Revenue Code or, alternatively, (ii) as a taxable exchange under section 1001 of the Internal Revenue Code in its entirety. Under the regulations proposed by the Treasury, the exchange would be treated as a tax-free contribution. No gain or loss should be recognized with respect to the exchange of Claims for Newco Equity Interests and a Holder will have an initial tax basis in such Newco Equity
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Interests equal to the tax basis of the Secured Claims deemed exchanged therefor. A Holders holding period for the Newco Equity Interests should include the holding period of the Secured Claims deemed exchanged therefor. If the proposed regulations do not apply and the exchange is treated as a taxable exchange, a Holder who receives Newco Equity Interests with respect to an Allowed First Lien Lender Secured Claim will generally recognize income, gain or loss for U.S. federal income tax purposes in an amount equal to the difference between (a) the fair value of the consideration received and (b) the Holders adjusted basis in its Allowed First Lien Lender Secured Claim. Such gain or loss may be capital in nature (subject to the market discount rules described below) and may be long-term capital gain or loss if the First Lien Lender Secured Claims were held for more than one year. To the extent that a portion of the consideration received represents accrued but unpaid interest that the Holder has not already taken into income, the Holder may recognize ordinary interest income (see discussion below). A Holders tax basis in Newco Equity Interests received should equal the fair market value of the Newco Equity Interests as of the date distributed to the Holder, and a Holders holding period for such instruments should begin on the day following the exchange. (ii) Certain Tax Aspects of Holding and Disposing Newco Equity Interests
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Upon the transfer of the Newco Equity Interests to the First Lien Lenders, Newco will be treated for federal income tax purposes as a partnership on the Effective Date, and a holder of Newco Equity Interests will be treated as a partner on that day. Each holder of Newco Equity Interests will generally be considered a partner in Newco for federal income tax purposes. Each such holder will be required to include its distributive share of the income, gains, losses, deductions and credits of Newco on its own returns, whether or not any distributions are made, and will not be taxable on distributions when received except to the extent such distributions are in excess of the distributees adjusted basis in the Newco Equity Interests. In general, a holders adjusted basis in Newco Equity Interests will be increased by its additional capital contributions, if any, to Newco and by such holders distributive share of income or gains of Newco, and the holders adjusted basis in Newco Equity Interests will be decreased by the amount of distributions to such holder and such holders distributive share of losses or deductions of Newco. Since the deemed purchase of the Heritage Land Company LLC assets will occur on that date, Newco might recognize a loss equal to the difference between its basis in the First Lien Lender Secured Claims and the value of the property received. If it does, such loss would be allocable to the holders of the Newco Equity Interests. Such allocation might not be pro rata, but could vary depending on the basis of each such holders interest, which will in turn depend on each First Lien Lenders basis in its First Lien Lender Secured Claims. Moreover, since Newco will have engaged in a trade or business while treated as a partnership for tax purposes, its members will have a filing requirement to report such income of a U.S. federal income tax return. If a First Lien Lender is itself treated as a partnership for U.S. tax purposes, its members or partners including foreign partners or U.S. exempt organizations could be required to file a U.S. return.
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Once the election is made to treat Newco as a corporation, the holders of the Newco Equity Interests generally carry forward their basis in their interests (or shares, if Newco is converted to a corporation), and Newco generally carries forward its basis in its assets. To the extent Newcos basis in its assets is greater than their value as of the election/conversion, it will be required to reduce its basis in its shares to their fair market value or it may elect instead to have the holders of the Newco Equity Interests reduce their basis in such interests by such amount. Any distributions made on the Newco Equity Interests will constitute dividends for U.S. federal income tax purposes to the extent of the current or accumulated earnings and profits of Newco, as determined under U.S. federal income tax principles. To the extent that a U.S. Holder receives distributions that would otherwise constitute dividends for U.S. federal income tax purposes but that exceed such current and accumulated earnings and profits, such distributions will be treated first as a non-taxable return of capital reducing the U.S. Holders basis in its shares. Any such distributions in excess of the U.S. Holders basis in its shares (determined on a share-by-share basis) generally will be treated as capital gain. Subject to certain exceptions, dividends received by non-corporate U.S. Holders prior to 2011 will be taxed under current law at a maximum rate of 15%, provided that certain holding period requirements and other requirements are met. Any such dividends received after 2010 will be taxed at the rate applicable to ordinary income. Dividends paid to a U.S. Holder that is a corporation generally will be eligible for the dividends-received deduction so long as there are sufficient earnings and profits. However, the dividends received deduction is only available if certain holding period requirements are satisfied. The length of time that a shareholder has held its stock is reduced for any period during which the shareholders risk of loss with respect to the stock is diminished by reason of the existence of certain options, contracts to sell, short sales or similar transactions. In addition, to the extent that a corporation incurs indebtedness that is directly attributable to an investment in the stock on which the dividend is paid, all or a portion of the dividends received deduction may be disallowed. The benefit of the dividends-received deduction to a corporate shareholder may be effectively reduced or eliminated by operation of the extraordinary dividend provisions of Section 1059 of the IRC, which may require the corporate recipient to reduce its adjusted tax basis in its shares by the amount excluded from income as a result of the dividends-received deduction. The excess of the excluded amount over adjusted tax basis may be treated as gain. A dividend may be treated as extraordinary if (1) it equals or exceeds 10% of the holders adjusted tax basis in the stock (reduced for this purpose by the non-taxed portion of any prior extraordinary dividend), treating all dividends having ex-dividend dates within an 85-day period as one dividend, or (2) it exceeds 20% of the holders adjusted tax basis in the stock, treating all dividends having ex dividend dates within a 365-day period as one dividend. Dividends paid to a Non-U.S. Holder (to the extent paid out of our current or accumulated earnings and profits, as determined for U.S. federal income tax purposes) generally will be subject to withholding of U.S. federal income tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty.
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To claim the benefit of a tax treaty a Non-U.S. Holder must provide a properly executed IRS Form W-8BEN (or such successor form as the IRS designates), in the manner described above, prior to the payment of the dividends. A Non-U.S. Holder that is eligible for a reduced rate of U.S. withholding tax pursuant to an income tax treaty may obtain a refund from the IRS of any excess amounts withheld by filing timely an appropriate claim for refund with the IRS. A holder will recognize gain or loss upon disposition of its Newco Equity Interests equal to the difference between the amount such holder realizes in connection with the disposition and such holders adjusted tax basis for such Newco Equity Interests. Any gain or loss will generally be capital gain or loss (which will be long-term capital gain or loss if the Newco Equity Interest has been held in excess of 12 months), subject to the application of certain recapture provisions that convert capital gain into ordinary income in certain circumstances. The deductibility of capital loses is subject to limitations. 2. Consequences to Holders of Allowed Class A-2 Second Lien Lender Secured Claims
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On the Effective Date, each of the Second Lien Lenders shall receive its pro rata share of 50% of the net proceeds of the Stanley Engineering Litigation on account of its Allowed Secured Claim. A Holder who receives Cash with respect to an Allowed Second Lien Lender Secured Claim will generally recognize income, gain or loss for U.S. federal income tax purposes in an amount equal to the difference between (a) the amount of Cash received and (b) the Holders adjusted basis in its Allowed Second Lien Lender Secured Claim. Such gain or loss may be capital in nature (subject to the market discount rules described below) and may be longterm capital gain or loss if the Class A-2 Claims were held for more than one year. To the extent that a portion of the Cash received represents accrued but unpaid interest that the Holder has not already included in income, the Holder may recognize ordinary interest income. 3. Consequences to Holders of Allowed Class A-3 Other Secured Claims
The following discussion assumes that each Holder of an Allowed Other Secured Claim holds such claim as a capital asset within the meaning of Section 1221 of the IRC. Pursuant to the Plan, each Allowed Other Secured Claim, at the election of the Reorganized Debtors, may be (i) Reinstated, (ii) paid in full in Cash, (iii) satisfied by the delivery of the collateral securing such Claim and paying any interest required to be paid, or (iv) otherwise rendered unimpaired. If an Allowed Other Secured Claim is Reinstated, the Holder of such Claim should not recognize gain or loss except to the extent that collateral securing such Claim is changed, and the change in collateral constitutes a significant modification of the Allowed Other Secured Claim within the meaning of the Treasury Regulations promulgated under Section 1001 of the IRC. If an Allowed Other Secured Claim is paid in full in Cash, the Holder should recognize capital gain or loss (which capital gain or loss would be long-term capital gain or loss to the extent that the Holder has held the debt instrument underlying its claim for more than one year) in an amount equal to the amount of Cash received over the
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Holders adjusted basis in the debt instruments underlying its Allowed Other Secured Claim. To the extent that a portion of the Cash received represents accrued but unpaid interest that the Holder has not already taken into income, the Holder should recognize ordinary interest income (as described below). If a Holder of an Allowed Other Secured Claim exchanges its Claim for the collateral securing such Claim, or for Cash in an amount equal to the proceeds actually realized from the sale of such collateral, the exchange should be treated as a taxable exchange under Section 1001 of the IRC. The Holder should recognize capital gain or loss (which capital gain or loss would be long-term capital gain or loss if the Holder has held the debt instrument underlying its Claim for more than one year) equal to the difference between (i) the fair market value of the collateral received (or, as the case may be, the amount of Cash received from the sale of such collateral), and (ii) the Holders adjusted tax basis in the debt instrument constituting its Claim. To the extent that a portion of the collateral received (or, as the case may be, the amount of Cash received from the sale of such collateral) in the exchange is allocable to accrued interest that has not already been taken into income by the Holder, the Holder should recognize ordinary interest income (as described below). If, on the Effective Date, the Holder receives the collateral (rather than Cash) in exchange for its Claim, the Holders tax basis in the collateral should be equal to the fair market value of the collateral on the Effective Date, and the Holders holding period in the collateral should begin on the day following the Effective Date. 4. Consequences to Holders of Class C-1 General Unsecured Claims, Class C-2 First Lien Lender Deficiency Claims, and Class C-3 Second Lien Lender Deficiency Claims
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On the Effective Date, each Holder of an Allowed General Unsecured Claim shall receive its pro rata share of the Litigation Trust Interests allocable to the Holders of General Unsecured Claims on account of its Allowed Claim. The amount received, if any, from the Litigation Trust is contingent on the value obtained from the unencumbered assets and the outcome of the causes of action held by the Litigation Trust. The Holder should recognize gain or loss equal to the difference between (i) the fair market value as of the Effective Date of the Litigation Trust Interests received (to the extent it is not allocable to accrued interest) and (ii) the Holders tax basis in the Claims surrendered by the Holder. Such gain or loss should be capital in nature (subject to the market discount rules described below) and should be long term capital gain or loss if the Claims were held for more than one year by the Holder. To the extent that any portion of the Litigation Trust Interests received in the exchange is allocable to accrued interest, the Holder may recognize ordinary income, which is addressed in the discussion below regarding accrued interest. A Holders tax basis in the Litigation Trust Interests received should equal their fair market value as of the Effective Date. A Holders holding period for the Litigation Trust Interests should begin on the day following the Effective Date. It is plausible that a Holder could treat the transaction as an open transaction for tax purposes, in which case the recognition of any gain or loss on the transaction might be deferred pending the determination of the amount of the Litigation Trust Interests received.
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The federal income tax consequences of an open transaction are uncertain and highly complex and a Holder should consult with its own tax advisor if it believes that open transaction treatment might be appropriate. 5. Receipt of Litigation Trust Interests
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On the Effective Date, the Litigation Trust will be settled and is currently anticipated to exist as either a grantor trust or partnership for the benefit of certain creditors. Subject to definitive guidance from the IRS or a court of competent jurisdiction to the contrary (including the receipt of an adverse determination by the IRS upon audit if not contested by the Litigation Trustee), pursuant to Treasury Regulation Section 301.7701-4(d) and related Treasury Regulations, the Litigation Trustee may designate and file returns for the Litigation Trust as a grantor trust and/or liquidating trust and therefore, for federal income tax purposes, the Litigation Trusts taxable income (or loss) should be allocated pro rata to its beneficiaries. The Litigation Trustee intends to take a position on the Litigation Trusts tax return that the Litigation Trust should be treated as a grantor trust set up for the benefit of creditors. Holders of Claims that receive Litigation Trust Interests will be required to report on their U.S. federal income tax returns their share of the Litigation Trusts items of income, gain, loss, deduction and credit in the year recognized by the Litigation Trust whether or not the Litigation Trust is taxed as a partnership or a grantor trust. This requirement may result in Holders being subject to tax on their allocable share of the Litigation Trusts taxable income prior to receiving any cash distributions from the Litigation Trust. In general, Holders of Litigation Trust Interests will not be subject to tax on their receipt of distributions from the trust. Any Litigation Trust Assets held by the Litigation Trust on account of Disputed Claims shall be treated as held in trust by the Litigation Trust as fiduciary for the benefit of the Holders of Disputed Claims (each a Disputed Claims Reserve). Under IRC Section 468B(g), amounts earned by an escrow account, settlement fund or similar fund must be subject to current tax. Although certain Treasury Regulations have been issued under this section, no Treasury Regulations have as yet been promulgated to address the tax treatment of such accounts in a bankruptcy setting. Thus, depending on the facts of a particular situation, such an account could be treated as a separately taxable trust, as a grantor trust treated as owned by the Holders of Disputed Claims or by the Debtor (or, if applicable, any of its successors), or otherwise. On February 1, 1999, the IRS issued proposed Treasury Regulations that, if finalized in their current form, would specify the tax treatment of reserves of the type here involved that are established after the date such Treasury Regulations become final. In general, such Treasury Regulations would tax such a reserve as a qualified settlement fund under Regulation Sections 1.468B-1 et seq. and thus subject to a separate entity level tax. As to previously established escrows and the like, such Treasury Regulations would provide that the IRS would not challenge any reasonably, consistently applied method of taxation for income earned by the escrow or account, and any reasonably, consistently applied method for reporting such income.
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Absent definitive guidance from the IRS or a court of competent jurisdiction to the contrary, the Litigation Trust will (i) treat each Disputed Claims Reserve as a discrete trust for federal income tax purposes, consisting of separate and independent shares to be established in respect of each Disputed Claim in the Class of Claims to which such reserve relates, in accordance with the trust provisions of Code, and (ii) to the extent permitted by applicable law, report consistently for state and local income tax purposes. In addition, pursuant to the Plan, all parties shall report consistently with such treatment. Accordingly, subject to issuance of definitive guidance, the Litigation Trust, in each case as fiduciary for Holders of Disputed Claims, will report as subject to a separate entity level tax any amounts earned by its respective Disputed Claims Reserves, except to the extent such earnings are distributed by such fiduciary during the same taxable year. In such event, any amount earned by a Disputed Claims Reserve that is distributed to a Holder during the same taxable year will be includible in such Holders gross income. 6. Consequences to Holders of Allowed Class D Old Equity Interests
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Pursuant to the Plan, on the Effective Date, all Old Equity Interests shall be deemed canceled and shall be of no further force and effect, whether surrendered for cancellation or otherwise, and there shall be no distribution to the Holders of Old Equity Interests. For U.S. federal income tax purposes, the tax consequences arising from the cancellation of a Old Equity Interest are complex, and may give rise to a deemed distribution to such Holder and/or an allocation of COD income, as described in more detail above under Certain U.S. Federal Income Tax Consequences to Reorganized Debtors. Holders of Old Equity Interests are urged to consult with their own tax advisers regarding such consequences. 7. Accrued but Unpaid Interest
A portion of the consideration received by Holders of Claims may be attributable to accrued but unpaid interest on such Claims. Such amount should be taxable to that Holder as interest income if such accrued interest has not been previously included in the Holders gross income for United States federal income tax purposes. Conversely, it is possible that a Holder of Claims may be able to recognize a deductible loss (or, possibly, a write-off against a reserve for worthless debts) to the extent that any accrued interest on the Claims was previously included in the U.S. holders gross income but was not paid in full by Debtors. The character of such loss may be ordinary rather than capital, but the tax law is unclear on this issue. If the fair value of the consideration is not sufficient to fully satisfy all principal and interest on Allowed Claims, the extent to which such consideration will be attributable to accrued but unpaid interest is unclear. Under the Plan, the aggregate consideration to be distributed to Holders of Allowed Claims in each Class will be allocated first to the principal amount of Allowed Claims, with any excess allocated to unpaid interest that accrued on such Claims, if any. Certain legislative history indicates that an allocation of consideration as between principal and interest provided in a chapter 11 plan of reorganization is binding for United States federal income tax purposes. The IRS could take the position, however, that the consideration received by the Holder should be allocated in some way other than as provided
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in the Plan. Holders of Claims should consult their own tax advisors regarding the proper allocation of the consideration received by them under the Plan. 8. Market Discount
Holders who exchange Allowed Claims for their pro rata share of each of (a) the New First Lien Notes, (b) Newco Equity Interests, and (c) Cash may be affected by the market discount provisions of sections 1276 through 1278 of the IRC. Under these provisions, some or all of the gain realized by a Holder may be treated as ordinary income (instead of capital gain), to the extent of the amount of accrued market discount on such Allowed Claims. In general, a debt obligation with a fixed maturity of more than one year that is acquired by a holder on the secondary market (or, in certain circumstances, upon original issuance) is considered to be acquired with market discount as to that holder if the debt obligations stated redemption price at maturity (or revised issue price as defined in section 1278 of the IRC, in the case of a debt obligation issued with original issue discount) exceeds the tax basis of the debt obligation in the holders hands immediately after its acquisition. However, a debt obligation is not a market discount bond if the excess is less than a statutory de minimis amount (equal to 0.25% of the debt obligations stated redemption price at maturity or revised issue price, in the case of a debt obligation issued with original issue discount, multiplied by the number of complete years remaining until maturity at the time of the acquisition). Any gain recognized by a Holder on the taxable disposition of Allowed Claims (determined as described above) that were acquired with market discount should be treated as ordinary income to the extent of the market discount that accrued thereon while the Allowed Claims were considered to be held by the Holder (unless the Holder elected to include market discount in income as it accrued). To the extent that the Allowed Claims that were acquired with market discount are exchanged in a tax-free transaction for other property (as may occur here), any market discount that accrued on the Allowed Claims (i.e., up to the time of the exchange) but was not recognized by the Holder is carried over to the property received therefor and any gain recognized on the subsequent sale, exchange, redemption or other disposition of such property is treated as ordinary income to the extent of such accrued market discount. 9. Issue Price
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For U.S. federal income tax purposes, the issue price of a debt instrument depends on whether such instrument is deemed to be publicly traded. If, at any time during the 60day period ending 30 days after the issue date of a debt instrument, a substantial amount of the debt instruments in an issue is traded on an established market within the meaning of the applicable Regulations, then the debt instrument will be treated as publicly traded and the issue price of the debt instrument will equal the fair market value of that debt instrument on the date of issuance. In general, a debt instrument will be treated as traded on an established securities market if it is listed on a major securities exchange, appears on a system of general circulation that provides a reasonable basis to determine fair market value or otherwise is,
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among other things, readily quotable by dealers, brokers or traders. For purposes of applying these rules, each tranche of new debt instruments is treated as a separate issue. If a tranche of new debt instrument is not publicly traded and the old Claim exchanged for such new debt instrument in such tranche is also not publicly traded, then the issue price of that new debt instrument generally would equal the stated principal amount of such debt instrument. Holders of Claims should consult their tax advisors regarding the issue prices for New First Lien Notes. 10. Claim Purchase
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For U.S. federal income tax purposes, the sale of an Allowed Class C-1 Claim for Cash should be a taxable exchange under section 1001 of the IRC. A Holder who receives Cash in exchange for its Allowed Class C-1 Claim will generally recognize income, gain or loss for U.S. federal income tax purposes in an amount equal to the difference between (a) the amount of Cash received and (b) the Holders adjusted basis in its Allowed Class C-1 Claim. Such gain or loss may be ordinary or capital in nature (subject to the market discount rules described above) and may be long-term capital gain or loss if the Class C-1 Claim was held for more than one year. To the extent that a portion of the Cash received represents accrued but unpaid interest that the Holder has not already taken into income, the Holder may recognized ordinary interest income (as described herein). C. Other Tax Matters 1. Information Reporting and Backup Withholding
In general, information reporting requirements may apply to distributions or payments under the Plan. Additionally, under the backup withholding rules, a Holder of a Claim may be subject to backup withholding (currently at a rate of 28%) with respect to distributions or payments made pursuant to the Plan unless that Holder: (a) comes within certain exempt categories (which generally include corporations) and, when required, demonstrates that fact; or (b) provides a correct taxpayer identification number and certifies under penalty of perjury that the taxpayer identification number is correct and that the Holder is not subject to backup withholding because of a failure to report all dividend and interest income. Backup withholding is not an additional tax but is, instead, an advance payment that may be refunded to the extent it results in an overpayment of tax; provided, however, that the required information is provided to the IRS. The Debtors will withhold all amounts required by law to be withheld from payments of interest. The Debtors will comply with all applicable reporting requirements of the IRS. The Plan may impose additional U.S. federal income tax filing requirements on indirect holders of the Newco Equity Interests reflecting the activities on the Effective Date, as discussed above in Section B.
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2.
Importance of Obtaining Professional Tax Assistance
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THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN INCOME TAX CONSEQUENCES OF THE PLAN AND IS NOT A SUBSTITUTE FOR CAREFUL TAX PLANNING WITH A TAX PROFESSIONAL. THE ABOVE DISCUSSION IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT TAX ADVICE. THE TAX CONSEQUENCES ARE IN MANY CASES UNCERTAIN AND MAY VARY DEPENDING ON A CLAIM HOLDERS PARTICULAR CIRCUMSTANCES. ACCORDINGLY, HOLDERS OF CLAIMS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS ABOUT THE UNITED STATES FEDERAL, STATE, AND LOCAL, AND APPLICABLE FOREIGN INCOME AND OTHER TAX CONSEQUENCES OF THE PLAN. Article VIII. RECOMMENDATION In the opinion of the First Lien Steering Committee, the Plan is preferable to the alternatives described herein because it provides for a larger distribution to the Holders of Claims than would otherwise result in a liquidation under chapter 7 of the Bankruptcy Code. In addition, any alternative other than Confirmation could result in extensive delays and increased Administrative Claims resulting in smaller distributions to the Holders of Claims. Accordingly, the First Lien Steering Committee recommends that Holders of Claims entitled to vote on the Plan support Confirmation and vote to accept the Plan. [Remainder of Page Intentionally Left Blank]
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Article IX. CONCLUSION The First Lien Steering Committee believes that the Plan is in the best interests of Creditors and urges such parties to vote to accept the Plan. Dated: November 12, 2009 THE FIRST LIEN STEERING COMMITTEE By: Its Counsel
8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Counsel for the First Lien Steering Committee AKIN GUMP STRAUSS HAUER & FELD LLP Philip C. Dublin (NY Bar No, 2959344) Abid Qureshi (NY Bar No. 2684637) One Bryant Park New York, New York 10036 (212) 872-1000 (Telephone) (212) 872-1002 (Facsimile) pdublin@akingump.com aqureshi@akingump.com By: /s/ Philip C. Dublin Nile Leatham (NV Bar No. 002838) KOLESAR & LEATHAM Wells Fargo Financial Center 3320 W. Sahara Ave. Las Vegas, NV 89102 (702) 979-2357 (Telephone) (702) 362-9472 (Facsimile) Nleatham@klnevada.com
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LIST OF EXHIBITS Exhibit A B C D E F G H I J K L M N ..................................................... ..................................................... ..................................................... ..................................................... ..................................................... ..................................................... ..................................................... ..................................................... ..................................................... ..................................................... ..................................................... ..................................................... ..................................................... Description Plan of Reorganization Debtors Organizational Chart Current Cash Collateral Budget Going Concern Analysis Liquidation Analysis Pending Litigation Litigation Trust Assets Claim Purchase Schedule Litigation Trust Agreement Newco LLC Operating Agreement New First Lien Credit Agreement Schedule of Causes of Action Asset and Stock Transfer Agreement Schedule of Assumed Executory Contracts and Unexpired Leases
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EXHIBIT A
EXHIBIT A
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Nile Leatham (NV Bar No. 002838) KOLESAR & LEATHAM Wells Fargo Financial Center 3320 W. Sahara Ave. Las Vegas, NV 89102 Telephone: 702.979.2357 Facsimile: 702.362.9472 E-Mail: nleatham@klnevada.com Philip C. Dublin (NY Bar No. 2959344) Abid Qureshi (NY Bar No. 2684637) AKIN GUMP STRAUSS HAUER & FELD LLP One Bryant Park New York, NY 10036 Telephone: 212.872.1000 Facsimile: 212.872.1002 E-Mail: pdublin@akingump.com aqureshi@akingump.com
Electronically Filed November 12, 2009
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Counsel for the First Lien Steering Committee UNITED STATES BANKRUPTCY COURT DISTRICT OF NEVADA SOUTHERN DIVISION IN RE: THE RHODES COMPANIES, LLC, aka Rhodes Homes, et al., Debtors.1
Case No. 09-14814-LBR Jointly Administered
The Debtors in these cases, along with the last four digits of each Debtors federal tax identification number, if applicable, are: Heritage Land Company, LLC (2918); The Rhodes Companies, LLC (3060); Rhodes Ranch General Partnership (1760); Tick, LP (0707); Glynda, LP (5569); Chalkline, LP (0281); Batcave, LP (6837); Jackknife, LP (6189); Wallboard, LP (1467); Overflow, LP (9349); Rhodes Ranch Golf and Country Club (9730); Tuscany Acquisitions, LLC (0206); Tuscany Acquisitions II, LLC (8693); Tuscany Acquisitions III, LLC (9777); Tuscany Acquisitions IV, LLC (0509); Parcel 20 LLC (5534); Rhodes Design and Development Corp. (1963); C&J Holdings, Inc. (1315); Rhodes Realty, Inc. (0716); Jarupa LLC (4090); Elkhorn Investments, Inc. (6673); Rhodes Homes Arizona, LLC (7248); Rhodes Arizona Properties, LLC (8738); Tribes Holdings LLC (4347); Six Feathers Holdings, LLC (8451); Elkhorn Partners, A Nevada Limited Partnership (9654); Bravo Inc. (2642); Gung-Ho Concrete, LLC (6966); Geronimo Plumbing, LLC (6897); Apache Framing, LLC (6352); Tuscany Golf Country Club, LLC (7132); Pinnacle Grading, LLC (4838).
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Affects: All Debtors Affects the following Debtor(s)
SECOND AMENDED PLAN OF REORGANIZATION PURSUANT TO CHAPTER 11 OF THE BANKRUPTCY CODE FOR THE RHODES COMPANIES, LLC, ET AL.
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TABLE OF CONTENTS Page INTRODUCTION ................................................................................................................... 1 ARTICLE I. DEFINED TERMS, RULES OF INTERPRETATION, COMPUTATION OF TIME, AND GOVERNING LAW .............................. 1 A. Defined Terms ................................................................................................. 1 B. Rules of Interpretation ................................................................................... 15 C. Reference to Monetary Figures...................................................................... 16 ARTICLE II. ADMINISTRATIVE AND PRIORITY CLAIMS.......................................... 16 A. Administrative Claims ................................................................................... 16 B. Priority Tax Claims........................................................................................ 17 ARTICLE III. CLASSIFICATION AND TREATMENT OF CLAIMS AND INTERESTS .................................................................................................. 17 A. Classification of Claims and Interests............................................................ 17 B. Treatment of Classes of Claims and Interests................................................ 18 C. Class Voting Rights ....................................................................................... 21 D. Bankruptcy Code Section 1111(b) Election .................................................. 23 E. Acceptance or Rejection of the Plan.............................................................. 23 ARTICLE IV. PROVISIONS FOR IMPLEMENTATION OF THE PLAN ........................ 23 A. Substantive Consolidation ............................................................................. 23 B. Sources of Consideration for Plan Distributions ........................................... 24 C. Corporate Existence ....................................................................................... 25 D. Vesting of Assets in the Reorganized Debtors .............................................. 26 E. Cancellation of Equity Securities and Related Obligations........................... 26 F. Restructuring Steps and Transfer of Certain Interests to Newco................... 27 G. Restructuring Transactions ............................................................................ 27 H. Corporate Action............................................................................................ 28 I. Post-Confirmation Property Sales.................................................................. 28 J. Organizational Documents............................................................................. 28 K. Effectuating Documents, Further Transactions ............................................. 29 L. Exemption from Certain Transfer Taxes and Recording Fees....................... 29 M. Directors and Officers of the Reorganized Debtors....................................... 29 N. Management and Director Equity Incentive Plan.......................................... 29 O. The Litigation Trust ....................................................................................... 29 P. Preservation of Causes of Action................................................................... 30 Q. HOA Board Seats........................................................................................... 31 R. Licensing........................................................................................................ 31 S. Transfer of Rhodes Ranch Golf Course......................................................... 32 T. Cash Payment................................................................................................. 33 iii
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U. V. W. X. Y.
Transfer of Arizona Assets ............................................................................ 33 Trademarks and Trade Names ....................................................................... 34 Self Insured Retention Obligations................................................................ 34 Bond Replacement or Indemnification .......................................................... 34 Stanley Engineering Litigation ...................................................................... 35
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ARTICLE V. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES......................................................................................................... 35 A. Assumption and Rejection of Executory Contracts and Unexpired Leases............................................................................................................. 35 B. Cure of Defaults for Assumed Executory Contracts and Unexpired Leases............................................................................................................. 36 C. Preexisting Obligations to the Debtors Under Executory Contracts and Unexpired Leases........................................................................................... 37 D. Claims Based on Rejection or Repudiation of Executory Contracts and Unexpired Leases........................................................................................... 37 E. Intercompany Contracts, Contracts, and Leases Entered Into After the Petition Date: ................................................................................................. 38 F. Home Sales .................................................................................................... 38 G. Warranties ...................................................................................................... 38 H. Modification of Executory Contracts and Unexpired Leases Containing Equity Ownership Restrictions ...................................................................... 38 I. Modifications, Amendments, Supplements, Restatements, or Other Agreements .................................................................................................... 38 J. Reservation of Rights..................................................................................... 38 K. Nonoccurrence of Effective Date................................................................... 39 ARTICLE VI. PROCEDURES FOR RESOLVING DISPUTED CLAIMS......................... 39 A. Allowance of Claims...................................................................................... 39 B. Claims Administration Responsibilities ........................................................ 39 C. Estimation of Claims...................................................................................... 39 D. Adjustment to Claims Without Objection...................................................... 39 E. Time to File Objections to Claims ................................................................. 40 F. Disallowance of Claims ................................................................................. 40 G. Offer of Judgment .......................................................................................... 40 H. Amendments to Claims.................................................................................. 40 ARTICLE VII. PROVISIONS GOVERNING DISTRIBUTIONS....................................... 41 A. Total Enterprise Value for Purposes of Distributions Under the Plan........... 41 B. Distributions on Account of Claims Allowed as of the Effective Date......... 41 C. Distributions on Account of Claims Allowed After the Effective Date: ....... 41 D. Delivery of Distributions ............................................................................... 42 E. Claims Paid or Payable by Third Parties. ...................................................... 45 F. Payment of $1.5 Million to First Lien Lenders.............................................. 46 G. General Unsecured Claims Purchase ............................................................. 47 ARTICLE VIII. EFFECT OF CONFIRMATION OF THE PLAN ...................................... 48
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A. B. C. D. E. F. G. H. I. J. K. L. M. N.
Discharge of Claims and Termination of Interests ........................................ 48 Subordinated Claims...................................................................................... 48 Compromise and Settlement of Claims and Controversies ........................... 49 Releases by the Debtors of the Released Parties ........................................... 49 Releases by the Debtors of the Rhodes Entities............................................. 50 Releases by First Lien Lenders of First Lien Lenders ................................... 50 Exculpation .................................................................................................... 50 Injunction ....................................................................................................... 51 Protection Against Discriminatory Treatment ............................................... 51 Setoffs ............................................................................................................ 51 Recoupment ................................................................................................... 52 Release of Liens............................................................................................. 52 Document Retention ...................................................................................... 53 Reimbursement or Contribution .................................................................... 53
ARTICLE IX. ALLOWANCE AND PAYMENT OF CERTAIN ADMINISTRATIVE CLAIMS ........................................................................................................ 53 A. Professional Claims: ...................................................................................... 53 B. Other Administrative Claims ......................................................................... 54 ARTICLE X. CONDITIONS PRECEDENT TO CONFIRMATION AND CONSUMMATION OF THE PLAN ............................................................ 54 A. Conditions to Confirmation ........................................................................... 54 B. Conditions Precedent to the Effective Date ................................................... 55 C. Waiver of Conditions Precedent .................................................................... 56 D. Effect of Non-Occurrence of Conditions to Consummation ......................... 56 E. Satisfaction of Conditions Precedent to Confirmation .................................. 57 ARTICLE XI. MODIFICATION, REVOCATION, OR WITHDRAWAL OF THE PLAN ............................................................................................................. 57 A. Modification and Amendments...................................................................... 57 B. Effect of Confirmation on Modifications ...................................................... 58 C. Revocation or Withdrawal of Plan................................................................. 58 ARTICLE XII. RETENTION OF JURISDICTION ............................................................. 58 ARTICLE XIII. MISCELLANEOUS PROVISIONS........................................................... 61 A. Immediate Binding Effect.............................................................................. 61 B. Additional Documents ................................................................................... 61 C. Payment of Statutory Fees ............................................................................. 61 D. Dissolution of Creditors Committee............................................................. 61 E. Reservation of Rights..................................................................................... 61 F. Successors and Assigns.................................................................................. 61 G. Service of Documents:................................................................................... 62 H. Term of Injunctions or Stays.......................................................................... 63 I. Entire Agreement ........................................................................................... 63 J. Governing Law .............................................................................................. 63
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K. L. M. N. O.
Exhibits .......................................................................................................... 63 Nonseverability of Plan Provisions................................................................ 64 Closing of the Chapter 11 Cases.................................................................... 64 Waiver or Estoppel ........................................................................................ 64 Conflicts......................................................................................................... 64
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INTRODUCTION The First Lien Steering Committee proposes the following second amended plan of reorganization for the resolution of outstanding Claims against, and Interests in, The Rhodes Companies, LLC and the other debtors in the above-referenced chapter 11 cases pursuant to title 11 of the United States Code, 11 U.S.C. 1011532. Capitalized terms used in the Plan and not otherwise defined shall have the meanings ascribed to such terms in Article I.A. of the Plan. Reference is made to the Disclosure Statement, Filed contemporaneously with the Plan, for a discussion of the Debtors history, businesses, assets, results of operations, and projections of future operations, as well as a summary and description of the Plan and certain related matters. The First Lien Steering Committee is the proponent of the Plan within the meaning of section 1129 of the Bankruptcy Code. ALL HOLDERS OF CLAIMS ENTITLED TO VOTE ON THE PLAN ARE ENCOURAGED TO READ THE PLAN AND THE DISCLOSURE STATEMENT IN THEIR ENTIRETY BEFORE VOTING TO ACCEPT OR REJECT THE PLAN. THE PLAN PROVIDES FOR THE SUBSTANTIVE CONSOLIDATION OF ALL OF THE ESTATES FOR ALL PURPOSES ASSOCIATED WITH CONFIRMATION AND DISTRIBUTIONS UNDER THE PLAN. ARTICLE I. DEFINED TERMS, RULES OF INTERPRETATION, COMPUTATION OF TIME, AND GOVERNING LAW A. Defined Terms: As used in the Plan, the capitalized terms below have the following meanings, except as expressly provided or unless the context otherwise requires. Any term used but not defined in the Plan, but that is used in the Bankruptcy Code or the Bankruptcy Rules, shall have the meaning ascribed to that term in the Bankruptcy Code or the Bankruptcy Rules. 1. Accrued Professional Compensation: At any given moment, all accrued fees and expenses for services rendered by all Professionals through and including the Effective Date, to the extent such fees and expenses have not been paid and regardless of whether a fee application has been Filed for such fees and expenses. To the extent there is a Final Order denying some or all of a Professionals fees or expenses, such denied amounts shall no longer be considered Accrued Professional Compensation. 2. Administrative Claim: A Claim for costs and expenses of administration pursuant to sections 503(b), 507(a)(2), 507(b), or 1114(e)(2) of the Bankruptcy Code, including: (a) the actual and necessary costs and expenses incurred after the Petition Date and through the Effective Date of preserving the Estates and operating the businesses of the Debtors (such as wages, salaries, or commissions for services, and payments for goods and other services and leased premises); (b) compensation for legal, financial advisory, accounting, and other services and reimbursement of expenses Allowed pursuant to sections 328, 330(a), or 331 of the Bankruptcy Code or otherwise for the period commencing on the Petition Date and ending on the Effective Date; (c) all fees and charges assessed against the
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Estates pursuant to chapter 123 of the Judicial Code and 28 U.S.C. 1930; and (d) all requests for compensation or expense reimbursement for making a substantial contribution in the Chapter 11 Cases pursuant to sections 503(b)(3), (4), and (5) of the Bankruptcy Code. 3. Administrative Claim Bar Date: The deadline for filing requests for payment of Administrative Claims, which shall be thirty days after the Effective Date for all other Administrative Claims incurred after the Petition Date through the Effective Date, except with respect to Professional Claims, which shall be subject to the provisions of Article IX. 4. Affidavit of Publication: An affidavit of a representative or agent of a publisher of a periodical certifying that notice has been served through publication in the publishers periodical. 5. Affiliate: (a) An Entity that directly or indirectly owns, controls, or holds with power to vote, twenty percent or more of the outstanding voting securities of any of the Debtors, other than an Entity that holds such securities (i) in a fiduciary or agency capacity without sole discretionary power to vote such securities or (ii) solely to secure a debt, if such Entity has not in fact exercised such power to vote; (b) a corporation twenty percent or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote, by any of the Debtors, or by an Entity that directly or indirectly owns, controls, or holds with power to vote, twenty percent or more of the outstanding voting securities of any of the Debtors, other than an Entity that holds such securities (i) in a fiduciary or agency capacity without sole discretionary power to vote such securities or (ii) solely to secure a debt, if such Entity has not in fact exercised such power to vote; (c) an Entity whose business is operated under a lease or operating agreement by any of the Debtors, or an Entity substantially all of whose property is operated under an operating agreement with any of the Debtors; (d) an Entity that operates the business or substantially all of the property of any of the Debtors under a lease or operating agreement; or (e) the Debtors domestic, wholly-owned, direct and indirect subsidiaries that have not commenced cases under chapter 11 of the Bankruptcy Code. 6. Allowed: With respect to Claims and Interests: (a) any Claim or Interest, proof of which is timely Filed by the applicable Bar Date (or that by the Bankruptcy Code or Final Order is not or shall not be required to be Filed); (b) any Claim or Interest that is listed in the Schedules as of the Effective Date as not disputed, not contingent, and not unliquidated, and for which no Proof of Claim or Interest has been timely Filed; or (c) any Claim Allowed pursuant to the Plan; provided, however, that with respect to any Claim or Interest described in clauses (a) or (b) above, such Claim or Interest shall be considered Allowed only if and to the extent that (x) no objection to the allowance thereof has been interposed within the applicable period of time fixed by the Plan, the Bankruptcy Code, the Bankruptcy Rules, or the Bankruptcy Court, (y) such an objection is so interposed and the Claim or Interest shall have been Allowed for distribution purposes only by a Final Order, or (z) the Debtors allow such Claim prior to the Effective Date with the consent of the First Lien Steering Committee and the Creditors Committee or the Reorganized Debtors allow such Claim after the Effective Date in their sole and absolute discretion. Except as otherwise specified in the Plan or a Bankruptcy Court order, the amount of an Allowed Claim shall not include interest on such Claim from and after the Petition Date. For
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purposes of determining the amount of an Allowed Claim, there shall be deducted therefrom an amount equal to the amount of any Claim that the Debtors may hold against the Holder thereof, to the extent such Claim may be offset, recouped, or otherwise reduced under applicable law. Any Claim or Interest that has been or is hereafter listed in the Schedules as disputed, contingent, or unliquidated, and for which no Proof of Claim or Interest has been timely Filed, is not considered Allowed and shall be expunged without further action by the Reorganized Debtors and without any further notice to or action, order, or approval of the Bankruptcy Court. 7. Arizona Assets: The Debtors homebuilding business in Arizona (Arizona) that will be transferred to the Rhodes Entities on the Effective Date, including the real and personal property (including general intangibles, contracts, and unexpired leases) of the following three Debtors: Rhodes Homes Arizona Properties, LLC, Rhodes Homes Arizona, LLC, and Elkhorn Investments, Inc., to the extent set forth on Attachment D to the Mediation Term Sheet. 9. Ballot or Ballots: The ballots upon which Holders of Impaired Claims entitled to vote shall cast their vote to accept or reject the Plan. 10. Bankruptcy Code: Title 11 of the United States Code, 11 U.S.C. 1011532, as applicable to the Chapter 11 Cases. 11. Bankruptcy Court: The United States Bankruptcy Court for the District of Nevada or any other court having jurisdiction over the Chapter 11 Cases. 12. Bankruptcy Rules: The Federal Rules of Bankruptcy Procedure as applicable to the Chapter 11 Cases, promulgated pursuant to section 2075 of the Judicial Code and the general, local, and chambers rules and orders of the Bankruptcy Court. 13. Bar Date: August 5, 2009, except as otherwise provided in the Plan or by Bankruptcy Court order. 14. Interest. 15. 16. Beneficial Holder: The Entity holding the beneficial interest in a Claim or Business Day: Any day, other than a Saturday, Sunday, or Legal Holiday. Cash: Cash and cash equivalents.
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17. Cash Collateral Order: The Bankruptcy Court order entitled, Final Stipulated Order (I) Authorizing Use of Cash Collateral Pursuant to Sections 105, 361, 362, and 363 of the Bankruptcy Code and (II) Granting Adequate Protection and Super Priority Administrative Expense Priority to Prepetition Secured Lenders Re Debtors' Motion for Interim and Final Orders Pursuant to Sections 105, 361, 362, 363, and 364 of Debtors' Motion for Interim and Final Orders Pursuant to Sections 105, 361, 362, 363 and 364 of the Bankruptcy Code (A) Authorizing Debtors to Use Cash Collateral, (B) Granting Adequate Protection to the Debtors' Prepetition Secured Parties and (C) Scheduling a Final Hearing; Memorandum of Points and Authorities Filed by Zachariah Larson on Behalf of Heritage 3
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Land Company, LLC [Relates to Heritage Docket No. 35], entered in the Chapter 11 Cases on April 30, 2009 [Rhodes Docket No. 126], as amended or extended with the consent of the First Lien Steering Committee, from time to time and in accordance with the terms thereof. 18. Cause of Action: Any claim, cause of action, controversy, demand, right, action, Lien, indemnity, guaranty, suit, obligation, liability, damage, judgment, account, defense, offset, power, privilege, license, and franchise of any kind or character whatsoever, known, unknown, contingent or non-contingent, matured or unmatured, suspected or unsuspected, liquidated or unliquidated, disputed or undisputed, secured or unsecured, assertable directly or derivatively, whether arising before, on or after the Petition Date, in contract or in tort, in law or in equity, or pursuant to any other theory of law. Cause of Action also includes: (a) any right of setoff, counterclaim, or recoupment and any claim on contracts or for breaches of duties imposed by law or in equity; (b) the right to object to Claims or Interests; (c) any claim pursuant to sections 362, 510, 542, 543, 544 through 550, or 553 of the Bankruptcy Code; (d) any claim or defense including fraud, mistake, duress, and usury and any other defenses set forth in section 558 of the Bankruptcy Code; (e) any state law fraudulent transfer claim; (f) any claim or cause of action of any kind against any Released Party or Exculpated Party based in whole or in part upon acts or omissions occurring prior to or after the Petition Date; and (g) any claim listed in Exhibit L to the Disclosure Statement. 19. Certificate: Any instrument evidencing a Claim or an Interest.
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20. Chapter 11 Cases: The chapter 11 bankruptcy cases filed by the Debtors on the Petition Date in the Bankruptcy Court, with case numbers 09-14778-LBR, 09-14861LBR, 09-14825-LBR, 09-14843-LBR, 09-14862-LBR, 09-14837-LBR, 09-14828-LBR, 0914820-LBR, 09-14865-LBR, 09-14822-LBR, 09-14818-LBR, 09-14860-LBR, 09-14839LBR, 09-14856-LBR, 09-14848-LBR, 09-14868-LBR, 09-14882-LBR, 09-14846-LBR, 0914844-LBR, 09-14854-LBR, 09-14841-LBR, 09-14814-LBR, 09-14833-LBR, 09-14866LBR, 09-14817-LBR, 09-14853-LBR, 09-14852-LBR, 09-14850-LBR, 09-14849-LBR, 0914858-LBR, 09-14884-LBR, 09-14887-LBR. 21. 22. Claim: As defined in section 101(5) of the Bankruptcy Code. Claims and Solicitation Agent: Omni Management Group, LLC.
23. Claims Objection Deadline: (i) One year from the Effective Date for all Claims other than the Rhodes Entities Claims; and (ii) sixty days from the Effective Date for the Rhodes Entities Claims. 24. Claims Register: The official register of Claims and Interests maintained by the Claims and Solicitation Agent. 25. Class: A class of Holders of Claims or Interests as set forth in the Plan.
26. CM/ECF: The Bankruptcy Courts Case Management and Electronic Case Filing system, which can be accessed at https://ecf.nvb.uscourts.gov/.
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27. Confirmation: The entry of the Confirmation Order, subject to all conditions specified in Article X.A having been satisfied or waived pursuant to Article X.C. 28. Confirmation Date: The date upon which the Confirmation Order is entered by the Bankruptcy Court on its docket, within the meaning of Bankruptcy Rules 5003 and 9021. 29. Confirmation Hearing: The hearing at which the Confirmation Order is first considered by the Bankruptcy Court. 30. Confirmation Hearing Notice: The notice approved in the Solicitation Procedures Order that sets forth in detail the voting and objection deadlines with respect to the Plan. 31. Confirmation Order: The order of the Bankruptcy Court confirming the Plan pursuant to section 1129 of the Bankruptcy Code. 32. Contingent Bond Indemnity Claim: company due to a bond being called. 33. 34. Any Claim asserted by a bonding
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Consummation: The occurrence of the Effective Date. Creditor: A Holder of a Claim. The Official Committee of Unsecured Creditors
35. Creditors Committee: appointed in the Chapter 11 Cases.
36. Cure: The distribution in the ordinary course of business as soon as reasonably practicable following the Effective Date of Cash, or such other property as may be ordered by the Bankruptcy Court or agreed upon by the contracting party and (i) the Debtors and the First Lien Steering Committee, or (ii) the Reorganized Debtors in an amount equal to all unpaid monetary obligations under applicable law or such lesser amount as may be agreed upon by the parties, under an executory contract or unexpired lease assumed pursuant to section 365 of the Bankruptcy Code, to the extent such obligations are enforceable under the Bankruptcy Code and applicable non-bankruptcy law. 37. Cure Bar Date: The deadline for filing requests for payment of Cure, which shall be the later of: (a) thirty days after the Effective Date or (b) thirty days after the assumption of the applicable executory contract or unexpired lease, unless otherwise ordered by the Bankruptcy Court or agreed to by the First Lien Steering Committee and the counterparty to the applicable executory contract or unexpired lease. 38. Debtors: The following Entities: Heritage Land Company, LLC; The Rhodes Companies, LLC; Rhodes Ranch General Partnership; Tick, LP; Glynda, LP; Chalkline, LP; Batcave, LP; Jackknife, LP; Wallboard, LP; Overflow, LP; Rhodes Ranch Golf and Country Club, LLC; Tuscany Acquisitions, LLC; Tuscany Acquisitions II, LLC; Tuscany Acquisitions III, LLC; Tuscany Acquisitions IV, LLC; Parcel 20 LLC; Rhodes Design and Development Corp.; C&J Holdings Inc.; Rhodes Realty, Inc.; Jarupa LLC;
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Elkhorn Investments, Inc.; Rhodes Homes Arizona, LLC; Rhodes Arizona Properties, LLC; Tribes Holdings LLC; Six Feathers Holdings, LLC; Elkhorn Partners, A Nevada Limited Partnership; Bravo Inc.; Gung-Ho Concrete, LLC; Geronimo Plumbing, LLC; Apache Framing, LLC; Tuscany Golf Country Club, LLC; and Pinnacle Grading, LLC. 39. Debtors in Possession: The Debtors, as debtors in possession in the Chapter 11 Cases, pursuant to sections 1107 and 1108 of the Bankruptcy Code. 40. Disclosure Statement: The disclosure statement for the Plan describing the Plan, including all exhibits and schedules thereto, that is prepared and distributed in accordance with sections 1125, 1126(b), and 1145 of the Bankruptcy Code, Bankruptcy Rule 3018, and other applicable law, as may be amended from time to time. 41. Disputed: With respect to any Claim or Interest, (i) any Claim or Interest on the Claims Register that is not yet Allowed, (ii) any Claim or Interest that is not yet Allowed pursuant to the terms of the Plan; (iii) any Claim that is not set forth on the Debtors Schedules or (iv) any Claim objected to by the applicable Claims Objection Deadline. 42. Disputed Claims Reserve: The Litigation Trust Interests and distributions in respect thereof held in reserve pursuant to Article VII. 43. Distribution Agent: The Reorganized Debtors, or the Entity or Entities chosen by the First Lien Steering Committee, to make or to facilitate distributions pursuant to the Plan. 44. Distribution Date: The date occurring as soon as reasonably practicable after the Effective Date when distributions under the Plan shall commence, but not later than thirty days after the Effective Date, without further Bankruptcy Court order. 45. Distribution Record Date: The date for determining which Holders of Allowed Claims are eligible to receive distributions pursuant to the Plan, which shall be the Confirmation Date or such other date as designated in the Plan or a Bankruptcy Court order. 46. Effective Date: The date in a notice Filed by the First Lien Steering Committee on or after the eleventh day following entry of an order, in form and substance acceptable to the First Lien Steering Committee, by the Bankruptcy Court confirming the Plan and satisfaction of all conditions set forth in Article X.B. of the Plan having been satisfied or waived in accordance with the terms of the Plan; provided, however, that the Effective Date shall occur no earlier than January 1, 2010. 47. Entity: As defined in section 101(15) of the Bankruptcy Code.
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48. Equity Security: Any equity security as defined in section 101(16) of the Bankruptcy Code in a Debtor. 49. Equity Security Holder: A Holder of an Interest.
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50. Estate: The bankruptcy estate of any Debtor created by virtue of section 541 of the Bankruptcy Code upon the commencement of the Chapter 11 Cases. 51. Exculpated Claim: Any claims and Causes of Action arising on or after the Petition Date, including any act taken or omitted to be taken in connection with, or related to, formulating, negotiating, preparing, disseminating, implementing, administering, confirming, or consummating the Plan, in each case other than claims for gross negligence, willful misconduct or fraud. 52. Exculpated Party: Each of: (i) the Creditors Committee, the First Lien Steering Committee, the First Lien Lenders and the Second Lien Lenders, and all of their respective current and former officers, directors, members, employees, advisors, attorneys, professionals, consultants, agents, or other representatives, and (ii) the Debtors current officers, employees, advisors, attorneys, professionals, consultants, agents, or other representatives. 53. Federal Judgment Rate: The federal judgment rate of .59%, which was in effect as of the Petition Date. 54. File: To file with the Bankruptcy Court in the Chapter 11 Cases, or in the case of Proofs of Claim or Interest, to file with the Claims and Solicitation Agent. 55. Final Decree: The decree contemplated under Bankruptcy Rule 3022.
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56. Final Order: As applicable, an order or judgment of the Bankruptcy Court or other court of competent jurisdiction with respect to the relevant subject matter, which has not been reversed, stayed, modified, or amended, and as to which the time to appeal or seek certiorari has expired and no appeal or petition for certiorari has been timely taken, or as to which any appeal that has been taken or any petition for certiorari that has been or may be Filed has been resolved by the highest court to which the order or judgment was appealed or from which certiorari was sought; provided, however, that the First Lien Steering Committee or Reorganized Debtors, as appropriate, reserve the right to waive any such appeal or similar conditions of a Final Order. 57. First Lien Agent: The current and former agents, arranger, and bookrunner with respect to, or under, the First Lien Credit Agreement. 58. First Lien Credit Agreement: The first lien Credit Agreement dated as of November 21, 2005 (as may have been amended from time to time) among Heritage Land Company, LLC, The Rhodes Companies, LLC, and Rhodes Ranch General Partnership, as the Borrowers, the Lenders Listed Therein as Lenders, and Credit Suisse, Cayman Islands Branch, as Administrative Agent, Collateral Agent, Syndication Agent, Sole Bookrunner and Sole Lead Arranger, and the other Loan Documents (as defined in the First Lien Credit Agreement). 59. First Lien Lender Claims: All First Lien Lender Secured Claims and First Lien Lender Deficiency Claims.
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60. First Lien Lender Secured Claim: Any Secured Claim for principal or interest under the First Lien Credit Agreement or the SWAP Transaction. 61. First Lien Lender Deficiency Claim: Any deficiency Claim arising under the First Lien Credit Agreement. 62. First Lien Lenders: (i) The First Lien Agent, (ii) the entities that hold debt under the First Lien Credit Agreement and (iii) the holders of Claims relating to under the SWAP Transaction. 63. First Lien Steering Committee: Credit Suisse Asset Management, Candlewood Special Situations Master Fund, Credit Suisse Loan Funding LLC, CypressTree Investment Management, LLP, General Electric Capital Corporation, Highland Capital Management, L.P., and Sorin Capital Management. 64. General Unsecured Claims: Any Claim (including any Allowed Rhodes Entities Claims) against any of the Debtors that is not a/n (a) Administrative Claim, (b) Priority Tax Claim, (c) Priority Non-Tax Claim, (d) First Lien Lender Secured Claim, (e) Second Lien Lender Secured Claim, (f) Other Secured Claim, (g) First Lien Lender Deficiency Claim, (h) Second Lien Lender Deficiency Claim, (i) Subordinated Claim, or (j) Intercompany Claim. 65. Government Bar Date: September 28, 2009 or, with respect to Rhodes Homes Arizona, LLC, Tuscany Golf Country Club, LLC and Pinnacle Grading, LLC, September 29, 2009. 66. Heritage Equity Securities: Members interests and/or the interests as a noneconomic member in Heritage Land Company, LLC, a Nevada limited liability company. 67. 68. Holder: An Entity holding a Claim or Interest, as applicable. HOA: A homeowners association.
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69. Impaired: With respect to any Class of Claims or Interests, a Class of Claims or Interests that is impaired within the meaning of section 1124 of the Bankruptcy Code. 70. Indemnification Obligation: A Debtors obligation under an executory contract or otherwise to indemnify directors, officers, or employees of the Debtors who served in such capacity at any time, with respect to or based upon any act or omission taken or omitted in any of such capacities, or for or on behalf of any Debtor, pursuant to and to the maximum extent provided by the Debtors respective articles of incorporation, certificates of formation, bylaws, similar corporate documents, and applicable law, as in effect as of the Effective Date, which shall be deemed rejected under the Plan. 71. Insider: As defined in section 101(31) of the Bankruptcy Code.
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72. Insured Claim: A Claim arising from an incident or occurrence alleged to have occurred prior to the Effective Date that is covered under an insurance policy applicable to the Debtors or their businesses. 73. 74. 75. Intercompany Claim: A Claim held by a Debtor against another Debtor. Intercompany Contract: A contract between two or more Debtors. Intercompany Interest: An Interest held by a Debtor.
76. Interest: Any: (a) Equity Security, including all issued, unissued, authorized, or outstanding shares of stock together with any warrants, options, or contractual rights to purchase or acquire such Equity Securities at any time and all rights arising with respect thereto and (b) partnership, limited liability company or similar interest. 77. Interim Compensation Order: The Bankruptcy Court order entitled, Order Granting Debtors Motion for Administrative Order Pursuant to Sections 105(a) and 331 of the Bankruptcy Code and Bankruptcy Rule 2016 Establishing Procedures for Interim Monthly Compensation and Reimbursement of Expenses of Professionals [Re: Docket No. 62], entered in the Chapter 11 Cases on May 18, 2009 [Rhodes Docket No. 180], as may have been modified by a Bankruptcy Court order approving the retention of the Professionals. 78. 9833. 79. 80. Judicial Code: Title 28 of the United States Code, 28 U.S.C. 14001. Lien: As defined in section 101(37) of the Bankruptcy Code. Internal Revenue Code: Title 26 of the United States Code, 26 U.S.C. 1
9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 82. Litigation Trust Advisory Board: The advisory board formed pursuant to the Litigation Trust Agreement. 83. Litigation Trustee: The Person designated by the First Lien Steering Committee in consultation with the First Lien Agent, the Second Lien Agent and the Creditors Committee on or before the Confirmation Date and retained as of the Effective Date to administer the Litigation Trust in accordance with the Plan and the Litigation Trust Agreement, and any successor appointed in accordance with the Litigation Trust Agreement. The identity of the Litigation Trustee shall be disclosed by the First Lien Steering Committee at or prior to the Confirmation Hearing. 84. Litigation Trust Agreement: That certain trust agreement, substantially on the terms set forth on Exhibit I to the Disclosure Statement and in form and substance acceptable to the First Lien Steering Committee, in consultation with the First Lien Agent,
81. Litigation Trust: That certain litigation trust to be created on the Effective Date in accordance with the provisions of Article IV of the Plan and the Litigation Trust Agreement.
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Second Lien Agent, Creditors Committee and the Debtors, that, among other among other things: (a) establishes and governs the Litigation Trust (including any Litigation Trust Advisory Board or similar oversight committee); and (b) describes the powers, duties, and responsibilities of the Litigation Trustee, the Liquidation Trust Assets, and the distribution of the proceeds thereof. 85. Litigation Trust Assets: All Claims and Causes of Action on which the First Lien Lenders do not have a lien and that have not been released pursuant to the Plan or order of the Bankruptcy Court. The Litigation Trust Assets shall include those set forth on Exhibit G to the Disclosure Statement. 86. Litigation Trust Beneficiaries: The Holders of Claims that are to be satisfied, in whole or in part, by post-Effective Date distributions that are to be made by the Litigation Trust. 87. Litigation Trust Funding Amount: The amount of $100,000 to be used to initially fund the Litigation Trust, which shall be repaid to the Reorganized Debtors from the first proceeds received by the Litigation Trust. 88. Litigation Trust Interests: The beneficial interests in the Litigation Trust to be distributed to certain Holders of Claims in accordance with the terms of the Plan. 89. Management and Director Equity Incentive Plan: A post-Effective Date management and director compensation incentive plan intended for certain management, employees, consultants and directors of certain of the Reorganized Debtors. 90. Master Ballots: The master ballots upon which the applicable Nominee or other holder of record shall submit on behalf of the Beneficial Holders it represents the votes cast by such Beneficial Holders to accept or reject the Plan. 91. Mediation Settlement: The agreement in principle on a comprehensive settlement reached among the Debtors, the First Lien Steering Committee, the Creditors Committee and the Second Lien Agent during a mediation held in Los Angeles, California on August 17, 24 and 25 of 2009 before the Honorable Richard Neiter. 92. Mediation Term Sheet: The document attached as Exhibit 1 to the Plan, which sets forth the terms of the Mediation Settlement. 94. Newco: An entity to be newly formed which will be the ultimate holding company of the Reorganized Debtors. 95. Newco Equity Interests: The shares of common stock in Newco or limited liability company interests in Newco initially issued and outstanding pursuant to the Plan as of the Effective Date. The Newco Equity Interests may consist of a class of full-voting equity interests (the Class A-1 Equity Interests) and a separate class of limited-voting equity interests (the Class A-2 Equity Interests). To the extent applicable, each First Lien Lender shall have the option to choose to take its New Equity Interests in the form of Class A-1 Equity Interests or Class A-2 Equity Interests. 10
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96. Newco LLC Operating Agreement: That certain limited liability company operating agreement which will govern Newco and shall be in form and substance acceptable to the First Lien Steering Committee. A draft of the Newco LLC Operating Agreement is attached as Exhibit J to the Disclosure Statement. 97. Newco Total Enterprise Value: $99.6 million, which is the midpoint range of the total enterprise value of the Reorganized Debtors set forth in the Disclosure Statement or such amount provided in the Confirmation Order as the total enterprise value of the Reorganized Debtors. 98. New First Lien Notes: The term notes issued pursuant to Article IV.B hereof in partial satisfaction of the First Lien Lender Secured Claims, which shall have the terms and conditions described on Exhibit 2 to the Plan. 99. Date. 100. Nominee: Any broker, dealer, commercial bank, trust company, savings and loan, financial institution, or other party in whose name securities are registered or held of record on behalf of a Beneficial Holder. 101. Notice of Confirmation: That certain notice pursuant to Bankruptcy Rule 3020(c)(2) notifying Holders of Claims and Interests and parties in interest that the Bankruptcy Court has confirmed the Plan. 102. Old Equity Interests: All of the Interests in any of the Debtors and any rights, options, warrants, calls, subscriptions or other similar rights or agreements, commitments or outstanding securities obligating the Debtors to issue, transfer or sell any Interests. 103. Other Secured Claim: Any Secured Claim, other than a: (i) First Lien Lender Secured Claim; or (ii) Second Lien Lender Secured Claim. 104. Periodic Distribution Date: The first Business Day that is as soon as reasonably practicable occurring approximately ninety days after the Distribution Date, and thereafter, the first Business Day that is as soon as reasonably practicable occurring approximately ninety days after the immediately preceding Periodic Distribution Date. 105. Permitted Nominee: Any nominee of a First Lien Lender or Second Lien Lender that such lender has confirmed in writing to the Debtors and the First Lien Agent or Second Lien Agent (as applicable) that it is such lenders nominee for the purpose of distribution of some or all of such lenders distribution hereunder, provided that such nominee shall be an affiliate of such lender. 106. Person: As defined in section 101(41) of the Bankruptcy Code. New First Lien Notes Maturity Date: The sixth anniversary of the Effective
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107. Petition Date: March 31, 2009 or, for Tuscany Golf Club, LLC, Pinnacle Grading, LLC and Rhodes Homes Arizona, LLC, April 1, 2009.
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108. Plan: This Second Amended Plan of Reorganization for each of the Debtors pursuant to chapter 11 of the Bankruptcy Code either in its present form or as it may be altered, amended, modified, or supplemented from time to time in accordance with the terms of the Plan, the Bankruptcy Code, and the Bankruptcy Rules. 109. Plan Proponent: The First Lien Steering Committee.
110. Pravada: A Rhodes Homes development located in Mohave County (vicinity of Kingman, Arizona) on approximately 1,312 acres. 111. Priority Non-Tax Claim: Any Claim accorded priority in right of payment pursuant to section 507(a) of the Bankruptcy Code, other than a Priority Tax Claim or an Administrative Claim. 112. Priority Tax Claim: Any Claim of the kind specified in section 507(a)(8) of the Bankruptcy Code. 113. Professional: An Entity: (a) employed pursuant to a Bankruptcy Court order in accordance with sections 327 and 1103 of the Bankruptcy Code and to be compensated for services rendered prior to or on the Confirmation Date, pursuant to sections 327, 328, 329, 330, and 331 of the Bankruptcy Code or (b) awarded compensation and reimbursement by the Bankruptcy Court pursuant to section 503(b)(4) of the Bankruptcy Code. 114. Proof of Claim: A proof of Claim Filed against any of the Debtors in the Chapter 11 Cases. 115. Proof of Interest: A proof of Interest Filed against any of the Debtors in the Chapter 11 Cases. 116. Qualified Employee: An employee that satisfies the requirements of Chapter 624.260 of the Nevada Revised Statutes. 117. Record Date: [November 16, 2009]
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118. Reinstated: (a) Leaving unaltered the legal, equitable, and contractual rights to which a Claim entitles the Holder of such Claim or Interest so as to leave such Claim Unimpaired or (b) notwithstanding any contractual provision or applicable law that entitles the Holder of a Claim or Interest to demand or receive accelerated payment of such Claim or Interest after the occurrence of a default: (i) curing any such default that occurred before or after the Petition Date, other than a default of a kind specified in section 365(b)(2) of the Bankruptcy Code or of a kind that section 365(b)(2) expressly does not require to be cured; (ii) reinstating the maturity (to the extent such maturity has not otherwise accrued by the passage of time) of such Claim as such maturity existed before such default; (iii) compensating the Holder of such Claim or Interest for any damages incurred as a result of any reasonable reliance by such Holder on such contractual provision or such applicable law; (iv) if such Claim or Interest arises from a failure to perform a nonmonetary obligation other than a default arising from failure to operate a nonresidential real property lease subject to section 365(b)(1)(A) of the Bankruptcy Code, compensating the Holder of such 12
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Claim or Interest (other than the Debtor or an insider) for any actual pecuniary loss incurred by such Holder as a result of such failure; and (v) not otherwise altering the legal, equitable or contractual rights to which such Claim entitles the Holder. 119. Rejection Damages Claim: Any Claim on account of the rejection of an executory contract or unexpired lease pursuant to section 365 of the Bankruptcy Code. 120. Rejection Damages Claim Deadline: The deadline to file a Rejection Damages Claim which shall be thirty days after the later of the Effective Date or the effective date of rejection or repudiation of an executory contract or unexpired lease. 121. Released Party: Each of: (a) the First Lien Lenders in their capacity as such; (b) the First Lien Steering Committee; (c) the Second Lien Lenders in their capacity as such; (d) with respect to each of the foregoing Entities in clauses (a) through (c), such Entities predecessors, successors and assigns; (e) the Creditors Committee and the members thereof in their capacity as such; (f) with respect to each of the foregoing Entities in clauses (a) through (e), such Entities subsidiaries, affiliates, officers, members, directors, principals, employees, agents, financial advisors, attorneys, accountants, investment bankers, consultants, representatives, and other Professionals; (g) the Debtors officers, employees (including Thomas Robinson and Joseph Schramm) and Professionals, as of the Petition Date; and (h) Paul Huygens; provided, however, that clause (g) shall not include (i) the Rhodes Entities or their affiliates; (ii) insiders of any of the Rhodes Entities (except as to Thomas Robinson and Joseph Schramm); or (iii) relatives of Rhodes. 122. Reorganized Debtors: The Debtors, as reorganized pursuant to and under the Plan, or any successor thereto, by merger, consolidation, or otherwise, on or after the Effective Date. 123. Rhodes: James M. Rhodes, in his individual capacity and any capacity related to any of the Debtors including, without limitation, as shareholder, general partner, limited partner, agent, officer or principal. 124. Rhodes Entities: The following Entities: Rhodes; Glynda Rhodes; John Rhodes; James M. Rhodes Dynasty Trust I; James M. Rhodes Dynasty Trust II; JMR Childrens Irrevocable Educational Trust; Truckee Springs Holdings, Inc.; Sedora Holdings LLC; Gypsum Resources, LLC; Tulare Springs Holdings, Inc.; Escalante-Zion Investments, LLC; HH Trust; Harmony Homes, LLC; Tock, LP; Tapemeasure, LP; Joshua Choya, LLC; American Land Management, LLC; South Dakota Conservancy, LLC; Meridian Land Company, LLC; Yucca Land Company, LLC; Sagebrush Enterprises, Inc.; Rhodes Ranch, LLC; Westward Crossing, LLC; Pinnacle Equipment Rental, LLC; Desert Communities, Inc.; Spirit Underground, LLC; Tropicana Durango Investments, Inc.; Tropicana Durango, Ltd. I; Dirt Investments, LLC; Underground Technologies, LLC; South Dakota Aggregate and Engineering, LLC; Freedom Underground, LLC; Jerico Trust; Canberra Holdings, LLC; Custom Quality Homes, LLC; and Rhodes Ranch Golf, Inc.; and ID Interior Design, LLC. 125. 126. Rhodes Entities Claims: Claims asserted by the Rhodes Entities. Rhodes Entities Release: As set forth in Article VIII.E hereof. 13
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127. Rhodes Ranch Golf Course: The golf course situated within the Rhodes Ranch master-planned community located in the southwestern Las Vegas valley. 128. Roll-Up Transaction: A dissolution or winding up of the corporate existence of a Debtor or Reorganized Debtor under applicable state law or the consolidation, merger, contribution of assets, or other transaction in which a Debtor or Reorganized Debtor merges with or transfers substantially all of its assets and liabilities to another Debtor or Reorganized Debtor, on or after the Effective Date. 129. Schedules: The schedules of assets and liabilities, schedules of executory contracts, and statement of financial affairs, as amended from time to time, Filed by the Debtors pursuant to section 521 of the Bankruptcy Code, the official bankruptcy forms, and the Bankruptcy Rules. 130. Second Lien Agent: The current and former agents, arranger, and bookrunner with respect to, or under, the Second Lien Credit Agreement. 131. Second Lien Credit Agreement: The Credit Agreement (as may have been amended from time to time) dated as of November 21, 2005 among Heritage Land Company, LLC, The Rhodes Companies, LLC, and Rhodes Ranch General Partnership, as the Borrowers, the Lenders Listed Therein, as the Lenders, and Credit Suisse, Cayman Islands Branch, as Administrative Agent, Collateral Agent, Syndication Agent, Sole Bookrunner and Sole Lead Arranger, and the other Loan Documents (as defined in the Second Lien Credit Agreement). 132. Second Lien Lender Claims: All Second Lien Lender Secured Claims and Second Lien Lender Deficiency Claims. 133. Second Lien Lender Secured Claim: Any Secured Claim on account of the Second Lien Credit Agreement. 134. Second Lien Lender Deficiency Claim: Any deficiency Claim arising under the Second Lien Credit Agreement. 135. Second Lien Lenders: The Second Lien Agent and the entities that hold debt under the Second Lien Credit Agreement. 136. Secured: When referring to a Claim: (a) secured by a Lien on property in which an Estate has an interest, which Lien is valid, perfected, and enforceable pursuant to applicable law or by reason of a Bankruptcy Court order, or that is subject to setoff pursuant to section 553 of the Bankruptcy Code, to the extent of the value of the Creditors interest in the Estates interest in such property or to the extent of the amount subject to setoff, as applicable, as determined pursuant to section 506(a) of the Bankruptcy Code; or (b) Allowed pursuant to the Plan as a Secured Claim. 137. Securities Act: The Securities Act of 1933, 15 U.S.C. 77a-77aa, or any similar federal, state, or local law.
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138.
Security: As defined in section 2(a)(1) of the Securities Act.
139. Servicer: An agent, servicer, or other authorized representative of Holders of Claims or Interests recognized by the Plan Proponent. 140. Solicitation Procedures Order: That certain order entered by the Bankruptcy Court on [November 16], 2009, approving certain solicitation procedures for solicitation of votes on the Plan [Rhodes Docket No. [XX]]. 141. Stanley Engineering Litigation: The litigation styled Rhodes Homes Arizona, LLC v. Stanley Consultants, Inc., No. CV2006-011358, currently pending in the Superior Court of Arizona, Maricopa County. 142. Subordinated Claim: Any Claim that is subordinated pursuant to section 510 of the Bankruptcy Code. 143. Supremacy Clause: Paragraph 2 of Article VI of the U.S. Constitution.
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145. SWAP Transaction: That certain transaction between Credit Suisse International and Heritage Land Company, LLC with Trade Date of December 9, 2005 and CSIN External ID 53095828. 146. Unclaimed Distribution: Any distribution under the Plan on account of an Allowed Claim to a Holder that has not: (a) accepted a particular distribution or, in the case of distributions made by check, presented such check for payment within 120 days of the date of the check; (b) given notice to the Reorganized Debtors of an intent to accept a particular distribution; (c) responded to the Debtors or Reorganized Debtors requests for information necessary to facilitate a particular distribution; or (d) taken any other action necessary to facilitate such distribution. 147. Uniform Commercial Code: The Uniform Commercial Code as in effect on the Effective Date, as enacted in the applicable state. 148. Unimpaired: With respect to a Class of Claims or Interests, a Class of Claims or Interests that is unimpaired within the meaning of section 1124 of the Bankruptcy Code. 149. Unsecured Claim: Any Claim that is not secured by a Lien on property in which the Debtors Estate has an interest. 150. 152. B. U.S. Constitution: The Constitution of the United States of America. Voting Deadline: [December 18], 2009.
Rules of Interpretation:
1. For purposes of the Plan: (a) whenever from the context it is appropriate, each term, whether stated in the singular or the plural, shall include both the singular and the plural, and pronouns stated in the masculine, feminine, or neuter gender shall include the
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masculine, feminine, and the neuter gender; (b) unless otherwise specified, any reference in the Plan to a contract, instrument, release, indenture, or other agreement or document being in a particular form or on particular terms and conditions means that such document shall be substantially in such form or substantially on such terms and conditions; (c) unless otherwise specified, any reference in the Plan to an existing document, schedule, or exhibit, whether or not Filed, shall mean such document, schedule, or exhibit, as it may have been or may be amended, modified, or supplemented; (d) any reference to an Entity as a Holder of a Claim or Interest includes that Entitys successors and assigns; (e) unless otherwise specified, all references in the Plan to Articles are references to Articles of the Plan or to the Plan; (f) the words herein, hereof, and hereto refer to the Plan in its entirety rather than to a particular portion of the Plan; (g) subject to the provisions of any contract, certificate of incorporation, bylaw, instrument, release, or other agreement or document entered into in connection with the Plan, the rights and obligations arising pursuant to the Plan shall be governed by, and construed and enforced in accordance with applicable federal law, including the Bankruptcy Code and Bankruptcy Rules; (h) captions and headings to Articles are inserted for convenience of reference only and are not intended to be a part of or to affect the interpretation of the Plan; (i) unless otherwise set forth in the Plan, the rules of construction set forth in section 102 of the Bankruptcy Code shall apply; (j) any term used in capitalized form in the Plan that is not otherwise defined but that is used in the Bankruptcy Code or the Bankruptcy Rules shall have the meaning assigned to such term in the Bankruptcy Code or the Bankruptcy Rules, as applicable; (k) all references to docket numbers of documents Filed in the Chapter 11 Cases are references to the docket numbers under the Bankruptcy Courts CM/ECF system; (l) all references to statutes, regulations, orders, rules of courts, and the like shall mean as amended from time to time, as applicable to the Chapter 11 Cases, unless otherwise stated; and (m) any immaterial effectuating provisions may be interpreted by the Reorganized Debtors in such a manner that is consistent with the overall purpose and intent of the Plan all without further Bankruptcy Court order. 2. Computation of Time: In computing any period of time prescribed or allowed, the provisions of Bankruptcy Rule 9006(a) shall apply. If the date on which a transaction may occur pursuant to the Plan shall occur on a day that is not a Business Day, then such transaction shall instead occur on the next succeeding Business Day. C. Reference to Monetary Figures: All references in the Plan to monetary figures shall refer to currency of the United States of America. ARTICLE II. ADMINISTRATIVE AND PRIORITY CLAIMS In accordance with section 1123(a)(1) of the Bankruptcy Code, Administrative Claims and Priority Tax Claims have not been classified and thus are excluded from the Classes of Claims set forth in Article III. A. Administrative Claims: Each Allowed Administrative Claim shall be paid in full, in Cash, (i) on the later of (a) the Effective Date, (b) the date on which the Bankruptcy Court enters an order allowing such Allowed Administrative Claim or (c) the date on which the
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Reorganized Debtors or the Debtors, with the consent of the First Lien Steering Committee (and in consultation with the First Lien Agent and Second Lien Agent) and the Holder of such Allowed Administrative Claim otherwise agree, and (ii) in such amounts as (a) are incurred in the ordinary course of business by the Debtors, (b) are Allowed by the Bankruptcy Court, (c) may be agreed upon between the Holder of such Allowed Administrative Claim and the Reorganized Debtors or the Debtors, with the consent of the First Lien Steering Committee (and in consultation with the First Lien Agent and Second Lien Agent), or (d) may otherwise be required under applicable law. Such Allowed Administrative Claims shall include costs incurred in the operation of the Debtors businesses after the Petition Date, the allowed fees and expenses of Professionals retained by the Debtors and the Creditors Committee and the fees due to the United States Trustee pursuant to 28 U.S.C. 1930. B. Priority Tax Claims: Allowed Priority Tax Claims shall be paid in full, in Cash, upon the later of (a) the Effective Date, (b) the date upon which there is a Final Order allowing such Claim as an Allowed Priority Tax Claim, (c) the date that such Allowed Priority Tax Claim would have been due if the Chapter 11 Cases had not been commenced, or (d) upon such other terms as may be agreed to between the Reorganized Debtors or the Debtors, with the consent of the First Lien Steering Committee (and in consultation with the First Lien Agent and Second Lien Agent), and any Holder of an Allowed Priority Tax Claim; provided, however, that the Reorganized Debtors or Debtors, with the consent of the First Lien Steering Committee (and in consultation with the First Lien Agent and Second Lien Agent), in lieu of payment in full of Allowed Priority Tax Claims on the Effective Date, may make Cash payments respecting Allowed Priority Tax Claims deferred to the extent permitted by Section 1129(a)(9) of the Bankruptcy Code and, in such event, unless otherwise provided herein, interest shall be paid on the unpaid portion of such Allowed Priority Tax Claim at the Federal statutory rate; provided, further, that deferred Cash payments on account of an Allowed Priority Tax Claim shall be paid quarterly over a period of six years commencing with the quarter after which such Priority Tax Claim has been Allowed.
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ARTICLE III. CLASSIFICATION AND TREATMENT OF CLAIMS AND INTERESTS All Claims and Interests, except A. Classification of Claims and Interests: Administrative Claims and Priority Tax Claims, are classified in the Classes set forth in Article III. A Claim or Interest is classified in a particular Class only to the extent that the Claim or Interest qualifies within the description of that Class and is classified in other Classes to the extent that any portion of the Claim or Interest qualifies within the description of such other Classes. A Claim is also classified in a particular Class for the purpose of receiving distributions pursuant to the Plan only to the extent that such Claim is an Allowed Claim in that Class and has not been paid, released, or otherwise satisfied prior to the Effective Date.
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1. Class Identification: Below is a chart assigning each Class a letter and, in some cases, a number for purposes of identifying each separate Class.
Class Claim or Interest Type
A-1 A-2 A-3 B C-1 C-2 C-3 C-4 D E
First Lien Lender Secured Claims Second Lien Lender Secured Claims Other Secured Claims Priority Non-Tax Claim General Unsecured Claims First Lien Lender Deficiency Claims Second Lien Lender Deficiency Claims Subordinated Claims Old Equity Interests Intercompany Claims
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B. Treatment of Classes of Claims and Interests: To the extent a Class contains Allowed Claims or Interests with respect to a particular Debtor, the treatment provided to each Class for distribution purposes is specified below. 1. Class A-1First Lien Lender Secured Claims Classification: Class A-1 consists of all First Lien Lender Secured
a. Claims.
b. Impairment and Voting: Class A-1 is Impaired by the Plan. Each Holder of an Allowed Claim in Class A-1 is entitled to vote to accept or reject the Plan. c. Treatment: On the Effective Date or such other date as set forth herein, each of the First Lien Lenders (or its Permitted Nominee) shall receive on account of its Secured Claims, (w) its pro rata share of $1.5 million in Cash from the proceeds of the First Lien Lenders Collateral, (x) its pro rata share of 100% of the New First Lien Notes, and (y) its pro rata share of 100% of the Newco Equity Interests (subject to dilution for any Newco Equity Interests issued pursuant to a Management and Director Equity Incentive Plan). The $1.5 million payment to the First Lien Lenders shall be allocated and deemed paid to the First Lien Lenders in accordance with Article VII.F. of the Plan. 2. Class A-2Second Lien Lender Secured Claims Classification: Class A-2 consists of all Second Lien Lender Secured
a. Claims.
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b. Impairment and Voting: Class A-2 is Impaired by the Plan. Each Holder of an Allowed Claim in Class A-2 is entitled to vote to accept or reject the Plan. c. Treatment: On the Effective Date, only if the Class of Second Lien Lender Secured Claims votes in favor of the Plan, each of the Second Lien Lenders (or its Permitted Nominee) shall receive its pro rata share of 50% of the net proceeds of the Stanley Engineering Litigation, without a reduction on account of the reasonable fees and expenses of Ropes & Gray LLP and local counsel for the Second Lien Agent, subject to an aggregate cap of $500,000, each of which such fees shall be paid in Cash to the Second Lien Agent on the Effective Date. If the Class of Second Lien Lender Secured Claims votes against the Plan, each of the Second Lien Lenders shall receive no recovery on account of such Secured Claims. 3. Class A-3Other Secured Claims a. Classification: Class A-3 consists of all Other Secured Claims.
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b. Impairment and Voting: Class A-3 is Unimpaired by the Plan. Each Holder of an Allowed Claim in Class A-3 is conclusively presumed to have accepted the Plan and is not entitled to vote to accept or reject the Plan. c. Treatment: To the extent not satisfied by the Debtors, pursuant to Bankruptcy Court order, in the ordinary course of business prior to the Effective Date, at the option of the Reorganized Debtors on or after the Effective Date (i) an Allowed Other Secured Claim shall be Reinstated and rendered Unimpaired in accordance with section 1124(2) of the Bankruptcy Code, (ii) a Holder of an Allowed Other Secured Claim shall receive Cash in an amount equal to such Allowed Other Secured Claim, including any interest on such Allowed Other Secured Claim required to be paid pursuant to section 506(b) of the Bankruptcy Code, on the later of the Effective Date and the date such Other Secured Claim becomes an Allowed Other Secured Claim, or as soon thereafter as is practicable, (iii) a Holder of an Allowed Other Secured Claim shall receive the Collateral securing both its Allowed Other Secured Claim and any interest on such Allowed Other Secured Claim required to be paid pursuant to section 506(b) of the Bankruptcy Code, or (iv) a Holder of an Allowed Other Secured Claim shall receive such treatment as to which such holder and the Reorganized Debtors or the Debtors, with the consent of the First Lien Steering Committee (and in consultation with the First Lien Agent and Second Lien Agent), otherwise agree. 4. Class BPriority Non-Tax Claims a. Classification: Class B consists of all Priority Non-Tax Claims.
b. Impairment and Voting: Class B is Unimpaired by the Plan. Each Holder of an Allowed Claim in Class B is conclusively presumed to have accepted the Plan and is not entitled to vote to accept or reject the Plan.
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c. Treatment: Each Holder of an Allowed Priority Non-Tax Claim shall receive Cash in an amount equal to such Allowed Priority Non-Tax Claim on the later of the Effective Date and the date such Priority Non-Tax Claim becomes an Allowed Priority Non-Tax Claim, or as soon thereafter as is practicable, unless the Holder of an Allowed Priority Non-Tax Claim and the Reorganized Debtors or the Debtors, with the consent of the First Lien Steering Committee (and in consultation with the First Lien Agent and Second Lien Agent), otherwise agree. 5. Class C-1General Unsecured Claims (including any Allowed Rhodes Entities Claims) a. Classification: Class C-1 consists of all General Unsecured Claims including any Allowed Rhodes Entities Claims. b. Impairment and Voting: Class C-1 is Impaired by the Plan. Each Holder of an Allowed Claim in Class C-1 is entitled to vote to accept or reject the Plan. c. Treatment: On the Effective Date, each Holder of an Allowed General Unsecured Claim (including any Allowed Rhodes Entities Claims) shall receive its pro rata share of the Litigation Trust Interests allocable to the Holders of General Unsecured Claims on account of its Allowed Claim. 6. Class C-2First Lien Lender Deficiency Claims Classification: Class C-2 consists of all First Lien Lender Deficiency
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a. Claims.
b. Impairment and Voting: Class C-2 is Impaired by the Plan. Each Holder of an Allowed Claim in Class C-2 is entitled to vote to accept or reject the Plan. c. Treatment: On the Effective Date, each Holder of a First Lien Lender Deficiency Claim shall receive its pro rata share of the Litigation Trust Interests allocable to the Holders of First Lien Lender Deficiency Claims on account of its Allowed Claim. 7. Class C-3Second Lien Lender Deficiency Claims Class C-3 consists of all Second Lien Lender
23 24 25 26 27 28 a. Classification: Deficiency Claims.
b. Impairment and Voting: Class C-3 is Impaired by the Plan. Each Holder of an Allowed Claim in Class C-3 is entitled to vote to accept or reject the Plan. c. Treatment: On the Effective Date, each Holder of an Allowed Second Lien Lender Deficiency Claim shall receive its pro rata share of the Litigation Trust
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Interests allocable to the Holders of Second Lien Lender Deficiency Claims on account of its Allowed Claim. If the Class of Second Lien Lender Secured Claims votes against the Plan, the distribution of Litigation Trust Interests allocable to the Holders of Second Lien Lender Deficiency Claims shall be subject to the reasonable fees and expenses of Ropes & Gray LLP and local counsel for the Second Lien Agent. 8. Class C-4Subordinated Claims
a. Classification: Class C-4 consists of all Subordinated Claims. The First Lien Steering Committee does not believe there are any Subordinated Claims but has created Class C-4 out of an abundance of caution. b. Impairment and Voting: Class C-4 is Impaired by the Plan. Each Holder of an Interest in Class C-4 is conclusively presumed to have rejected the Plan and is not entitled to vote to accept or reject the Plan. c. Treatment: Claims subordinated under applicable law shall not receive any recovery on account of their Claims. 9. Class DOld Equity Interests a. Classification: Class D consists of all Old Equity Interests.
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b. Impairment and Voting: Class D is Impaired by the Plan. Each Holder of an Interest in Class D is conclusively presumed to have rejected the Plan and is not entitled to vote to accept or reject the Plan. c. Treatment: Each holder of an Old Equity Interest shall not be entitled to, and shall not receive or retain any property or interest in property on account of such Old Equity Interest. 10. Class EIntercompany Claims a. Classification: Class E consists of all Intercompany Claims.
20 21 22 23 24 25 26 27 28 C. b. Impairment and Voting: Class E is Impaired by the Plan. Each Holder of a Claim in Class E is conclusively presumed to have rejected the Plan and is not entitled to vote to accept or reject the Plan. c. Treatment: At the election of the Reorganized Debtors, Intercompany Claims will be (i) reinstated, in full or in part, (ii) resolved through set-off, distribution, or contribution, in full or in part, or (iii) cancelled and discharged, in full or in part, in which case such discharged and satisfied portion shall be eliminated and the Holders thereof shall not be entitled to, and shall not receive or retain, any property or interest in property on account of such portion under the Plan. Class Voting Rights: The voting rights of each Class are as follows.
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1. Classes Entitled to Vote: The following Classes are Impaired and thus entitled to vote to accept or reject the Plan.
Classes
A-1 A-2 C-1 C-2 C-3 2. Presumed Acceptance of Plan: The following Classes are Unimpaired and deemed to accept the Plan. Therefore, such Classes are not entitled to vote to accept or reject the Plan and the vote of such Holders of Claims and Interests shall not be solicited.
Classes
9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
A-3 B
3. Presumed Rejection of Plan: The following Classes are Impaired and conclusively presumed to reject the Plan. Therefore, such Classes are not entitled to vote to accept or reject the Plan and the vote of such Holders of Claims or Interests shall not be solicited.
Class
C-4 D E
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D. Bankruptcy Code Section 1111(b) Election: Bankruptcy Code section 1111(b)(1)(A) authorizes a class of secured claims to elect, by at least two-thirds in amount and more than half in number, to waive any deficiency claim otherwise assertable against the debtor and instead require the debtor to make payments equal to the total amount of the claims, with such payment obligation having a present value equal to the current value of the creditors collateral. A section 1111(b) election must be made by a class of secured creditors at or prior to the conclusion of the hearing on the Disclosure Statement. No class of Secured Claims made a section 1111(b) election at or prior to the conclusion of the hearing on the Disclosure Statement. Accordingly, Bankruptcy Code section 1111(b) is not applicable to the Plan. E. Acceptance or Rejection of the Plan
8
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1. Acceptance by Impaired Classes of Claims: Pursuant to Bankruptcy Code section 1126(c) and except as otherwise provided in Bankruptcy Code section 1126(e), an Impaired Class of Claims has accepted the Plan if the Holders of at least two-thirds in dollar amount and more than one-half in number of the Allowed Claims in such Class actually voting have voted to accept the Plan. 2. Tabulation of Votes on a Consolidated Basis: The Claims and Solicitation Agent will tabulate all votes on the Plan on a consolidated basis for the purpose of determining whether the Plan satisfies Bankruptcy Code section 1129(a)(8) and (10). 3. Cramdown: The First Lien Steering Committee requests Confirmation of the Plan under section 1129(b) of the Bankruptcy Code with respect to any Impaired Class that does not accept the Plan pursuant to section 1126 of the Bankruptcy Code. The First Lien Steering Committee reserves the right to modify the Plan to the extent, if any, that Confirmation pursuant to section 1129(b) of the Bankruptcy Code requires modification. 4. Controversy Concerning Impairment: If a controversy arises as to whether any Claims or Interests, or any Class of Claims or Interests, are Impaired, the Bankruptcy Court shall, after notice and a hearing, determine such controversy on or before the Confirmation Date. ARTICLE IV. PROVISIONS FOR IMPLEMENTATION OF THE PLAN A. Substantive Consolidation: The Plan shall serve as a motion by the First Lien Steering Committee seeking entry of a Bankruptcy Court order substantively consolidating all of the Estates into a single consolidated Estate for all purposes associated with Confirmation and distributions to be made under the Plan. If substantive consolidation of all of the Estates is ordered, then on and after the Effective Date, all assets and liabilities of the Debtors shall be treated as though they were merged into the Estate of The Rhodes Companies, LLC for all purposes associated with Confirmation and Consummation, and all guarantees by any Debtor of the obligations of any other Debtor shall be eliminated so that any Claim against any Debtor and any guarantee thereof by any other Debtor, as well as any joint and several liability of any Debtor with 23
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respect to any other Debtor shall be treated as one collective obligation of the Debtors. Substantive consolidation shall not affect the legal and organizational structure of the Reorganized Debtors or their separate corporate existences or any prepetition or postpetition guarantees, Liens, or security interests that are required to be maintained under the Bankruptcy Code, under the Plan, or in connection with contracts or leases that were assumed or entered into during the Chapter 11 Cases. All duplicative Claims (identical in both amount and subject matter) Filed against more than one of the Debtors shall be automatically expunged so that only one Claim survives against the consolidated Debtors (but in no way shall such surviving Claim be deemed Allowed by reason of this Section). Any alleged defaults under any applicable agreement with the Debtors or the Reorganized Debtors arising from substantive consolidation shall be deemed Cured as of the Effective Date. B. Sources of Consideration for Plan Distributions: The Reorganized Debtors shall fund distributions under the Plan with Cash on hand, proceeds from the Mediation Settlement, existing assets, and the issuance of the New First Lien Notes and Newco Equity Interests. 1. Newco Equity Interests: On the Effective Date, but not more than thirty days after the Effective Date for initial distributions on account of Allowed Claims, Newco shall issue Newco Equity Interests (based upon the Newco Total Enterprise Value) to the Holders of First Lien Lender Secured Claims. Each share of Class A-2 Equity Interest will be convertible at the option of the holder, exercisable at any time, into one Class A-1 Equity Interest. The economic rights of the Class A-1 Equity Interests and Class A-2 Equity Interests shall be identical. The Class A-2 Equity Interests will not be entitled to general voting rights, but will be entitled to vote on an as converted basis (together with the holders of the Class A-1 Equity Interests, as a single class) on certain non-ordinary course transactions, including (i) any authorization of, or increase in the number of authorized shares of, any class of capital stock ranking equal or senior to the Newco Equity Interests as to dividends or liquidation preference, including additional Newco Equity Interests, (ii) any amendment to the Newcos certificate of incorporation or by-laws, (iii) any amendment to any shareholders agreement, (iv) any sale, lease or other disposition of all or substantially all of the assets of the Reorganized Debtors through one or more transactions, (v) any recapitalization, reorganization, consolidation or merger of the Reorganized Debtors, (vi) to the extent that holders of Class A-1 Equity Interests have the right to vote thereon, any issuance or entry into an agreement for the issuance of capital stock (or any options or other securities convertible into capital stock) of the Reorganized Debtors, except as may be provided for under any management incentive plan, and (vii) to the extent that holders of Class A-1 Equity Interests have the right to vote thereon, any redemption, purchase or other acquisition by the Newco of any of its capital stock (except for purchases from employees upon termination of employment). The Class A-2 Equity Interests will be entitled to a separate class vote on any amendment or modification of any rights or privileges of the Class A-2 Equity Interests that
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does not equally affect the Class A-1 Equity Interests. In any liquidation, dissolution or winding up of the Reorganized Debtors, all assets will be distributed to holders of the Newco Equity Interests on a pro rata basis. a. Section 1145 Exemption: Pursuant to section 1145 of the Bankruptcy Code, the offering, issuance, and distribution of any Securities contemplated by the Plan and any and all settlement agreements incorporated therein, including the Newco Equity Interests, shall, to the fullest extent permitted by applicable law, be exempt from, among other things, the registration requirements of section 5 of the Securities Act and any other applicable law requiring registration prior to the offering, issuance, distribution, or sale of Securities. In addition, under section 1145 of the Bankruptcy Code any Securities contemplated by the Plan, including the Newco Equity Interests and New First Lien Notes, will be freely tradable and transferable by the recipients thereof, subject to (i) the provisions of section 1145(b)(1) of the Bankruptcy Code relating to the definition of an underwriter in section 2(a)(11) of the Securities Act, and compliance with any rules and regulations of the Securities and Exchange Commission, if any, applicable at the time of any future transfer of such Securities or instruments; (ii) the restrictions, if any, on the transferability of such Securities and instruments set forth in the Newco LLC Operating Agreement, a draft of which is attached to the Disclosure Statement as Exhibit J; and (iii) applicable regulatory approval. b. Issuance and Distribution of the Newco Equity Interests: The Newco Equity Interests, when issued or distributed as provided in the Plan, will be duly authorized, validly issued, and, if applicable, fully paid and nonassessable. Each distribution and issuance shall be governed by the terms and conditions set forth in the Plan applicable to such distribution or issuance and by the terms and conditions of the instruments evidencing or relating to such distribution or issuance, which terms and conditions shall bind each Entity receiving such distribution or issuance. 2. New First Lien Notes: On the Effective Date or as soon as reasonably practicable thereafter, Newco shall issue the New First Lien Notes. The Reorganized Debtors shall be co-borrowers and guarantors under the New First Lien Notes. The New First Lien Notes shall have the terms set forth on Exhibit 2 to the Plan and as otherwise provided in the terms of the documents governing the New First Lien Notes. A draft of the New First Lien Notes credit agreement is attached to the Disclosure Statement as Exhibit K. 3. Exit Financing: To the extent the board of directors of Newco (or such other governing body) determines that additional financing is necessary for the operation of the Reorganized Debtors businesses, Newco and/or the Reorganized Debtors may obtain additional financing. The First Lien Steering Committee does not anticipate that additional sources of funding in addition to Cash on hand, the Newco Equity Interests and the New First Lien Notes will be necessary to fund distributions under the Plan on the Effective Date. C. Corporate Existence: Except as otherwise provided in the Plan, each Debtor shall continue to exist after the Effective Date as a separate corporate entity, limited liability company, partnership, or other form, as the case may be, with all the powers of a
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corporation, limited liability company, partnership, or other form, as the case may be, pursuant to the applicable law in the jurisdiction in which each applicable Debtor is incorporated or formed and pursuant to the respective certificate of incorporation and bylaws (or other formation documents) in effect prior to the Effective Date, except to the extent such certificate of incorporation and bylaws (or other formation documents) are amended by the Plan or otherwise, and to the extent such documents are amended, such documents are deemed to be pursuant to the Plan and require no further action or approval. D. Vesting of Assets in the Reorganized Debtors: Except for any Claims or Causes of Action transferred to the Litigation Trust and unless otherwise provided in the Plan or any agreement, instrument, or other document incorporated therein, on the Effective Date, all property in each Estate, all Causes of Action, and any property acquired by any of the Debtors pursuant to the Plan shall vest in each respective Reorganized Debtor, free and clear of all Liens, Claims, charges, or other encumbrances. On and after the Effective Date, except as otherwise provided in the Plan, each Reorganized Debtor may operate its business and may use, acquire, or dispose of property and compromise or settle any Claims, Interests, or Causes of Action without supervision or approval by the Bankruptcy Court and free of any restrictions of the Bankruptcy Code or Bankruptcy Rules. E. Cancellation of Equity Securities and Related Obligations: On the Effective Date, except as otherwise specifically provided for in the Plan: (1) the Old Equity Interests and any other Certificate, note, bond, indenture, purchase right, option, warrant, or other instrument or document directly or indirectly evidencing or creating any indebtedness or obligation of or ownership interest in the Debtors giving rise to any Claim or Interest (except such Certificates, notes, other instruments or documents evidencing indebtedness or obligations of the Debtors that are Reinstated pursuant to the Plan), shall be cancelled solely as to the Debtors, and the Reorganized Debtors shall not have any continuing obligations thereunder and (2) the obligations of the Debtors pursuant, relating, or pertaining to any agreements, indentures, certificates of designation, bylaws, or certificate or articles of incorporation or similar documents governing the Old Equity Interests and any other Certificates, notes, bonds, indentures, purchase rights, options, warrants, or other instruments or documents evidencing or creating any indebtedness or obligation of the Debtors (except such agreements or Certificates, notes or other instruments evidencing indebtedness or obligations of the Debtors that are specifically Reinstated pursuant to the Plan) shall be released and discharged; provided, however, that notwithstanding Confirmation, any such indenture or agreement that governs the rights of the Holder of a Claim shall continue in effect solely for purposes of: (w) allowing Holders to receive distributions under the Plan; (x) allowing a Servicer to make distributions on account of such Claims as provided in the applicable governing agreement; (y) permitting such Servicer to maintain any rights and Liens it may have against property other than the Reorganized Debtors property for fees, costs, and expenses pursuant to such indenture or other agreement; and (z) governing the rights and obligations of non-Debtor parties to such agreements vis--vis each other (including, without limitation, the rights and obligations of non-Debtor parties under the First Lien Credit Agreement and the Second Lien Credit Agreement, which, for the avoidance of doubt, shall not be affected by the Plan except as otherwise expressly provided in the Plan); provided, further, however, that the preceding proviso shall not affect the discharge of Claims or Interests pursuant to the Bankruptcy 26
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Code, the Confirmation Order, or the Plan, or result in any expense or liability to the Reorganized Debtors. The Reorganized Debtors shall not have any obligations to any Servicer for any fees, costs, or expenses, except as expressly otherwise provided in the Plan. F. Restructuring Steps and Transfer of Certain Interests to Newco: In the event the Rhodes Entities comply with all of their obligations pursuant to the Mediation Settlement and the Plan, on the Effective Date or, in the case of step (4) below, effective the next day, the following transactions shall be deemed to have occurred in the order set forth below. 1. Newco shall be formed as a new limited liability company. The First Lien Lender Secured Claims shall be deemed to have been exchanged for the membership interests in Newco. Newco shall be deemed to hold all of the First Lien Lender Secured Claims. At the option of a holder, membership interests in Newco may be transferred to a corporation prior to Step 2. 2. Newco shall purchase all of the Heritage Equity Securities for $10.00.
9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3. Contemporaneous with or subsequent to Newcos purchase of the Heritage Equity Securities, The Rhodes Companies, LLC - the general partner of each of Tick, LP; Glynda, LP; Jackknife, LP; LP; Batcave, LP; Overflow, LP; Wallboard, LP; and Chalkline, LP, --shall sell its general partnership interests in such entities to Newco for $1.00. Alternatively, the membership interest in The Rhodes Companies, LLC may be acquired from its sole member Sagebrush Enterprises, Inc. in consideration for release of its obligations under the First Lien Lender Secured Claims. 4. Newcos members may agree to continue Newco as an LLC, file a check the box election effective the day after the Effective Date to treat Newco as a corporation for tax purposes, or convert into a corporation as of the day after the Effective Date. In any event, to the extent any cancellation of indebtedness is derived from the foregoing transactions under the Internal Revenue Code, it shall be allocable to the holders of the Old Equity Interests as required by the Internal Revenue Code. To be clear, Newcos purchase of the Heritage Equity Securities shall occur (a) contemporaneously with or immediately before the membership interests of those entities described in Article IV.F.3, immediately above, are acquired; (b) before any debt or obligations of the Debtors are canceled or forgiven; (d) before any new notes are issued or existing debt is modified by the Reorganized Debtors; and (e) before any of the other acts or events contemplated in Article III.B, et seq., of the Plan. The holders of the Heritage Equity Securities and Newco will report the sale and purchase of the Heritage Equity Securities in accordance with revenue ruling 99-6, 1991-1 CB 432. G. Restructuring Transactions: On the Effective Date or as soon as reasonably practicable thereafter, the Reorganized Debtors may take all actions as may be necessary or appropriate to effect any transaction described in, approved by, contemplated by, or necessary to effectuate the Plan, including: (1) the execution and delivery of appropriate agreements or other documents of merger, consolidation, or reorganization containing terms that are consistent with the terms of the Plan and that satisfy the requirements of applicable law; (2) the execution and delivery of appropriate instruments of transfer, assignment, 27
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assumption, or delegation of any property, right, liability, duty, or obligation on terms consistent with the terms of the Plan; (3) the filing of appropriate certificates of incorporation, merger, or consolidation with the appropriate governmental authorities pursuant to applicable law; (4) the Roll-Up Transactions; (5) the establishment of a liquidation trust or other appropriate vehicle to hold assets for sale that will not be utilized in the business of the Reorganized Debtors; and (6) all other actions that the Reorganized Debtors determine are necessary or appropriate, including the making of filings or recordings in connection with the relevant Roll-Up Transactions. The form of each Roll-Up Transaction shall be determined by the Reorganized Debtor that is party to such Roll-Up Transaction. Implementation of the Roll-Up Transactions shall not affect any distributions, discharges, exculpations, releases, or injunctions set forth in the Plan. H. Corporate Action: Each of the matters provided for by the Plan involving the corporate structure of the Debtors or corporate or related actions to be taken by or required of the Reorganized Debtors shall, as of the Effective Date, be deemed to have occurred and be effective as provided in the Plan (except to the extent otherwise indicated), and shall be authorized, approved, and, to the extent taken prior to the Effective Date, ratified in all respects without any requirement of further action by Holders of Claims or Interests, directors of the Debtors, or any other Entity. Without limiting the foregoing, such actions may include: the adoption and filing of the Newco LLC Operating Agreement; the adoption and filing of organization documents of the other Reorganized Debtors; the appointment of directors and officers for the Reorganized Debtors; and the adoption, implementation, and amendment of the Management and Director Equity Incentive Plan. I. Post-Confirmation Property Sales: To the extent the Reorganized Debtors sell any of their property prior to or including the date that is one year after Confirmation, the Reorganized Debtors may elect to sell such property pursuant to sections 363, 1123, and 1146(a) of the Bankruptcy Code. J. Organizational Documents: The certificates of incorporation and bylaws (or other formation documents relating to limited liability companies, limited partnerships or other forms of Entity) of the Debtors shall be in form and substance acceptable to the First Lien Steering Committee and shall be consistent with the provisions of the Plan and the Bankruptcy Code. The Newco LLC Operating Agreement shall be in form and substance acceptable to the First Lien Steering Committee. The organizational documents for Newco shall, among other things: (1) authorize issuance of the Newco Equity Interests; and (2) pursuant to and only to the extent required by section 1123(a)(6) of the Bankruptcy Code, include a provision prohibiting the issuance of non-voting Equity Securities. On or as soon as reasonably practicable after the Effective Date, to the extent required, each of the Reorganized Debtors shall file new certificates of incorporation (or other formation documents relating to limited liability companies limited partnerships, or other forms of Entity) in form and substance acceptable to First Lien Steering Committee, with the secretary (or equivalent state officer or Entity) of the state under which each such Reorganized Debtor is or is to be incorporated or organized. On or as soon as reasonably practicable after the Effective Date, to the extent required, Newco shall file the applicable organizational documents with the secretary (or equivalent state officer or Entity) of the state under which Newco is to be incorporated or organized. After the Effective Date, each
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Reorganized Debtor may amend and restate its new certificate of incorporation and other constituent documents as permitted by the relevant state corporate law. K. Effectuating Documents, Further Transactions: On and after the Effective Date, the Reorganized Debtors, and the officers and members of the boards of directors (or other governing bodies) thereof, are authorized to and may issue, execute, deliver, file, or record such contracts, Securities, instruments, releases, and other agreements or documents and take such actions as may be necessary or appropriate to effectuate, implement, and further evidence the terms and conditions of the Plan and the Securities issued pursuant to the Plan in the name of and on behalf of the Reorganized Debtors, without the need for any approvals, authorizations, or consents except for those expressly required pursuant to the Plan. L. Exemption from Certain Transfer Taxes and Recording Fees: Pursuant to section 1146(a) of the Bankruptcy Code, any transfer from a Debtor to a Reorganized Debtor or to any Entity pursuant to, in contemplation of, or in connection with the Plan or pursuant to: (1) the issuance, distribution, transfer, or exchange of any debt, equity security, or other interest in the Debtors or the Reorganized Debtors; (2) the creation, modification, consolidation, or recording of any mortgage, deed of trust, or other security interest, or the securing of additional indebtedness by such or other means; (3) the making, assignment, or recording of any lease or sublease; or (4) the making, delivery, or recording of any deed or other instrument of transfer under, in furtherance of, or in connection with, the Plan, including any deeds, bills of sale, assignments, or other instrument of transfer executed in connection with any transaction arising out of, contemplated by, or in any way related to the Plan, shall not be subject to any document recording tax, stamp tax, conveyance fee, intangibles or similar tax, mortgage tax, real estate transfer tax, mortgage recording tax, Uniform Commercial Code filing or recording fee, or recording fee, or other similar tax or governmental assessment, and the appropriate state or local governmental officials or agents shall forego the collection of any such tax or governmental assessment and to accept for filing and recordation any of the foregoing instruments or other documents without the payment of any such tax or governmental assessment. M. Directors and Officers of the Reorganized Debtors: On the Effective Date, the board of directors of the Reorganized Debtors or similar governing entities shall be composed of one or more members appointed by the First Lien Steering Committee. On the Effective Date, a chief executive officer or similar officer selected by the board of directors of the Reorganized Debtors shall be appointed. The identity of such officers and directors shall be disclosed at or prior to the Confirmation Hearing. N. Management and Director Equity Incentive Plan: The Reorganized Debtors reserve the right to implement a Management and Director Equity Incentive Plan. The terms and conditions of any Management and Director Equity Incentive Plan shall be determined by the Board of Directors of Newco. O. The Litigation Trust: On the Effective Date, the Litigation Trust will be implemented pursuant to the terms of the Litigation Trust Agreement. A draft of the Litigation Trust Agreement is attached to the Disclosure Statement as Exhibit I. On the
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Effective Date, pursuant to the terms of the Litigation Trust Agreement, the Debtors will transfer the Litigation Trust Assets for and on behalf of the Litigation Trust Beneficiaries, which will be the Holders of Allowed Claims in Classes C-1, C-2 and C-3. For all federal income tax purposes, the beneficiaries of the Litigation Trust shall be treated as grantors and owners thereof and it is intended that the Litigation Trust be classified as a liquidating trust under Section 301.7701-4 of the Treasury Regulations and that such trust is owned by its beneficiaries. Accordingly, for federal income tax purposes, it is intended that the Litigation Trust Beneficiaries be treated as if they had received a distribution of an undivided interest in the Litigation Trust Assets and then contributed such interests to the Litigation Trust. The Litigation Trust will initially be funded with $100,000, which amount will be transferred to the Litigation Trust on the Effective Date and which will be repaid to the Reorganized Debtors from the first proceeds received by the Litigation Trust. The Litigation Trust shall issue non-transferable interests to Holders of Allowed First Lien Lender Deficiency Claims, Allowed Second Lien Lender Deficiency Claims, and Allowed General Unsecured Claims (including any Allowed Rhodes Entities Claims) with each Holder of an Allowed Claim in each of the foregoing Classes of Claims receiving its pro rata share of the Litigation Trust Interests allocable to each such Class of Claims. A list of Litigation Trust Assets is attached to the Disclosure Statement as Exhibit G. The Litigation Trust Assets shall include all Claims existing against the Rhodes Entities that are not expressly released under the Plan. P. Preservation of Causes of Action: In accordance with section 1123(b) of the Bankruptcy Code, except as otherwise provided in the Plan, the Reorganized Debtors and the Litigation Trust shall retain and may enforce all rights to commence and pursue, as appropriate, any and all Causes of Action, whether arising before or after the Petition Date, including any actions specifically enumerated on Exhibit L to the Disclosure Statement, and the Reorganized Debtors rights to commence, prosecute, or settle such Causes of Action shall be preserved notwithstanding the occurrence of the Effective Date. The Reorganized Debtors and the Litigation Trust, as applicable, may pursue such Causes of Action, as appropriate, in accordance with the best interests of the Reorganized Debtors and the Litigation Trust, as applicable. No Entity may rely on the absence of a specific reference in the Plan or the Disclosure Statement to any Cause of Action against them as any indication that the Debtors, Reorganized Debtors or the Litigation Trust, as applicable, will not pursue any and all available Causes of Action against them. The Reorganized Debtors and the Litigation Trust, as applicable, expressly reserve all rights to prosecute any and all Causes of Action against any Entity, except as otherwise expressly provided in the Plan. Unless any Causes of Action against an Entity are expressly waived, relinquished, exculpated, released, compromised, or settled in the Plan or a Bankruptcy Court order, the Reorganized Debtors and the Litigation Trust, as applicable, expressly reserve all Causes of Action for later adjudication and, therefore, no preclusion doctrine, including the doctrines of res judicata, collateral estoppel, issue preclusion, claim preclusion, estoppel (judicial, equitable or otherwise), or laches, shall apply to such Causes of Action upon, after, or as a consequence of Confirmation or the occurrence of the Effective Date.
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The Reorganized Debtors and the Litigation Trust, as applicable, reserve and shall retain the foregoing Causes of Action notwithstanding the rejection or repudiation of any executory contract or unexpired lease during the Chapter 11 Cases or pursuant to the Plan. In accordance with section 1123(b)(3) of the Bankruptcy Code, any Causes of Action that a Debtor may hold against any Entity shall vest in the Reorganized Debtors and the Litigation Trust, as the case may be, on the Effective Date. The applicable Reorganized Debtor and the Litigation Trust, as applicable, through its authorized agents or representatives, shall retain and may exclusively enforce any and all such Causes of Action belonging to it. The Reorganized Debtors and the Litigation Trust, as applicable, shall have the exclusive right, authority, and discretion to determine and to initiate, file, prosecute, enforce, abandon, settle, compromise, release, withdraw, or litigate to judgment any such Causes of Action and to decline to do any of the foregoing without the consent or approval of any third party or further notice to or action, order, or approval of the Bankruptcy Court. Neither the Litigation Trust nor the Reorganized Debtors shall commence any litigation against the Rhodes Entities until the Bankruptcy Court rules on the allowance of the Rhodes Entities Claims set forth in Proofs of Claim, included in the Debtors Schedules or otherwise set forth in the Mediation Term Sheet. To the extent any statute of limitations to pursue any claims belonging to the Debtors against the Rhodes Entities would lapse from the execution date of the Mediation Term Sheet through the Bankruptcy Courts resolution of the allowance of the Rhodes Entities Claims, the Rhodes Entities shall be deemed to have consented to an extension of the applicable statute of limitations until sixty days following the Bankruptcy Courts ruling on the allowance of the Rhodes Entities Claims. The Litigation Trust shall have no liability to any entity for any Claims or Causes of Action it determines not to pursue. Q. HOA Board Seats: The Rhodes Entities shall ensure that designees identified by the Reorganized Debtors shall replace the Rhodes Entities on any HOA boards that in any way are related to the Debtors, Reorganized Debtors or their businesses and Declarant rights or the like shall be transferred to the Reorganized Debtors or their designee(s). R. Licensing: The Rhodes Entities shall take commercially reasonable steps and/or enter into any agreements or similar documentation reasonably necessary to ensure the Reorganized Debtors' continued use of all of the Debtors applicable professional licenses at no cost to the Rhodes Entities for a period of up to twelve months following the Effective Date. To the extent, Sagebrush Enterprises, Inc. shall have rescinded by September 25, 2009 its revocation of its indemnity of the Nevada contractors license held by Rhodes Design & Development Corporation and such rescission did not negatively affect the general contractors license held by Rhodes Design & Development Corporation, Sagebrush shall be entitled to file an Administrative Claim on behalf of any and all claims asserted against Sagebrush as a result of Sagebrush being the indemnitor that arose from and after the effectiveness of Sagebrushs recission of its indemnity through the Effective Date, provided that the allowance of such Administrative Claim shall be subject to resolution by the Bankruptcy Court and/or such other court(s) of competent jurisdiction. The Reorganized Debtors shall indemnify Sagebrush for any and all claims asserted against Sagebrush as a result of Sagebrush being the indemnitor that arise from and after the Effective Date. Professional licenses include, but are not limited to the Nevada State Contractors Board license, and any other general business or similar licenses in any county, state, municipality 31
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or other jurisdiction in which the Reorganized Debtors conduct business or own assets as of the Effective Date. The Rhodes Entities shall use commercially reasonable efforts to maintain third party agreements with their real estate brokers and sales agents. S. Transfer of Rhodes Ranch Golf Course: On the Effective Date, the applicable Rhodes Entities shall transfer their equity interests in the entity that owns the Rhodes Ranch Golf Course to the Reorganized Debtors (together with any equipment, golf carts, contracts or other assets determined by the First Lien Steering Committee to be necessary for the operation of the Rhodes Ranch Golf Course) pursuant to the terms of a stock transfer agreement in form and substance acceptable to the First Lien Steering Committee and Rhodes, subject to any outstanding debt on the Rhodes Ranch Golf Course. The stock transfer agreement shall contain representations by the Rhodes Entities that the entity that owns the Rhodes Ranch Golf Course does not have any liabilities other than ordinary course liabilities related to the Rhodes Ranch Golf Course and indemnification provisions in favor of the Reorganized Debtors by the Rhodes Entities for any non-ordinary course liabilities. In addition, prior to the deadline for filing objections to the Disclosure Statement, the Rhodes Entities shall provide the First Lien Steering Committee with a list of all liabilities of the entity that owns the Rhodes Ranch Golf Course, a lien analysis and copies of all contracts related to the Rhodes Ranch Golf Course and to which the entity that owns the Rhodes Ranch Golf Course is a party, each of which must be acceptable to the First Lien Steering Committee. The existing debt outstanding on the Rhodes Ranch Golf Course shall be refinanced on or before the Effective Date, for a period of no less than twelve (12) months from the Effective Date, on terms and conditions acceptable to Rhodes and the First Lien Steering Committee. The parties will work together in good faith to refinance the existing debt. The Reorganized Debtors shall pay the reasonable costs and expenses associated with the refinancing; provided, that the terms of such refinancing are acceptable to the First Lien Steering Committee. The First Lien Steering Committee acknowledges that the loan documentation may provide that, upon the transfer of the Rhodes Ranch Golf Course to the Reorganized Debtors on the Effective Date, additional collateral from the Reorganized Debtors may be required. The Rhodes Entities shall transfer to the Reorganized Debtors on the Effective Debt any contracts related to the operation of and revenue generated by any cell towers located on the property of the Rhodes Ranch Golf Course. Any funds received after July 31, 2009 from the Las Vegas Valley Water District or other similar entity as an incentive for converting the golf course from a green course to a desert course shall be used for operating expenses associated with the Rhodes Ranch Golf Course, with any excess to become property of the Reorganized Debtors on the Effective Date. Rhodes and/or his designee shall have the absolute right to repurchase the Rhodes Ranch Golf Course from the Reorganized Debtors at eight (8) years from the Effective Date for $5.9 million in cash. The Reorganized Debtors may require Rhodes to purchase the Rhodes Ranch Golf Course any time between four (4) and eight (8) years from the Effective Date for $5.9 million in cash provided that the Reorganized Debtors shall provide Rhodes with at least one year advance notice of its intent to sell the Rhodes Ranch Golf Course back to Rhodes. Such transfer shall occur on the applicable anniversary date of the Effective
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Date. For the avoidance of doubt, if the Reorganized Debtors put the Rhodes Ranch Golf Course to Rhodes in accordance with the terms hereof and Rhodes fails to comply with his obligation to purchase the Rhodes Ranch Golf Course, Rhodes shall be deemed to have forfeited his option to purchase the Rhodes Ranch Golf Course. On the Effective Date, Rhodess obligations to comply with the repurchase shall be secured by either (i) $500,000 in cash in an escrow account or (ii) property worth at least $2 million (the Golf Course Security Property), with the value of such property to be agreed to by Rhodes and the First Lien Steering Committee or otherwise valued by an independent third party appraisal firm acceptable to both Rhodes and the First Lien Steering Committee (except Cushman Wakefield). In the event that Rhodes does not meet the repurchase request, provided that the Rhodes Ranch Golf Course is in the standard condition (defined below), then the Reorganized Debtors shall be entitled to liquidated damages in the form of security pledged (i.e., the $500,000 or the Golf Course Security Property). So long as Rhodes has not defaulted on his obligation to repurchase the Rhodes Ranch Golf Course, Rhodes shall have the absolute and sole discretion to replace the Golf Course Security Property with $500,000 in cash on 30 days written notice to the Reorganized Debtors. Upon deposit of the $500,000 in cash, the Golf Course Security Property shall be released to Rhodes or his designee. Notwithstanding anything to the contrary contained herein, if the Rhodes Ranch Golf Course is not maintained with substantially the same performance and rating criteria at the time of the repurchase request as verified by an independent third party rating agency as it was on the Effective Date (Standard Condition), James Rhodes can (i) require the Reorganized Debtors to cure any conditions to return the Rhodes Ranch Golf Course to its Standard Condition (provided, that the cost of such cure does not exceed $500,000), or (ii) choose not to purchase the Rhodes Ranch Golf Course. Upon either the repurchase of the Rhodes Ranch Golf Course or the written decision to not repurchase the Rhodes Ranch Golf Course (in accordance with the preceding sentence), the Golf Course Security Property or the $500,000 Cash (if not applied to the repurchase of the Rhodes Ranch Golf Course) shall be returned to Rhodes within 30 days. On the Effective Date, the Reorganized Debtors shall record a memorandum of agreement against the Rhodes Ranch Golf Course to evidence the above. T. Cash Payment: The Rhodes Entities shall make a cash payment to the Reorganized Debtors of $3.5 million in Cash on the Effective Date. The $3.5 million cash payment shall be used to fund distributions under the Plan and provide working capital to the extent of any excess. U. Transfer of Arizona Assets: On the Effective Date, pursuant to the asset transfer agreement attached to the Disclosure Statement as Exhibit M, the Debtors shall transfer Pravada and the other Arizona Assets set forth on Attachment D to the Mediation Term Sheet, plus the Golden Valley Ranch tradename to the Rhodes Entities free and clear of all liens, claims and encumbrances pursuant to section 363(f) of the Bankruptcy Code; provided, that the non-First Lien Lender/Second Lien Lender liens do not exceed $60,000; provided, further, that such assets shall not include assets owned by Pinnacle Grading
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located in Arizona and related contracts associated with the assets. All Claims asserted against the Arizona Assets shall be deemed asserted against the Estates and shall be classified in accordance with Article III hereof for distribution purposes. The Debtors shall provide James Rhodes notice of any proposed sale of the Pinnacle assets, and James Rhodes shall be granted a right to bid on the sale of such assets within 10 days of such notice. The Rhodes Entities shall permit storage of Pinnacle Grading equipment at current locations at no cost to the Reorganized Debtors for a period through six months following the Effective Date. All executory contracts and unexpired leases associated solely with Arizona shall be assumed and assigned to the Rhodes Entities (or their designee), at no cost to the Debtors or the Reorganized Debtors and all cure costs associated therewith shall be borne by the Rhodes Entities. V. Trademarks and Trade Names: Within the earlier of thirty (30) days following: (i) upon completion of the buildout of all of the Reorganized Debtors homebuilding assets and inventory (regardless of when such assets and inventory were acquired), or (ii) bulk sale of the remaining inventory of the Reorganized Debtors, the Reorganized Debtors shall transfer to James Rhodes (or his designee) the trademarks and tradenames set forth on Attachment E to the Mediation Term Sheet. W. Self Insured Retention Obligations: The Reorganized Debtors shall indemnify subcontractors that are obligated under any of the Reorganized Debtors existing insurance policies for any post-Effective Date self insured retention obligations paid and/or to be paid by such subcontractors pursuant to such existing insurance policies. X. Bond Replacement or Indemnification: Those performance bonds guaranteed by the Rhodes Entities in favor of the Debtors shall be replaced on a renewal date by new performance bonds. In the alternative, subject to the Rhodes Entities being reasonably satisfied with the creditworthiness of the Reorganized Debtors, which shall be satisfied solely as of the Effective Date by the Court finding that the Plan is feasible, the existing performance bonds guaranteed by the Rhodes Entities and such guarantees shall remain in place. The applicable Rhodes Entitys agreement to remain a guarantor under the existing performance bonds as such performance bonds may be renewed shall be at no cost to the Rhodes Entities (including, but not limited to, the payment of bond premiums). In the event the Reorganized Debtors fail to perform their obligations underlying such renewed performance bonds after the Effective Date, the Reorganized Debtors will indemnify the Rhodes Entities under such outstanding performance bonds for damages incurred by the Rhodes Entities on account of their guarantee of such performance bonds solely as a result of the Reorganized Debtors failure to perform such obligations subsequent to the Effective Date. The Reorganized Debtors shall use commercially reasonable efforts to replace all outstanding performance bonds backstopped by Rhodes Entities within 30 months of the Effective Date. The Bankruptcy Court shall retain jurisdiction to resolve any disputes arising out of this paragraph.
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Contingent Bond Indemnity Claims will be released in the ordinary course of business as time passes or as work on the underlying project is completed. To the extent that a Contingent Bond Indemnity Claim becomes an Allowed or estimated Claim, such Contingent Bond Indemnity Claim shall be treated as a General Unsecured Claim. Y. Stanley Engineering Litigation In the event the Stanley Engineering Litigation is resolved either by judgment or settlement in a manner favorable to the Reorganized Debtors and such resolution does not provide for Cash consideration to be received by the Reorganized Debtors and Second Lien Lenders, the Reorganized Debtors and the Second Lien Agent, assuming the Class of Second Lien Lender Secured Claims votes in favor of the Plan, shall engage in good faith negotiations to ensure that the Second Lien Lenders receive consideration equivalent to 50% of the net value of such resolution and to determine the timing of payment of any such consideration. In the event the Reorganized Debtors and the Second Lien Agent are unable to agree on the amount or form of such consideration, the parties will submit the matter to binding arbitration with the costs thereof to be split evenly among the Reorganized Debtors and the Second Lien Agent (with the costs of the Second Lien Agent to be reimbursed from the consideration to be distributed to the Second Lien Lenders on account of the Stanley Engineering Litigation). ARTICLE V. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES A. Assumption and Rejection of Executory Contracts and Unexpired Leases: Except as otherwise provided in the Plan, the Debtors executory contracts or unexpired leases not assumed or rejected pursuant to a Bankruptcy Court order prior to the Effective Date shall be deemed rejected pursuant to sections 365 and 1123 of the Bankruptcy Code, except for those executory contracts or unexpired leases: (1) listed on the schedule of Assumed Executory Contracts and Unexpired Leases attached to the Disclosure Statement as Exhibit N; (2) that are Intercompany Contracts, in which case such Intercompany Contracts are deemed automatically assumed by the applicable Debtor as of the Effective Date, unless such Intercompany Contract previously was rejected by the Debtors pursuant to a Bankruptcy Court order, is the subject of a motion to reject pending on the Effective Date; (3) that are the subject of a motion to assume or reject pending on the Effective Date (in which case such assumption or rejection and the effective date thereof shall remain subject to a Bankruptcy Court order); (4) that are subject to a motion to reject with a requested effective date of rejection after the Effective Date; or (5) that are otherwise expressly assumed or rejected pursuant to the Plan. Entry of the Confirmation Order shall constitute a Bankruptcy Court order approving the assumptions or rejections of such executory contracts or unexpired leases as set forth in the Plan, all pursuant to sections 365(a) and 1123 of the Bankruptcy Code. Unless otherwise indicated, all assumptions or rejections of such executory contracts and unexpired leases in the Plan are effective as of the Effective Date. Each such executory contract and unexpired lease assumed pursuant to the Plan or by Bankruptcy Court order but not assigned to a third party prior to the Effective Date shall revest in and be fully enforceable by the applicable contracting Reorganized Debtor in accordance with its terms, except as such terms may have been modified by such order. Notwithstanding anything to the contrary in the Plan, the Plan Proponent and the Reorganized Debtors, as applicable, reserve the right to alter, amend, modify, or supplement
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the schedules of executory contracts or unexpired leases identified in Exhibit N to the Disclosure Statement at any time through and including fifteen days after the Effective Date. All executory contracts and unexpired leases associated solely with the Arizona Assets shall be assumed and assigned to the Rhodes Entities (or their designee) to the extent set forth on the schedule of Assumed Executory Contracts and Unexpired Leases attached to the Disclosure Statement as Exhibit N, at no cost to the Debtors or the Reorganized Debtors and all Cure costs associated with such scheduled Arizona contracts or leases shall be borne by the Rhodes Entities. B. Cure of Defaults for Assumed Executory Contracts and Unexpired Leases: With respect to each of the Debtors executory contracts or unexpired leases listed on the schedule of Assumed Executory Contracts and Unexpired Leases, the Plan Proponent shall have designated a proposed Cure, and the assumption of such executory contract or unexpired lease may be conditioned upon the disposition of all issues with respect to Cure. Any provisions or terms of the Debtors executory contracts or unexpired leases to be assumed pursuant to the Plan that are, or may be, alleged to be in default, shall be satisfied solely by Cure, or by an agreed-upon waiver of Cure. Except with respect to executory contracts and unexpired leases in which the Plan Proponent or the Debtors, with the consent of the First Lien Steering Committee, and the applicable counterparties have stipulated in writing to payment of Cure, all requests for payment of Cure that differ from the amounts proposed by the Debtors must be Filed with the Court on or before the Cure Bar Date. Any request for payment of Cure that is not timely Filed shall be disallowed automatically and forever barred from assertion and shall not be enforceable against any Reorganized Debtor, without the need for any objection by the Reorganized Debtors or further notice to or action, order, or approval of the Bankruptcy Court, and any Claim for Cure shall be deemed fully satisfied, released, and discharged upon payment by the Debtors of the amounts listed on the proposed Cure schedule, notwithstanding anything included in the Schedules or in any Proof of Claim to the contrary; provided, however, that nothing shall prevent the Reorganized Debtors from paying any Cure despite the failure of the relevant counterparty to File such request for payment of such Cure. The Reorganized Debtors also may settle any Cure without further notice to or action, order, or approval of the Bankruptcy Court. If the Debtors or Reorganized Debtors, as applicable, or First Lien Steering Committee object to any Cure or any other matter related to assumption, the Bankruptcy Court shall determine the Allowed amount of such Cure and any related issues. If there is a dispute regarding such Cure, the ability of the Reorganized Debtors or any assignee to provide adequate assurance of future performance within the meaning of section 365 of the Bankruptcy Code, or any other matter pertaining to assumption, then Cure shall occur as soon as reasonably practicable after entry of a Final Order resolving such dispute, approving such assumption (and, if applicable, assignment), or as may be agreed upon by the Debtors with the consent of the First Lien Steering Committee, or the Reorganized Debtors and the counterparty to the executory contract or unexpired lease. Any counterparty to an executory contract and unexpired lease that fails to object timely to the proposed assumption of any executory contract or unexpired lease will be deemed to have consented to such assumption. The Debtors, with the consent of the First Lien Steering Committee, or the Reorganized Debtors, as applicable, reserve the right either to reject or nullify the assumption of any executory contract or unexpired lease no later than thirty days after a Final Order 36
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determining the Cure or any request for adequate assurance of future performance required to assume such executory contract or unexpired lease. Assumption of any executory contract or unexpired lease pursuant to the Plan or otherwise shall result in the full release and satisfaction of any Claims or defaults, whether monetary or nonmonetary, including defaults of provisions restricting the change in control or ownership interest composition or other bankruptcy-related defaults, arising under any assumed executory contract or unexpired lease at any time prior to the effective date of assumption. Any Proofs of Claim Filed with respect to an executory contract or unexpired lease that has been assumed shall be deemed disallowed and expunged, without further notice to or action, order, or approval of the Bankruptcy Court. All Cure costs associated with Executory Contracts related to the Arizona Assets shall be borne by the Rhodes Entities. C. Preexisting Obligations to the Debtors Under Executory Contracts and Unexpired Leases: Rejection or repudiation of any executory contract or unexpired lease pursuant to the Plan or otherwise shall not constitute a termination of pre-existing obligations owed to the Debtors under such contracts or leases. In particular, notwithstanding any nonbankruptcy law to the contrary, the Reorganized Debtors expressly reserve and do not waive any right to receive, or any continuing obligation of a counterparty to provide, insurance coverage, utilitiy services, warranties, indemnity, guarantee of workmanship, or continued maintenance obligations on goods or services previously purchased by the contracting Debtors or Reorganized Debtors, as applicable, from counterparties to rejected or repudiated executory contracts. The Reorganized Debtors expressly reserve and do not waive the right to receive coverage under any past insurance policy to extent that coverage has not expired under the terms of the insurance policy, regardless of whether such insurance policy is listed as an assumed contract. Similarly, the Reorganized Debtors expressly reserve and do not waive the right to receive services under any contract with a utility provider, regardless of whether such agreement with a utility provider is listed as an assumed contract. D. Claims Based on Rejection or Repudiation of Executory Contracts and Unexpired Leases: Unless otherwise provided by a Bankruptcy Court order, any Proofs of Claim asserting Claims arising from the rejection or repudiation of the Debtors executory contracts and unexpired leases pursuant to the Plan or otherwise must be Filed with the Claims and Solicitation Agent no later than the Rejection Damages Claim Deadline. Any Proofs of Claim arising from the rejection or repudiation of the Debtors executory contracts or unexpired leases that are not timely Filed by the Rejection Damages Claim Deadline shall be disallowed automatically, forever barred from assertion, and shall not be enforceable against any Reorganized Debtor without the need for any objection by the Reorganized Debtors or further notice to or action, order, or approval of the Bankruptcy Court, and any Claim arising out of the rejection or repudiation of the executory contract or unexpired lease shall be deemed fully satisfied, released, and discharged, notwithstanding anything in the Schedules or a Proof of Claim to the contrary. All Allowed Claims arising from the rejection or repudiation of the Debtors executory contracts and unexpired leases shall be classified as General Unsecured Claims.
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E. Intercompany Contracts, Contracts, and Leases Entered Into After the Petition Date: Intercompany Contracts, contracts, and leases entered into after the Petition Date by any Debtor, and any executory contracts and unexpired leases assumed by any Debtor, may be performed by the applicable Reorganized Debtor in the ordinary course of business. F. Home Sales: All pending home sale contracts shall be assumed by the applicable Reorganized Debtor. G. Warranties: All eligible prepetition home sale contracts with one-year warranty obligations shall be performed in the ordinary course of business of the Reorganized Debtors. Upon the Effective Date, any remaining warranty obligations that are to be assumed by the Reorganized Debtors, which shall only be assumed with the consent of the First Lien Steering Committee, shall be transferred to the Reorganized Debtors. Warranty obligations that are not expressly assumed shall be rejected and treated as General Unsecured Claims. H. Modification of Executory Contracts and Unexpired Leases Containing Equity Ownership Restrictions: All executory contracts and unexpired leases to be assumed, or conditionally assumed, under the Plan pursuant to sections 365 and 1123 of the Bankruptcy Code shall be deemed so assumed, or so conditionally assumed, without giving effect to any provisions contained in such executory contracts or unexpired leases restricting the change in control or ownership interest composition of any or all of the Debtors, and upon the Effective Date (1) any such restrictions shall be deemed of no further force and effect and (2) any breaches that may arise thereunder as a result of Confirmation or Consummation shall be deemed waived by the applicable non-Debtor counterparty. I. Modifications, Amendments, Supplements, Restatements, or Other Agreements: Unless otherwise provided in the Plan, each executory contract or unexpired lease that is assumed shall include all modifications, amendments, supplements, restatements, or other agreements that in any manner affect such executory contract or unexpired lease, and all executory contracts and unexpired leases related thereto, if any, including all easements, licenses, permits, rights, privileges, immunities, options, rights of first refusal, and any other interests, unless any of the foregoing agreements has been previously rejected or repudiated or is rejected or repudiated under the Plan. Modifications, amendments, supplements, and restatements to prepetition executory contracts and unexpired leases that have been executed by the Debtors during the Chapter 11 Cases shall not be deemed to alter the prepetition nature of the executory contract or unexpired lease, or the validity, priority, or amount of any Claims that may arise in connection therewith. J. Reservation of Rights: Neither the exclusion nor inclusion of any contract or lease on Exhibit N to the Disclosure Statement, nor anything contained in the Plan, shall constitute an admission by the Debtors or the First Lien Steering Committee that any such contract or lease is in fact an executory contract or unexpired lease or that any Reorganized Debtor has any liability thereunder. If there is a dispute regarding whether a contract or lease is or was executory or unexpired at the time of assumption or rejection, the Debtors, with the consent of the First Lien Steering Committee, or Reorganized Debtors shall have
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thirty days following entry of a Final Order resolving such dispute to alter their treatment of such contract or lease. K. Nonoccurrence of Effective Date: In the event that the Effective Date does not occur, the Bankruptcy Court shall retain jurisdiction with respect to any consensual request to extend the deadline for assuming or rejecting unexpired leases pursuant to section 365(d)(4) of the Bankruptcy Code. ARTICLE VI. PROCEDURES FOR RESOLVING DISPUTED CLAIMS A. Allowance of Claims: After the Effective Date, each Reorganized Debtor shall have and retain any and all rights and defenses such Debtor had with respect to any Claim immediately prior to the Effective Date, including the Causes of Action referenced in Article IV. B. Claims Administration Responsibilities: Except as otherwise specifically provided in the Plan, after the Effective Date, the Reorganized Debtors shall have the sole authority: (1) to File, withdraw, or litigate to judgment, objections to Claims; (2) to settle or compromise any Disputed Claim without any further notice to or action, order, or approval by the Bankruptcy Court; and (3) to administer and adjust the Claims Register to reflect any such settlements or compromises without any further notice to or action, order, or approval by the Bankruptcy Court. C. Estimation of Claims: Before or after the Effective Date, the First Lien Steering Committee or the Reorganized Debtors, as applicable, may (but are not required to) at any time request that the Bankruptcy Court estimate any Disputed Claim that is contingent or unliquidated pursuant to section 502(c) of the Bankruptcy Code for any reason, regardless of whether any party previously has objected to such Claim or whether the Bankruptcy Court has ruled on any such objection, and the Bankruptcy Court shall retain jurisdiction to estimate any such Claim, including during the litigation of any objection to any Claim or during the appeal relating to such objection. Notwithstanding any provision otherwise in the Plan, a Claim that has been expunged from the Claims Register, but that either is subject to appeal or has not been the subject of a Final Order, shall be deemed to be estimated at zero dollars, unless otherwise ordered by the Bankruptcy Court. In the event that the Bankruptcy Court estimates any contingent or unliquidated Claim, that estimated amount shall constitute a maximum limitation on such Claim for all purposes under the Plan (including for purposes of distributions), and the relevant Reorganized Debtor may elect to pursue any supplemental proceedings to object to any ultimate distribution on such Claim. Notwithstanding section 502(j) of the Bankruptcy Code, in no event shall any Holder of a Claim that has been estimated pursuant to section 502(c) of the Bankruptcy Code or otherwise be entitled to seek reconsideration of such estimation unless such Holder has Filed a motion requesting the right to seek such reconsideration on or before twenty days after the date on which such Claim is estimated. D. Adjustment to Claims Without Objection: Any Claim that has been paid or satisfied, or any Claim that has been amended or superseded, may be adjusted or expunged
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on the Claims Register by the Reorganized Debtors without a Claims objection having to be Filed and without any further notice to or action, order, or approval of the Bankruptcy Court. Beginning on the end of the first full calendar quarter that is at least ninety days after the Effective Date, the Reorganized Debtors shall publish and File every calendar quarter a list of all Claims that have been paid, satisfied, amended, or superseded during such prior calendar quarter. E. Time to File Objections to Claims: Any objections to Claims shall be Filed on or before the later of (1) the applicable Claims Objection Deadline and (2) such date as may be fixed by the Bankruptcy Court, after notice and a hearing, whether fixed before or after the date that is one year after the Effective Date. Notwithstanding the foregoing, the First Lien Steering Committee, any First Lien Lender and/or the Reorganized Debtors shall have until sixty days following the Effective Date to object to the Proofs of Claim filed by the Rhodes Entities in the Debtors chapter 11 cases (provided, that, such objections shall not seek to subordinate the Rhodes Entities Claims, if Allowed). F. Disallowance of Claims: Except as set forth herein, any Claims held by an Entity from which property is recoverable under section 542, 543, 550, or 553 of the Bankruptcy Code or that is a transferee of a transfer avoidable under section 522(f), 522(h), 544, 545, 547, 548, 549, or 724(a) of the Bankruptcy Code, shall be deemed disallowed pursuant to section 502(d) of the Bankruptcy Code, and Holders of such Claims may not receive any distributions on account of such Claims until such time as such Causes of Action against that Entity have been settled or a Bankruptcy Court order with respect thereto has been entered and all sums due, if any, to the Debtors by that Entity have been turned over or paid to the Reorganized Debtors or the Litigation Trust, as applicable. EXCEPT AS OTHERWISE AGREED, ANY AND ALL PROOFS OF CLAIM FILED AFTER THE BAR DATE SHALL BE DEEMED DISALLOWED AND EXPUNGED AS OF THE EFFECTIVE DATE WITHOUT ANY FURTHER NOTICE TO OR ACTION, ORDER, OR APPROVAL OF THE BANKRUPTCY COURT, AND HOLDERS OF SUCH CLAIMS MAY NOT RECEIVE ANY DISTRIBUTIONS ON ACCOUNT OF SUCH CLAIMS, UNLESS ON OR BEFORE THE CONFIRMATION HEARING SUCH LATE CLAIM HAS BEEN DEEMED TIMELY FILED BY A BANKRUPTCY COURT ORDER. G. Offer of Judgment: The Reorganized Debtors shall be authorized to serve upon a Holder of a Claim an offer to allow judgment to be taken on account of such Claim, and, pursuant to Bankruptcy Rules 7068 and 9014, Federal Rule of Civil Procedure 68 shall apply to such offer of judgment. To the extent the Holder of a Claim must pay the costs incurred by the Reorganized Debtors after the making of such offer, the Reorganized Debtors shall be entitled to setoff such amounts against the amount of any distribution to be paid to such Holder without any further notice to or action, order, or approval of the Bankruptcy Court. H. Amendments to Claims: On or after the Effective Date, except as expressly authorized in the Plan, a Claim may not be Filed or amended without the prior authorization of the Bankruptcy Court or the Reorganized Debtors, and any such new or amended Claim Filed shall be deemed disallowed in full and expunged without any further action.
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ARTICLE VII. PROVISIONS GOVERNING DISTRIBUTIONS A. Total Enterprise Value for Purposes of Distributions Under the Plan: Distributions of Newco Equity Interests to Holders of Allowed First Lien Lender Secured Claims shall be based upon, among other things, the Newco Total Enterprise Value of $99.6 million. For purposes of distribution, the Newco Equity Interests shall be deemed to have the value assigned to them based upon, among other things, the Newco Total Enterprise Value, regardless of the date of distribution. B. Distributions on Account of Claims Allowed as of the Effective Date: Except as otherwise provided in the Plan, a Final Order, or as agreed to by the First Lien Steering Committee, initial distributions under the Plan on account of Claims Allowed on or before the Effective Date shall be made on the Distribution Date; provided, however, that (1) Allowed Administrative Claims with respect to liabilities incurred by the Debtors in the ordinary course of business during the Chapter 11 Cases or assumed by the Debtors prior to the Effective Date shall be paid or performed in the ordinary course of business in accordance with the terms and conditions of any controlling agreements, course of dealing, course of business, or industry practice and (2) Allowed Priority Tax Claims, unless otherwise agreed, shall be paid in full in Cash on the Distribution Date or over a five-year period as provided in section 1129(a)(9)(C) of the Bankruptcy Code with annual interest provided by applicable non-bankruptcy law. C. Distributions on Account of Claims Allowed After the Effective Date:
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1. Payments and Distributions on Disputed Claims: Except as otherwise provided in the Plan, a Final Order, or as agreed to by the First Lien Steering Committee prior to the Effective Date or the Reorganized Debtors after the Effective Date, distributions under the Plan on account of Disputed Claims that become Allowed after the Effective Date shall be made on the Periodic Distribution Date that is at least thirty days after the Disputed Claim becomes an Allowed Claim; provided, however, that (a) Disputed Administrative Claims with respect to liabilities incurred by the Debtors in the ordinary course of business during the Chapter 11 Cases or assumed by the Debtors on or before the Effective Date that become Allowed after the Effective Date shall be paid or performed in the ordinary course of business in accordance with the terms and conditions of any controlling agreements, course of dealing, course of business, or industry practice and (b) Disputed Priority Tax Claims that become Allowed Priority Tax Claims after the Effective Date, unless otherwise agreed, shall be paid in full in Cash on the Periodic Distribution Date that is at least thirty days after the Disputed Claim becomes an Allowed Claim or over a five-year period as provided in section 1129(a)(9)(C) of the Bankruptcy Code with annual interest provided by applicable non-bankruptcy law. 2. Special Rules for Distributions to Holders of Disputed Claims: Notwithstanding any provision otherwise in the Plan and except as otherwise agreed by the relevant parties: (a) no partial payments and no partial distributions shall be made with respect to a Disputed Claim until all such disputes in connection with such Disputed Claim have been resolved by settlement or Final Order and (b) any Entity that holds both an
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Allowed Claim and a Disputed Claim shall not receive any distribution on the Allowed Claim unless and until all objections to the Disputed Claim have been resolved by settlement or Final Order and the Claim has been Allowed. In the event that there are Disputed Claims requiring adjudication and resolution, the Reorganized Debtors shall establish appropriate reserves for potential payment of such Claims or Interests pursuant to Article VII.C.3. Subject to Article IX.A.5, all distributions made pursuant to the Plan on account of an Allowed Claim shall be made together with any dividends, payments, or other distributions made on account of, as well as any obligations arising from, the distributed property as if such Allowed Claim had been an Allowed Claim on the dates distributions were previously made to Holders of Allowed Claims included in the applicable Class. 3. Reserve of Litigation Trust Interests: On the Effective Date, the Reorganized Debtors shall maintain in reserve Litigation Trust Interests for distribution to Holders of Disputed Claims that become Allowed after the Effective Date. As Disputed Claims are Allowed, the Distribution Agent shall distribute, in accordance with the terms of the Plan, Litigation Trust Interests to Holders of Allowed Claims, and the Disputed Claims Reserve shall be adjusted. The Distribution Agent shall withhold in the Disputed Claims Reserve any payments or other distributions made on account of, as well as any obligations arising from, the Litigation Trust Interests initially withheld in the Disputed Claims Reserve, to the extent that such Litigation Trust Interests continue to be withheld in the Disputed Claims Reserve at the time such distributions are made or such obligations arise, and such payments or other distributions shall be held for the benefit of Holders of Disputed Claims whose Claims, if Allowed, are entitled to distributions under the Plan. The Reorganized Debtors may (but are not required to) request estimation for any Disputed Claim that is contingent or unliquidated. Notwithstanding anything in the applicable Holders Proof of Claim or otherwise to the contrary, the Holder of a Claim shall not be entitled to receive or recover a distribution under the Plan on account of a Claim in excess of the lesser of the amount: (a) stated in the Holders Proof of Claim, if any, as of the Distribution Record Date, plus interest thereon to the extent provided for by the Plan; (b) if the Claim is denominated as contingent or unliquidated as of the Distribution Record Date, the amount that the Reorganized Debtors elect to withhold on account of such Claim in the Disputed Claims Reserve, or such other amount as may be estimated by the Bankruptcy Court prior to the Confirmation Hearing; or (c) if a Claim has been estimated, the amount deposited in the Disputed Claim Reserve to satisfy such Claim after such estimation. D. Delivery of Distributions
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1. Record Date for Distributions: On the Distribution Record Date, the Claims Register shall be closed and any party responsible for making distributions shall be authorized and entitled to recognize only those record Holders listed on the Claims Register as of the close of business on the Distribution Record Date. Notwithstanding the foregoing, if a Claim is transferred twenty or fewer days before the Distribution Record Date, the Distribution Agent shall make distributions to the transferee only to the extent practical and in any event only if the relevant transfer form contains an unconditional and explicit certification and waiver of any objection to the transfer by the transferor.
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2. Distribution Agent: The Distribution Agent shall make all distributions required under the Plan, except that distributions to Holders of Allowed Claims governed by a separate agreement and administered by a Servicer shall be deposited with the appropriate Servicer, at which time such distributions shall be deemed complete, and the Servicer shall deliver such distributions in accordance with the Plan and the terms of the governing agreement. 3. Delivery of Distributions in General: Except as otherwise provided in the Plan, and notwithstanding any authority to the contrary, distributions to Holders of Allowed Claims shall be made to Holders of record as of the Distribution Record Date by the Distribution Agent or a Servicer, as appropriate: (a) in accordance with Federal Rule of Civil Procedure 4, as modified and made applicable by Bankruptcy Rule 7004; (b) to the signatory set forth on any of the Proofs of Claim Filed by such Holder or other representative identified therein (or at the last known addresses of such Holder if no Proof of Claim is Filed or if the Debtors have been notified in writing of a change of address); (c) at the addresses set forth in any written notices of address changes delivered to the Distribution Agent after the date of any related Proof of Claim; (d) at the addresses reflected in the Schedules if no Proof of Claim has been Filed and the Distribution Agent has not received a written notice of a change of address; or (e) on any counsel that has appeared in the Chapter 11 Cases on the Holders behalf. Except as otherwise provided in the Plan, distributions under the Plan on account of Allowed Claims shall not be subject to levy, garnishment, attachment, or like legal process, so that each Holder of an Allowed Claim shall have and receive the benefit of the distributions in the manner set forth in the Plan. The Debtors, the First Lien Steering Committee, the Reorganized Debtors, and the Distribution Agent, as applicable, shall not incur any liability whatsoever on account of any distributions under the Plan. 4. Accrual of Distributions and Other Rights: For purposes of determining the accrual of distributions or other rights after the Effective Date, the Newco Equity Interests and the Litigation Trust Interests, as applicable, shall be deemed distributed as of the Effective Date regardless of the date on which they are actually issued, dated, authenticated, or distributed even though the Reorganized Debtors shall not make any such distributions or distribute such other rights until distributions of the Newco Equity Interests and the Litigation Trust Interests, as applicable, actually take place. 5. Allocation Between Principal and Accrued Interest: Except as otherwise provided in the Plan, distributions on account of Allowed Claims shall be treated as allocated first to principal and thereafter to any interest. 6. Compliance Matters: In connection with the Plan, to the extent applicable, the Reorganized Debtors and the Distribution Agent shall comply with all tax withholding and reporting requirements imposed on them by any Governmental Unit, and all distributions pursuant to the Plan shall be subject to such withholding and reporting requirements. Notwithstanding any provision in the Plan to the contrary, the Reorganized Debtors and the Distribution Agent shall be authorized to take all actions necessary or appropriate to comply with such withholding and reporting requirements, including liquidating a portion of the distribution to be made under the Plan to generate sufficient funds to pay applicable withholding taxes, withholding distributions pending receipt of
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information necessary to facilitate such distributions, or establishing any other mechanisms they believe are reasonable and appropriate. The Reorganized Debtors reserve the right to allocate all distributions made under the Plan in compliance with all applicable wage garnishments, alimony, child support, and other spousal awards, liens, and encumbrances. 7. Fractional, De Minimis, Undeliverable, and Unclaimed Distributions:
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a. Fractional Distributions: Notwithstanding any other provision of the Plan to the contrary, payments of fractions of shares of Newco Equity Interests or fractions of Litigation Trust Interests shall not be made. The Distribution Agent shall not be required to make distributions or payments of fractions of Newco Equity Interests, Litigation Trust Interests or dollars. Whenever any payment of Cash of a fraction of a dollar or payment of a fraction of Newco Equity Interests or fraction of Litigation Trust Interests pursuant to the Plan would otherwise be required, the actual payment shall reflect a rounding of such fraction to the nearest whole dollar (up or down), with half dollars, half Newco Equity Interests or half Litigation Trust Interests or less being rounded down. b. Undeliverable Distributions: If any distribution to a Holder of an Allowed Claim is returned to a Distribution Agent as undeliverable, no further distributions shall be made to such Holder unless and until such Distribution Agent is notified in writing of such Holders then-current address, at which time all currently due missed distributions shall be made to such Holder on the next Periodic Distribution Date. Undeliverable distributions shall remain in the possession of the Reorganized Debtors until such time as a distribution becomes deliverable, or such distribution reverts to the Reorganized Debtors pursuant to Article VII.D.7.c, and shall not be supplemented with any interest, dividends, or other accruals of any kind. c. Reversion: Any distribution under the Plan that is an Unclaimed Distribution for a period of six months after distribution shall be deemed unclaimed property under section 347(b) of the Bankruptcy Code and such Unclaimed Distribution shall revest in the Reorganized Debtors and, to the extent such Unclaimed Distribution is a distribution of Newco Equity Interests, such Newco Equity Interests shall be deemed cancelled. Upon such revesting, the Claim of any Holder or its successors with respect to such property shall be cancelled, discharged, and forever barred notwithstanding any applicable federal or state escheat, abandoned, or unclaimed property laws to the contrary. The provisions of the Plan regarding undeliverable distributions and Unclaimed Distributions shall apply with equal force to distributions that are issued by the Debtors, made pursuant to any indenture or Certificate (but only with respect to the initial distribution by the Servicer to Holders that are entitled to be recognized under the relevant indenture or Certificate and not with respect to Entities to whom those recognized Holders distribute), notwithstanding any provision in such indenture or Certificate to the contrary and notwithstanding any otherwise applicable federal or state escheat, abandoned, or unclaimed property law.
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8. Manner of Payment Pursuant to the Plan: Any payment in Cash to be made pursuant to the Plan shall be made at the election of the Reorganized Debtors by check or by wire transfer. Checks issued by the Distribution Agent or applicable Servicer on account of Allowed Claims shall be null and void if not presented within 120 days after issuance, but may be requested to be reissued until the distribution revests in the Reorganized Debtors pursuant to Article VII.D.7.c. 9. Surrender of Cancelled Instruments or Securities: On the Effective Date or as soon as reasonably practicable thereafter, each Holder of a Certificate shall surrender such Certificate to the Distribution Agent or a Servicer (to the extent the relevant Claim or Interest is governed by an agreement and administered by a Servicer). Such Certificate shall be cancelled solely with respect to the Debtors, and such cancellation shall not alter the obligations or rights of any non-Debtor third parties vis--vis one another with respect to such Certificate. No distribution of property pursuant to the Plan shall be made to or on behalf of any such Holder that is a Holder of a Claim unless and until such Certificate is received by the Distribution Agent or the Servicer or the unavailability of such Certificate is reasonably established to the satisfaction of the Distribution Agent or the Servicer. Any Holder of a Claim who fails to surrender or cause to be surrendered such Certificate or fails to execute and deliver an affidavit of loss and indemnity acceptable to the Distribution Agent or the Servicer prior to the first anniversary of the Effective Date, shall have its Claim discharged with no further action, be forever barred from asserting any such Claim against the relevant Reorganized Debtor or its property, be deemed to have forfeited all rights and Claims with respect to such Certificate, and not participate in any distribution under the Plan; furthermore, all property with respect to such forfeited distributions, including any dividends or interest attributable thereto, shall revert to the Reorganized Debtors, notwithstanding any federal or state escheat, abandoned, or unclaimed property law to the contrary. E. Claims Paid or Payable by Third Parties.
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1. Claims Paid by Third Parties: The Claims and Solicitation Agent shall reduce in full a Claim, and such Claim shall be disallowed without a Claims objection having to be Filed and without any further notice to or action, order, or approval of the Bankruptcy Court, to the extent that the Holder of such Claim receives payment in full on account of such Claim from a party that is not a Debtor or Reorganized Debtor. Further, to the extent a Holder of a Claim receives a distribution on account of such Claim and receives payment from a party that is not a Debtor or a Reorganized Debtor on account of such Claim, such Holder shall, within two weeks of receipt thereof, repay or return the distribution to the applicable Reorganized Debtor, to the extent the Holders total recovery on account of such Claim from the third party and under the Plan exceeds the amount of such Claim as of the date of any such distribution under the Plan. The failure of such Holder to timely repay or return such distribution shall result in the Holder owing the applicable Reorganized Debtor annualized interest at the Federal Judgment Rate on such amount owed for each Business Day after the two-week grace period specified above until the amount is repaid.
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2. Claims Payable by Insurance: Holders of Insured Claims that are covered by the Debtors insurance policies shall seek payment of such Claims from applicable insurance policies, provided that the Reorganized Debtors shall have no obligation to pay any amounts in respect of pre-petition deductibles or self insured retention amounts. Allowed Insured Claim amounts in excess of available insurance shall be treated as General Unsecured Claims. No distributions under the Plan shall be made on account of an Allowed Claim that is payable pursuant to one of the Debtors' insurance policies until the Holder of such Allowed Claim has exhausted all remedies with respect to such insurance policy. To the extent that one or more of the Debtors insurers agrees to satisfy in full a Claim (if and to the extent adjudicated by a court of competent jurisdiction), then immediately upon such insurers agreement, such Claim may be expunged to the extent of any agreed upon satisfaction on the Claims Register by the Claims and Solicitation Agent without a Claims objection having to be Filed and without any further notice to or action, order, or approval of the Bankruptcy Court. 3. Applicability of Insurance Policies: Distributions to Holders of Allowed Claims shall be in accordance with the provisions of any applicable insurance policy. Except for Claims and Causes of Action released under the Plan to the Released Parties and Exculpated Parties, nothing contained in the Plan shall constitute or be deemed a waiver of any Cause of Action that the Debtors or any Entity may hold against any other Entity, including insurers under any policies of insurance, nor shall anything contained herein constitute or be deemed a waiver by such insurers of any defenses, including coverage defenses, held by such insurers. F. Payment of $1.5 Million to First Lien Lenders: The $1,500,000 in Cash payable to the Holders of First Lien Lender Secured Claims from the proceeds of their Collateral pursuant to Article III.B.1. shall be paid as follows: (i) $400,000 on the Effective Date and (ii) the remaining up to $1,100,000 in five quarterly installments of $220,000 beginning on the first day of the fourth month following the Effective Date; provided, that the Reorganized Debtors shall have the right to defer up to two quarterly payments, with such deferred amount(s) to be paid on the next quarterly payment date (and the amount scheduled to be paid on such quarterly payment date deferred for another quarter; provided that the full $1.5 million payment shall be made to the Holders of First Lien Lender Secured Claims within eighteen months of the Effective Date). Notwithstanding the foregoing, in the event that, as of the Effective Date, the debt on the Rhodes Ranch Golf Course has been refinanced on terms and conditions acceptable to the First Lien Steering Committee and the Reorganized Debtors have unrestricted cash of at least $3.5 million (after taking into account any amounts required to be paid to reduce the amount of debt on the Rhodes Ranch Golf Course below $5.9 million and without taking into consideration amounts that may have been borrowed under any exit facility unless such amounts were used to pay-down debt on the Rhodes Ranch Golf Course, in which case any amounts used to pay-down debt on the Rhodes Ranch Golf Course will be deemed to reduce unrestricted cash on a dollar for dollar basis), then the initial $400,000 payment to the First Lien Lenders will be increased as follows: (i) if unrestricted cash (as calculated above) is equal to or greater than $3.5 million but less than $4.5 million, the $400,000 payment shall be increased to $700,000; (ii) if unrestricted cash (as calculated above) is equal to or greater than $4.5 million but less than $5.5 million, the $400,000 payment shall be increased to $1,000,000; and (iii) if unrestricted 46
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cash (as calculated above) is equal to or greater than $5.5 million, the $400,000 payment shall be increased to $1.5 million, in each case with the subsequent quarterly installments reduced by a corresponding amount to provide for equal payments over the payout periods discussed above. In no event shall the aggregate Cash payments to the First Lien Lenders exceed $1.5 million. G. General Unsecured Claims Purchase: The First Lien Lenders have agreed to use the aggregate $1.5 million Cash payment provided to them under the Plan to acquire those General Unsecured Claims of the Creditors listed on the schedule attached to the Disclosure Statement as Exhibit H (the Claim Purchase Schedule) to the extent such Claims remain outstanding as of the Effective Date; provided that (i) each Holder of a Claim so listed is the original Holder of such Claim and (ii) such Claim(s) is ultimately Allowed. The Claim Purchase Schedule shall delineate whether such Claims are Allowed or Disputed and Claims may be purchased only to the extent ultimately Allowed. Claims included on the Claim Purchase Schedule shall be purchased (subject to the conditions contained in Article VII.G of the Plan) for the amounts listed for such Claims under the heading Allowed Amount (Claim Purchase Amount) on the Claim Purchase Schedule. Payments on account of the purchased Allowed Claims listed on the Claim Purchase Schedule shall be made on the same time frame as the First Lien Lenders receive their allocable Cash payments under Article VII.F of the Plan, with the First Lien Steering Committee determining the order in which Claims are purchased (which, in the first instance, shall be the order in which they are listed on the Claim Purchase Schedule). For the avoidance of doubt, any claim listed on the Claim Purchase Schedule that is disputed, will not be purchased until allowed and only to the extent the aggregate purchase price for all claims purchased inclusive of such newly allowed claims are equal to or less than $1.5 million. Claims subsequently allowed will be purchased in the order in which they are allowed. The First Lien Lenders reserve the right to modify the Claim Purchase Schedule prior to or subsequent to the Effective Date without further Court order; provided, that a Creditor may be removed from the Claim Purchase Schedule only to the extent that (i) its Claims are not ultimately Allowed, (ii) its Claims are subject to setoff (other than under section 547 of the Bankruptcy Code); (iii) such Creditor sells its Claim to a party other than the First Lien Lenders pursuant to Article VII.G of the Plan or (iv) the full $1.5 million has been used to purchase other Allowed Claims on the Claim Purchase Schedule before such Creditors Claim is Allowed. The First Lien Lenders shall be subrogated to the rights of Creditors whose Claims are purchased hereunder and any distributions otherwise allocable to the Holders of Claims purchased by the First Lien Lenders shall be distributed pro rata to the Holders of First Lien Lender Secured Claims. The Reorganized Debtors shall be authorized to make the foregoing payments to the Creditors on the Claim Purchase Schedule on behalf of the First Lien Lenders with a corresponding reduction in the $1.5 million payable to the First Lien Lenders. Under no circumstances shall the First Lien Lenders (either directly or through the Reorganized Debtors) pay in excess of $1.5 million in the aggregate for the Claims on the Claim Purchase Schedule. The First Lien Steering Committee may, in its sole discretion (but after consultation with the Debtors and the Creditors Committee), add Claims to the Claim Purchase Schedule at any time; provided that the amount to be paid for all such
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Claims listed on the Claim Purchase Schedule does not exceed $1.5 million in the aggregate regardless of the total amount of Allowed Claims reflected on the Claim Purchase Schedule. In the event that Allowed Claims in excess of $1.5 million are listed on the Claim Purchase Schedule, Holders of Claims listed on the Claim Purchase Schedule shall have the right to accept or decline payment of less than 100 cents on account of their Claims from the First Lien Lenders. No Creditor listed on the Claim Purchase Schedule shall receive in excess of 100 cents on the dollar for its Claim, and the Reorganized Debtors shall not pursue Claims under Bankruptcy Code section 547 against any Creditor whose Claim is purchased in accordance with this Article VII.G. The Plan shall serve as the notice of transfer of Claim required under Bankruptcy Rule 3001(e). If no objections are received by the Voting Deadline, the First Lien Lenders shall be authorized upon the Effective Date to effectuate the foregoing Claim purchase transactions. ARTICLE VIII. EFFECT OF CONFIRMATION OF THE PLAN A. Discharge of Claims and Termination of Interests: Pursuant to section 1141(d) of the Bankruptcy Code, and except as otherwise specifically provided in the Plan, the distributions, rights, and treatment that are provided in the Plan shall be in complete satisfaction, discharge, and release, effective as of the Effective Date, of Claims, Interests, and Causes of Action of any nature whatsoever, including any interest accrued on Claims or Interests from and after the Petition Date, whether known or unknown, against, liabilities of, Liens on, obligations of, rights against, and Interests in, the Debtors or any of their assets or properties, regardless of whether any property shall have been distributed or retained pursuant to the Plan on account of such Claims and Interests, including demands, liabilities, and Causes of Action that arose before the Effective Date, any liability (including withdrawal liability) to the extent such Claims or Interests relate to services performed by employees of the Debtors prior to the Effective Date and that arise from a termination of any employee, regardless of whether such termination occurred prior to or after the Effective Date, any contingent or non-contingent liability on account of representations or warranties issued on or before the Effective Date, and all debts of the kind specified in sections 502(g), 502(h), or 502(i) of the Bankruptcy Code, in each case whether or not: (1) a Proof of Claim or Interest based upon such debt, right, or Interest is Filed or deemed Filed pursuant to section 501 of the Bankruptcy Code; (2) a Claim or Interest based upon such debt, right, or Interest is Allowed pursuant to section 502 of the Bankruptcy Code; or (3) the Holder of such a Claim or Interest has accepted the Plan. Any default by the Debtors with respect to any Claim or Interest that existed immediately prior to or on account of the filing of the Chapter 11 Cases shall be deemed Cured on the Effective Date. The Confirmation Order shall be a judicial determination of the discharge of all Claims and Interests subject to the Effective Date occurring. B. Subordinated Claims: The allowance, classification, and treatment of all Allowed Claims and Interests and the respective distributions and treatments under the Plan take into account and conform to the relative priority and rights of the Claims and Interests in each Class in connection with any contractual, legal, and equitable subordination rights relating thereto, whether arising under general principles of equitable subordination, section 510(b) of the Bankruptcy Code, or otherwise. Pursuant to section 510 of the
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Bankruptcy Code, the Plan Proponent or Reorganized Debtors, as applicable, reserve the right to re-classify any Allowed Claim or Interest in accordance with any contractual, legal, or equitable subordination relating thereto. C. Compromise and Settlement of Claims and Controversies: Pursuant to section 363 of the Bankruptcy Code and Bankruptcy Rule 9019 and in consideration for the distributions and other benefits provided pursuant to the Plan, the provisions of the Plan shall constitute a good faith compromise of all Claims, Interests, and controversies relating to the contractual, legal, and subordination rights that a Holder of a Claim may have with respect to any Allowed Claim or Interest, or any distribution to be made on account of such an Allowed Claim or Interest. The entry of the Confirmation Order shall constitute the Bankruptcy Courts approval of the compromise or settlement of all such Claims, Interests, and controversies, as well as a finding by the Bankruptcy Court that such compromise or settlement is in the best interests of the Debtors, their Estates, and Holders of Claims and Interests and is fair, equitable, and reasonable. In accordance with the provisions of the Plan, pursuant to section 363 of the Bankruptcy Code and Bankruptcy Rule 9019(a), without any further notice to or action, order, or approval of the Bankruptcy Court, after the Effective Date, the Reorganized Debtors may compromise and settle Claims against them and Causes of Action against other Entities. D. Releases by the Debtors of the Released Parties:
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Pursuant to section 1123(b) of the Bankruptcy Code and except as otherwise specifically provided in the Plan, for good and valuable consideration, including the service of the Released Parties to facilitate the expeditious reorganization of the Debtors and the implementation of the restructuring contemplated by the Plan, and as part of the global settlement described in Article I.B. of the Disclosure Statement, on and after the Effective Date, the Released Parties are deemed released by the Debtors, the Reorganized Debtors, and the Estates from any and all Claims, obligations, rights, suits, damages, Causes of Action, remedies, and liabilities whatsoever, including any derivative Claims asserted on behalf of the Debtors, taking place on or before the Effective Date, whether known or unknown, foreseen or unforeseen, existing or hereinafter arising, in law, equity, or otherwise, that the Debtors, the Reorganized Debtors or the Estates would have been legally entitled to assert in their own right (whether individually or collectively) or on behalf of the Holder of any Claim or Interest or other Entity, based on or relating to, or in any manner arising from, in whole or in part, the Debtors, the Chapter 11 Cases, the purchase, sale, or rescission of the purchase or sale of any Security of the Debtors, the subject matter of, or the transactions or events giving rise to, any Claim or Interest that is treated in the Plan, the business or contractual arrangements between any Debtor and any of the Released Parties, the restructuring of Claims and Interests prior to or in the Chapter 11 Cases, the negotiation, formulation, or preparation of the Plan and Disclosure Statement, or related agreements, instruments, or other documents, upon any other act or omission, transaction, agreement, event, or other occurrence taking place on or before the Effective Date.
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E. Releases by the Debtors of the Rhodes Entities: The Rhodes Entities shall be deemed released from any and all Claims, obligations, rights, suits, damages, Causes of Action, remedies, and liabilities whatsoever arising under chapter 5 of the Bankruptcy Code with respect to transfers made by the Debtors to the Rhodes Entities during the 2 years prior to the Petition Date; provided, however, that such release shall only apply to transfers expressly set forth in the Schedules as Filed with the Bankruptcy Court as of August 1, 2009 or as disclosed in Attachment B to the Mediation Term Sheet. F. Releases by First Lien Lenders of First Lien Lenders: Pursuant to Bankruptcy Rule 9019, and except as otherwise specifically provided in the Plan, to the extent a First Lien Lender elects on its Ballot to release the First Lien Lenders in accordance with this Section VIII.F., for good and valuable consideration, on and after the Effective Date, each of the First Lien Lenders electing to grant this release, shall be deemed to release each of the other First Lien Lenders that has elected to grant this release and each of their affiliates from any and all Claims, obligations, rights, suits, damages, Causes of Action, remedies, and liabilities whatsoever, whether known or unknown, foreseen or unforeseen, existing or hereinafter arising, in law, equity, or otherwise, that such First Lien Lender would have been legally entitled to assert against any other First Lien Lender that elected to grant this release, based on or relating to, or in any manner arising from, in whole or in part, the First Lien Credit Agreement, the First Lien Lender Claims, any other claims arising under or related to the First Lien Credit Agreement, the Debtors, the Chapter 11 Cases, the subject matter of, or the transactions or events giving rise to any First Lien Lender Claim, the restructuring of the First Lien Lender Claims prior to or during the Chapter 11 Cases, the negotiation, formulation, or preparation of the Plan and Disclosure Statement, or related agreements, instruments, or other documents, upon any other act or omission, transaction, agreement, event, or other occurrence taking place on or before the Effective Date; with such releases constituting an express waiver and relinquishment by each First Lien Lender electing to grant this release of any claims, whether known or unknown that such First Lien Lender may have under Section 1542 of the California Civil code or other analogous state or federal law related to the matters being released; provided, however, that Claims or liabilities arising out of or relating to any act or omission of any First Lien Lender or any of its affiliates that constitutes gross negligence or willful misconduct shall not be released. G. Exculpation: Except as otherwise specifically provided in the Plan, no Exculpated Party shall have or incur, and each Exculpated Party is hereby released and exculpated from any Claim, obligation, Cause of Action, or liability to one another or to any Exculpating Party for any Exculpated Claim, except for gross negligence, willful misconduct or fraud, but in all respects such Entities shall be entitled to reasonably rely upon the advice of counsel with respect to their duties and responsibilities pursuant to the Plan. The Debtors, the First Lien Steering Committee and the Reorganized Debtors (and each of their respective agents, members, directors, officers, employees, advisors, and attorneys) have, and upon Confirmation of the Plan shall be deemed to have, participated in good faith and in compliance with the applicable provisions of the Bankruptcy Code with regard to the distributions of the Securities pursuant to the Plan, and therefore are not, and on account of such 50
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distributions shall not be, liable at any time for the violation of any applicable law, rule, or regulation governing the solicitation of acceptances or rejections of the Plan or such distributions made pursuant to the Plan. H. Injunction Except as otherwise expressly provided in the Plan or for obligations issued pursuant to the Plan, all Entities who have held, hold, or may hold Claims against the Debtors, and all Entities holding Interests, are permanently enjoined, from and after the Effective Date, from: (1) commencing or continuing in any manner any action or other proceeding of any kind against the Debtors or Reorganized Debtors on account of or in connection with or with respect to any such Claims or Interests; (2) enforcing, attaching, collecting, or recovering by any manner or means any judgment, award, decree or order against the Debtors or Reorganized Debtors on account of or in connection with or with respect to any such Claims or Interests; (3) creating, perfecting, or enforcing any encumbrance of any kind against the Debtors or Reorganized Debtors or the property or estates of the Debtors or Reorganized Debtors on account of or in connection with or with respect to any such Claims or Interests; (4) asserting any right of setoff, subrogation, or recoupment of any kind against any obligation due from the Debtors or Reorganized Debtors or against the property or Estates of the Debtors or Reorganized Debtors on account of or in connection with or with respect to any such Claims or Interests unless such Holder has Filed a motion requesting the right to perform such setoff on or before the Confirmation Date, and notwithstanding an indication in a Proof of Claim or Interest or otherwise that such Holder asserts, has, or intends to preserve any right of setoff pursuant to section 553 of the Bankruptcy Code or otherwise (provided, that, to the extent the Rhodes Entities Claims are Allowed, the Rhodes Entities, without the need to file any such motion, shall retain the right to assert a setoff against any Claims or Causes of Action that the Reorganized Debtors or Litigation Trust may assert against the Rhodes Entities, with the Reorganized Debtors and Litigation Trust, as applicable, reserving the right to challenge the propriety of any such attempted setoff, with any such challenge to be resolved by the Bankruptcy Court); and (5) commencing or continuing in any manner any action or other proceeding of any kind on account of or in connection with or with respect to any such Claims or Interests released or settled pursuant to the Plan. I. Protection Against Discriminatory Treatment: Consistent with section 525 of the Bankruptcy Code and the Supremacy Clause of the U.S. Constitution, all Entities, including Governmental Units, shall not discriminate against the Reorganized Debtors or deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise, or other similar grant to, condition such a grant to, discriminate with respect to such a grant against, the Reorganized Debtors, or another Entity with whom such Reorganized Debtors have been associated, solely because one of the Debtors has been a debtor under chapter 11, has been insolvent before the commencement of the Chapter 11 Cases (or during the Chapter 11 Cases but before the Debtor is granted or denied a discharge) or has not paid a debt that is dischargeable in the Chapter 11 Cases. J. Setoffs: Except as otherwise expressly provided for in the Plan, each Reorganized Debtor, pursuant to the Bankruptcy Code (including section 553 of the 51
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Bankruptcy Code), applicable non-bankruptcy law, or as may be agreed to by the Holder of a Claim, may setoff against any Allowed Claim and the distributions to be made pursuant to the Plan on account of such Allowed Claim (before any distribution is made on account of such Allowed Claim), any Claims, rights, and Causes of Action of any nature that such Debtor, Reorganized Debtor or the Litigation Trust, as applicable, may hold against the Holder of such Allowed Claim, to the extent such Claims, rights, or Causes of Action against such Holder have not been otherwise compromised or settled on or prior to the Effective Date (whether pursuant to the Plan or otherwise); provided, however, that neither the failure to effect such a setoff nor the allowance of any Claim pursuant to the Plan shall constitute a waiver or release by such Reorganized Debtor or the Litigation Trust of any such Claims, rights, and Causes of Action that such Reorganized Debtor or the Litigation Trust may possess against such Holder. In no event shall any Holder of Claims be entitled to setoff any Claim against any Claim, right, or Cause of Action of the Debtor or Reorganized Debtor, as applicable, unless such Holder has Filed a motion with the Bankruptcy Court requesting the authority to perform such setoff on or before the Confirmation Date, and notwithstanding any indication in any Proof of Claim or otherwise that such Holder asserts, has, or intends to preserve any right of setoff pursuant to section 553 or otherwise; provided, however, that, to the extent the Rhodes Entities Claims are Allowed, the Rhodes Entities, without the need to file any such motion, shall retain the right to assert a setoff against any Claims or Causes of Action that the Reorganized Debtors or Litigation Trust may assert against the Rhodes Entities, with the Reorganized Debtors and Litigation Trust, as applicable, reserving the right to challenge the propriety of any such attempted setoff, with any such challenge to be resolved by the Bankruptcy Court. K. Recoupment: In no event shall any Holder of Claims or Interests be entitled to recoup any Claim or Interest against any Claim, right, or Cause of Action of the Debtors or the Reorganized Debtors, as applicable, unless such Holder actually has performed such recoupment and provided notice thereof in writing to the Debtors and the First Lien Steering Committee on or before the Confirmation Date, notwithstanding any indication in any Proof of Claim or Interest or otherwise that such Holder asserts, has, or intends to preserve any right of recoupment. L. Release of Liens: Except as otherwise provided in the Plan or in any contract, instrument, release, or other agreement or document created pursuant to the Plan, on the Effective Date and concurrently with the applicable distributions made pursuant to the Plan, all mortgages, deeds of trust, Liens, pledges, or other security interests against any property of the Estates shall be fully released, and discharged, and all of the right, title, and interest of any Holder of such mortgages, deeds of trust, Liens, pledges, or other security interests shall revert to the Reorganized Debtors and their successors and assigns. Upon the Effective Date, the Confirmation Order shall be binding upon and govern the acts of all entities, including, without limitation, all filing agents, filing officers, title agents, title companies, recorders of mortgages, recorders of deeds, registrars of deeds, administrative agencies, governmental departments, secretaries of state, federal and local officials, and all other persons and entities who may be required by operation of law, the duties of their office, or contract, to release any mortgages, deeds of trust, Liens, pledges or other security interests 52
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against any property of the Estates; and each of the foregoing persons and entities is hereby directed to accept for filing the Confirmation Order any and all of the documents and instruments necessary and appropriate to effectuate the discharge. M. Document Retention: On and after the Effective Date, the Reorganized Debtors may maintain documents in accordance with their current document retention policy, as may be altered, amended, modified, or supplemented by the Reorganized Debtors in the ordinary course of business. Copies of all Debtors books and records shall be delivered to the Rhodes Entities at no cost to the Rhodes Entities on or prior to the Effective Date. N. Reimbursement or Contribution: If the Bankruptcy Court disallows a Claim for reimbursement or contribution of an Entity pursuant to section 502(e)(1)(B) of the Bankruptcy Code, then to the extent that such Claim is contingent as of the time of allowance or disallowance, such Claim shall be forever disallowed notwithstanding section 502(j) of the Bankruptcy Code, unless prior to the Effective Date: (1) such Claim has been adjudicated as noncontingent or (2) the relevant Holder of a Claim has Filed a noncontingent Proof of Claim on account of such Claim and a Final Order has been entered determining such Claim as no longer contingent. ARTICLE IX. ALLOWANCE AND PAYMENT OF CERTAIN ADMINISTRATIVE CLAIMS A. Professional Claims:
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1. Final Fee Applications: All final requests for payment of Claims of a Professional shall be Filed no later than forty-five days after the Effective Date. After notice and a hearing in accordance with the procedures established by the Bankruptcy Code and prior Bankruptcy Court orders, the Allowed amounts of such Professional Claims shall be determined by the Bankruptcy Court. 2. Payment of Interim Amounts: Except as otherwise provided in the Plan, Professionals shall be paid pursuant to the Interim Compensation Order. 3. Reimbursable Expenses: The reasonable fees and expenses incurred by (i) the First Lien Agent, including its professionals, to the extent provided by the First Lien Credit Agreement, (ii) the Second Lien Agent, including its professionals, to the extent provided by the Second Lien Credit Agreement (only to the extent the Class of Second Lien Lender Secured Claims votes in favor of the Plan), and (iii) the First Lien Steering Committee, including its professionals, in connection with the Chapter 11 Cases shall be paid by the Debtors or Reorganized Debtors, as applicable, within 15 days of receipt of an invoice from such parties or their advisors. 4. Post-Effective Date Fees and Expenses: Except as otherwise specifically provided in the Plan, from and after the Effective Date, the Reorganized Debtors shall, in the ordinary course of business and without any further notice to or action, order, or approval of the Bankruptcy Court, pay in Cash the reasonable legal, professional, or other fees and expenses related to implementation and Consummation incurred by the Reorganized Debtors and First Lien Steering Committee. Upon the Effective Date, any requirement that 53
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Professionals comply with sections 327 through 331 and 1103 of the Bankruptcy Code in seeking retention or compensation for services rendered after such date shall terminate, and the Reorganized Debtors may employ and pay any Professional in the ordinary course of business without any further notice to or action, order, or approval of the Bankruptcy Court. 5. Substantial Contribution Compensation and Expenses: Except as otherwise specifically provided in the Plan, any Entity who requests compensation or expense reimbursement for making a substantial contribution in the Chapter 11 Cases pursuant to sections 503(b)(3), (4), and (5) of the Bankruptcy Code must File an application and serve such application on counsel for the Debtors or Reorganized Debtors, as applicable, and the First Lien Steering Committee and the Creditors Committee, and as otherwise required by the Bankruptcy Court and the Bankruptcy Code on or before the Administrative Claim Bar Date or be forever barred from seeking such compensation or expense reimbursement. B. Other Administrative Claims: All requests for payment of an Administrative Claim must be Filed with the Claims and Solicitation Agent and served upon counsel to the Debtors or Reorganized Debtors, as applicable, and the First Lien Steering Committee on or before the Administrative Claim Bar Date. Any request for payment of an Administrative Claim that is not timely Filed and served shall be disallowed automatically without the need for any objection by the Debtors, Reorganized Debtors, or the First Lien Steering Committee. The Reorganized Debtors may settle and pay any Administrative Claim in the ordinary course of business without any further notice to or action, order, or approval of the Bankruptcy Court. In the event that any party with standing objects to an Administrative Claim, the Bankruptcy Court shall determine the Allowed amount of such Administrative Claim. Notwithstanding the foregoing, no request for payment of an Administrative Claim need be Filed with respect to an Administrative Claim previously Allowed by Final Order. ARTICLE X. CONDITIONS PRECEDENT TO CONFIRMATION AND CONSUMMATION OF THE PLAN The following are conditions precedent to A. Conditions to Confirmation: Confirmation that must be satisfied or waived in accordance with Article X.C: 1. The Bankruptcy Court shall have approved the Disclosure Statement, in a manner acceptable to the Plan Proponent, as containing adequate information with respect to the Plan within the meaning of section 1125 of the Bankruptcy Code. 2. Proponent. The Confirmation Order shall be in form and substance acceptable to the Plan
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3. The terms and conditions of employment or retention of any Persons proposed to serve as officers or directors of Newco, including, without limitation, as to compensation, shall be acceptable to the Plan Proponent and shall be disclosed at or prior to the Confirmation Hearing. 4. Any disclosures made pursuant to 11 U.S.C. 1129(a)(5) shall be acceptable to the Plan Proponent. 54
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5. All of the schedules, documents, and exhibits ancillary to the Plan and Disclosure Statement including, but not limited to, (i) the Claim Purchase Schedule, (ii) the Litigation Trust Agreement, (iii) the Newco LLC Operating Agreement, (iv) the New First Lien Notes credit agreement, (v) the Schedule of Causes of Action, (vi) the Asset and Stock Transfer Agreement, and (vii) the Schedule of Assumed Executory Contracts and Unexpired Leases shall be in form and substance acceptable to the Plan Proponent. B. Conditions Precedent to the Effective Date: The following are conditions precedent to Consummation that must be satisfied or waived in accordance with Article X.C: 1. The Bankruptcy Court shall have authorized the assumption and rejection of executory contracts and unexpired leases by the Debtors as contemplated by Article V. 2. The Confirmation Order shall have become a Final Order in form and substance acceptable to the Plan Proponent. 3. All of the schedules, documents, and exhibits ancillary to the Plan and Disclosure Statement including, but not limited to, (i) the Claim Purchase Schedule, (ii) the Litigation Trust Agreement, (iii) the Newco LLC Operating Agreement, (iv) the New First Lien Notes credit agreement, (v) the Schedule of Causes of Action, (vi) the Asset and Stock Transfer Agreement, and (vii) the Schedule of Assumed Executory Contracts and Unexpired Leases shall be in form and substance acceptable to the Plan Proponent. 4. The documents governing the New First Lien Notes and the Newco LLC Operating Agreement shall be in form and substance acceptable to the Plan Proponent. 5. The Confirmation Date shall have occurred.
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6. The First Lien Steering Committee shall have designated and replaced each existing Qualified Employee of the Debtors with a new Qualified Employee for the Reorganized Debtors. 7. The debt outstanding on the Rhodes Ranch Golf Course shall be refinanced on terms and conditions acceptable to Rhodes and the First Lien Steering Committee. 8. Copies of all Debtors books and records shall have been delivered to the Rhodes Entities at no cost to the Rhodes Entities. 9. The Arizona Assets shall have been transferred to the Rhodes Entities (or their designee) free and clear of all liens and claims pursuant to section 363(f) of the Bankruptcy Code on the Effective Date; provided, that the non-First Lien Lender/Second Lien Lender liens do not exceed $60,000. 10. The Debtors shall have assumed and assigned all executory contracts and unexpired leases related solely to the Arizona Assets to the Rhodes Entities (or their designee), at no cost to the Debtors or the Reorganized Debtors, with all Cure costs associated therewith to be borne by the Rhodes Entities.
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11.
The tax structure set forth in Article IV.F shall be implemented.
12. The Rhodes Entities and First Lien Steering Committee shall have agreed on the Golf Course Security Property. 13. The Rhodes Entities shall have performed all of their obligations under the Plan including, without limitation, depositing $3.5 million in Cash in an account designated by the Debtors, with the consent of the First Lien Steering Committee, and transferred the Rhodes Ranch Golf Course and related contracts and assets as required by Article IV.S. to the Reorganized Debtors. C. Waiver of Conditions Precedent: The First Lien Steering Committee may waive any of the conditions to the Effective Date at any time, without any notice to parties in interest and without any further notice to or action, order, or approval of the Bankruptcy Court, and without any formal action other than proceeding to confirm or consummate the Plan; provided, that the First Lien Steering Committee will not waive the conditions precedent in items X.B.6 through 12 above if the Rhodes Entities shall have complied with all of their obligations hereunder and in the Plan by the Effective Date (or such earlier date specifically set forth herein). In the event the Rhodes Entities fail to comply with any of their obligations under the Mediation Term Sheet or under the Plan by the Effective Date (or such earlier date specifically set forth herein) and fail to cure such alleged breach within ten (10) days written notice to the Rhodes Entities, then the First Lien Steering Committee shall be entitled to file a motion on at least seven (7) days notice to (i) determine that a breach has occurred (except that the failure of the parties to agree on the refinancing of the Rhodes Ranch Golf Course solely as a result of the First Lien Steering Committee acting unreasonably or in bad faith shall not be deemed a failure of the Rhodes Entities to comply with their obligations hereunder or under the Plan), and the Rhodes Entities reserve their right to object to such motion; (ii) modify the Plan to remove any provisions hereof that were included for the benefit of the Rhodes Entities; and (iii) consummate the Plan, as modified. Upon entry of an order of the Bankruptcy Court finding a breach by the Rhodes Entities and authorizing the modifications to the Plan to remove any provisions that were included for the benefit of the Rhodes Entities, the First Lien Steering shall be authorized to make such modifications and consummate the Plan. D. Effect of Non-Occurrence of Conditions to Consummation: Each of the conditions to Consummation must be satisfied or duly waived pursuant to Article X.C, and Consummation must occur within 180 days of Confirmation, or by such later date established by Bankruptcy Court order. If Consummation has not occurred within 180 days of Confirmation, then upon motion by a party in interest made before Consummation and a hearing, the Confirmation Order may be vacated by the Bankruptcy Court; provided, however, that notwithstanding the Filing of such motion to vacate, the Confirmation Order may not be vacated if Consummation occurs before the Bankruptcy Court enters an order granting such motion. If the Confirmation Order is vacated pursuant to Article X.D. or otherwise, then except as provided in any order of the Bankruptcy Court vacating the Confirmation Order, the Plan will be null and void in all respects, including the discharge of Claims and termination of Interests pursuant to the Plan and section 1141 of the Bankruptcy Code and the assumptions, assignments, or rejections of executory contracts or unexpired
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leases pursuant to Article V, and nothing contained in the Plan or Disclosure Statement shall: (1) constitute a waiver or release of any Claims, Interests, or Causes of Action; (2) prejudice in any manner the rights of the Debtors, the First Lien Steering Committee or any other Entity; or (3) constitute an admission, acknowledgment, offer, or undertaking of any sort by the Debtors, the First Lien Steering Committee or any other Entity. E. Satisfaction of Conditions Precedent to Confirmation: Upon entry of a Confirmation Order acceptable to the Plan Proponent, each of the conditions precedent to Confirmation, as set forth in Article X.A, shall be deemed to have been satisfied or waived in accordance with the Plan. ARTICLE XI. MODIFICATION, REVOCATION, OR WITHDRAWAL OF THE PLAN A. Modification and Amendments: The First Lien Steering Committee shall not modify materially the terms of the Plan without the prior consent of the parties to the Mediation Term Sheet; provided, that in the event the Rhodes Entities fail to comply with any of their obligations under the Mediation Term Sheet or the Plan by the Effective Date (or such other date set forth herein) and fail to cure such alleged breach within ten (10) days written notice to the Rhodes Entities, then the First Lien Steering Committee shall be entitled to file a motion on at least seven (7) days notice to (i) determine that a breach has occurred (except that the failure of the parties to agree on the refinancing of the Rhodes Ranch Golf Course solely as a result of the First Lien Steering Committee acting unreasonably or in bad faith shall not be deemed a failure of the Rhodes Entities to comply with their obligations hereunder or under the Plan), and the Rhodes Entities reserve their right to object to such motion; (ii) modify the Plan to remove any provisions hereof that were included for the benefit of the Rhodes Entities; and (iii) consummate the Plan, as modified. Upon entry of an order of the Bankruptcy Court finding a breach by the Rhodes Entities and authorizing the modifications to the Plan to remove any provisions that were included for the benefit of the Rhodes Entities, the First Lien Steering shall be authorized to make such modifications and consummate the Plan. Except as otherwise specifically provided in the Plan, the Plan Proponent reserves the right to modify the Plan and seek Confirmation consistent with the Bankruptcy Code. Subject to certain restrictions and requirements set forth in section 1127 of the Bankruptcy Code and Bankruptcy Rule 3019 and those restrictions on modifications set forth in the Plan, the Plan Proponent expressly reserves its rights to revoke, withdraw, alter, amend, or modify materially the Plan with respect to any Debtor, one or more times, after Confirmation, and, to the extent necessary, may initiate proceedings in the Bankruptcy Court to so alter, amend, or modify the Plan, or remedy any defect or omission, or reconcile any inconsistencies in the Plan, the Disclosure Statement, or the Confirmation Order, in such matters as may be necessary to carry out the purposes and intent of the Plan. Any such modification or supplement shall be considered a modification of the Plan and shall be made in accordance with Article XI.A. The Plan, Disclosure Statement and all ancillary documents may be inspected in the office of the clerk of the Bankruptcy Court or its designee during normal business hours, at the Bankruptcy Courts website at http://www.nvb.uscourts.gov. All documents to be entered into in connection with the consummation of the Plan as described in the Plan and/or Disclosure
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Statement are integral to the Plan and shall be approved by the Bankruptcy Court pursuant to the Confirmation Order. B. Effect of Confirmation on Modifications: Entry of a Confirmation Order shall mean that all modifications or amendments to the Plan since the solicitation thereof are approved pursuant to section 1127(a) of the Bankruptcy Code and do not require additional disclosure or resolicitation under Bankruptcy Rule 3019. C. Revocation or Withdrawal of Plan: The Plan Proponent reserves the right to revoke or withdraw the Plan prior to the Confirmation Date and to File subsequent plans of reorganization; provided, that, any subsequently filed plan shall be consistent with the Mediation Settlement unless the Rhodes Entities fail to comply with any of their obligations under the Mediation Term Sheet or the Plan by the Effective Date (or such other date set forth herein) and fail to cure such alleged breach within ten (10) days written notice to the Rhodes Entities, in which case the First Lien Steering Committee shall be entitled to file a motion on at least seven (7) days notice to (i) determine that a breach has occurred (except that the failure of the parties to agree on the refinancing of the Rhodes Ranch Golf Course solely as a result of the First Lien Steering Committee acting unreasonably or in bad faith shall not be deemed a failure of the Rhodes Entities to comply with their obligations hereunder or under the Plan), and the Rhodes Entities reserve their right to object to such motion; (ii) revoke or withdraw the Plan as a result of such breach; and (iii) file a subsequent plan that removes the benefits provided to the Rhodes Entities pursuant to the Mediation Term Sheet. If the Plan Proponent revokes or withdraws the Plan, or if Confirmation or Consummation does not occur, then: (1) the Plan shall be null and void in all respects; (2) any settlement or compromise embodied in the Plan (including the fixing or limiting to an amount certain of any Claim or Class of Claims), assumption or rejection of executory contracts or unexpired leases effected by the Plan, and any document or agreement executed pursuant to the Plan, shall be deemed null and void; and (3) nothing contained in the Plan shall: (a) constitute a waiver or release of any Claims or Interests; (b) prejudice in any manner the rights of the Plan Proponent or any other Entity; or (c) constitute an admission, acknowledgement, offer, or undertaking of any sort by the Plan Proponent or any other Entity. ARTICLE XII. RETENTION OF JURISDICTION Notwithstanding the entry of the Confirmation Order and the occurrence of the Effective Date, the Bankruptcy Court shall retain exclusive jurisdiction over all matters arising out of, or related to, the Chapter 11 Cases and the Plan pursuant to sections 105(a) and 1142 of the Bankruptcy Code, including jurisdiction to: 1. Allow, disallow, determine, liquidate, classify, estimate, or establish the priority, Secured or unsecured status, or amount of any Claim or Interest, including the resolution of any request for payment of any Administrative Claim and the resolution of any and all objections to the Secured or unsecured status, priority, amount, or allowance of Claims or Interests;
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2. Decide and resolve all matters related to the granting and denying, in whole or in part, of any applications for allowance of compensation or reimbursement of expenses to Professionals authorized pursuant to the Bankruptcy Code or the Plan; 3. Resolve any matters related to: (a) the assumption, assumption and assignment, or rejection of any executory contract or unexpired lease to which a Debtor is party or with respect to which a Debtor may be liable and to hear, determine, and, if necessary, liquidate, any Cure or Claims arising therefrom, including Cure or Claims pursuant to section 365 of the Bankruptcy Code; (b) any potential contractual obligation under any executory contract or unexpired lease that is assumed; (c) the Reorganized Debtors amending, modifying, or supplementing, after the Effective Date, pursuant to Article V, any executory contracts or unexpired leases to the list of executory contracts and unexpired leases to be assumed or rejected or otherwise; and (d) any dispute regarding whether a contract or lease is or was executory or expired; 4. Ensure that distributions to Holders of Allowed Claims are accomplished pursuant to the provisions of the Plan; 5. Adjudicate, decide, or resolve any motions, adversary proceedings, contested or litigated matters, and any other matters, and grant or deny any applications involving a Debtor that may be pending on the Effective Date; 6. Action; Adjudicate, decide, or resolve any and all matters related to Causes of
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7. Adjudicate, decide, or resolve any and all matters related to section 1141 of the Bankruptcy Code; 8. Enter and implement such orders as may be necessary or appropriate to execute, implement, or consummate the provisions of the Plan and all contracts, instruments, releases, indentures, and other agreements or documents created in connection with the Plan or the Disclosure Statement; 9. Enter and enforce any order for the sale of property pursuant to sections 363, 1123, or 1146(a) of the Bankruptcy Code; 10. Resolve any cases, controversies, suits, disputes, or Causes of Action that may arise in connection with the Consummation, interpretation, or enforcement of the Plan or any Entitys obligations incurred in connection with the Plan; 11. Resolve any disputes with respect to the Debtors or Reorganized Debtors performance bonds guaranteed by the Rhodes Entities or other matters contemplated by Article IV.X. 12. Issue injunctions, enter and implement other orders, or take such other actions as may be necessary or appropriate to restrain interference by any Entity with Consummation or enforcement of the Plan;
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13. Resolve any cases, controversies, suits, disputes, or Causes of Action with respect to the releases, injunctions, and other provisions contained in Article VIII and enter such orders as may be necessary or appropriate to implement such releases, injunctions, and other provisions; 14. Resolve any cases, controversies, suits, disputes, or Causes of Action with respect to the repayment or return of distributions and the recovery of additional amounts owed by the Holder of a Claim for amounts not timely repaid pursuant to Article VII.E; 15. Enter and implement such orders as are necessary or appropriate if the Confirmation Order is for any reason modified, stayed, reversed, revoked, or vacated; 16. Determine any other matters that may arise in connection with or related to the Plan, the Disclosure Statement, the Confirmation Order, or any contract, instrument, release, indenture, or other agreement or document created in connection with the Plan or the Disclosure Statement; 17. 18. the Plan; Enter an order or Final Decree concluding or closing the Chapter 11 Cases; Adjudicate any and all disputes arising from or relating to distributions under
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19. Consider any modifications of the Plan, to cure any defect or omission, or to reconcile any inconsistency in any Bankruptcy Court order, including the Confirmation Order; 20. Determine requests for the payment of Claims entitled to priority pursuant to section 507 of the Bankruptcy Code; 21. Hear and determine disputes arising in connection with the interpretation, implementation, or enforcement of the Plan, or the Confirmation Order, including disputes arising under agreements, documents, or instruments executed in connection with the Plan; 22. Hear and determine matters concerning state, local, and federal taxes in accordance with sections 346, 505, and 1146 of the Bankruptcy Code; 23. Hear and determine all disputes involving the existence, nature, or scope of the Debtors discharge, including any dispute relating to any liability arising out of the termination of employment of any employee, regardless of whether such termination occurred prior to or after the Effective Date; 24. 25. Enforce all orders previously entered by the Bankruptcy Court; and Hear any other matter not inconsistent with the Bankruptcy Code.
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ARTICLE XIII. MISCELLANEOUS PROVISIONS A. Immediate Binding Effect: Subject to Article X.B. and notwithstanding Bankruptcy Rules 3020(e), 6004(g), or 7062 or otherwise, upon the occurrence of the Effective Date, the terms of the Plan shall be immediately effective and enforceable and deemed binding upon the Debtors, the Reorganized Debtors, and any and all Holders of Claims or Interests (irrespective of whether such Claims or Interests are deemed to have accepted the Plan), all Entities that are parties to or are subject to the settlements, compromises, releases, discharges, and injunctions described in the Plan or herein, each Entity acquiring property under the Plan, and any and all non-Debtor parties to executory contracts and unexpired leases with the Debtors. B. Additional Documents: On or before the Effective Date, the Plan Proponent may file with the Bankruptcy Court such agreements and other documents as may be necessary or appropriate to effectuate and further evidence the terms and conditions of the Plan. The Debtors or the Reorganized Debtors, as applicable, the First Lien Steering Committee and all Holders of Claims receiving distributions pursuant to the Plan and all other parties in interest shall, from time to time, prepare, execute, and deliver any agreements or documents and take any other actions as may be necessary or advisable to effectuate the provisions and intent of the Plan. C. Payment of Statutory Fees: All fees payable pursuant to section 1930(a) of the Judicial Code, as determined by the Bankruptcy Court at a hearing pursuant to section 1128 of the Bankruptcy Code, shall be paid for each quarter (including any fraction thereof) until the Chapter 11 Cases are converted, dismissed, or closed, whichever occurs first. D. Dissolution of Creditors Committee: Upon the Effective Date, the Creditors Committee shall dissolve automatically (except with respect to the resolution of applications for Professional Claims), and members thereof shall be released and discharged from all rights, duties, responsibilities, and liabilities arising from, or related to, the Chapter 11 Cases and under the Bankruptcy Code. E. Reservation of Rights: Except as expressly set forth in the Plan, the Plan shall have no force or effect unless the Bankruptcy Court shall enter the Confirmation Order. None of the Filing of the Plan, any statement or provision contained in the Plan, or the taking of any action by any Debtor with respect to the Plan, the Disclosure Statement, or any documents ancillary to either the Plan or the Disclosure Statement, shall be deemed to be an admission or waiver of any rights of any Debtor with respect to the Holders of Claims or Interests prior to the Effective Date. F. Successors and Assigns: The rights, benefits, and obligations of any Entity named or referred to in the Plan shall be binding on, and shall inure to the benefit of, any heir, executor, administrator, successor or assign, affiliate, officer, director, agent, representative, attorney, beneficiaries, or guardian, if any, of each Entity.
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G.
Service of Documents:
1. After the Effective Date, any pleading, notice, or other document required by the Plan to be served on or delivered to the Reorganized Debtors shall be served on: Debtors The Rhodes Companies, LLC 4730 South Fort Apache Road Suite 300 Las Vegas, NV 89147 Counsel to the Debtors Pachulski Stang Ziehl & Jones LLP 10100 Santa Monica Boulevard #1100 Los Angeles, CA 90067 Attn: James I. Stang Shirley S. Cho Werner S. Disse Larson & Stephens 810 S. Casino Center Boulevard Suite 104 Las Vegas, NV 89101 Attn: Zachariah Larson Counsel to the First Lien Steering Committee Akin Gump Strauss Hauer & Feld One Bryant Park New York, NY 10036 Attn: Philip C. Dublin Abid Qureshi Kolesar & Leatham, Chtd. 3320 West Sahara Avenue Suite 380 Las Vegas, NV 89102 Attn: Nile Leatham Counsel to First Lien Agent Skadden, Arps, Slate, Meagher & Flom LLP 300 South Grand Avenue, Suite 3500 Los Angeles, CA 90071 Attn: Van C. Durrer II Ramon M. Naguiat
9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Counsel to the Creditors Committee Parsons Behle & Latimer 201 S. Main St., Suite 1800 Salt Lake City, Utah 84111 Attn: J. Thomas Beckett Parsons Behle & Latimer 50 West Liberty Street, Suite 750 Reno, Nevada 89501 Attn: Rew Goodenow United States Trustee United States Trustee LV-11 300 Las Vegas Boulevard S. Suite 4300 Las Vegas, NV 89101 Attn: Edward M. McDonald
2. After the Effective Date, the Reorganized Debtors have authority to send a notice to Entities that to continue to receive documents pursuant to Bankruptcy Rule 2002, they must file a renewed request to receive documents pursuant to Bankruptcy Rule 2002. 62
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After the Effective Date, the Reorganized Debtors are authorized to limit the list of Entities receiving documents pursuant to Bankruptcy Rule 2002 to those Entities who have Filed such renewed requests. 3. In accordance with Bankruptcy Rules 2002 and 3020(c), within ten business days of the date of entry of the Confirmation Order, the Plan Proponent shall serve the Notice of Confirmation by United States mail, first class postage prepaid, by hand, or by overnight courier service to all parties having been served with the Confirmation Hearing Notice; provided, however, that no notice or service of any kind shall be required to be mailed or made upon any Entity to whom the Plan Proponent mailed a Confirmation Hearing Notice, but received such notice returned marked undeliverable as addressed, moved, left no forwarding address or forwarding order expired, or similar reason, unless the Plan Proponent has been informed in writing by such Entity, or is otherwise aware, of that Entitys new address. To supplement the notice described in the preceding sentence, within twenty days of the date of the Confirmation Order, the First Lien Steering Committee shall publish the Notice of Confirmation once in the Vegas Sun. Mailing and publication of the Notice of Confirmation in the time and manner set forth in the this paragraph shall be good and sufficient notice under the particular circumstances and in accordance with the requirements of Bankruptcy Rules 2002 and 3020(c), and no further notice is necessary. H. Term of Injunctions or Stays: Unless otherwise provided in the Plan or in the Confirmation Order, all injunctions or stays in effect in the Chapter 11 Cases pursuant to sections 105 or 362 of the Bankruptcy Code or any order of the Bankruptcy Court, and extant on the Confirmation Date (excluding any injunctions or stays contained in the Plan or the Confirmation Order) shall remain in full force and effect until the Effective Date. All injunctions or stays contained in the Plan or the Confirmation Order shall remain in full force and effect in accordance with their terms. I. Entire Agreement: Except as otherwise indicated, the Plan supersedes all previous and contemporaneous negotiations, promises, covenants, agreements, understandings, and representations on such subjects, all of which have become merged and integrated into the Plan. J. Governing Law: Unless a rule of law or procedure is supplied by federal law (including the Bankruptcy Code and Bankruptcy Rules) or unless otherwise specifically stated, the laws of the State of Nevada, without giving effect to the principles of conflict of laws, shall govern the rights, obligations, construction, and implementation of the Plan, any agreements, documents, instruments, or contracts executed or entered into in connection with the Plan (except as otherwise set forth in those agreements, in which case the governing law of such agreement shall control), and corporate governance matters; provided, however, that corporate governance matters relating to the Debtors or Reorganized Debtors, as applicable, not incorporated or organized in Nevada shall be governed by the laws of the state of incorporation or organization of the applicable Debtor or Reorganized Debtor, as applicable. K. Exhibits: All exhibits and documents ancillary to the Plan and/or the Disclosure Statement are incorporated into and are a part of the Plan as if set forth in full in the Plan.
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Copies of such exhibits and documents are available upon written request to the First Lien Steering Committees counsel at the address above or by downloading such exhibits and documents from the Bankruptcy Courts website at http://www.nvb.uscourts.gov. To the extent any exhibit or document is inconsistent with the terms of the Plan, unless otherwise ordered by the Bankruptcy Court, the non-exhibit or non-document portion of the Plan shall control. L. Nonseverability of Plan Provisions: If, prior to Confirmation, any term or provision of the Plan is held by the Bankruptcy Court to be invalid, void, or unenforceable, the Bankruptcy Court shall have the power to alter and interpret such term or provision to make it valid or enforceable to the maximum extent practicable, consistent with the original purpose of the term or provision held to be invalid, void, or unenforceable, and such term or provision shall then be applicable as altered or interpreted. Notwithstanding any such holding, alteration, or interpretation, the remainder of the terms and provisions of the Plan will remain in full force and effect and will in no way be affected, impaired, or invalidated by such holding, alteration, or interpretation. The Confirmation Order shall constitute a judicial determination and shall provide that each term and provision of the Plan, as it may have been altered or interpreted in accordance with the foregoing, is: (1) valid and enforceable pursuant to its terms; (2) integral to the Plan and may not be deleted or modified without the Plan Proponents consent; and (3) nonseverable and mutually dependent. M. Closing of the Chapter 11 Cases: The Reorganized Debtors shall, promptly after the full administration of the Chapter 11 Cases, File with the Bankruptcy Court all documents required by Bankruptcy Rule 3022 and any applicable order of the Bankruptcy Court to close the Chapter 11 Cases. N. Waiver or Estoppel: Each Holder of a Claim or an Interest shall be deemed to have waived any right to assert any argument, including the right to argue that its Claim or Interest should be Allowed in a certain amount, in a certain priority, Secured or not subordinated by virtue of an agreement made with the Debtors or their counsel, the First Lien Steering Committee or its counsel, or any other Entity, if such agreement was not disclosed in the Plan, the Disclosure Statement, or papers Filed with the Bankruptcy Court prior to the Confirmation Date. O. Conflicts: Except as set forth in the Plan, to the extent that any provision of the Disclosure Statement, the Mediation Term Sheet or any order (other than the Confirmation Order) referenced in the Plan (or any exhibits, schedules, appendices, supplements, or amendments to any of the foregoing), conflict with or are in any way inconsistent with any provision of the Plan, the Plan shall govern and control.
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Las Vegas, Nevada Dated: November 12, 2009
FIRST LIEN STEERING COMMITTEE By: /s/ Philip C. Dublin Nile Leatham (NV Bar No. 002838) KOLESAR & LEATHAM Wells Fargo Financial Center 3320 W. Sahara Ave. Las Vegas, NV 89102 (702) 979-2357 (Telephone) (702) 362-9472 (Facsimile) Nleatham@klnevada.com AKIN GUMP STRAUSS HAUER & FELD LLP Philip C. Dublin (NY Bar No, 2959344) Abid Qureshi (NY Bar No. 2684637) One Bryant Park New York, New York 10036 (212) 872-1000 (Telephone) (212) 872-1002 (Facsimile) pdublin@akingump.com aqureshi@akingump.com Counsel for the First Lien Steering Committee
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LIST OF EXHIBITS Exhibit 1 2 ..................................................... ..................................................... Description Mediation Term Sheet Term Sheet for New First Lien Notes
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EXHIBIT i
EXHIBIT i
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EXECUTION COpy
RHODES ENTiTlES' MEI)IATlON SETTLEMENT PROPOSAL
i i ,
Releases for Rhodes Entities:
"the RJiodes Entities (as set fort on Attachment A) shall receive a full release ~r chapter 5 causes of actio,n with respect to transfers made by the Debtors. to , e Modes Entities during the 2 years prior to the Petition Date provided. t~at, such release shall only apply to transfers expressly set forth in the Debtors' statements offinancIal affairs as fied with the Bankrptcy Cour as
of August 1. 2009 or as disclosed in AttachmentB. I

Releases for Debtors' offcers,
ToO the extent peritted by applicable law, the Plan shall provide that, but for - i
i .
employees aDd professionals
(i~ the Rhodes Entities and their affliates; (ii) insiders of any or the Rhodes
Entities (except as to Thomas Robinson and ettioyees of
Joseph Schramm who were also I
the Deb(OIS)~ (i) relatives ofJames Rhodes. the Debtors' !

the Petition Date, and Paul Huygens shall receive a I
I I I
o ieers, employees (including Thomas Robinson and Joseph Schrmm). and

p~ofesionais, as of
glnera1 releae from the Debtors ~ estates. i

Exculpation:
Tte rIan shall contain standard exculpation provisions.
i
---, Replacement or Bond

Indemnification:
T~e Plan shall provide for one of the following: (i) those perormance bonds
gUaranteed by the Rhodes Entities in favor of we Debtors to be replaced on a re~ewal date by new performance bonds or, in the altemative, (ii) subject to
the Rhodes Entities being reasonably satisfed with the creditworthiness of th~ Reorganized Debtors, which shan be satisfied solely as of the Effective Date by th Cour finding that the Plan is feasible, the existig performance bopds guaranteed by lie Rhodes Entities and such guarantees to remain in
I I I
place. The applicable Rhodes Entity's agreement to remain a guarntor under
th9 existing pefonnance bonds as such penormance bonds may be renewed

sball be at no cost to the Rhodes Enlties (including, but not limted to, the
payment of bond premiums). In the event the Reorganized Debtors fail to I

I
pe,orm their obligations underlying such renewed perfomiance bonds after I
the! Effective Dale, the Reorganzed Debtors wil indemnify the Rhodes
Entites under such outstading performance bonds for damages incurred by
the! Rhodes Entities on account of their guarantee of such perfonnaiice bonds soiiy as a result of the Reorganizd Debtors' failure to perform such obJlgaiions subsequent to the Effective Date. The Reorganized Debtors shall
use~ commercially reasonable effort to replace all outstandig perfonnance
bo~ds backstopped by Rhdes Entities within 30 months of the Effective Dart_ The Bankptcy Cour shall retain jurisdiction to resolve any disputes
aris1ng out of !
this paragrph.
HOA Board Seals:
The Rhodes Entities shan ensure that de.~ignees identified by the Reorganied DeBton; shall replace the Rhodes Entities on any HOA Boards lat in any way are related to the Debtors, Reorganized Debtors or their businesses and
Dec)arant rights or the like shall be transferred to the Reorganized Debtors or their desgnee(s).
i
Licensing:
, , I
TheRhOdes Entities shan take commercially reasonable steps and/or enter into any agreement'\ or similar documeniation reasonably necessar to ensure
the .Reorganied Debtors' continued use of all of
the Debtors' applicable
pro~ssional license at no cost to the Rhodes Entities for a period of up to

twelwe months foJ1owing the Effective Date. Additionally, provided that the
paribs have executed this Mediation Settlement Term Sheet, Sagebrush

Entefprises, Inc. shall rescind by Septe~ber 25, 2009 ito. revocatio~ of its
I
L!
indemnity of
the Nevada Contractors' license held by Rhodes Design &
Dev~iODment Corporation to the extent such rescisson does not negatively
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I
ffect the general contractor's licemie held by Rhodes Design & Development
,laim on behalf of any and an claims shall be against to fie an administrative li0rporation provided that Sagebrush asserted entitled Sagebrush as a result of Sagebruh being the indemnitor thaI arose from and aftr the effectiveness of
Sagebrush's recission of
its indemnity through the Effective Date, provided
t the allowance of such adminisirative claim shall be subject 10 resolution
Uie Bankrptcy Court and/or such other court(s) of competent jurisdiction.

: e Reorganize Debtors shall indemnify Sagebrush for any and all claims
alserted againSt Sagebrush as a result of
Sagebrush being the indemntor that
arise from and after the Effective Date. Professional licenses include, but are
nbt limited to the Nevada State Contractor's Board license, and any other
jgs,nerai business or similar licenses inDebtors conduct business or own assets risdiction in which the Reorganized any county~ stale, municipality or other as of-the Effective Date. The Rhodes Entities shall use commercially r9asonable effort to maintain thrd party agreements with their rea estate btokers and sales agents.
i
Rhodes Enttie.s' Claim
Treatment:
T? the extent allowed, the Rhodes Entities' Claims shall be treated in the same class as and treated pari passu with General Unseured Claims,
e~cluding Trade Claims. The First Lien Steerig Committee, any First Lien
~nder and/or the Reorganized Debtors shall have until sixty days following
th, Effective Date to object to the proofs of claim fied by the Rhodes Entities
in!the Debtors' chapter 1 i caes (provided, that, such objecton shall not seek
to fubordinate the Rhodes Entities Claim, if allowed). Neither the Litigation
T rpst nOT the Reorganized Debtors shall commence any litigation against the
R~odes: Entities until the Banptcy Court rules on the allowance of the
~odes Entities Claims set forth in such proofs of claim (for the avodance of
do bt, the First Lien Lenders are not bound by this provision). To the extent any statute of limitations to pursue any claims belonging to the Debtors ag4inst the Rhodes Entities would lapse, from executIon ofthis term sheet aml- prior to the Bankptcy Court' oS resolution of the allowance of the Rhodes Entities Clams, as set forth in fied proofs of claim, the Rhodes Entities shall be tleemed to have consented to a tolling of the applicable statute of iin~hations until sixty days following the Bankruptcy Court's ruling on the
allawance of
the Rhodes Entities Claims_
Tax Treatment:
Th~!lan shal be strctured in a tax efficient manner to the Rhodes Entities
to effectuate the benefits set fort in item 4 on Attachment C; provided) that

thef shall be no adverse impact on the Reorganized Debtors or the First Lien
Len;ders. The Rhodes Entities and the First Lien Steering Committee shall agre on the structure necessary to implement the tax treatmem on or before , Sep!ember 25, 2009.
:
Effective Date:
ThelPlan Effective Date shall occur no earlier than Januar 4, 20 J 0_

t
Rhodes Ranch Golf Course:
The1 term Rhodes Ranch Golf Course, as referred to herein, shall mean the
gOlf! course situated within the Rhodes Ranch master-plaoed community
laca ed in the southwestern Las Vegas valley.
Conditions Precedent to Effective
J. 1le Bankrptcy Court shall have authorized the assumption and rejection
Date:
of e~ecutory contracts and unexpired leases by me Debtors.

I
2. the Confirmation Order shall have become a Final Order in fonu and
I
substance acceptable to the First LieD Steering Committee. i

i
3. The most current version of the Plan Sunnlement and all of the schedules,
,
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dbcuments. and exhibits contained therein shall have been Fled in form and slbstance acceptable to the First Lien Steering Committee.
4) The documents governing the New First Lien Notes, the Newco Charter,
tle Newco Bylaws and the Stockholders Agreement ghall be in fonn and S1bsiance acceptable to the First Lien Steering Committee.
5' The Confirmation Date shall have occurred,
6.\ The First Lien Steerig Committee shall have de.'tignated and replaced
eith existing Qualified Employee wiih a new Qualified Employee.
i
7. The currnt debt outstanding on the Rhodes Ranch Golf Course shall be
refinanced on terms and conditions acceptable to Rhodes and the Firt Lien
Steering Committee.
I
8. \ Copies of all Debtors) books and records shall have been delivered to the
iodes Entities at no cost to the Rhodes Entities. 9. \ The Arzona Asset.c: shall have been transferred to the Rhodes Entities (or
thair designee) free and clear of all liens and claims purnuant to section 363(f)
of the Banlptcy Code on the Effective Date provided, that the non-First
LiOD Lender/Second Lien Lender liens do Dot exceed $60,000.
!
10.: The Debtors shall have assumed and assigned all executory contrct." and un~xpire leases related solely to the Arizona Assets to ie Rhodes Entities (orter designee), at no cost to Ute Debtors or the Reorganized Debtors. with
an. ure costs associated therwith to be borne by the Rhodes Entities
!
11 J The Rhodes Entities and the First Lien Steering Committee shaH have ag~ on the strctue neces.~ry to implement the ta structure benefits set
, I I
fo in Exhibit C.
12. The Rhodes Entities aDd Firt Lien Steering Commitlee shall have agreed
on ~e Golf Course Security Propert.
! .
; (
13. ! The Rhodes Entities shall have ensured that designees identified by the Reorganized Debtors shall have replaced the Rhodes Entities on any HOA Boards that in any way are related to the Debtors1 Reorganized Debtors or
tbcit busineses and Declarant rights or the like shall be transferred to the Reorganized Debtors or their designce(s)
14. The Rhodes Entities shall have performed all of their obligations. under the Plan including, without limitation, depositing $3.5 millon in Cash.i an the First Lien Steerig acco~nl designat~d by the Debtors, with the consent of
Conimittee and trnsfering the equity in the entity that own the Rhodes Ran~h Golf Cours and related contracts and assets to the Reorganized Debtors pursuant to the terms of a stock transfer agreement in ronn and
I i
,substance acceptable to the Rhodes Entities and the First Lien Stecrng
Committee,
15. j All other customary Conditions Precdent to the Effective Date as deteirined by and acceptable to the Fjrst Lien Steeg Committee, in its sole
dio;crftion.
,
Waiver of Conditions Precedent
The tirst Lien Steering Committee may waive any of the conditions to the
i
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to the Effective Date
Effective Date at any iime. without any notce to partes in interest and
without any further notice 0 or action, order, or approval of the Bankrptcy Curt, and without any formal action other than proceeding to confirm or
cnsunuate the Plan; provided, that the Firt Lien Steerig Committee wil
nOt waive the conditions precedent in items 6 through 12 above if the Rhodes
Entities shall have complied with all of their obligations hereunder and in the
lJ;an by the Effective Date (or such earlier date specifically set forth herin).
In! the event the Rhodes Entities fail to comply with any of their obligations
I I I
heireunder or under the Plan by the Effective Dale and fail to cure such
al(eged breach wilhin ten (10) days' written notice to the Rhodes Entities, then the First Lien Steering Committee shaH be entitled to fie a moton on at
idst seven (7 days notice to (i) determine that a breach has occured (except
tht the failure of the paries to agree on the refinancing of the Rhodes Ranch
Gqlf Coure solely as a result of the Firt Lien Steering Committee acting unreasonably or in bad faith shall not be deemed a failure of the Rhodes
Eqtities to comply with their obligations hereunder or under the Plan), and the ~odes Entities reerve lheIr right to object to such motion; (ii) modifY tlie Phln to remove any provisions hereof that were included for the benefit of the
~ode.'" Entities; and (ii) consummate the Plan, as modified. Upon entr of an Orde of the Bankptcy Court finding a breach by the Rhodes Entities and
auioriing the modifications to the Plan to remove any provisions that were
i included for the beefit of the Rhodes Entities, the First Lien Steering shall
be ~uthorized to make such modifications and consummate the Plan.
,
Modifcation 4)f the Plan
Th First Lien Steering Committee shall not modify materially the tenns of
the! Plan without tiie prior consent of the parties to this tenn sheet so long as
their obligations hereunder and under suc~ parties have complied with all of theiPlan by Januar 4, 2010 (or such other date specifically set fort herein).
;
Plan Support:
Th~ Debtors and Rhodes Entities shaH only support a plan of reorganization
file? by th First Lien Steering Conujttee containig all of the provisions of

ths Mediation Settlement Tenn Sheet and consistent with the Plan to wbich
this! tenn sbeet is an exhibt and wiB not file a competing plan of
reoimanization or support any other plan of reorganization filed in the
Deqtors' chapter 11 cases.

i
Golf Course Transfer:
On ~he Effective Date. the applicable Rhodes Entities shall transfer their
equity interests in the entity that own the Rhodes Ranch Golf Course to the
I r
Reo~ganized Debtors (together with any equipment, golf cart... contrcts or other assets determined by the first Lien Steerig Committee to be necessary Cours) pursuant to the tens of a the Rhodes Ranch Golf for te operation of
stoc transfer agreement in form and substance acceptable to the First Len
SteeTing Committee and Rhodes, subject to any outstanding debt on the
Rhodes Ranch GoJfCourse. The stock transfer agreement shaH contain

reprtsentations by the Rhodes Entities that the entity that owns the Rhodes
Ran6h Golf Course docs not have any liabilities other than ordinary course Course and indemnification liabi)ities related to the Rhodes Rach Golf
I
pro\(isions in favor of the Reorganzed Debtors by the Rhodes Entities for any
non-brdinar course liabilities. In addition, prior to the deadlne for fiing

objetons to the Disclosure Statement. the Rhodes Entities shall provide the
FirsiLien Steering Committee with a list of all liabilities of the entity that
own$ the Rhodes Rach Golf Course. a lien analysis and copies of an Cours and to which the entity cont~acts related to the Rhodes Ranch Golf
that ~wns we Rhodes Ranch Golf Course is a pary. each of which mu.'ll be acce~lable to the First Len Steering Commttee.
The 4xistinp" debt outstandinp on tlie Rhodes Ranch GoJfCourse shall be
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r~financed on or before the Effective Date, for a period orno less than twelve (~2) month from the Effective Date, on terms and conditions acceptable to
~odes and the First Lien Steering Committee. The parties wiH work together ii good faith to refinance the existing debt. The Reorganized Debtors shan
pay the resonable costs and expenses associated with the refinancing;
plovided. that the tenns of such refinancing are acceptable to the First Lien Steering Committee. The First Lien Steering Committee acknowledges that th loan documentation may provide 1at, upon the transfer of the Rhodes
R~nch Golf Course to the Reorganize Debtois on the Effective Date, aqdilionaJ collateral from the Reorganized Debtors may be required. The i R.odes Entities shall transfer to the Reorgalzed Debtors on the Effective
I Ol:bt any contrcts related to the operation of and revenue generated by c~l1 towers located on the property of
any the Rhodes Ranch GolfCowse. !'ny fuhds received after July 31, 2009 from the i.. Vegas Valley Water District
orlother similar entity as an incentive for converting the golf course from a gr~en coure to a desert course shaJl be used for operating expenses asSociated with the Rhodes Ranch Golf Coure, with any excess to become
pr~pert of the Reorganized Debtors on the Effective Date.
i ,
Rhodes and/or his designee shall have the absolute right to repurchase the
~odes Ranch Golf Course from the Reorganzed Debtors at eight (8) years from the Effective Date for $5.9 millon in cash. The Reorganzed Debtors
m~y require Rhodes to purchase the Rhodes Ranch Golf Course any lime beIWeen four (4) and eight (8) years from the Effective Date for $5_9 milion in ash provided that the Reorganized Debtors shall provide Rhodes with at Jeast one year advance notice of its intent to sell the Rhodes Ranch Golf
Co~rse back to Rhodes. Such transfer shall occur on the applicable aiirpversary date of the Effective Date. For the avoidance of doubt, if the
Recprganized Debtors put the Rhodes Ranch Golf Course to Rhodes in

accprdace with the terms hereof and Rhodes fails to comply with his
obllgation to purchase the Rhodes Ranch GolrCourel Rhodes shall be deefted to have forfeited his option to purchase the Rhodes Rach Golf
Co~rse_
i
On the Effective Date, Rhodes~s obligations to comply with the repurchase

shaD be secured by either (i) $500,000 in ca in an escrow account or (ii)
propert worth at least $2 milion (the HGolfCourse Security Proper"), with the jvalue of such property to be agred to by Rhodes and the Frst Lien Ste~ring Committee or otherwise valued by an independent third party
app~aIsa finn acceptable to both Rhode and the First Lien Steering
Con)mjttee (except Cushman Wakefield). In the event that Rhodes does not meet the repurchase request. provided that the Rhodes Ranch Golf Course is in tlie stadard condition (defined below), then the Reorganized Debtors shall be ~titJed to liquidated damages in the fonn of security pledged (i.e., the
$500,000 or the Golf I
Course Security Property)_
So ibng as Rhodes has nol defaulted on his obligation to repurchase the Rlo~es Ranch Golf Course, Rhodes shaH have the absolute and sole
disctetion 10 repJace U1e Golf Coure Security Propery with $500,000 in cash
oil 30 days wnuen notice to tbe Reorganized Debtors. Upon deposit of the
$5001,000 in cash, the Golf Course Security Property shall be released to
Rho4es or his designee. Noiwithstanding anythig to the contrar contained
herein. if the Rhodes Ranch Golf Course is not maintained with substantially the s4ine perfoffiance and rating criteria at the time of the repurchase request as v4rified by an independent third par rating agency as it was on th EffecJive Date ("Standard Condition"), James Rhodes can (i) require the
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EXECUTION COpy
Rleorganized Debtors to cure any conditions to return the Rhodes Ranch Golf
~ure to its Standard Condition (provided, that the cost of such cure does n t exceed $500,000), or (ii) choose not to purchase the Rhodes Ranch Golf
Cpurse. Upon either the repurchase of the Rhodes Ranch Golf Course or ihe
"'itten decison to not repurchase the Rhodes Ranch Golf Course (in
aqcordance with the precedmg sentence). me Golf Course Security Propert 0\ the $500,000 Cash (if not applied to the repurchase of the Rhodes Ranch Gflf Course) shall be returned to Rhodes within 30 days.
Or the Effective Date, the Reorganized Debtors shall record a memorandum
of agreement against the Rhodes Ranch Golf Course to evidence the above.
!
Golf Course Audit:
Di\ring the period from September I, 2009 through September 23, 2009. the R.odes Entities shall provide access Lo lhe First Lien Steering Committee or its! designee to undertake a financial and operational audit of the Rhodes R~nch Golf Course. The results of such audit must be acceptable to the First Litn Steering Committee in its sole discretion and evidence, among other thigS~ that (he financial pedonnance of the Rhodes Ranch Golf Course is
su ficient to pay operating expenses and service the debt on the Rhodes
RarCh Golf Course without the need for additional liquidity.
Cash Payment;
Ari7.ona:
Th~ Rhodes Entities shall make a cash payment to the Reorganized Debtors of$3.5 milion in cash on the Effective Date.
!
On\the Effective Date, puruant to an asset transfer agreement in form and su~stance acceptable to the First Lien Steering Committee and the Rhodes Entities, the Debtors shan transfer Pravada and the other Arizona assets set
forf on Attchment D hereto, pIns the Golden Val1y Ranch tradename to
thelRJodes Entities free and clear of aUllens. claims and encumbrances

,
r pur~uant to section 363(1) of the Banptcy Code; provided, that the non-
tbaa such assets shall not include assets owned by Pinnacle Grading located in I FirS! IJen Lender/Second Lien Lender liens do not exceed $60,000; provided Ariiona and related contracts asociated with the assets.. Debtors shaH
proirde James Rhodes notice of any proposed sale of the Pinnacle as...ets, and Jarres Rhodes shall be grated a right to bid on the sale of such assets within
i 0 4ays of such notice. Rhodes Entities shall permt storage of Pinnacle
Grafting equipment at current locations at no cost to the Reorganized Debtors
for ~ periOd through six months foHowing the Effective Date.

;
All bxecutory contracts and unexpired leases associated solely with Arzona shall be assumed and assigned to the Rhodes Entities (or their designee), at
no ~ost to ie Debtors or the Reorganized Debtors and aU cure costs
assobated therewith shall be borne by the Rhodes Entities.

I
lin Filng:
The Debiors, the Rhodes Entities, the Firt Lien Steering Committee. the First Lie~ Agent, the Second Lien Agent and the Creditors Committee shall agree not to fie a plan of reorganization until the earlier of (i) the date the pariies agre~ on the lerms of a plan of reorganiztion (and accompanying disclosure statep,ent) or (ii) September 25, 2009.
i
' ._=agred upon budget, though Januar 11, 2010.
Cash CoDateral:
The First Lien Steering Committee, Firt Lien Agent and Second Lien Agent wil Kgree to the continued use of cash collateral on exisLng terms and subject
to 4
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j Trdem9rks Rnd Trode N~mes
'\yi1n the earHer ofibiny (30) days following: () upon completion orthe i.uildoui of all of IlieReorgnnizcd DebtorS? homebuilding asS,Cls and
iiyen!ory-(icgardlc$;$ of when :l!Jclnlsscts and inventory were acquired), or (i~) l?~lk sale"of'tlie remaining ;nvenlory ofth.Rcrgtlnized Debtors. 1C '~orgCtnit;d Debtors ;;hnll tmii.tfer fo JafJe.i:Rhtdc... (or his de~ignc)lh
trdeniarks and trdcnamcs set runh on
Auadmient E.
Trade Claims Aniilysi,s

I
,,~U agrec:, prior to the hearing 011 the
The Finn Lien Steering Committee; the -Debtois and the Creditors Committe Disclmmre Sticmcnt, (i) which fied or !!qhedu1ed c1aiii1:s:shnll be c1;iificd a1i Trade Clajmsand (ii) on a.prCKdure
fot,th~,rcc.oncmatioJ) uf1'ridc Clajni~ rOhepnics arc Unahle to agr on ()

o((ii)a.vc in a.dvnce of
the DisclosurStat,ennt hci.ngi1he BMkptcy
Ciun shall resolYt any disputCS11l tlic'OisclosureSlalement hearing.
I ""~~a..,,.,
I Holtlers of AUo:wed Trade Cll1lrS
I
TIie Reorganized Dcbtorsshall'no\ seekio avoid prcpetition trnsfei'to ._h~ldcts nfnllowd Trade Claims under BaDkruplcy Code section S~-7 to the exien.t ihe reslting claim from the avoidaiiccof'$uh.ca profeicniialtramfer
WiJld likewis be an allowed Tradc'Cla'm.. .
hi:thoevcni"thc-Siiinlcy Engineeng: Liiigitionjstcsolv~d 'either by judgment or~~~i:mtnt in a manner'favorable to th Reorgnm:i.e Debtors -and s~h
I Stnole)' Englnoerlrig
I ;
r~~Qluiion doC$ nol provide for iish considertuion 10 be T~~jved by the
R~rgnized Debtoni and Second Liei Lenders.. tbe Reorgnnv.e Debtors-an~ tlt! S~nd U~nAgen( sliall engage "good faith'n~.gotiations lo'ensure thai
i~'Secoud Lien lenderS reivc co:~idcrtion eauh:lent to 50% of the net
vlllue of such .reilution nod to -determine .ihetiming, of paymerl o(atty:such
coisiderntion;. lntbe eyem the .Reotgnizd Debtors _ithe S,econd Lien

i j
Agent arc uru~ic toagrc on lIiC.8J1lOuni or foin,or~iich-considenltion,'lhc .plit~s willsubi-nii the maIler to binding nrblition with th~ costs thcrofto_ _iie split evenly among-the Rcorgani1.ed Dtb.lors:ttnd thc"Secorid-L~n Agci:i (.w(tli the ~osts'of-tbe Second liCt Agem _to t)_e:~imbwsd from ibe .
comdcrationto be dstdbiucd .to the Scood l~ieJ) Lenders n)lcCOUTl f ihe
i
I
StnIloy:EnRnering Lii~a(jori)
Dalc-d: September 2S~ 2009
..'';
Y. ~ "-ll"V.A: ' . ___~__ N -4~;"lJi~vilrlf/l...JL. it ft t(? Title:

,Coi-nsd io the-!''r.i Lie/I S(~.eri1rg'C9l1mlilrt'(.'i 11'/11,
l1rllmil)'fro11 el.lch ofihl! mt:1lbersllif?rp,f
,~PPROVED
By; Namc; Tide: '("'l/Jse11O Wells Fargo. N.A~, as Agcmfor'.iJw Sei:imi
Licn Leni/i!r.! .
APPROVED
Nwne: Title:
lly:____
COHw;el mtlu.' O.uiCial Commiu(!e of Uml:CU1'i.'dOwliors
;:PROVD % l
-.Na; . J c~ M.RhQdes' .
Title .l, sidesii
Al)PROVED
By;
Niiiic: es M. Rliods
'h.~
Tiile B e...ideni
Debi 'sl1nd-Dl.)!Jtors.jn.Po.'esion
The' ljiM.'; Ejuitt.'S
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EXECUTION COpy
Trademarks and Trade Names
Withn the ealier of thy (30) days followli:
binldoui of all of th Rerg Debtors' hoinbuildli asts an

iivcnry (regarless of when sncb ostsand iiventory were acq),or
(i) upn completon of
th
Roized Debtors shall trfer 10 JiiRldes (or his degnee) the

irdar andirdenames set fort on Altclt E.
(ii) bulk sae of the remaining inventory of th .Reorgan DeblOrs, th
Trade Claims Ansly8
will
FilSt Lien Steng.Commit~e, the Dltor an the Credito ConiiUee agre, prior to the heng on the Disciosue Sta~enl; (i)wlch filed or schedied claim shan be classified as Ti:'Cla and () on a procere
The
for threuciliation ofTi: Cl. If th panes ar Wible to age on (i)
or() bove in advance of the Diselosure Stawient~ th Bantcy

Cour shall reolve any disputes al theDisclos Statement li.
lIolders. of
Preforenae Claims Against Alowed Trade Claims
Tb Reorganed Debtors shall not$0toaVQidpreptition trfi to

iildlT of
allowed Trsde Clais iideB:aoknipicCode setion 547 to lhe
. exteiitb re\tig claim from the avoidaci ohuch a prfetl iisfer
Stanley Engineerig
.
would likeise be an allowed Trae Cli hitheevent.i1i Staey Engieerig Liiigaton is .resolved eitlerby judgnl
.or.'seeii in a iRerfavorable to th Ileorganed Deblorsad mch
relntiondoe. nitprovide for Ciih coide:tionto bei:ve by the
Reorgan Debtors im .Send Lien Lel, ile Reorgan Debtors and

the Secnd UenAgent shall engage ingQOd fath negotitions to eltii thi
thSeoond Uen 4Dder reive cosidetion eq\!leil to 50% of
th net
value of such reSlution and 10 determin tl1lg of paymen fany such

condelion Ji tle eVent ile ReorganzepebtolS ana
the SecondLien
Aerit are \Ub1e"to agr on the amunt or fOni ofsucb.- co~idertion,;th
partieS willsubIii the mattr to binin aritrtioiiwi th cOS _fio be split evenly among the Reorg Debfu an th Sec Lien Agen
(with the costs of the Secon Lien. Agent to coiiiderti to be disbuted to the Sec
be Ilimbu frm the

Lien Lendor on
acunt of the
Datoo: Selember 25;.2009

APPROVED
By: Name:
T~e:
Staiev.EnJtnce~ Liti~tcII. .
Counsel to the FIr~t Lie'l S(eGr/'g :Dmmittee~ with
authority from eoeli of/he member. thereof
APPROVED
Nain: J.
By:
Ti~e: ~yV
Counl
By: Name;
to WelisPargo,N.A" os Agenfor ile Second
Title: Coun.el to the Offial Commitee of

Unsecured Credltor
Lien Lenders
APPROVED
By: Name: James.M. Rhodes
APPRVED
By:
Name: James M. Rlio
Title: Presdent.
Title: Prsidcnt
Th Rhodes Enties
Debtors tu,d Debiors.;in.:Po~fQn-
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Trademarks aDd Trade Name,
Wtl 111e eaer of lhirt (30) day following: (i) upon completon of1he
pFidout of aU of
the Reorganze Debto' homcbldig a.~ and
inventory (rerdles ofwben such nsselS an inventor were acquired), or

(~) bulk Sale orthe remainng inventory of th Rergani.zed Detors, le
Rfrgaize DebtorS 5h11 trfer to Jam Rhod (or his des~iee) th trrdein Dd treiames set fort on Attchmen E,
Trade Claims Anaysis
Th First L,en Steerin Committee, th Debtors an(i the Creditors Coriiuee wl agr, prior ki Uie heag on the Disclos StateeIL () which filed or
sceduled clas shall be clased as Trade Clais and'(ii) on a procedure
flt the reconcilation of Trae Clams. If
the pares ar unble to agr on (i)

hear, the BanJcptcy
o.() above in advace oflhe Disclosur Statement
C?urshall relve any disputes at the Disclosure Stateent hearg.

i
Preferenc~ Clais Against
The ReOrgnize DebLoIS shall not seek ro avoid prcpttion trnsfer to

hqlde. of allowe Trade Claim under Bantcy
Holders of AUOlVt'd Trade Claims
Code seon 547 to tbt
CXteDt the resltig claim from the avoidace of such a preferal trsfer
wuld likewise be an allowed Trae Claim
Stanley Engieering
In,~hc evt the Staey Enginee Litigation is resolvd either by judgment
or~ettle'met in a maer favorable 10 th Reorganiz De and such

rdoiution doe not provide for Cash considertion'to be,recive"by th
Re6rganize Debtors an Second Lien Lede. lh Reorgaize Debtors an
th Se:nd lien Agent shal engage in goo faith negonatins to ei tht
thJ, Se.eod Lien Lender recive considertionequ~ to 50% of1h 'O"et
value of su:eh reslution aDd to detein th tiing ofpay,en of any such

co~ideralion. In the event ~ Reorgan Debtors and ,th Seond Lien
A&ctare wiabc to agree on the amout or form of ~cl coderation th
p~ wil subm ~e i:Elttf: to ti.ang arbittion with the osts thereo ro be $plit Vly amng th Rerganized Debtors an the Sec Lien Agent
(wl the costs ofihe Secnd Lien AgeOl to be ~nibur frm th ~~~ertion to be distributd to the Secnd Lien L:ndm on accunt oftbe S cv Enginring Uligaiion)
.Dated Senteniber 25. 2009
~PPIlOV!:f//L?..~ !
~J . -: - .,.i Vr; \
Tite:' qA.. ilc~(id.q+o'"J l~ 4 fil :
CoulJselio he i-irst Lien Steering Committee, with aut/lOri!)' from each of the members theregf
V'~~~ l
APPROVED
By:
Na'e:
Title:
Lien I.enders :
The
AP~~By:
APROVED
By: _
Name: ::--~ i;llll ?..o"l~ 1i1e:~_""Ib.. """ Counsel to ihe Official ComiiJee IJI UnsecunuJ Creditors
COU1se! to Wells Fargo. N.A., asAgenlforjheSecond
APPROVED
By: Name: James M. Rhodes
Title: President
Name: James M. Rhodes
Title: Prdent
Deb/ars an Debiors'-in-Pos~e.siol'
Rlodes Enii,ies
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EXECUTION COPY
ATllACHMENT A - RHODES ENTITlES
i
James M. RJiodes
I i I
Glynda Rhodes
John Rhodes
James M. Rhodes Dyna8ty Trut r
James M. Rhodes Dyna.'ty Trust II

i i JMR Children's Irrevocable Educational lIiust ,
Truckee Springs Holdings, Inc.
i i
Sedora Holdings LLC
Gypswn Resources, LLC

Tulare Springs Holdings, Inc.
Escalante-Zion Investments. LLC

llH Trust
Harony Homes, liC

T ock, LP
Tapemeasure, LP
Joshua Choya, LLC

American Land Management, LLC
South Dakota Conservancy. LLC
Meridiau Land Company, LLC

Yucca Lad Company, LLC
Sagebrush Enterprises, Inc.
Rhodes Ranch, LLC

Westward Crossing, LLC
Pinacle Equipment Rental, LLC

Desert Communities, IDC.
Spirit Underground, LLC
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Tropicana Durango Investments,
Inc.
i I i , ,
Tropicana Durango, Ltd. I
Dirt Investments, LLC I
Underground T echnologics, LLC I

South Dakota Aggregate and Engineeri+, LLC
Jerico Trust
Canberra Holdings, LLC
Freedom Underground, LLC I

, ; i I
Custom Quality Homes, LLC

!
Rhodes Ranch Golf,lnc.

lD Interior Design, LLC
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i i I I i
EXECUTION COPY
ATTACHMENT B
t. The foIlowng distributions teTe made and permitted pursuant to terms of Credit Agreement:
Date
4ii 7/2007
Amount i
i
Distribution Comments
I
$\2,705
$, 07,295
$ti6,939
i
Hentage -? Sedora
4/17/2007
5/412007
f-5i42007
Heritage -? Sagebrush
Hentage -? Sedor.
$?43,06 i
I i
Hentage -? Sagebrush
TOTAL
$),750,000
2. Trasactions with Spint UndJrground and Freedom Underground (as set fort below):
I i !
(ATTACHED)
i !
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EXECUTION COPY
,
! ATIACHMENTC
1. The lenders would form a new Jitity (UNewco'j. Newco would be either a corporation OT a limited
liability company. The First Lien loans J,ould be deemed contbuted to Newco.
I
2. Newco would purchas all Oflht interesls in Heritage fim its members for $10.00.
3. Revenue Ruling 99-6 provides t~1 on a sale of all of
the interests of a parerhip for tax puroses (which
would nclude a limited liabilty company), the sellers are treate as sellng 4'parersbip interests". On the other
hand, the buyer is deemed to be buying tle assets of the partnership. As a resull., from the Heritage members' perspective they would be treate as sell~g an of the interests in Heritage. Newco would be treated for federal
income tax purposes as purchasing the 99% partership interesls in each of the limited parerhips held by Heritage
and the 1 % partership interest held bY~Ckee Springs. Furter, asi;urning that the general partner of ea of the
limited parerships in turn sens its gener I parership interests to Newco. Newco would be deemed to have owned
the real estate owned by the liited pa cships (since each of
the parerships would have terminated for federal
income la purposes). At that point New 0 would own all oftbe real estate.
~. ... For fed~ral income tax purpses.
leach Heri~ge member w.ould h~ve liabilities of Rentage allocable to such mt1ber (which the trsaction reheves a gain equalof) minus the member's the member to th ~xcess of the .
ta basis in its Heritage interet. This gairt would be treated as long-term capita gain (except to the extent Heritage
holds, directly or indirectly, assets subject !to Section 751 of i 5. Therefore, contemporaeous WjtJ or subsequent to Newco's purchase of interess, The Rhodes Companies, LLC - 1e general parner of each of
the Code, generally inventory or receivables arising
from the sale of inventory). i
the Heritage membership

Tick, LP; Glynda, LP; Jackkife, LP; LP;
Batcave, LP; Overflow, LP; Wallboard, L~; and Chalkline, LP, - shall selI its genel parership interests in such entities to Newco for $1.00. AlternativelYi the membership interest in The Rhodes Companie.c;, LLC may be acquired from its sole member - Sagebn Enterprises. Inc. - in consideration for releae of its obligations under
the First Lien Lender Claims. !
after the Effective Date. !
6. Newco's members may agree to ~ntinue Newco as an LLC, fie a check the box election effective the day after the Effective Date to treat Newco as ~ corpration for ta puroses. or convert inlo a corporation as of the day
7. The holders of the Heritage memBership interests and Newco win report the sale and purchase of the
Heritage membership interests in accordan~e with Revenue Ruling 99~6, 1999. i CB 432,
i
, ! i i i i i i
i
I ! i
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EXECUTION COPY
I i
IATT ACHMENT D - ARIZONA

i I
RHODES ARIZONA PROPE~T1ES

,
1825 S AZTEC
RHODES ARIZONA PROPERTIES LC RHODES ARIZONA PROPERTIES LC

RHODES ARIZONA PROPERTIES LiC RHODES ARIZONA PROPERTIES LiC
RHODES ARIZONA PROPERTIES ~LC RHODES ARIZONA PROPERTIES ~LC
306-24-115 306-24-116 306-63-017
20.25 RD 20.24 1807 AZEC RD 7.35 4536 W DORA DR
Model Home
Model Home
Model Home
Model Home
Dirt Dirt
306-63-018
306-42-008A
306-42-001
6.83
19.92
4528 W DORA DR 1156 S AZTEC RD
1094 S AZEC
40
114.59
RD
Total Acreage
Inside Pravada
Pravada and all parts of Pravada 'yin6 within Sections 2, 3, 4, 9 and 10, all in Township 20 North, Range 18 West of the Gila and Salt River Base and Meridian, Mohave County, Arizona and within the follOWing APN
numbers: I
Partially
Rhodes Arizona Pro ertes

Rhodes Arizona Pro erties
215-1-116
215-01-113
Graded
Partially
Graded
Partially
Rhodes Arizona Pro rties Rhodes Arizona Pro rties
215-1-114
215-01-111
Graded
Partially
Graded
Total Acreage 1,306:!
Arizona ersonal Property

;
Comouters
HP 5150 HP 5150
Serial Number
2UA6030J6N MXL615027R 2UA6030J57 2UA70608F7 2UA70608HV 2UA54215Gl GZOGR61
HP 5150 HP WX4400 HP WX4400 HP XW4200

Dell
laptops
8200277 v.13
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EXECUTION COPY
HPNX6125 HPNX9600
CND5403L Y CNF6071GBR
Printers HPlaser Jet 4250

HPLaser Jet 4101
HPLaser Jel.41 00
HPLaser Jet 1320 HP color Laser Jet 2600 HP color Laser Jet 2804 HP color Laser Jet 5550
CNBXD06564 USLGY26030 USLGY42771 CNHC620168 CNGC64C1KC
JPBG532058 JPDC4D2072
CN639BGOYK
HP offce jet 6310

HP Photosmart D5160
Lexmark 7001-001 Lexmark 7001-001

Super G3 Pnnter-Scanner
MY67Gll0DC 890CSTB 890CD3N J8141101150
Fax Machines
2 - HP offce
jets 7310 i
6 of the printers and the fax machine~ have copier capabilties

i
M;scllaneous EauiDment i
Dell Power Edge Server 2850
HP Design Jet
85172579422
1 055CM Plus Plotter ,
4 calculators i
14 telephone owned by Rhodes !
10 Battery Surge boxes and 10 powef strips 11 -computer monitors 20" flat scree~
Offce Furniture I
2 - 5 drawer 63 x 18
1 - 3 drawer 36 x 20 7 - 4 drawer 18 x 48 2 - 4 drawer 20 x 48
2 - drafting tables I
3 - work tables with open shelves for ~Ians
12 - file cabinets !
4 - 4 shelf bookcases: (2) metal (2) w90d
2 - 3 shelf wood bookcases 1i
1 - hanging file for plans I

11-desks: (1) metal (10)
1 - metal storage cabinet, 2-door, 4 s~elves 2- wooden storage cabinets 2-door, 1 ~helf
12 - desk chairs :
12 - guest chairs 5 - stacking chairs 1 - 4 x 6 rotating white board 1 - garbage can
wood i
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EXECUTION COPY
\
10 - waste baskels \
3 - 6 foollables
2 - melal sforage shelves- dimensiobs S'h x 3'w x 18.S"d 2 - plastic storage shelves- dimenlbns 6'h x 3'W x 18" d
,
To be provided by Plan Supplement: ate but shall include, bul nol

limited to all development agreements and subcontractor
be iI agreements
i
Executa. Contracts and Unex ired Leases
Trademarks and Tradenames

Rhodes Arizona Properties Rhodes Anzona Golden Valley Ranch
Pravada
All architectural and engineering dra'Yings, plus work product associated with Pravada and Golden Valley Ranph.
Intaniiibles I
All agreements with municipalities anti utillies with respect 10 Pravada and Golden Valley Ranch. ,
Arizona general contractots license. \
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ATTACHMENT E - TRENAMES.IRAEMARS
i !
RJodeMa~ter i
R (logo) Rhodes Homes (owned by Rhodi" Homes, Inc.)
R(logo) I
All Rhodes Lead Horne! Rhodes Home.
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EXHIBIT 2
EXHIBIT 2
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EXHIBIT 2
Summary of
Terms and Conditions ("Term Sheet'') for
$50 Milon New First Lien Notes ("New First Lien Notes")
TERMS
Borrowers:
Newco, Heritage Land Company, LLC; The Rhodes Companies, LLC; Rhodes Ranch General Partnership; Tick, LP; Glynda, LP; Chalkline, LP; Batcave, LP; Jackknife, LP; Wallboard, LP; Overfow, LP; Rhodes Ranch Golf and Country
Club; Tuscany Acquisitions, LLC; Tuscany Acquisitions II, LLC; Tuscany Acquisitions II, LLC; Tuscany Acquisitions IV, LLC; Parcel 20 LLC; Rhodes Design and Development Corp.; C&J Holdings, Inc.; Rhodes Realty, Inc.; Jarupa LLC; Elkhorn Investments, Inc.; Rhodes Homes Arzona, LLC; Rhodes Arizona Properties, LLC; Tribes Holdings LLC; Six Feathers Holdings, LLC; Elkhorn
Parners, A Nevada Limited Partnership; Bravo Inc.; Gung-Ho Concrete, LLC;
Geronimo Plumbing, LLC; Apache Framing, LLC; Tuscany Golf Countr Club,
plan of
LLC; and Pinnacle Grading, LLC, each as may be reorganized pursuant to a joint reorganization to be proposed by the First Lien Steerig Committee.
New First Lien Notes:
$50 milion in first lien secured notes. Once repaid, the New First Lien Notes
may not be reborrowed.
the Borrowers.
Guarantors:
Agent:
All of
To be determined ("Agent").
Lenders:
The lenders ("Lenders") under the first lien Credit Agreement dated as of November 21, 2005 (as may have been amended from time to time) among
Heritage Land Company, LLC, The Rhodes Companies, LLC, and Rhodes Ranch
General Parnership, as the Borrowers, the Lenders Listed Therein as Lenders,
and Credit Suisse, Cayman Islands Branch, as Administrative Agent, Collateral
Agent, Syndication Agent, Sole Bookrner and Sole Lead Arranger, and the other loan documents (as defined in the First Lien Credit Agreement) (as may
have been amended from time to time, the "Existing Credit Facilty").
Maturity Date:
The date that is the sixth aniversar of
the Effective Date ("Maturity Date").
Purpose:
Security:
To refinance a portion of the Existing Credit Facility and satisfy a portion of the Lenders' claims under the Existing Credit Facility.
The New First Lien Notes and all guarantees thereof wil be secured by first
priority perfected liens on substantially all existing and after acquired property of
the Borrowers.
Interest Rate:
"Cash Pav Rate": LIBOR plus 2.00% per annum; or
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"PIK Rate"; LIBOR plus 5.00% per annum.
Interest Payments:
Interest on the New First Lien Notes shall be payable in Cash quarterly in aJTears
at the Cash pay rate of LIB
OR +2%; provided that if the average of the
Reorganized Debtors' unrestricted consolidated Cash as of the last day of each of the two immediately preceding consecutive quarters is less than $15 milion or if
the unrestrcted consolidated Cash as of the last day of the immediately preceding
quarer is Jess than $ 15 mi\1on (collectively, the "Cash Interest Threshold"), then the Reorganized Debtors shall have the option to capitalize the amount of interest
due in excess of LIB
OR for the immediately preceding quarter, with such
capitalized interest to be capitalized on such interest payment date, and all such capitalized interest shall be due on the next interest payment date to the extent the Cash Interest Threshold is met after giving effect to the payment of interest and capitalized interest or as the Reorganized Debtors otherwise elect. All capitalized interest not previously paid shall be paid on the Maturity Date. LIBOR shall be subject to a cap of 2%.
Mandatory Prepayments:
Mandatory prepayments of
principal shall be made by the Reorganized Debtors if
the average of the Reorganized Debtors' unrestricted consolidated Cash as of the
last day of each of the two immediately preceding consecutive quarers is greater than $15 mi\1on or if the unrestrcted consolidated Cash as of the last day of the immediately preceding quarer is greater than $15 million, in each case, after the payment of interest due on the New First Lien Notes.
Covenants:
Customar affrmative and negative covenants for facilities of
this type, including
but not limited to financial covenants and covenants limiting other indebtedness,
off-balance sheet financing, liens, investments, guaranties, restricted junior

payments (dividends, redemptions, and payments on subordinated debt), mergers and acquisitions, sales of assets, capital expenditures, transactions with affliates and conduct of business, subject to exceptions and baskets to be mutually agreed
by the paries.
Senior Revolving
Loan and Letter of

Credit Facilty:
The New First Lien Notes shall contain provisions permitting the Borrowers to incur up to $10 million in secured indebtedness senior to the New First Lien
Notes in the form of a working capital revolving loan and letter of credit facility,
subject to the satisfaction of the terms and conditions set forth in the New First Lien Notes Documentation.
Events of Default:
Customary for cilities of this type, including but not limited to failure to make
payments when due, defaults under other agreeents or instrments of
indebtedness, noncompliance with covenants, breaches of representations and
waranties, bankrptcy, judgments, invalidity of guaranties, impairment of

security interests, and change of ownership.
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Other Terms:
The New First lien Notes shaH include without limitation a default rate of
interest,
optional, increased costs or reduced returns, conditions precedent to closing, representations and waranties, assignments/participations, amendment, waiver, this type. and required lender provisions, in each case, customary for facilities of
Documentation:
The New First Lien Notes Documentation shaH be in form and substance
acceptable to the First Lien Steering Committee.
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EXHIBIT B
EXHIBIT B
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EXHIBIT C
EXHIBIT C
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EXHIBIT D
EXHIBIT D
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EXHIBIT D
Going Concern Analysis
The First lien Steering Committee believes that the Plan meets the feasibilty requirement set forth in section 1129(a)(11) of the Bankruptcy Code, as confirmation is not likely to be followed by liquidation or the need for further financial reorganization of the Debtors or any successor under the Plan. In connection with the development of the Plan and for the purposes of determining whether the Plan satisfies this feasibility standard, the First lien Steering Committee analyzed the Debtors' abilty to
satisfy their financial obligations while maintaining sufficient liquidity and capital resources. The First
lien Steering Committee, through its financial advisor, Winchester Carlisle Partners ("WCP"), and its
valuation consultant, Robert Charles lesser & Company ("RClCO"), developed a business plan and
prepared financial projections (the "Proiections") for the fiscal years 2010 to 2014 (the "Proiection
Period"). The Going Concern Analysis relies principally upon the application of the discounted cash flow
methodology (as further explained below), to arrive at a total enterprise value range of the Reorganized Debtors as of January 1, 2010, of $89.2 millon to $111.5 milion.
The Debtors do not, as a matter of course, publish their business plans or strategies, projections or
anticipated financial position. Accordingly, the First lien Steering Committee does not anticipate that the Debtors will, and disclaims any obligation to, furnish updated business plans or projections to Holders of Claims or other parties in interest after the Confirmation Date, or to include such information
in documents required to be filed with any governmental or regulatory entity or otherwise make such information public.
In connection with the development of the Plan, the Projections were prepared by the First lien Steering Committee to present the anticipated impact of the Plan. The Projections assume that the Plan will be implemented in accordance with its stated terms. The Projections are based on forecasts of key
economic variables and may be significantly impacted by, among other factors, changes in the
competitive environment, regulatory changes and/or a variety of other factors, including those factors
listed in the Plan and Disclosure Statement. Accordingly, the estimates and assumptions underlying the Projections are inherently uncertain and are subject to significant business, economic and competitive uncertainties. Therefore, such Projections, estimates and assumptions are not necessarily indicative of current values or future performance, which may be significantly less or more favorable than set forth herein. The Projections included herein were prepared in September 2009. The First lien Steering Committee and its professionals are unaware of any circumstances as of the date of this Disclosure
Statement that would require the re-forecasting of the Projections due to a material change in the
Debtors' prospects.
The Projections consist of the following unaudited pro forma financial statements: a balance sheet (the "Opening Balance Sheet") projected as of an assumed Effective Date of January I, 2010; a projected balance sheet (the "Balance Sheet") as of each year end from December 31, 2010 through December 31, 2014; a projected income statement (the "Income Statement") for January 1, 2010 through December 31,2014; and a projected cash flow statement (the "Cash Flow Statement") for January 1, 2010 through
December 31, 2014. The Projections should be read in conjunction with the significant assumptions and qualifications set forth in the notes below, and elsewhere in the Disclosure Statement, which comprise
an integral part of the Projections and should be referenced in connection with any review of the
Projections.
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THE FIRST LIEN STEERING COMMITTEE PREPARED THE PROJECTIONS WITH THE ASSISTANCE OF ITS PROFESSIONALS. THE FIRST LIEN STEERING COMMITTEE DID NOT PREPARE SUCH PROJECTIONS TO COMPLY, OR ALLOW THE DEBTORS TO COMPLY, WITH THE GUIDELINES FOR PROSPECTIVE FINANCIAL STATEMENTS PUBLISHED BYTHE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS OR THE RULES AND REGULATIONS OF THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION. THE DEBTORS' INDEPENDENT ACCOUNTANTS HAVE NEITHER EXAMINED NOR COMPILED THE PROJECTIONS THAT ACCOMPANY THE DISClOSURE STATEMENT AND, ACCORDINGLY, DO NOT EXPRESS ANY OPINION
TO THE PROJECTIONS, ASSUME NO RESPONSIBILITY FOR THE PROJECTIONS, AND DISCLAIM ANY ASSOCIATION WITH THE PROJECTIONS.
OR ANY OTHER FORM OF ASSURANCE WITH RESPECT
EXCEPT FOR PURPOSES OFTHE DISCLOSURE STATEMENT, THE DEBTORS DO NOT PUBLISH PROJECTIONS OF THEIR ANTICIPATED FINANCIAL POSITION OR RESULTS OF OPERATIONS. THE PROJECTIONS ARE
QUALIFIED IN THEIR ENTIRETY BY THE DESCRIPTION THEREOF CONTAINED IN ARTIClE V OF THE DISCLOSURE STATEMENT.
MOREOVER, THE PROJECTIONS CONTAIN CERTAIN STATEMENTS THAT ARE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITES LITIGATION REFORM ACT OF 1995. THESE STATEMENTS ARE SUBJECT TO A NUMBER OF ASSUMPTIONS, RISKS, AND UNCERTAINTIES, MANY
OF WHICH ARE BEYOND THE CONTROL OF THE DEBTORS AND THE FIRST LIEN STEERING COMMITTEE,
INCLUDING THE CONSUMMATION AND IMPLEMENTATION OF THE PLAN, THE CONTINUING AVAILABILITY OF SUFFICIENT BORROWING CAPACITY OR OTHER FINANCING TO FUND OPERATIONS, ACHIEVING OPERATING EFFICIENCIES, COMMODITY PRICE FLUCTUATIONS, CURRENCY EXCHANGE RATE FLUCTUATIONS, MAINTENANCE OF GOOD EMPLOYEE RELATIONS, EXISTING AND FUTURE GOVERNMENTAL REGULATIONS AND ACTIONS OF GOVERNMENT BODIES, NATURAL DISASTERS AND UNUSUAL WEATHER CONDITIONS, ACTS OF TERRORISM OR WAR, INDUSTRY-SPECIFIC RISK FACTORS (AS DETAILED IN ARTIClE VI OF THE DISClOSURE STATEMENT ENTITLED "CERTAIN FACTORS TO BE CONSIDERED PRIOR TO VOTING"), AND OTHER MARKET AND COMPETITIVE CONDITIONS. HOLDERS OF CLAIMS ARE CAUTIONED THAT THE FORWARD-LOOKING STATEMENTS SPEAK AS OF THE DATE MADE AND ARE NOT GUARANTEES OF FUTURE PERFORMANCE. ACTUAL RESULTS OR DEVELOPMENTS MAY DIFFER MATERIALLY FROM THE EXPECTATIONS EXPRESSED OR IMPLIED IN THE FORWARD-LOOKING STATEMENTS, AND THE DEBTORS UNDERTAKE NO OBLIGATION TO UPDATE ANY SUCH STATEMENTS.
THE PROJECTIONS, WHILE PRESENTED WITH NUMERICAL SPECIFICITY, ARE NECESSARILY BASED ON A
VARIETY OF ESTIMATES AND ASSUMPTIONS WHICH, THOUGH CONSIDERED REASONABLE BY THE FIRST
LIEN STEERING COMMITTEE, MAY NOT BE REALIZED AND ARE INHERENTLY SUBJECT
TO SIGNIFICANT
BUSINESS, ECONOMIC, COMPETITIVE, INDUSTRY, REGULATORY, MARKET, AND FINANCIAL UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND THE REORGANIZED DEBTORS' CONTROL. THE FIRST LIEN STEERING COMMITTEE CAUTIONS THAT NO REPRESENTATIONS CAN BE MADE OR ARE MADE AS TO THE ACCURACY OF THE PROJECTIONS OR TO THE REORGANIZED DEBTORS'
ABILITY TO ACHIEVE THE PROJECTED RESULTS. SOME ASSUMPTIONS INEVITABLY
WILL BE INCORRECT. MOREOVER, EVENTS AND CIRCUMSTANCES OCCURRING SUBSEQUENT TO THE DATE ON WHICH THE FIRST LIEN STEERING COMMITTEE PREPARED THESE PROJECTIONS MAY BE DIFFERENT FROM THOSE ASSUMED, OR, ALTERNATIVELY, MAY HAVE BEEN UNANTICIPATED, AND THUS THE OCCURRENCE OF THESE EVENTS MAY AFFECT FINANCIAL RESULTS IN A MATERIALLY ADVERSE OR MATERIAllY BENEFICIAL MANNER. THE FIRST LIEN STEERING COMMITTEE, DEBTORS AND REORGANIZED DEBTORS, AS APPLICABLE, DO NOT INTEND AND UNDERTAKE NO OBLIGATION TO UPDATE OR OTHERWISE REVISE THE PROJECTIONS TO REFLECT EVENTS OR CIRCUMSTANCES EXISTING OR ARISING AFTER THE DATE THE
DISClOSURE STATEMENT IS INITALLY FILED OR TO REFLECT
THE OCCURRENCE OF UNANTICIPATED EVENTS. THEREFORE, THE PROJECTIONS MAY NOT BE RELIED UPON AS A GUARANTY OR OTHER
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WILL OCCUR. IN DECIDING WHETHER TO VOTE TO ACCEPT OR REJECT THE PLAN, HOLDERS OF CLAIMS ENTITlED TO VOTE ON THE PLAN MUST MAKE THEIR OWN DETERMINATIONS AS TO THE REASONABLENESS OF SUCH ASSUMPTIONS AND THE RELIABILITY OF THE PROJECTIONS AND SHOULD CONSULT WITH THEIR OWN ADVISORS.
ASSURANCE OF THE ACTUAL RESULTS THAT
Pro Forma Balance Sheet

Esimated
Pre-Effective Date
(12131'0~)_
Balance
Pro Fonna
-Efective Date Accounting
Balance Sheet of
Sheet
823,099 160,368
678,6_97
Adjustents
Reorganized Debtors
ASSETS
C.",
Accounts receivable-net
Due from related p:rtes
Inventories
Land Held for Investment
162,4:9,?:4!.
13,7&i~478
__3".?~?,~~7
Propert, plant, and equipment-net Deposits,f ou'er asstsnet

TOTAL ASSETS
LIABILITIES
1,625,000 (160,368) (678,697) (53,745,10~) 73,488,575
(.)
(b) (c)
2,448,099
(dJ.
(d)
108,704,6~8,
87,253,O5~,: ~,7~?,~.~!_:
_3,_283,(),2_4
9,584,063
191,168,449
(6,301,039), (oj
14,228,362
205,396,811
Notes payable - Wells Fargo Notes payable - Credit SuhiS! Inlerest rate hedge ~ Credit Suiss
Notes payable ~ Pre-iffectve dale
,,72,868,346 305,752,225 20,195,341

5,256,547 10,753,010 231,439
(72,868,346) en (305,752,225) en (20,195,341) (n
Notes payable - New Firs Lien Accounts payable and accrued liabilities
Customer deposits
TOTAL UABILITIES
'lVi.n_Ority Partners
()ue to related partes
50,000,000 (.) (1,580,061) (h) (10,753,010) (0)

(361,148,983)
(240,690) ,oj 375,618,035 (i) 14,228,362
50,000,000 3,676,486
231,439
415,056,908
240,690 (224,129,149) 191,168,449
53,907,925
151,488,886 205,396,811
Equ!ty
TOTAL UABLIUTIES AND EQUITY
NOTES TO PRO FORMA PROJECTED BALANCE SHEET
(al Reflects cash disbursements made pursuant to the Plan at closing and includes $400,000 payment on emergence to Holders of First lien Lender Claims consistent with the terms of the Plan (with additional payments anticipated in the amount of $220,000 per quarter for the next five quarters), $600,000 payment on emergence to Secured Creditors holding Other Secured Claims, and $3.5 milion to be received from the Rhodes Entities consistent with the terms of the
Mediation Settlement. Additionally, this balance reflects $875,000 paid to satisfy Administrative and Priority Claims related to the Chapter 11 cases.
(b) Reflects the elimination of remaining miscellaneous accounts receivable balances determined to be uncollectible. No accounts receivable balances were assumed going forward as the nature of the Reorganized Debtors' business wil be exclusively homebuilding and wil generate only short term (typically less than 5 days) receivables from title companies on home closings. As such,
these funds were included in cash in future years.
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(c) Reflects the elimination of all pre-Effective Date related party receivable and payable balances
(intercompany). These amounts may be disputed by the Reorganized Debtors, but solely for purposes of this analysis are presumed to have been paid.
(d) Reflects the "fresh start" accounting adjustment to revalue the inventory assets to market value
at the Effective Date.
(e) Represents adjustments to the Deposits and Other Assets to (1) eliminate $5.7 millon in unamortized loan fees on the pre-Effective Date debt that is being restructured, and (2)
eliminate $645,000 in capitalized costs on land held for investment, which is being revalued at the Effective Date and included in Inventory (see d).
(f) This amount reflects restructuring and/or forgiveness of debt of (i) $305.8 milion of first lien debt, (ii) $20.2 millon interest rate hedge on first lien debt, and (iii) $72.9 millon of second lien
debt.
(g) Represents the New First Lien Notes of $50 millon.
(h) Reflects the adjustment to reduce warranty accrual to $360,000 based on recent historical
warranty expenses and number of homes under warranty at the Effective Date.
(i) Reflects the net effect of the above changes, which are adjustments to the equity value of the Reorganized Debtors.
PROJECTIONS
The First Lien Steering Committee prepared the Projections for the Projection Period. The Projections are based on a number of assumptions made by the First Lien Steering Committee with respect to the future performance of the Reorganized Debtors' operations. Although the First Lien Steering Committee has prepared the Projections in good faith and believes the assumptions to be reasonable, it is
important to note that the First Lien Steering Committee can provide no assurance that such
assumptions wil be realized. As described in detail in the Disclosure Statement, a variety of risk factors
could affect the Reorganized Debtors' financial results and must be considered. The Projections should be reviewed in conjunction with a review of these assumptions, including the qualifications and footnotes set forth herein.
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Projected Balance Sheet

2010 PI~n
2011
Pl~n
15,000.000 175,751,785
2012 PI~n
2013 'pj;in
~"
PI~n
66,386,990 103.910,082
3,4.1,638
ASSETS
c,~
9.626,43
"
16.000,000
1GO,982,565
Invcmto.os~nill~nil
P,oport,pl~nt.aniloquipmont_not
__ Oo_P:~_tsani: ;'lIO'_~SSls"-t
186,731,264 953,546 4,221,092 201,542,724
16,000,000 144,940,855
3,470,638
2,720,183
4,221,092
154,161,957
TOTAL ASSET
UABIUTIES
194,222,423
178,702,748
173.767,709
Notospayablo_NowFirsLion Accountspayabloandacc,uodll"bilitlos Custmordoposits

TOTALLlABlLmES
_Eqity TOTAL LIABULlnES AND EQUITY
53,199,008 4,5a-Z;i:i-
26i,089
5l,046,O01
48,6~2.~7z 3,749,369 346.169

62,788.111
3:0,28,158
2,112,425 482,669
2,2_28,098
4,280,253
5G5,7oW
3.430,893
~,~
33.629,252
145,073.496 178.702,748
7,074,092
157,087,865 154,161,957
4.095,639
169,672,171
143,497,123
141,43.312
194,222.423
201.542,724
173,767,709
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Projected Statement of Cash Flows
2010
2011
Pion
CASH FLOWS FROM OPERATING ACTIVITES:
PIon
Pion
3,63~,111
ro"
rou
Pion
12,014,36~
2014
PIon
12,684,306
Adju..cntslO,cccncllcnc.lnccinoionclcoslprcvldcdby
(uscdln)epe..llnoactlvltlco:
Ne'lnceme
17,111,163)
l1.43,411)
~G3,~46
rnlo.c.lupcnsc Chongnlnopcrollngosstsondliobiiiics:
Invenlorluondlond
r..ci.co5iprovidid;':d)byepcrollniiacllvillc&
CASH FLOWS FROM INVESTING ACTIVITES:
Dop.cclollonondoinoni%ollon
2,744062
3,199,008
2.118,630
lG,919,469 12,218,633
1,374,11
.38,274
18,103
9,22,437
8,068,336
14,169,220 19,182,666
16,041,10G
41,030,163
63,33,192
28,94,344
Netcosl
provided
(\lscd)
by rnveOing
acllvitles
CASH FLOWS FROM FINANCING ACTIVlTlES:
OOblpayronts
P~ymcni:-iOG'nc.on,,c\lr'; Credlter"
-- N'c~5ip;'Yi;;d .:;iby r,n;;nclng NET INCREASEI(OECREASEI IN CASH
i6;6:i(96il:
(880,001
l22G,OOOI
l19,i82,~6f.
_(~8:614;i4--
l2,::i6,2~)
activities
(880,001
(i,Il,9'I
G,373,6ii
9,S7i,434
16,000,000
In,Tal,6iG)
(28,G94,341
l2,l4i,20l)
Gl,38i,990
7,178,33
2,448,099
CASH_BcglnningoIPo'lod
16,OO,OOO
16,000,00
16,00,000
CASH.EndolPcrlod
9,626,43
16,000.000
16,000,00
66,3l,~90
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Pro Forma Statement of Operations
2010
2011
2012
2013
2014
Plan
HomoCloslngs
RC\vC\nuos
Plan
Plan
Plan
Plan
m
28,655,038
'"
41,378,058
8,472,839
~
62,000,761 1,365,9D9 8,732,154
'"
82,815,340
8,999,610
'"
104,006,797 14,783,628 9,276,261 128.066.686
Salosolinvontory
Salosofland
G.C\C\nfC\osandothC\rgollrovonuos
8,221,4G
36,876,442
14,588,377 8,541,260 3,837,774
3,681,880 2,744,052
Conlr.i:salos
Total.C\vonuos
49,850,897
19,758,075 11,238,500
72,098,824
'---91.j14,950
33,968,084 18,366,920 8,259,250
10,35.1,.918
CostandoxptnSCS:
Cost Land ofsalC\s-lnvC\ntory cost 01 salC\s.;nvontory (homC\s) (homC\s)
21,64,029
15,669,680 7,118,557 1,037,337 7,750,095
7,961,781 67,885,479 5,013,345
1,374,161
41,189,916
21,sn,92G
9,963,269 21,273,300 13,0(1,860
Costofsalos-landdovolopmont Costolsalos_landsalos Solllng,gonor.l.andadminlsttivo OCproclationandamortzatlon

Golfcourn cost and C\x.ponSCs
4-,!18,ci~;
5,172,251 963,945 7,724,904 49,515,778
275,119
7,495,25
40,788,596
(3,912,155)
3,199,.008
(7,111,1631'
TotalcostandC\xpC\n:s.s
OporatinglncornolLossj
Oior (lncomo) C\xponSC
8,206,125 19,162,301
ii,m,'B7i' 116.463.277:
12.602.409
18,103
---'2,652,64
638,214
IntorostoxponSl
NotlncomC\IILoss)
2,118,530
(1,84,411)
3,639,164
12,014,369
12,68,30
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KEY ASSUMPTIONS
A. General
1. Methodology: The Projections were developed based on inputs from the Debtors, wep,
and RCLCQ. The Projections are based on assumptions and initiatives, including
expectations on market stabilzation. The key drivers are: (1) average sales price; (2) average cost of construction; (3) average lot cost and; (4) annual home sales and
closings. These key drivers were utilized to forecast the operational plan reflected in the income statement, balance sheet, and statement of cash flows. Furthermore, a discounted cash flow ("DCF") methodology was utilized to arrive at a value for the
Debtors' real estate assets by discounting unlevered projected free cash flows to a net present value as of the Effective Date. Revenue is derived from the construction and sale of single famify homes on all single family lots currently in inventory, as well as certain multi-family lots and commercial parcels where it was determine that single
family homes were the highest and best use. Pricing and sales velocity for these homes
were projected to recover from their currently depressed levels as determined by
an
analysis of recent and historical sales data, to more sustainable levels of growth by
2011. Additional revenue is derived from the sale of certain land parcels at prices and dates supportable by market conditions, as well as operation and sale of the Tuscany
Golf Course and the Rhodes Ranch Golf Course.
A discount rate range of 20%-25% was used in the Going Concern Analysis, reflecting the
prevailing capital market requirements of similar transactions. Based on the methodologies described above and further review, discussions, considerations and assumptions, the value of the Debtors' real estate assets as of January 1, 2010 under a Going Concern analysis ranges from $89.2 milion to $111.5 million with a midpoint of $99.6 milion.
2. Plan Consummation: The operating assumptions assume that the Plan will have an
Effective Date of January 1, 2010.
3. Projected Subsidiaries: The Projections include the assets of all the Debtor entities. Pinnacle Grading, lLC and the entities under Tribes Holdings, lLC will be phased out and operations ended by the Effective Date.
B. Projected Balance Sheets and Statements of Cash Flow
1. Cash: The Projections assume the Reorganized Debtors wil maintain a minimum cash
balance of $15 million after debt service in 2011 and forward, in accordance with the anticipated New First Lien Notes.
2. Working Capital: Capital expenditures for inventory were forecast based on the assumptions for sales absorptions. Inventory days are projected to remain static
throughout the Projection Period.
3. Property, Plant, and Equipment: The equipment and fixed assets of the company are
forecast to be fully depreciated by the end of 2011. As the Debtors currently have
8
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excess PP&E for the go forward operation, it is not anticipated that any substantial purchases in the future will be required.
4. Deposits and Other Assets: As insurance policies are renewed, premiums are prepaid
and amortized over the life of the policy periods.
5. Borrowing (Repayment) of Debt: The first lien debt at the Effective Date is projected to
be $50 milion. Interest on the New First lien Notes shall be payable in Cash quarterly in arrears at the Cash pay rate of USOR +2%; provided that if the average of the Reorganized Debtors' unrestricted consolidated Cash as of the last day of each of the two immediately preceding consecutive quarters is less than $15 millon or if the unrestricted consolidated Cash as of the last day of the immediately preceding quarter is less than $15 milion (collectively, the "Cash Interest Threshold"), then the Reorganized Debtors shall have the option to capitalize the amount of interest due in excess of USOR for the immediately preceding quarter, with such capitalized interest to
be capitalized on such interest payment date, and all such capitalized interest shall be
due on the next interest payment date to the extent the Cash Interest Threshold is met
after giving effect to the payment of interest and capitalized interest or as the
Reorganized Debtors otherwise elect. All capitalized interest not previously paid shall
be paid on the Maturity Date. USOR shall be subject to a cap of 2%.

C. Projected Statements of Operations
1. Total Revenue: Consolidated Revenues consist of Homebuilding Revenue, Land Sales,
Course Revenue. Home sales absorptions are projected to remain static in 2010 and 2011 and increase slowly throughout the remaining forecast period. Average
and Golf
sales price is expected to decrease 9.3% in 2010 and then increase 9.8%, 9.1%, 11.3%,
and 4.0% in years 2011 through 2014, respectively. The Company's land assets are forecast to be monetized at prices and dates supportable by market conditions. The revenues of the Tuscany Golf Course and the Rhodes Ranch Golf Course are forecast
based on historical sales and operations.
2. Cost of Sales: The Company's vertical construction costs are estimated to remain flat on
average throughout the projection period. Lot costs are based on the allocation of the
lots, and the projected land development costs to be incurred throughout the projection period. While it is anticipated that costs wrl generally rise toward the latter half of the Projection Period,
land basis, valued at the Effective Date, to the individual
the Reorganized Debtors anticipate that they can achieve design and other cost efficiencies to offset any market increases.
3. Selling, General, and Administrative Expenses: Overhead operating expenses are
projected based on historical averages as a percentage of home sales revenue, which

percentages are projected to remain static throughout the Projection Period.
4. Golf Course Expenses: The Tuscany Golf Course and Rhodes Ranch Golf Course
expenses are forecast based on historical profit margins and operations.
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5. Interest Expense: Interest expense is based on the New First Lien Notes of $50 milion.
Interest on the New First Lien Notes shall be payable in Cash quarterly in arrears at the Cash pay rate of lIBOR +2%; provided that if the average of the Reorganized Debtors'
unrestricted consolidated Cash as of the last day of each of the two immediately preceding consecutive quarters is less than $15 milion or if the unrestricted consolidated Cash as of the last day of the immediately preceding quarter is less than
$15 million (collectively, the "Cash Interest Threshold"), then the Reorganized Debtors shall have the option to capitalize the amount of interest due in excess of lIBOR for the
immediately preceding quarter, with such capitalized interest to be capitalized on such

interest payment date, and all such capitalized interest shall be due on the next interest payment date to the extent the Cash Interest Threshold is met after giving effect to the
payment of interest and capitalized interest or as the Reorganized Debtors otherwise

elect. All capitalized interest not previously paid shall be paid on the Maturity Date. lIBOR shall be subject to a cap of 2%.
6. Taxes: The Projections assume the Reorganized Debtor wil not have income tax liability
throughout the projection period based on the utilzation of net operating losses. Property taxes are capitalized and are included in the lot cost of sales. Sales taxes on the golf course operations are included in the Tuscany Golf Course and Rhodes Ranch
Golf Course expenses.
10
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EXHIBIT E
EXHIBIT E
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EXHIBIT E
liquidation Analysis
Under the "best interests" of creditors test set forth in section 1129(a)(7) of the Bankruptcy Code, the Bankruptcy Court may not confirm a plan of reorganization unless the plan provides each holder of a claim or interest who does not otherwise vote in favor of the plan with propert of value, as of the effective date of the plan, that is not less than the amount that such holder would receive or retain if
the debtor was liquidated under chapter 7 of the Bankruptcy Code. To demonstrate that the Plan
satisfies the "best interests" of creditors test, the First Lien Steering Committee has prepared the following hypothetical Liquidation Analysis, which is based upon certain assumptions discussed in the Disclosure Statement, and in the accompanying Liquidation Analysis notes. The conclusion of the
Liquidation Analysis, as set forth below, is a value range of $44.2 million to $55.0 millon.
The Liquidation Analysis was prepared by the First Lien Steering Committee through its financial
advisors, Winchester Carlisle Partners ("WCP"), and its valuation consultants, Robert Charles Lesser &
Company ("RCLCO"). The Liquidation Analysis estimates the potential cash distributions available to Holders of Allowed Claims in a hypothetical chapter 7 liquidation of the Debtors' assets. The preparation of this Liquidation Analysis involved extensive use of estimates and assumptions that, although considered reasonable by the First Lien Steering Committee and its professionals, are
inherently subject to significant business, economic and competitive uncertainties beyond the control of
the Debtors and the First Lien Steering Committee. The First Lien Steering Committee and its professionals undertake no obligation to update or revise the Liquidation Analysis.
The following notes present the general assumptions that were relied upon in preparing the Liquidation Analysis, comprise an integral part of the Liquidation Analysis, and should be referenced in connection with any review of the Liquidation Analysis.
THE FIRST LIEN STEERING COMMITTEE AND ITS ADVISORS MAKE NO REPRESENTATION OR WARRAN1Y THAT, IF THE DEBTORS WERE IN FACT TO UNDERGO A CHAPTER 7 LIQUIDATION, THE ACTUAL RESULTS WOULD OR WOULD NOT APPROXIMATE THE ESTIMATES AND ASSUMPTIONS REPRESENTED IN THE
LIQUIDATION ANALYSIS. ACTUAL RESULTS COULD VARY MATERIALLY.
NOTES
Basis of Presentation
(1) The Liquidation Analysis presents high, low, and average recovery scenarios, based upon a range of assumptions relating to the costs incurred during a liquidation and the proceeds realized
therefrom. It is assumed that under a liquidation scenario, certain distinctive factors would limit recoveries from the sale of the Debtors' operations and other land assets. The Liquidation
Analysis assumes that a chapter 7 trustee will attempt to maximize recoveries by selling the Debtors' assets on an orderly basis over a period of twelve months commencing on January 1, 2010. It is assumed that homes under construction as of this commencement date wil be sold as is in their then current state of construction. Given the current depressed state of the homebuilding and real estate markets, as well as the limited availability of credit, this expedited sale process could materially reduce recoveries from the Debtors' assets.
(2) Recovery values are estimated on a consolidated basis for all of the Debtors' entities.
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(3) Asset liquidation ranges are assumed to be estimated recovery amounts before deduction of any commissions or chapter 7 trustee fees, but net of property taxes, association dues, bond fees, and other operating costs specific to each asset.
Assets
(1) Cash. The cash balance is the actual cash balance as of June 30, 2009, with certain roll~forward
adjustments to estimate the cash balance as of 12/31/09.

(2) Accounts Receivable - Pinnacle Grading. This accounts receivable balance represents
receivables from grading contract work completed, and is assumed to have cash recovery ranging from 80% to 100% of book value.
(3) Accounts Receivable - Other. This account represents miscellaneous receivables in the
ordinary course of business and is assumed to have a cash recovery ranging from 0% to 20% of
book value.
(4) Due from Related Parties. This account represents related party receivables and is assumed to have zero value in liquidation.
(5) Inventories. This account represents all real estate holdings, including homes under construction, completed homes and model homes, and developed and undeveloped land and is net of overhead costs incurred to operate the Debtors during the liquidation phase. The cash
recovery for these assets ranges from 20.5% to 25.7% of book value.
(6) Property. Plant & Equipment. This includes furniture and fixtures, leasehold improvements, offce equipment, vehicles, and the construction equipment of the grading company, Pinnacle
Grading, LLC. The grading equipment is assumed to have a liquidation value, net of the notes on
the equipment, of approximately $450,000. Inclusive of the remaining assets, the total
liquidation value is assumed to range from 16.2% to 31.4% of book value.
(7) Deposits and Other Assets. This category of assets includes various prepaid expenses, utilty
deposits, and debt issuance costs, and is assumed to have zero value in a chapter 7 liquidation.
Liabilities and Wind-down Expenses
(1) Bond Release Costs. During the pre
petition period, the Debtors routinely used performance and improvement bonds to provide assurance to municipalities that certain infrastructure work would be completed in conjunction with development orders tied to the Debtors' real estate
developments. The projects associated with these bonds include projects for "onsite" improvements (Le., within the Debtors' developments) and "offsite" improvements (i.e., within the municipality but outside of the Debtors' development). In a hypothetical liquidation, it is assumed that the Debtors proceed only with onsite improvements that have a direct impact on the value of the real estate assets and the ability to sell such real estate assets. It is assumed that the cost to complete such onsite projects is treated as an Administrative Claim (by
expending cash to complete) and that no prepetition Claims from the bond issuers arise given
that these projects are completed. It is assumed the onste projects are not completed by the
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Debtors and therefore give rise to General Unsecured Claims from the bond issuers against the Debtors. Any costs to be incurred are expected to be minimal as most assets wil be sold in an
"as is" state.
(2) Wind-down Expenses. In addition to Administrative and Priority Claims, the wind-down
expenses include expenses directly related to liquidation of the assets, such as commissions to real estate brokers of an average of 4% of estimated liquidation proceeds, and fees paid to a
chapter 7 trustee and its professionals totaling approximately 2% of liquidation proceeds.
(3) Secured Claims - Pre
petition Secured Debt. These liabilities include the first and second lien
outstanding debt, accrued interest and certain fees, as well as secured hedging agreements.
(4) Other Secured Claims. This group of liabilities represents mechanics lien claims and claims by
equipment lenders.
(5) General Unsecured Claims. This group of liabilties includes pre
petition claims by vendors and
subcontractors, in addition to other unsecured claims, including anticipated claims by issuers of performance bonds due to the anticipated non-performance of the related work.
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Case 09-14814-lbr
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Rhodes Homes
t!9.~idation Analysis
,Claims Reco.l,_~iy Schedule
Amount
Total Assets Available to Creditors
Total Wind Down_~)(p.e:i:~_~:s,- ,,_
49,318.665
2,450,000 750,000 125,000
Total Administrative Claims --otal Priority Claims

Estimated R~cove:!YtA~,,n1_inistrative and Priority Claims) Net Estimated Recovery
Assets Available to Cre~i~~_~..!!?"I_~~.n_gther Secured Claims
3,325,00
100.0%
45,993,665
2,300,000 2,300,000
100.0%
Total Other Secured Claims

~_st!mated Recovery (Other Secured Claims_)
Net Estimated Recovery
:Assets Available to Secured Creditors
43,693,665
Secured Claims - First lien

Estimated Recovery (Secured Claims ~ First lien)
,
325,947,566
43,693,665
13.4%
:Assets Available to Secured Creditors
Secured Claims - Second lien

Estii:~t~d__Recovery (Secured Claims - Second lienL
72,868,347
0.0%
"Assets Available to Unsecured Creditors

Total Unsecured Claims
Estimated Recovery (Unsecured Claims)
15,000,000
0.0%
Case 09-14814-lbr
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EXHIBIT F
EXHIBIT F
CLAIMS AND AU PENDING CASES SEPTEMBER 18, 2009
PeNDING CASES
COURT
CASE NUMBER
Plilnltfsillomiiy
ADDRESS
NATURE OF THE
STATUS
oisCOYeRYSTAGE
CASE
CONTR CLAIM
G.c.
w.LACE,
INC.
vsRHODESDESIGN
~m"
N..()eo
RiibcrlAvila,s.
ANOELOPINT
LuVeg..NV89107
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Case 09-14814-lbr
COIlORTION
A1METHODSCORP. VS.RHOOESOESION
Ctalp Itra Esq. llACHOl LEASE
~="
N"".IlDI!1Cc
S2DEr~\C
CASEAlE03lM1&SERvoViii,::s, NOPOST
olOoeLOI
O9-SL2OS
UEJ. FORCLOSURE
... LUV~,NVB9\04
SU"'''LHOI&
COMLNNTP~~S ORO~CCNR~
I/GIUNMISONRY,
Doc 713-3
INC,VS.TUCA
N..llD"itC:
RiItOr'ittt.ElQ
CAEFI!.OJUSTPfRTOSTAYORDER NO
RESPONSNEPLEAI/ICSFa.ED.
ACQUISTIOJSIV,UC
..
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CONTRACTCi.I/~
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RESPOHSIVPLEltSONFJtE
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PENOING CASES
CASE NUMBER
NATURE OF THE
STATUS
CASE
COtiSTucnONDEFECT
SUIT FILED BUrNOTSERIJD
Entered 11/12/09 16:22:42
t:SLlE8tASCO.l'EtL
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SCELSAN~NCY ,YoSON,sCSLSA
N"~lDi_cc SI'Ry&RlllI 2I1Ilui"..Por P,C.

CoUl$ln21D
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8$128
Page 22 of 68
VlRGIUOUERTO.JOHN
OOCS_LA~l
Pagc1
CLAIMS AND ALLPENDINO.CASES SEPTEMBER 18,1009
JII.MVlaOONE. HAULM.BOOI,
1l0Ni.IIVi\ClM' .c NOTiDI'
co'lTlUCTIlOElECT
ININIT\.CHAPTE~ONOTCEPERIOD
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Case 09-14814-lbr
CORTei,OONNi
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Page 23 of 68
PENDING CASES I CASE NUMBER
NATUREOFTHE CASE
STATUS
DOCS_lA'lln
PlIga2
Case 09-14814-lbr
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Entered 11/12/09 16:22:42
Page 24 of 68
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CLAIMS AND All PENDING CASES
SEPTMBER 18, 209
i.ROSEN~~
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ROSENFOflfRTRIBEEtdI'LO'ESUlFOR
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PENDING
Case 09-14814-lbr
SEnED CASES WITH INURACE
FULKSll.ELKOR
COHSTRUCTIONOEFE,CT
13'HOMESI-.D,o:
..""
NQY.dOIl!eo~
tNSUREDSETMET
COtlSTlICTIONOElECT
PRSERVESAT
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CDfSlRCTlOlDEFECT
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INSUREOSETTMaJ
NOTlCEF
CLAIMS
NO
SUIT
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NATURE OF CLA
INSURED
U:-I$UREO
CLAIMANT
AMOUNT CLAIMED
CONCLAVo
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UNLSURED
Entered 11/12/09 16:22:42
AlReeMENT
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FAllURETO
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COMPETE
POST
Oo~orCo.\
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CONSTRUCTlOHlN
Page 25 of 68
SPANLSHHI1l.
OOCS_LA'~\
Pil!l4
Case 09-14814-lbr
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Page 26 of 68
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EXHIBIT G
EXHIBIT G
Case 09-14814-lbr
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Page 28 of 68
Exhihit G
Litigation Trust Assets
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NON.EXCLUSIVE LIST OF LITIGATION TRUST ASSETS
ARTICLE IV.O OF THE PLAN PROVIDES THAT, ON THE EFFECTIVE DATE, THE DEBTORS SHALL TRANSFER THE LITIGATION TRUST ASSETS TO THE LITIGATION TRUST FOR AND ON BEHALF OF THE LITIGATION TRUST BENEFICIARIES. SET FORTH BELOW IS A NON-EXCLUSIVE LIST OF THOSE CAUSES OF ACTION TO BE TRANSFERRED TO THE LITIGATION TRUST PURSUANT TO ARTICLE IV.O OF THE PLAN. SUCH CAUSES OF ACTION INCLUDE, BUT ARE NOT LIMITED TO, CAUSES OF ACTION HELD BY THE ESTATES AGAINST THE RHODES ENTITIES, AND CAUSES OF ACTION THAT ARE NOT INCLUDED IN THE FIRST LIEN LENDERS' COLLATERAL.
THE PLAN OR A FINAL
TO ORDER IN THEIR CAPACITIES AS SUCH, ENTITIES NOT LISTED ON THE ATTACHED LIST ARE NOT RELEASED AND THE DEBTORS AND THE LITIGATION TRUST OR REORGANIZED DEBTORS, AS APPLICABLE, EXPRESSLY RETAIN ALL CAUSES OF ACTION OF ANY KIND WHATSOEVER AGAINST ALL SUCH ENTITIES, INCLUDING WITHOUT LIMITATION THE CAUSES OF ACTION SET FORTH BELOW.
FOR AVOIDANCE OF DOUBT, UNLESS EXPRESSLY RELEASED PURSUANT
FAILURE TO ATTIBUTE ANY SPECIFIC CAUSE OF ACTION TO A PARTICULAR ENTITY ON THE ATTACHED LIST SHALL NOT UNDER ANY CIRCUMSTANCES BE INTERPRETED TO MEAN THAT SUCH CAUSE OF ACTION IS NOT RETAINED AGAINST SUCH ENTITY. ALL POSSIBLE CAUSES OF ACTION, INCLUDING CAUSES OF ACTION NOT LISTED BELOW, ARE RETAINED AGAINST ALL ENTITIES NOT EXPRESSLY RELEASED PURSUANT TO THE PLAN OR A FINAL ORDER IN THEIR CAPACITIES AS SUCH,
IN THE EVENT OF ANY APPARENT INCONSISTENCY BETWEEN THE RELEASES OF ENTITIES IN THEIR CAPACITIES AS SUCH PURSUANT TO THE PLAN OR A BANKRUPTCY COURT ORDER AND THE ATTACHED LIST, SUCH RELEASES ORDER SHALL GOVERN. GRANTED PURSUANT TO THE PLAN OR FINAL
The Litigation Trust Assets shan include. but are not limited to. the following:
1. Claims and Causes of Action held by the Estates against the Rhodes Entities, including:
a. Claims for beach of fiduciary duty;
b. Claims for misappropriation of Debtor assets for personal use;
c. Claims for usurping corporate opportunity for the benefit of competing
interests;
d. Claims for mismanagement of
the Debtors' operations;
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e. Claims for rraudulent transfers (to the extent not expressly released under the
Plan); and
i: Claims for the diversion of corporate resources for the henefit of competing
interests.
2. Claims and Causes of Action that are not included in the First Lien Lenders' CollateraL.
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EXHIBIT H
EXHIBIT H
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Exhihit H
Claim Purchase Schedule
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EXHIBIT I
EXHIBIT I
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Exhibit!
Litigation Trust Agreement
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PRELIMINARY DRAFT SUBJECT TO MODIFICATION FINAL VERSION MUST BE ACCEPTABLE TO FIRST LIEN STEERING COMMITTEE
LITIGATION TRUST AGREEMENT

This LITIGATION TRUST AGREEMENT, dated as of January U, 2010 (this "Agreement"), is hereby entered into by and among The Rhodes Companies, LLC and its
subsidiares and affiiates signatory hereto and any successors in interest (collectively, the
"Debtors")! as settlors in their capacities as debtors in the Chapter 11 Cases (as defined below) and as reorganized debtors as of the Effective Date (as defined in the Plan (as defined below)) (in such capacities, the "Reorganzed Debtors"), and r 1, as trstee of the Litigation Trust referred to herein (in such capacity, the "Litigation Trustee"). Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Second Amended Plan of Reorganization pursuant to Chapter 11 of the Bankruptcy Code for the Rhodes Companes, LLC et a!. dated November 12, 2009 (including all exhibits attched thereto or referenced therein, as the same may be amended, modified, or supplemented, the "Plan").
Background
A. On either March 31, 2009 or April 1,2009, each of petition for relief Court for the District of under chapter 11 of
the Debtors fied a voluntar the Banruptcy Code in the United States Banptcy Nevada (the "Banuptcy Cour"), commencing their chapter 11 cases
(the "Chapter 11 Cases"). the Mediation Settlement. the Litigation Trust for the benefit of the Holders of Allowed Claims in Classes C-L, C-2, and C-3, or as otherwise provided for the benefit of the Reorganized Debtors in Article VII.C.3. of the Plan (collectively, the "Litigation Trust Beneficiaries").
B. The Plan incorporates, among other things, the terms of The Plan and the Confirmation Order also provide for the establishment of
C. The Plan and the Confirmation Order further provide that, on the Effective Date, the Debtors shall transfer the Litigation Trust Funding Amount and shall grant, assign, transfer, convey, and deliver all of their right, title, and interest in and to all of the Litigation Trust Assets
including, without limitation, interest eared thereon (together with any and all other earnings, other income, or other assets of or comprising the Litigation Trust Assets) to the Litigation Trust
on behalf and for the benefit of
the Litigation Trust Beneficiaries.
D. On
Plan (the "Confirmation Order").
. the Banptcy Court entered an order confirming the
l The Debtors are: Apache Framing, LLC; Batcave, LP; Bravo Inc.; C&J Holdings, Inc.; Chalkline, LP; Elkhorn
Investments, Inc.; Elkhorn Partners, A Nevada Limited Partership; Geronimo Plumbing, LLC; Glynda, LP; Gung~ Ho Concrete, LLC; Heritage Land Company, LLC; Jackknife, LP; Jarupa LLC; Overflow, LP; Parcel 20 LLC; Pinnacle Grading, LLC; Rhodes Arizona Properties, LLC; Rhodes Companies, LLC; Rhodes Design and Development Corp.; Rhodes Homes Arizona, LLC; Rhodes Ranch General Partnership; Rhodes Ranch Golfand Countr Club; Rhodes Realty, Inc.; Six Feathers Holdings, LLC; Tick, LP; Tribes Holdings LLC; Tuscany Acquisitions, LLC; Tuscany Acquisitions II, LLC; Tuscany Acquisitions Il, LLC; Tuscany Acquisitions iv, LLC; Tuscany Golf Countr Club, LLC; Wallboard, LP.
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E. On the date hereof, the Effective Date ofthe Plan occurred.

F. The Litigation Trust is being created pursuant to this Agreement for the purposes
of liquidating the Litigation Trust Assets and distributing or utilizing the proceeds thereof
to or
for the benefit oftlie Litigation Trust Beneficiaries, as described in Articles IV.a. and VII.C.3.
ofthe Plan.
G. The Litigation Trustee shall have all powers necessary to implement the
provisions of
this Agreement and administer the Litigation Trust as provided herein.
Agreement
the premises and the mutual covenants contained herein, the Debtors and the Litigation Trustee agree as follows:
NOW, THEREFORE, in consideration of
ARTICLE I DECLARTION OF LITIGATION TRUST

Litigation Trust. The Debtors and the Litigation Trustee, pursuant to the Plan and the Confirmation Order and in accordance with the applicable provisions of the Banptcy Code, hereby constitute and create the Litigation Trust on the terms set forth herein.
1.1 Creation of
1.2 Litigation Trust Interests. The Litigation Trust Interests shall be distributed to
certain Holders of Allowed Claims as follows:
the Holders of (a) Holders of Allowed General Unsecured Claims. Each of Allowed General Unsecured Claims (including any Allowed Rhodes Entities Claims) shall receive a pro rata share of the Litigation Trust Interests based on a percentage equal to the total amount of the applicable Holder's Allowed General Unsecured Claim (including any Allowed Rhodes Entities Claim) divided by the aggregate total amount of all Allowed Claims of holders of Litigation Trust Interests.
(b) Holders of Allowed First Lien Lender Deficiency Claims. Each of the
the the applicable Holder's Allowed First Lien Lender Deficiency Claim divided by the aggregate total amount of all Allowed Claims of holders of Litigation Trust Interests.
Holders of Allowed First Lien Lender Deficiency Claims shall receive a pro rata share of Litigation Trust Interests based on a percentage equal to the total amount of (c) Holders of Allowed Second Lien Lender Deficiency Claims. Each of Holders of Allowed Second Lien Lender Deficiency Claims shall receive a pro rata share of Litigation Trust Interests based on a percentage equal to the total amount of
the the
the applicable
Holder's Allowed Second Lien Lender Deficiency Claim divided by the aggregate total amount of all Allowed Claims of holders of Litigation Trust Interests. Distributions to Holders of their Litigation Trust Interests Allowed Second Lien Lender Deficiency Claims on account of shall be made to the Second Lien Agent for distribution to such holders.
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this Agreement is to implement the the Litigation Trust Beneficiaries, and to serve as a mechanism for prosecuting all Causes of Action in respect of the Litigation Trust Assets and distrbuting the proceeds thereof to or for the benefit of the Litigation Trust Beneficiaries in accordance with this Agreement, the Plan, and the Confirmation Order. The Litigation Trust Assets shall be liquidated in accordance with Treasur Regulation Section 301.7701-4(d), with no objective to continue or engage in the conduct of a trade or business, except to the extent reasonably necessar to, and consistent with, the liquidating purose of the Litigation Trust. The Litigation Trust shall not be deemed a successor-in-interest of the Debtors or the Reorganized Debtors for any purpose other than as specifically set forth herein or in the Plan and the Confirmation Order. The Litigation Trust is intended to qualify as a "grantor trust" for federal income tax purposes with the holders of Litigation Trust Interests treated as grantors and owners of the Litigation Trust.
1.3 Purpose of Litigation Trust. The purose of Plan on behalf, and for the benefit, of
1.4 Transfer of Litigation Trust Assets.
(a) In full saiisfaction of all Allowed Claims in Classes C-1, C-2, and C-3, as
applicable, the Debtors hereby transfer as of
the 123(a)(5)(B) and 1 123(b)(3)(B) and in accordance with the Plan and the Confrmation Order, the Litigation Trust Assets to the Litigation Trust, free and clear of any and all liens, claIms, encumbrances, and interests (legal, beneficial, or otherwse) of all other entities to the maximum extent
the Effective Date, for the sole benefit of Litigation Trust Beneficiaries, pursuant to Banuptcy Code sections 1
contemplated by and permissible under Bankptcy Code section 1141(c). Nothing in this Agreement is intended to, or shall be construed to, effect a release, extinguishment, or compromise of any Litigation Trust Asset transferred to the Litigation Trust pursuant to this Agreement. The Litigation Trust Assets are to be held and utilized or distrbuted, as applicable,
by the Litigation Trustee in accordance with the terms hereof for the benefit of
the Litigation
Trust Beneficiaries, and for no other part, subject to the further covenants, conditions, and terms hereinafter set forth.
the Debtors ("Restricted Assets") cannot be (b) To the extent any assets of transferred to the Litigation Trust because of a restrction on transferabilty under applicable nonbankptcy law that is not superseded by Banptcy Code section 1123 or any other provision of the Bankruptcy Code, such Restricted Assets shall be retained by the applicable
Debtors and Estates. The proceeds of any such Restricted Asset retained by the Debtors and the
Estates shall be allocated to the Litigation Trust pursuant to the Plan as if such transfer had not been restricted under applicable nonbankptcy law. The Litigation Trustee may commence an action in the Banruptcy Court to resolve any dispute regarding the allocation of the proceeds of
any Restricted Assets retained by the Debtors. To the extent necessar or appropriate, the
the Estates pursuant to Bankptcy Code section 1123(b)(3)(B) to enforce or pursue any rights, claims, or Causes of Action that remain propert of the Estates after the Effective Date.
Litigation Trustee may be designated as a representative of one or more of
(c) For all federal, state, and local income tax purposes, each holder ofan
Allowed Claim in Classes C-1, C-2, and C-3 shall be treated as transferring all of
such Allowed
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PRELIMINARY DRAFT SUBJECT TO MODiFICATION FINAL VERSION MUST BE ACCEPTABLE TO FIRST LIEN STEERING COMMITTEE
Claim to the applicable Debtors in exchange for the holder's pro rata share of Assets, and then transferring the holder's pro rata share of such liabilities) to the Litigation Trust in exchange for such holder's pro rata share of Litigation Trust Interests in accordance with the terms of Section 4.3(a) of
the Litigation Trust the Litigation Trust Assets (subject to

the this Agreement.
(d) As soon as practicable after the Effective Date, but no later than 180 days
following the Effective Date, the Litigation Trustee (to the extent that the Litigation Trustee deems it necessary or appropriate in his or her sole discretion) shall make a good faith determination of the value of Litigation Trust Assets as of the Effective Date and shall provide such valuation in writing to each Litigation Trust Beneficiary. The valuation shall be used consistently by all paries for all federal and other income tax purposes. The Banruptcy Cour
shall resolve any dispute regarding such valuation.
expeditious but orderly maner and subject to the other provisions of
Litigation Trust Assets. The Litigation Trustee shall, in an the Plan, the Confirmation Order and this Agreement, liquidate and convert the Litigation Trust Assets to Cash, make timely
1.5 Liquidation of distributions in accordance with the terms hereof and not unduly prolong the existence of
the
Litigation Trust. The Litigation Trustee shall exercise reasonable business judgment and liquidate the Litigation Trust Assets to maximize net recoveries to the Litigation Trust Beneficiares; provided that the Litigation Trustee shall be entitled to take into consideration the risks, timing, and costs of potential actions in making determinations as to the maximization of such recoveries. Such liquidations may be accomplished through the prosecution, compromise and settlement, abandonment, or dismissal of any or all Causes of Action in respect of the Litigation Trust Assets or otherwise or through the sale or other disposition of the Litigation Trust Assets (in whole or in combination, and including the sale of any or all Litigation Trust Assets). Pursuant to an agreed upon budget in accordance with Section 4.5 of this Agreement, the Litigation Trustee may incur any reasonable and necessary expenses in connection with the the proceeds thereof. liquidation of the Litigation Trust Assets and distribution of
1.6 Apoointment and Acceotance of Litigation Trustee. The Litigation Trustee shall be deemed to be appointed pursuant to Bankruptcy Code section 1123(b)(3)(B), The Litigation Trustee accepts the Litigation Trust created by this Agreement and the grant,
assignent, transfer, conveyance, and delivery to the Litigation Trust and the Litigation Trustee,
on behalf, and for the benefit of, the Litigation Trust Beneficiaries, by the Debtors of all of
their respective right, title, and interest in the Litigation Trust Assets, upon and subject to the terms and conditions set forth herein, in the Plan, and in the Confirmation Order.
1.7 Reversion to Reorganized Debtors. The Litigation Trust Funding Amount, which
the Debtors will transfer to the Litigation Trust on the Effective Date pursuant to the Plan and Section 4.2 hereof, wil be repaid to the Reorganzed Debtors from the first proceeds received by the Litigation Trust. In no event shall any other Litigation Trust Assets revert to or be distributed
to any of the Reorganzed Debtors.
1.8 Incidents of Ownership. The Litigation Trust Beneficiaries shall be the sale beneficiaries of the Litigation Trust and the Litigation Trust Assets, and the Litigation Trustee
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shall retain only such incidents of ownership as are necessary to undertake the actions and transactions authorized herein, in the Plan and in the Confirmation Order, including, but not limited to, those powers set forth in Section 6.1 hereof.
1.9 Intervention. On the Effective Date, and without having to obtain any further
order of the Bankptcy Court, the Litigation Trustee shall be deemed to have intervened as plaintiff, movant, or additional par, as appropriate, in any applicable Causes of Action in respect of the Litigation Trust Asset, including adversary proceedings, contested matters, avoidance actions, motions, and other actions, in each case filed by any Debtor, Creditors' Committee, or any other Estate representative prior to the Effective Date. Without limiting the foregoing, the Litigation Trustee shall take any and all actions necessary or prudent to intervene in Causes of Action in respect of the Litigation Trust Assets in a timely manner.
ARTICLE II LITIGATION TRUST BENEFICIARIES

2.1 Conflcting Claims. If any conflcting claims or demands are made or asserted
with respect to a Litigation Trust Interest, the Litigation Trustee shall be entitled, at its sole election, to refuse to comply with any such conflicting claims or demands. In so refusing, the Litigation Trustee may elect to make no payment or distribution with respect to the Litigation Trust Interest represented by the claims or demands involved, or any part thereof, and the Litigation Trustee shall refer such conficting claims or demands to the Bankptcy Court, which shall have exclusive jurisdiction over resolution of such conflicting claims or demands. In so doing, the Litigation Trustee shall not be or become liable to any par for its refusal to comply with any of such conflicting claims or demands. The Litigation Trustee shall be entitled to refuse to act until either (a) the rights ofthe adverse claimants have been adjudicated by a Final the Banptcy Court or (b) all differences have been resolved by a written agreement Order of among all of such paries and the Litigation Trustee, which agreement shall include a complete release of the Litigation Trust and the Litigation Trustee with respect to the subject matter of the dispute (the occurrence of either (a) or (b) being referred to as a "Dispute Resolution"). Until a Dispute Resolution is reached with respect to such conflcting claims or demands, the Litigation Trustee shall hold in a segregated interest-bearing account with an Approved Financial Institution (as defined below) any payments or distributions from the Litigation Trust to be made with respect to the Litigation Trust Interest(s) at issue. Promptly after a Dispute Resolution is reached, the Litigation Trustee shall transfer the payments and distributions, if any, held in the segregated account, together with any interest and income generated thereon, in accordance with the terms of such Dispute Resolution.
"Approved Financial Institution" means a commercial ban, savings ban, or savings and
loan association organized under the laws of combined capital and surplus of
the United States, or any state thereof, and having a

at least $1,000,000,000.
2.2 Rights of
Litigation Trust Beneficiaries. Each Litigation Trust Beneficiary shall
be entitled to paricipate in the rights and benefits due to a Litigation Trust Beneficiary hereunder according to the terms of its Litigation Trust Interest. Each Litigation Trust Beneficiar shall
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take and hold the same, subject to all the terms and conditions of this Agreement, the Plan, and the Confirmation Order. The interest of a Litigation Trust Beneficiar is hereby declared and shall be in all respects personal property. Except as expressly provided hereunder, a Litigation Trust Beneficiary shall have no title to, right to, possession of, management of, or control of the Litigation Trust or the Litigation Trust Assets.
2.3 Litigation Trust Interest Only. The ownership ora Litigation Trust Interest in the
Litigation Trust shall not entitle any Litigation Trust Beneficiary to any title in or to the Litigation Trust Assets or to any right to call for a parition or division of such assets or to require an accounting, except as specifically provided herein.
2.4 Evidence of Litigation Trust Interest. Ownership ofa Litigation Trust Interest in the Litigation Trust shall not be evidenced by any certificate, security, or receipt or in any other form or maner whatsoever, except as maintained on the books and records of the Litigation Trust by the Litigation Trustee Cor any agent appointed by the Litigation Trustee for purposes of maintaining a record of the Litigation Trust Beneficiaries and their respective Litigation Trust Interests in the Litigation Trust). The Litigation Trustee shall, upon written request of a holder of a Litigation Trust Interest, provide reasonably adequate documentary evidence of such holder's Litigation Trust Interest, as indicated in the books and records of The expense of
the Litigation Trust.
providing such documentation shall be borne by the requesting Litigation Trust
Beneficiary.
Litigation Trust Interests. The Litigation Trust Interests shall not be assignable or transferable, except by wil, intestate succession, or operation of law.
2.5 No Transfers of
this Agreement, the Plan, or the Confirmation Order, and no mere enumeration herein of the rights or privileges of any Litigation Trust Interest holder, shall give rise to any liability of such Litigation Trust Interest holder solely in its capacity as such, whether such liability is asserted by the Reorganzed Debtors, by creditors, or employees of the Reorganized Debtors, or by any other Person. Litigation Trust Interest holders are deemed to receive the Litigation Trust Assets in accordance with the provisions of this Agreement, the Plan, and the Confirmation Order in full satisfaction of their Allowed Claims, as applicable, without furter obligation or liability of any kind, but subject to the provisions of this Agreement.
2.6 Limited Liability. No provision of
ARTICLE II
DURATION AN TERMATION OF LITIGATION TRUST

3.1 Duration. The Litigation Trust shall be deemed effective upon the Effective Date and shall remain and continue in full force and effect until terminated as provided herein. The
Litigation Trust shall terminate (the "Termination Date") upon the occurrence of the full liquidation, administration, and distribution of
the earlier ofCa)
the Litigation Trust Assets in accordance with the Plan, the Confirmation Order, and this Agreement and the full performance of all other duties and functions of the Litigation Trustee set forth in the Plan, the Confirmation Order and
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the Effective Date, subject to one or more finite extensions, which must be approved by the Banuptcy Court pursuant to the terms set forth in the Plan within six months prior to the then~curent Termination Date and provided that the Litigation Trustee receives a favorable ruling from the Internal Revenue Service to the effect that any such extension would not adversely affect the status of the Litigation Trust as a grantor trust
this Agreement or (b) the fift aniversary of
for federal income tax purposes. Notwithstanding anything to the contrary in this Agreement, in
the Litigation Trust, and the Litigation Trustee shall, in the exercise of its reasonable business judgment and in the interests of the Litigation Trust Beneficiaries, at all times prosecute the Causes of Action in respect of the Litigation Trust Assets in a manner reasonably calculated to maximize net recoveries to the Litigation Trust Beneficiaries.
no event shall the Litigation Trustee unduly prolong the duration of 3.2 Continuance of Litigation Trust for Winding Uo. After the termination of
Litigation Trust and solely for the purpose of liquidating and winding up the affairs of
the the
Litigation Trust, the Litigation Trustee shall continue to act as such until its duties have been fully performed. Upon distribution of all the Litigation Trust Assets, the Litigation Trustee shall retain the books, records, and fies that shall have been delivered to or created by the Litigation Trustee. At the Litigation Trustee's discretion, all of such records and documents may be destroyed at any time following the date that is six years after the final distribution of Litigation Trust Assets (unless such records and documents are necessary to fulfill the Litigation Trustee's obligations pursuant to Sections 4.8(a) and 6.1 hereof) subject to the terms of any joint prosecution and common interests agreement(s) to which the Litigation Trustee may
be a par. Except as otherwise specifically provided herein, upon the final distribution of
Litigation Trust Assets, the Litigation Trustee shall be deemed discharged and have no further duties or obligations hereunder, except to account to the Litigation Trust Beneficiares as
provided in Section 4.5 hereof and as may be imposed on the Litigation Trustee by virte of
Section 6. I hereof, the Litigation Trust Interests shall be cancelled, and the Litigation Trust shall be deemed to have been dissolved.
ARTICLE iv
ADMINISTRATION OF LITIGATION TRUST

4. i Payment of Claims. Expenses. and Liabilities. Subject to the budget agreed upon
this Agreement, the the Litigation Trust: (a) to pay reasonable administrative expenses of the Litigation Trust that are incurred (including, but not limited to, any taxes imposed on the Litigation Trust or professional fees and expenses in connection with
by the Litigation Trust Advisory Board in accordance with Section 4.5 of Litigation Trustee shall expend the Cash of the administration and liquidation of the Litigation Trust Assets and preservation of
books and
records as provided in Section 3.2 hereof); (b) to satisfy other obligations or other liabilities incurred or assumed by the Litigation Trust (or to which the Litigation Trust Assets are otherwise subject) in accordance with the Plan, the Confirmation Order, this Agreement and applicable United States and non United States law or regulation (it being understood that the Litigation Trust has not assumed any obligations or liabilities of the Debtors), including fees and costs incurred in connection with the protection, preservation, liquidation, and distribution of the
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Litigation Trust Assets, the reasonable, documented out-or-pocket expenses of
the Litigation
Trust Advisory Board members, and the costs of investigating, prosecuting, and resolving the the Litigation Trust Assets; and (c) to satisfy any other obligations Causes of Action in respect of of the Litigation Trust expressly set forth in the Plan, the Confrmation Order, or this Agreement.
4.2 Funding of the Litigation Trust. On the Effective Date, (i) the Debtors shall transfer, and shall be deemed to have automatically transferred, the Litigation Trust Funding Amount and (ii) the Debtors shall transfer, and shall be deemed to have automatically transferred, the Litigation Trust Assets in accordance with Section 1.3 hereof, in each case, to the the Litigation Trust Beneficiaries. No furter amounts shall Litigation Trust for and on behalf of be paid or payable by the Debtors for any purose whatsoever. The Litigation Trust Funding Amount shall be repaid to the Reorganized Debtors from the first proceeds received by the
Litigation Trust.
4.3 Distrbutions.
(a) Generally. On the terms and subject to the conditions set forth in this Section 4.3, from the Effective Date through the Termination Date on each Distribution Date (as defined below), each holder of Litigation Trust Interests shall receive pro rata distributions of Litigation Trust Assets distributed on such Distribution Date.
Distributions. The Litigation Trustee shall make the Litigation Trust Assets Available for Distribution (as defined below) on each Periodic Distribution Date (as defined below) and on such additional dates that the Litigation Trustee, in consultation with the Litigation Trust Advisory Board, determines are appropriate from time to time (each Periodic Distrbution Date and any such additional date, a "Distribution
(b) Timing and Amount of distributions of Date"); provided, however, that the Litigation Trustee shall be entitled, with the consent of
the
Litigation Trust Advisory Board, to defer any such distribution to the next Distribution Date if Litigation Trust Assets Available for the Litigation Trustee determines that the amount of Distribution at such time is insufficient to justify the cost f effecting the distribution.
"Periodic Distribution Date" means, as applicable, (a) the first Business Day that is as soon as reasonably practicable occurring approximately ninety days after the Distribution Date, and (b) thereafter, the first Business Day that is as soon as reasonably practicable occurring
approximately ninety days afer the immediately preceding Periodic Distribution Date.
(c) Litigation Trust Assets Available for Distribution. Notwithstanding
anything in this Agreement to the contrary, the Litigation Trustee shall cause the Litigation Trust at all times to retain suffcient funds (the "Expense Reserve") as the Litigation Trustee shall determine, in consultation with the Litigation Trust Advisory Board and subject to the budget this agreed upon by the Litigation Trust Advisory Board in accordance with Section 4.5 of Agreement, are reasonably necessar for the Litigation Trust to: (i) meet contingent liabilties the Liquidation Trust Assets; (ii) make the payments and satisfy the and maintain the value of obligations and liabilities described in Section 4.1 as well as satisfy all obligations to remit amounts pursuant to applicable United States and non United States laws relating to taxes; and
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(iii) fund any other amounts as required under the Plan and as identified in the Litigation Trust budget. and fund the reasonable, documented out-or-pocket fees and expenses of the Litigation Trustee, the Litigation Trust Professionals (as defined below), and the Litigation Trust, and the reasonable, documented out-or-pocket expenses of the Litigation Trust Advisory Board members. The Litigation Trustee shall not be deemed to be an "underwiter" in connection with
its distrbution of any Litigation Trust Assets. as such term is defined in section 1145(b) of
the
Banptcy Code, and no employees, agents, or representatives of
the Litigation Trustee shall be
deemed to be a '''broker-dealer'' as such term is defined In the Securities Exchange Act of 1934,
as amended, or any rules promulgated thereunder.

"Litigation Trust Assets Available for Distribution" means the portion of Litigation Trust Assets calculated by subtracting the Expense Reserve from the then available proceeds of the Litigation Trust Assets, as determined by the Litigation Trustee in advance of each Distribution Date in consultation with the Litigation Trust Advisory Board.
Distribution of Proceeds ofthe Litigation Trust. Any Litigation (d) Priority of Trust Assets Available for Distribution shall be applied (a) first, to payor reimburse, as applicable, the reasonable, documented out-of-pocket fees, costs, expenses, and liabilities of the Litigation Trust and the Litigation Trustee, and the reasonable, documented out-of-pocket expenses of the Litigation Trust Advisory Board members as provided in Section 4.1; (b) second, to repay the Litigation Trust Funding Amount to the Reorganized Debtors and (c) third, to distributions to Litigation Trust Beneficiaries, in accordance with Section 4.3(a) of this Agreement.
the Litigation Trust Upon Termination. the Litigation Trust, the Litigation Trustee shall distribute any Litigation Trust Assets A vaIlable for Distribution not yet distrbuted from the Litigation Trust to the Litigation Trust Beneficiaries in accordance with the terms of this Agreement, the Plan, and the Confirmation Order.
(e) Distribution of Proceeds of Promptly following the termination of
(t) Location for Distributions: Notice of Change of Address. Distributions to
the Litigation Trust Beneficiaries shall be made by the Litigation Trustee to the Litigation Trust the applicable Distribution Date (a) at the addresses set forth on the Proofs of Beneficiaries as of Claim fied by such holders of Claims (or at the last known addresses of such holders of Claims ifno Proof of Claim is fied or if the Reorganized Debtors have been notified in writing ofa change of address), (b) at the addresses set forth in any written notices of address changes any related Proof of Claim, or (c) in the case delivered to the Litigation Trustee after the date of of Holders of Allowed Second Lien Lender Deficiency Claims, to the Second Lien Agent. Each Litigation Trust Beneficiary shall be responsible for providing the Litigation Trustee with timely written notice of any change in address. The Litigation Trustee is not obligated to make any effort to determne the correct address of any Litigation Trust Beneficiary.
4.4 Undeliverable Propert.
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any distribution of proceeds of
(a) If
the Litigation Trust or other Litigation
Trust Assets to a Litigation Trust Beneficiary is retued to the Litigation Trustee as
undeliverable, no fuher distribution to such Litigation Trust Beneficiary shall be made unless and until the Litigation Trustee is notified in writing of such Litigation Trust Beneficiary's thencurent address, at which time all missed distributions shall be made to such Litigation Trust
this Agreement, undeliverable distributions shall include checks sent to a Litigation Trust Beneficiary, respecting distributions to such Litigation Trust Beneficiar, which checks have not been cashed within six months following the date of issuance of such checks. Undeliverable distributions shall remain in the possession of the Litigation Trustee until the next Distribution Date that the relevant distribution becomes deliverable (in which event it shall be distributed to such Litigation Trust Beneficiary), subject to Section 4.3(b) hereof.
Beneficiar without interest. For purposes of
(b) Any Litigation Trust Beneficiary that does not assert a claim for an
the Litigation Trust or other Litigation Trust Assets the Distribution Date on which such distribution was made shall no longer have any further claim to or interest in the funds represented by such undeliverable distribution and all title to and all Litigation Trust Interests related thereto shall revert to or remain in the Litigation Trust and shall be redistributed to the remaining holders of Litigation Trust Interests in accordance with Section 4.3 hereof.
undeliverable distribution of proceeds of held by the Litigation Trust at least U days prior to the first anniversary of
4.5 Reports.
the (a) The Litigation Trustee shall deliver reports ("Reports") to members of Litigation Trust Advisory Board not later than r-i days prior to each fiscal quarer. Such Reports shall specify in reasonable detail (i) the status of the Litigation Trust Assets, including any settlements entered into by the Litigation Trust, (i) the fees and expenses of the Litigation Trust, the Litigation Trustee, and the Litigation Trust Professionals incurred and/or eared during the prior fiscal quarter, (iii) the aggregate fees and expenses of the Litigation Trust, the Litigation Trustee, and the Litigation Trust Professionals incurred and/or eared since the date of this Agreement, (iv) the amount of proceeds of the Litigation Trust
received by the Litigation Trust during the prior fiscal quarer, (v) the aggregate amount of proceeds of the Litigation Trust received by the Litigation Trust since the date of this Agreement, the Litigation Trust Assets Available for Distribution for the next (vi) the calculation of Distribution Date, including the amounts ofavaIlable proceeds of the Litigation Trust and the Expense Reserve, (vii) the aggregate amount of distributions from the Litigation Trust to Litigation Trust Beneficiaries since the date of this Agreement, and (viii) such other information as the Litigation Trust Advisory Board may reasonably request from time to time. The Litigation Trustee shall also timely prepare, fie, and distribute such additional statements, reports, and submissions (A) as may be necessary to cause the Litigation Trust and the Litigation Trustee to be in compliance with applicable law or (B) as may be otherwise reasonably requested from time to time by the Litigation Trust Advisory Board.
(b) The Litigation Trustee shall prepare and submit to the Litigation Trust Advisory Board for approval an amual plan and budget at least r-i days prior to the
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commencement of each fiscal year of
the Litigation Trust; provided, however, that the first such
report shall be submitted no later than 90 days after the Effective Date of
the Plan. Such anual
plan and budget shall set forth in reasonable detail: (i) the Litigation Trustee's anticipated actions to administer and liquidate the Litigation Trust Assets; and (ii) the anticipated expenses, including professional fees, associated with conducting the affairs of the Litigation Trust. Such
anual plan and budget shall be updated and submitted to the Litigation Trust Advisory Board
for review and approval on a quarerly basis, and each such quarerly update shall reflect the differences between the anticipated actions described in the anual report and actual operations of the Litigation Trust to date. All actions by the Litigation Trustee must be substantially consistent with the plan and budget, as updated on a quarerly basis and approved by the Litigation Trust Advisory Board; provided, however, that the Litigation Trustee may take action outside of the plan and budget with the prior approval of the Litigation Trust Advisory Board.
(c) The Litigation Trustee shall provide the Litigation Trust Advisory Board
with such other information as may be reasonably requested from time to time or on a regular basis by the Litigation Trust Advisory Board.
(d) The Litigation Truslee shall make available by delivery, by posting on a
website, or otherwise, to all Litigation Trust Beneficiaries, the Reports set forth in Section 4.5(a) above, in such form and in such detail as the Litigation Trustee deems appropriate in consultation with the Litigation Trust Advisory Board.
4.6 Exchange Act. In addition to certain requirements set forth in this Agreement, the Litigation Trust shall take such precautions as the Litigation Trustee shall deem necessary or appropriate for the Litigation Trust to avoid becoming subject to the registration requirements of the Securities Exchange Act of i 934, as amended (the "Exchange Act"); provided, however, that if the Litigation Trust becomes subject to such registration requirements, the Litigation Trustee shall cause the Litigation Trust to register pursuant to, and comply with, the applicable reporting requirements of the Exchange Act.
4.7 Fiscal Year. Except for the first and last years of year of the Litigation Trust shall be the calendar year. For the first and last years of the Litigation Trust shall be such portion of
the Litigation Trust, the fiscal the

the calendar year
Litigation Trust, the fiscal year of
that the Litigation Trust is in existence.

4.8 Books and Records. (a) The Debtors and/or Reorganzed Debtors shall deliver to and/or make available to the Litigation Trustee, and the Litigation Trustee shall retain and preserve, copies of the Debtors' and Reorganized Debtors' books, records, and fies related to the Litigation Trust Assets, including all such books, records, and fies as may be needed to investigate, prosecute, and resolve the Litigation Trust Assets held by the Litigation Trust and otherwise liquidate the Litigation Trust Assets. The Litigation Trustee shall cause the Litigation Trust to perform its obligations under any non-prosecution agreement and/or joint prosecution and common interest agreement to which the Litigation Trust has succeeded or the Litigation Trustee is a party, and shall retain or destroy copies of any information that was provided or received pursuant to the terms of any such agreement.
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the Litigation Trust and the holders of Litigation Trust Interests, books and records relating to the assets and the income of the Litigation Trust and the payment of expenses of the Litigation Trust and the Litigation Trustee, in such detail and for such period of time as may be necessary to enable it to make full and proper reports in respect thereof in accordance with the provisions of this Agreement and the Litigation applicable provisions of law. The Litigation Trustee shall provide any member of Trust Advisory Board or, at its expense, any other Litigation Trust Beneficiar, with access to such books and records during normal business hours as may be reasonably requested with advance notice.
(b) The Litigation Trustee shall maintain, in respect of
4.9 Cash Payments. All distributions required to be made by the Litigation Trustee to the holders of Litigation Trust Interests shall be made in Cash denominated in United States
dollars by checks drawn on a United States domestic ban selected by the Litigation Trustee or,
at the option of
the Litigation Trustee, by wire transfer from a United States domestic ban
selected by the Litigation Trustee; provided, however, that Cash payments to foreign holders of the Litigation Trustee, in such funds and Litigation Trust Interests may be made, at the option of the jurisdiction. All Cash of by such means as are necessary or customar in a paricular foreign Litigation Trust shall be maintained in an Approved Financial Institution.
4.10 Insurance. The Litigation Trust shall maintain customar insurance coverage for the Litigation Trust Advisory Board, and the Litigation Trustee, the members of the Litigation Trust on and any such other Person serving as an adminstrator and overseer of after the Effective Date as the Litigation Trustee determines to be reasonably appropriate in consultation with the Litigation Trust Advisory Board.
the protection of
TAX
ARTICLE V MATTERS
5.1 Tax Treatment. The Debtors, the Reorganized Debtors, the Litigation Trustee, Litigation Trust Interests will treat the Litigation Trust as a "liquidating trust" and the holders of
withn the meanng of of
Treasur Regulation Section 301.7701-4(d) and any comparable provision
state or local law. The Litigation Trust shall be considered a "grantor" trust and is intended to comply with the requirements of a liquidating trust, which is a grantor trust, as set forth in Revenue Procedure 94-45, 1994-2 C.B. 684. Consistent with this treatment, for all federal, state, and local income tax purposes, each holder of an Allowed Claim in Classes C- 1, C-2, and C-3, as applicable, shall be treated as transferring all of such Claim to the Debtors in exchange for such the holder's share of the Litigation Trust Assets and then as transferring the holder's share of Litigation Trust Assets (subject to such liabilities) to the Litigation Trust in exchange for the Litigation Trust Interests in the Litigation Trust holder's Litigation Trust Interest. The holders of the Litigation Trust, wil be treated solely for tax purposes as the grantors and deemed owners of and the Debtors, the Reorganized Debtors, the Litigation Trustee, and the Litigation Trust the Litigation Trust Assets (and liabilities) as of Beneficiaries wil use consistent valuations of the Effective Date in accordance with Section l.3(d) hereof. The Litigation Trustee shall be authorized to take any action necessary to maintain compliance with this Treasury Regulation or its successor that does not contradict the terms of this Agreement, the Plan, or the Confirmation
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Order. In the event the Litigation Trust shall fail or cease to qualify as a liquidating trust in accordance with Treasury Regulations Section 301.7701-4(d), the Litigation Trustee shall take such action as it shall deem appropriate to have the Litigation Trust classified as a partnership for
federal tax puroses under Treasury Regulations Section 301.7701-3 (but not a "publicly traded
parership" subject to Section 7704(a) orthe Internal Revenue Code of 1986, as amended (the
necessary, creating or converting it into a Delaware limited liabilty parership or limited liability company that is so classified.
"Tax Code")), including, if 5.2 Tax Reporting, The "taxable year" of year" as those terms are defined in Section 441 of
the Litigation Trust shall be the "calendar
the Tax Code. The Ltigation Trustee shall file statements for the Litigation Trust as a grantor trust pursuant to Treasur Regulation Section
1.671 -4(a). The Litigation Trustee shall anually, within 75 days after the end of each calendar year, send to each record holder of a Litigation Trust Interest a separate statement setting forth the holder's share or items of income, gain, loss, deduction, or credit for such year and wil instruct all such holders to report such items on their federal income tax returns for such year. Such reporting shall also occur within 75 days of the dissolution of the Litigation Trust. The Litigation Trust's taxable income, gain, loss, deduction, or credit wil be allocated (subject to provisions of the Plan relating to Disputed Claims and Section 5.4 hereof) to the Litigation Trust
Beneficiares in accordance with their relative Litigation Trust Interests in the Litigation Trust.
5.3 Tax Withholdings. The Litigation Trustee may withhold and pay to the appropriate taxing authority all amounts required to be witheld pursuant to the Tax Code, or any provision of any foreign, state, or local tax law with respect to any payment or distribution to the Litigation Trust Beneficiaries. All such amounts withheld, and paid to the appropriate taxing authority, shall be treated as amounts distributed to such Litigation Trust Beneficiaries for all purposes of this Agreement. The Litigation Trustee shall be authorized to collect such tax information from the Litigation Trust Beneficiaries (including, without limitation, social security numbers or other tax identification numbers) as it in its sole discretion deems necessary to effectuate the Plan, the Confrmation Order, and this Agreement, prior to making any distribution. The Litigation Trustee may refuse to make a distribution to any Litigation Trust Beneficiar that fails to furnish such information in a timely fashion, until such information is delivered; provided, however, that upon the Litigation Trust Beneficiary's delivery of such information, the Litigation Trustee shall make such distribution to which the Litigation Trust Beneficiar is entitled, without any interest or income earned thereon.
Litigation Trust Assets and any other income or gain of the Litigation Trust allocable to Disputed Claims, the Litigation Trustee shall cause the Litigation Trust to pay any taxes imposed on the Litigation Trust by any United States federal, state, or local, or any non United States taxing authority. The amount of such taxes paid by the Litigation Trust with respect to a Disputed Claim, (i) wil reduce the amount distributed with respect to such Disputed Claim to the extent it becomes an Allowed Claim, and (ii) to the extent such Disputed Claim does not become an Allowed Claim, will reduce distributions ratably to aU Holders in the same Class as such Disputed Claim; provided, however, that any taxes that reduce distributions pursuant to the foregoing clauses (i)
5.4 Disputed Claims Tax Matters. With respect to any proceeds of
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this Agreement, be treated as amounts distributed to those Holders of Claims whose distributions are so reduced.
and (ii) shall, for all purposes of
5.5 Foreign Tax Matters. The Litigation Trustee shall take all reasonable steps, including the filing of any necessary documentation or elections with any non United States tax authority, to minimize, under non United States law: (i) the liabilities of the Litigation Trust and the Litigation Trust Beneficiaries for non United States taxes, interest, penalties, and other amounts; (ii) the obligations of the Litigation Trust to file non United States tax or information returns or other documentation; and (ii) the obligations of the Litigation Trust to withhold and remit amounts to any non United States taxing authority in respect of payments or distributions of income or propert by the Litigation Trust. The Litigation Trustee shall duly comply on a timely basis with all obligations, and satisfy all liabilities, imposed on the Litigation Trustee or the Litigation Trust under non United States law relating to taxes. Without the consent of the members of the Litigation Trust Advisory Board, the Litigation Trustee, or any other legal representative of the Litigation Trust, shall not distribute Litigation Trust Assets or proceeds thereof without having first obtained all certificates required to have been obtained under applicable non United States law relating to taxes.
ARTICLE VI POWERS OF AND LIMITATIONS ON THE LITIGATION TRUSTEE

the Litigation Trustee. The Litigation Trustee shall have only such rights, powers, and privileges expressly set forth in the Plan and this Agreement, and such other powers reasonably incident thereto, and as otherwise provided by applicable law. Subject to the other provisions herein, including, without limitation, the provisions relating to the Litigation
6.1 Powers of Trust Advisory Board in Section 6.3, and subject to Article IV.P. of
the Plan, the Litigation
Trustee shall be expressly authorized to undertake the following actions, in the Litigation judgment, in the best interests of Trustee's good faith the Litigation Trust Beneficiaries and to maximize net recoveries therefor:
(a) Hold, administer, prosecute, settle, or otherwse compromise or abandon
Litigation Trust Assets, including, without limitation, take any action with respect to appeals, counterclaims, and defenses of, or with respect to, such Causes of Action or otherwise in respect of the Litigation Trust Assets;
Causes of Action in respect of
(b) Liquidate the Litigation Trust Assets;
connection with, the liquidation of
(c) Execute any documents and take any other actions related to, or in the Litigation Trust Assets and the exercise ofthe Litigation
Trustee's powers granted herein;
Cd) Hold legal title to any and all rights ofthe Litigation Trust Beneficiaries in, to or arsing from the Litigation Trust Assets;
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(e) Protect and enforce the rights to the Litigation Trust Assets vested in the
Litigation Trustee by this Agreement by any method deemed reasonably appropriate, including, without limitation, by judicial proceedings or pursuant to any applicable bankruptcy, insolvency, moratorium, or similar law and general principles of equity;
the Litigation Trust Assets to the appropriate (f) Make distributions of Litigation Trust Beneficiaries in accordance with this Agreement, the Plan, and the Confirmation
Order;
(g) Prepare and file, if necessar, any and all tax returns with respect to the
Litigation Trust and pay taxes properly payable by the Litigation Trust, if any;
(h) Prepare and make all necessary filings in accordance with any applicable
law, statute, or regulation, including, but not limited to, the Exchange Act;
(i) Determine and satisfy from the Litigation Trust Assets any and all taxes
and ordinary course liabilities, including reasonable professional fees and expenses, created, incurred or assumed by the Litigation Trust;
u) Retain, as an expense of Professionals as may be appropriate to perform the duties required of
the Litigation Trust, Litigation Trust the Litigation Trustee
hereunder or in the Plan;

(k) Invest monies received by the Litigation Trust or Litigation Trustee or
otherwise held by the Litigation Trust or Litigation Trustee in accordance with Section 6.6 hereof, limited, however, to such investments that are consistent with the Litigation Trust's status
as a liquidating trust within the meaning of
Treasury Regulation Section 30L.7701-4(d);
(1) In the event that the Litigation Trustee determines that the Litigation Trust
Beneficiaries or the Litigation Trust may, wil or have become subject to adverse tax consequences, take such actions that wil, or are intended to, alleviate such adverse tax consequences;
liquidating trust within the meaning of
(m) In the event that the Litigation Trust shall fail or cease to qualify as a Treasury Regulations Section 301.7701-4(d), take any
and all necessar actions as it shall deem appropriate to have the Litigation Trust classified as a
parership for federal tax purposes under Treasury Regulations Section 301.7701-3 (but not a
"publicly traded parnership" subject to Section 7704(a) ofthe Tax Code), including, if necessary, creating or converting the Litigation Trust into a Delaware limited liabilty parnership or limited liability company that is so classified;
which the Litigation Trust or the Litigation Trust Beneficiaries hold the beneficial or ownership interests, as applicable;
(n) Create sub-trusts or title vehicles of
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(0) Provide periodic reports and updates regarding the status of the
adminstration of
the Litigation Trust in accordance with Section 4.5;

(P) Purchase customary insurance coverage in accordance with Section 4.10
hereof;
(q) Perform such functions and take such actions with respect to the Litigation Trust as are provided for or permitted in the Plan, the Confirmation Order, this Agreement or any
other agreement executed pursuant to the Plan;
the forgoing actions, and execute any documents relating the Litigation Trust; and thereto, in the Litigation Trustee's own name, on behalf of
(r) Take any of
(s) Take any other actions that the Litigation Trustee, in consultation with the Litigation Trust Advisory Board, deems necessary and appropriate to carr out the purposes of
this Agreement.
the Plan, neither the Litigation Trust nor the Litigation Trustee shall have the right to commence any litigation against the Rhodes Entities until the Bankrptcy Court rules on the allowance of the Rhodes Entities Claims set forth in Proofs of Claim, included in the Debtors' Schedules or otherwise set forth in the Mediation Tenu Sheet. Notwithstanding anything to the contrary set forth herein or in the Plan,
For the avoidance of doubt, in accordance with Aricle IV.P. of
the Reorganzed Debtors shall not pursue Claims under Bankruptcy Code section 547 against
any Creditor whose Claim is purchased in accordance with Article VII.G.

6.2 Establishment of
the Litigation Trust Advisory Board.
(a) The Litigation Trust Advisory Board shall have I 1 members and be
comprised of
the Persons identified on, and in accordance with the tenus of, Annex (-i hereto.
(b) As soon as practicable after the creation of
the Litigation Trust, the
Litigation Trust Advisory Board shall adopt bylaws approved by all of consistent with the tenus and conditions of
the members that are this Agreement and include such other provisions as
the Litigation Trust Advisory Board deems necessar or appropriate. Such bylaws may include,
but shall not necessarly be limited to, guidelines for. among other matters, paricipation by Litigation Trust Advisory Board members in meetings and for removal of Litigation Trust Advisory Board members.
(c) Each Litigation Trust Advisory Board member shall designate (i) one or
more representatives who shall attend meetings of and paricipate in other activities of
the
paricipate in other activities of
Litigation Trust Advisory Board and (ii) an alternate representative to attend meetings and the Litigation Trust Advisory Board when the representatives designated pursuant to clause (i) above are unavailable to paricipate in such meetings and activities.
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(d) The purose of liquidation and distribution of accordance with the terms of
the Litigation Trust Advisory Board shan be to oversee the the Litigation Trust Assets by the Litigation Trustee, in this Agreement, the Plan, and the Confrmation Order.
the Litigation Trust Advisory Board shall the non~recused members of the Litigation Trust Advisory Board then consist ora majority of serving; provided, however, that, for purposes of determining whether a quorum is present at such a meeting, a member of the Litigation Trust Advisory Board shall be deemed present fa representative of the member is attending in person, by telephone, or by proxy.
(e) A quorum for meetings of
(f) Except as expressly provided herein, the affrmative vote of a majority of
the Litigation Trust Advisory Board with respect to any matter that requires the determination, consent, approval, or agreement of the Litigation Trust Advisory Board. In all matters submitted to a vote of the Litigation Trust Advisory Board, each Litigation Trust Advisory Board member shall be entitled to cast one vote, which vote shall be cast personally by such Litigation Trust Advisory Board member or by proxy. In a matter in which the Litigation Trustee canot obtain direction or authority from the Litigation Trust Advisory Board, the Litigation Trustee may file a motion, on notice to the Litigation Trust Advisory Board members, requesting such direction or authority from the Banuptcy Court.
the non-recused members of the Litigation Trust Advisory Board shall be the act of
(g) A Litigation Trust Advisory Board member and its representative shall be recused from the Litigation Trust Advisory Boards deliberations and votes on any matters as to which such member has a conflicting interest. If a Litigation Trust Advisory Board member or its representative does not recuse itself from any such matter, that Litigation Trust Advisory Board member and its representative may be recused from such matter by the majority vote of the remainig members of the Litigation Trust Advisory Board that are not recused from the matter. In such event, such recused member of the Litigation Trust Advisory Board can the Litigation Trust Advisory Board with challenge such decision of the non-recused members of the Banuptcy Cour, which shall have jurisdiction under the Plan to adjudicate such matter.
(h) Litigation Trust Advisory Board members shall be reimbursed by the
Litigation Trust for reasonable, documented out-of-pocket business expenses, other than attorneys' and other professionals' fees, incured in connection with their service on the Litigation Trust Advisory Board. Litigation Trust Advisory Board members shall not receive any other compensation from the Litigation Trust for their services as Litigation Trust Advisory Board members.
6.3 Approval of
the Litigation Trust Advisory Board. Notwithstanding anything in
ths Agreement to the contrar, the Litigation Trustee shall submit to the Litigation Trust
Advisory Board for its review and prior approval the following matters and any other matters that the Litigation Trust Advisory Board may direct the Litigation Trustee to submit for its the Litigation Trust Advisory Board pursuant approval or that expressly require the approval of to the terms of this Agreement:
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(a) Any proposed final settlement or disposition in connection with a greater than $1,000,000; provided, that the Litigation Trustee will be authorized and empowered to take such action without any further (i)
Litigation Trust Asset that has an asserted value of action by the Litigation Trust Advisory Board or (ii) order of (10) Business Days written notice to the members of
the Banptcy Court, after at least
either (A) no objection is received from any member of
the Litigation Trust Advisory Board and the Litigation Trust Advisory Board or (B) subject to a further written agreement between the Litigation Trustee and the Litigation Trust
Advisory Board;
(b) Any transaction to sell, assign, transfer, or abandon any other Litigation
Trust Assets in which the amount of the transaction exceeds such amount as may be determined from time to time by the Litigation Trust Advisory Board;
(c) Determinations of the amounts of the Expense Reserve and the Litigation
Trust Assets Available for Distribution;

the date and amount of all distributions made on dates (d) Determinations of other than a Distribution Date and determinations to defer distributions otherwse required on a Distribution Date;
(e) Any determinations to retain Litigation Trust Professionals (as defined

beiow);
(f) Any detennnations to initiate lawsuits or proceedings;

(g) Any actions that would give rise to or alleviate adverse ta consequences
to the Litigation Trust or the Litigation Trust Beneficiaries; and
(h) The reports and budgets described in Section 4.5(a), (b) and (d).
the Litigation Trust Advisory Board to any proposed action ofthe Litigation Trustee with respect to the Litigation Trust Assets within the time periods prescribed herein, and the Litigation Trustee is not authorized to settle as a result of such objection, then (i) if the Litigation Trust Advisory Board member(s) withdraws for any reason its objection to the proposed action, the Litigation Trustee may pursue the proposed the Litigation Trust Advisory action in accordance with the procedures outlined above or (ii) if Board member(s) does not withdraw its objection, the Litigation Trustee will have the option of the Litigation Trust Advisory (A) foregoing the proposed course of action that is the subject of Board member(s)' objection, (B) modifying the proposed course of action in a way that results in the Litigation Trust Advisory Board member(s) withdrawing its objection, or (C) following five
If any objection is interposed by a member of Business Days' written notice to the Litigation Trust Advisory Board, seeking an order of
the
Bankrptcy Court authorizing the Litigation Trustee to pursue the proposed course of action over the Litigation Trust Advisory Board member(s)' objection.
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6.4 Limitations on Litigation Trustee. No par of the Litigation Trust Assets shall he used or disposed of by the Litigation Trustee in furterance of any trade or business. The Litigation Trustee shall, on hehalfoftbe Litigation Trust, hold the Litigation Trust out as a trust in the process ofliquidation and not as an investment company. The Litigation Trustee shall not engage in any investments or activities inconsistent with the treatment of the Litigation Trust as a liquidating trst within the meaning of Treasury Regulations Section 301.7701-4(d) while the Litigation Trust qualifies as a liquidating trust; provided, however, that if the Litigation Trust (or a Delaware limited liabilty or limited liability parnership into which it shall he converted) shall
be classified as a parership for federal tax purposes under Treasury Regulations 301.7701-3
the Tax Code), the foregoing restrictions shall not apply. The Litigation Trustee shall be restricted to the liquidation of the Litigation Trust Assets on behalf, and for the benefit, of the Litigation Trust Beneficiaries and the distribution and application of Litigation Trust Assets for the purposes set forth in this
(but not a "publicly traded parnership" subject to Section 7704(a) of Agreement, the Plan, and the Confirmation Order, and the conservation and protection of Litigation Trust Assets and the administration thereof in accordance with the provisions of
the this
Agreement, the Plan, and the Confrmation Order.

6.5 Agents and Professionals: Employees. The Litigation Trust may, but shall not be required to, from time to time enter into contracts with, consult with and retain, as approved by the Litigation Trust Advisory Board, independent contractors, including attorneys, accountants,
appraisers, disbursing agents or other paries deemed by the Litigation Trustee to have qualifications necessary or desirable to assist in the proper administration of the Litigation Trust, including any estate professionals retained during the bankptcy cases as may be appropriate in the circumstances (collectively, "Litigation Trust Professionals"). The Litigation Trustee shall pay the reasonable fees and expenses of the Litigation Trust Professionals out of the Litigation
Trust Assets in the ordinary course of business without the need for approval of
the Bankruptcy
Court. The Litigation Trust may, but shall not be required to, from time to time, employ Litigation Trust Professionals in such capacities as may be approved by the Litigation Trust Advisory Board. In addition, the Litigation Trust may enter into an agreement with the Debtors to utilize the services of one or more employees of the Debtors.
Litigation Trust Monies. The Litigation Trustee shall, as approved by the Litigation Trust Advisory Board, invest the proceeds of the Litigation Trust received by the Litigation Trustee or otherwise held by the Litigation Trustee in highly-rated short-term investments of which the length of term shall be consistent with the obligations to pay costs, expenses, and other obligations and make distributions under Article iv ofthIs Agreement, which investments shall consist of (a) short-term investments issued or guaranteed by the United States or by a deparment, agency, or instrmentality of the United States, (b) other short-term instruments of the highest credit rating available of two nationally recognized rating agencies, or (c) other short-term investments approved by the Litigation Trust Advisory Board.
6.6 Investment of
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ARTICLE VII LITIGATION TRUSTEE I LITIGATION TRUST ADVISORY BOARD

7. i Generallv. The Litigation Trustee shall exercise such of the rights and powers
vested in it by this Agreement, the Plan and the Confirmation Order, and use the same degree of care and skil in its exercise as a prudent person would exercise or use under the circumstances in the conduct of its own affairs. No provision of this Agreement, the Plan or the Confinnation Order shall be construed to relieve the Litigation Trustee from liabilty for its own gross negligence, fraud, or wilful misconduct, except that the Litigation Trustee shall not be liable for any error of judgment or any action taken in good faith in reliance upon the advice of professionals retained by the Litigation Trustee in accordance with this Agreement.
7.2 Reliance bv Litigation Trustee. Except as otherwise provided in this Agreement,
the Plan or the Confirmation Order:

(a) The Litigation Trustee may rely and shall be protected in acting upon any
resolution, statement, instrument, opinion, report, notice, request, consent, order, or other paper or document reasonably believed by the Ltigation Trustee to be genuine and to have been signed
or presented by the proper pary or paries; and
(b) The Litigation Trustee may absolutely and uncondtiona1ly presume that any
other paries purorting to give any notice of instrctions in wrting has been duly authorized to do
so, and may rely on such notice; and

(c) Persons (including any Litigation Trust Professionals retained in
accordance with ths Agreement) engaged in transactions with the Litigation Trustee shall
look only to the Litigation Trust Assets to satisfy any liability incurred by the Litigation Trustee to such person in carrying out the terms of this Agreement, the Plan, or the Confrmation Order, and the Litigation Trustee shall have no personal or individual obligation to satisfy any such liability.
7.3 Liability to Third Persons. No Litigation Trust Beneficiary shall be subject to any
personal liability whatsoever, in tort, contract, or otherwise, to any person in connection with the Litigation Trust Assets or the affairs of the Litigation Trustee. The Litigation Trustee, the Litigation Trust Professionals, and the members of the Litigation Trust Advisory Board shall not be subject to any personal liabilty whatsoever, in tort, contract, or otherwise, to any person in connection with the Litigation Trust Assets or the affairs of the Litigation Trust, except for its own gross negligence, fraud, or willful misconduct, and all such persons shall look solely to the Litigation Trust Assets for satisfaction of claims of any nature arising in connection with affairs the Litigation Trust. Other than as set forth in the Plan or in the Confirmation Order, nothing of in this Section 7.3 shall be deemed to release any Litigation Trust Beneficiary from any actions or omissions occurring prior to the Effective Date.
7.4 Nonliabilty of Litigation Trustee for Acts of
Others. Nothing contained in this
Agreement, the Plan, or the Confination Order shall be deemed to be an assumption by the
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Litigation Trustee of any of the liabilities, obligations, or duties of the Debtors or Litigation Trust Beneficiaries and shall not be deemed to be or contain a covenant or agreement by the Litigation Trustee to assume or accept any such liability, obligation, or duty. Any successor Litigation Trustee may accept and rely upon any accounting made by or on behalf of any predecessor Litigation Trustee hereunder, and any statement or representation made as to the assets comprising the Litigation Trust Assets or as to any other fact bearing upon the prior administration of the Litigation Trust, so long as it has a good faith basis to do so. A Litigation Trustee shall not be liable for having accepted and relied in good faith upon any such accounting, statement, or representation if it is later proved to be incomplete, inaccurate, or untrue. A Litigation Trustee or successor Litigation Trustee shall not be liable for any act or omission of any predecessor Litigation Trustee, nor have a duty to enforce any claims against any predecessor Litigation Trustee on account of any such act or omission, unless directed to do so by ihe Litigation Trust Advisory Board.
7.5 Indemntv. The Litigation Trustee, the members of the Litigation Trust Advisory Board, and their respective agents, employees, offcers, directors, professionals, attorneys, accountants, advisors, representatives, and principals (collectively, the "Indemnified Paries")
shall be indemnified and held harless by the Litigation Trust, to the fullest extent permitted by
law, solely from the Litigation Trust Assets, including any insurance obtained by the Litigation Trust for such purposes, for any losses, claims, damages, liabilities, and expenses, including, without limitation, reasonable attorneys' fees, disbursements, and related expenses which the Indemnified Parties may incur or to which the Indemnified Paries may become subject in connection with any action, suit, proceeding, or investigation brought or threatened against one the Litigation Trustee or more of the Indemnified Parties on account of the acts or omissions of or the members of the Litigation Trust Advisory Board solely in their capacity as such; orovided,
however, that the Litigation Trust shall not be liable to indemnify any Indemnified Part for any
act or omission constituting gross negligence, fraud, or wilful misconduct. Notwithstanding any provision herein to the contrary, the Indemnified Paries shall be entitled to obtain advances from the Litigation Trust to cover their reasonable expenses of defending themselves in any action brought against them as a result of the acts or omissions, actual, or alleged, of an Indemnified
Par in its capacity as such; provided, however, that the Indemnifed Paries receiving such
advances shall repay the amounts so advanced to the Litigation Trust upon the entry of a Final Order finding that such Indemnified Paries were not entitled to any indemnity under the provisions of this Section 7.5. The foregoing indemnity in respect of any Indemnified Pary shall survive the termination of such Indemnified Part from the capacity for which they are indemnfied.
7.6 Compensation and Expenses. The Litigation Trustee shall receive fair and reasonable compensation for its services in accordance with the compensation schedule attached
as ( ) hereto. The Litigation Trustee shall be entitled to reimburse itself and the
Litigation Trust Professionals from the Litigation Trust Assets on a monthly basis for all
reasonable out-of-pocket expenses actually incurred by it in the performance of
its duties in
accordance with this Agreement, and, when due, professionals' fees in accordance with the terms of such Litigation Trust Professionals' retention.
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ARTICLE VII SUCCESSOR LITIGATION TRUSTEES

8.1 Resignation. The Litigation Trustee may resign from the Litigation Trust by to each member of the Litigation Trust Advisory Board. Such resignation shall become effective on the later to occur of (a) the date specified in such written notice or (b) the effective date of the appointment of a successor Litigation Trustee in accordance with Section 8.4 hereof and such successor's acceptance of such appointment in accordance with Section 8.5 hereof.
8.2 RemovaL. The Litigation Trustee may be removed, with or without cause, by an
afrmative vote of66.66% of the members of the Litigation Trust Advisory Board. Such removal shall become effective on the date specified in such action by the Litigation Trust
giving at least 30 days prior wrtten notice thereof
Advisory Board.
Resignation or RemovaL. The resignation, removal, incompetency, bankruptcy, or insolvency of the Litigation Trustee shall not operate to terminate the Litigation Trust or to revoke any existing agency created pursuant to the terms of this Agreement, the Plan, or the Confirmation Order or invalidate any action theretofore taken by the Litigation Trustee. All fees and expenses incurred by the Litigation Trustee prior to the resignation, incompetency, or removal of the Litigation Trustee shall be paid from the Litigation Trust Assets, unless such fees and expenses are disputed by (a) the Litigation Trust Advisory Board or (b) the successor Litigation Trustee, in which case the Bankrptcy Court shall resolve the dispute and any disputed fees and expenses of the predecessor Litigation Trustee that are subsequently allowed by the Banuptcy Court shall be paid from the Litigation Trust Assets. In the event of the resignation or removal of the Litigation Trustee, such Litigation Trustee shall: (i) promptly execute and deliver such documents, instruments, and other writings as may be reasonably requested by the successor Litigation Trustee or directed by the Bankptcy Court to effect the termination of such Litigation Trustee's capacity under this Agreement; (ii) promptly deliver to the successor Litigation Trustee all documents, instruments, records, and other writings related to the Litigation Trust as may be in the possession of such Litigation Trustee; provided, however, that such Litigation Trustee may retain one copy of each of such documents for its purposes, subject to the terms of any joint prosecution and common interest agreement to which the Litigation Trustee is a pary; and (iii) otheiwise assist and cooperate in effecting the assumption of its obligations and fuctions by such successor Litigation Trustee.
8.3 Effect of 8.4 Appointment of incompetency, bankruptcy, or insolvency of Successor. In the event of
the resignation, removal,
the Litigation Trustee, a vacancy shall be deemed to the Litigation Trust Advisory Board. In the event that a successor Litigation Trustee is not appointed within 30 days after the date of such vacancy, the Bankruptcy Court, upon its own motion or the motion of a the Litigation Trust Advisory Board, shall appoint a Litigation Trust Beneficiar or member of successor Litigation Trustee.
exist and a successor shall be appointed by the affrmative vote of 66.66% of
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8.5 Acceptance of Appointment by Successor Litigation Trustee. Any successor
Litigation Trustee appointed hereunder shall execute an instrument accepting its appointment
and shall deliver one counterpar thereof to the Bankruptcy Court for filing and, in case of
the
Litigation Trustee's resignation, to the resigning Litigation Trustee. Thereupon, such successor Litigation Trustee shall, without any further act, become vested with all the liabilties, duties, powers, rights, title, discretion, and privileges of its predecessor in the Litigation Trust with like effect as if originally named Litigation Trustee and shall be deemed appointed pursuant to Banplcy Code section 1l23(b)(3)(B). The resignng or removed Litigation Trustee shall duly assign, transfer, and deliver to such successor Litigation Trustee all propert and money held by such retiring Litigation Trustee hereunder and shall, as directed by the Bankruptcy Court or reasonably requested by such successor Litigation Trustee, execute and deliver an instrument or instruments conveying and transferring to such successor Litigation Trustee upon the Litigation Trust herein expressed, all the liabilties, duties, powers, rights, title, discretion, and privileges of such resigning or removed Litigation Trustee.
ARTICLE ix
MISCELLANEOUS PROVISIONS
accordance with the laws of
9.1 Governing Law. This Agreement shall be governed by and construed in New York (without reference to conflcts oflaw).
the State of
9.2 Jurisdiction. Subject to the proviso below, the parties agree that the Bankrptcy
Court shall have exclusive jurisdiction over the Litigation Trust and the Litigation Trustee, including, without limitation, the administration and activities of the Litigation Trust and the Litigation Trustee; provided, however, that notwithstanding the foregoing, the Litigation Trustee shall have power and authority to bring any action in any court of competent jurisdiction to prosecute any Causes of Action in respect of the Litigation Trusts Assets.
9.3 Severability. In the event any provision of thereof
this Agreement or the application
to any person or circumstances shall be determined by Final Order to be invalid or unenforceable to any extent, the remainder of this Agreement or the application of such provision to persons or circumstances or in jurisdictions other than those as to or in which it is held invalid or unenforceable, shall not be affected thereby, and each provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.
9.4 Notices. Any notice or other communication required or permitted to be made
under this Agreement shall be in writing and shall be deemed to have been suffciently given, for all puroses, if delivered personally or by telex, facsimile, or other telegraphic means, sent by nationally recognzed overnight delivery service, or mailed by first-class maiL. The date of
receipt of such notice shall be the earliest of (a) the date of actual receipt by the receiving par,
the personal delivery (or refusal upon presenlation for delivery), (c) the date of (b) the date of transmission confirmation, or (d) three Business Days after service by first class mail, to the receiving party's below addressees):
(i) fto the Litigation Trustee, to:
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PRELIMINARY DRAFT SUBJECT TO MODiFICATION FINAL VERSION MUST BE ACCEPTABLE TO FIRST LIEN STEERING COMMITTEE
r
(ii) fto a member of
the Litigation Trust Advisory Board, to the
address set fort on r 1, or such other address as may be
provided to the Litigation Trustee by such member of the Litigation Trust Advisory Board.
(iIi) if
to any Litigation Trust Beneficiary, to the last known address of such Litigation Trust Beneficiar according to the Litigation Trustee's records; and
to the Reorganized Debtors, to:
r
1
(iv) if
with copy to:

r
1
9.5 Headings. The headings contained in ths Agreement are solely for convenience of reference and shall not affect the meaning or interpretation of this Agreement or of any term or provision hereof.
this Agreement are intended to supplement the terms provided by the Plan and the Confirmation Order. Accordingly, in the this Agreement, on the one event of any direct conflct or inconsistency between any provision of the Plan and the Confirmation Order, on the other hand, the hand, and the provisions of
9.6 Plan and Confrmation Order. The terms of provisions of
the Plan and the Confrmation Order, as applicable, shall govern and control.
9.7 Cooperation. The Debtors and/or the Reorganzed Debtors shall turn over or
otherwse make available to the Litigation Trustee at no cost to the Litigation Trust or the
Litigation Trustee, copies of all books and records reasonably required by the Litigation Trustee
to car out its duties hereunder, and agree to otherwise reasonably cooperate with the Litigation
Trustee in carrying out its duties hereunder.

9.8 Entire Agreement. This Agreement and the Exhbits and Annexes attached hereto
contain the entire agreement between the paries and supersede all prior and contemporaneous agreements or understandings between the parties with respect to the subject matter hereof. To the extent there is inconsistency between this Agreement and the Plan, the Plan shall control; provided, however, that the Confirmation Order shall control over the Plan.
9.9 Amendment. This Agreement may be amended by (a) order of Cour or (b) approval by the Litigation Trustee and all members of Board; provided, however, that the approval of
the Bankruptcy the Litigation Trust Advisory the Banptcy Court shall be required for any
the Plan or the
changes or amendments to this Agreement that are inconsistent with the terms of
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PRELIMINARY DRAFT TO MODIFICATION SUBJECT FINAL VERSION MUST BE ACCEPTABLE TO FIRST LIEN STEERING COMMITTEE
Confirmation Order. In the event that the Litigation Trust shall fail or cease to qualify as a liquidating trust in accordance with Treasury Regulations Section 301.7701-4(d), this Agreement may be amended by the Litigation Trustee to the extent necessar for the Litigation Trustee to take such action as it shall deem appropriate to have the Litigation Trust classified as a partnership for federal tax purposes under Treasury Regulations Section 301.7701-3 (but not a "publicly traded parnership" subject to Section 7704(a) of the Tax Code), including, if necessary, creating or converting it into a Delaware limited liability partnership or limited liability company that is so classified.
9.10 Meanings of Other Terms. Except where the context otherwise requires, words
importing the masculine gender include the feminine and the neuter, if appropriate, words importing the singular number shall include the plural number and vice versa and words importing persons shall include firms, associations, corporations, and other entities. All references herein to Aricles, Sections, and other subdivisions, unless referring specifically to the
Plan or provisions of
the Banuptcy Code, the Bankptcy Rules, or other law, statute or
regulation, refer to the corresponding Aricles, Sections, and other subdivisions of this Agreement, and the words herein and words of similar import refer to this Agreement as a whole and not to any paricular Article, Section, or subdivision of this Agreement. The term "including" shall mean "including, without limitation."
9.1 i Counterpars. This Agreement may be executed in any number of counterpars,

each of
which shall be deemed an original, but such counterpars shall together constitute but one
and the same instruent. A facsimile or electronic mail signature of any par shall be
considered to have the same binding legal effect as an original signature.
(Remainder of Page Blank - Signature Page Follows)
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IN WITNESS WHREOF, the parties hereto have executed this Agreement or caused ths Agreement to be duly executed by their respective offcers, representatives, or agents, effective as of the date first above written.
RHODES COMPANIES LLC, on its own behalf as a Debtor and a Reorganized Entity and on behalf of each other Debtor and Reorganized Entity
1,a5 the
Reorganized Debtor
By: Name: Title:
By:
Name: Title:
1, as Litigation Trustee
By:
Name: Title:
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APACHE FRANUNG, LLC
BATCA VE, LP
By: Name: Title:
By:
Name: Title:
BRAVO INC.
C&J HOLDINGS, INC.
By: By:
Name: Title:
Name: Title:
CHAKLINE, LP
ELKHORN INVSTMENTS, INC.
By:
By:
Name: Title:
Name: Title:
ELKHORN PARTNERS, A NEVADA LINUTED P ARTNERSIDP

By:
GERONIMO PLUMBING, LLC

By:
Name: Title:
Name: Title:
GLYNDA, LP
GUNG-HO CONCRETE, LLC

By:
By:
Name: Title:
Name: Title:
27
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HERITAGE LAN COMPANY, LLC

By:
JACKKIFE, LP
By:
Name: Title:
Name: Title:
JARUPALLC
By:
OVERFLOW, LP
By:
Name:
Tite:
PARCEL 20 LLC
By:
Name: Title:
PINNACLE GRADING, LLC

By:
Name: Title:
Name: Title:
RHODES ARIZONA PROPERTIES, LLCO RHODES DESIGN AND DEVELOPMENT CORP.O o o o o o

By: Name: Title:
By:
Name:
Title: 0
o o
RHODES HOMES ARIZONA, LLC
o o
RHODES RANCH GENERAL PARTNERSIDP
o o o
By:
o o
By: Name: Title:
Name: Title:
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RHODES RANCH GOLF AND COUNTRY RHODES REALTY, INC. CLUB D

D D D D
By: Name: Title:
By:
Name: Title:
six FEATHERS HOLDINGS, LLC

D D
TICK, LPD
D D
By:
Name: Title:
By: Name: Title:
TRIBES HOLDINGS LLCD

D D
TUSCANY ACQUISITIONS, LLCD

D D
By: Name: Title:
By:
Name: Title:
TUSCANY ACQUISITIONS II, LLC

D D

D D
By: Name: Title:
By:
Name: Title:
TUSCANY ACQUISITIONS iv, LLC

By:
TUSCANY GOLF COUNTRY CLUB, LLC

By: Name: Title:
Name: Title:
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WALLBOARD, LP.
By:
Name: Title:
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Annex A
The composition of the Litigation Trust Advisory Board shall be determined by the First Lien Steering Committee and shall be disclosed at or prior to the Plan confirmation hearing.
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EXHIBIT J
EXHIBIT J
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Exhibit J
Newco LLC Operating Agreement
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PRELIMINARY DRAFT AGREEMENT SUBJECT TO CONTINUING AMENDMENT AND REVIEW
(NEWCO), LLC
(A
DELAWARE LIMITED LIABILITY COMPANY)
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
JANUARY ( 1,2010
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TABLE OF CONTENTS
Page
Section i.
Section 2.
Section 3. Section 4.
Definitions; Rules of Construction. .........................................................................1

Name; Company History; Bylaws; Schedule of
Members; Capital
Contributions........................................................................................................... .2
Purpose; No Termination. ........................................................................................3
Offces. .....................................................................................................................3
Management of the Company; Board of
Section 7. Section 8. Section 9.
Section 10.
Managers. ................................................3
Company Actions Requiring Approvals. .;...............................................................5
Authorized Units; Preemptive Rights. ....................................................................7

Conversion Rights of
Class B Units. .......................................................................9
Voting Rights. ........................................................................................................1 0

Representations by Members Upon Acquisition or Receipt of
Units. ...................10
Section 1 i.
Section 14.
Distributions Generally. ........................................................................ .............. ...12
Discretionary and Liquidating Distributions. ........................................................12

Tax Distributions..................................................... .............................................. .12
Distributions In Kind. ........................................................................................... .13

Capital Accounts. .................................................................................................. .13
Book Allocations of
Section 15. Section 16. Section 17. Section 18.

Section 19.
Net Profit and Net Loss. .......................................................13
Special Book Allocations. ......................................................................................14

Tax Allocations. .. .................................................................................................. .15
Liability for Retur of
CapitaL. ..............................................................................15

Section 24.
Tax Reports and Elections. ....................................................................................16

Transfer Restrictions. .............................................................................................18
WithdrawaL. ....... ................ ... .... .... ... ... ... ... ... ... ........... .......... ... ....... ......... ........ ........20
Additional Members. ............................................................................................ .20

Dissolving Events. ................................................................................................ .21
Dissolution and Winding-Up. ................................................................................21

Distributions in Cash or in Kind Upon Dissolution. ..............................................21
Termination Upon Dissolution.......... ............................. ........ .............................. ..22
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Section 28.
Information Rights; Observer Rights; Confidentiality; Other Restrictive

Covenants...... ... ... ..... .... ........ .... ....... ....... ... ... ......... ........... ........ ....... ... ...... ... ........ ...22
Section 29.
Section 30.
Registration Rights. ... ... ... ... ... ... ........ ....... ...... ........ ... ........ ........ ............. ... .... ........ ..23
Exculpation and Indenmification. ........................................................................ ..23

Insurance. ............. ... ... ... ... ... ... ........ ... .......... ... ... ....... .... ........ ..... ........ ......... .... ....... .25
Section 3 i.
Competitive Opportunity. ......................................................................................25

Notices. .... ... ..... ........ .... ... ......... ... .... ... ....... ................. ... ... ........ ..... ..... ... ... .... .... ..... .26
Amendments. . ... ..... ... ... ... ... ... .... ... ... ........ ... ... ........ ... ... ... ..... ... ............. ...... .... .... ... ..26
Certain Members.... ... .... ..... ... .... ........... ... ...... ........ ... .............. ... ................. .... ...... ..27
Management Members' Services. ..........................................................................27

No Conflicting Agreements. ..................... .......................................................... ...27

Entire Agreement. ................................................................................................ ..27

Governing Law; Jurisdiction, Waiver of Jury TriaL. ..............................................28
No Third Party Beneficiaries. ................................................................................28

Further Assurances. ............................................................................................... .28

Counterparts. ..........................................................................................................2 9
Separabilty of Provisions. ................................................................................... ..29

Spousal Consent..................................................................... .............................. ..29
Recapitalizations, Exchanges, Splits, Etc. .............................................................29

Remedies. ... ..... ..... ... ... ... ... ... ... ... ... ..... ... ...... ............ ... ... ..... ... ..... ...... ..... ... .... ... .... ....30
II
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Annex. Schedules and Exhibits
Annex
Anex I
Schedules
Schedule I
Definitions
Schedule of
Members and Unit Ownership
Exhibits
Exhibit A
Exhibit B
Bylaws of
the Company
Joinder Agreement
Spousal Consent
Exhibit C
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PRELIMINARY DRAFT AGREEMENT SUBJECT TO CONTINUING AMENDMENT AND REVIEW

LIMITED LIABILITY COMPANY OPERATING AGREEMENT, dated as of
( j, 2010 (this "Agreement"), of (Newco J, LLC, a Delaware limited liabilty
company (the "Comoanv"), among the Company and the paries listed on Schedule I hereto from time to time.
WHEREAS, the paries hereto are entering into this Agreement for the purpose of the business of, a limited liability company formed pursuant to the provisions of the Delaware Limited Liabilty Company Act, codified in the Delaware Code Anotated, Title 6, Section 18-101, et seq., as the same may be amended from time to time (the "Delaware Act").
governing the affairs of, and the conduct of
NOW, THEREFORE, in consideration ofthe mutual covenants and agreements contained in this Agreement and other good and valuable consideration, the receipt and suffciency of which are hereby acknowledged, the parties hereto agree as set forth below.
Section 1.
(a)
Definitions: Rules of Construction.

Capitalized terms used in this Agreement are defined in Anex I hereto.
(b) The use herein of the masculine, feminine or neuter forms shall also
denote the other forms, as in each case the context may require.
(c) Except when the context requires otherwise, any reference in this
Agreement to a singular nurber shall include the pluraL.
(d) Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without limitation," whether or not so followed.
(e) All references to "$" or dollar amounts are to lawful currency of the
United States of America, unless otherwise expressly stated.

(f) Captions contained in this Agreement are inserted only as a matter of
convenience and in no way define, limit, extend or describe the scope or intent of
this Agreement
or of any of its provisions. All references in this Agreement to any numbered Sections are, unless otherwise indicated, references to the Sections of this Agreement which are so numbered.
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All references to the numbered or lettered Exhibits are references to the Exhibits so numbered or lettered which are appended to this Agreement, as such Exhibits may be amended, supplemented or otherwise modified from time to time. Such references to Exhibits are to be construed as incorporating by reference the contents of each Exhibit to which such reference is made as though such contents were set out in full at the place in this Agreement where such reference is made.
Section 2.
Name: Company History: Bylaws: Schedule of
Members: Capital
Contributions.
the Company shall be "(NewcoJ, LLC" or such other name as the Board of Managers may from time to time hereafter designate; provided, however, that any such name shall comply with the Delaware Act.
(a) The name of
(b) The Company was formed upon the execution and filing by r 1
(such Person being hereby authorized to take such action) with the Secretary of of Delaware of a certificate off ormation (the "Certificate") of State of
the State
the Company on r 1,
2009. The paries hereto ratify and confirm the filing of the Certificate.
(c) The bylaws of the Company attached hereto as Exhibit A
(as amended,
restated, supplemented or otherwise modified from time to time, the "Bvlaws") are hereby adopted and approved by the Members.
(d) This Agreement (including the definitions set forth in Annex I hereto) and the Bylaws are intended to serve as a "limited liabilty company agreement," as such term is
defined in Section 18-101 (7) of the Delaware Act.
(e) The name and business, mailing or residence address of each of the
Members of the Company are set forth on Schedule I hereto. The Board of
Managers shall
amend Schedule I from time to time to accurately reflect the names and business, mailng or residence addresses of each of the Members and each of the Persons who shall become Members after the Effective Date. Any Person (other than a Member on the Effective Date) who holds Units in accordance with the terms hereof shall execute and deliver to the Company a Joinder Agreement, substantially in the form of Exhibit B hereto, pursuant to which such Person wil thereupon become a pary to and be bound by and obligated to comply with all ofthe terms and
provisions of
this Agreement.
(f) Capital Contributions. No Member shall be obligated to make any Capital
the Board of Managers and the other terms ofthis Agreement, the Members may make additional Capital Contributions to the Company from time to time through the purchase of additional Units. Contributions to the Company. Subject to the approval of
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Section 3.
Purpose: No Termination.
the Company shall be to engage in any lawfl business activities that may be engaged in by a limited liability company organized under the Delaware Act, as such business activities may be determined by the Board of Managers from time to time.
(a) The purpose of
(b) No Member's death, status as a debtor in a banuptcy case, disability,

resignation, retirement or other termination of employment with the Company or any Affliate
thereof shall result in the dissolution, winding up or termination of
the Company.
Section 4.
Offces.
the Company, and such additional offces as the (a) The principal offce of Board of Managers may establish, shall be located at such place or places inside or outside the State of Delaware as the Board of Managers may designate from time to time. The initial principal offce of the Company is set forth in Section 33(a)(i.
(b) The registered offce of the Company in the State of Delaware shall be
1209 Orange Street, Wilmington, Delaware 19801 or as hereafter determined by the Board of Managers in accordance with Delaware Act. The registered agent of the Company for service of process at such address shall be The Corporation Trust Company or as hereafter determined by the Board of Managers in accordance with Delaware Act.
Section 5.
Manal!ement of the Company: Board of Manal!ers.
(a) Subject to the delegation ofrights and powers provided for herein and in
the Bylaws, the Board of Managers shall have the sole right to manage the business and affairs of the Company and shall have all powers and rights necessary, appropriate or advisable to effectuate and carr out the purposes and business of the Company. The Board of Managers shall consist initially of five (5) Managers, appointed from time to time in accordance with this Agreement and the Bylaws. Notwithstanding the foregoing, upon the affrmative vote of a majority of the Board of Managers, the chief executive offcer or the senior representative of the Operations Manager, if any, may be appointed as a sixth Manager. Each Manager shall have one vote with respect to any matters that come before the Board of Managers. Each Member agrees to vote all of his Units on matters subject to the vote of such Member and to take all other necessary or desirable actions within his control (whether in such Member's capacity as a Member or otherwise, and including, without limitation, attendance at meetings in person or by proxy for puroses of obtaining a quoru and execution of written consents in lieu of meetings), and the Company wil, as promptly as practicable, take all necessary and desirable actions within
its control (including, without limitation, callng special meetings of the Members), so that each Manager on the Board of the Board of
Managers and
Managers shall be elected from nominees
determined, or removed as directed, as follows:

(i) For so long as the Highland Managed Funds collectively continues
to own at least 15.0% of the outstanding Units (excluding any Securities of
the Company
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issued or granted to Managers, directors, offcers or employees of the Company or its Subsidiaries as incentive compensation for services), the Highland Managed Funds shall be entitled (A) to nominate one individual to the Board of Managers to serve as Manager (the "Highland Manager") until his successor is elected and qualified, (B) to nominate each successor to the Highland Manager and (C) to direct the removal from the Board of Managers of the Highland Manager nominated under the foregoing clauses (A) and (B).
(ii) For so long as Credit Suisse Loan Funding and Credit Suisse
the outstanding Units (excluding any Securities of the Company issued or granted to Managers, directors, offcers or employees of the Company or its Subsidiaries as incentive compensation for
SWAP continue to own, in the aggregate, at least 15.0% of
services), Credit Suisse Loan Funding and Credit Suisse SWAP, collectively, shall be
Managers to serve as Manager (the "Credit Suisse Manager") until his successor is elected and qualified, (B) to nominate each successor to the Credit Suisse Manager and (C) to direct the removal from the Board of Managers of the Credit Suisse Manager nominated under the foregoing clauses (A) and (B).
entitled (A) to nominate one individual to the Board of
(iii) For so long as CSAM and Candlewood continue to own, in the
the Company issued or granted to Managers, directors, offcers or employees of the Company or its Subsidiaries as incentive compensation for services), CSAM and Candlewood, collectively, shall be entitled (A) to nominate one individual to the Board of Managers to serve as Manager (the "CSAM Manager") until his successor is elected and qualified, (B) to nominate each successor to the CSAM Manager and (C) to direct the removal from the Board of Managers of the CSAM Manager nominated under the foregoing clauses (A) and (B).
aggregate, at least 15.0% of the outstanding Units (excluding any Securities of
the (iv) The remaining Managers, and, to the extent that any of Highland Managed Funds, Credit Suisse Loan Funding, Credit Suisse SWAP, CSAM or Candlewood loses its right to appoint a Manager pursuant to the above provisions, the relevant board seat( s), wil thereafter be designated for nomination and election, and such Managers may be removed by an affirmative vote ofthe Members holding at least a majority of the outstanding Class A Units (excluding any Member who has the right to nominate a Manager pursuant to paragraphs (i) through (iii) above for so long as such Member has such right). Any Manager appointed pursuant to this Section 5(a)(iv) shall not be an Affiliate of any Member and the qualifications, experience, integrity, independence and disinterestedness of any such Manager shall be satisfactory to the Members holding at least a majority of the outstanding Class A Units (excluding any Member who has the right to nominate a Manager pursuant to paragraphs (i) through (iii) above for so long as such Member has such right).
(b) Except to the extent any Member loses its rights to nominate a Manager as
set forth in Section 5(a), (i) no Manager elected pursuant to Section 5(a)(i), (ii) or (iii) may be removed without the consent of the Member who is entitled to nominate such individual as a
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Manager pursuant this Agreement, (ii) such Manager may only be removed at the direction of the pary that was entitled to nominate such Manager and (iii) the vacancy created by any former Manager may only be filled by a nominee of the pary that was entitled to nominate such former
Manager.
(c) Subject to the foregoing, in the event a vacancy is created on the Board of
the death, disability, resignation or termination (with cause or without cause) of any Manager, each of the Members hereby agrees that such vacancy shall be filled in accordance with the procedures set forth in this Section 5.
Managers by reason of
(d) The Company shall reimburse each Manager for all necessary and proper
costs and expenses (including reasonable and properly documented travel, lodging and meal expenses) incurred in connection with such Manager's attendance and participation at meetings
of the Board of Managers to the extent not otherwise reimbursed by the Company or any of its
Subsidiaries by virtue of the status of such Manager as an employee or service provider of the Company or any of its Subsidiaries.
(e) The nominees designated in Section 5(a) will be elected as Managers at

any annual or special meeting of the Members (or by written consent in lieu of a meeting of the Members) and wil serve until their successors are duly elected and qualified pursuant to the terms of this Agreement and the Bylaws or until their earlier death, disabilty, resignation, termination (with cause or without cause) or other removaL. The Members wil vote all of their Units in order to elect or remove the Managers as designated pursuant to Section 5(a).
(f) No Member, by reason of such Member's status as a Member, shall have
any authority to act for or bind the Company but shall have only the right to vote on or approve the actions to be voted on or approved by such Member as specified in this Agreement or the Bylaws or as required under the Delaware Act.
the Company shall be elected, removed and perform such (g) The offcers of functions as are provided in the Bylaws. The Board of Managers may delegate to any offcer of the Company or to any such other Person such authority to act on behalf of the Company as the Board of Managers may from time to time deem appropriate in its sole discretion.
Section 6.
Company Actions Reauirinl! Approyals.

(x) the Board of
(a) Without the affrmative vote of
Managers and
the then outstanding Units, voting together as a single (y) Members owning at least a majority of class, the Company shall not, and shall cause each of its Subsidiaries not to, take any of the following actions:
(i) sell, transfer or otherwise dispose of any asset of
the Company or
any of its Subsidiaries for consideration in excess of $20,000,000;
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(ii) sell, transfer or otherwse dispose of the Rhodes Ranch master
planed community for consideration in excess of $(60,000,000) (such amount to be reduced by any net cash proceeds received by the Company for any prior sales of assets associated with the Rhodes Ranch master planed community);
(iii) sell, transfer or otherwise dispose of the Tuscany master planed
$(40,000,000) (such amount to be reduced by any net cash proceeds received by the Company for any prior sales of assets associated with the Tuscany master planed community);
community for consideration in excess of
(iv) enter into any recapitalization, reorganization, consolidation or

the consolidated assets of the Company, in each case, for consideration in excess of$(100,000,000) (such amount to be reduced by any net cash proceeds received by the Company for any prior recapitalizations, reorganizations, consolidations or asset sales); or merger of the Company or sell all or substantially all of
(v) agree to any of
the foregoing.
(b) Without the prior approval of (x) the Board of Managers and (y) Members
owning at least 66.66% of Company shall not, and shall cause each of
the then outstanding Units, voting together as a single class, the its Subsidiaries not to, take any of the following
actions:
(i) except as otherwise set forth in Section 5( a ), increase or decrease
the size ofthe Board of Managers;

(ii) except for transactions between the Company and its Subsidiaries,
enter into any transaction with any Affliate of a Member or any Affliate of an offcer or manager of the Company or its Subsidiaries (other than in the ordinary course of business on commercially reasonable terms no less favorable to the Company and its Subsidiaries than what a third-party negotiating on an arms-length basis could reasonably expect);
(iii) change the nature of
the Company's or its Subsidiaries' primary
business;
(iv) incur any indebtedness other than (A) in the ordinary course of
business, (B) the New First Lien Notes and (C) indebtedness permitted to be incured under the New First Lien Notes;
(v) create, authorize or issue, or grant any options, warrants, or other
rights to purchase or obtain any Units of
to the Units as to dividends or liquidation preference, or modifying any of
the Company raning pari passu with or senior the rights of
any class or series of Units;
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(vi) enter into any transaction or series of liquidation, dissolution or winding up of
transactions to effect the
the Company;
(vii) enter into a transaction providing for the use of any parcel of real
property owned by the Company, other than for the development of residential homes and
communities and commercial development currently contemplated by the Company's
business plan as of the Effective Date;

(viii) sell, transfer or otherwise dispose of
the Rhodes Ranch master
planed community for consideration less than $(60,000,000) (such amount to be reduced by any net cash proceeds received by the Company for any prior sales of assets associated with the Rhodes Ranch master planed community);
the Tuscany master planned communty for consideration less than $(40,000,000) (such amount to be reduced by any net cash proceeds received by the Company for any prior sales of assets associated with the Tuscany master planned community);
(ix) sell, transfer or otherwise dispose of
(x) enter into any recapitalization, reorganization, consolidation or

the assets of the Company, in each case for consideration less than $(100,000,000) (such amount to be reduced by any net cash proceeds received by the Company for any prior recapitalizations, reorganizations, consolidations or asset sales); merger or sell all or substantially all of
(other than wholly-owned Subsidiaries of
(xi) make any investments in, or acquire the Securities of, any Person the Company having no material assets);
(xii) purchase, redeem or otherwse acquire for value (or pay into or set
aside a sinkng fud for such purpose) Securities of the Company (other than any
Securities owned by any employee of
the Company upon such employee's termination of
employment);
(xiii) agree to become liable for any indemnification obligation that is
out of
business, including without limitation, any indemnification obligation in connection with the environmental condition of any parcel of real property owned by the Company or any of its Subsidiaries and sold out ofthe ordinary course of
the ordinary course of
business; or
(xiv) agree to any of
the foregoing.
Section 7.
Authorized Units; Preemptive Ril!hts.
(a) Authorized Units. The Company shall be authorized to issue from time to
time up to an aggregate of 125,000 Units, consisting of
Units, as follows: (i) 100,000 Class A Units and (ii) 25,000 Class B Units. Each authorized Unit may be issued
two classes of
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pursuant to such agreements and on such terms (including valuation and pricing) as the Board of Managers shall approve. In addition, the Company may reissue any Units that have been repurchased by the Company. The Board of Managers shall have the right to increase the number of authorized Units from time to time. Fractional Units may be issued.
(b) Preemptive Rights. After the Effective Date and prior to any IPO or Sale
of the Company, other than in the case of issuances or grants of any Excluded Securities, the Company shall not (x) issue additional Units, warants and/or any other Securities of the
Company convertible into or exchangeable for Units to any Person or (y) issue any debt to any
Member of
its Affliates ((x) and (y) hereinafter referred to as "New Securities"), in each case, other than in accordance with the following terms:
the Company or any of
(i) The Company shall not issue any New Securities unless it first
delivers to each Member who holds Units and is an "accredited investor" (as defined in Rule 501(a) of Regulation D promulgated under the Securities Act) (each such Person, a "Buver"), a written notice ("Notice of Proposed Issuance") specifying the type, total number and all the material terms of such New Securities that the Company then intends to issue, and stating that the Buyer shall have the right to purchase the New Securities in
the maner specified in this Section 7(b) for the same price per New Security and in
accordance with the same terms and conditions specified in such Notice of
Proposed
Issuance.
(ii) During the ten Business Day period commencing on the date the
Proposed Issuance ("Exercise Period") in accordance with Section 7(b )(i), the Buyers shall have the right (but not the obligation), to purchase New Securities at the same price per New Security and upon the same terms
Company delivers to the Buyers the Notice of and conditions specified in the Notice of
Proposed Issuance. Each Buyer electing to
purchase New Securities must give irrevocable written notice of its election to the Company prior to the expiration of the Exercise Period, and if a Buyer has not provided such irrevocable notice within the Exercise Period, such Buyer shall be deemed to have waived and rejected its right to purchase New Securities. If the New Securities are being
offered as par of an investment unit together with debt or other instruments, any election
by a Buyer to purchase New Securities shall also constitute an election to purchase a like
portion of such debt or other instruments.
(iii) Each Buyer shall have the right to purchase its Pro Rata Portion of
New Securities.
the New Securities have not been purchased by this Section 7(b), then the Company shall the Buyers who have exercised their right offer such remaining New Securities to any of to purchase their respective full Pro Rata Portion of the New Securities and have the indicated a desire to purchase any unsubscribed New Securities. If some or all of New Securities have not been purchased by the Buyers pursuant to paragraphs (i) - (iii) ofthis Section 7(b) and the immediately prior sentence, then the Company shall have the
(iv) If some or all of the Buyers pursuant to paragraphs (i)-(iii) of
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right to issue such remaining New Securities to one or more paries at not less than, and on terms no more favorable to the buyers thereof than, the price and other terms specified in the Notice of Proposed Issuance. If such issuance or sale is not closed within 90 days after the expiration of the Exercise Period the Company shall not thereafter issue or sell any New Securities, without first again offering such New Securities to the Members in the maner provided in this Section 7(b ).
(v) The Notice of Proposed Issuance shall specify the place, time and
date ofthe consummation of the purchase of
the New Securities.
(vi) If any Class A Units are included in the New Securities, each
Member shall have the right to elect to purchase Class B Units in lieu of Class A Units on identical terms as offered with respect to the Class A Units.
(vii) Nothing in Section 7(b) or any other provision of this Agreement
shall prevent the Company from issuing or sellng to any Person any New Securities without first complying with the provisions of Section 7(b ); provided, that in connection with such issuance or sale (a) the Company gives reasonably prompt notice to the other Members of such investment (prior to such investment having occured), which notice shall describe in reasonable detail the New Securities being purchased by the Person making such purchase (for puroses of this Section 7, the "Purchasing Member") and the purchase price thereof and (b) the Purchasing Member and the Company enable the other Members to effectively exercise their respective rights under Section 7(b) with respect to their purchase of their Pro Rata Portion of the New Securities issued to the Purchasing Member within 45 days after such purchase by the Purchasing Member on the terms
specified in Section 7(b ).
Section 8.
Conversion Ril!hts of Class B Units.
At any time and from time to time after the Effective Date, each Class B Unit shall be convertible, at the option ofthe holder thereof, at the principal offce ofthe Company, into an equal number of validly issued, fully paid and nonassessable Class A Units. Before any holder of Class B Units shall be entitled to convert the same into Class A Units pursuant to this Section 8,
such holder shall give written notice to the Company at its principal offce, of
the election to
convert the same. The Company shall, as soon as practicable thereafter, issue to such holder of Class B Units, an acknowledgment of registration for the number of Class A Units to which such holder shall be entitled as aforesaid and shall amend Schedule I hereto to reflect such conversion. The issuance of Class A Units upon conversion of the Class B Units shall be made without charge to the holders of Class B Units. Such conversion shall be deemed to have been made immediately prior to the close of business on the date ofreceipt of notice thereof, and the Person entitled to receive the Class A Units issuable upon such conversion shall be treated for all purposes as the record holder or holders of such Class A Units as of such date.
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Section 9.
V otinl! Ril!hts.
On any matter to be voted on by the Members hereunder, each Member shall have one vote for each Class A Unit held by such Member and the holders of Class B Units shall have no voting rights, other than as specifically set forth in Section 6. Section 21(c) and Section 34.
Section 10. Representations by Members Upon Acauisition or Receipt of Units.
Upon the acquisition or receipt of any Units, in addition to any other representations and waranties set forth in any other document required by the Board of Managers with respect to such acquisition or receipt, each Member makes the representations and warranties set forth below to the Company and the other Members with respect to such Units, effective upon the acquisition or receipt thereof and upon such Member's execution and delivery of a counterpar hereof or such other document required by the Board of Managers.
(a) Such Member is acquiring the Units for his own account, for investment the Securities Act or applicable state securities laws.
and not with a view to the Distribution thereof or any interest therein in violation of
(b) Such Member understands that (i) the Units have not been registered under the Securities Act by reason oftheir issuance by the Company in a transaction exempt from the registration requirements of the Securities Act and Applicable Law and (ii) the Units must be held by such Member indefinitely unless a subsequent Transfer thereof is registered under the Securities Act and Applicable Law or is exempt from such registration.
(c) Such Member fuher understands that the exemption from registration
afforded by Rule 144 (the provisions of the Securities Act ("Rule 144") depends on the satisfaction of
applicable, Rule 144 may afford the basis for sales of
which are known to such Member) promulgated under various conditions, and that, if the Units acquired hereunder in limited
amounts.
(d) Such Member (i) is an "accredited investor" (as defined in Rule 501(a) of
Regulation D promulgated under the Securities Act) or (ii) has a pre-existing personal or business relationship with the Company, its Subsidiaries or certain members ofthe Board of Managers or offcers of the Company which is of a nature and duration suffcient to make such Member aware ofthe character, business acumen and general business and financial circumstaces of the Company, and/or such Members or the Board of Managers or offcers of the Company, if any.
(e) The Company has made available to such Member or its representatives
all agreements, documents, records and books that such Member has requested relating to an investment in the Units being acquired by the Member. Such Member has had an opportunity to
ask questions of, and receive answers from, Persons acting on behalf of
the Company,
concerning the terms and conditions ofthis investment, and answers have been provided to all of such questions to the full satisfaction of such Member. Such Member has such knowledge and
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experience in financial and business matters that it is capable of evaluating the risks and merits of this investment and to suffer a complete loss of its investment.
(f) Such Member has no need for liquidity in its investment in the Units.
Such Member can bear the economic risk of investment in the Units and has such knowledge and experience in financial or business matters to be capable of evaluating the merits and risks of the investment in the Units. Such Member has consulted with its professional, tax and legal advisors with respect to the federal, state, local and foreign income tax consequences of such Member's
paricipation as a Member of
the Company.
(g) Such Member understands that there is no public market for the Units and that the transferabilty of the Units is restricted.
this Agreement by such (h) The execution, delivery and performance of Member has been duly authorized. This Agreement has been duly executed and delivered by
such Member and (assuming the valid authorization, execution and delivery of
this Agreement
by the other paries hereto) is the legal, valid and binding agreement of such Member, enforceable against such Member in accordance with its terms, subject to bankuptcy, insolvency, reorganization, moratorium, and similar laws of general application relating to or affecting
creditors' rights and to general equity principles.
(i) Such Member has not granted and is not a part to any proxy, voting trust
or other agreement which is inconsistent with or conflcts with the provisions of this Agreement without the prior written consent of the Board of Managers.
this the transactions contemplated hereby, and the compliance by such Member with the provisions hereof wil not (i) conflct with or result in a breach of any provision of the certificate of incorporation, bylaws, operating agreement, formation agreement,
(j) The execution, delivery and performance by such Member of
Agreement, the consummation of
parnership agreement or any other organizational document of such Member, as applicable,
(ii) violate or conflict with or constitute (with notice or lapse oftime or both) a default (or give termination, cancellation or acceleration) under, or result in the creation of any encumbrance upon such Member's Units pursuant to, the terms, conditions or provisions of any contract, note, bond, lease, mortgage, indenture, license, agreement or other instrument or obligation to which such Member is a party or by which such Member or such Member's properties or assets are bound or (iii) violate any provision of Applicable Law or any order, judgment, award, writ, injunction or decree applicable to such Member or any of such Member's properties or assets.
rise to any right of
(k) No permit, authorization, consent or approval of or by, or notification of or filing with, any Person is required in connection with the execution, delivery or performance by such Member of this Agreement.
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Section 11. Distributions Generally.

Any Distributions of cash or other assets by the Company to Members shall be made in accordance with Section 11 through Section 14. Available cash shall be distributed, at such times and in such amounts as the Board of Managers determines in its discretion. Notwithstanding any other provision hereof, the Company shall cause its Subsidiaries to distribute or otherwise transfer to the Company, to the fullest extent possible within the limits imposed by Applicable Law, the cash or cash equivalents necessary for the Company to make the Distributions to be
made hereunder.
Section 12. Discretionary and Liauidatinl! Distributions.

(a) Subject to the other provisions of Section 11 through Section 14, in the
Managers, the Company may distribute available cash from time to time to the holders of Units in accordance with their Pro Rata Portion.
discretion of the Board of
(b) Notwithstanding anything to the contrary contained herein, the Company
may issue from time to time, pursuant to an equity incentive plan approved by the Board of
Managers, additional units or Securities of value of the equity of the Company representing up to 10% of
the economic
directors and/or consultants or service providers of
the Company as equity incentives to employees, offcers, managers, the Company, and that such issuances wil be dilutive to all Units proportionately.
Section 13. Tax Distributions.

To the extent of available cash and to the extent permitted by the Delaware Act, the Board of Managers shall cause the Company to make distributions to the Members to provide them with fuds to pay applicable United States federal, state and local income tax liabilities attributable to Company income allocated to them pursuant to Section 18 (calculated based on the Assumed Tax Rate taking into account any losses ofthe Company (including prior year losses) to the extent such losses are available under such income tax laws applicable to corporations to offset such income (or would be available if losses utilized against income other than Company income in prior years were instead caried forward to offset Company income in subsequent years) ("Tax Distributions"). Any Tax Distribution shall be made to all such Members, whether or not they are subject to United States federal, state and local income taxes, in the same proportions as the Company taxable income is allocated in accordance with Section
l8. The Company shall make Tax Distributions quarerly based on the Board of
Managers good
faith calculation of such distribution. With respect to a Fiscal Year, the excess of (a) the
aggregate quarerly Tax Distributions made to a Member, over (b) the amount of
Tax
Distributions that would be permitted to be made to a Member pursuant to this Section 13 if only annual distributions were permitted, shall be treated as an advance of, and shall reduce, subsequent Tax Distributions which such Member would otherwise be entitled to receive pursuant to this Section 13.
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Section 14. Distributions In Kind.

making Distributions under Section 12 hereof, the Distribution shall only be included in calculating the thresholds set forth in Section 12 at such time as such Distribution in kind is converted to cash by sale or otherwise and (b) for all other purposes of this Agreement, the Distribution shall be treated as if the Company had sold such distributed property for cash in an amount equal to the Fair Market Value of such property and distributed such cash to the Members instead.
If the Company makes Distributions in kind, then (a) for purposes of
Section 15. Capital Accounts.
A separate capital account (a "Capital Account") shall be established and maintained for each Member. The initial Capital Account of each Member shall equal the amount next to such Member's name as shown on Schedule i10n the Effective Date. As of the end of each Accounting Period, the balance in each Member's Capital Account shall be adjusted by (a) increasing such balance by such Member's (i) allocable share of Net Profit (allocated in accordance with Section 16) and (ii) the amount of cash and the Fair Market Value of any property (as of the date ofthe contribution thereof and net of any liabilities encumbering such property) contributed by such Member to the Company during such Accounting Period, if any, and (b) decreasing such balance by (i) the amount of cash and the Fair Market Value of any property (as of the date of the Distribution thereof and net of any liabilities encumbering such property) distributed to such Member during such Accounting Period and (ii) such Member's allocable share of Net Loss (allocated in accordance with Section 16). Each Member's Capital Account shall be fuher adjusted with respect to any Special Book Allocations pursuant to Section 17. The provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulations i.704-1(b) and 1.704-2 and shall be interpreted and applied in a maner consistent with such Treasury Regulations. At no time during the term of the Company or upon dissolution and liquidation thereof shall a Member with a negative balance in its Capital Account have any obligation to the Company or the other Members to restore such negative balance, except as may be required by Applicable Law or in respect of any negative balance resulting from a withdrawal of capital or dissolution in contravention ofthis Agreement.
Section 16. Book Allocations of Net Profit and Net Loss.

Except as otherwise provided in Section 17 or elsewhere in this Agreement, Net Profit and Net Loss and to the extent necessar, individual items of income, gain or loss or deduction of the Company, shall be allocated among the Members in a manner such that the Capital Account of each Member, after giving effect to such allocation and the Special Book Allocations set forth in Section 17, is, as nearly as possible, equal (proportionately) to (a) the Distributions that would be made pursuant to Section 12 (taking into account and treating as distributed any amounts set
To be equal to each Member's pro rata share ofthe purchase price/Fair Market Value of the assets on formation.
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aside with respect to Unvested Units) ifthe Company were dissolved, its affairs wound up and its assets sold for cash equal to their Carying Value (except that any Company asset that is realized in such Fiscal Year shall be treated as if sold for an amount of cash equal to the sum of any net cash proceeds and the Fair Market Value of any property actually received by the Company in connection with such disposition), all Company liabilties were satisfied (limited with respect to each non-recourse liability to the Carying Value of the assets securing such liability) and the net assets of the Company were distributed in accordance with Section 12 to the Members immediately after making such allocation, minus (b) such Member's share of "parnership minimum gain" (as determined pursuant to Treasury Regulations i.704-2(b)(2) and i.704-2(d)) and partner nonrecourse debt minimum gain, computed immediately prior to the hypothetical sale of assets. For purposes of the preceding sentence, "parner nonrecourse minimum gain" shall mean an amount, with respect to each "parner nonrecourse debt" (as
defined in Treasury Regulations 1-704-2(b)(4)), equal to the parner nonrecourse minimum
gain that would result if the parner nonrecourse debt were treated as a nonrecourse liabilty
pursuant to Treasury Regulations 1.704-2(i)(3).
Section 17. Special Book Allocations.
(a) Oualified Income Offset. If any Member unexpectedly receives any
adjustment, allocation or Distribution described in Treasury Regulations 1.704-1(b)(2)(ii)(d) (4), (5) or (6) and such adjustment, allocation or Distribution causes or increases a deficit in such Member's Capital Account (a "Deficit"), items of gross income and gain for such Accounting Period and each subsequent Accounting Period shall be specifically allocated to such Member in
an amount and maner suffcient to eliminate, to the extent required by the Treasury Regulations,
the Deficit of such Member as quickly as possible; provided, that an allocation pursuant to this Section 17(a) shall be made only if and to the extent that such Member would have a Deficit after all other allocations provided for in Section 15 through Section 18 have been tentatively made as if this Section !7(a) were not in this Agreement. This Section 17(a) is intended to comply with the qualified income offset provision of Treasury Regulations 1.04-1(b)(2)(ii)(d) and shall be interpreted in a maner consistent therewith.
(b) Special Allocations and Capital Account Maintenance. Special allocations
shall be made in accordance with the requirements set forth in the Treasury Regulations
1.704-2(f), (g) and (j) (minimum gain chargeback), 1.704-1
(g) (gross income allocation),
i.704-2(i)(2) (nonrecourse deductions), and to the extent that a Section 754 election is in effect,
1.04-1(b)(2) (iv)(m) (Section 754 adjustments).
(c) Forfeitures. In the event ofa forfeiture ofa Unit, such Unit and the
Capital Account associated therewith, if any, shall be transferred (the "Forfeiture Transfer") to the other Members pro rata in accordance with Capital Accounts (the "Forfeited Unit Transferees"). Ifthe Forfeiture Transfer gives rise to the receipt of taxable income to the Forfeited Unit Transferee pursuant to Section 83 of the Code in the year of the Forfeiture Transfer or any subsequent year, any deduction to which the Company is entitled pursuant to Section 83 ofthe Code as a result of such income receipt shall be allocated among the Members the Forfeiture Transfer and any (other than the Forfeited Unit Transferee) in the taxable year of
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the Forfeiture Transfer so as to minimize any income or gain required to be recognized by the Company as a result ofthe Forfeitue Transfer and any excess deduction shall be allocated to the Forfeited Unit Transferee or in such other maner as the Board of Managers deems to be
subsequent year in which the Forfeited Unit Transferee recognizes income as a result of
appropriate to the extent permitted by law.

(d) Restorative Allocations. Any special allocations of items of income or
gain pursuant to this Section 17 shall be taken into account in computing subsequent allocations pursuant to this Agreement, so that the net amount for any item so allocated and all other items allocated to each Member pursuant to this Agreement shall be equal, to the extent possible, to the net amount that would have been allocated to each Member pursuant to the provisions of this Agreement if such special allocations had not occurred.
(e) For purposes of determining the Net Profit, Net Loss, or any other items
allocable to any period, Net Profit, Net Loss, and any such other items shall be determined on a daily, monthly, or other basis, as determined by the Board of Managers, using any permissible method under Code Section 706 and the Regulations thereunder.
(f) The Members are aware of the income tax consequences of
the allocations
made by Section 15, Section 16, Section 17, and Section 18 and hereby agree to be bound by the provisions of these Sections in reporting their share of Company income and loss for income tax
puroses.
Section 18. Tax Allocations.
The income, gains, losses, credits and deductions recognized by the Company shall be
allocated among the Members, for U.S. federal, state and local income tax puroses, to the extent
permitted under the Code and the Treasury Regulations, in the same manner that each such item is allocated to the Members' Capital Accounts. Notwthstanding the foregoing, the Board of Managers shall have the power to make such allocations for U.S. federal, state and local income
tax purposes as may be necessary to maintain substantial economic effect, or to' insure that such
allocations are in accordance with the Members' interests in the Company, in each case within
the meaning of
the Code and the Treasury Regulations thereunder, income, gain, loss and deduction with respect to any property contributed to the capital of the Company shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis
the Code and the Treasury Regulations. In accordance with Section 704(c) of
of such property to the Company for U.S. federal income tax purposes and its Fair Market Value
at the time of contribution by applying any permissible method selected by the Board of Managers.
Section 19. Liabilty for Return of CapitaL.
No Member or Manager shall have any liabilty for the retur of any Member's Capital
Contribution, which Capital Contribution shall be payable solely from the assets of at the absolute discretion of the Board of Managers, subject to the requirements of
the Company the Delaware
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Act. No Member, nor any successor-in-interest to any Member, shall have the right, while this Agreement remains in effect, to have the property of the Company paritioned, or to file a
complaint or institute any proceeding at law or in equity to have the propert of paritioned, and each of the Members, on behalf of itself
the Company
and its successors, representatives and
assigns, hereby irrevocably waives any such right.
Section 20. Tax Reports. Elections and Withholdinl!.
(a) No later than 90 calendar days after the end of each Fiscal Year, the Board
of Managers shall cause the Company to furnish each Member a estimated IRS Schedule K -1,
Managers shall cause the Company to furnish each Member the IRS Schedule K-1 and any similar form required for the fiing of state or local income tax returns for such Member for such Fiscal Year. Upon the written request of any such Member and at the expense of such Member, the Company wil use reasonable efforts to deliver or cause to be delivered any additional information necessary for the preparation of any state, local and foreign income tax return that must be filed by such Member.
and not later than 270 calendar days after the end of each Fiscal Year, the Board of (b) The Board of
Managers shall determine, subject to Section 20(e), whether
to make or revoke any available election pursuant to the Code. Each Member wil, upon request, supply the information necessary to give proper effect to any such election.
(c) To the extent applicable, the Company hereby designates r 1 to act
as the "Tax Matters Parner" (as defined in Section 6231(a)(7) ofthe Code) in accordance with Sections 6221 through 6233 of the Code and any similar provision of state, local or foreign tax Applicable Law. The Tax Matters Parner is authorized and required to represent the Company the Company's affairs by tax (at the Company's expense) in connection with all examinations of authorities, including resulting administrative and judicial proceedings, and to expend Company
fuds for professional services and costs associated therewith; provided, that the Tax Matters
Parner may be removed and replaced by, and shall act in such capacity at the direction of, the
Managers. Each Member agrees to cooperate with the Tax Matters Partner and to do or refrain from doing any or all things reasonably requested by the Tax Matters Parner with respect
Board of
to the conduct of such proceedings. Subject to the foregoing proviso, the Tax Matters Parer
wil have reasonable discretion to determine whether the Company (either on its own behalf or on behalf of the Member) wil contest or continue to contest any tax deficiencies assessed or proposed to be assessed by any taxing authority. Any deficiency for taxes imposed on any Member (including penalties, additions to tax or interest imposed with respect to such taxes) wil be paid by such Member, and if paid by the Company, wil be recoverable from such Member (including by offset against Distributions otherwise payable to such Member).
(d) Except as otherwise required (i) by Applicable Law or (ii) as a result of an

election by the Company to be classified as a corporation for Federal income tax puroses in
anticipation of an IPO, (A) each of the Members and the Company shall take no action inconsistent with, and shall make or cause to be made all applicable elections with respect to (1) the treatment of the Company as a parnership for Federal income tax purposes and (2) the
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treatment of
the Company as not a publicly traded parnership for Federal income tax purposes, and (B) neither the Company nor any Member on its behalf shall fie an election to be excluded
from Subchapter K of
the Code.
(e) Elections with Respect to Issuance of Certain Compensatorv Eauitv
Interests.
(i) The Tax Matters Parer is hereby authorized and directed to cause
the Company to make an election to value any interests issued by the Company as compensation for services to the Company (collectively, "Compensatorv Interests") at liquidation value (the "Safe Harbor Election"), as the same may be permitted pursuant to or in accordance with the finally promulgated successor rules to Proposed Treasury Regulations i.83-3(1) and IRS Notice 2005-43 (collectively, the "Proposed Rules"). The Tax Matters Parner shall cause the Company to make any allocations of items of income, gain, deduction, loss or credit (including forfeiture allocations and elections as to allocation periods) necessary or appropriate to effectuate and maintain the Safe Harbor Election.
(ii) Any such Safe Harbor Election shall be binding on the Company
and on all of its Members with respect to all Transfers of Compensatory Interests thereafter made by the Company while a Safe Harbor Election is in effect. A Safe Harbor Election once made may be revoked by the Tax Matters Partner as permitted by the Proposed Rules or any Applicable Law.
(iii) Each Member (including any person to whom a Compensatory
Interest is transferred in connection with the performance of services), by signing this Agreement or by accepting such Transfer, hereby agrees to comply with all requirements of the Safe Harbor Election with respect to all Compensatory Interests transferred while the Safe Harbor Election remains effective.
(iv) The Tax Matters Parner shall file or cause the Company to fie all
returns, reports and other documentation as may be required to perfect and maintain the Safe Harbor Election with respect to Transfers of Compensatory Interests covered by such Election.
Managers is hereby authorized and empowered to amend the Agreement as necessary to comply with the Proposed Rules or any rule, in order to provide for a Safe Harbor Election and the ability to maintain or revoke the same, and shall have the authority to execute any such amendment by and on behalf of each Member. Any undertakings by the Members necessary to enable or preserve a Safe Harbor Election may be reflected in such amendments and to the extent so reflected shall
(v) The Board of
be binding on each Member, respectively.
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(vi) Each Member agrees to cooperate with the Tax Matters Parner to
perfect and maintain any Safe Harbor Election, and to timely execute and deliver any documentation with respect thereto reasonably requested by the Tax Matters Parner.
(vii) Costs and expenses incured by the Tax Matters Parner in making
and preserving (or if revoked, revoking) the Safe Harbor Election shall be paid by the Company.
(f) The Company shall be entitled to deduct or withhold taxes as required by

applicable law with respect to any amounts payable to any Member. Any amounts so deducted or withheld shall be timely remitted to the applicable taxing authority and shall be treated as amounts otherwise distributed to the Member pursuant to Section 13 or, if applicable, Section 11 or Section 12. with respect to which such amounts were deducted or withheld.
Section 21. Transfer Restrictions.

(a) Limitations on Transfers. No Member shall be permitted to Transfer any
Units held by such Member, except for (i) Permitted Transfers and (ii) Transfers made in accordance with this Section 21.
(b) Transfer Prerequisites. No Transfer of any Units shall become effective
Managers, (ii) unless such Transfer complies with subsections (b) through (d) ofthis Section 21, (iii) until the Transferee (unless already party to this Agreement) executes and delivers to the Company a Joinder Agreement in the form attached hereto as Exhibit B, (iv) if the Transfer wil result in the
(i) unless prior written notice thereof has been delivered to the Board of
number of parners hereunder being more than 100 within the meaning of Treasury Regulations
.1.7704-(h) (uness such Transfer is approved by the affrmative vote of 66.66% of the then outstanding Units), (v) until, upon request by the Board of the holders of
at least
Managers, an
opinion of counsel, in form and substance reasonably satisfactory to the Board of Managers, is delivered to the Board of Managers, with respect to the compliance of the Transfer with Applicable Law and (vi) if the Board of Managers reasonably determines in good faith that such
Transfer is to a direct or indirect competitor ofthe Company or its Subsidiaries. Upon such
Transfer and execution and delivery, the Transferee shall be bound by, and entitled to the benefits
of, this Agreement with respect to the Transferred Units in the same maner as the Member
effecting such Transfer.

(c) Drag-Along Rights.
Members representing the Drag-Along Threshold (collectively, the Company (a "Drag-Along Sale"), the Drag-Along Sellers may require all Members to sell the same Pro Rata Portion of their respective Units as the Drag-Along Sellers desire to sell to any Transferee that is not affliated with any Drag-Along Seller in such Drag Along Sale on the same terms and conditions as apply to those Units to be sold by the Drag-Along Sellers.
(i) If the "Drag-Along Sellers") desire to effect a Sale of
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the Drag-Along Sale (the "Drag-Along Sale Notice") shall be provided by the Company to all holders of Units. Such Drag-Along Sale Notice shall disclose in reasonable detail the number and class of Units to be subject
(ii) Written notice of to the Drag-Along Sale (the "Drag-Along Securities"), an estimate of the other proposed terms and conditions of
the proposed price,
the proposed Drag-Along Sale (including copies of the definitive agreements relating thereto, if available) and the identity of the prospective purchaser.
(iii) With respect to any Drag-Along Sale, each Member agrees that it
shall use its reasonable best efforts to effect the Drag-Along Sale as expeditiously as practicable, including delivering all documents necessary or reasonably requested in connection with such Drag-Along Sale, voting in support of such transaction and entering into any contract, instrument, undertaking or obligation necessary or reasonably requested in connection with such Drag-Along Sale (as specified in the Drag-Along Sale Notice). Subject to the terms and conditions of this Section 2!(c) and without limiting the generality of the foregoing, the Company and each Member shall take or cause to be taken all actions, and do, or cause to be done, on behalf and in respect of the Company
any and all actions that may be reasonably requested consistent with this Section 21 (c) in
connection with any Drag-Along Sale. In addition, each holder of Drag-Along Securities shall (A) pay its Pro Rata Portions of the reasonable expenses (if any) incured by the Company in connection with such Drag-Along Sale; and (B) join on a pro rata basis jointly, in any and all (based on respective Pro Rata Portions), severally and not indenmification or other obligations that are specified in the Drag-Along Sale Notice, other than any such obligations which relate specifically and particularly to another holder such as indenmification with respect to representations and warranties given by a holder regarding such holder's title to and ownership of Units and other fundamental customary representations and waranties; provided that no holder shall be obligated under this clause in connection with such Transfer to agree to indenmify or hold harless the Transferee with respect to an amount in excess of the net proceeds received by the holder in respect of such holder's Units in connection with such Drag-Along Sale.
(iv) In the event of a Drag-Along Sale, each Member shall be required
to Transfer such Units held by such holder as provided in the Drag-Along Sale Notice to the extent such Transfer is required under Section 21( c )(i hereof.
(v) Each Member acknowledges and agrees that it shall not be entitled
to (and hereby waives any) appraisal, dissenter's or any similar rights in connection with any Drag-Along Sale.
(d) Co-Sale Rights.
If anyone or more Members (collectively, the "Co-Sale Transferors") propose to

Transfer (other than a Permitted Transfer) Units representing 25% or more of
the then
outstanding Units to any Person (the "Co-Sale Transferee") in one transaction or a series of related transactions, the paries hereto shall comply with the following procedures:
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(i) The Co-Sale Transferors shall, at least five Business Days before
such proposed Transfer, deliver a written notice (a "Co-Sale Notice") to each other Member that (i) sets forth substantially the same information required in a Drag-Along Sale Notice pursuant to Section 2!( c) and (ii) indicates that the Co-Sale Transferee has been informed of the co-sale rights provided for in this Section 2!( d) and has agreed to purchase Units (the "Co-Sale Units") from the other Members in accordance with the
terms hereof.
(ii) The Co-Sale Transferors shall not Transfer any Units to the Co-
Sale Transferee unless each of the other Members is permitted to Transfer simultaneously therewith a number of Units equal to his Pro Rata Portion of the aggregate number of Units to which the offer to the Co-Sale Transferors relates (A) at a price per Unit equal to the same price per Unit proposed to be paid to the Co-Sale Transferor for each Unit and Members (B) otherwise on the same terms and conditions. To the extent one or more of exercise such right of paricipation in accordance with the terms and conditions set forth herein, the number of Units that each other Member, including the Co-Sale Transferors, may Transfer in such Transfer shall be reduced pro rata.
the Co-Sale Notice, each Member may elect to participate in the proposed Transfer by delivering to the CoSale Transferors a notice (the "Tag-Along Notice") specifying the number of Units (up to his Pro Rata Portion) with respect to which such Member shall exercise his rights under this Section 2I(d), and the number of Units to be Transferred to the Co-Sale Transferee
(iii) Within five Business Days after delivery of
by the Co-Sale Transferors shall be reduced accordingly.

(iv) Any Units requested to be included in any Tag-Along Notice shall
be Transferred at the price per Unit set forth in this Section 21 (d) and otherwise on the same terms and conditions as are set forth in the Co-Sale Notice.
Section 22. Withdrawal.

No Member shall have the right to withdraw from the Company except with the consent Managers and upon such terms and conditions as may be specifically agreed upon between the Company and the withdrawing Member.
of the Board of
Section 23. Additional Members.

The Board of Managers shall have the right to cause the Company to issue additional Units and to admit additional Members upon the issuance of such Units upon such terms and conditions, at such time or times, and for such Capital Contributions as shall be determined by the Board of Managers, subject to the limits set forth herein. In connection with the admission of Managers shall amend an additional Member or additional Capital Contributions, the Board of Schedule I hereto to reflect the name and address of each additional Member and the amount of any additional Capital Contributions.
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Section 24. Dissolyinl! Eyents.

The Company shall be dissolved and its affairs wound up in the manner hereinafter provided upon the happening of any of the following events:
Managers and the Members, in accordance with Section 6(b)(vi), shall vote or agree in writing to dissolve the Company; and
(a) the Board of
(b) any event which under Applicable Law would cause the dissolution ofthe
Company; provided, that unless required by Applicable Law, the Company shall not be wound up as a result of any such event and the business of the Company shall continue.
Section 25. Dissolution and Windinl!-Up.
the Company shall be liquidated or distributed under the direction of and to the extent determined by the Board of Managers and the business of the Company shall be wound up. Within a reasonable time after the effective date of dissolution of the Company, the Company's assets shall be distributed in the following manner and order:
Upon the dissolution of the Company, the assets of
indebtedness, whether by payment or (a) First, to creditors in satisfaction of the makng of reasonable provision for payment, and the expenses of liquidation, whether by payment or the making of reasonable provision for payment, including the establishment of reasonable reserves (which may be fuded by a liquidating trust) determined by the Board of Managers or the liquidating trustee, as the case may be, to be reasonably necessary for the payment of the Company's expenses, liabilities and other obligations (whether fixed, conditional, unmatured or contingent); and
(b) Second, to the Members in the same maner as Distributions under
Section 12.
Section 26. Distributions in Cash or in Kind Upon Dissolution.

Managers shall use all commercially the Company's assets in an orderly manner and apply the proceeds of such liquidation as set forth in Section 25; provided that if in the good faith judgment of the Board of Managers, a Company asset should not be liquidated, the Board of Managers shall cause the Company to distribute such assets in accordance with Section 25, and for puroses of making such Distribution, and for all other purposes of this Agreement the Company had sold such assets (excluding Section 12), the Distribution shall be treated as if for cash in an amount equal to their Fair Market Value and distributed such cash to the Members instead.
Upon the dissolution of the Company, the Board of reasonable efforts to liquidate all of
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Section 27. Termination Upon Dissolntion.

the Company's affairs has been the Company have been distributed and an application for a Certificate of Dissolution has been fied by the Registered Agent of the Company in accordance with the Delaware Act.
The Company shall terminate when the winding up of the assets of completed, all of
Section 28. Information Ril!hts; Obseryer Ril!hts; Confidentiality; Other Restrictiye COY en ants.
Section 28(c) and (d): each (x) First Lien Steering Committee Member, for so long as such Person owns any Units and
(a) Information Rights. Subject to the terms of (y) each Member, for so long as such Person continues to own at least 5.0% of
the outstanding
Units, in each case, shall have the right, upon ten (10) days' prior written notice and during normal business hours, to inspect the properties, books and other business records of the Company and its Subsidiaries and to reasonably request from time to time (i) any other information (financial or otherwise) about the Company and (ii) to have reasonable access to the Company's or any Subsidiar's management, auditors and legal counsel.
(b) Observer Rights. Each (x) First Lien Steering Committee Member, for so
long as such Person owns any Units and (y) Member, for so long as such Person continues to own at least 5.0% of the outstanding Units, in each case, shall have the right to have one representative (each, an "Observer") present at all meetings ofthe Board of Managers. The Company wil give each Observer reasonable prior notice (it being agreed that substantially the same prior notice given to the members of the Board of Managers shall be deemed reasonable prior notice) of the time and place of any proposed meeting of the Board of Managers. The Company will deliver to each Observer copies of all material documentation distributed from time to time to the members of the Board of Managers, at such time as such documents are so distributed to them, including copies of any written consent. The Company reserves the right to and may, in its sole discretion, withhold any information and to exclude any Observer from any meeting or portion thereof if the Company reasonably determines in good faith that access to such information or attendance at such meeting (i) could be reasonably expected to create a potential or actual conflct of interest or adversely affect the attorney-client privilege between the Company and its counsel, (ii) is prohibited by an agreement with a third par or (iii) wil not be in the best interest of the Company. Notwithstanding anything to the contrary contained in this Agreement, the Observers may not use or disclose any confidential information received by the Observers and the Observers shall agree in writing to be bound by confidentiality provisions substantially similar to those in Section 28( d).
(c) Competitors. Notwithstanding anything to the contrary contained herein,
in no event shall any Member be entitled to any of the information, inspection rights or access set forth in Section 28(a) or be entitled to designate an Observer if the Company reasonably
determines in good faith that such Member is a direct or indirect competitor of
the Company or
its Subsidiaries.
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(d) Confidentialitv. Each Member, on behalf of itself and its Affliates

(collectively, the "Subiect Paries") shall be bound by the provisions contained in this Section
28( d). The Subject Paries recognize and acknowledge that they have been provided by the
Company, its Subsidiaries and their respective agents certain confidential and proprietary information and trade secrets of the Company and its Subsidiaries including, without limitation, customer information, pricing information, financial plans, business plans, business concepts, supplier information, know-how and intellectual property and materials related thereto (the "Confidential Information"). Each Subject Pary agrees that it wil not, directly or indirectly, use, take commercial or proprietar advantage of or profit from any Confidential Information or disclose Confidential Information to any Person for any reason or purpose whatsoever, except for the benefit of the Company and its Subsidiaries and except as is required to be disclosed under Applicable Law; provided, that the party required to make such disclosure shall, to the extent permitted by law, provide the Company with prompt notice of any such disclosure and shall use commercially reasonable efforts to limit the extent of such disclosure. Notwithstanding the foregoing, Confidential Information shall not include any information which (i) was publicly known and available in the public domain prior to the time of disclosure by the Company; (ii) becomes publicly known and available in the public domain after disclosure by the Company
through no action or inaction of the Subject Pary; (iii) is in the possession of
the Subject Pary at
the time of disclosure by the Company and the Subject Pary was not aware of its confidential natue at the time of its receipt of such information; (iv) is independently developed by the
Subject Par without use of or reference to the Confidential Information; or (v) is received by the Subject Par from a third pary without an accompanying duty of confidentiality.
Section 29. Rel!istration Ril!hts.

Upon the request of the holders of a majority of the outstanding Units, the Company shall enter into a registration rights agreement with the Members upon such terms and conditions that
are reasonably satisfactory to the holders of a majority of
the outstanding Units.
Section 30. Exculpation and Indemnification.

(a) Except as otherwse provided under the Delaware Act, no Member, in such
capacity, shall be liable for any debts, liabilities, contracts or any other obligations of the Company, except for and only to the extent of such Member's Capital Contribution, and then only to the extent and under the circumstances set forth in the Delaware Act, or for any debts, liabilities contracts or obligations of any other Member. Except as otherwise provided in the Delaware Act, this Agreement or in any separate written instrument signed by the Member, no Member of the Company shall be obligated personally for any debt, obligation or liability of the
the Company. Except as otherwse provided in the Delaware Act, by Applicable Law or expressly in this Agreement,
Company or of any other Member solely by reason of being a Member of
no Member shall have any fiduciary or other duty to another Member with respect to the business and affairs of the Company. No Member shall have any responsibility to restore any
negative balance in his capital account or to contribute to or in respect ofthe liabilties or
obligations of
the Company or to retu Distributions made by the Company, except as required
by the Delaware Act or other Applicable Law.

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(b) No Member, Manager, offcer, or any direct or indirect offcer, director,

Affliate, stockholder, member or partner of a Member (each, an "Indenmitee"), shall be liable, responsible or accountable in damages or otherwise to the Company or any Member for any act or failure to act by such Indenmitee in connection with the conduct of the business of the Company, or by any other such Indemnitee in performing or paricipating in the performance of the obligations of the Company, so long as such Indenmitee acted in the good faith belief that such action or failure to act was in the best interests, or not opposed to the best interests, of the Company and/or its Subsidiaries and such action or failure to act was not in material violation of this Agreement and did not constitute gross negligence or wilful misconduct. Except as otherwise required by the Delaware Act, no Person who is a Member, Manager or offcer, or any combination of the foregoing, shall be personally liable under any judgment of a cour, or in any other maner, for any debt, obligation, or liability of the Company, whether that liability or obligation arises in contract, tort, or otherwise, solely by reason of being a Member, Manager, offcer or any combination ofthe foregoing.
(c) The Company shall indenmify and hold harmless each Indemnitee to the
fullest extent permitted by Applicable Law (as in effect on the date hereof or as such laws may from time to time hereafter be amended to increase the scope of such permitted indenmification) against losses, damages, liabilities, costs or expenses (including reasonable attorneys' fees and expenses and amounts paid in settlement) incurred by any such Indenmitee in connection with any action, suit or proceeding to which such Indemntee may be made a par or otherwise involved (including, without limitation, as a witness) or with which it shall be threatened by reason of its being a Member, Manager, offcer, or any direct or indirect officer, director, Affliate
stockholder or parner of a Member, or while acting as (or on behalf of) a Member on behalf of
the Company or in the Company's interest. Such attorneys' fees and expenses shall be paid by the Company as they are incurred upon receipt, in each case, of an undertaking by or on behalf of the Indemntee to repay such amounts ifit is ultimately determined that such Indenmitee is not entitled to indemnification with respect thereto.
(d) The right of an Indemnitee to indenmification hereunder shall not be
exclusive of any other right or remedy that a Member, Manager or offcer may have pursuant to Applicable Law or this Agreement.
(e) An Indenmitee shall be fully protected in relying in good faith upon the
records of the Company and upon such information, opinions, reports or statements presented to the Company by any Person as to matters the Indemnitee reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Company, including information, opinions, reports or statements as to the value and amount ofthe assets, liabilities, or any other facts pertinent to the existence and amount of assets from which Distributions to the Member might properly be paid.
(f) To the extent that, at law or in equity, an Indenmitee has duties (including
fiduciar duties) and liabilities relating thereto to the Company or to any other Indemnitee, an Indenmitee acting within the scope of this Agreement shall not be liable to the Company or to any other Indemnitee for its good faith reliance on the provisions of this Agreement or any
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approval or authorization granted by the Company or any other Indenmitee. The provisions of this Agreement, to the extent that they restrict the duties and liabilities of an Indenmitee otherwise existing at law or in equity, are agreed by the Members to replace such other duties and liabilties of such Indenmitee.
(g) In the event that any Indenmitee is entitled to indenmification under this
Section 30 and such Indenmitee is also entitled to, or has received, indemnification by any of its Affliates (whether by way of payment or reimbursement to a director of any such amounts), whether pursuant to any agreement, the governing or constituent documents of any entity or by applicable law, then (i) the Company acknowledges and agrees that, as between the Company and its Affliates, on the one hand, and the Affliates of such Indenmitee, on the other hand, the indemnification obligations of the Company and its Affliates shall be a primar obligation and the indenmification obligation of the Affliates of such Indenmitee shall be a secondary obligation; and (ii) the Affliates of such Indemnitee shall be subrogated to the rights ofthe Indemnitee against the Company and its Affliates, as the case may be, with respect to any amounts paid by the Affliates of such Indenmitee in connection with any such indenmification obligation
this Section 30 shall (i) survive any (h) The foregoing provisions of termination of this Agreement and (ii) be contract rights, and no amendment, modification, supplement, restatement or repeal of this Section 30 shall have the effect oflimiting or denying any such rights with respect to actions giving rise to losses, damages, liabilities, costs or expenses (including reasonable attorneys' fees and expenses and amounts paid in settlement) prior to any such amendment, modification, supplementation or repeaL.
Section 31. Insurance.

The Company shall have the power to purchase and maintain customar and reasonable D&O insurance for its Managers and executive offcers and any other insurance on behalf of any Indenmitee or any Person who is or was an agent of the Company against any liability asserted against such Person and incured by such Person in any such capacity, or arising out of such Person's status as an agent, whether or not the Company would have the power to indenmify such Person against such liability under the provisions of Section 30 or under Applicable Law.
Section 32. Competitive Opportunity.

such Member's partners, If any Member (other than a Management Member) or any of members, shareholders, directors, offcers or Affliates (collectively, "Representatives"), acquires knowledge of a potential transaction or matter which may be an investment or business
opportity or prospective economic or competitive advantage in which the Company could
have an interest or expectancy (a "Competitive Opportnitv") or otherwise is then exploiting any Competitive Opportunity, the Company wil have no interest in, and no expectation that, such Competitive Opportunity be offered to it. Any such interest or expectation is hereby renounced so that such Member and its Representatives shall (a) have no duty to communicate or present such Competitive Opportunty to the Company and (b) have the right to either hold any such
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Competitive Opportity for such Member's (and its agents', parners' or affliates') own account and benefit or to recommend, assign or otherwise transfer such Competitive Opportunity
to Persons other than the Company or any Affliate of
the Company.
Section 33. Notices.

(a) All notices, requests, consents and other communications hereunder to any
pary shall be deemed to be suffcient if delivered in writing in person or by telecopy (or similar
electronic means with a copy following by nationally recognized overnight courier) or sent by nationally-recognized overnight courier or first class registered or certified mail, return receipt requested, postage prepaid, addressed to such pary at the address set forth below or at such other address as may hereafter be designated in writing by such party to the other paries.
(i) If, to the Company:
(Newco), LLC
Attention: Telephone: Facsimile:
r 1
York, New
with a copy to (which shall not constitute notice):

Akin Gump Strauss Hauer & Feld LLP One Bryant Park
New
York 10036
Attention: Philip C. Dublin David 1. D'Urso

Telephone: 212-872-1000
Facsimile: 212-872-1002; and
(ii) Schedule I hereto.
if
to any Member, to their respective address set forth on
(b) All such notices, requests, consents and other communications shall be
deemed to have been received (i) in the case of personal delivery or delivery by facsimile, on the date of such delivery, (ii) in the case of dispatch by nationally recognized overnight courier, on the next Business Day following such dispatch and (iii) in the case of mailing, on the fifth Business Day after the posting thereof.
Section 34. Amendments.

Except as otherwise expressly set forth herein, this Agreement may only be amended, modified, restated or supplemented, and provisions hereof may only be waived, by an instrment in writing duly executed and delivered by the Company and holders of 66.66% ofthe
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outstanding Units; provided, however, that (a) any amendment, modification, restatement, supplement or waiver that would materially and adversely affect the rights or obligations of any Member, in its capacity as a holder of Units, without similarly affecting the rights or obligations hereunder of all holders of Units, shall not be effective as to such Member without its prior written consent and (b) the Company shall automatically amend Schedule I hereto without the this the Members upon any change required thereby in accordance with the terms of consent of Agreement. Any waiver of any provision of this Agreement requested by any pary hereto must be in writing by the pary granting such waiver.
Section 35. Certain Members.

Each Member that is not an individual and is a special purpose entity organized or holding Units, agrees that (a) certificates or instruments incorporated for the primary purpose of reflecting equity interests in such entity wil note the restrictions contained in this Agreement on the transfer of Units as if such equity interests were Units and (b) no equity interests of such entity may be Transferred to any Person other than in accordance with the terms and provisions of this Agreement as if such equity interests were Units. The Company shall have the right to audit each Management Member that is subject to this Section 35 for compliance with this Section 35 from time to time upon prior written notice to such Management Member.
Section 36. Manal!ement Members' Seryices.
Nothing contained in this Agreement shall be deemed to obligate the Company or any Subsidiar to employ or retain the Services of any Management Member in any capacity whatsoever or to prohibit or restrict the Company or any Subsidiary from terminating the services of any Management Member at any time or for any reason whatsoever, with or without cause.
Section 37. No Conflctinl! Al!reements.

No Member shall enter into any agreements or arrangements of any kind with any Person the Company on terms inconsistent with the with respect to any Units or other Securities of provisions of this Agreement (whether or not such agreements or arrangements are with other
Members or with Persons that are not pary to this Agreement).
Section 38. Entire Al!reement.
This Agreement and the Bylaws contain the entire agreement among the paries with respect to the subject matter hereof and supersede all prior agreements and understandings, written or oral, with respect to such subject matter. The parties hereto represent and warant that there are no other agreements or understandings, written or oral, regarding any ofthe subject matter hereof other than as set forth herein and covenant not to enter into any such agreements or understandings after the Effective Date, except pursuant to an amendment, modification or waiver of the provisions of this Agreement.
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Section 39. Goyerninl! Law; Jurisdiction. Waiyer of JUry TriaL.

(a) This Agreement shall be governed by and constred in accordance with
the Applicable Laws of the State of Delaware, without giving effect to any choice of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the Applicable Laws of any jurisdiction other than the State of Delaware to be applied.
(b) ANY ACTION OR PROCEEDING AGAINST THE PARTIES RELATING IN ANY WAY TO THIS AGREEMENT MAY BE BROUGHT AND ENFORCED IN THE COURTS OF THE STATE OF NEW YORK LOCATED IN NEW YORK COUNTY OR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND THE PARTIES IRRVOCABLY SUBMIT TO THE JURISDICTION OF BOTH SUCH COURTS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAWS, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH ACTION OR PROCEEDING IN THE COURTS OF THE STATE OF NEW YORK LOCATED IN NEW YORK COUNTY OR THE SOUTHERN DISTRICT OF NEW YORK AND ANY CLAIM THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN ANY INCONVENIENT FORUM. THE PARTIES HERETO AGREE THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENTERED IN AND ENFORCED IN ANY COURT HAVING JURISDICTION THEREOF.
(c) EACH OF THE PARTIES HERETO HEREBY IRRVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 40. No Third Party Beneficiaries.

the provisions in this Agreement shall be for the benefit of or enforceable by any Person other than the paries to this Agreement and their
Except as set forth in Section 30, none of
respective successors and assigns. The covenants and agreements contained herein shall be
binding upon and inure to the benefit ofthe heirs, executors, administrators, successors and
assigns of
the respective paries hereto.
Section 41. Further Assurances.
Each Member shall execute all such certificates and other documents and shall do all such other acts as the Board of Managers deem appropriate to comply with the requirements of Applicable Law for the formation of the Company and with any Applicable Laws and third-pary requests relating to the acquisition, operation or holding ofthe property of the Company and to achieve the purpose ofthe Company, including, without limitation, (a) any documents that the Board of Managers deems necessary or appropriate to form, qualify or continue the Company as a limited liability company in all jurisdictions in which the Company has an offce or conducts or
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plans to conduct business and (b) all such agreements, certificates, tax statements and other
documents as may be required to be fied under Applicable Law in respect of
the Company.
Section 42. Counterparts.

which shall be deemed an original, but all of which taken together shall constitute one and the same Agreement. Facsimile counterpart signatures to this Agreement shall be binding and enforceable.
This Agreement may be executed in counterparts, each of
Section 43. Separabilty of Proyisions.

this Agreement be enforced to the fullest extent permissible under the Applicable Laws applied in each jurisdiction
It is the desire and intent of the Members that the provisions of in which enforcement is sought. Accordingly, if any paricular provision of
this Agreement shall
be adjudicated by a cour of competent jurisdiction to be invalid, prohibited or unenforceable for any reason, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. Notwithstanding the foregoing, if such provision could be more narowly drawn so as not to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narowly drawn, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any
other jurisdiction.
Section 44. Spousal Consent.
Each Member who is an individual shall cause his or her spouse, as applicable, to execute and deliver a Spousal Consent in the form attached as Exhibit C to this Agreement. The signature of a spouse on a Spousal Consent shall not be construed as making such spouse a
Member of
the Company or a pary to this Agreement except as may otherwise be set forth in
such consent. Each Member who is an individual wil certify his or her marital status to the Company at the Company's request.
Section 45. Recapitalizations. Exchanl!es. Splis. Etc.
The provisions of this Agreement shall apply to the full extent set forth herein with the Company or any successor company (whether by merger, consolidation, sale of assets or otherwise) which may be issued in respect of, in exchange for, or in substitution of the Units, all of which shall be appropriately adjusted for any equity dividends or Distributions, splits, reverse splits, combinations, recapitalizations and similar transactions occurring from time to time. In the event of any split, reverse split, combination, recapitalization or similar transaction made with respect to the Class A Units, an identical split, reverse split, combination, recapitalization or similar transaction shall be proportionately made to the Class B Units based on the number of outstanding Class A Units and Class B Units at such time.
respect to the Units and to any and all Securities of
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Section 46. Remedies.

Each party hereto acknowledges and agrees that in the event it fails to perform, observe or discharge any of its obligations or liabilities under this Agreement, no remedy at law wil provide adequate relief to the other paries hereto, and agrees that the other paries hereto shall be entitled to specific performance and/or temporary and permanent injunctive relief in any such case without the necessity of proving actual damages.
*****
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IN WITNESS WHEREOF, the undersigned have duly executed this Limited Liability Company Operating Agreement as of the date first written above.
THE COMPANY:
(NEWCO), LLC
By:
Name: Title:
(MEMBERS):
By:
Name: Title:
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Schedule of
Schedule I Members and Unit Ownership
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Anex I
DEFINITONS
"Accounting Period" shall mean, for the first Accounting Period, the period commencing on the Effective Date and ending on the next Adjustment Date. All succeeding Accounting Periods shall commence on the day after an Adjustment Date and end on the next Adjustment Date.
the Company or any other date determined by the Board of Managers, in its sole discretion, as appropriate for an interim closing of the Company's books.
"Adiustment Date" shall mean the last day of each Fiscal Year of
"Affliate" shall mean, with respect to any Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person. For purposes of this definition, the terms "control," "controlling," "controlled by" and "under common control with," as used with respect to any Person, means the possession, directly or indirectly, of the power to direct the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
"Agreement" shall have the meaning set forth in the preamble.
"Applicable Law" means, with respect to any Person, all provisions of laws, statutes, ordinances, rules, regulations, permits, certificates, judgments, decrees or orders of any Governental Authority applicable to such Person.
"Assumed Tax Rate" shall mean the highest effective marginal statutory combined U.S. federal, state and local income tax rate prescribed for a corporation doing business in New York City, New York (taking into account (a) the deductibility of state and local income taxes for U.S.
federal income tax puroses, and (b) the character (long-term or short-term capital gain, dividend
income or other ordinary income) ofthe applicable income).

"Board of Managers" shall mean the board of managers of
the Company.
"Business Dav" shall mean any day that is not a Saturday, Sunday, legal holiday or other
day on which commercial bans in New York, New York are authorized or required by
Applicable Law to close.
"Buver" shall have the meaning set forth in Section 7(b )(i.
"Bylaws" shall have the meaning set forth in Section 2(c).
"Candlewood" shall mean (
).
"Capital Account" shall have the meaning set forth in Section 15.
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"Capital Contribution" shall mean, with respect to each Member, the total amount of cash and the Fair Market Value of propert contributed to the Company by such Member pursuant to Section 15 or otherwise or deemed to be contributed to the Company by such Member for U.S. federal income tax puroses, net of any liabilities associated with such contributed property that the Company is considered to assume or "take subject to" under Section 752 of the Code, which Capital Contribution shall be reflected on Schedule I hereto, as amended from time to time in accordance with the terms of this Agreement.
"Carving Value" shall mean, with respect to any Company asset, the asset's adjusted basis for U.S. federal income tax purposes, except that the Carrying Values of all Company assets shall be adjusted to equal their respective Fair Market Values (as determined by the Board of Managers), in accordance with the rules set forth in U.S. Treasury Regulations Section 1.704l(b)(2)(iv)(f), except as otherwise provided herein, immediately prior to (a) the date of the acquisition of any additional Units by any new or existing Member in exchange for more than a de minimis Capital Contribution; (b) the date of the Distribution of more than a de minimis amount of Company propert to a Member, (c) the date of the grant of more than a de minimis profits interest to a Member for services rendered or to be rendered to the Company in his capacity as a Member, or (d) the liquidation of the Company within the meaning of Treasury Regulations Section 1.704-1(b )(2)(ii)(g); provided, that adjustment pursuant to clauses (a), (b) and (c) above shall be made only ifthe Board of Managers reasonably determines that such adjustments are necessary or appropriate to reflect the relative economic interests of the Members. The Carrying Value of any Company asset distributed to any Member shall be adjusted immediately prior to such Distribution to equal its Fair Market Value. The Carrying Value of any asset contributed by a Member to the Company shall be the Fair Market Value of the asset at the date of its contribution. In the case of any asset that has a Carying Value that differs from its adjusted tax basis, Caring Value shall be adjusted by the amount of Depreciation calculated for puroses ofthe definition of "Net Profits and Net Losses" rather than the amount of depreciation determined for U.S. federal income tax purposes, and Depreciation
shall be calculated by reference to Carying Value rather than tax basis once Carrying Value
differs from tax basis.
"Certificate" shall have the meaning set forth in Section 2(b ).

"Class A Units" shall mean an interest of
the Company designated as a Class A Unit.
"Class B Units" shall mean an interest of
the Company designated as a Class B Unit.
"Code" means the Internal Revenue Code of 1986, as amended. "Companv" shall have the meaning set forth in the preamble.
"Compensatorv Interests" shall have the meaning set forth in Section 20( e )(i)'
"Competitive Opportunity" shall have the meaning set forth in Section 32.
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"Confidential Information" shall have the meaning set forth in Section 28( d)'
"Co-Sale Notice" shall have the meaning set forth in Section 2Hd)(i.
"Co-Sale Transferee" shall have the meaning set forth in Section 2
Hd)(i.
"Co-Sale Transferor" shall have the meaning set forth in Section 21 (d)(i.
"Co-Sale Units" shall have the meaning set forth in Section 2!( d)(i.
"Credit Suisse Loan Funding" shall mean 1
J.
"Credit Suisse Manager" shall have the meaning set forth in Section 5(a)(ii.
"Credit Suisse SWAP" shall mean 1
J.
"CSAM" shall mean 1
).
"CSAM Manaier" shall have the meanng set forth in Section 5(a)(iii.
"CvoressTree" shall mean 1
).
"Deficit" shall have the meaning set forth in Section 17( a).
"Delaware Act" shall have the meaning set fort in the recitals.
"Depreciation" shall mean, for each Fiscal Year, an amount equal to the depreciation,
amortization, or other cost recovery deduction allowable for Federal income tax puroses with
respect to an asset for such Fiscal Year, except that (a) with respect to any asset the Caring
Value of
which differs from its adjusted tax basis for Federal income tax puroses at the
the "remedial the Treasury Regulations, Depreciation for such Fiscal Year shall be the amount of book basis recovered for such Fiscal Year under the rules prescribed by Section 1.704-3(d)(2) of the Treasury Regulations, and (b) with respect to any other asset the Carying Value of which differs from its adjusted tax basis for Federal income tax purposes at the beginning of such Fiscal Year, Depreciation shall be an amount which bears the same ratio to such beginning Carying Value as the Federal income tax depreciation, amortization, or other cost recovery deduction for such Fiscal Year bears to such beginning
beginning of such Fiscal Year and which difference is being eliminated by use of method" as defined by Section 1.704-3(d) of adjusted tax basis; provided, however, that in the case of clause (b) above, if
the adjusted tax
basis for Federal income tax puroses of an asset at the beginning of such Fiscal Year is zero, Depreciation shall be determined with reference to such beginning Carring Value using any reasonable method selected by the Board of Managers.
"Distribution" shall mean each Distribution made by the Company to a Member, whether in cash, property or securities ofthe Company and whether by Distribution, redemption, repurchase or otherwise; provided that the following shall not be a Distribution: (a) any
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recapitalization or exchange of securities of the Company in which the Members do not receive any cash or other assets or (b) any subdivision (by Unit split or otherwise) or any combination (by reverse Unit split or otherwise) of any outstanding Units.
"Drag-Along Sale" shall have the meaning set forth in Section 21( c )(i).
"Drag-Along Sale Notice" shall have the meaning set forth in Section 2!( c )(ii).
"Drag-Along Securities" shall have the meaning set forth in Section 21(c)(ii).
"Drag-Along Seller" shall have the meaning set forth in Section 21( c )(i.
the DragAlong Sale attributes to the Company an enterprise value in excess of $1 00,000,000 or (ii) 66.66% ofthe outstanding Units, ifthe Drag-Along Sale attributes to the Company an enterprise value less than or equal to $100,000,000.
"Drag-Along Threshold" means either (i) 50% of the outstanding Units, if
"Effective Date" shall mean (
),010.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
the Company (a) issued or granted to Managers, directors, offcers or employees of the Company or its Subsidiaries as incentive compensation for services; (b) issued as a dividend or pro rata distribution to existing Members, or any split, recapitalization or other subdivision or combination of Units; (c) issued in connection with, or for the purose of, an acquisition (whether by stock sale, merger, recapitalization, asset sale or otherwise) of another Person (or any portion thereof) or its respective businesses or operations; and (e) issued in a public offering of Securities of the
"Excluded Securities" mean Securities of
Company.
"Exercise Period" shall have the meaning set forth in Section 7(b ).
the date of determination, (a) in the case of publicly-traded Securities, the average of their last sales prices on the applicable trading exchange or quotation system in each trading day during the five trading-day period ending on such date and (b) in the case of any other Securities or property, the fair market value of such Securities or property, as reasonably determined in good faith by the Board of Managers.
"Fair Market Value" shall mean, as of
"First Lien Steering Committee Member" shall mean any of Candlewood, Credit Suisse Loan Funding, CSAM, CypressTree, GE, the Highland Managed Funds and Sorin.
"Fiscal Year" means (a) the taxable year ofthe Company, which shall be the calendar year unless otherwise required (or, in the Board of Managers' reasonable discretion, permitted)
by Section 706(b) of the Code, and (b) for puroses of Section 11 though Section 14, the portion
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any Fiscal Year for which the Company is required to (or does) allocate gross income, Net Profit, Net Loss, or other items pursuant to Section 11 through Section 14.
of
"Forfeited Unit Transferees" shall have the meaning set forth in Section 17( c).
"Forfeiture Transfer" shall have the meaning set fort in Section 17( c ).
"GE" shall mean (
J.
"Governental Authority" shall mean any domestic or foreign governent or political

subdivision thereof, whether on a federal, state or local
level and whether executive, legislative
or judicial in natue, including any agency, authority, board, bureau, commission, cour,
deparment or other instrumentality thereof.
"Highland Managed Funds" shall mean all of (

affliated funds (and any direct designee of ( D.
) and its associated related
"Highland Manager" shall have the meaning set forth in Section 5(a)(i.
"Indenmitee" shall have the meaning set forth in Section 30(b ).
"IPO" shall mean the closing of the first public offering of and sale of Securities of the the Company) (other than on Company (or any other entity created through any reorganzation of Forms 8-4 or S-8 or their equivalent), pursuant to an effective registration statement filed by the
Company under the Securities Act.
"IRS" shall mean the Internal Revenue Service.

"Management Members" shall mean (a) r 1 and (b) any other Member
designated as a "Management Member" by the Board of
Managers from time to time.

the Board of
"Manager" shall mean any Person that is a member of
Managers.
"Members" shall mean the holders of Class A Units and Class B Units signatory to this Agreement (including pursuant to the execution and delivery of a Joinder Agreement, substantially in the form attached hereto as Exhibit B).
"Net Profits" and "Net Losses" shall mean, with respect to any Accounting Period, net income or net loss ofthe Company for such Accounting Period, determined in accordance with 703(a) ofthe Code, including any items that are separately stated for purposes of 702(a) of the Code, as determined in accordance with federal income tax accounting principles with the
following adjustments:
(a) any income ofthe Company that is exempt from United States federal income tax shall be included as income;
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the Company described in 705(a)(2)(B) of (b)(2)(iv)(i) of
(b) any expenditures of or treated as expenditues pursuant to 1.704-1
the Code
the Treasury Regulations shall be
treated as current expenses;

(c) any items of income, gain, loss or deduction specially allocated pursuant
to this Agreement, including pursuant to Section 17(a), Section 17(b) and Section 17(d). shall be Net Profit and Net Loss; excluded from the determination of
(d) any adjustment to the Carying Values ofthe Company's assets pursuant to
the definition of Carying Value shall be treated as Net Profit and Net Loss; and
(e) in lieu of depreciation, amortization, and other cost recovery deductions
taken into account in computing such taxable income or loss, there shall be taken into account "Depreciation". Depreciation for such Fiscal Year, computed in accordance with the definition of
"New First Lien Notes" shall mean those certain New First Lien Notes, dated as of ( ,2010), issued by the Company pursuant to ( ).
"New Securities" shall have the meanng set forth in Section 7(b).
"Notice of
Proposed Issuance" shall have the meaning set forth in Section 7(b).
"Observer" shall have the meaning set forth in Section 28(b ).
"Operations Manager" shall mean the Person designated by the holders of 66.66% ofthe
outstanding Units from time to time to manage the business of
the Company. Initially, the
Operations Manager shall be ( J.
"Permitted Transfer" means:

(a) in the case of any Member who is an individual, a Transfer of
Units to a
trust or estate planing-related entity for the sole benefit of such Member or solely upon the
death of such individual in accordance with such individual's wil or pursuant to laws of intestacy;
(b) in the case of any Member that is a parnership (other than a Management
Member), (i) a Transfer of Units to its limited, special and general parners as a Distribution by
such parership to its parners and (ii) a Transfer of Units made to any Affliate of such Member
or any of its Affliates; or

(c) in the case of any Member that is a corporation, company or limited
liability company (in each case, other than a Management Member), (i) a Transfer of Units to its shareholders or members, as the case may be, as a Distribution by such Person to its shareholders or members, as the case may be and (ii) a Transfer made to any Affliate of such Member or any of its Affliates.
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with the provisions of
"Permitted Transferee" means any Person acquiring Units from a Member in accordance this Agreement.
"Person" means any legal person, including any individual, corporation, investment fund, parnership, limited parnership, limited liability company, joint venture, joint stock company,
association, trst, unincorporated entity or Governmental Authority.
"Pro Rata Portion" shall mean, with respect to any Member in respect of (expressed as a percentage), the numerator of Member, and the denominator of which is the number of which is the total number of
Units, a fraction Units held by such Units outstanding, at the time in
question.
"Proposed Rules" shall have the meaning set forth in Section 20( e )(i.
"Purchasing Member" shall have the meaning set forth in Section 7(b )(vii.
"Representatives" shall have the meaning set forth in Section 32.
"Rule 144" shall have the meanng set forth in Section 1 O( c).
"Safe Harbor Election" shall have the meaning set forth in Section 20(e)(i.
"Sale of
the Companv" shall mean (a) the Transfer of all or substantially all ofthe
the outstanding equity Securities of
Company's assets, (b) the Transfer of merger or consolidation of
the Company or (c) the
the Company with another Person, in each case in clauses (b) and (c) above under circumstances in which the holders of a majority of the issued and outstanding Units, immediately prior to such transaction, hold less than 50% of the outstanding Units (or less than 50% of the voting power of the outstanding equity Securities of the surviving or resulting Person, as the case may be) immediately following such transaction.
"SEC" shall mean the Securities and Exchange Commission and any other Governental Authority at the time administering the Securities Act.
"Securities" shall mean, with respect to any Person, all equity interests of such Person, all securities convertible into or exchangeable for equity interests of such Person, and all options, warants, and other rights to purchase or otherwise acquire from such Person equity interests, including any equity appreciation or similar rights, contractual or otherwise.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
"Sorin" shall mean (
J.
"Spousal Consent" shall mean a consent, in the form attached to this Agreement as
Exhibit C, executed by the spouse of any Member who is an individuaL.
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"Subiect Paries" shall have the meaning set forth in Section 28( d)'
"Subsidiarv" shall mean, with respect to any Person, any corporation, association, parnership, limited liabilty company or other business entity of which 50% or more of the total voting power of equity interests (including parnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, representatives or trustees thereof is at the time owned or controlled, directly or indirectly, by (a) such Person, (b) such Person and one or more subsidiaries of such Person, or ( c) one or more subsidiaries of such Person. For puroses of this definition, the terms "control," "controlling," "controlled by" and "under common control with," as used with respect to any Person, means the possession, directly or indirectly, ofthe power to direct the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
"Tag-Along Notice" shall have the meaning set forth in Section 21 (d)(iy).
"Tax Distributions" shall have the meaning set forth in Section 13.
"Tax Matters Parner" shall have the meaning set forth in Section 20( c ).
"Transfer" shall mean, as applicable, (a) as to any Security or asset (the "Subject Propert"), to sell, transfer, assign, gift, pledge, grant a security interest in, distribute, encumber, hypothecate or otherwise dispose of (including, without limitation, the foreclosure or other acquisition by any lender with respect to the Subject Property pledged to such lender by the
holder of
the Subject Propert), whether directly or indirectly (including, without limitation, by means of a Transfer of any Security issued by a Person that holds, directly or indirectly, an
interest in the Subject Property), such Subject Propert, either voluntarily or involuntarily and with or without consideration or (b) the act of such sale, transfer, assignment, gift, pledge, grant of security interest, Distribution, encumbrance, hypothecation or other disposition.
"Transferee" shall mean any Person to whom a Member shall Transfer Units in accordance with the terms of this Agreement. "Treasurv Regulations" shall mean regulations promulgated pursuant to the Code.
"Units" shall mean all Class A Units and Class B Units held at any time during the term of this Agreement by any Member, and shall include any Securities issued in respect of or in exchange for such Class A Units or Class B Units, whether by way of dividend or other Distribution, split, reverse split, recapitalization, merger, rollup transaction, consolidation,
conversion or reorganization.
*******
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Exhibit A
BYLAWS
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Exhibit B
JOINDER AGREEMENT
The undersigned is executing and delivering this Joinder Agreement pursuant to the Limited Liability Company Operating Agreement dated r 1,2010, as amended, modified, restated or supplemented from time to time, (the "Operating Agreement"), of (Newco), LLC, a Delaware limited liability company (the "Companv").
By executing and delivering this Joinder Agreement to the Company, the undersigned the provisions of the Operating Agreement in the same maner as if the undersigned were an original signatory to the Operating Agreement.
hereby agrees to become a par to, to be bound by, and to comply with all of
The undersigned agrees that the undersigned shall be a (Member/Management Member), as such term is defined in the Operating Agreement.
Accordingly, the undersigned has executed and delivered this Joinder Agreement as of
Signature of Member
Print Name of Member
Address
Facsimile
Telephone
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Exhibit C
SPOUSAL CONSENT
Dated:
Reference is hereby made to the Limited Liability Company Operating Agreement of

(Newco J, LLC, dated as of r 1, 2010, as may be amended, supplemented, modified or
restated from time to time (the "Operating Agreement"). Capitalized terms used herein but not
otherwise defined shall have the meaning ascribed thereto in the Operating Agreement.
This Spousal Consent is being delivered pursuant to Section 44 of
the Operating
Agreement, a copy of which has been provided to the undersigned ("Spouse"). Spouse, as the the provisions spouse of (the "Relevant Member"), consents to all of of the Operating Agreement and to the extent that Spouse may lawflly do so, Spouse confirms that the Relevant Member may act alone with respect to all matters in connection with the Operating Agreement. Spouse also confirms that the Relevant Member may enter into agreements pursuant to the Operating Agreement and consent to and execute amendments
thereof, without further signature or consent of, or notice to, Spouse. Spouse fuher agrees that
he/she wil not take any action to oppose or otherwise hinder the operation of the provisions of the Operating Agreement.
To the extent of any propert interest that Spouse may have in such Units, Spouse consents to be bound by the terms of the Operating Agreement, including, without limitation,
restrictions on transfer and obligations to sell set forth therein.
Name of Spouse:
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EXHIBIT K
EXHIBIT K
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Exhihit K
New First Lien Credit Agreement
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CREDIT AGREEMENT
DATED AS 01; I
among
INEWCO LLq,
THE RHODES COI\'IPANIES, LLC
RIIODES RANCH GENERA PARTNERSHIP

RHODES RANCH GOLF AND COUNTRY CLUB, LLC HERITAGE LAND COl\lPANY, LLC.
TICK, LP,
GLYNDA, LP, CHALKLINE, LP, nA TeA V,,:, LP, .JACKKNIFE, LP, WALLBOARD, LP, OVERFL.OW, LP. TUSCANY ACQl1SlTIONS. LLC. TUSCANY ACQUISITIONS II, LLC, TUSCANY ACQl!JSITIONS II, LLC. TUSCANY ACQUJSITIONS iv, LLC, PARCEL 20 LLC, RHODES DESIGN AND DEVELOPMENT CORPORATION, C&.J HOI.D1NGS INC., RHODES REAL.TY, INC.. ,IARVPA I.Le, ELKIIORN INVESTMENTS, INC., RHODES HOMES ARIZONA, LLC, RHODES ARIZONA PROPERTIES. LLC,
TRIBES HOLDINGS LLe, SiX FEA TilERS HOLDINGS, LLC. ELKHORN IJARTNERS, A NEVADA L1MlrEIl PARTNERSHIP BRAVO INC., CVNG-HO CONCRETE, LLC, CERONIi\IO PLUMBING, LLC, AIJACHE FRAMING, LLC, TUSCANY GOI.F COUNTRY CLUB, LLC, and PINNACLE GRADING, LLC as the Borrowers,
TilE LENI)ERS 1,ISTED HEREIN, as the i'enders,
as Administrative Agent and Collateral Agent

$50,OOO,Oll(t SENIOR SECURED CREI)IT FACILITY
I I,
and
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TABLE OF CONTENTS
Paee
SECTION I. D EF i N ITI ONS ...... ........... .............. .............. .............. ............... .................... .....3
i.1 Certain Defined Tenns .h........m..............................................mumm.................3

i.2 Defined Tenus; Accounting Terms; Utilization ofGAAP for Purposes of
Calculations Under Agreement.. __mmu.... ....... ......... ....... .... .... ....mm.......... ...32
SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS ......................33
2. i Commitments; Loans ..... .... ...n.................... ............... ................... .... ............... ......33 2.2 Interest 011 the Loans........................m.........................................................33
2.3 Fees ...................... ... .... ....... ........ .... "'...n...... .................. ... ......... ... .... ..... ..... ...........36
2.4 Repayments and Prepayments; General Provisions Regarding Payments ............36 2.5 (Intentionally Omitted) .... ...n... ..... ... ... .... ... ......................... ....... ..... ......... ... ..40 2.6 Special Provisions Governing L1BOR Loans..................................................40
2.7 Increased Costs; Taxes ..........................................................n....................42

2.8 Mitigation Obligations; Replacement of Lenders............................................45
2.9 Releases; Subordinations ....... ............ ... .... ... ............... ....... .... ........ ........ ................46
2.10 Subordinations in connection with Map Approvals........................................47 2.11 Subordinations in connection with Qualified Sales Agreements.........................48
SECTION 3. CONDITIONS TO EFFECTIVENESS ...........................................................48
3.1 Conditions to Effectiveness .........................................................................48

SECTION 4. REPRESENTATIONS AND WARRANTIES .....................................................55
4. i Organization and Qualification ........... ...... ....... ..... ... .... ....... .............. .............55 4.2 Power and Authority .................................................................................55 4.3 Legally Enforceable Agreement. .... ... ... ....... ...... ........ ....... .... .... ....... ........ ..........56 4.4 No Conflict. ..... .......... ............. ....... ... ...... ... .... ........ .... ........... ..n............ ......... .56
4.5 Capital Structure .. .... .... ... ............ .............. .......... ................ .... .... ....................... ....56 4.6 Licenses............................................. .....................................................................57
4.7 Corporate Naines ................ .... .... ... .... ... .... ....... ............... ................ .... .... ...... .........57
4.8 Busincss Locations; Agent for Process ............................................................57 4.9 litle to Properties. ........ ... .... ............... ... ........... ........ ... .... ............ ....................... ....57 4.10 Priority of Liens; UCC-1 Financing Statements...........................................58
4.1 i No Subordination .......................................................................................59

4.12 Permits; Licenses; Franchises .................. ...... .... .... .... .... ..... ... ......................59
4.13 lndebtedness. ............ ....... ... ............ ................................. ..... ....... .... .... ..... ..............59
4.14 (Intcntionally Omitted) ..............................................................................59
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4.15 Disclosure ......u......n................................ ..._........ ....... ... ............... .................... .... .59
4. i 6 Solvent Financial Condition .....................................................................60
4. i 7 Surety Obligations mm..mmm..mu................................_..........................60

4. i 8 Taxes ..... ....... ... .... .... ....... ... ..... ... .... ........... ........ ...... ....... ........................ .... .... ....60 4.19 Brokers.. ... ... .... ........ .............. .........................n......n...............n.............................60
4.20 Intellectual Property... ... .... .... .... .................. .... ............................ .......... ............6 i
4.21 Governmental Authorization.... ........ ........... .... .... .............. ..............................61
4.22 Coinpliancc \vith La\vs ....................... ............ .... ........ ...... ............... .... .... .... "'00'" ..6 i
4.23 BurdenSOlTIe Contracts.. ....... ............ ... ........ .... .... ..... ... ...............................00.... ...00.62 4.24 Litigation 00...... ..........00... ........... ........... ............ ........ ... .......... ........ .... ....... ............. ..62 4.25 No Defaults ......... ...... .... ... ...................... ..... ............ ... ... ........... .... ..........................62 4.26 Leases..n.n.n.n..n..n..n.....n.n..n......n............................. ........... ... ........ .... ......... ......62
4.27 Employee Benefit rlans.........................................................................63

4.28 Trade Relations ...........00.................................................................................. .......64
4.29 Lahor Relations. .... ... .... ....... ............... .... ....................... .................. .... .... .... ...........64
4.30 Not a Regulated Entity................................................................................64

4.31 Margin Stock. .... .... ... .... ....... .... ........ ... .... ... ......... ........... ...... .... ............ ...................64
4.32 No Material Adverse Change..........................................................................64
4.33 Environmental Matters.............................. .......... .................... .... .... ..... ..64

4.34 Material Contracts ....... .... .... ........ ....... ... .... ......... ..00'00...... ..00..00....... .......00........ .... ...66
4.35 Utilities.........................................
..........................................................................67
4.36 Entitlements ...00.... .............. ............... ........ ......... .... .......... ... ... .... .... .... .... ................6 7
SECTION 5. AFFIRMMIVE COVENANTS ......................................................................68
5.1 Visits and Inspections ....... ............ ........... ......... .....................................................68

5.2 Notices ........ ........... .... ... .... ........ .... ... ... ......... ............... ... ............... .... ......... ...00.....0068
5.3 financial Statements and Other Reports............................................................70

5.4 Corporate Existence ...... ................... ................................................. .... .... ............. 7 5
5.5 Payment of
Taxes and Claims; Tax Consolidation .......................................75 5.6 Maintenance of Propcl1ies; Insurance. ........ .... ..... ... .............. .... ........................ .....76 5.7 Lender Meeting ................ ........ .... ........................... ... ....... ....... ..... ....... ............. .....76 5.8 Compliance with Laws ................................................................................76 5.9 Environmental Disclosure and Inspection ................................................. 76 5.10 Remedial Action Regarding Hazardous Materials.............................................78
5.1 i Additional Collateral; Execution of Guaranty and Collateral Documents
by Future Subsidiaries. .............................. ............... .... .......... ................ ..... ..... .....78
5.12 Intentionally Omitted.) ............. ...... .... ........... .... ... .... .............m.... ......... ........81
5.13 Further Assurances.. ....... .... .... ..... ... ... ........ ......... .......... ............... .... ............ ...00..00..81
5.14 Ti tie .... ...... ......................... ............. .......... ....... ............ ........ .... .... .... ..... ..8 I 5.15 Maintenance of Entitlements; Development Agreements.................................81
SECTION 6. N EGA TIV E COVEN ANTS .... ........ ... ............ ..... .............. ... .... .... ..... ... .... ..... ........ ..82
6.1 Inebtedness........................................ ............................................... .... ......... .......82
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6.2 Liens and Related Matters ......m..umm.........................mm.............................84 6.3 Iiivcstincnts ..... .... ........ ........... .,. ..... ... .......................... ... ..........n........... ... ... ...........85 6.4 Contingent Obligations ...mm........... ........... ....... .mmm........ .... ........ .............87
6.5 Restricted Payments ... .._ ..mm...... ...... ...........nom.. mmn' ........ ...... .................87 6.6 Financial Covenants ...mm......h. ...... ...... ..... ,m.m....' ... ........... .... ........ ...........88
6.7 Restriction 011 Fundamental Changes .......................................................89 Receivables ................................................................89

6.8 Sale or Discount of
6.9 Asset Sales. .... .......... ... ....... .............. ........................................................... ...........89
6.10 Transactions with Shareholders and Affliates..................................................92
6.11 Conduct of Business ...............................................................................93

6_ I 2 (Intentionally Omitted) ____________m__mmm________________________________m_____________________________93
6.13 Amendments or Waivers of
Certain Agreements.......................................m.93
6.14 Fiscal Year ........... ..... ...... ......................... ........ ............... ................ ... ....... ... ........... 93
6.1 5 Hedge Agreements. .... ...... ..0000.. .... ..... .... ........ ......... .... ... ............................ 93 6.16 (Intentionally Omitted) .................................00..........................................93 6.17 Limitation on Unentitled Properties............................................................93
6.18 Limitation on Purchase or
Rea) Property Assets.........................................94
SECTION 7_ EVENTS OF DEFAULT__________m__m____mm________________m______m__mmm_______________________94
7. I Payment of Obligations....... ............ ..... ........ ......... ........ .... ......... ... ..00......94
7.2 Misrepresentations .... ...... .... ... .... ....... ........... ................... ... ......... .... .... ... ... .... .... .....94
7.3 Breach of Certain Covenants ..... .......... ....... ..... ..... ... .......... ........ ........ .............. ......94
7.4 Breach of ther Covenants ... .................. .... ..... ... ... ... ..... ........... ........ .... .......94 7.5 Dcfault Under Loan Documents..............................mm...........................95
7_6 Other Defults _m___m_ __mm______________m ___ ___ _____mmm _________ ___m__. _m ._____mm______________95
7.7 1nso) vency Proceedings ..... ........ ........................... .... ... ... ............ .... .......... .............96 7.8 Busincss Disruption; Condcmnationm............................................................96
7 _9 ER ISA _m ___..__ _____.___ _____________m__________ ___ ___.m .____.___ _m_ m m m ________. .__m_____ ___ m____m____ 96
7.10 Challenge to Loan Documents; Invalidity..................................................96

7_ i i J udgienl __ _____mmm_m_____ ____ .__. _______. ___ m m_ m__________ ____ ______ ______mm ______________________ ____97
7.12 Repudiation of or Default Undcr Guaranty ......................................................97 7.13 Criminal F orleiturc . ... .... ... .... ........... .... ... ................. .................. .... .... ....... ........... ..97 7.14 Change of Control................ ........ .... ... ... .... .................... ........... ....................... ......97
SECTION 8_ AGENTS __m___m mmm m____ ___. ___ ________m ____ __m________ ___m_ _________m___ __________m_________ ____ _m98
8.1 App0lltnient ........... ... ....... .... .... ....... ... .... ......... .... .... .......................... ....... ............ .98
8.2 Rights as a Lender......................................................................00............99

8.3 Exculpatory Provisions ......... ............ .................. ... ... .... ..... ............... ....... ...99 8.4 Reliance by the Agents................................................................................ i 00 Duties ...................................................................................100 8.5 Delegation of 8.6 Resignation of Administrative Agent and/or Collateral Agent .......................101 8.7 Collateral Documents.... ... ....... ........ ............................................................. .... ....1 02 8.8 Non-Reliance on Agents and Other Lenders ..................................................102
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SECTION 9_ MISCELLANEOUS ______________________________________________________________________________________________103
9.1 Assignments and Participations in Loans ......................................................103 9.2 Expenses; Indemnity; Damage Waiver ..........................................................107
9.3 Right of 9.4 Sharing of
Set-Off ______________________.____________________________________________________________________________108
Payments by Lenders .........................................................109
9.5 Amendments and Waivers ...........................................................................109
9.6 Independence ofCovcnunts .....................................................................111

9_7 Notices ___________________________________________________________________________________________________II I
9.8 Survival of
Rcprcscntatol1s, Wan'antics and Agreements ...........................113
9.9 Failure or Indulgence Not Waiver; Remedies Cumulative ....nn..................... i 13
9. i 0 Marshalling; Payments Set Aside ................................................................ I 13

9.11 Severability .......................................................................................................... i i 4
9.12 Obligations Several; Independent Nature of
the Lenders' Rights ...................)14 9. i 3 Maxiinum Ainount ............................................................................................... J 14

9_14 Headings ________________________________________________________________________________._______________________115
9_15 Applicable Law_______________________________________________________________________.__________________1 15
9.16 Successors and Assigns........................................................................................1 i 5 Process ......................................... 1 15 9.17 Consent to Jurisdiction and Service of 9.18 Waiver of Jury Trial .............................................................................................1 J 6
9_19 Confidentiality ________________________________.__________________________________________________________117
9.20 Borrowers' Responsibility For Compliance With Environmental Laws ............1 is 9.21 Joint and Several Liability ................................................................................ i 1 8 9.22 Counterparts; Integration; Effectiveness; Electronic Executil1.....................120 9.23 USA Patriot Act Notification ................... ... ..................... ....... ............... .... ..........121
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EXHIBITS
Administrative Questionnaire Assignment Agreement Exhibit iii.......Fol1n of Assignment of Declarants Rights
Exhibit I ...........Fol1n of Exhibit II ........Fonn of
Compliance Cei1iticatc Exhibit V ...........(Intcntionally Omitted)

Exhibit IV..........Form of
Exhibit VL......(Intcntionally Omitted) Exhibit Vll......(lntcntionalJy Omitted)

Exhibit VLL nom.Form of
Note Exhibit IX........n(ll1tentionaiiy Omitted) Exhibit X.......h.Form of Pledge and Security Agreement Exhibit XI..........Description OfPfOjccts Exhibit XII ........Form of Guaranty Exhibit Xiii .......Form of Copyright Security Agreement Exhibit xiv ......(Intcntionally Omitted)
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CREDIT AGREEMENT
This CREDIT AGREEMENT (this "A2reemenf') is dated as of

I i and entered into by and among INEWCO LLC), a I_I limited liability company (("Newco")), THE RHODES COMPANIES, LLC ('Rhodes Companies"), RHODES
RANCH GENERAL PARTNERSHIP ("Rhodes GP"), RHODES RANCH GOLF AND COUNTRY CLUB, LLC ('Rhodes Ranch Golf'), HERITAGE LAND COMPANY, LLC, a Nevada limited liability company ("Hcrita2c Land"), TICK, LP, a Nevada limited partnership ('Tick"), GLYNDA, LP, a Ncvada limitcd partnership ("Glvnda"), CHALKLINE, LP, a Nevada limited partnership ("'Chalkline"), BATCAVE, LP, a Nevada limited partnership ("Batcayc"), JACKKNIFE, LP, a Nevada limitcd partncrship ("Jackknife"), WALLBOARD, LP, a Nevada
limited partnership ("'Vallboard"), OVERFLOW, LP, a Nevada limited partnership ("Overflow"), TUSCANY ACQUISlllONS, LLC, a Nevada limited liability company
("Tuscanv Acquisitions"), TUSCANY ACQUISITIONS II, LLC, a Nevada limited liability
company ("Tuscanv Acquisitions II"), TUSCANY ACQUISITIONS Il, LLC, a ( I
limited liability company ('Tuscan
v Acquisitions lll"), TUSCANY ACQUISITIONS IV, LLC,
a I 1 limited liability company ("Tuscanv Acquisitions IV.'), PARCEL 20 LLC, a
i ) limited liahility company C"Pareel"), RHODES DESIGN AND DEVELOPMENT CORPORATION, a Nevada corporation ("Rhodes Desie.n'"), C&J HOLDINGS INC., a Nevada
corporation ("C&J'"), RHODES REALTY, INC., a Nevada corporation ("Rhodes Realty"),
JARUPA LLC, a ( i limited liability company ("Jarupa""), ELKHORN

INVESTMENTS, INC., a Nevada corporation ("Elkhorn Investments'"), RHODES HOMES ARIZONA, LLC, an Arizona limited liability company ('Rhodes Homes Arizona'"), RHODES
ARIZONA PROPERTIES, LLC, an I i limited liability company ("Rhodes Arizona

Properties"), TRiBES HOLDINGS LtC, a Nevada limited liability company ('"Tribes'"), SIX
FEATHERS HOLDINGS, LLC, a ( ) limited liability company ("Six Feathers""),

ELKHORN PARTNERS, A NEVADA LIMITED PARTNERSHIP, a Nevada limited partnership
('Elkhorn Partners'"), BRAVO INC., a Nevada corporation ('Bravo"), GUNG-HO
CONCRETE, LLC, a Nevada limited liability company ('"Gune.-Ho"), GERONIMO PLUMBING, LLC, a ( ( limited hahility eompany C.Geronimo"), APACHE FRAMING,
LLC, a Ncvada limited liability company ("Apache""), TUSCANY GOLF COUNTRY CLUB, LLC, a Nevada limited liability company ("Tuscam' Golf'), and PINNACLE GRADING, LLC a
Nevada limited liability company ('"Pinnacle" and, col1ectively with INewco), Rhodes
Companies, Rhodes GP, Rhodes Ranch Golf, Heritage Land, Tick, Glynda, Chalkline, Batcave,
Jackknife, Wallboard, Overflow, Tuscany Acquisitions, Tuscany Acquisitions ll, Tuscany
Acquisitions 1I, Tuscany Acquisitions LV, Parcel, Rhodes Design, C&J, Rhodes Realty, Jarupa, Elkhorn Investments, Rhodes Homes Aiizona, Rhodes Arizona Properties, Tribes, Six Feathers,
Elkhorn Partners, Bravo, Gung-Ho, Geronimo, Apache, and Tuscany Golt~ the ".Borrowcrs'" and
each, individually, a "'Borrower"), THE BANKS, FINANCIAL INSTITUTIONS AND OTHER ENTITIES LISTED ON THE SIGNATURE PAGES HEREOF (together with their
respective successors and pemiitted assigns, each individually referred to herein as a "'Lender"
and collectively as the '"Lcndcrs"), and I I as administrative agent for the Lenders
(together with its successors in such capacity, the "Administratiyc Ae.cnf'), as collateral agent
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for the Secured Parties (as defined below) (together with its successors in such capacity, the "Collateral A2ent" and together with the Administrative Agent collectively, the "Agents") for
the Lenders.
REClTAL~
A. \VHEREAS, Heritage Land, Rhodes Companies, Rhodes GP (collectively, the "Orie.inal Borrowers"), Credit Suisse Cayman Islands Branch, as administrative agent,
collateral agent and syndication agent, and the financial institutions party thereto, as lenders, arc
parties to that certain Credit A,!'Tccmcnt, dated as of November 21,2005 (as amended, restated,
supplemented or otherwise modified from time to time prior to the date hereof, the "Pre-Petition Credit Agreement").
B. WHEREAS, on March 31, 2009 or, for Tuscany Golf~ Pinnacle, and Rhodes
Homes Arizona, April I, 2009 ("Petition Date"), the Original Borrowers and certain affliates,
as debtors and debtors-in-possession (the "Debtors"), commenced voluntary cases under Chaptcr 11 of the Bankruptcy Codc (as defined below) in the United States Bankruptcy Court for
the District of Nevada (the "Bankruptcy CourC), which cases arc being jointly administered (the "Chapter 11 Cases").
c. \VI-EREAS, the Second Amended Plan of Reorganization pursuant to Chapter I I of thc Bankruptcy Code for the Rhodcs Companies, LLC et al. dated November 1-i,2009, filed with the Bankruptcy Court and any Modifications (as defined below) thereto (the "Plan of
Reoreanization") has been conlrmed pursuant to the Conlnnation Order (as defined below),
and concurrently with the effectiveness of this Agreement the e1Tective date with respect to such Plan of Reorganization has occurred.
D. \VHEREAS, in connection with the Plan of Reorganization, the Pre-Petition

Credit Agreement has been tenninated and it has been agreed by the parties hereto to enter into this Agreement.
E. WHEREAS, the Agents and the Lenders party hereto desire to enter into this
Agreement to provide for such loans to the Borrowers subject to the terms and conditions
contained herein.
NO''', THEREFORE, in consideration of the premises and the agreements,

provisions and covenants herein containcd, the parties hereto agree to enter into this Agrcement
as follows:
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SECTION i. DEFINITIONS
i.i Certain Defined Terms.
The following terms used in this Agreement shall have the following meanings:
"Acceptable Appraisal" means an appraisal commissioned by and addressed to the

Agents (and reasonably acceptable to the Requisite Lenders as to fonn, assumptions, substance,
and appraisal date), prepared by a qualified professional appraiser acceptable to the Requisite
Lenders, and complying in all material respects with the requirements of the Federal Financial Institutions Refonn, Recovery and Enforcement Act of 1989; provided, that with respect to any Real Property Collateral, until a new Acceptable Appraisal has been completed following the Effective Date, the appraisal existing as of the Effective Date shall be deemed to constitute the Acceptable Appraisal with respect thereto.
'"Administrativc Agcnt" has the meaning assigned to that tenn in the preamble to this
Agreement.
'"Administrative Ouestionnairc" means an Administrative QuestiOlmaire substantially
in the fomi of Exhibit I annexed hereto or in such other form as may be approved by the
Administrative Agent.
'"Affcctcd Lender" has the meaning assigned to that tenn in subsection 2.6C
"Affected Loans" has the meaning assigned to that term in subsection 2.6C.
'"Affiiate" means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common
Control with the Person specifed.
'"Affiiate Transaction" has thc mcaning assigned to that term in subsection 6.10.
'"Agents.' has the mcaning assigned to that term in the preamble to this Agreement.
"Agrccmcnt- has the meaning assigned to that terni in the preamble hereto.
"Apache" has the meaning assigned to that tcnn in the preamble to this Agreement.
"'Applicable Laws" means, collectively, all statutes, laws, rules, regulations, ordinances, decisions, writs, judgments, decrees, and injunctions of any Governmental Authority affecting the Borrowers, any of their Subsidiaries, any Project or any Collateral (including, without limitation, any Real Property Collateral), or any of the other assets of the Borrowers and their
Subsidiaries, whether now or hereafter enacted and in force, and a11 Governmental
Authorizations relating thereto, and all covenants, conditions, and restrictions contained in any instruments, either of record or known to the Borrowers or any of their Subsidiaries, at any time
o
o
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in force affecting any Real Property Asset or any pai1 thereof, including any such covenants, conditions and restrictions which may (a) require improvements, repairs or alterations in or to such Real Property Asset or any pai1 thereof or (b) limit the use and enjoyment of such Real Property Asset as used or intended to be used by the Borrowers and their Subsidiaries.
"Applicable Tax Rate" means, with respect to each Fiscal Year, the sum of the highest marginal tax rates applicable to individuals under the United States federal income tax laws and applicable state and local income tax laws for such years.
"Appraised Value" means, with respect to the Real Property Collateral or any portion
thereof, the "as is" appraised value of such Real Property Collateral or portion thereof set forth in the most-rccent Acceptable Appraisal received by the Agents pursuant to the Loan Documents.
"Approved Fund" means any Fund or similar investment vehicle that is administered or managed by (a) a Lender, (b) an Affliate of a Lender or (e) an entity or an Affliate of an entity that administers or manages a Lender.
"Asset Sale" means the sale, lease, sale and leaseback, assignment, conveyance, transfer their Subsidiaries to any Person (other than the Loan Parties) of any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible, including, without limitation, Capital Stock (including, without limitation, of any of the Capital Stock of any of the Borrowers or any of their Subsidiaries, or the issuance of Capital Stock any Subsidiary of the Borrowers to any Person that is not a Loan Party), but excluding (a) sales, leases and other dispositions of products and services in connection with the golf and other ancillary facilities of any Project (including sales of memberships in the clubs relating to such facilities), in each case, in the Ordinary Course
or other voluntary disposition by the Borrowers or any of
of Business, (b) sales, exchanges and other dispositions of obsolete, worn out or excess
equipment in the Ordinary Course of Business, which, in the case of such asset sales in excess of $ i ,000,000 in a single transaction or scrics of relatcd transactions, shall be certified in an 01lcer's Certifcate as being a sale of obsolete, worn out or excess equipment in the Ordinary Course of Business, (c) any use of Cash and Cash Equivalents in a manner not prohibited hereunder, and (d) the non-excJusive licensing of intellectual property in the Ordinary Course of Business.
"Assienment Aereemenf' means an assignment and assumption agreement in

substantially the fonn of Exhibit Il annexed hereto or in such other form as may be approved by the Administrative Agent.
"Assienment of Declarant's Riehts" means the collective rcfercnce to (i) the

Assignment ofDecJarant"s Rights, dated as of , made by
in favor of the Agents, substantially in the fom) of Exhibit lI-A annexed hereto, (ii) the
Assignment of Declarant's Rights, dated as of , made by
in favor of the Agents, substantially in the fonn of Exhibit ll-B annexed hereto, and (Ii) the
Assignment of Declarant's Rights, dated as of , made by ~_~__..~_____
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in favor of the Agents, substantially in the f(mn of Exhibit II-C annexed hereto, as each may
hereafter be Modified from time to time.
"Bankruptcy Code" means Title 11 of
the United States Code entitled '"Bankruptcy", as
now and hereafter in effect, or any successor statute, together with all ofticial rules and
regulations thereunder.
"Bankruptcy Court" shall have the meanings set foi1h in the recitals hereto.
"Batcave" has the meaning assigned to that tenn in the preamble to this Agreement.
"Board" means the Board of Managers of IN ewe
oJ.
"Borrower Entity" means anyone of the Borrowers or their respective Subsidiaries.

"Borrower Pension Plan" means any pension plan, as defined in Section 3(2) of ERISA, other than a Pension Plan or Multiemployer Plan, which is intended to be qualified under Section 401 (a) orthe Internal Revenue Code and which is, or was within the past six years, maintained
or contributed to by any Borrower Entity.
"Borrowers" has the meaning assigned to that tenn in the preamble to this Agreement.
"Borrowers' Knowledee" means the actual knowledge, after reasonable inquiry, of any
Responsible Offcer.
"Bravo" has the meaning assigned to that tenn in the preamble to this Agreement.
"Business Dav" means a day other than a Saturday, Sunday or other day on whieh
commercial banks in New York City are authorized or required by law to dose.
"Calculation Date" has the meaning assigned to that tenn in subsection 6.6A.
"Capital Lease" means, as applied to any Pcrson, any leasc of any properly (whether real, personal or mixcd) by that Person as lessee that, in conformity with GAAP, is or should he
accounted for as a capital lease on the balance sheet or
that Person.
"Capital Stock" means any and all shares, interests, participations or other equivalents (howevcr designatcd) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation), including, without limitation, common stock, preferred
stock, pai1nership interests (general and limited) and membership interests, and any and all warrants, rights or options to purchasc or ot11cr arrangements or rights to acquire any of the
foregoing.
"Cash" means money, currency or a credit balance in a Deposit Account
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"Cash Equivalents" means (a) marketable securities issued or directly and

unconditionally guaranteed by the United States Government or issued by any agency thereof
the United States, in each case maturing within one year from the date of acquisition thereof; (b) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrmentality thereof maturing within one year from the date of acquisition thereof and, at the
and backed by the full faith and credit of
time of acquisition, having the highest rating obtainable from either S&P or Moody's; (c)
commercial paper maturing no more than one year from the date of creation thereof and, at the time of acquisition, having a rating of at least A-I from S&P or at least P-J from Moody's; (d)
certificates of deposit or bankers' acceptances maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having a rating of at least A-J from S&P or at least P-J from Moody's, issued by any Lender or any commercial bank organized under thc Jaws of the United States of America or any state thereof or the District of Columbia having
unimpaired capital and surplus of not less than $500,000,000 (each Lender and each such commercial bank being herein called a "Cash Equivalent Bank"); (e) investment funds with a
rating of at least AAA from S&P investing 95% of their assets in securities of the type described
in clauses (a), (c) and Cd) above; and (0 eurodollar time deposits having a matui;ty of
less than
one year purchased directly from any Cash Equivalent Bank (provided such deposit is with such
bank or any other Cash Equivalent Bank).
"Cash Interest Threshold" has the meaning assigned to such tenn in subsection 2.2C(ii)
"Cash Pay Rate Mar2in" means 2.00% per annum.
"Chalkline" has the meaning assigned to that term in the preamble to this Agreement.
"Chan2e in La\\'" means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change
in any law, rule, regulation or treaty or in the administration, interpretation or application thereof
by any Governmental Authority or (c) the making or issuance of any request, guideline or
directive (whether or not having the force oflaw) by any Governmental Authority.
"Chan2c of Control" means, at any time, I I shall cease to beneficially own

(within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act) and Control (without giving effect to clause (a) of the definition of ;'Control") more than 50.0% of the economic interests in the Capital Stock of INewcoJ (detennined on a fully diluted basis) and more than the Capital Stock of INewcol (detennined on a fully diluted basis) ordinarily entitled to vote or consent with respect to actions ofihe members ofiNewcoJ.
50.0% of
"Chapter 11 Cases" shall have the meaning set forth in the recitals hereto.
"Clark County" means Clark County, a political subdivision of the State of
Nevada.
"Cleanup" means all actions required or prudent to: (a) cleanup, remove, treat or
remediate Hazardous Materials in the indoor or outdoor environment; (b) prevent the Rclease of
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Hazardous Materials so that they do not migrate, endanger or threaten 10 endanger public health
or welfare or the indoor or outdoor environment; or (c) pcrfonn pre-remedial studies and
investigations and post-remedial monitoring and care.
"Collaterar means all of the properties and assets In which Liens are granted or
purported to be granted by the Collateral Documents.
"Collateral A2cnf' has the meaning assigned to that tcnn m the preamble to this
Agreement.
"Collateral Documents" means (a) this Agreement, (b) the Pledge and Security Agreement, (c) the Copyrght Security Agreement, (d) the Mortgages, (e) each Assignment of Declarant's Rights, and (f) any other documents, instruments or agreements delivered by any Loan Party pursuant to this Agreement or any of the other Loan Documents in order to grant,
protect or perfect liens on any assets of such Loan Pariy as security for all or any of the
Obligations.
"Commitments" means the commitments of the Lenders to make Loans as set forth in
subsection 2.1 A of
this Agreement in the amount set forth in the Register.
"Common Units" means the limited liability company interests of INcwcol. including
any limited liability company interests with limited voting rights.
"Compliance Certificatc" means a certificate substantially in the fomi of Exhibit IV

annexed hereto delivered to the Administrative Agent by the BOlTowers pursuant to subsection
5.3(iii).
"Communications" has the meaning assigned to that tenn in subsection 9.7B(ii).
"Condemnation Procceds" has the meaning assigned to that term in subsection

2.4B(ii)(c).
"Confirmation Order"' means the Findings of Fact, Conclusions of Law, and Order
Contirming the Borrowers' Plan of Reorganization issued by the Bankruptcy Court and entered
on I I in the Chapter 11 Cases.
"Consolidated EBITDA" means, tor any period, without duplication, (a) the sum olthe amounts for such period (as detennined for the Borrowers and their Subsidiaries on a conibined consolidated basis) of (i) Consolidated Net Income, (ii) Consolidated Interest Expense, to the extent deducted in the calculation of Consolidatcd Net Income for such period, (iii) provisions for taxes based on income, to the extent deducted in the calculation of Consolidated Net Income
for such period, (iv) total dcprcciation expense to the extent deducted in the calculation of
Consolidated Net Inconie tor such period, (v) total amoi1ization expense to the extent deducted
iii thc calculation of Consolidated Net Income for such period, (vi) other non-cash items
reducing Consolidated Net Income to the extent reflected as a charge or otherwise dcductcd from
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the determination of Consolidated Net Income for such period (other than any noii-cash charges to the extent such charges represent an accrual of or reserve tor cash expenditures in any future period) and (vii) extraordinary or non-recurring items reducing Consolidated Net Income, less (b) the sum of (i) non-cash items increasing Consolidated Net Income and Oi) extraordinary or
non-recurring items, in each case, increasing Consolidated Net Income, all of the foregoing (except as otherwise provided in the definition of any tenn used herein) as detcmiincd on a consolidated basis in conformity with GAAP. For the purposes of this definition, provisions for taxes based on income shall also include such state or local taxes that in lieu of taxable income,
are assessed on an alternate taxing methodology, such as net worth or tangible asscts.
"Consolidated Interest Expense" means, for any period (as detennined for the Borrowers and their Subsidiaries on a consolidated basis), (1) interest expense for such period determined in accordance with GAAP paid in such period or payable in cash, including, without limitation, all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing and net costs under Hedge Agreements, plus capitalized interest to the extent included in cost of sales (excluding, however, any amounts referred to in subsection 23 payable to Agents or the Lenders on or before the Effective Date) less (2) Cash interest income earned on Cash and Cash Equivalents in such period: provided that for the purposes of this definition only, notwithstanding anything to the contrary herein, for the initial four Fiscal Quarters ending following the Effective Date, Consolidated Interest Expense shall equal the product of (x) Consolidated Interest Expense from the EJTective Date to the applicable Calculation Date and (y) a fraction, the numerator of which is 365 and the denominator of which
is the number of days from the Effective Date to the applicable Calculation Date.
"Consolidated Net Income" means, for any period, the net income (or loss) of the
Borrowers and their Subsidiaries, on a combined consolidated basis for such period taken as a single accounting period detennined in eonfonnity with GAAP: provided that there shall be
excluded therefrom (a) the income (or loss) of any Person (other than a Subsidiary of a
Borrower) in which a Borrower or any of its Subsidiaries has an equity interest, except to the extent of the amount of dividends or other distributions actually paid to the Borrowers or any Subsidiary of the Borrowers by such Person during such period, (b) the income (or loss) of any Person aecrucd prior to the date it becomes a Subsidiary of the Borrowers, is merged into or consolidated with one of the Borrowers or any Subsidiary of the Borrowers, or that Person-s
assets are acquired by the Borrowers or any Subsidiary of the Borrowers, (c) the income of any Subsidiary of the Borrowers to the extent that the declaration or payment of dividends or similar
distributions by that Subsidiary of that income is not at the time permitted by operation of the
tenns of its charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary, (d) any after-tax gains or losses
attributable to discontinued operations, and (c) to the extent not included above, any net extraordinary gains or net non-cash extraordinary losses.
"Contin2ent Obli2ation" means, as applied to any Person, any direct or indirceiliability, contingent or otherwise, of that Person (a) with respect to any Indebtedness, lease, dividend or
other obligation of another if the primary purpose or intent thereof by the Person incUlTing the
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Contingent Obligation is to provide assurance to the obligee of such obligation of another that such obligation of another will be paid or discharged, or that any agreements relating thereto wil be complied with, or that the holders of such obligation wiii be protected (in whole or in part) against loss in respect thereot: (b) with respect to any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings or (c) under Hedge Agreements. Contingent Obligations shall include, without limitation, (i) the direct or Indirect guaranty, endorsement (other than for collection or deposit in the Ordinary Course of
Business), co-making, discounting with recourse or sale with recourse by such Person of the
obligation of another, (ii) the obligation to make take-or-pay or similar payments if required
regardless of non-perfonnanec by any other party or pai1ies to an agreement and (iii) any liability another through any agreement (contingent or otherwise) (A) of such Person for the obligation of
to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the fonn of loans,
advances, stock purchases, capital contributions or otherwise) or (B) to maintain the solvency or any balance sheet item, level of income or financial condition of another if, in the case of any this sentence, the primary purpose or intent agreement described under subclauses (A) or (B) of thereof is as described in the preceding sentence. The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported or, if Jess, the amount to which such Contingent Obligation is specifically limited.
"Control" means the possession, directly or indirectly, of the power to either (a) vote
i 0% or more of the securities having ordinary voting power for the election of directors (or
persons perfonning similar functions) of such Person or (b) direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. "Controllne" and "Controlled" have meanings correlative thereto.
"Copvri2ht Security Agreement" means the Copyright Security Agreement, dated as of the date hereot~ by the applicable Loan Parties in favor of the Collateral Agent, in the fonn of Exhibit XII annexed hereto, as such Copyright Security Agreement may be Modified from time
to
time.
"Debt Service" means, for any period, all cash payments of interest on Indebtedness of
the Borrowers and their Subsidiaries made or required to be made during such period, all scheduled payments of principal of Indebtedness of the Borrowers and their Subsidiaries made
during such period (including, without limitation, with respect to assessments payable by the Borrowers and their Subsidiaries in connection with Special Improvement Bonds), and all voluntary prepayments of the Loans made during such period (other than such scheduled payments of principal and voluntary prepayments of the Loans made directly or indirectly with the proceeds of any issuance of debt Securities or other Indebtedness of any of the Borrowers or
any Subsidiary or any Insurance Proceeds).
"Default" means a condition or event that, after notice or after any applicable grace
period has lapsed, or both, would constitute an Event of Default.
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"Deposit Account" means a demand, time, savings, passbook or like account with a bank, savings and loan association, credit union or like organization, other than an account
evidenced by a negotiable certificate of deposit.
"Development Aereements" means the (i) the Rhodes Ranch Development Agreement and (ii) each other effective development agreement (or similar agreement) with a Governmental
Authority relating to any oftlie Real Property CollateraL.
"'Dollars" and the sign "!" mean the lawful money ofihe United States of
Amen
ca.
"Effective Date" means such date on which the conditions to effectiveness set forth in
subsection 3.1 are satisfied.
"Elieible Assienee" means (a) a Lender, (b) an Affliate of a Lender, (c) an Approved
Fund, (d) a commercial bank organized under the laws of
the United States, or any State thereof,
and having a combined capital and surplus of at least $250,000,000; (e) a savings and loan
association or savings bank organized undcr the laws of
the United States, or any Statc thereof,
and having a combined capital and surplus of at least $250,000,000; (t) a commercial bank
organized under the laws of any other country that is a member of the OECD or has concluded special lending alTangements with the Intemational Monetary Fund associated with its General Arrangements to Borrow or a political subdivision of any such country, and having a combined capital and surplus of at least $250,000,000, so long as such bank is acting through a branch or
agency located in the United States; (g) a finance company, insurance company or other 1nancial
institution or fund (whether a corporation, partnership, trust or other entity) that is engaged in making, purchasing or otherwise holding commercial loans in the ordinary course and having a combined capital and surplus of at least $250,000,000 or an Approved Fund thereof and (h) any
other Person (other than a natural person) that is an "accredited investor'- (as deJned in
Regulation D under the Securities Act) that extends credit or buys loans in the ordinary eourse and is approved by the Administrative Agent and (so long as no Default or Event of Default has
occurred and is continuing) the Borrower (such approvals not to be unreasonably withheld or
delayed); provided that notwithstanding the foregoing, "EHeibIe Assienee.' shall not include any Borrower Entity or any Affliate of any Borrower Entity.
"Elkhorn Investments" has the meaning assigned to that term in the preamble to this
Agreement_
;'Elkhorn Partners" has the meaning assigned to that terni 11 the preamble to this
Agreement.
"Entitlement Documents" has the meaning assigned to that term in subsection 436A.
"Entitlements" means those certain Governmental Authorizations which are required under Applicable Law to be obtained and maintained (as applicable) or appropriate in order to
allow the expeditious and efficient completion of the development of the Real Property
Collateral and the sale of
the Real Propei1y Collateral (and portions thereof), as legal lots, all as
HI
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PRELIMINARY DRAFT SUBJECT TO MODIFICATION FINAL VERSION MUST BE ACCEPT ABLE TO FIRST LIEN STEERING COMMITTEE
contemplated by the most recent Acceptable Appraisal, and/or any applicable Development
Agreement, and including, without limitation, all Govemmental Authorizations necessary to

permit applicable platting, subdividing, earthwork, grading, infrastructure, improvements,
equipment, drainage, stoiin water and sewer systems, roadways and other work, labor or
materials required to be furnished or actions to be taken by or in connection with amending.
modifying, maintaining and perpetuating all of the foregoing, and the documents, agreements and instruments relating thereto.
"Environmental Claim" means any claim, action, investigation or written notice by any
Person alleging potential liability (including, without limitation, potential liability for
investigatory costs, Cleanup costs, governmental response costs. natural resources damages, property damages, personal injuries, or penalties) arising out of, based on or resulting from (a) the presence or Release of any Hazardous Materials at any location, whether or not owned, leased or operated by the Borrowers any of their Subsidiaries or (b) circumstances fonning the
basis of any violation, or alleged violation, of any Environmental Law.
"Environmental Lan's" means all federal, state, local and foreign laws, regulations and other governental requirements relating to pollution or protection of human health or the environment, including, without limitation, laws relating to Releases or threatened Releases of
Hazardous Materials or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, Release, disposal, transport or handling of Hazardous Materials, laws and regulations with regard to record keeping, notification, disclosure and reporting requirements respecting Hazardous Materials and laws relating to the management or use of natural resources, as now or may at any time hereafter be in effect
"Environmental Liabilties" means all liabilities, obligations, responsibilities,

obligations to conduct Cleanup, and Environmental Claims against any Loan Pai1y or their Subsidiaries or against any Person whose liability for any Environmental Claim any Loan Party or their Subsidiaries may have retained or assumed either contractually or by operation of law, arising from (a) environmental conditions, (b) the presence, Release or threatened Release of
Hazardous Materials at any location, whether or not owned, leased or operated by the Borrowers or their Subsidiaries, or (c) circumstances fomiing thc basis of any violation, or allegcd violation,
of any Environmental Law.
"Equity Proceeds" means the sum of (i) cash proceeds from: (a) the issuance of any
Capital Stock or other equity Securities of, or (b) the making of any capital contribution to, any of thc Borrowers after the Effcctive Datc (other than any such issuances that arc made to, or
capital contributions that are made by, any of the other Borrowers); less (ii) bona fide. direct
costs actually incurred by Borrowers in connection with the receipt of Equity Proceeds,
including, without limitation, underwriting discounts or commissions and fees and expcnscs of counsel and other advisors in connection therewith.
"ERISA" means the Employee Retirement Income Security Act of )974, as amended
from time to time, and any successor statute.
II
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"ERISA Affiiate" means (a) any corporation which is a member of a controlled group of corporations within the meaning of Section 414(b) of the Internal Revenue Code of which the
Borrowers are a member; (b) any trade or business (whether or not incorporated) which is a
member of a group of trades or businesses under common control within the meaning of Section 414(c) oftlie Internal Revenue Cde of which the Borrowers arc a member; and (c) solely for
purposes of obligations under Section 4 i 2 of the Internal Revenue Code or under the applicable
the Internal Revenue Code, any member of an affliated service group within the meaning of Section 414(m) or (0) of the Internal Revenue Code of which the Borrowers, any corporation described in clause (a) above or any trade or business described in clause (b) above is a member.
sections set forth in Section 414(t)(2) of "ERISA Event" means (a) a "reportable event" within the meaning of Section 4043(c) of ERISA and the regulations issued thereunder with respect to any Pension Plan (excluding those for which the provision for 30-day notice to the PBGC has been waived by regulation); (b) the iilure to meet the minimum funding standard of Section 4 I 2 of the Internal Revenue Code with respect to any Pension Plan (whether or not waived in accordance with Section 412(d) oftlic Internal Revenue Code) or the failure to make by its due date a required installment under Section 4l2(m) of the Internal Revenue Code with respect to any Pension Plan or the failure to make any required contribution to a Multiemployer Plan; (c) the provision by the administrator of any Pension Plan pursuant to Section 4041 (a)(2) of ERISA of a notice of intent to tenninate such plan in a distress tennination described in Section 4041(c) of
ERISA; (d) the withdrawal by
the Borrowers or any ERISA Affliate from any Pension Plan with two or more contributing
sponsors or the tennination of any such Pension Plan resulting, in either case, in liability
pursuant to Section 4063 or 4064 of ERISA, respectively; (e) the institution by the PBGC of
proceedings to lemiinate any Pension Plan pursuant to Section 4042 of
ERISA; (f) the imposition
of liability on the Borrowers or any ERISA Affliate pursuant to Section 4062(e) or 4069 of ERISA; (g) the withdrawal by the Borrowers or any ERISA Affliate in a complete or partial withdrawal (within the meaning of
ERISA or by reason of the application of Section 4212(c) of
Sections 4203 and 4205 of ERISA) from any Multicmployer Plan resulting in withdrawal
liability pursuant to Section 4201 of ERISA, or the receipt by the Borrowers or any ERISA
Affiliate of written notice from any MuItiemployer Plan that it is in reorganization or insolvency
pursuant to Section 4241 or 4245 of ERISA, or that it intends to terminate or has tenninated
under Section 4042 of ERISA or under Section 404 i A of ERISA if such tcrniination would result
in liability to the Borrowers or any ERISA Affliate; (h) the disqualification by the Internal Revenue Service of any Pension Plan or Borrower Pension Plan under Section 401 (a) of the Internal Revenue Code, or the detcnnination by the Internal Revenue Service that any trust
forming part of any Pension Plan or Borrower Plan fails to qualify for exemption from taxation under Section 501 (a) of the Internal Revenue Code; or (i) the imposition of a Lien pursuant to
Section 401 (a)(29) or 412(n) of
the Internal Revenue Code or pursuant to ER1SA with respect to
any Pension Plan.
"Event of Default" has the meaning assigned to that term in Section 7.
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"Exchane.c Act" means the Securities Exchange Act of 1934, as amended from time to time, and any successor statute.
;'Excluded Taxes" means, with respect to the Administrative Agent, any Lender, or any other recipient of any payment to be made by or on account of any obligation of the Borrowers hereunder, (a) taxes imposed on or measured by its overall net income (however denominated),
and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any
political subdivision thereof) under the laws of which such recipient is organized or in which its principal offce is located or, in the case of any Lender, in which its applicable Lender Offce is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which any of the Borrowers are located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrowers under subsection 2.SB), any witllOlding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party hereto (or designates a new Lender Offce) or is attributable to such Foreign Lender's failure (other than as a result of a Change in Law) to comply with subsection 2.7E(v), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new Lender Offce (or assignment), to receive additional amounts from the Borrowers with respect to such withholding tax pursuant
to subsection 2.7E(i).
"Existine. Entitlements" has the meaning assigned to that term in subsection 4.36A.
"Existine. Indebtedness" means the Indebtedness described on Schedule 1.1(a) atlached

hereto.
"Federal Funds Effective Rate" means, for any period, a fluctuating interest rate equal
for each day during such pcriod to the weighted average of transactions with members of
the rates on overnight Federal funds
the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business such rate is not so published for any day the quotations for such day on such transactions received by the Administrative Agent ham three Federal funds brokers of recognized standing selected by
Day) by the Federal Reserve Bank orNew York, or, if which is a Business Day, the average of
the Administrative Agent.
"Final Order" shall mean an order or judgment of a court of competent jurisdiction that
has been entered 011 the docket maintained by the clerk of such coui1 and has not been reversed,
vacated or stayed and as to which (a) the time to appeal, petition for certiorari or move for a stay, new trial, reargument or rehearing has expired and as to whieh no appeal, petition for certiorari or other proceedings for a stay, new trial, reargument or rehearing shall then be pending or (b) if an appeal, writ of certiorari, stay, new trial, reargument or rehearing thereof has been sought, (i) such order or judgment shall have been affnned by the highest court to which such order was
appealed, certiorari shall have been denied or a stay, new trial, reargument or rehearing shall
have been denied or resulted in no modification of such order and (ii) the time to take any further appeal, petition for certiorari or move for a stay, new trial, reargument or rehearing shall have expired.
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"First Lien Debt LTV Ratio" has the meaning assigned to that lenn in subsection 6.6B.
"First Lien Declined Amounts" means mandatory prepayments of the Loans pursuant to subsection 2.4B(ii) that are declined by Lenders.
"First Prioritv" means, with respect to any Lien purported to be created in any Collateral
pursuant to any Collateral Document, that such Lien is the most senior Lien (other than (a) Permitted Title Exceptions, (b) Liens for taxes, assessments or governmental charges or claims
the payment of which is not, at the time, required by subsection 5.5, (e) Liens permitted under clause (iv) of subsection 6.2A and (d) Specified Encumbrances to which any Lien created in any Collateral pursuant to any Collateral Document has been subordinated pursuant to subsection 2.9B) to which such Collateral is subject.
"Fiscal Quarter" means a fiscal quarter of a Fiscal Year.
"Fiscal Year" means the fiscal year of the Borrowers and their Subsidiaries ending on
December 31 of each calendar year.
"Flood Hazard Propertv" means Real Property Collateral located in an area designated by the Federal Emergency Management Agency as having special flood or mud slide hazards.
'"FLSA" means the Fair Labor Standards Act of i 938, as amended from time to time, and
any successor statute.
"Foreiim Lender" means any Lender that is organized under the laws of a jurisdiction other than that in whieh the Borrowers are residents for tax purposes. for purposes of this definition, the United States of America, each State thereof and the Distiict of Columbia shall be
deemed to constitute a single jurisdiction.
making, purchasing, holding or otherwise investing in commercial
"Fund" means any Person (other than a natural person) that is (or wil be) engaged in loans or similar extensions of
credit in the ordinary course.
'"Funding and Payment Office" means the office of the Administrative Agent located at the Administrative Agent or any successor Administrative Agent ( I (or such offce of specified by the Administrative Agent or such successor Administrative Agent in a written notice
to the Loan Parties and the Lenders).
"'GAAP" means, subject to the limitations on the application thereof set forth in
subsection 1.2, gcnerally aeceptcd accounting principles, as in effect in the Unitcd States of
America and on the date of detcnnination.

"Geronimo" has the meaning assigned to thai tel1TI in the preamble to this Agreement.
"Glvnda" has thc meaning assigned to that tCD1i in the preamble to this Agrccment.
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l.'Gune-Ho" has the meaning assigned to that terni in the preamble to this Agreement.
"Governmental Authority" means the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to governent.
"Governmental Authorization" means any pennit, approval, license, zoning and other resolution, certificate of occupancy, authorization, plan, directive, consent order, consent decree
or similar authorizations of or from any Governmental Authority.
"Grantin2 Lender" has the meaning assigned to that tenn in subsection 9. I G

""Guarantors" means the Borrowers and the Subsidiary Guarantors.
'"Guaranty" means the Guaranty, substantially in the forn) of Exhibit XII annexed hereto, executed and delivered by the Guarantors on the Effective Date, or executed and delivered by any additional Subsidiary Guarantor from time to time thereafter pursuant to subsection 5.11, as each such Guaranty may hereafter be Modified from time to time.
'"Hazardous Materials" means any chemical, material or substance, the generation, use, storage, transportation or disposal of which, or the exposure to which, is prohibited, limited or regulated by any Governmental Authority or which mayor could pose a hazard to human health and safety or to the indoor or outdoor environment.
"Hcd2e Al!recment' means any agreement with respect to any swap, collar, cap, floor,
hedge, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, fimincial or pricing these transactions; provided that no risk or value or any similar transaction or any combination of
phantom stock or similar plan providing for payments only on account of services provided by current or former directors, offcers, employees or consultants of any of the Borrowers or any of their Subsidiaries shall be a "Hedge Agreement".
"'Herital!e Land" has the meaning assigned to that term 11 the preamble to this
Agreement.
the Real Property Collateral that have been legally subdivided into lots suitable for the construction of single family and multi-family residences pursuant to recorded plats.
"i-omesites" means those portions of
"Identified Acauisition" means an acquisition transaction identified by the Borrowers

approved by the Administrative Agent and the Requisite Lenders.
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"Improvements" means all buildings, structures, fixtures, tenant improvements, and

other improvements of any kind and description now or hereafter located in or on or attached to any land that is a Real Property Asset, including all building materials, water, sanitary and storm sewers, drainage, electricity, steam, gas, telephone and other utility, facilities, parking areas, roads, driveways, walks and other site improvements; and all additions and betterments thereto and all renewals, substitutions and replacements thereof.
"Indebtedness" means, as applied to any Person, without duplication, (a) all

indebtedness for borrowed money, (b) that portion of obligations with respect to Capital Leases
that is properly classified as a liability on a balance sheet in eonfonnity with GAAP, (c) notes
payable and drafts accepted representing extensions of credit, whether or not representing
obligations for borrowed money (other than current accounts payable incurred in the Ordinary Business and accrued expenses incurred in the Ordinary Course of Business), (d) any Course of
obligation owed for all or any pai1 of the deferred purchase price of property or services
(excluding deferred compensation, any such obligations incurred under ERISA and eUiTent trade
payab1cs incurred in the Ordinary Course of Business, but including earn-outs with respect to any acquisition), (e) all obligations evidenced by notes, bonds (other than perfonnance bonds),
debentures or other similar instruments, (t) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to any property or assets acquired
by such Person (even though the rights and remedies of the seller or the lendcr under such
agreement in thc event of default are limited to repossession or sale of such property or assets), (g) all obligations, contingent or otherwise, as an account party under any letter of credit or under acceptance, letter of credit or similar facilities to the extcnt not reflcctcd as tradc liabilities on the balance sheet of such Person in accordance with GAAP, (h) all obligations, contingent or otherwise, to purchase, redeem, retire or otherwise acquire for value any Capital Stock of any
Borrower or any Subsidiary of any Borrowcr, (i) solely for purposes of subsection 6.1 and subsection 7.6, net obligations under Hedge Agreements, including, as of any date of
detcnnination, the net amounts, if any, that would be required to be paid by such Pcrson if such Hedge Agrecmcnts were tenninated on such date, m all Contingent Obligations in respect of obligations of the kind referred to in clauses (a) through (i) above or in respect of the payment of
dividends on the Capital Stock of any other Person, (k) all obligations under Special
Improvement Bonds and (1) all indebtedness secured by any Lien on any property or asset
owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is nonrecourse to the credit of that Person (including, without limitation, Special Improvement Bonds relating to Real Property Assets of the Borrowers and their Subsidiaries); provided that if such Person has not assumed such secured indebtedness that is nonrecoursc to its credit, thcn the amount of indebtedness of such Person pursuant to this clause (I) shall be equal to the lesser of the amount of the secured indebtedness or the fair market value of the assets of such Person which secure such indebtedness.
""Indemnified Taxes" means Taxes other than Excluded Taxes.
"Indemnitee" has the meaning assigned to that tel111 in subsection 9.28.
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"Insolvencv Proceedine:" means (a) any case, action or proceeding before any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding~up or relief of debtors or (b) any general assignment for the benefit of creditors, composition, marshalling of assets for creditors or other, similar arrangement in respect of its creditors generally or any substantial portion of its creditors, in the case of each
of the foregoing clauses (a) and (b), undertaken under U.S. Federal, State or foreign law,
including the Bankruptcy Code.
'"Insurance Proceeds" has the meaning assigned to that term in subsection 2.4B(ii)(c).
"Intellectual Property" has the meaning assigned to that tenn in the Pledge and Security
Agreement.
"Interest Coverage Ratio" has the meaning assigned to that tenn in subsection 6.6C.
"Interest Pavment Date" means the last day Business Day in each of March, June,
September and December of
each year, commencing on March 31,2010.
"Interest Period" means select an interest period applicable to each LlBOR Loan, which
Intefest Period sliall be a lone (J)ltwo (2)1thfee (3)1six (6)j month pefiod.
"Interest Rate Determination Date" means each date for calculating the LIBOR Rate, for purposes of detennining the interest rate in respect of an Interest Period. The lntercst Rate Determination Date for purposes of calculating the LlBOR Rate shall be the second Business
Day prior to the first day of
the related Interest Period.
"Internal Revenue Code" means the Intemal Revenue Code of 1986, as amended to the date hereof and from time to time hereafter and any successor statute.
"Investment" means, with respect to any Person, (a) any direct or indirect purchase or other acquisition by such Pcrson of, or of a beneficial interest in, Capital Stock or other Securities of, all or substantially all of the assets 01: or any other investment in, any other Person or (b) any direct or indirect loan, advance (other than advances to employees for moving, entertainment and travel expenses, drawing accounts and similar expenditures in the Ordinary
Course of Business), extension of credit (by way of guaranty or otherwise) or capital

contribution by such Person to any other Person, including all indebtedness and accounts
receivable acquired from that other Person ihat arc not cutTcnt assets or did not arise from sales to that other Person in the Ordinary Course of Business. The amount of any Investment shall be
the original cost of such Investment plus the cost of all additions thereto, without any
adjustments for increases or decreases in value, or write-ups, write-downs or write-ofts with
respect to such Investment.
"1P Collateral" has the meaning assigned to the term "Intellectual Property" II the
Pledge and Security Agreement.
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"Jackknife" has the meaning assigned to that term in the preamble to this Agreement.
"Jarupa" has the meaning assigned to that term in the preamble to this Agreement.
"Joint Venture" means any Subsidiary that is not a wholly-owned Subsidiary.
'"'Land and Operation Expenses" means, for any period, the costs and cash expenditures reasonably allocable to, without duplication, (i) the operations of the Projects and amenities related to the Projects (including sales of club memberships, operations related to the golf the Projects) and/or (ii) the
courses and other recreational operations relating to the operation of
ownership, development, construction and sale of the Real Property Collateral, including,
without limitation, general and administrative expenses, marketing and selling expenses
(including subsidies, incentives and rebates relating thereto), net land development costs
(consisting of (x) land development costs (excluding any land development costs funded with amounts received from Clark County, Mohave County or any other Govemmental Authority, any
Permitted Special Improvement District or any other Person in respect of any Special
Improvement Bonds) minus (y) all reimbursements (including, without limitation,

reimbursements or other payments received in respect of Special Improvement Bonds) from
Clark County, Mohave County or any other Govemmental Authority, any Permitted Special
Improvement District or any other Person, for land development costs).
"Lender" and "Lenders" means the Persons identified as "Lenders" and listed on the
signature pages of this Agreement, together with their successors and permitted assigns pUI"suant
to subsection 9.1.
"'Lender Offce" means, as to any Lender, the offce or olfces of such Lender specified in the Administrative Questionnaire completed by such Lender and delivered to the
Administrative Agent, and the offce or offces of such Lender that the Administrative Agent
notifies the Borrowers promptly but no later than two days after the EfTective Date, or such other
offce or oflices as such Lender may from time to time designate to the Borrowers and the
Administrative Agent
"LIBOR Loans" means Loans bearing interest at rates determined by reference to the
LIBOR Rate as provided iii subsection 2.2A.
"LIBOR Rate" shall mean, with respect to any Interest Period for the LlBOR Loans, a necessary to the nearest 1/16 of 1 %) of (a) the rate per annum appearing on the Telerate Page 3750 (or such other display screen as may replace Page 3750 on Tclerate Access Service or any successor publication) on the second
rate per annum equal to the quotient (rounded upward if
Business Day prior to the first day of such Interest Period at or about 11 :00 a.m. (London time)
(or as soon thereafter as practicable) (for delivery on the first day of sueh Interest Period) for a tenn comparable to sueh Interest Period and in an amount approximately equal to the amount of
the Loan to be made or funded by the Administrative Agent as part of such bOlTowing, divided
! (b) one minus the Reserve Requirement for such Loans in effeet from time to time. If
for any reason rates are not available as provided in clause (a) of the preceding sentence, the rate to be
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used in clause (a) shall be (in each case, rounded upward if
necessary to the nearest 1/16 of 1%),
(i) the rate per annum at which Dollar deposits are offered to the Administrative Agent in the London interbank eurodollar currency market or (ii) the rate at which Dollar deposits are offered
to the Administrative Agent in, or by the Administrative Agent to major banks in, any offshore interbank curodollar market selected by the Administrative Agent, in each case on the second Business Day prior to the commencement of such Interest Period at or about i 0:00 a.m. (for
delivery 011 the first day of such Interest Period) for a term comparable to such Interest Period and in an amount approximately equal to the amount of the Loan to be made or funded by the
Administrative Agent as part of such borrowing. The L1BOR Rate shall be adjusted
automatically as to all LIBOR Loans then outstanding as of the effective date of any change in the Reserve Requirement, and in no event shall the LlBOR Rate exceed 2% per annum.
"Lien" means any lien, mortgage, pledge, assignment, hypothecation, security interest, fixed or floating charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and any agreement to give any security
interest) and any option, trust or deposit or other preferential arrangement having the practical effcct of any of the foregoing.
.'LLC Agreement" means the Limited Liability Company Operating Agreement of

INewco), dated as of I ), as such Limited Liability Company Operating Agreement of
INewco) may be Modified from time to time.
"Loan Documents" means this Agreement, the Notes, the Guaranties, the Collateral Documents and other documents evidencing or securing Obligations, and all other documents, instruments and agreements delivered by any Loan Party to any Agent or any Lender in
connection with this Agreement or any other Loan Document.
"Loan Exposure" means, with respect to any Lender, as of any date of determination the
outstanding principal amount of the Loan of
that Lender.
'.Loan Parties" means the Borrowers and the Subsidiary Guarantors.
"Loans" meaiis the loans outstanding or made by the Lenders pursuant to subsection
2.IA.
.'Major Collateral Asset Sale" means any transaction (or series of related transactions with the same or related parties) constituting an arms-length sale for fir market value of any
portion of the Real Property Collateral in the Ordinary Course of Business pursuant to a
Qualified Sales Agreement that contemplates (i) a gross sales price in excess of $20,000,000 or
Oi) the sale of Real Property Collateral with an Appraised Value in excess of$20,000,000.
"Maior Entitlements" means all (i) zoning approvals, (ii) mapping approvals, (iii)
development agreements and (iv) solely with respect to commercial developments, use permits,
necessary or appropriate in order to allow the expeditious and efficient completion of the
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development of real property and the sale and usage of such real property in accordance with all
Applicable Law.
"Mandatorv Prepayment Date" has the meaning assigned to that term in subsection
2.4C(i).
"Mar2.in Stock" has the meaning assigned to that term in Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time.
"Material Adverse Effect" means (a) a material adverse effect upon the business, operations, properties, assets, financial condition or prospects of the Borrowers and their
Subsidiaries, taken as a whole, (b) the material impairment of the ability of the Loan Parties to pcrfonn the Obligations, (c) a material adverse effect upon the legality, validity, binding effect or enforceability against the Loan Parties of the Loan Documents, (d) a material adverse effect upon the rights, remedies and benefits, available to, or conferred upon, the Agents or any Lender under the Loan Documents, or (e) a material adverse effect upon the value of the Real Property Collateral taken as a whole; provided that, neither the Chapter i i Cases nor the events leading thereto shall constitute a Material Adverse Effect.
"Material Contracts" means each of the Development Agreements in effeet on the

Effective Date.
"Material Environmental Liabilty" means an Environmental Liability which could
reasonably be expected to result in (i) a discontinuation of a substantial portion of the business,
operations or development of the Borrowers and their Subsidiaries, taken as a whole, (ii) potential costs, liabilities or other losses in excess of $7,500,000, (iii) any designation of any
portion ofthe Real Property Assets on the federal National Priorities List, or any similar state list any portion of the Real Property Assets on any other list maintained by or (iv) any designation of any Govemmental AuthOlity of sites at which a Release of Hazardous Materials has occurred if such Release could reasonably be expected to result in potential costs, liabilities or other losses in excess of (x) for purposes of the provisions of subsection 5.9A, $7,500,000 or (y) for purposes of all other provisions hereof, $1,000,000.
"Material Licenses" has the meaning assigned to t1mt term in subsection 4.6.
hI\:laturitv Date" means I
),2016.
"Maximum Amount" has the meaning assigned to that term in subsection 9.13A.
"Modifcations" means any amendments, restatements, amendment and restatements, supplements, modifications, renewals, replacements, consolidations, severances, substitutions and extensions of any document or instrument from time to time; "l\:lodifv-', "Modified"~ or relatcd words shall have meanings correlative thereto.
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"Mohave Countv" means Mohave County, a political subdivision of the State of

Arizona.
"'Moody's" means Moody's Investors Service, Inc.
"Morte.3e.e" means a deed of trust, assignment of leases and rents, security agreement and fixture fiing executed and delivered by any Loan Party on or after the Effective Date in such
fonn as may be approved by the Collateral Agent, with such changes thereto as may be
recommended by the Collateral Agents local counsel based on local laws or customary local mortgage or deed of trust practices, as such security instrument may be Modified from time to time. "Morte.ae.cs" means all such instruments collectively.
'"'Mort232ce Policies" has the meaning assigned to that term in subsection 3.1 G.
"MulticnlPlovcr Plan" means a "multiemployer plan", as defined in Section 4001(a)(3)
of ERISA, to which the Borrowers or any ERISA Affliate is contributing or to which the
Borrowers or any ERISA Affliate had an obligation to contribute within the last six years.
"Non-Consentine: Lender" has the meaning assigned to that tenn in subsection 9.5B.
the Loans of any Lender, in each case substantially in the fonn of
"Notes" means (a) the promissory notes of the Borrowers issued pursuant to subsection 2.10 and (b) any promissory notes issued by the Borrowers in connection with assignments of Exhibit VIl annexed hereto, as they may be Modified from time to time.
"ObJi2ations.' means all obligations of every nature of each Loan Party from time to time
owed to the Agents, the Lenders or any of them or their respective Affliates under the Loan Documents, or, if approved by the Administrative Agent, whether for principal, interest (including, without limitation, interest accruing aftcr thc maturity of the Loans and interest accruing after the fiing of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to any Borrower or any Subsidiary Guarantor, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) or payments for fees, expenses, indemnification or otherwise.
"OECD" means the Organisation tor Economic Co-Operation and Development.

"Officer's Certificate" mcans, with respect to any Person, a cei1ificate executed on
behalf of sueh Person (a) if such Person is a partnership or limited liability company, by its chaimian of the board (if an oBiecr) or chief executive offcer or by the chief executive oflcer or the chief financial offcer of its general partner or managing member or other Person authorized to do so by its Organizational Documents, (b) if such Person is a corporation, on behalf of such
corporation by its chairnian of the board (if an offcer) or chief executive offeer or its chief
financial offcer or viee president, and/or (e) if such person is one of the Borrowers or a
Subsidiary of
the Borrowers, a Responsible Offeer.
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"Opcratinl? Lease" means, as applied to any Person, any lease (including, without limitation, leases that may be terminated by the lessee at any time) of any property (whether real, personal or mixed) that is not a Capital Lease other than any such lease under which that Person is the lessor.
"Ordinan' Course of Business" means, with respect to a specific Person, the ordinary course of such Person's business, substantially as conducted by any such Person prior to and as the Effective Date) or as otherwise contemplated in connection with the development of the Projects, and which shall not in any event interfere in any material respect with the ongoing operation of the assets of such
o1'tl1e Effective Date (to the extent such Person was a Loan party as of
Person.
"Ore.anizational Authorizations" means, with respect to any Person, resolutions of its Board of Directors, general partners or members of such Person, and such other Persons, groups or committees (including, without limitation, managers and managing committccs), if any, required by the Organizational Certificate or other Organizational Documents of such Person to
authorize or approve the taking of any action or the entering into of any transaction.
"Ore.anizational Certificate" means, with respect to any Person, the certificate or articlcs of incorporation, partnership or limited liability company or any other similar or equivalent organizational, charter or constitutional certi1cate or document filed with the applicable Govemmental Authority in the jurisdiction of its incorporation, organization or
fonnation, which, if such Person is a partnership or limited liability company, shall include such ccrtificatcs, articles or other certificates or documents in respect of each partner or member of
such Person.
"Ore.anizational Documents" means, with respect to any Person, its Organizational
Certificate and the by-laws, partnership agrcement, limited liability company agreement,
opcrating agreement, management agreement or other similar or equivalent organizational,
chai1er or constitutional agreement or arrangement, which, if such Person is a partnership or limited liability company, shall include such by-laws, agreements or arrangements in respect of
each partner or membcr of such Person.
"OSHA" means the Occupational Safety and Health Act of 1970, as amended from time to time, and any successor statute.
"Other Taxes" means all present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies arising from any payment made hereunder or
any other Loan Document or from the execution, delivery or enforcement of, or otherwise with
respect to, this Agreement or any other Loan Document.
"Overflow" has thc meaning assigned to that term in the preamble to this Agreement.
"Parcel" has the meaning assigned to that tenn in the preamble to this Agreement.
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"Participant" has the meaning assigned to that tenn in subsection 9. I D.
"Participant Register" has the meaning assigned to that term in subsection 9.1.D(iv).
"Paving Ae:cnt" has the meaning assigned to that term in subsection 8.6.
"PBGC" means the Pension Benefit Guaranty Corporation established pursuant to

Section 4002 of
ERISA (or any successor thereto).
"PCBs" has the meaning assigned to that tenn in subsection 4.33(vi).
"Pension Plan" means any employee pension benefit plan, as defined in Section 3(2) of ERISA, other than a Multiemployer Plan, which is subject to Title iv of ERISA and is, or was within the past six years, maintained or contributed to by the Borrowers or any ERISA Affliate.
"Permitted Collateral Asset Sale' means any transaction (or series of rclated
transactions with the same or related parties) constituting an anns-Iength sale for fair market
value of any portion of the Real Property Collateral in the Ordinary Course of Business pursuant to a Qualified Sales Agreement that docs not constitute a Major Collateral Asset Sale.
"Permitted Encumbrances" means the following types of Liens:
Encumbrances) for taxes, assessments or governmental charges or claims the

payment otwhich is not, at the time, required by subsection 5.5;
(b) statutory Liens of landlords, statutory Liens of carrers,
(a) Liens (including, without limitation,
Specified
warehousemen, mechanics and materialmen and other Liens imposed by law

(other than any such Lien imposed pursuant to Section 401 Internal Revenue Code or by ERISA) incurred in the Ordinary Course of (a)(29) or 412(n) of
the Business
for sums not yet delinquent or being Properly Contested;

(c) Liens incurred or deposits made in the Ordinary Course of Business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the perfoffianee of tenders,
statutory obligations, surety and appeal bonds, bids, leases, govenunent contracts, trade contracts, perfonnanee and retum-of-money bonds and other similar
obligations (exclusive, in each case, of obligations for the payment of borrowed
money or other Indebtedness);

(d) any attachmcnt or judgmcnt Licn with rcspcct to a money
judgment, writ, warrant of attachment or similar process not constituting an Event
of Default, so long as such Lien could not reasonably be expected to have a

Matenal Adverse Effect;
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(e) leases, subleases, licenses and sublicenses granted to others

(in the Ordinary Course of Business or the operations of
Business) not interfering with the Ordinary Course of the Borrowers or any of their Subsidiaries;
(f) easements, covenants, conditions, rights-or-way,

restnclions, minor defects, encroachments or irregularities 1n title and other
similar charges or encumbrances entered into or arising in the Ordinary Course of Business ofthc Borrowers or any of their Subsidiaries;
(g) any (i) interest or title of a lessor or sublessor under any Capital Lease pcnnittcd by subsection 6.1 (iii) or any operating lease not
prohibited by this Agreement, (ii) restriction or encumbrance that the interest or title of such lessor or sublessor may be subject to or (iii) subordination of the interest of the lessee or sublessee under such lease to any restriction or encumbrance referred to in the preceding clause (ii);
(h) deposits in the Ordinary Course of Business to secure
liabilities to insurance carrers, lessors, utilities and other service providers;

(i) zoning, building codes and other Govemmental
Authorizations regulating the use, development and/or occupancy of any Real
Property Asset or activities conducted thereon whieh are imposed by any

Govemmental Authority having jurisdiction over such Real Property Asset which are not violated and would not be violatcd by the current and contemplated use, the development and/or occupancy of such Real Property Asset or the operation of business of the Borrowers or any of their Subsidiaries thereon; and
U) bankers liens and rights of setoff with rcspect to customary

depository arrangements entered into in the Ordinary Course of Business.
"Permitted Existinelndebtedness" means the Indebtedness described on Schedule l(c)

attached hereto.
"Permitted Real Property ACQuisitions" means one or more bona fide arms~length
acquisitions for fair market value by any Loan Party of an interest in real property.
"Permitted Special Improvement Districts" means one or more special improvement

districts, special assessment districts or community facility districts establishcd for the bencfit of a Projcct after the Effective Date.
'.Permitted Title Exceptions" means (a) the Permitted Encumbrances reJlecied in the Moi1gagee Policies delivered pursuant to subsection 3.IG(iii) and (b) Permitted Encumbrances reasonably satisfactory to the Administrative Agent reflected in Mortgagee Policies delivered
pursuant to subsection 5.1 i).
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"Person" means any natural person, corporation, limited liability company, trust, joint
venture, joint stock company, unincorporated association, company, partnership, limited

partnership, Governmental Authority or other entity of whatever nature.
"Petition Date" shall have the meaning set forth in the recitals hereto.
"PIK Mare:in" means 5.00% per annum.
"Pinnacle" has the meaning assigned to that tcnn in the preamble to this Agreement. "Plan of Reor2:anization" shall have the meaning set forth In the recitals hereto.
"Pledge and Security Agreement" means the Pledge and Security Agreement dated as
of the date hereof and entered into by and among the Borrowers, the Collateral Agent, and any
Subsidiary Guarantor that becomes party thereto, substantially in the form of Exhibit X annexed hereto, as such Pledge and Security Agreement may hereafter be Modified from time to time.
"Plcde.ine. Parcne has the meaning assigned to that term in subsection 5.11.
"Pre-Petition Credit Ae.rccmenf' shall have the meanings set forth in the recitals hereto.
....Proceedings" has the meaning assigned to that tenn in subsection 5.3(xii).
"Proiects" means the collective reference to Rhodes Ranch, Tuscany, South West Ranch,
and Spanish Hils.
"'Properl" Contested" means, in the case of any obligations of a Loan Party (including
any Taxes) that are not paid as and when due or payable by reason of
such Loan Party's bona fide
dispute concerning its liability to pay same or concerning the amount thereof: (1) such
obligations arc being properly contested in good faith by appropriate proceedings promptly
instituted and diligently conducted; (ii) such Loan Party has established appropriate reserves as shall be required in conformity with GAAP; (ili) the non-paynient of such obligations could not reasonably be expected to have a Material Adverse Effect; (iv) no Lien is imposed upon any of such Loan Party's assets with respect to such obligations unless such Lien is at all times junior and subordinate in priority to the Liens in favor of the Collateral Agent (except only with respect to property taxes that have priority as a matter of applicable state law) and enforcement of such Lien is stayed during the period prior to the final resolution or disposition of such dispute; (v) if the obligations rcsult ITom, or arc detemiined by the entry, rendition or issuance against a Loan Party or any of its assets of a judgment, writ, order or decree, enforcement of such judgment, writ, order or decree is stayed pending a timely appeal or other judicial review; and (vi) if such contest is abandoned, settled or detennined adversely (in whole or in part) to such Loan Party,
such Loan Party forthwith (and in any event prior to commencement of any enforcement
proceedings against such Loan Party or any property of such Loan Party) pays such obligations and all penalties, interest and other amounts due in connection therewith.
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.'Pro Rata Share" means, with respect to all payments, computations and other matters relating to the Loans of any Lender, the percentage obtained by dividing (i) the Loan Exposure of
that Lender by (ii) the aggregate Loan Exposure of all the Lenders; in any such case as the
applicable percentage may be adjusted by assignments pcnnittcd pursuant to subsection 9.1. The initial Pro Rata Share of each Lender is set forth in the Register.
"'PTO" means the United States Patent and Trademark Office.
"Oualified Sales Agreement" means a definitive and binding purchase and sale
agreement between any of the Loan Parties and a non~affliated third party purchaser with
respect to any Real Property CollateraL.
"Real Property Assef' means, at any time of detennination, any interest (fee, leasehold or otherwise) then owned by any Borrower Entity in any real property.
"Real Prooerlv Collateral" means the portion of the Collateral compnsing a Real
Property Asset in whieh one or more of the Loan Parties hold fee simple title or a valid leasehold interest, as dctcnnined from time to time, which is, or is required pursuant to the terms of this
Agreement or the other Loan Documents to be, encumbcred by a Licn of the Mortgages"
"Recovery Event" has the meaning assigned to that tenn in subsection 2.4B(ii)(c).
"Refinancim!:' means, in respect of any Indebtedness, to refinance, extend, renew, restructure or replace or to issue other Indebtedness in exchange or replacement for, such Indebtedness, in whole or in part. "Refinanccd" and "Refinance" have meanings correlative
thereto.
"Rce:istcr" has the meaning assigned to that tenn in subsection 9.1 C.
".Rce:istercd Loan" has the meaning assigned to that tenn in subsection 9.1C
'"Related Parties" means, with respect to any Person, such Person's Affiliates and the directors, o1eers, employees, agents, trustees, advisors, controlling Persons and members of such Person and of such Person's Affliates.
"Release" means any release, spil, emission, leaking, pumping, pouring, IlJeetion, escaping, deposit, disposal, discharge, dispersal, dumping, leaching or migration of Hazardous
Materials into the indoor or outdoor environment (including, without limitation, the
abandonment or disposal of any ban"els, containers or other closed receptacles containing any Hazardous Materials), or into or out of any property, including the movement of any Hazardous
Material
through the air, soil, surface water, groundwater or property.
"Release Instruments" has the meaning assigned to that term in subsection 2.9A.
'.Released Parcel" has the meaning assigned to that tcnn in subsection 2.9A.
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"Reauired Dedication" means a dedication or conveyance of a portion of the Real

Property Collateral at the direction ora Governmental Authority or a public utility, or pursuant to
or in connection with a Development Agreement, or to a homeowners or condominium owners
association, to (i) such Governmental Authority (or any designee of such Governmental
Authority), or (ij) a utility provider or (iii) a homeowners or condominium owners association, for parks, schools, recreation centers, common community facilities, public streets, utility easements and installations, slopes or other rights-or-way or public use; provided any such dedication or conveyance (individually and/or taken together will all other such dedications and
conveyances) (i) has not had and could not reasonably be expected to have a Material Adverse
Effect or (ii) has not impaired and could not reasonably be expected to impair the Collateral
Agenrs First Priority Lien on the remaining Real Property CollateraL.
"Reauisite Lenders" means Lenders having or holding more than 50% of
the sum of the
aggregate Loan Exposure of all Lenders.
"Rescn'c Reauircmcnts" shall mean, with respect to any day in an Interest Period for a the reserve requirement rates (expressed as a LIBOR Loan, thc aggregate of the maximum of decimal) in effect on such day for Eurocurrency funding (currently referred to as "Eurocurrency liabilities" in Regulation D of the Federal Reserve Board) maintained by a member bank of the Federal Reserve System. As used herein, the term "reserve requirement" shall include, without limitation, any basic, supplemental or emergency reserve requirements imposed on any Lender
by any Govcmmental Authority.
"Responsible Offcer" means the chainnan of the board (if an otlcer), chief executive
offcer, president/chief operating offcer, any vice president, general counsel, chief financial
offcer, managing member, offcer, or board member of the Borrowers and their Subsidiaries, as applicable, but in any event, with respect to financial matters, the chief financial officer, treasurer, managing member, or board member of the Borrowers and their Subsidiaries, as
applicable.
"Restricted" means, when referrng to Cash or Cash Equivalents of
the Borrowers or any
of the Subsidiary Guarantors, that such Cash or Cash Equivalents (a) appears (or would be required to appear) as "restrictedO' on a consolidated balance sheet of the Borrowers or of any such Subsidiary Guarantor (unless such appearance is related to the Loan Documents or Liens created thereunder), (b) are subject to any Lien in favor of any Person other than the Collateral Agent for the benefit of the Secured Parties or (c) are not otherwise generally available for use
by the BOITowers or such Subsidiary Guarantor.
"Restricted Payment" means (a) any dividend or other distiibution, direct or indirect, on
account of any shares of any class of Capital Stock of the Borrowers or any of their Subsidiaries now or hereaHer outstanding, except a dividend payable solely in shares of that class of stock to
the holders of that class, (b) any redemption, retirement, sinking fund or similar payment,
purchase or other acquisition for value, direct or iiidirect, of any shares of any class of Capital Stock of the Borrowers or any of their Subsidiaries now or hereafter outstanding, and (c) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other
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rights to acquire shares of any class of Capital Stock of the Borrowers or any of their
Subsidiaries now or hereafter outstanding.
"Restricted Seller Carry-Back Notes" means promissory notes issued as consideration to any of the Borrowers or any of their Subsidiaries by the purchaser under a Qualified Sales Agreement that (i) are secured by a first priority Lien in favor of any oftlic Borrowers or any of
their Subsidiaries on the interest in real property sold to such purchaser pursuant to such
Qualified Sales Agreement and (ii) have a final maturity date that is prior to the Maturity Date.
"Rhodes Arizona Properties" has the meaning assigned to that term in the preamble to
this Agreement.
"Rhodes Deshm" has the meaning assigned to that term in the preamble to this
Agreement.
"Rhodes Gp.' has the mcaning assigned to that temi in the preamble to this Agreement.
"Rhodes Homes Arizona" has the meaning assigned to that tenn in the preamble to this Agreement.
"Rhodes Ranch" means those certain golf, commercial and residential developments
located in Clark County commonly known as Rhodes Ranch, as dcpicted on the maps attached hereto as Exhibit XI.
"Rhodes Ranch Development Aerccmcnf' means the Development AbJTeement, dated December 18, 1996, by and among Clark County and Rhodes Ranch Limited Partnership, a Nevada limited partnership, Rhodes Ranch Land Holdings Limited Partnership, a Delaware limited partnership, Southwestem Opportunities Limited Pai1nership, a Nevada liniited partnership, and Durango/Springs Limited Partnership, a Nevada limited partnership, each as predecessors to Rhodes Design & Development.
"Rhodes Ranch Golf' has the meaning assigned to that tenll in the preamble to this
Agreement.
"Rhodes Realtv" has the meaning assigned to that term 10 the preamble to this
Agreement.
"S&P" means Standard & Poor's, a division of
the McGraw-Hili Companies, Inc.
"Secured Parties" means the collective reference to the Agents and the Lcnders.
"Securities" means any Capital Stock, voting trust certificates, certificates of interest or participation in any profit-sharing agreement or arrangement, bonds, debentures, notes, or other evidences of Indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or
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participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any oftlic foregoing.
"Securities Act" means the Securities Act of 1933, as amended from time to time, and
any successor statute.
"Six Feathers" has the meaning assigned to that term in the preamble to this Agreement. "Solvent" means, with respect to any Person, that as of any date of detem1Ination, (a) the sum of the "fair value" of the assets of such Person will, as of such date, exceed the sum of all
debts of such Person as of such date, as such quoted terms are determined in accordance with
applicable federal and state laws governing determinations of the insolvency of debtors, (b) the "present fair saleable value" of the assets of such Person wil, as of such datc, be greater than the amount that wil be requircd to pay the probable liability on existing debts of such Person as such
debts become absolute and matured, as such quoted tcnn is dctennined in accordance with the insolvency of debtors, (c) such applicable fcdcral and state laws governing detenninations of
Person will not have, as of such date, an unreasonably small amount of capital with which to conduct any business in which it is or is about to become engaged and (d) such Person does not intend to incur, or believe or reasonably should believe that it wil incur, debts beyond its ability to pay as they mature. For purposes of this definition, (i) "dcbt" means liability on a "claim",
and (ii) '"'"claim'. means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured or (y) right to an equitable rcmcdy for breach of
perfonnance if such brcaeh gives rise to a right to payment, whether or not such right to an
equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed,
undisputed, secured or unsecured. For purposes of
this definition, the amount of any contingent, unliquidated and disputed claim and any claim that has not been reduced to judgment at any time shall be computed as the amount that, in light of all the facts and circumstances existing at such
timc, represents the amount that can reasonably be expected to become an actual or matured
liability (irrespective of whether such liabilities meet the criteria for accrual under the Financial Accounting Standards Board Statement of Financial Accounting Standards No.5).
"South 'Vest Ranch" means those certain commercial and residential developments locatcd in Clark County commonly known as South West Ranch, as depicted on the maps
attached hereto as Exhibit XI.
"Spanish Hils" means those certain residential developments located in Clark County
commonly known as Spanish Hills, as depicted 011 the maps attached hereto as Exhibit XI.
'.Special Improvement Bonds" means special improvement district bonds, special assessment bonds, community facility district bonds, private activity bonds, tax increment
financing, general obligation bonds, special assessment revenue bonds and any similar bonds (i) issued by a Pennitted Special Improvcment District, (ii) the tenns of which have been reviewed which and approved by the Administrative Agent and the Requisite Lenders, (iii) the proceeds of arc solely available to directly payor to reimburse the Borrowers or their Subsidiaries for Land
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and Operation Expenses, (iv) which are paid or satisfied (in whole or in part) through Special Taxes and (v) for which the aggregate amount of all Special Taxes paid in any Fiscal Year docs
not exceed the Special Tax Cap for such Fiscal Year.
.'Special Tax Cap" means the special tax levy or assessment per year equal to the special taxes or assessments for the base year that together with ad valorem real estate taxes, and other real propei1y liens and charges by a Governmental Authority, does not exceed 2% of the market
value of the Homesites located in, or in the vicinity of, the applicable Pennitted Special
Improvement District (which is the issuer of the applicable Special Improvement Bonds)
intended to be sold (projected as of the date of issuance of such Special Improvement Bonds), as deteiinined by the Govcmmcntal Authority through which such Permitted Special Improvement District is established, which special tax levy or assessment may be increased by up to 2% per
year thereafter. For purposes of this Agreement, such Special Tax Cap includes any charges for
maintenance and services imposed as a charge against real property, including such fees and
charges imposed through a landscape and lighting maintenance district, special improvement
district, special assessment district, a community facilities district, a community services district or other similar mechanism.
"Special Taxes" mcans special taxes or assessments on Real Property Assets used to pay or satisfy Special Improvement Bonds.
"Specified Encumbrances" has the meaning assigned to that term in subsection 2.9B.
"SPV" has the meaning assigned to that tcnn in subsection 9.1G.
"Subsidiarv" mcans, with respect to any Person, any corporation, partnership, limited which more than 50% of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Person or Persons (whether directors, managers, trustees or other Persons performing similar functions) having the power to direct or cause the direction of the management and policies thereof is at the time owned or controlled, directly or indirectly, by that Person or onc or more of the other Subsidiaries of that Person or a combination thereof, or the management of which is otherwise controlled, directly or
liability company, association, joint venture or other business entity of
indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof. Unless otherwise quali1ed, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of any of the Borrowers (including Subsidiaries of a Borrower that are Borrowers).
"Subsidiarv Guarantor" means any Subsidiary of the Borrowers that is a party to the
Guaranty at any time pursuant to subsection 5.1 J.
"Subsidiarv Loan Documents" has the meaning assigned to that telTl 11 subsection
S.IIB.
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"Supplemental Collateral Aecnf' and "Supplemental Collateral Aecnts" shall have

the meaning assigned to these tenns in subsection 8.IB.
"'Tax Distributions" means Restricted Payments made pursuant to subsection 6.5(iii).
"Taxes" means 111 present or future taxes, levies, imposts, duties, deductions,
withholdings, assessments, fees or other charges imposed by any Govemrnental Authority, including any interest, additions to tax or penalties applicable thereto.
"Terminated Lender" has the meaning assigned to that term In subsection 9.5B.
"Test Period" means each period of four consecutive Fiscal Quarters then last ended on each Calculation Date, in each case taken as one accounting period.
"The Rhodes Companies" has the meaning assigned to that term in the preamble to this
Agreement.
"Tick" has the meaning assigned to that tcnn in the preamble to this Agreement.
"Tite Company'. mcans, collectively, onc or more title insurance companies rcasonably satisfactory to the Administrative Agent.
"Total Consolidated Indebtedness" means, as at any date of deteniiination, the aggregate amount of all Indebtedness of the Borrowers and their Subsidiaries, detennined on a consolidated basis in accordance with GAAP.
"Total Debt LTV Ratio" has the meaning assigned to that term in subsection 6.6A.
"Tribes" has the meaning assigned to that term in the preamble to this Agreement.
"Tuscany" means those certain golf, commercial and residential developments located in Clark County commonly known as Tuscany, as depictcd on the maps attached hercto as Exhibit
Xl.
"Tuscanv Acquisitions" has the meaning assigned to that term in the preamble to this
Agreement.
"Tuscany Acquisitions II" has the meaning assigned to that term in the preamble to this Agreement.
'Tuscany Acquisitions iii" has the meaning assigned to that tenii in the preamble to this Agreement.
'Tuscany Acquisitions IV" has the meaning assigned to that term in the preamble to this Agreement.
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"Tuscanv Golf" has the meaning assigned to that term in the preamble to this Agreement.
in force in the State orNe\\ York or, when the laws of
"uee" means the Unifonn Commercial Code (or any successor statute) as adopted and any other jurisdiction govern the method
such
or manner of the perfection or enforcement of any security interest in any of the Collateral, the
Unifnn Commercial Code (or any successor statute) of
jursdiction.
any of
"Unrestricted'" means, when referring to Cash or Cash Equivalents of the Borrowers or the Subsidiary Guarantors, that such Cash or Cash Equivalents are not Restricted.
"Wallboard" has the meaning assigned to that term in the preamble to this Agreement.
1.2 Defined Terms~ Accountin2 Terms: Utilization of GAAP for Purposes of
Calculations Under A2rccment.
A. The defintiomi of terms herein shall apply equally to the singular and plural
fonns of the tenns defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. TIie words '.include", "includes" and
''"including'' shall be deemed to be followed by the phrase "without limitation". The word "wil" shall be construed to have the same meaning and effect as the word "shall". Unless the context
requires otherwise (a) any definition of or reference to any agreement, instrument or other
document herein shall be construed as referrng to such agreement, instrument or other document as from time to time Modified (subject to any restrictions on such Modifications set forth herein),
(b) any reference herein (i) to any Person (other than a natural person) shall be construed to include such Person's pennirted successors and assigns and (ii) to any Borrower or any other Loan Party shall be construed to include such Borrower or such other Loan Party as debtor and debtor-in-possession and any receiver or trustee for such Borrower or such other Loan Party, as
the case may be, in any insolvency or liquidation proceeding, (c) the words "'herein", "hereof and
""hereunder", and words of similar import, shall be construed to refer to this Agreement in its
entirety and not to any particular provision hereof, (d) all references herein to Sections, Exhibits and Schedules shall be construed to refer to Sections of, and Exhibits and Schedules to, this
cITing to another agreement) and (e) the words "asset" and Agreement (unless expressly ref "'property" shall be constnied to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including, without limitation, Real Property Assets, fixtures, Cash, securities, Capital Stock, accounts and contract rights, and Proceeds (as such terni is defined in the Pledge and Security Agreement) therefrom.
B. Except as otherwise expressly provided in this Agreement, (a) all accounting
tenns not otherwise deJIned herein shall have the meanings assigned to them in confOimity with
GAAP; and (b) financial statements and other infonnation required to be delivered by the
Borrowers to the Lenders pursuant to clauses (i), (ii) and (x) of subsection 5.3 shall he prepared in accordance with GAAP (except, with respect to interim financial statements, for the absence
ofnon1ial year-end audit adjustments and explanatory footnotes) as in eiTect at the time of
such
preparation (and delivered together with the reconciliation statements provided for in subsection this 5.3(iv)). Calculations in connection with the definitions, covenants and other provisions of
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Agreement shall utilize accounting principles and policies in confomlity with those used to prepare the financIal statements referred to in subsection 4.14A; provided, that should such accounting principles and policies change, the Borrowers, the Administrative Agent, and the Lenders shall negotiate in good faith to amend the financial definitions and related covenants in
confomiity therewith.
SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS

2.1 Commitments; Loans.
A. Loans. Each Lender has prior to the Effective Date funded term loans under the Pre-Petition Credit Agreement. In connection with the implementation of the Plan of
Reorganization and in partial satisfaction of the Lenders' claims under the Pre-Petition Credit
Agreement, on the Effective Date, each Borrower hereby incurs loans (as to each Lender a "Loan" and collectively, the "Loans") in an initial aggregate principal amount equal to
$50,000,000 as Obligations hereunder. Eaeh Lender's Commitment shall terminate immediately and without further action after giving effect to the incurrence of the Loans by the Borrowers. The proceeds of the Loans shall be used for the purposes identified in subsection 2.5A. Loans, once repaid or prepaid, may not be reborrowed.
B. Ilntentionally Omittedl.
C. (Intentionally Omitted).
D. Notes. 111e Bon'owcrs shall execute and deliver on the Effective Date to each
Lender requesting the same (or to the Administrative Agent for that Lender) a Note substantially
in the form of Exhibit Vll annexed hereto to evidence that Lender's Loan. Any Lender not
receiving a Note may request at any time that the BOlTowers issue it such Note on the terms set forth herein, and the BOlTowers agree to issue such Note promptly upon the request of a Lender.
TIie Notes and the Obligations evidenced thereby shall be governed by, subject to and benefit from all of the terms and conditions of this Agreement and the other Loan Documents and shall
be secured by the CollateraL.
2.2 Interest on the Loans.
A. Rate of Interest. Subject to the provisions ofsubseetions 2.2E, 2.6 and 2.7, each
Loan shall bear interest on the unpaid principal amount thereof from the date made to maturity (whether by acceleration or otherwise) at a rate determined by reference to the LIBOR Rate. Subject to the provisions of subsections 2.2E, 2.6 and 2.7, the Loans shall bear interest through maturity as follows:
(i) if a LlBOR Loan, and the interest is paid in Cash on the applicable Interest Payment Date and not capitalized pursuant to subsection 2.2C(i), then at the sum of the
L1BOR Rate for the relevant Interest Period plus the Cash Pay Rate Margin.
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(ii) if a L1BOR Loan, and the interest is not paid in Cash on the applicable
Interest Payment Date and capitalized pursuant to subsection 2.2C(ii), then at the sum of the LIBOR Rate for the relevant Interest Period plus the rlK Margin.
B. Jntcrcst Periods. The following tcnns shall be applicable to each Interest Period:
(i) each successive Interest Period shall automatically commence on the day
on which the next preceding Interest Period expires;

(ii) ifan Interest Period would othc"..isc expire on a day that is not a Business
Day, such Interest Period shall expire on the next succeeding Business Day; provided that if any Interest Period wuld otherwise expire on a day that is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such
Interest Period shall expire on thc next preceding Business Day; and
(iii) any Interest Period that begins on the last Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, end on the last Business Day of a calendar
month; and
(iv) no Interest Period with respect to any portion of the Loans shall extend
beyond the Maturity Date.

c. Interest Pa)'mcnts.
(i) Interest Payments Generally. Subject to the provisions of subsections
2. J C(ii) and 2.2E below, interest on each Loan shall be payable in arrears in Cash on cach Interest Payment Date applicable to that Loan, upon any prepayment of that Loan
(to the extent accrued on the amount being prepaid) and at maturity (including final
maturity, by acceleration or otherwise).
(ii) Caoitalization of Interest. If an Interest Payment Date occurs and (a) the
average of the Unrestricted Cash and Cash Equivalents held by the Borrowers and the
Subsidiary Guarantors as of the last day of each of the two (2) consecutive Fiscal
Quarters immediately preceding such Interest Payment Date is less than $15,000,000, or
(b) the Unrestricted Cash and Cash Equivalents held by the Bon'owers and the Subsidiary
Guarantors as of the Fiscal Quarter immediately preceding the Fiscal Quarter in which
such Interest Payment Date occurs is less than $15,000,000 (collectively, the "Cash Interest Threshold"), then on such Interest Payment Date the Borrowers may, at their
option and in their sale discretion, in lieu of the payment in whole or in part of interest due on such Loan on such Interest Payment Date which is in excess of the LlBOR Rate then in effect for such Loan for such Fiscal Quarter, pay such amounts of interest by adding such amounts to the principal amount of such Loan on such Interest Payment
Date. For the avoidance of doubt, (x) on the relevant Interest Payment Date the Borrower
shall pay in Cash the interest due on such Interest Payment Date attributable to the
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L1BOR Rate, and (y) the interest capitalized on the relevant Interest Payment Date
pursuant to this subsection 2.2C(ii) shall be attributable to the PIK Margin (or the interest
relating to that portion of the llK Margin not paid in Cash on the relevant Interest
Payment Date). Capitalized interest shall be payable in cash on any future Interest Payment Date to the extent the Cash Interest Threshold is met after giving effect to the payment of interest and capitalized interest due on such Interest Payment Date or, jf the
Cash Interest Threshold is not met on such Interest Payment Date, as the Borrowers may otherwise elect. Lf the Borrowers eJect to pay a portion of the interest due on any Loan
through an increase in the principal amount of such Loan as provided in this subsection 2.2C(ii), the Borrowers shall, within two (2) Business Days of each relevant Interest Payment Date, deliver to the Administrative Agent written notice of such election, which notice shall also state the amount of interest so added to the principal of the Loan and the new principal amount of the Loan. To the extent not previously paid, all capitalized interest shall be paid in cash at maturity (including final maturity, by acceleration or otherwise).
D. Automatic Continuation. Subject to the provisions of subsection 2.6, upon the expiration of any Interest Period applicable to a LlBOR Loan and until prepayment of such LIBOR Loan in full or until maturity (including final maturity, by acceleration or otherwise),
such LlBOR Loan shall automatically be continued for a successive Interest Period.
E. Post-Default Interest. Upon the occurrence and during the continuation of any
Event of Default (x) under subsections 7.1 or 7.7, and (y) during the continuation of any other
Event of Default, following written l1)tice thereof to the Borrowers, at the election of the
Administrative Agent (which may be revoked at the option of the Requisite Lenders
notwithstanding any provision of subsection 9.5A that would require the consent of all Lenders thereto), the outstanding principal ainount of all Loans and, to the extent pennitted by applicable law, any interest payinents thereon not paid when due and any fees and other amounts then due
and payable hereunder, shall thereafter bear interest (including post-petition interest in any
proceeding under the Bankuptcy Code, or other applicable bankruptcy or insolvency laws)
payable upon demand at a rate that is 2% per annum in excess of the interest rate othef'ise
payable under this Agreement with respect to the applicable Loans. Payment or acceptance of
interest provided for in this subsection 2.2E is not a permitted altemative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of the Administrative Agent or any Lender.
the increased rates of
F. Computation of Interest. interest on the Loans shall be computed on the basis

of a 360-day year and for the actual number of days elapsed in the period during which it such Loan or the first day the making of accrues. In computing interest on any Loan, the date of of an Interest Period applicable to such Loan shall be included, and the date of payment of such
Loan or the expiration date of an Interest Period applicable to such Loan shall be excluded;
provided that if a Loan is repaid on the same day on which it is made, one day's interest shall be
paid on that Loan.
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2.3 Fees.
The Borrowers agree to pay such fees to the Agents as may hereafter be (or have
previously been) agreed upon.
2.4 Repayments and Prcpa\'mcnts~ General Provisions Regarding Payments.

A. Scheduled Payments of Loans.
The Borrowers shall repay the principal amount of the Loans on the Maturity Date, together with all other amounts owing by the Borrowers under this Agreement with respect to the Loans.
. Prepayments of Loans.
(i) Voluntarv Prepayments.
(a) Subject to the teiins of subsection 2.4B(i)(b), the Borrowers may,
upon not less than three (3) Business Days~ prior irrevocable written or telephonic notice, promptly confnned in writing to the Administrative Agent (which notice the Administrative Agent wil promptly transmit to each Lender), at any time and from time to time prepay the Loans on any Business Day in whole or in part in an aggregate minimum amount of $ i ,000,000 and integral multiples of $500,000 in excess of that amount or such lesser amount as is then outstanding; provided, however, that in the event the Borrowers cleet to prepay a LlBOR Loan other than
on the expiration of the Interest Period applicable thereto, the BOlTowers shall, at
the time of such prepayment, also pay any amounts payable under subsection
2.60 hereof; and orovided, further, that if such notice of prepayment indicates
that such prepayment is with respect to a11 outstanding Loans and is to be funded
with the proceeds of a Refinancing, such notice may be revoked if the
Refinancing is not consummated. Notice of prepayment having been given as aforesaid, the Loans shall become due and payable on the prepayment date specified in such notice and in the aggregate principal amount specified therein.
Any voluntary prepayments pursuant to this subsection 2AB(i) shall be applied as
specified in subsection 2AC. Concurrently with each voluntary prepayment

pursuant to this subsection 2.4B(i) the Borrowers sha11 deliver to the
Administrative Agent an Offcer's Certificate that identifies the source of the funds used to finance such voluntary prepayment, including a statement as to whether such voluntary prepayment of the Loans is being made directly or
indirectly with the proceeds of any issuance of debt Securities or other

lndehtedness of any of
the Borrowers or any Subsidiary.
(b) (Intentionallv Omitted.)
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(ii) Mandatory Prepayments.
The Loans shall be prepaid in the manner provided in subsection 2AC upon the
QCCUlTence of
the following circumstances:

(a) Prepayments Due to Issuance of Debt. Subject to the tenns of
subsection 2.4B(ii)(f), no later than the first (1st) Business Day following the closing of any transaction pursuant to which any of the Borrowers or any of their Subsidiaries issue debt Securities or incur additional Indebtedness for borrowed
money (other than Indebtedness pcnnittcd under subsection 6.1), the Borrowers
shall prepay the Loans in an amount equal to the principal amount of such debt Securities or Indebtedness for borrowed money, net of the underwriting discounts and commissions paid or payable to the Borrowers or their Subsidiaries, plus an amount equal to the prepayment premium, if any.
(b) Prepayments Due to Issuance of Equity Securities. No later than

the first (l st) Business Day following the closing of any transaction pursuant to
which any of the Borrowers or any of their Subsidiaries receive any Equity
Proceeds (other than Equity Proceeds received by a Borrower~s whoiiy~owned
Subsidiary from Investments made by a Borrower or another of its Subsidiaries in such Subsidiary and permitted by subsection 6.3), the Borrowers shall prepay the Loans in an aggregate amount equal to 50% of such Equity Proceeds.
(e) rlntentionallv Omittedl.
(d) Prepayments from Unrestricted Cash and Cash Equivalents_ No
later than the third (3rd) Business Day following the last day of the each Fiscal
Quarter, the BOlTowers shall prepay the Loans, after
interest (and the Unrestricted Cash capitalized interest) required hereunder, if(a) the average of and Cash Equivalents held by the Borrowers and the Subsidiaiy Guarantors as of
the payments of
the last day of each of the two (2) immediately preceding consecutive Fiscal
Quarters is greater than $15,000,000, or (b) the Unrestricted Cash and Cash Equivalents held by the Borrowers and the Subsidiary Guarantors as of the last day of the immediately preceding Fiscal Quarter is greater than $15,000,000;
provided that such prepayment shall not be required to the extent that, after giving effect to such prepayment, the Unrestricted Cash and Cash Equivalents held by the last day of the immediately the BOlTowcrs and the Subsidiary Guarantors as of preceding Fiscal Quarter is reduced to less than $ i 0,000,000; and provided further that such prepayment shall not be required to the extent that (i) the Board and a majority of the outstanding Common Units have affnnatively voted to set aside an amount not to exceed $7,000,000 from such amounts that arc otherwise required to be prepaid, or (ii) the Board and 66.67% of the outstanding Common
Units have affinnatively voted to set aside an amount in excess of $7,000,000, from such amounts that are otherwise required to be prepaid, in each case for (i) and (ii) above, to effectuate an Identified Acquisition and so long as such funds
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have been deposited into a segregated deposit account (subject to a perfected

security interest in favor of the Collateral Agent for the benefit of
the Lenders) for
such purpose.
(iii) No Waiver. Nothing contained in subsection 2.4B(ii) shall be deemed to
pcnnit any Loan Party to incur Indebtedness or enter into any transaction not otherwise permitted under this Agreement.
C. Application of Prepayments.
(i) Application of PreDayments. Each prepayment received by the
Administrative Agent from the Borrowers under subsection 2.4B(i) or (ii) with respect to
the Loans shall be applied in the following order: First, to the payment of any late
charges due and payable hereunder; second, to the repayment of any amounts advanced by the Administrative Agent or the Collateral Agent in accordance with the Mortgages or any of the other Collateral Documents for insurance premiums, taxes, assessments or for preservation or protection of the Collateral and to the payment of all costs and expenses incurred by the Administrative Agent or the Collateral Agent in connection with the collcction of the Loans or under, or in connection with, the Loan Documents (including
all attorneys' fccs payable hereunder); third, to the payment of accrued and unpaid interest to the extent then due and payable; fourth, to fund any reserves or escrows required by the Administrative Agent or the Collateral Agent in accordance with the
tenns of the Mortgagcs or any of the Collateral Documents; fifth, to the payment of any
UBOR breakage costs incurred by Lenders on account of such payment; and sixth, to reduction of the outstanding principal balance of the Loans (provided that any First Lien Declined Amounts to be applied pursuant to this clause sixth shall be distributed to the prcpayment on a pro rata basis, of the Loans held by Lenders that have elected to accept such First Licn Declined Amounts). Notwithstanding the foregoing, (i) if an Event of Default has occurred and is continuing, the Administrative Agent may apply any payments received in such order or proportion as the Administrative Agent, in its sole discretion, may detemiine and (ii) as among the Lenders, such paymcnts shall be applied in accordance with subsection 2.4D(iii) below. The Borrowers shall deliver to the
Administrative Agent and each Lender notice of each prepayment of Loans in whole or in part pursuant to subsection 2.4B(ii) not less than five (5) Business Days prior to the date
such prepayment shall be made (each, a "Mandator\ Prepayment Date"). Such notice shall set forth (i) the Mandatory Prepayment Date, (ii) the aggregate amount of such
prepayment and (iii) the option of each Lender to (x) decline its share of sueh prepayment or (y) accept First Lien Declined Amounts. Any Lender that wishes to exercise its option
to decline such prepayment or to accept First Lien Declincd Amounts shall notify the Administrative Agent by facsimile not later than three (3) Business Days prior to the Mandatory Prepayment Date. Any Lender that docs not decline such prepayment in wiiting on or prior to the third (3rd) Business Day prior to thc Mandatory Prepayment Date shall be deemed to have acccpted such prepayment but not elected to accept First
Lien Declined Amounts.
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(ii) i Intentionally Omittedl-
D. General Provisions Regarding Payments.
(i) Manner and Time of Payment. All payments by the Borrowers of
principal, interest, fees and other Obligations hereunder and under the Notes shall be made in same day funds and without defense, setoff or counterclaim, free of any
restriction or condition, and delivered to the Administrative Agent not later than i 2:00
Noon (New York time) on the date due at the Funding and Payment Offce for the
account of the Lenders; funds received by the Administrative Agent after that time on such due date shall, at the Administrative Agents sole discretion, be deemed to have been paid by the Borrowers on the next succeeding Business Day.
(ii) Application of Payments to PrincipaL. Interest and Prepayment Fees.
Except as provided in subsection 2.2C, all payments in respect of the principal amount of any Loan shall include payment of accrued interest and prepayment fees, if any, on the principal amount being repaid or prepaid, and all such payments (and in any event any
payments made in respect of any Loan on a date when interest is due and payable with
respect to such Loan) shall be applied to the payment of interest and prepayment fees, if
any, before application to principaL.
(iii) Apportionment of Payments. TIie aggregate principal, prepayment fees
and interest payments shall be apportioned among all outstanding Loans to which such payments relate, in each case proportionately to the Lenders' respective Pro Rata Shares. The Administrative Agent shall promptly distribute to each Lender, at its applicable
Lender Offce, its Pro Rata Share of all such payments received by the Administrative
Agent.
(iv) Payments on Business Days. Except if expressly provided otherwise,

whenever any payment to be made hereunder shaIl be stated to be due on a day that is not
a Business Day, such payment shan be made on the next succeeding Business Day and
such extension of time shall be included in the computation of the payment of interest
hereunder.
(v) Notation of Payment. Each Lender agrees that before disposing of any
Note held by it, or any part thereof (other than by granting participations therein), that Lender will make a notation thereon of all Loans evidenced by that Note and all principal payments previously made thereon and of the date to whieh interest thereon has been paid; provided that the failure to make (or any error in the making of) a notation of any Loan made under such Note shall not limit or otherwise affect such disposition or the obligations of the Borrowers hereunder or under such Note with respect to any Loan or
any payments of principal or interest on such Note.
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E. Application of Proceeds of CollateraL.
Except as provided in subsection 2AB(ii) with respect to prepayments, all

proceeds received by the Collateral Agent after an Event of Default or as a result of
exercising remedies under the Loan Documents, in respect of any sale of, collection from, or other realization upon all or any part of the Collateral under any Collateral Document
shall, in the discretion of the Collateral Agent, be held by the Collateral Agent as Collateral for, and/or (then or at any time thereafter) applied in full or in part by the
Administrative Agent against, the applicable Obligations in the following order of
piiority:
(a) to the payment of all costs and expenses of such sale, collection or
other realization, including, without limitation, reasonable compensation to the Agents and their agents and counsel, and all other reasonable expenses, liabilities and advances made or incurred by the Agents in connection therewith, and all amounts for which such Agents are entitled to indemnification under such Collateral Document and all advances made by the CoJJateral Agent thereunder
for the account of the applicable Loan Party (excluding principal and interest in
respect of any Loans of such Loan Party), and to the payment of all reasonable costs and expenses paid or incurred by the Collateral Agent in connection with the
exercise of any right or rcmedy under such CoJJateral Document, all in
accordance with thc tenns of
this Agreement and such Collateral Document;
(b) thereafter, to the extent of any excess proceeds, to the payment of
all other Obligations on a pro rata basis; and

(c) thereafter, to the extent of any excess proceeds, to the payment to
or upon the order of such Loan Party or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct.
2.5 (Intentionall" Omitted.l.

2.6 Spccial Provisions Governing: LlBOR Loans.
Notwithstanding any other provision of this Agreement to the contrary, the following provisions shall govcrn with respect to LlBOR Loans as to the matters covered:
A. Dctermination of Applicable Intercst Rate. As soon as practicable after

i J :00 a.m. (New York lime) on eaeh Interest Rate Determination Date, the Administrative Agent
shall detennine (which determination shall, absent manifest error, be final, conclusive and binding upon all parties) the interest rate that shall apply to the LlBOR Loans for which an
interest rate is then being detennined for the applicable Interest Period and shaJJ promptly give
notice thereof (in writing or by telephone confirmed in wiiting) to thc Borrowers and each
Lender.
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PRELIMINARY DRAFT
SUBJECT TO MODIFICATION FINAL VERSION MUST BE ACCEPTABLE TO FIRST LIEN STEERING COMMITTEE
B. Inabilty to Determine Applicable Interest Rate. In the event that the
Administrative Agent shall have reasonably deteniiIned (which dctennination shall be final and conclusive and binding upon all parties hereto), on any Interest Rate Detennination Date with
respect to any LlBOR Loans, that by reason of circumstances arising after the date of this Agreement afJcting the London interbank market, adequate and lir means do not exist for
ascertaining the interest rate applicable to such Loans on the basis provided for in the definition
of LlBOR Rate the Administrative Agent shall on such date give notice (by telecopy or by
telephone confinncd in writing) to the Borrowers and each Lender of such determination,
whereupon no Loans may be continued as L1BOR Loans (including, without limitation, pursuant to subsection 2.20 hereof), until such time as the Administrative Agent notifies the Borrowers
and the Lenders that the circumstances giving rise to such notice no longer exist (such
notification not to be unreasonably withheld or delayed).
C. Ilegality or Impracticabiln' of LIBOR Loans. In the event that on any date

any Lender (in the ease of elause (i)) and the Required Lenders (in the case of clause (ii)) shall have reasonably detennincd (which detem1inatIon shall be final and conclusive and binding upon
all parties hereto but shall be made only after consultation with the Borrowers and the Administrative Agent) that the making, maintaining or continuation of its L1BOR Loans (i) has
become unlawful as a result of compliance by such Lender in good faith with any law, treaty,
govcnl111ental rule, regulation, guideline or order (or would conflict with any such treaty,
governmental rule, regulation, guideline or order not having the force of law even though the failure \0 comply therewith would not be unlawful) or (ii) has become impracticable, or would cause such Lendcr material hardship, as a result of contingencies occurrng after the date of this Agreement which materially and adversely aflect the London interbank market, then, and in any such event, such Lender shall be an "Affected Lender" and it shall on that day give notice (by finned in writing) to the Borrowers and the Administrative Agent of such determination (which notice the Administrative Agent shall promptly transmit to each other Lender). Thereafter (a) the obligation of the Affected Lender to make Loans as UBOR Loans shall be suspended until such notice shall be withdrawn by the Atleeted Lender, and (b) the Affected Lender.s obligation to maintain its outstanding LIBOR Loans, as the case may be (the "Affected Loans"), shall be temiinated at the earlier to occur of the expiration of the Interest Period then in etlect with respect to the Affected Loans or when required by law. Nothing in this subsection 2.Ge shall affect the obligation of any Lender other than an Affected Lender to make
telecopy or by telephone con or maintain Loans as L1BOR Loans in accordance with the terms of
this Agreement.
D. Compensation For Breakage or Non-Commencement of Interest Periods.

The Borrowers shall compensate each Lender, upon written request by such Lender (which
request shall set forth in reasonable detail the basis for requesting such a11ounts), for all
reasonable losses, expenses and liabilities (including, without limitation, any interest paid by such Lcnder to the lenders of funds borrowed by it to make or carry its LIBOR Loans and any actual loss, expense or liability sustained by such Lender in connection with the liquidation or reemployment of sud, funds) which such Lender may sustain: (i) if any prepayment (including any prepayment pursuant to subsection 2.4B or assignment pursuant to subsection 2.8) of any of its LIBOR Loans occurs on a date that is not the last day of an Interest Period applicable to that
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Loan, (ii) if any prepayment of any of its L1BOR Loans is not made on any date specified in a notice of prepayment given by the Borrowers or (i) as a consequence of any other default by the Borrowers in the repayment of its LlBOR Loans when required by the tcnns of this Agreement.
E. Booking of LIBOR Loans. Aiiy Lender may make, carr or transfer LIBOR
Loans at, to, or for the account of any of its branch offices or the offce of an Affliate of that
Lender.
F. Assumptions Concerning Funding of LlBOR Loans. Calculation of all

amounts payable to a Lender under this subsection 2.6 and under subsection 2.7 A shall be made
as though thaI Lender had actually funded each of its relevant LIBOR Loans through the purchase of a eurodollar deposit bearing interest at the rate obtained pursuant to the definition of LIBOR Rate in an amount equal to the amount of such LIBOR Loan and having a maturity
comparable to the relevant Interest Period and, through the transfer of such eurodolIar deposit
from an offshore offce of that Lender to a domestic offce of that Lender in the United States of America; provided, however, that each Lender may fund each of its LIBOR Loans in any manner
it sees fit and the foregoing assumptions shall be utilized only for the purposes of calculating
amounts payable under this subsection 2.6 and under subsection 2.7 A.
G. LIBOR Loans After Default. After the occurrence of and during the
continuation of a Default or Event of Default, no Loan may be continued as a LlBOR Loan and
the Borrowers may no longer maintain any Loan as a LlBOR Loan after the expiration of any Interest Period then in eflect for that Loan.
2.7 Increased Costs: Taxes.
A. Increased Costs Generally. If any Change in Law shall: (i) impose, Modify or
deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar
requirement against assets of: deposits with or for the account of, or credit extended by, any Lender (except any reserve requirement reflected in the LIBOR Rate); or (ii) impose on any Lender or the London interbank market any other condition, cost or expense affecting this Agreement or LlBOR Loans hereunder made by such Lender; and the result of any of the
foregoing shall be to increase the cost to such Lender of making or maintaining any LIBOR Loan maintaining its obligations to make any such Loan) or to increase the cost to such Lender, (or of or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of
principal, interest or any other amount), then upon request of such Lender, the BOlTowers wil
pay to such Lender such additional amount or amounts as will compensate such Lender on an after-tax basis for such additional costs incurred or reduction suffered.
B. Capital Requirements. If any Lender determines that any Change in Law
a1lecting such Lender or the applicable Lender Offce of such Lender or such Lender"s holding
company, if any, regarding capital requirements has or would have the effect of reducing the rate return on such Lcnder"s capital or on the capital of such Lender's holding company, if any, as of a consequence of this Agreement, the Commitments of such Lender or the Loans made by such Lender, to a level below that which such Lender or such Lender's holding company could have
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achieved but tor such Change in Law (taking into consideration such Lender's policies and the policies of such Lender's holding company with respect to capital adequacy), then from time to
time the Borrowers wil pay to such Lender such additional amount or amounts as wil
compensate such Lender or such Lender"s holding company on an aner-Iax basis for any such reduction suffered.
C. Certifcates for Reimbursement. A certificate of a Lender setting forth in reasonable detail the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in subsection 2.7A or 2.7B and delivered to the
Bon-owcrs shall be conclusive absent manifest error. The Borrowers shall pay such Lender the amount shown as due on any such certifcate within ten (I 0) days after receipt thereof.
D. Delay in Requests. Failure or delay on the part of any Lender to demand

compensation pursuant to this subsection 2.7 shall not constitute a waiver of such Lender's right to demand such compensation; provided that the Borrowers shall not be required to compensate a
Lender pursuant to this subsection 2.7 for any increased costs incurred or reductions sufTered
more ihan nine months prior to the date that such Lender notifies the Borrowers of the Change in Law giving rise to such increased costs or reductions and of such Lender's intention to claim the Change in Law giving rise to sueh increased costs or compensation therefor (except that, if
reductions is retroactive, then the nine-month period referred to above shall be extended to
include the period of
retroactive effeet thereof).
E. Taxes.
(i) Payments Free of
Taxes. Subject to subsection 2.7E(v) bclow, any and all
payments by or on account of any obligation of the Borrowers hereunder or any other Loan Document shall be made free and clear of and without reduction or withholding for any Indemnified Taxes or Other Taxes, provided that if the Borrowers shall be required by applicable law to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under this
subsection) the Agent or Lender receives an amount equal 10 the sum it would have
received had no such deductions been made, Oi) the Borrowers shall make such
deductions and (iii) the Borrowers shall timely pay the full amount deducted to the
relevant Governmental Authority in accordance with applicable law.
(ii) Payment of Other Taxes bv the Borrowers. Without limiting the
provisions of paragraph (i) above, the Borrowers shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.
(iii) Indemnification by the Borrowers. The Borrowers shall indemnify the
Agents and each Lender within twenty (20) days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this subsection 2.7E) paid by such Agent or such Lender and any penalties, interest and
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reasonable expenses ansing therefrom or with respect thereto, whether or not such
Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate stating the amount of such payment or liability and setting forth in reasonable detail the calculation thereof delivered to the
Borrowers by an Agent or a Lender (with a copy to the Administrative Agent), or by the
Administrative Agent on its own behalf or on behalf of a Lender shall be conclusive

absent manifest error.
(iv) Evidence of Payments. As soon as practicable after any payment of

Indemnified Taxes or Other Taxes by the Borrowers to a Governmental Authority, the
Borrowers shall deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy of the
return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.
(v) Status of Lenders. Any Lender, if requested by the Borrowers or the
Administrative Agent, shall deliver documentation prescribed by applicable law or

reasonably requested by the Borrowers or the Administrative Agent as wil enable the
Borrowers or the Administrative Agent to determine whether or not such Lender is

subject to withholding, backup withholding or infonnation reporting requirements.
the Borrowers is a resident for tax purposes in the United States of America, each Foreign Lender shall
Without limiting the generality of the foregoing, in the event that any of
deliver to the Borrowers and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on whieh such Foreign Lender
becomes a Lender under this Agreement (and from time to time thereafter upon the
request of the Borrowers or the Administrative Agent), whichever of the following is
applicable: (i) duly completed copies of Internal Revenue Service Fonn W-8BEN, claiming eligibility Jr benefits of an income tax treaty to which the United States of America is a party; (ii) duly completed copies of Internal Revenue Service Form WSECl; (iii) in the ease of a Foreign Lender claiming the benefits of the exemption for
portfolio interest under section 881(e) of the Internal Revenue Code, (x) a certificate to the effect that such Foreign Lender is not (A) a "bank" within the meaning of section
881(c)(3)(A) of the Internal Revenue Code, (B) a "10 percent shareholder" of the
Borrowers within the meaning of section 881 (e)(3)(B) of the Internal Revenue Code or (C) a "controlled freign corporation'. described in section 881 (c)(3)(C) of the Internal
Revenue Code and (y) duly completed copies of lntemal Revenue Service Form
W-8BEN; or (iv) any othcr form prescribed by applicable law as a basis for claiming exemption from or a reduction in United States Federal withholding tax and reasonably
requested by the Borrowers or the Administrative Agent duly completed together with
such supplementary documcntation as may be prescribed by applicable law and

reasonably requested by the Borrowers or the Administrative Agent to permit the
Borrowers to detennine the withholding or deduction required to be made. A Foreign
Lender shall not be required to deliver any fonn or statement pursuant to this subsection 2.7E(v) that such Foreign Lender is not legally able to dcliver.
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(vi) Treatment of Certain Refunds. If the Administrative Agent or a Lender
determines, in ils reasonable discretion, that it has received a refund of any Taxes or
Other Taxes as to which it has been indemnified by the Borrowers or with respect to which the Borrowers have paid additional amounts pursuant to subsection 2.7E, it shall
pay to the Borrowers an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrowers under subsection 2.7E with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-ofpocket expenses of the Agent or such Lender and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided that
the Borrowers, upon the request of such Agent or such Lender, agrees to repay the
amount paid over to the Borrowers (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to such Agent or such Lender in the event such
Agent or such Lender is required to repay such refund to such Governmental Authority.
This paragraph shall not be construcd to require any Agent or any Lender to make available its lax returns (or any other information relating to its taxes which it decms
confidential) to the Borrowers or any other Person.
2.8 Mitiiiation Obli2ations~ Replacement of Lenders.
A. Designation of a Different Lender Offce. If any Lender requests compensation
under subsection 2.7 A or 2.7B, or requires the Borrowers to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to subsection 2.7E, then such Lender shall use reasonable efforts to designate a different Lender Offce for making, issuing, funding or maintaining its Commitments or Loans hereunder or to assign its
rights and obligations hereunder to another of its offces, branches or affliates, if: in the
judgment of such Lender, such dcsignation or assignment (i) would eliminate or reduce amounts payable pursuant to subsection 2.7 in the future and (ii) would not subject such Lendcr to any unreimbursed cost or expense and would not otherwise be materially disadvantageous to such Lender. The Borrowers hereby agree to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.
B. Replacement of Lenders. If any Lender requests compensation under subsection

2.7 A or 2.7B, or if the Borrowers are required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to subsection 2.7E, or if any Lender defaults in its obligation to fund Loans hereundcr, or if any Lender has detennined that it is unable 10 make, maintain or continue its LlBOR Loans in accordance with subsection 2.6.C hereof, then the Borrowers may, at their sole expense and effort, upon noticc to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to thc rcstrietions contained in, and consents required by, subsection 9. i), all of its interests, rights and obligations under this Agreement and thc relatcd Loan
Documcnts to an Eligible Assignee that shall assume such obligations (which Eligible Assignee
may be another Lender, if a Lcnder acccpts such assignment), provided that (i) in the case of
assignments not made using an electronic settlement system (e.g., CIearPar), the Borrowers shall
have paid to thc Administrative Agent the assignment fee specified in subsection 9.1 B(i)(c), (ii)
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such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Docuinents (including any amounts under subsection 2.60) from such Eligible Assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrowers (in the case of all other amounts), (iii) such Eligible Assignee is able to make,
maintain or continue, as applicable, LlBOR Loans, (iv) in the case of any such assignment
resulting from a claim for compensation under subsection 2.7A or 2.7B or payments required to
be made pursuant to subsection 2.7E, such assIgnment will result in a reduction in such
compensation or payments thereafter and (v) such assignment does not eonilet with applicable law. A Lender shall not be required to make any such assignment or delegation if, prior thereto,
as a result of a waiver by such Lender or othcf\rise, the circumstances entitling thc Borrowers to
require such assignment and delegation cease to apply.

2.9 Releases~ Subordinations.
A. Release Upon Qualified Sale or Required Dedication. In connection with any

Pcnnitted Collateral Asset Sale, Major Collateral Asset Sale or Required Dedication, the
Collateral Agent or its duly authorized attorney-in-fei shall release the applicable portion of the
Real Property Collateral from the Lien of the Mortgages (such portion of the Real Property CollateraL a "Released Parcel"); provided that all of the applicable conditions set forth in
subsection 6.9 have been satisfied and thc applicable Borrowers shall have submitted to the
Collateral Agent not less than ten (10) days (or such shorter pciiod as is acceptable to the
such proposed release (which must be on a Business Day), a reconveyance or release of Liens (and related Loan Documents) for each Released Parcel (for
Collateral Agent) prior to the date of
execution by the Collateral Agent) (or its agent) in a fonn appropriate for recordation in the
applicablejurisdietion and otherwise satisfactory to the Collateral Agent (or its agent) in its good faith discretion and all other documentation as the Collateral Agent reasonably requires to be
delivered by the Borrowers in connection with such release (collectively, the '"Release Instruments") tor each Released Parcel (for execution by Collateral Agent) together with an Offcer's Cei1ilcate certifying that (i) the Release Instruments arc in compliance with all
Applicable Laws and Governmental Authorizations, (ii) the release to be efth:ted wil not violate
the tenns of this Agreement and (iii) the release to be effected will not impair or otherwise
adversely affect the Liens and other rights of
the Collateral Agent under the Loan Documents not
being released. The Collateral Agent is authorized by the Lenders to enter into release and/or
escrow arrangcinents with the Title Company or any other third~party designated by the
Collateral Agent for purposes of delivery ofRcJease Instruments.
B. Subordinations in connection with Specified Encumbrances. If required by the
applicable Pemiittcd Special linprovement District, upon ten (10) Business Days prior written
notice from the Borrowers, the Collateral Agent shall subordinate the First Priority Lien of the applicable Mortgage to any Liens granted by the Borrowers or their Subsidiaries in favor of such Permitted Special Improvement District securing Special Improvement Bonds issued by such Permitted Special Improvement District after the Effective Date ("'Specifed Encumbrances") that, in each case, as certified by a Responsible Offcer, are necessary or desirable in connection
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with the development of the Projects; provided that (i) any such signature f the Collateral Agent is expressly made with no implied duty or obligation on the part of the Collateral Agent to review any documentation relating to such Specified Encumbrances and is only made for the purpose of subordinating the First Priority Lien of the applicable Mortgage to, such Specified
Encumbrance, (ii) no Detult or Event of Default has occurred and is continuing, (iii) the
Borrowers have provided evidence to the Collateral Agent that such consent and/or subordination is required by the applicable Pennitted Special Improvement District, (iv) the Collateral Agent
shall, as a condition to such subordination, he satisfied in its reasonable discretion that such subordination could not reasonably be expected to (a) have a Material Adverse Etfect or impair
Collateral Agents Lien on the remaining Real Property Collateral or (b) materially impair the
value of the Real Property Collateral and (v) the Collateral Agent shall have received evidence reasonably satisfactory to the Collateral Agent that the priority of the Liens evidenced by the Mortgages with respect to the remaining Real Property Collateral after giving effect to any such subordination shall be maintained following such subordination. The Borrowers shall pay all costs and expenses of the Collateral Agent and the Title Company in connection with any such
subordination.
2.10 Subordinations in connection with Map Approvals.
less than ten (10) Business Days' prior written notice trom the Borrowers, the Collateral Agent shall subordinate the First Priority Lien of the applicable Mortgage to any
Upon not
proposcd "subdivision," "parcel," "tract" or other maps approved by the applicable

Governmental Authority and contemplated to be recorded in conncction with the development of a Project (collectively, the "1\aps"), and, to the extent required by Applicable Law or the applicable Governmental Authority, the Collateral Agent agrees to sign and acknowledge any such Map; provided, in each such case, that (i) the Collateral Agent's signature is expressly made
with 110 implied duty or obligation on the part of the Collateral Agent to review such Maps and is
only made for the purpose of subordinating the Lien of the applicable Moi1gage to such Map, (ii) no Default or Event of Default has occurred and is continuing, (iii) the Borrowers have provided evidence to the Collateral Agent that such subordination and/or execution is required for the subdivision approval of the appropriate Governmental Authority or otherwise reasonably necessary or desirable in connection with the development of a Project, (iv) the Collateral Agent
shall, as a condition to such subordination and/or execution, be satisied in its reasonable
discretion that such subordination and/or execution could not reasonably be expected to have a
Material Adverse Effect or impair Collateral Agents Lien on the remaining Real Property
Collateral or materially impair the value of
the Real Property Collateral, (v) the Collateral Agent
shall have received evidence reasonably satisfactory to the Collateral Agent that the priority of
the Liens evidenced by the Mortgages so subordinated with respect to the remaining Real Property Collateral subject to such Mortgages after giving effeet to any such subordination shall
be maintained following such subordination and (vi) the documentation evidencing such
subordination shall be reasonably satisfactory to the Collateral Agent. The Borrowers shall pay all costs and expenses of the Collateral Agent and the Title Company in connection with any
such subordination.
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2.11 Subordinations in connection with Qualified Sales A2rccments.
Upon not less than ten (10) Business Days' prior written notice from the Borrowers and provided no Event ofDefult has occurred and is continuing, the Collateral Agent shall enter into
a subordination and non-disturbance agreement, in f0I111 and substance reasonably satisfctory to
the Collateral Agent, with a homebuilder or other commercial developer who is party to a Qualified Sales Agreement and the Borrower pursuant to which such homebuilder or other
commercial developer confinns, among other things, that its interest in the relevant Real
Property Collateral and the applicable Qualified Sales Agreement are subordinate to the First
Priority Lien of the Collateral Agent and the Collateral Agent agrees, subject to certain
conditions, to recognize the validity of the Qualified Sales Agreement in the event of a realization upon such First Priority Lien, provided that the .collateral Agent shall not be required to enter into any such subordination and non-disturbance agreement unless the Collateral Agent is reasonably satisfied that the sales contemplated by such Qualified Sales Agreement are, and
wil be, permitted under Section 6.9.
SECTION 3. CONDITIONS TO EFFECTIVENESS

3.1 Conditions to Effectiveness.
The effectiveness of this Agreement, and the obligation of each Lender to make the
extension of credit requested to be made by it is subject to the satisfaction, prior to or

concurrently with the making of such extension of credit on the Effective Date, of the following conditions precedent:
A. Borrowers' Documents. On or before the Effective Date, each Borrower shall

deliver or cause to be delivered to thc Administrative Agent the following, each, unless otherwise noted, dated the Efleetive Date:
(i) certified copies of iis Organizational Certificate (in fon11 and substance
reasonably satisfactory to the Administrative Agent), together with a good standing
certificate from the applicable Governmental Authority of its jurisdiction of

incorporation, organization or formation, each state in which any of its Real Proprty Assets are located, and each other state in which it is qualified as a foreign corporation or
other entity to do business, each dated a recent date prior to the Effective Date;
its Organizational Documents (in fon11 and substance reasonably (ii) copies of satislctory to thc Administrative Agent), certified as of the Effective Date by its corporate secretary or an assistant secretary;
(iii) copies of iis Organizational Authorizations approving and authorizing the
execution, delivery and performance of this Agreement and the other Loan Documents to which it is party or by which it or its assets may be bound that are to be delivered on the
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Effective Date, certified as of the Effective Date by its corporate secretary or an assistant secretary as being in full force and effect without Modification;
(iv) incumbency certificates of its officers executing this Agreement and the
other Loan Documents to which it is a party as of
the Effective Date;
(v) executed originals of this Agreement and the other Loan Documents to
which it is a party that are to be delivered on the Effective Date;

(vi) copies of each of
the Material Contracts to which it is a party, certified by
a Responsible Offcer; and

(vii) such other documents as the Administrative Agent may reasonably
request.
B. Intentionally Omitted).
c. Consummation ofTi-ansactions.
the Loan Documents shall be in fonn and substance reasonably (i) (a) Each of satisfactory to the Administrative Agent and each such Loan Document shall have been duly executed and delivered by each party thcreto and shall be in full force and effect; and (b) all othcr conditions set forth in the Loan Documents shall have been satisfied or the fulfillment of any such conditions shall have been waived with the written consent of the Administrative Agent; and
(ii) after giving effect to the transactions contemplated hereby, the Borrowers
and their Subsidiaries shall have no outstanding Indebtedness or preferred Capital Stock other than (a) the Loans under this Agreement, and (b) the Pemiilled Existing Indebtedness.
D. Lender Signatures. The Lenders and the Agents shall have executed and
delivered this Agreement.
E. Necessary Consents and Estoppels. The Borrowers shall have obtained all
approvals and consents of
Governmental Authorities and other Persons necessary or advisable in
connection with the transactions contemplated hereby and the continued operation of the
business conducted by the Borrowers and their Subsidiaries, and all applicable appeal periods shall have expired, and shall have received estoppels from such Persons as may be reasonably requested by the Administrative Agent, and eaeh of the foregoing shall be in full force and effect and in fomi and substance reasonably satisfactory to the Administrative Agent. Such approvals and consents and estoppels shall be satisfactOl)' to Administrative Agent in its sole and absolute discretion and shall include, without limitation:
(i) executed estoppel certificates from all homeowners. associations and
property owners' associations related to each Project;

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(ii) executed consents from any other lenders of the Borrowers or any of their
Subsidiaries, as required by the tenns of any other loan documents 10 which the Borrowers or such Subsidiaries, as applicable, are a party;
(iii) executed consents from any Person required in connection with the Pledge
and Security Agreement and executed consents from any Person required in connection
with the other Collateral Documents; and

(iv) executed estoppel certificates from Clark County regarding the Rhodes
Ranch Development Agreement.

F. Perfection of Sccurin' Interests. The Borrowers shall have taken or caused to be
taken such actions in such a manner directed by the Collateral Agent to create a valid and
perfected First Priority security interest in the Collateral of each Loan Party in which a security interest can be granted and perfected under the UCC or other Applicable Law to the extent required by the Pledge and Security Agreement or other applicable Collateral Documents. Such actions shall include: (i) the delivery pursuant to the applicable Collateral Documents of (a) such
certificates or other instruments (each of which shall be registered in the name of the Collateral
Agent or properly endorsed in blank for transfer or accompanied by irrevocable undated stock or equivalent powers duly endorsed in blank, all in fomi and substance satisfactory to the Collateral Agent) representing all of the shares or other interests of Capital Stock required to be pledged pursuant to the Collateral Documents identified on Schedule 3. i F- I and (b) all promissory notes or other instruments (duly endorsed, where appropriate, in a manner satisfactory to the Collateral Agent) evidencing any Collateral; (ii) the delivery to the Collateral Agent of (a) the results of a recent search, by a Person satisfctory to the Collateral Agent, of all effective UCC financing statements and fixture filings and all judgment and tax lien filings which may have been made with respect to any personal or mixed property of any Loan Pai1y, together with copies of all which such filings disclosed by such search and (b) uce financing statements the recordation of has been authorized by the applicable Loan Parties as to all such Collateral granted by such Loan Parties for all jurisdictions as may be necessary or desirable to perfect Collateral Agent's security interest in such Collateral: and (iii) the delivery to the Collateral Agent of evidence reasonably satisfactory to the Collateral Agent that all other filings (including UCC tennination statements
and releases and filings with the PTO and the United States Copyrght Offce with respect to
Intellectual Propei1y of the Loan Parties), rccordings and other actions the Collateral Agent deems necessary or advisable to establish, preserve and perfect the First Priority Liens granted to the Collateral Agent in Collateral constituting personal (both tangible and intangible) and mixed
property shall have been made or will be made concurrently with the Effective Date. All
'"'securities accounts" and "deposit accounts" (as such terms are defined in the UCC) of any of
the Borrowers (other than any such deposit accounts identified on Schedule 3.lF-2) shall be subject to effective control agreements in tvor of the Collateral Agent in fonn and substance reasonably satisfactory to the Collateral Agent, all of which have been duly executed and
delivered by each party thercto and are in full force and effect.
G. Real Property. The Administrative Agent shall havc received on or prior to the
Effective Date from the Borrowers and each other applicable Loan Pai1y:
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(i) Morte3e.es. Fully executed and notarized Mortgages, together with any
Modifications thereto deemed necessary by the Collateral Agent in connection with the execution and delivery of this Agreement, the other Loan Documents and the transactions
contemplated hereby and thereby, in proper form for recording in the real property records of Clark County or Mohave County, as applicable, encumbering the Real Property Collateral listed on Schedule 3.1G, in each case in rom1 and substance
satisfactory to the Collateral Agent;
(ii) Opinions of Local CounseL. An opinion of counsel (which counsel shall
be satisfactory to the Collateral Agent) with respect to the enforceability of the Mortgages to be recorded in the real property records of Clark County or Mohave
County, as applicable, and such other related matters as the Collateral Agent may reasonably request, in each ease in form and substance satisfactory to the Collateral Agent;
(iii) Title Insurancc. AL T A extended coverage moi1gagee title insurance
policies (the "Mort2a2cC Policies.') issued by the Title Company with respect to the
Mortgages listed on Schedule 3. i G. in amounts not less than the respective amounts designated on such Schedule with respect to any particular Real Property Collateral,
insuring fee simple title to each such Real Property Collateral vested in such Loan Party
and insuring the Collateral Agent that the applicable Moi1gages create valid and
enforceable First Priority mortgage Liens on the respective Mortgaged Properties encumbered thereby, which Mortgagee Policies (i) shall include all endorsements requested by Collateral Agent including an endorsement for mechanics' liens (or a
deletion of the standard pre-printed mechanics' lien exception) and (2) shall provide for
affirmative insurance and such reinsurance as the Collateral Agent may reasonably
request, all of the foregoing in form and substance reasonably satisfactory to the
Collateral Agent; and evidence satisfactory to the Collateral Agent that such Loan Party has (i) delivered to the Title Company all certificates and affidavits required by the Title Company in connection with the issuance of the Mortgagee Policies and Oi) paid to the
Title Company or to the appropriate Governmental Authorities all expenses and
premiums of the Title Company and all other sums required in connection with the
issuance of
the Mortgagee Policies and all recording and stamp taxes (including mortgage recording and intangible taxes) payable in coiinection with recording the Mortgages in the Clark County or Mohave County, as applicable, real property records;
(iv) Ilntentionally Omitted);
(v) (IntentionaJly Omitted);

(vi) Intentionally Omitted);
(vii) I
Intentionally Omitted);
(viii) (Intentionally Omitted);
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(ix) Matters Relatim~. to Flood Hazard Properties. If any Real Property
Collateral constitutes a Flood Hazard Property, and if such Flood Hazard Property is
located in a community that participates in the National Flood Insurance Program,

evidence that the Borrowers have obtained flood insurance in respect of such Flood
Hazard Property to the extent required under the applicable regulations of the Board of Governors oftl1c Federal Reserve System.
H. Intentionally Omitted.J.
I. (Intentionally Omitted.l.
J. Transaction Costs, Fees and Expenses. On or prior to the Effective Date, the
Borrowers shall have paid (i) to the Administrative Agent any and all fees and reasonable
expenses of the Agents that arc then due and owing or accrued and not yet paid under or in
connection with this Agreement or any of the documents, instruments or agreements executed in connection herewith and (ii) to the appropriate Persons any and all outstanding reasonable fees and expenses (including legal advisors) incurred by the Agents through the Effective Date in connection with the negotiation, drafting and execution of the Loan Documents, as well as all fees reasonably estimated to be incurred following the Effective Date, including with respect to the perfection and recordation of the Liens granted under the Collateral Documents. On or prior to the Effective Date, the Borrowers shall have delivered to the Administrative Agent a schedule, In a form satisfactory to the Administrative Agent, setting forth the Borrowers-estimate of the the Agents). transaction costs (other than fees payable to any of
K. Opinions of Loan Parties' Counsel. The Administrative Agent and its counsel shall have received the written opinions of (i) II ), special Nevada and Arizona
counsel for the Loan Parties,) (ii) II l, special New York counsel for the Loan
Parties,! and (iii) each other special and local counsel for the Loan Parties as the Administrative Agent may reasonably request, in each case, (a) in fnn and substance reasonably satisfactory to the Administrative Agent and its counsel, (b) dated the Effective Date, (c) addressed to each of
the Agents and the Lenders, and (d) setting forth the matters reasonably requested by the
Administrative Agent.
L. Financial Information. Prior the Effective Date, the Administrative Agent shall
have received from the Borrowers such financial statements and other cash flow and financial
information as the Administrative Agent may reasonably request, all in fonn and substance
reasonably satisfactory to the Administrative Agent.
M. Evidence of Insurance. The Administrative Agent shall have received copies of certificates of insurance with respect to each of the insurance policies required pursuant to subsection 5.6, and the Administrative Agent shall be reasonably satisfied with the nature and
scope of these insurance policies.
N. Environmental. The Administrative Agent shall have received one or more

environmental assessment reports which, in their totality, provide a detailed environmental
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assessment of the Projects, in form and substance and from an independent environmental
assessment finn satisfactory to the Administrative Agent, and the Administrative Agent shan be reasonably satisfied as to the amount and nature of any environmental and employee health and safety exposures to which the Borrowers and their Subsidiaries may be subject after giving effect the Borrowers or such Subsidiaries to the transactions contemplated hereby, and with the plans of with respect thereto.
o. (Intentionally Omitted).
P. Corporate and Capital Structure, Ownership, Management.

(i) Organizational Structure. The corporate organizational structure of the
Borrowers and their Subsidimies as of the Effective Date shall be as set forth on
Schedule 4.5.
(ii) Capital Structure and Ownership. The capital structure and ownership of
the BOlTowers and their Subsidiaries as of the Effective Date shall be as set forth on
Schedule 4.5.
Q. Representations and \Varranties; Performance of Agreements. The
Borrowers shall have delivered to the Administrative Agent an Offcer's Certificate, in fonu and
substance satisfactory to the Administrative Agent, to the effect that the representations and
wan'anties in Section 4 hereof and in the other Loan Documents are true and correct in all
material respects on and as of the Effective Date and both before and after giving effect to the
transactions contemplated hereby, to the same extent as though made on and as of that date, that
the Borrowers have pedoffied in all material respects all agreements and satis1ied all conditions
which this Agreement provides shall be perfonned or satisfied by it on or before the Effective Default has occurred on and as of the Effective Date before Date, and that no Default or Event of and after giving effect to the transactions contemplated hereby.
R. Ilntentionally Omitted).
S. No Litigation. There shall he no litigation or governmental, administrative or
judicial actions or proceedings, actual or threatened, that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect or that could reasonably be expected to
restrain, prevent or impose burdensome conditions on any of the transactions contemplated

hereby.
T. Completion of Proceedings. All partnership, corporate, limited liability company and other proceedings taken or to be taken in connection with the transactions
contemplated hereby shall be satisfactory in fonn and substance to the Administrative Agent and
its counsel, and the Administrative Agent and its counsel shall have received all such counterpart
originals or certified copies of such documents as the Administrative Agent may reasonably request (including, without limitation, consents and approvals with respect to the execution,
delivery and perfonnance by each applicable Loan Party of the Credit Agreement, thc Guaranty,
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and the other Loan Documents to which it is party or by which it or its assets may be bound that
arc to be delivered on the Effective Date, certified as of the Effective Date by its corporate
secretary or an assistant secretary as being in full force and effect without Modification). Each
Lender, by delivering its signature page to this Agreement, shaIl be deemed to have
acknowledged receipt of, and consented to and approved, each Loan Document and each other document required to be approved by any Agent, Requisite Lenders or Lenders, as applicable, on or prior to the Effective Date.
u. Money Laundering. 111e Administrative Agent shall have received, suffciently
in advance of the Effective Date, all documentation and other infon11ation required by bank
regulatory authorities from the Loan Parties under applicable "know your customer" and antimoney laundering rules and regulations, including the U.S.A. Patriot Act.
v. (Intentionally OmittedJ_
w. Confirmation Order. The Agents and the Lenders shall have received the
Confinnation Order. Plan of Reorganization. The tenns and provisions of the Plan of
Reorganization shall be reasonably satisfactory to the Agents and Lenders (it being acknowledged by the Agents and the Lenders that the tenns and provisions ofihe Plan of
Reorganization, and fied with the Bankruptcy Court on I ), are satisfactory), and
the Confirmation Order shall include such provisions with respect to the Loans as arc reasonably satisfactory to the Agents and the Lenders and, providing, among other things, that the Borrowers shall be authorized to 0) enter into the Loan Documents, (ii) grant the Liens and security interests and incur or guarantee the Obligations under the Loan Documents and (iii) issue, execute and dclivcr all documents, agreements and instruments necessary or appropriate to implement and effectuate all obligations under the Loan Documents and to take all other actions necessary to borrow Loans under the Loan Documents_ Except as consented to by the Agents jurisdiction under the Confinnation Order and the Lenders, the Bankruptcy Court"s retention of shall not govem the enforcement ofthe Loan Documents or any rights or remedies related thereto.
Y. Final Order. The Agents and the Lenders shall have received evidence,
reasonably satisfactory to the Agents and the Lenders, that (i) the '.EfTeclive Date" under and as
defined in the Plan of Reorganization shall have occurred, the Confiniiation Order shall be valid, subsisting and continuing as a Final Order and all conditions precedent to the effectiveness of the the Plan of Reorganization shall have been fulfilled, or validly waived with the consent of all of the limitation, the execution, delivery and perfonnance of Lenders, including, without the conditions thereof other than conditions that have been validly waived with the consent of the effectiveness ofthe Loan Documents) Lenders (but not including conditions consisting of and (ii) no motion, action or proceeding by any creditor or other party-in-interest to the Chapter
11 Cases which would adversely affect the Plan of Plan of Reorganization, the consummation of
the
the Borrowers or the transactions Reorganization, the business or operations of contemplated by the Loan Documents, as detennined by the Lenders in good faith, shall be pending.
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z. As of the Effective Date:
(i) The representations and warranties contained herein and in the other Loan
Documents shall be true and correct in all material respects on and as of the Effective
Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects on and as of such carlier date;
(ii) No event shall have occurred and be continuing or would result from the
consummation of
the borrowings contemplated by this Agreement that would constitute a Default or Event of Default, or could reasonably be expected to have a Material Adverse Effect; and
(iii) No order, judgment or decree of any Governmental Authority shall
purport to enjoin or restrain any Lender from making the Loans to be made by it on the
Effective Date.
SECTION 4. REPRESENTATIONS AND WARRANTIES

In order to induce the Lenders to enter into this Agreement and to make the Loans and in order to induce the Agents to enter into this Agreement, each of the Borrowers represents and
warrants to each Lender and each Agent, on the date of this Agreement and on the Effective Date, that the following statements arc true and correct.
4.1 Organization and Qualification.
Each Borrower and each of its Subsidiaries is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. Each Borrower and eaeh of its Subsidiaries is duly qualified and is authorized to do business and is in good standing as a foreign corporation or other organization in each state or jurisdiction listed on Schedule 4.1 hereto and in all other states and jurisdictions in which the lilure of such Borrower or any of
such Subsidiaries to be so qualified could reasonably be expected to have a Material Adverse Effect.
4.2 Power and Authoritv.
the Borrowers and the other Loan Parties are duly authorized and empowered to enter into, execute, deliver and perfonn this Agreement and each of the other Loan Documents to
Each of
which it is a party. This Agreement has been duly and validly executed and delivered by the
Borrowers and the other Loan Documents entered into on the Effective Date have been duly and
validly executed and delivered by the Loan Parties party thereto. The execution, delivery and
perf0D11anCC of this Agreement and each of
the other Loan Documents have been duly authorized
by all necessary action.
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4.3 Legally Enforceable Ae.reement.
This Agreement is, and each of the other Loan Documents when delivered under this
Agreement will be, a legal, valid and binding obligation of each Borrower and each of its Subsidiaries signatories thereto, enforceable against each of them in accordance with the
respective tem1S of such Loan Documents, except as the enffceability thereof may be limited by bankruptcy, insolvency or other similar laws of general application affecting the enforcement of creditors' rights or general equitable principals, whether applied in law or equity.
4.4 No Conflct.
The execution, delivery and pcrfonnancc by each of the applicable Loan Parties of the
Loan Documents, the issuance, delivery and payment of the Notes and the Loans, and the
consummation of the transactions contemplated hereby do not and wil not (i) violate,
contravene, or cause any Loan Party to be in deiult under, any provision of any 18\\' or any governmental rule or regulation applicable to any Loan Party, the Organizational Certificate or any other Organizational Documents of any Loan Party or any order, judgment, injunction,
decree, determination or award in effect having applicability to any Loan Party, (ii) conflct with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any
indenture or loan or credit agreement or any other material agreement, contract, lease or instrument to which any Loan Party is a party or by which any of thcm or any of its or their
property may be bound or affected, (iii) result in or require the creation or imposition of any Lien upon any of the properties or assets now owned or hereafter acquired by any Loan Party (other than any Liens created under any of the Loan Documents in favor of the Collateral Agent),
(iv) require any approval or consent of stockholders, partners or members or any approval or consent of any Person under any organizational certificate or other indenture, agreement, contract or instrument to which any Loan Party is a party or by which any of them or any of their
property may be bound, except for such approvals or consents obtained on or before the
Effective Date or (v) give rise to any preemptive rights, rights of first refusal or other similar rights on behalf of any Person under any Applicable Law or any provision of the Organizational Certificate or other Organizational Documents of any Loan Party or any Material Contract to
which any Loan Party is a party or by which any Loan Party is bound.
4.5 Capital Structure.
As of the date hereof: Schedule 4.5 hereto states (i) the COlTect name of each Borrower
and each Subsidiary, the jurisdiction of organization of each Borrower and each Subsidiary, and each Borrower and each Subsidiary (including thc percentage the owners oftlie Capital Stock of ownership of each such Person) and (Ii) the number of authorized and issued Capital Stock (and treasury shares) of each Borrower and each Subsidiary. Each Borrower has good title to all of the shares it purports to own of the Capital Stock of each of its Subsidiaries, free and clear in each case of any Lien (except as pennitted by this Agreement). All such Capital Stock have been duly issued and are fully paid and non-assessable. As of the date hereof, no Borrower has
obligated itself to make any Restricted Payment. No Borrower has issued any options to
purchase, or any rights or warrants to subscribe for, or any commitments or agreements to issue
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or sell, or any Capital Stock or obligations convertible into, shares of the Capital Stock of such Borrower or any of its Subsidiaries. Except as set forth on Schedule 4.5 hereto, as of the date
hereof, to the Borrowers' Knowledge, there arc no outstanding agreements or instruments
binding upon the holders of a Borrower's Capital Stock relating to the ownership of its Capital Stock.
4.6 Licenses.
The Loan Parties have obtained (or caused to be obtained) all material licenses, pemiits, way (and all such items arc currently in full force and effect) required from any Governmental Authority having jurisdiction over each of Rhodes Ranch, Tuscany, Spanish Hils and South West Ranch, or from private parties (collectively, "Material Licenses") necessary or advisable (i) for the current (and each fonner) stage of development and usage of each Project and (ii) to ensure vehicular and pedestrian ingress to and egress to permit the current (and former) development of each of Rhodes Ranch, Tuscany, Spanish Hils and South West Ranch. The Loan Pai1ies reasonably believe thcy wil obtain on a timely basis in the
approvals, easements and rights of
Ordinary Course of Business all Material Licenses necessary or advisable (i) for the full
development and usage of each Project and (ii) to ensure vehicular and pedestrian ingress to and egress as required to pennit the full development and usage of each of Rhodes Ranch, Tuscany, Spanish Hills and South West Ranch.
4.7 Corporate Names.
During the 5-year period preceding the date of this Agreement and as of the Effective Date, no Borrower nor any Subsidiary has been known as or used any corporate, fictitious or
trade names except those listed on Schedule 4.7 hereto. Except as set forth on Schedule 4.7, neither the Borrowers nor any Subsidiary has been the surviving corporation of a merger or
consolidation or acquired all or substantially all of the assets of any Person.
4.8 Business Locations~ Agent for Process.
As of the date hereof: the chief executive oifce and other places of business of each
Borrower and each Subsidiary are as lisled on Schedule 4.8 l1ereto. During the 5-year period
preceding the date of this Agreement, neither of Borrowers nor any Subsidiary has had an offce, place of business or agent for service of process other than as listed on Schedule 4.8. Except as shown on Schedule 4.8 on the date hereof: no inventory of any Bon.ower or any Subsidiary is stored with a bailee, warehouseman or similar Person, nor is any inventory consigned to any Person.
4.9 Title to Properties.

A. Each Borrower and each of its Subsidiaries has good and marketable title to and
fee simple ownership of, or in the case of the leased Real Property Assets described on
Schedule 4.9A. valid and subsisting leasehold interests in, all of its Real Property Assets
(including, without limitation, the Real Property Collateral), and good title to all of its personal
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property, including all property reflected in the financial statements referred to in subsection 4.14 or delivered pursuant to subsection 5.3, in each case free and clear of all Liens except for Liens
pemiitted by this Agreement. Each BOITower has paid or discharged, and has caused each Subsidiary to pay and discharge, all lawful claims which, if unpaid, could reasonably be
expected to become a Lien against any properties of such Borrower or such Subsidiary that is not pennitted by this Agreement, except to the extent such claim is being Properly Contested. The
Liens granted to the Collateral Agent pursuant to the Collateral Documents are First Priority this Agreement. Liens, subject only to those Liens which arc expressly pcnnittcd by the terms of
B. There are no material exceptions or material adverse matters (other than Permitted
Encumbrances) affecting the Real Property Collateral that would be disclosed by a survey of
the
Real Property CollateraL. A true, accurate and complete depiction of each Project as of the Effective Date is set forth on the maps attached hereto as Exhibit XI and which map identifies the portions of each Project comprising the Real Property Collateral as of the Effective Date. Attached hereto as Schedule 4.9B-1 is a true, correct and complete list of all Real Property
Assets owned by each Borrower and each of its Subsidiaries as of the date hereof, setting forth the name of the record owner of such Real Property Asset, the tax parcel identification number
or similar designation of such Real Properly Asset, and the property description (including parcel number and development).
c. No Borrower Entity has received any notiee of any material special assessment or proceeding affecting any Project, change in the tax rate or the assessed valuation of any Project or any other material changes affecting the taxes, assessments or other charges with respect to any Project which is not reflected in the title reports provided to the Administrative Agent prior
to the Effective Date pursuant to subsection 3.IG(iv). Other than those diselosed on
Schedule 4.9C. to the Borrowers' Knowledge there are no special assessment districts, or plans for the same, or for any other scheme that would involve the imposition of taxes, in each case relating to any Project. There arc no zoning or other land-use regulation proceedings or known change or proposed change in any applicable laws, regulations or the Entitlements which could detrimentally and materially affect the use, value, development or operation of any Project,
including the Real Property CollateraL.
4.10 Priority of
Liens: UCC-L Financin!! Statements.
A. As of the Effective Date, each of the Liens in the Collateral granted to the
Collateral Agent, for the benefit of the Secured Parties, pursuant to any of the Collateral
Documents (i) will (when (hut only to the extent) any UCC-i Financing Statements and/or other filings, recordations or control agreements required under or in respect of such Collateral Documents in appropriate fomi are filed or recorded in the appropriate offices of Governmental Authorities or are executed and delivered, as applicable) constitute valid and fully perfected
security interests under the UCC or other Applicable Law in all of the Collateral described
therein and (ii) wil be a First Priority Lien.
B. UCC-L Financing Statements containing a correct, complete and adequate

description of the Collateral have bcen delivered to the Administrative Agent for fiing in the
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office of the Secretary of State of the State of organization of each Loan Party and the State in which each Project is located, and for recording in the official records of the county in which each Project is located, to the extent necessary to establish under the UCC a valid and perfected lien in favor of the Collateral Agent, for the benefit of the Secured Parties, in all Collateral in
which a lien may be perfected by filing a UCC- i Financing Statement, and no further or
subsequent filing, recording or registration is necessary in any such jurisdiction or elsewhere in respect of Collateral that may be pedected by fiing a UCC-i Financing Statel1ent, except as provided under the UCC with respect to the fiing of continuation statements or in connection with any change in the name, identity or location of any such Loan Party.
4.11 No Subordination.
There is no agreement, indenture, contract or instrument to which the Borrowers or any oftheir Subsidiaries is subject or by which the Borrowers or their Subsidiaries may be bound that requires the subordination in right of payment of any of Borrowers' obligations under this Agreement to any other obligations of Borrowcrs.
4.12 Permits: Licenses: Franchises.
TIie Borrowers and each of
their Subsidiaries possess, in accordance with all Applicable
Laws, and without conflict with the rights of any third pai1ies, all pennits, memberships, franchises, contracts and licenses required and all trademark rights, trade names, trade name
rights, patents, patent rights and fictitious name rights necessary to enable them to conduct the business (i) in which they arc now engaged as of the Effective Date and (ii) in which they are contemplated to be engaged on and after the Effective Date, subject, in the case of clause (ii), to the receipt of further permits and licenses with respect to additional subdivisions as each Project is more fully developed, as contemplated by the applicable Development Agreements, except to the extent the failure to obtain or possess any of the foregoing could not reasonably be expected to result in a Material Adverse Effect. The Borrowers reasonably believe that all such further
pennits and licenses wil be received in a timely manner in the Ordinary Course of Business.
4.13 Indebtedness.
As of the Effective Date, the Borrowers and their Subsidiaries have no lndebtedness
except for Indebtedness permitted pursuant to subsection 6. i.
4.14 Ilntentionallv Omittedl.

4.15 Disclosure.
The representations and warranties of each of the Borrowers and their Subsidiaries contained in the Loan Documents and the infonnation contained in the other documents,
certificates and written statements furnished to any of
the Agents or the Lenders by or on behalf
of any Borrower or any of its Subsidiaries tor use in connection with the transactions
contemplated by this Agreement or any other Loan Document, when considered with all other
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infonnation then provided, do not contain, as at its date and as of the Effective Date, any untrue
statement of a material fact or omit to state a material fact necessary in order to make the
statements contained herein or therein not misleading in light of the circumstances in which the same were made. Any projections and financial infimnation prepared to give effect to the transactions contemplated hereby and contained in such materials are based upon good faith estimates and assumptions believed by the Borrowers to be reasonable at the time made and at the Effective Date, It being recognized by the Agents and the Lenders that such projections as to
future events are not to be viewed as facts and that actual results during the period or periods
covered by any such projections may differ from the projected rcsults and that the differences may be materiaL. l1icrc is no fact known to any Borrower that has had, or could reasonably be expected to result in, a Material Adverse Effect and that has not been disclosed herein or in such other documents, certificates and statements furnished to the Lenders for use in connection with
the transactions contemplated hereby.
4.16 Solvent Financial Condition.

Each Borrower and each of its Subsidiaries is now Solvent and, after giving effect to the
Loans to be made hereunder and the consummation of the transactions contemplated hereby,
each Borrower and, after giving effect to all rights of contribution, reimbursement and
subrogation arising in connection with the Guaranty, each of
its Subsidiaries, will be Solvent.
4.17 Surety Oblieations.

Except as set forth on Schedule 4. I 7 hereto on the date hereo!: the Borrowers and their Subsidiaries are not obligated as surety or indemnitor under any surety or similar bond or other contract issued or entered into any agreement to assure payment, perfonnance or completion of performance of any undeiiaking or obligation of any Person.
4.18 Taxes.
The FEIN of each Borrower and each of its Subsidiaries, on the date hereof, is as shown
on Schedule 4.18 hereto. Each Borrower and each of its Subsidiaries has filed all federal, state
and other material Tax returns and other reports it is required by law to file and has paid, or made provision for the payment of, all Taxes shown on such returns to be due and payable, together with all other material Taxes upon it, its income and properties as and when such Taxes are due and payable, except to the extent being Properly Contested. l1ic provision for Taxes on the books of each Borrower and each of its Subsidiaries arc adequate for all years not closed by applicable statutes, and for its current Fiscal Ycar. The BOlTowers are not aware of any proposed
material Tax assessment against any Loan Pai1y.
4.19 Brokers.
l1iere are. no claims against any Borrower or amounts owing or to be owed by any Borrower tor brokerage commissions, finder's fes or investment banking or similar fees in
connection with the Transactions. Eaeh of the Borrowcrs hereby indemnifies the Agents and the
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Lenders against, and agrees that it wil hold the Agents and the Lenders harmless fiom, any claim, demand or liability for any such commission or broker's or finder's fees or investment banking or similar fees alleged to have been incurred in connection herewith or therewith, and any claim, demand or liability relating thereto, and any expenses (including reasonable fees, expenses and disbursements of counsel) arising in connection with any such claim, demand or
liability.
4.20 Intellectual Property.
Each Borrower and each of its Subsidiaries owns or has the lawful right to use all
Intellectual Property necessary for the present and planned future conduct of its business without, to Borrowers' Knowledge, any conflict with the rights of others except to the extent the failure to own or possess any such right to use or any such conflict could not reasonably be expected to result in a Material Adverse Effect; there is no objection to, or pending (or, to the Borrowers' Knowledge, threatened) claim with respect to, such Borrower's or any of its Subsidiaries' right to use any such Intellectual Property (except to the extent any such objection or claim could not reasonably bc cxpected to result in a Material Adverse Effeet and such Borrower is not aware of any grounds for challenge or objection thereto; and, except as may be disclosed on Schedule 4.20
hereto, none of the Borrowers nor any of their Subsidiaries pay any royalty or other
compensation to any Person for the right to use any Intellectual Property (other than with respect to off-the-shelf or prepackaged software). All patents, trademarks, service marks, tradenames, copyrghts, licenses and other similar rights of the Loan Parties, as of the date hereof, are lisled on Schedule 4.20 hereto, to the extent they are registered under any Applicable Law or applications for registration thereof have been made under any Applicable Law.
4.21 Governmental Authorization.
Each Borrower and cach of its Subsidiaries has, and is in good standing with respect to, all Governmental Authorizations necessary to continue to conduct its business as heretofore or proposed to be conducted by it and to own or lease and operate its properties as now owned or leased by it, except where the failure to have such Governmental Authorization could not reasonably be expected to have a Material Adverse Effect.
4.22 Compliance with Laws.
Eaeh Borrower, each of its Subsidiaries, each Project and the use and operations of each Project arc in compliance in all material respects with, the provisions of all Applicable Laws (other than Environmental Laws) and there have been no citations, notices or orders of noncompliance issued to such Borrower or any of the Subsidiaries under any such law, rule or regulation. Each Borrower and eaeh of its Subsidiaries is in compliance with all Environmental Laws applicable to it and properties owned by it except to the extent failure to be in compliance could not reasonably be expected to have a Material Adverse Effect.
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4.23 Burdensome Contncts.

None of the Borrowers nor any oftlicir respective Subsidiaries is a party or subject to any contract, agreement, or charter or other corporate restriction, which has or (after giving effect to
the transactions contemplated by this Agreement) could be reasonably expected to have a

Material Adverse Effect.
4.24 Liti2,ation.
Except as set forth on Schedule 4.24 hereto, there are no actions, suits, proceedings or investigations pending or, to the Borrowers' Knowledge, threatened on the date hereof against or
affecting the Borrowers or any of their Subsidiaries, or the business, operations, properties, prospects, profits or condition of the Borrowers or any of their Subsidiaries, (i) which relate to any of the Loan Documents or any Material Contract, or any of the transactions contemplated thereby or (ii) which could reasonably be expected to have a Material Adverse Effect. Neither the Borrowers nor any of their Subsidiaries is in default on the date hereof with respect to any order, writ, injunction, judgment, decree or rule of any coul1, Governmental Authority or
arbitration board or tribunaL.
4.25 No Defaults.
No event has occurred and no condition exists which would, upon or after the execution and delivery of this Agreement or such Borrower's performance hereunder, constitute a Default
or an Event of Default. None of the Borrowers nor any of their respective Subsidiaries is in default, and no event has occurred and no condition exists which constitutes or which with the passage of time or the giving of notice or both would constitute a default, (x) in the payment of any Indebtedness of such Borrower or any Subsidiary to any Person which would result in a
Default or Event of Detult hereunder or that could reasonably be expected to have a Material
Adverse Effect or (y) under any Material Contract.

4.26 Leases.
Schedule 4.26 hereto is a complete listing of each Capitalized Lease and Operating Lease of each Borrower and each of its Subsidiaries on the date hereof that provides for payments in
excess of $7,500,000 over the tenn of such Capitalized Lease or Operating Lease. Each
Borrower and each of its Subsidiaries is in substantial compliance with all of the ternis of each of
its respective Capitalized Leases and Operating Leases and there is no basis upon which the lessors under any such leases could tenninate the same prior to the scheduled maturity or stated
tcnnination date thereof or declare such Borrower or any of its Subsidiaries in default thereunder,
which, in any case, would result in a Default or Event of Default hereunder or that could
reasonably be expected to have a Material Adverse Effect.
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4.27 Employee Benefit Plans.
A. Except as disclosed on Schedule 4.27 hereto, neither any of the Borrowers nor
any of in or may incur any liability under any Pension Plan as afthe date hereof. Each of
their Subsidiaries nor any oftlicir ERISA Affiliates maintains, contributes or participates the Borrowers
and their Subsidiaries and each of their ERISA Affiliates are in compliance in all material respects with all applicable provisions and requirements of ERISA and the Internal Revenue Code with respect to each Pension Plan and Borrower Pension Plan, and have perfonncd all their obligations under each Pension Plan and Borrower Pension Plan, except those where failure to perfonn such obligations could not reasonably be expected to result in material liability to any Borrower or any Subsidiary. With respect to each Pension Plan and Borrower Pension Plan, no material liability to the PBGC (other than required premium payments), thc Internal Revenue Service, any such Pension Plan or Borrower Pension Plan or any trust established under Title IV of ERISA has been, or is expected by any of the Borrowers or any of their Subsidiaries or any of
their ERISA Affliates to be, incurred by any of of
the Borrowers or any of their Subsidiaries or any
their ERISA Affliates.
B. No ERISA Event has occurred or could reasonably be expected to occur which has resulted or is reasonably likely to result in any material liability to any Borrower or any Subsidiary. No fact or situation that could reasonably be expected to have a Material Adverse
Effect exists with respect to any Pension Plan or Borrower Pension Plan.
C. Except as could not reasonably be expected to result in material liability to any

Borrower or any Subsidiary, no Borrower nor any of their Subsidiaries maintains or contributes to any employee welfare benent plan (as defined in Section 3(1) of ERISA) that provides health or welfare benefits (through the purchase of insurance or otherwise) for any retired or former employees of such Borrower or any Subsidiary other than as required under Section 49808 of
the Internal Revenue Code or Part 6 of Subtitle B of Title I of
ERISA.
D. Except as could not reasonably be expected to result in material liability to any

Borrower or any Subsidiary, no Pension Plan has any ""unfunded benefit liability" as denned in Section 4001(a)(1 8) of ERISA (but excluding from the definition of "current value" of '"assets" of such Pension Plan, accrued but unpaid contributions).
E. Except as could not reasonably be expected to result in material liability to any Borrower or any Subsidiary, each Borrower and its Subsidiaries and each ERISA AlTliate has complied with the requirements of Section 5 i 5 of ERISA with respect to each Multiemploycr
Plan and is not in "default" (as deIned in Section 4219(c)(5) of ERISA) with respect to
payments to a Multiemployer Plan. Neither any of the Borrowers nor any of their Subsidiaries nor any of their ERISA Affliates has incurred or could reasonably be expected to ineur any withdrawal liability in connection with a Multiemployer Plan.
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4.28 Trade Relations.
There exists no actual or, to the Borrowers' Knowledge, threatened tcnnination,
cancellation or material limitation of, or any materially adverse Modification or change in, the business relationship between any Borrower or any Subsidiary and any customer or any group of customers whose purchases individually or in the aggregate are material to the business of the Loan Parties, taken as a whole, or with any material supplier, contractor, builder or group of suppliers, contractors or builders and there exists no condition or state of facts or circumstances which could reasonably be expected to have a Material Adverse Effect or prevent such Borrower or any Subsidiary from conducting such business after the consummation of the transactions contemplated by this Agreement in substantially the same manner as it has heretofore been
conducted.
4.29 Labor Relations.
Except as described on Schedule 4.29 hereto, neither the Borrowers nor any of their
Subsidiaries is a party to any collective bargaining agreement on the date hereof. On the date
hereof, there are no material grevances, disputes or controversies with any union or any other
organization of
the Borrowers and their Subsidiaries.
4.30 Not a Regulated Entitv.
No Loan Party is (i) an "investment company" or a "person directly or indirectly

controlled by or acting on behalf of an investment company" within the meaning of the
Investment Company Act of 1940; (ii) a "holding company,'. or a "subsidiary company" of a

'"holding company," or an "aflliate" of a "holding company" or of a "subsidiary company" of a
the Public Utility Holding Company Act of 1935; or (iii) subject to regulation under the Federal Power Act, the Interstate Commerce Act, any public utilities code or any other Applicable Law regarding its authority to incur Indebtedness.
"holding company," within the meaning of
4.31 Margin Stock.
Neither any Borrower nor any Subsidiary is engaged, principally or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any Margin Stock.
4.32 No Material Adverse Chane:e.
Sinee the Effective Date, no event or change has occurred that has caused or evidences or
could reasonably be expected to cause or evidence, either individually or in the aggregate, a

4.33 EnvironmentaII\'Jattcrs.
Except as disclosed on Schedule 4.33 hereto, as of
the date hereof:
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(i) Each Borrower, each of its Subsidiaries (including, without limitation, all
operations and conditions at or in the Real Property Assets), and, to the Borrowers'
Knowledge, each of the tenants under any leases or occupancy agreements affecting any portion of any Real Property Assets, arc 11l compliance with all applicable Environmental Laws (which compliance includes, hut is not limited to, the possession by any Borrower,
each of its Subsidiaries and each of such tenants of all permits and other Govel1mental
Authorizations required under applicable Environmental Laws, and compliance with the terms and conditions thereof), except where failure to he in compliance could not reasonably he expected to result in a Material Adverse Effect. Neither any Borrower nor any of its Subsidiaries, nor, to the Borrowers' Knowledge, any tenants under any leases
or occupancy agreements affecting any portion of
the Real Property Assets has received
any communication, whether from a Governmental Authority, citizens group, employee or otherwise, alleging that any Borrower, any of its Subsidiaries, or any such tenant is not
in such compliance, and to the Borrowers' Knowledge there arc no past or present
actions, activities, circumstances conditions, events or incidents that could reasonably be expected to prevent or interfere with such compliance in the future, except iii each case to the extent the failure to be in compliance could not reasonably be expected to result in a
Oi) There is no Environmental Claim pending or, to the Borrowers'
Knowledge, threatened against any Borrower or any of its Subsidiaries or, to the
Borrowers' Knowledge, against any Person whose liability for any Environmental Claim any Borrower or any of its Subsidiaries has retained or assumed either contractually or by
operation of law, in each such case which, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect.

(iii) There are no past or present actions, activities, circumstances, conditions,
events or incidents, including, without limitation, the Release or presence of any

Hazardous Material, which could reasonably be expected to fonn the basis of any
Environmental Claim against any Borrower or any of its Subsidiaries, or to the Borrowers' Knowledge, against any Person whose liability for any Environmental Claim any Borrower or any of its Subsidiaries has retained or assumed either contractually or by operation of law, in each such case which could reasonably be expected to result in a
Material Adverse Eflct.
Borrowers' Knowledge, no other Person has placed, stored, deposited, discharged, buried, dumped or disposed of Hazardous Materials on, beneath or adjacent to any
property currently or formerly owned, operated or leased by any Borrower or any of its
(iv) Each Borrower and each of its Subsidiaries have not, and to the
Subsidiaries, in eaeh case, which, individually or in the aggregate, which could

reasonably be expected to result in a Material Adverse Effect.
(v) No Lien in favor of any Person relating to or in connection with any

Environmental Claim has been filed or has been attached to any Real Property Asset.
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(vi) Without in any way limiting the generality of the foregoing, except as
would not reasonably be expected to result in a Material Adverse Effect, none of
the Real
Property Assets contain any: underground storage tanks; asbestos; polychlorinated

biphenyls ("PCBs"); underground injection wells; radioactive materials; or septic tanks or waste disposal pits in which process wastewater or any Hazardous Materials have been discharged or disposed.
(vii) The Borrowers have provided to the Lenders all material assessments, reports, data, results of investigations or audits, and other infoniiation that is in the
possession of or reasonably available to the Borrowers regarding environmental matters
pertaining to or the environmental condition of the business of the Borrowers and their Subsidiaries, or the compliance (or noncompliance) by the Borrowers or any of their Subsidiaries with any Environmental Laws.
4.34 Material Contracts.
A. As of the Effective Date, the Borrowers and their Subsidiaiies arc not party to or bound by any contract, agreement, commitment or other document (or any related series of contracts, agreements, commitments or documents) that contemplates (x) the payment by the
Borrowers or any of their Subsidiaries of Cash or other consideration with a value exceeding an aggregate amount of SL 0,000,000 to a Person that is not a Loan Party or (y) the receipt by the Borrowers or any of their Subsidiaries of Cash or other consideration with a value exceeding an aggregate amount of $ i 0,000,000 from a Person that is not a Loan Party, other than the Material Contracts.
B. The Borrowers have heretofore fumished to the Administrative Agent a true, correct and complete copy of each Material Contract, and all exhibits, schedules and
Modifications thereto. The Material Contracts have not been Modified or clarified except as set forth on Schedule 4.34.
c. Each Material Contract, as of the date hereof, is in full force and effect and constitutes a legal, valid and binding obligation of the applicable Borrower Entity, and, to the
Borrowers' Knowledge, each other party thereto.
D. No Borrower Entity, as of
the date hereof, is in default or breach (with or without
the giving notice or the passage of time) of any Material Contract. Except as set forth on
Schedule 4.34, the Borrowers have no knowledge that any other party 1S in default or breach of any Material Contract, or the existence of any conditions which, with the giving of notice or the passage of time, or both, could constitute a default or breach. As otthe date hereo1~ none of the material rights and privileges under the Material Contracts inuring to any Borrower Entity has
lapsed, and neither Clark County nor any other party has any right as of the date hereof to
terminate any of
the Material Contracts.
E. As of the date hereof, each applicable Borrower Entity has paid all fees, made all posted all bonds and other security, completed all improvements and otherwise dedications,
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performed all obligations required to be performed by the applicable Borrower Entity under the Material Contracts in accordance therewith to the date hereof.
4.35 Utilties.
As of the date hereof, all material water, sewer, gas, electric, telephone and drainage facilities and all other utilities required (by Applicable Law or otherwise) to be installed for the current stage of development and the current usage of each Project are installed to the property lines of each Project, are all connected and operating pursuant to valid permits, arc adequate to service the current usage of each Project, and are connected to each Project by means of one or more public or private easements extending from such Project to one or more public streets, public rights-of-way or utility facilities. TIie Borrowers reasonably expect to obtain on a timely basis in the Ordinary Course of Business all water, sewer, gas, electric, telephone and drainage facilities and all other utilties (if not already so obtained) required (by Applicable Law or otherwise) for, and adequate to service, the intended full usage, development and operation of
each Project.
4.36 Entitlements.
A. The Loan Parties have (i) all Entitlements necessary for the current stage of
development and the current usage of each Project, and (ii) except as set forth in Pai1 A of Schedule 4.36, all Major Entitlements necessary to pemiit the full development and usage of
each Project (collectively, the "Existing Entitlements"). All of
the Existing Entitlements are in full force and effect. All Major Entitlements that are Existing Entitlements arc set forth in Part B of Schedule 4.36. All the Existing Entitlements arc vested in tlie Real Property Collateral, and
the consummation of the transactions contemplated hereby shall not affect the same. There are
no unperfomied obligations or conditions with respect to the eftctiveness of any of the Existing Entitlements that were or are required to be completed as of the Effective Date, and there arc no the date hereof, no Borrower material uncured defaults or breaches under any of the same. As of Entity is aware of any defects or actual or potential actions, challenges or proceedings by any third party or Governmental Authority with respect to the Existing Entitlements. No Borrower has received notice of any changes to any of the Existing Entitlements; all of the material documents relating to the Major Entitlements that arc Existing Entitlements arc identified in Part B of Schedule 436 (collectively, the "Entitlement Documents"), and there are no other material documents relating to the Existing Entitlements other than those set forth on Schedule 4,36.
. The Borrowers reasonably believe that all Entitlements necessary to pcnnit thc
full developmcnt and usagc of eaeh Project have been obtained or will be obtained on a timely
basis in the Ordinary Course of Business, and no Borrower is aware of any actual or potential
adverse actions, challenges or proceedings by any third party or Governmental Authority with
respect to any such Entitlements.
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SECTION 5. AFFIRMATIVE COVENANTS

Each of the Borrowers covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans and other
Obligations, each afthe Borrowers shall and shall cause each of its Subsidiaries to:
5.1 Visits and Inspections.
Permit representatives of
the Administrative Agent, from time to time, as often as may be
reasonably requested, but only during nOff1al business hours and (except when a Default or Event of Default exists) upon reasonable prior notice to such Borrower, to visit and inspect the
properties of such Borrower and each of its Subsidiaries, conduct appraisals of a Borrower's
properties, inspect, audit and make extracts from each Borrower's and each of its respective
Subsidiary's books and records, and discuss with its offcers, its employees and (with a
Responsible Offcer) its independent accountants, such Borrower's and each of its Subsidiary's business, financial condition, business prospects and results of operations. Representatives of the Borrowers (including, without limitation, the Borrowers' accountants) shall be authorized to accompany the Administrative Agent (or representative thereof) on any such visit or inspection,
but such authorization shall in no manner be deemed to be a requirement or condition of the
Administrative Agent's visits or inspections, and to the extent any of the Borrowers' representatives accompany the Administrative Agent on any visit or audit, such Persons shall in
no manner hinder or delay the audits or inspections of
the Administrative Agent. Representatives
of each Lender shall be authorized to accompany the Administrative Agent on each such visit
and inspection and to participate with the Administrative Agent therein, but at their own expense, unless a Default or Event of Default exists. Neither the Administrative Agent nor any Lender shall have any duty to make any such inspection and shall not incur any liability by reason of its failure to conduct or delay in conducting any such inspection.
5.2 Notices.
obtaining knowledge of
Notify the Administrative Agent and Lenders in writing, promptly after any Borrower's the following:
(i) the institution of, or written threat 01: any action, suit, proceeding,
governmental investigation or arbitration against or affecting the BOlTowers or their Subsidiaries and not previously disclosed, which action, suit, proceeding, governmental
investigation or arbitration (a) exposes, or in the case of multiple actions, suits, proceedings, governmental investigations or arbitrations arising out of the same general
allegations or circumstances expose, such Persons, in the Borrowers' reasonable
judgment, to liability in an amount aggregating $7,500,000 or (b) seeks injunctive or other relief which, if obtained, could reasonably be expected to havc a Material Adverse Effect, providing such other infonnation as may be reasonably available to enable Administrative Agent and its counscl to evaluate such matters; the Borrowers, upon
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PRELIMINARY DRAFT SUBJECT TO MODIFICATION FINAL VERSION MUST BE ACCEPTABLE
TO FIRST LIEN STEERING COMMmEE
request of the Administrative Agent, shall promptly give written notice of the status of any action, suit, proceeding, governental investigation or arbitration;
(ii) any labor dispute to which any of the Borrowers or their Subsidiaries may
become a party, any strikes or walkouts relating to any of
its property or facilities, and the expiration of any labor contract to which it is a party or by which it is bound, which could reasonably be expected to have a Material Adverse Effect;
(iii) any default by any of the Borrowers or their Subsidiaries under, or
termination of: any Material Contract, or any note, indenture, loan agreement, mortgage, lease, deed, guaranty or other similar agreement relating to any Indebtedness of such
Person exceeding $5,000,000 (or receipt of any notice claiming such a default or
termination or giving notice thereof);

(iv) tennination, suspension or revocation of any Entitlements which could
reasonably be expected to have a Materal Adverse Effect;

(v) the existence of any (a) Default, (b) Event of Default or (c) event,
circumstance or change that has caused or could be reasonably expected to cause, either in any case or in the aggregate, a Material Adverse Effect;
(vi) the occurrence of or forthcoming occurrencc of any ERISA Event or the
receipt by any Borrower or any ERISA Affiliate of notice from a Multiemployer Plan sponsor concerning an ERISA Event;
(vii) any judgment against any of the Borrowers or their Subsidiarics in an

amount exceeding $5,000,000;
(viii) any violation or asserted violation by any of the Borrowers or their Subsidiaries of any Applicable Law (including ERISA, OSHA, FLSA, or any
Environmental Laws), the adverse resolution of which could reasonably be expected to have a Material Adverse Effect or result in liability of such Borrower or Subsidiary in an amount in excess of $5,000,000;
(ix) any Release on any propei1y owned or occupied by any of the Borrowers
or their Subsidiaries if such Release could reasonably be expected to requirc Cleanup

under Environmental Laws at an expcctcd cost of grcatcr than $5,000,000;
(x) the discharge of such Borrower's independent accountants or any
withdrawal of resignation by such independent accountants from their acting in such capacity; in addition, each Borrower shall give the Administrative Agent at least ten (10)
Business Days' prior written notice of any change in any BOlTower's or Subsidiary
Guarantor's chief executive oflice, legal name or jurisdiction of organization;

(xi) copies of
any Tax assessments in an amount in excess of$5,OOO,OOO; and
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(xii) such other information and data with respect to such Borrower or any of
its Subsidiaries as from time to time may be reasonably requested by the Administrative Agent or any Lender.
5.3 Financial Statements and Other Reports.
Maintain all necessary and proper books and records including a system of accounting
established and administered in accordance with sound business practices to pennit preparation
of financial statements in confonnity with GAAP. Deliver to the Administrative Agent for distribution to each Lender:
(i) Quarterlv Financials: as soon as available and in any event within forty
five (45) days after the end of each Fiscal Quarter (other than the fourth Fiscal Quarter of any Fiscal Year), commencing with the Fiscal Quartcr ending March 31, 2010, (a) the respective combined consolidated balance sheets of the Borrowers and thcir respective Subsidiaries and Affiiates, as at the end of such Fiscal Quarter and the relatcd combined consolidated statemcnts of income and statement of cash flows of thc Borrowers and their respective Subsidiaries and Affliates for such Fiscal Quarter and for the period from the
beginning of the then current Fiscal Year to the end of such Fiscal Quarter, setting forth,
(x) supplemental consolidating schedules reflecting (1) the consolidated balancc sheets of the Borrowers and their Subsidiaries as at the end of such Fiscal Quarter, and the related
consolidated statements of income and statement of cash flows of
the Borrowers and their
Subsidiaries for such Fiscal Quartcr and for the period from the beginning of thc then current Fiscal Year to the end of such Fiscal Quarter, (2) eliminations for such period and (3) consolidating schedules for such period and, (y) in the case of statemcnts of income the only, in comparative form the corresponding figures for the corresponding periods of previous Fiscal Year, all prepared in accordance with GAAP and in reasonable detail and
certified by the chief financial officer of each Borrower that they fairly present, in all
material respects, the financial condition of the Borrowers and their respective
Subsidiaries and Affiliates, as at the dates indicated and the results of their operations and
their cash flows for the periods indicated, subject to changes resulting from audit and
nonnal year-end adjustments; and (b) a narrative report describing the operations of the
Borrowers and their Subsidiaries, in each case, taken as a whole, for such Fiscal Quarter and for the perod from the beginning of the then current Fiscal Year to the end of such Fiscal Quarter, which report shall include a summary describing (1) the number of real property parcels sold during such Fiscal Quarter with corresponding revenue and average
price calculations, (2) the number of real property parcels constituting inventory backlog
at the cnd of such Fiscal Quarter with corresponding rcvcnue and average price
calculations, (3) by subdivision, the number of real property parcels sold to datc on a cumulative basis, and the remaining number of real property parcels constituting Homcsitcs completed and under construction at the end
inventory, and (4) the number of
of such Fiscal Quarter;

(ii) Year-End Financials: as soon as available and in any event within ninety
(90) days after the end of each Fiscal Year, (a) the respective audited combined
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consolidated balance sheets of the Borrowers and their respective Subsidiaries and
Affiiates, as at the end of such Fiscal Year and the related audited consolidated and
unaudited consolidating statements of income and statement of cash flows of each for
such Fiscal Year (which shall also contain reviewed but unaudited supplemental
consolidating schedules retlecting (l) the consolidated balance sheets of the Borrowers
and their Subsidiaries as at the end of such Fiscal Year, and the related consolidated
statements of income and statement of cash flows of the Borrowers and their Subsidiaries for such Fiscal Year, (2) the consolidated balance sheets of Subsidiaries and Affiliates of any Borrower that are not Loan Parties for such Fiscal Year and the related consolidated statements of income and statement of cash flows of the Subsidiaries and Affiliates of any Borrower that arc not Loan Parties for such Fiscal Year, (3) eliminations for such
period and (4) consolidating schedules for such period, setting forth, in the case of statements of income only, in comparative fonn the corresponding figures for the
previous Fiseal Year, all prepared in accordance with GAAP and in reasonable detail and
certified by the chief financial offcer of each Borrower that they fairly present, in all
material respects, the financial condition of the Borrowers and their respective
Subsidiaries and Affiiates, as at the dates indicated and the results of their operations and their cash flows for the periods indicated; (b) a narrative report describing the operations of the Borrowers and their Subsidiaries, in each case, taken as a whole, for such Fiscal Year, which report shall include a summary describing (1) the number of real property
parcels sold during such Fiscal Year with corresponding revenue and average price
calculations, (2) the number of real property parcels constituting inventory backlog at the end of such Fiscal Year with con.esponding revenue and average price calculations, (3) by subdivision, the number of real property parcels sold to date on a cumulative basis, and the remaining number of real property parcels constituting inveniory, and (4) the
number of Homesites completed and under construction at the end of such Fiscal Year; the Borrowers and (e) in the case ofsueh combined consolidated financial statements of
and their respective Subsidiaries and Affiiates, a report thereon of independent certified public accountants of recognized national standing selected by the Borrowers and reasonably satisfactory to the Administrative Agent, which report shall be unqualified as to going concern and scope of audit and contains no other 1lateiial qualification or exception, and shall state that (x) such consolidated financial statements firly present, in all material respects, the combined consolidated financial position of the Borrowers and their their respective Subsidiaries and Affliates as at the dates indicated and the results of
operations and their cash flows for the periods indicated in confonnity with GAAP
applied on a basis consistent with prior years (except as otherwise disclosed in such
financial statements) and that the audit by such accountants in connection with sueh
combined consolidated financial statements has been made in accordance with generally accepted auditing standards and (y) such schedules have becn subject to audit procedures by such accountants;
(iii) Officer"s Certificates: Comoliance Cei1ilcates: together with each
delivery of financial statements of the Borrowers' and their respective Subsidiaries and
Affliates pursuant (a) to subdivisions (i) and (ii) of this subsection 5.3, an Offcer's
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Certificate of the Borrowers stating that the signer has reviewed the terms of this
Agreement and has made, or caused to be made under his or her supervision, a review in reasonable detail of the transactions and condition of the Borrowers and their respective Subsidiaries and Affliates during the accounting period covered by such financial statements and that such review has not disclosed the existence during or at the end of such accounting period, and that the signer did not have knowledge of the existence as at the date of such Offcer's Certificate, of any condition or event that constitutes a Default or Event of Default, or, jf any such condition or event existed or exists, specifying the nature and period of existence thereof and what action the Borrowers have taken, are this taking and propose to take with respect thereto; and (b) to subdivisions (i) and (ii) of subsection 5.3, a Compliance Certificate demonstrating in reasonable detail compliance during and at the end of the applicable accounting periods with the covenants set forth in
subsections 6.6 and 6.16.
(iv) fIntentionally Omittcdl
(v) r Intentionally Omittedl
(vi) Accountants' Reports: promptly upon receipt thereof (unless restrictcd by applicable professional standards), copies of all reports submit1ed to any Borrower, its Subsidiaries and/or Affliates by a national independent certified public accountants in connection with each annual, interim or special audit of the financial statements of such Borrower, its Subsidiaries, and Affliates made by such accountants, including, without
limitation, any comment letter submitted by such accountants to management in

connection with their annual audit;
(vii) flntentionally Omittedl
(viii) Casualty: promptly upon the occurrence of any casualty involving any
property of the Borrowers or any of their Subsidiaries involving a loss that could reasonably be expected to exceed $5,000,000, written notice with sufficient detail
describing the casualty and the extent to which any losses resulting from such casualty
wil be covered by insurance;
(ix) Appraisal Updates: together with each delivery of financial statements of
the Borrowers and thcir respective Subsidiaries and Atliliates pursuant to subdivision Oi) of this subsection 5.3, an Acceptable Appraisal that provides an Appraised Value of the remaining portion of all Real Property Collateral, effective as of the last day of the preceding Fiscal Year; provided, that, in addition to the foregoing, Administrative Agent will be entitled to obtain, at Borrowers' expense, additional Acceptable Appraisals of any such Real Propei1y CoIlateraI (or any portion thereoO if (i) an Event of Default exists, or (ii) an appraisal is required under applicable Law;
(x) Budgets: as soon as practicablc and in any event no latcr than ninety (90)
days aftcr the end of each Fiscal Year, a budget for the next succeeding Fiscal Year of
the
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Borrowers in form and substance reasonably satisfactory to the Requisite Lenders,

including, without limitation, forecasted quarterly financial results of the Borrowers and
their Subsidiaries for such Fiscal Year, together with an Offcer's Certificate
demonstrating compliance with the covenants set forth in subsection 6.6, prepared on a pro fonna basis to give effect to such forecasted financial results for such Fiscal Year and an explanation of the assumptions on which such forecasts are based and such other infonnation and projections as the Required Lenders may reasonably request;
(xi) Events of Default: promptly upon any Responsible Offcer obtaining
knowledge (3) of any condition or event that constitutes a Default or an Event of Default, (b) that any Person has given any written notice to the Borrowers or any of their
Subsidiaries or taken any other action that could reasonably be expected to have a material adverse effect on the Borrowers or any of their Subsidiaries with respect to a
claimed default or event or condition of the type refrred to in subsection 7.6 or (c) of
the
occurrence of any event or change that has caused or evidences or could be reasonably expected to cause or evidence, either individually or in the aggregate, a Material Adverse Effect, an Offcer's Certificate specifying the naturc and period of existence of such condition, cvent or change, or specifying the written notice given or action taken by any such Person and the nature of such claimed Default, Event of Default, default, event or condition, and what action the Borrowers (or applicable Subsidiaries) have taken, arc taking and propose to take with respect thereto;
(xii) Litigation or Other Proceedings: (a) promptly upon any Responsible
Officer obtaining knowledge of (x) the institution of: or written threat of: any action, suit, proceeding (whether administrative, judicial or otherwise), Environmental Claim, governental investigation or arbitration against or affecting the Borrowers or any of
their Subsidiaries or any property of the Borrowers or any of their Subsidiaries

(collectively, "Proceedin2:s") not previously disclosed in writing by the Borrowers to the Lenders or (y) any material development in any Proceeding that, in any case:
(a) could reasonably be expected to have a Material Adverse Effect; or
(b) seeks to enjoin or otherwise prevent the consummation of, or to
recover any damages or obtain relief as a result of, the transactions contemplated
hereby;
written notice thereof together with such other infonnation as may be reasonably available to the Borrowers and as the Borrowers and their counsel shall reasonably detennine would not jeopardize the attorney-client privilege with respect to such
Proceeding, to enable the Lenders and their counsel 10 evaluate such inatters; and (b) within forty-five (45) days after the end of each Fiscal Quarter of the Borrowers, a
schedule of all Proceedings involving an alleged liability of, or claims against or

aficting, the Borrowers or any of their Subsidiaries equal to or greater than $5,000,000 and promptly after request by the Administrative Agent such other infonnation as may be reasonably requested by the Administrative Agent to enable the Administrative Agent and
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its counsel to evaluate any of such Proceedings; provided, however, that the Bon-owers
and their counsel may withhold information if in their reasonable determination,
disclosure of such information would jeopardize the attorney-client privilege with respect to such Proceeding;
(xiii) ERISA Events: promptly upon the Borrowers becoming aware of the
occurrence of any ERISA Event that could reasonably be expected to have a Material Adverse Effect, a written notice specifying the nature thereof, what action the Borrowers or any ERISA Affiiate has taken, is taking or proposes to take with respect thereto and,
when known, any action taken or threatened by the Internal Revenue Service, the
Department of Labor or the PBGe with respect thereto;
(xiv) ERISA Notices: with reasonable promptness, copies of (a) all written
notices received by the Borrowers or any ERISA Affiiate from a MulticmpIoyer Plan sponsor conceming an ERISA Event; and (b) such other documents or govemmcntal
reports or filings relating to any Pension Plan or Borrower Pension Plan as the
Administrative Agent shall reasonably request;
(xv) Insurance: as soon as practicable and in any event by the last day of each Fiscal Year, a certificate in form and substance satisfactory to the Administrative Agent outlining all material insurance coverage maintained as of the date of such report by the
Borrowers and their Subsidiaries and all material insurance coverage planned to be
maintained by the Borrowers and their Subsidiaries in the immediately succeeding Fiscal Year;
(xvi) Environmental Audits and Reports; promptly upon their becoming
available, copies of all environmental audits and reports, whether prepared by personnel of the Borrowers or any of their Subsidiaries or by independent consultants, with respect to environmental matters affecting any property owned or operated by the Borrowers or their Subsidiaries or which relate to any Environmental Liabilities of the Borrowers or its
Subsidiaries, to the extent reflecting any matters which, in any such case, could
reasonably be expected to result in a Material Environmental Liability;
(xvii) Regulatory Notices: as soon as practicable, notification of any change in the Borrowers and their Subsidiaries which could reasonably be expected to have a Material Adverse Effect;
any law, rule or regulation relating to the business of
(xviii) Material Contracts: (a) conculTently with each delivery of quai1erly
financial statements, and within forty-five (45) days after the end of each Fiscal Year, a
repoi1 indicating any Material Contract that terminated or expired, or that was Modified
in any manner which is materially adverse to the BOlTowers and their Subsidiaries during
the quartcrly period then last ended and (b) promptly afler any notice or other
communication is delivered by any party to any Material Contract pursuant thereto or in respect thereof relating to (x) any financial matter or other matter that could reasonably
be expected to have adverse financial consequences to the Borrowers or any of their

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Subsidiaries in excess of $$5,000,000 or (y) any other non-financial maHer which could reasonably be expected to have material adverse consequences to the business of the
Borrowers and their Subsidiaries (whether or not constituting a Material Adverse Effect),
notice and a copy thereof;

(xix) (Intentionallv Omittedl
(xx) Monthlv Sales Reports: within five (5) Business Days after the end of each month, deliver a sales report in form and substance reasonably acceptable to the Administrative Agent setting forth a summary describing (1) the number of real property
parcels sold during such month with corresponding revenue and average price
calculations, (2) the number of real property parcels constituting inventory backlog at the end of such month with corresponding revenue and average price calculations, (3) by subdivision, the number of real property parcels sold to date on a cumulative basis, and the remaining number of real property parcels constituting inventory, and (4) the number ofHomesIles completed and under construction at the end of such month; and
(xxi) Other Infonnation: with reasonable promptness, such other infonnation
and data with respect to the Bon'owers or any of their Subsidiaries as from time to time may be reasonably requested by the Administrative Agent or any Lenders, and such other documentation, infonnatIon and certifications described in subsection 3.1 U as from time to time requested by the Administrative Agent or any Lender.
504 Corporate Existence,

At all times preserve and keep in full force and effect its organizational existence (except to the extent pennitted by subsection 6,7) and all rights and franchises material to the business of the Borrowers and their Subsidiaries (on a consolidated basis).
5.5 Payment of
Taxes and Claims: Tax Consolidation.
A. Pay all income and other material taxes, assessments (including, without
limitation, Special Taxes) and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its income, businesses or franchises befre any penalty accrues thereon, and all material claims (including, without limitation, claims for labor, services,
materials and supplies) for sums that have become due and payable which, if unpaid, might become a Lien (other than a Pennittcd Encumbrance) upon any of its properties or assets; provided that no such tax, charge or claim need be paid if being contested in good lith by
appropriate proceedings promptly instituted and diligently conducted and if such reserve or other
appropriate provision, if any, as shall be required in eonfonnity with GAAP shall have been
made iherefre.
B. Not fie or consent 10 the filing of any consolidated, combined or other similar
income tax return with any Person (other than the Borrowers and Subsidiaries of
the Borrowers)
(it being expressly understood that each direct and indirect equity holder of the Borrowers may
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file income tax returns that include such equity holder's share of the financial results of the
BOlTowers and their Subsidiaries as may be required under Applicable Law).
5.6 Maintenance of Properties~ Insurance.
Maintain or cause to be maintained in good repair, working order and condition, ordinary wear and tear excepted, all material properties used in the business of the Borrowers and their
Subsidiaries and from time to time will make or cause to be made all appropriate repairs,
renewals and replacements thereof Maintain or cause to be maintained, with financially sound and reputable insurers, insurance with respect to its properties and business and the properties and businesses of its Subsidiaries against loss or damage of the kinds and with respect to liability substantially similar to such insurance maintained as of the Effective Date. Each such policy of casualty insurance covering damage to or loss of property shall name the Collateral Agent for the benefit of the Secured Parties as additional insured and as the loss payee thereunder for all losses, subject to application ofprocccds as required by subsection 2.4B(iii)(e), each such policy of liability insurance coverage shall name the Collateral Agent, for the benefit of the Secured Parties, as additional insureds, and all such policies of insurance shall provide for at least thirty (30) days' piior written notice to the Collateral Agent of any Modification or cancellation of such
policy.
5.7 Lender Meetine..
Upon the request of the Administrative Agent, participate in a meeting of the

Administrative Agent and the Lenders at least once during each Fiscal Year (and will participate
in such other meetings at such other times as the Borrowers and the Administrative Agent may
agree) to be held at the Borrowers' corporate offces (or such other location as may be agreed to by the Borrowers and the Administrative Agent) at such time as may be agreed to by the Borrowers and the Administrative Agent.
5.8 Compliance with Laws
Comply with the rcquircmcnts of all Applicable Laws, noncompliancc with which, individually or in the aggregate with other non~comp1iances, could reasonably be expected to
cause a Material Adverse Effect.
5.9 Environmental Disclosure and Inspection.
A. Exercise all due diligence in order to comply and cause (i) all tenants or
subtenants under any leases or occupancy agreements affecting the Real Propei1y Assets, (ii) all contractors, engineers, architects and similar vendors and contractors and (Iii) all other Persons
on or occupying the Real Property Assets, to comply with all Environmental Laws, except for
any such noncompliance which could not reasonably bc expectcd to result in a Material Environmental Liability.
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. The Borrowers agree that the Administrative Agent may, from time to time,
retain, al the Borrowers' expense, an independent professional consultant reasonably acceptable to the Borrowers to review any report relating to Hazardous Materials prepared by or for the Borrowers and to conduct their own investigation (the scope of which investigation shall be reasonable based upon the circumstances) of any Real Property Asset currently owned, leased, operated or used by the Borrowers or any of their Subsidiaries, if (x) a Default or an Event of
Default shall have occurred and be continuing or (y) the Administrative Agent reasonably
believes (1) that an occurrence relating to such Real Property Asset is likely to give rise to an Environmental Liability or (2) that a violation of an Environmental Law on or around such Real Property Asset has occurred or is likely to occur, which could, in either such case, reasonably be
expected to result in a Material Environmental Liability. The Borrowers shall use their
reasonable efforts to obtain for the Administrative Agent and its agents, employees, consultants and contractors the right, upon reasonable notice to the Borrowers, to enter into or on to the Real
Property Assets currently owned, leased, operated or used by the Borrowers or any of their
Subsidiaries to perfonn such tests on such property as are rcasonably necessary to conduct such a
review and/or investigation. Any such investigation of any Real Property Asset shall be
conducted, unless otherwise agreed to by the Borrowers and the Administrative Agent, during
normal business hours and, shall be conducted so as not to unreasonably interfere with the ongoing operations at any such Real Propeity Asset.
C. Promptly advise the Administrative Agent in writing and in reasonable detail of

(i) any Release or threatened Release of any Hazardous Materials, or to the Borrowers'
Knowledge any tenants under any leases or occupancy agreements affecting any portion of any
Real Property Asset, required to be reported to any federal, slate, local or foreign governmental
or regulatory agency under any applicable Environmental Laws, (ii) any and all written
communications with respect to any pending or threatened Environmental Claims and any and
all material written communications with respect to any Release or threatened Release of
Hazardous Materials, in any case, the existence of which has a reasonable possibility of resulting
in a Material Environmental Liability, (iii) any Cleanup performed by the BOlTowers, any Subsidiary or any other Person in response to any Hazardous Materials on, under or about any
which has a reasonable possibility ofresulting in a Material Environmental Liability, (iv) any Borrower's or any Subsidiary's discovery of any occurrence or condition on any property that could reasonably be expected to cause any Real Property Asset to be subject to any material restrictions on the ownership, occupancy, transferability or use thereof
Real Property Asset, the existence of
under any Environmental Laws and (v) any written request for infonnation from any
govenunental agency that suggests such agency is investigating facts, conditions, events or
circumstances which have a reasonable possibility of giving rise to a Material Environmental

Liability.
D. Promptly notify the Administrative Agent of (i) any proposed acquisition of stock,
assets, or property by the Borrowers or any of their Subsidiaries that could reasonably be
expected to expose the Borrowers or any of their Subsidiaries to, or result in, Environmental
Liability that could reasonably be expected to have a Material Adverse Effect and (ii) any
proposed action to be taken by the Borrowers or any of their Subsidiaries to commence
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manufacturing, industrial or other similar operations that could reasonably be expected to subject the Borrowers or any oftheIr Subsidiaries to additional Environmental Laws, that are materially different from the Environmental Laws applicable to the operations of the Borrowers and their
Subsidiaries as of
the Effective Date.
E. At their own expense, provide copies of such documents or Infonnation as the
Administrative Agent may reasonably request in relation to any matters disclosed pursuant to this subsection 5.9.
5.10 Remedial Action RC2ardjo2llazardous Materials.
Promptly take any and all necessary or prudent Cleanup in connection with the presence, handling, storage, use, disposal, transportation or Release or threatened Release of any
Hazardous Materials on, under or affecting any Real Property Asset under Environmental Laws
and Governmental Authorizations. In the event the Borrowers or any of their Subsidiaries undertakes any Cleanup with respect to the presence, Release or threatened Release of any
Hazardous Materials on or affecting any Real Property Asset, the Borrowers or such Subsidiary
shall conduct and complete such Cleanup in material compliance with all applicable
Environmental Laws, and in accordancc with the policies, orders and directives of all federaL, state and local governmental authorities except when, and only to the extent that, the Borrowers' or such Subsidiary's liability for such presence, handling, storage, use, disposal, transportation or Release or threatened Release of any Hazardous Materials is being Properly Contested. In the event Borrowers shall fail timely to commence or cause to be commenced or fail diligently to prosecute to completion such Cleanup, Agent or Lenders may, but shall not be obligated to, cause such Cleanup to be performed, and all costs and expenses (including, without limitation, attorneys' and consultants' fees, charges and disbursements) thereof or incurred by Agent and Lenders in connection therewith shall be paid promptly by Borrowers with interest thereon at the rate equal to 2% per annum in excess of the highest interest rates applicable to Loans at such time and otherwise payable under this Agreement.
5.11 Additional Collatel"l~ Execution of Guaranty and Collateral Documents bv Future
Subsidiaries.
A. In the event that any Bon.ower Entity acquires any property after the Effective
Date (other than property described in subsection 5.1 IB and other than personal property 110t
required to be perfected pursuant to the Collateral Documents) as to which the Collateral Agent, for the benefit of the Secured Parties, docs not have a perfected Lien, promptly (i) notify the Administrative Agent of that fact, (ii) execute and deliver (or cause to be executed and delivered a Person that is not (and, in the ease orany documents, instruments or consents to be executed by a Borrower Entity or any Affliate thereof, use commercially reasonable erfoi1s to obtain)) to the Administrative Agent and the Collateral Agent, such Modifications to the Pledge and Security
Agreement and/or each other applicable Collateral Document, and take all such further action
and execute all such further documents and instruments as any Agent may deem reasonably necessary or advisable to grant and perfect in favor of the Collateral Agent, for the benefit or the Secured Parties, a First Priority security interest in: (a) any such personal property assets;
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(b) any such owned Real Property Assets and any development agreements (or other similar which agreements) related thereto; and (e) any such leasehold interests, the faiT market value of
exceeds, individually or in the aggregate, $5,000,000, as reasonably determined by the
Administrative Agent. If and to the extent requested by the Administrative Agent, the Borrowers
shall deliver to the Administrative Agent, together with such Loan Documents, a favorable
opinion of counsel to the Borrower Entities, that is reasonably satisfactory to the Administrative
Agent and its counsel, as to (a) the valid existence and good standing of such Borrower Entity,
(b) the due authorization, execution and delivery by such Borrower Entity of such Collateral Documents to which it is a party, (c) the enforceability of such Collateral Documcnts against such Borrower Entity, (d) the validity and perfection of the security interests b'Tanted by such Borrower Entity in favor of the Collateral Agent pursuant to the Collateral Documents and
(e) such other matters as any Agent may reasonably request, all of
the forego1ng to be reasonably
satisfactory in form and substance to the Administrative Agent, the Collateral Agent and their
counsel.
B. In the event that any Person becomes a Subsidiary of the Borrowers (other than
any Joint Venture that Investments have been madc 1n under subsection 6.3(x)), promptly notify the Administrative Agent of that fact and, cause such Subsidiary, no later than teii (10) Business Days (or such longer period of time as the Administrative Agent shall agrcc) aftcr it becomes a Subsidiary, to execute and deliver to the Administrative Agcnt and the Collateral Agent a countcrpart of the Guaranty and the Pledge and Security Agreement and each other applicable
Collateral Document, and to take all such further action and execute (and, in the ease of any
documents, instruments or consents to be executed by a Person that is not a Borrower Entity or any Affliate thcreof, use commercially reasonable efforts to obtain) all such further documents and instruments as any Agent may deem reasonably necessary or advisable to grant and perfect in favor of the Collateral Agent, for the bencfit of the Secured Parties, a First Priority sccurity interest in all of the: (a) personal property assets of such Subsidiary; (b) Real Property Assets owned by such Subsidiary; and (c) leasehold interests of such Subsidiary, the fair market value which exceeds, individually or in the aggregate, $5,000,000, as reasonably detennined by the of Administrative Agent (such documents and instruments required to be executed and delivered
pursuant 10 this subsection 5.11 B, the "Subsidiarv Loan Documents"). In addition, the
Borrowers shall plcdge (if
they are the direct owner of Capital Stock of such Subsidiary) or shall cause each of their applicable Subsidiaries to plcdge (if any of such other Subsidiaries is the direct owner of Capital Stock of such Subsidiary, each such owner, whether the Borrowers or any of their other Subsidiaries, the .'Pledging Parent") all of the Capital Stock of such Pledging Parent's Subsidiary to the Collateral Agent pursuant to the applicablc Collateral Documents and to take all such further action and execute all such further documents and instruments as may be required or advisable to grant and perfect in favor of the Collateral Agent, for the benefit of the Secured Parties, a First Priority security interest in such Capital Stock. The Borrowers shall deliver to the Administrative Agent, together with such Loan Documents, in the case of each such Subsidiary that is required to be a party to any Loan Document: (i) (a) certified copies of such Subsidiary's Organizational Certificate together, if applicable, with a good standing certificate from the Secretary of State of the jurisdiction of its incorporation, fOfflation or
organization, as applicable, each to be datcd a recent date prior to their delivery to the
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Administrative Agent, (b) a copy of such Subsidiary's Organizational Documents, certified by its
secretary or an assistant corporate secretary (or Person holding an equivalent title or having
equivalent duties and responsibilities) as of a recent date prior to their delivery to the
Administrative Agent, (e) a certificate executed by the secretary or an assistant secretary of such Subsidiary as to (x) the incumbency and signatures of the officers of such Subsidiary executing the Guaranty, the Collateral Documents and the other Loan Documents to which such Subsidiary is a party and (y) the fact that the attached Organizational Authorizations of such Subsidiary authorizing the execution, delivery and performance of such Guaranty, such Collateral
Documents and such other Loan Documents are in full force and effect and have not been
Modified or rescinded except to the extent reflected therein and (ii) if and to the extent requested
by the Administrative Agent, a fvorable opinion of counsel to such Subsidiary, that is

reasonably satisfactory to the Administrative Agent, and its counsel, as to (a) the valid existence and good standing of such Subsidiary, (b) the due authorization, execution and delivery by such
Subsidiary of such Guaranty, the Collateral Documents and any other Loan Documents to which
it is a party and (c) the enforceability of such Guaranty and such Collateral Documents against
such Subsidiary, (d) the validity and perfection of the security interests granted by such
Subsidiary (and by the Pledging Parent of Subsidiary) in fvor of such Subsidiary in respect of the Capital Stock of
such
the Collateral Agent pursuant to the Collateral Documents and (e) such
other matters as any Agent may reasonably request, all of the foregoing to be reasonably
satisfactory in fonn and substance to the Administrative Agent, the Collateral Agent and their
counseL. In addition, the Borrowers shall promptly deliver a supplement to Schedule 4.1 to the Administrative Agent if any Subsidiary is created or acquired.
c. If requested by the Collateral Agent, with respect to each Real Property Asset that
is subject to a Mortgage pursuant to subsection 5.1 lA or subsection 5.11B, provide (and in the
case of the following elause (v) use commercially reasonable efforts to provide) the Collateral
Agent with (i) Mortgagee Policies of the type described in subsection 3.1 G(iii) covering such Real Property Collateral in an amount at least equal to the purchase price of such Real Property Collateral (or such other amount as shall be reasonably specified by the Collateral Agent), (ii) an
AL T A/ACSM survey with respect to such Real Property Collateral dated a date, and prepared by
a Person and in fonn and substance, reasonably satisfactory to the Collateral Agent, (iii) environmental reports of the type described in subsection 3.1N with respect to such Real
Property Collateral dated a date, and in fonn and substance reasonably satisfactory to the Collateral Agent, (iv) title reports issued by the Title Company with respect to such Real
Property Collateral, dated a date, and in fonn and substance, satisfactory to the Collateral Agent (and which may include Pennitted Encumbrances), and (v) any consents or estoppels reasonably deemed necessary or advisable by the Collateral Agent in connection with the Mortgages relating to such Real Property Collateral, in form and substance reasonably satisfactory to the Collateral Agent.
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5.12 Intentionallv Omitted.l.

5.13 Further Assurances.
At any time or J'om time to time upon the request of the Administrative Agent or the Collateral Agent, each Borrower will, at its expense, promptly execute, acknowledge and deliver
such further documents and do such other acts and things as the Administrative Agent or the
CoJ1atcral Agent may reasonably request in order to effect llly the purposes of the Loan
Documents and to provide for payment of the Obligations in accordance with the tenus of this Agreement, the Notes and the other Loan Documents. In furtherance and not in limitation of the foregoing, the Borrowers shall take, and cause each .of its Subsidiaries to take, such actions as the Administrative Agent or the Collateral Agent may rcasonably request from time to time (including, without limitation, the execution and delivery of guaranties, security agreements, pledge agreements, moi1gages, deeds of trust, landlords consents and estoppels, stock powers, financing statements and other documents, the tiling or recording of any of the foregoing, title insurance with respect to any of the foregoing that relates to an interest in real property, and the delivery of stock certificates and other collateral with respect to which perfection is obtained by possession) to ensure that the Obligations arc guaranteed by the Borrowers and the Subsidiary
Guarantors and are secured by substantially all of excluded by the terms of this Agreement) of
the asscts (other than thosc assets specifically
the Borrowers and their Subsidiaries.
5.14 Title.
Eaeh of the Borrowers shall warrant and defend (a) its title to the Collateral and every
part thereof, subject only to Liens pennitted hereunder (including Pennitted Encumbrances) and (b) the validity, perfection and priority of the Liens of the applicable Collateral Documents, subject only to Liens pennitted hereunder (including Pennitted Encumbrances), in each case
against the claims of all Persons whomsoever. The Borrowers shall reimburse each Agent for
any costs or expenses (including reasonable attomeys' fees and court costs) incurred by such Agent if an interest in any of the Collateral, other than as pennitted hereunder, is claimed by
another Person.
5.15 Maintenance of Entitlements~ Development Agreements.
Warrant and defend, and otherwise maintain, all of the material Entitlements obtained by any of the Borrowers or any of their Subsidiaries in connection with any Real Property Collateral as necessary (i) for the development of Rhodes Ranch, Tuscany, South West Ranch, and Spanish Hills, and (ii) to ensure eaeh Project is in compliance in all material respects with Applicable
Laws. The Borrowers and their Subsidiaries shall on a timely basis obtain all material Entitlements that have not been obtained as of the Effective Date as necessary (i) for the
development of Rhodes Ranch, Tuscany, South West Ranch, Spanish Hills, and (ii) to ensure each Project is in compliance in all material respects with Applicable Laws. To the extent any
material Entitlements (including, without limitation, the tenns of require any obligations or conditions to be fulfilled by the Borrowers or any of
the Development Agreements)
their Subsidiaries, the Borrowers will perform (or caused to be performed) such obligations or conditions.
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SECTION 6. NEGATIVE COVENANTS

Each of the Borrowers covenants and a&'TCCS that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans and other
Obligations, each of the Borrowers shall perform, and shall cause each of its Subsidiaries to
perform, all covenants in this Section 6.
6.1 Indebtedness.
The Borrowers shall not, and shall not penn
it any of their Subsidiaries to, directly or
11ldircctly, create, incur, assume or guaranty, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness or prefrred stock, except that each of the Borrowers and their Subsidiaries may create, incur, assume or guaranty, or otherwise become or remain directly or indirectly liable with respect to Indebtedness or prefen-ed stock, as follows:
(i) Each of the Loan Parties may become and remain liable with respect to its
respective Obligations pursuant to the tenns of this Agreement and the other Loan Documents;
(ii) Each of the applicable Loan Parties may remain liable for the Permitted Existing Indebtedness or the Refinancing of any such Permitted Existing Indebtedness;
provided that any such Refinancing must not do any of the following: (i) change the obligor on or guarantors of such Indebtedness; (ii) increase the principal amount of such Indebtedness beyond the then existing balance (except by an amount equal to the premium on the principal amount paid and fees and expenses reasonably incurred in connection with any such Refinancing and); (iii) result in the maturity of the principal amount of such indebtedness being earlier than the maturity of the Indebtedness being
Relinanced; or (iv) extend any security interests beyond the assets securing the
Indebtedness being Refinanced:
(iii) The Borrowers and their Subsidiaries may become and remain liable after
the Effective Date with respect to Indebtedness under Capital Leases capitalized on the consolidated balance sheet of the Borrowers and purchase money Indebtedness (including
mortgage financing) to provide all or a portion of the purchase price or cost of
construction of an asset or improvement of an asset; provided that (a) such Indebtedness when incurred shall not exceed the purchase price or cost of construction or improvement of such asset, (b) no such Indebtedness shall be Refinanced for a principal amount in excess of the principal balance outstanding at the time of such Refinancing (except by an
amount equal to the premium on the principal amount paid and fees and expenses
reasonably incun-ed in connection with any such Refinancing), (c) such Indebtedness
shall be secured only by the asset acquired, constructed or improved with the proceeds of
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such Indebtedness and (d) the aggregate amount of all Indebtedness outstanding under
this clause (Iii) at any time shall 110t exceed $10,000,000;
(iv) Each of the Borrowers and the Subsidiary Guarantors may become and remain liable with respect to Indebtedness to any other Borrower or Subsidiary
Guarantor; provided that, in each case, (a) all such intercompany Indebtedness shall be
evidenced by promissory notes which shall have been pledged to the Collateral Agent
pursuant to the Collateral Documents, (b) all such intercompany Indebtedness owed by a Borrower to any of its respective Subsidiaries shall be unsecured and subordinated in right of payment to the payment in full of the Obligations pursuant to the terms of the applicable promissory notes or an intercompany subordination agreement that in any such case, are reasonably satisfactory to the Administrative Agent and (c) any payment by any Subsidiary under any Guaranty or any payment by a Borrower of the Obligations shall result in a pro tanto reduction of the amount of any intercompany Indebtedness owed by
such Borrower or by such Subsidiary to such BOlTower or to any of its Subsidiaries for
whose benefit such payment is made;

(v) 111C Borrowers and their Subsidiaries may become and remain liable with
respect to Indebtedness under performance, surety, appeal or indemnity bonds (or letters of credit used for these purposes) required by Governmental Authorities in connections with the development of any Project, in each case incurred in the Ordinary Course of Business:
(vi) The Borrowers and their Subsidiaries may become and remain liable with
respect to Indebtedness under the Hedge Agreements required under subsection 5.12 and any other Hedge Agreements that arc entered into and maintained for bona fide hedging activities and are not for speculative purposes;
(vii) The Borrowers and their Subsidiaries may become and remain liable with
respect to Indebtedness under Special Improvement Bonds in an amount not to exceed

$ i 0,000,000 at any time outstanding plus such greater amount as may be reasonably
acceptable to Administrative Agent;

(viii) Iintentionally Omitted);
(ix) (Intentionally Omilled);
(x) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument drawn against insuffcient funds in the Ordinary Course of Business; provided, however, that such Indebtedness is extinguished within five (5) Business Days ofineurrenee; and
(xi) The Borrowers and their Subsidiaries may become and remain liable for
unsecured Indebtedness in an aggregate principal amount (for thc Borrowers and all their Subsidiaries) not to exceed $3,000,000; and
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(xii) The Borrowers and their Subsidiaries may become and remain liable with
respect to Indebtedness (which may be senior or pari passu in right of payment to the Indebtedness pcnnittcd pursuant to subsection 6.1 (i)) under a working capital revolving
loan and letter of credit facility in an aggregate principal amount not to exceed
$ I 0,000,000 at any time outstanding.
6.2 Liens and Related Matters.
A. Prohibition on Liens. The Borrowers shall not, and shall not pcnnit any of their
Subsidiaries to, directly Of indirectly, create, incur, assume or pennit to exist any Lien on or with respect to any property or asset of any kind (including any document or instrument in respect of
goods or accounts receivable or Capital Stock) of any Borrower or any of its Subsidiaries,
whether now owned or hereafter acquired, or any income or profits therefrom, or file or permit the fiing of, or knowingly permit to remain in eflect, any financing statement, or other similar notice of any Lien with respect to any such property. asset, income or profits under the UCC of
any state or under any similar recording or notice statute, except (solely with respect to the Borrowers and their Subsidiaries):
(i) any Pennitted Encumbrances; provided, however, that (a) with respcct to any Real Property Collateral, no Peiinitted Encumbrances except Permitted Title
Exceptions and Specified Encumbrances shall be senior or prior 10 the Liens under the Mortgages; and (b) no such Peffiitted Encumbrances shall result in a Lien on the Capital Stock of any Borrower or its Subsidiaries;
(ii) Liens in favor of the Collateral Agent granted pursuant to the Collateral
Documents or granted in favor of any Agent or Secured Party pursuant to the terms of
this Ab'Tcemcnt;
(iii) (Intentionally Omittcd);
(iv) Liens securing Indebtedness under Capital Leases or purchase money
Indebtedness (including mortgage financing) of any Borrower or any Subsidiary incurred in accordance with subsection 6. I, or to Refinance any such Indebtedness incurred solely
for such purpose; providcd that (a) such Licns shall be created substantially
simultaneously with (or within 90 days of) the acquisition or construction of such assets or improvements, or at the time of such Refinancing, as the case may be, (b) such Liens do not at any timc cncumber any assets other than the assets acquired, constructed or improved with the proceeds of such Indebtedness (or securing such Indebtedness being
Relnanced) and (c) in the case of a Refinancing, the amount of Indebtedness secured
thereby is not increased (except by an amount equal to the premium on the principal amount paid and fees and expenses reasonably incurred in connection with any such Refinancing);
(v) Liens securing Indebtedness permitted by subsection 6.1 (vii);
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(vi) Liens securing Indebtedness pennitted by subsection 6.1(xii), which Liens
may rank senior or pari passu in priority to the Liens permitted pursuant to subsection
6.2A(iii); and
(vii) Precautionary UCC financing statement fiings (made by lessors) that do not at any time perfect any Liens, regarding operating leases entered into by the
Borrowers and their Subsidiaries.
B. No Further Negative Pledges. Neither any Borrower nor any of its Subsidiaries
shall enler into or sufrer to exist or become effective any agreement that prohibits or limits the ability of any Borrower or any of its Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of its property or revenues, whether now owned or hereafter acquired, other than: (i) this Agreement and the other Loan Documents; (ii) any agreements governing any purchase moncy Indebtedness or Capital Leases otherwise permitted by subsection 6.1 (in which case, any
prohibition or limitation shall only be effective against the assets financed thereby); (iii)
customary non-assignment and non-pledge provisions in any lease or licenses entered into in the Ordinary Course of Business; and (iv) agreements and instruments entered into by Joint Ventures relating to the properly of such Joint Venture so long as such prohibitions or limitations do not apply to the Capital Stock in the Joint Venture owned by any Loan Party.
C. No Restrictions on Distributions Except ror (a) restrictions existing under the

Loan Documents, (b) customary contractual non-assignment provisions in leases, licenses or
contracts entered into in the Ordinary Course of Business, (c) restrictions governing Capital Leases, mortgage financings or purchase money Indebtedness to the extent such restrictions
restrict the transfer of the property subject to such Capital Leases, mortgage financings or
purchase money Indebtedness, (d) restrictions imposed on assets to be sold in a manner
pennitted hereby pending the closing of such sale or disposition, and (c) customary provisions in
joint venture agreements and other similar arrangements, each Borrower will not, and will not pemiit any of its Subsidiaries to, ereate or otherwise cause or suffer to exist or become effective
any consensual encumbrance, limitation or restriction of any kind on the ability of any
Subsidiary or a Borrower to (i) make Restricted Payments in respect of any such Subsidiary's Capital Stock, (ii) repay or prepay any Indebtedness owed by such Subsidiary to a Borrower or any other Subsidiary of a Borrower, (iii) make loans or advances to, or other Investments in, a Borrower or any other Subsidiary of a Borrower or (iv) transfer any orits property or assets to a Borrower or any other Subsidiary of a Borrower.
6.3 Investments.
The Borrowers shall not, and shall not pennit any or their Subsidiaries to, directly or indirectly, make or own any Investments except:
(i) The Borrowers and their Subsidiaries may continue to own the
Investments owned by thcm as of
the Effective Date in any Borrower Entities as listed on
Schedule 6.3(i);
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(ii) The Borrowers and the Subsidiary Guarantors may make and own
intercompany loans to the extent pennitted by subsection 6. 1
(iv);
(iii) The Borrowers and their Subsidiaries may make and own Investments in
Cash Equivalents;
(iv) Any Borrower may make Investments in any other Borrower or any
Subsidiary Guarantor;
(v) Any Subsidiary Guarantor may make Investments in any other Subsidiary
Guarantor or any Borrower;

(vi) Investments in Persons not engaged in any material respect in any
business other than the ownership and development of real property and whose principal assets consist of interests in real property shall be pennitted; provided that each such
Investment results in the acquisition of either (I) one hundred percent (100%) of the Capital Stock of such Person or (II) all or substantially all of the assets of such Person
and, in the case of clause (I), such acquired Capital Stock is pledged to the Collateral Agent and such Person promptly becomes a Subsidiary Guarantor in accordance with
subsection 5.11 and, in either case, grants morlgages and Liens on its assets in favor of the Collateral Agent as required under subsection 5.11;
(vii) The Borrowers and their Subsidiaries may make and own Investments in
Hedge Agreements entered into pursuant to subsection 5.12 and any other Hedge Agreements that are entered into for bona fide hedging activities and are not for
speculative purposes;
(viii) Investments constituting accounts receivable ansing, and trade credit
granted, in the Ordinary Course of
Business, and any securities received by a Borrower or
any of its Subsidiaries in satisfaction or partial satisfaction thereof from financially
troubled account debtors to the extent reasonably necessary in order to prevent or limit loss, and any prepayments and other credits to suppliers made in the Ordinary Course of
Business shall be permitted;
(ix) The Borrowers and their Subsidiaries may make and own Investments in
Restricted Seller Carry-Back Notes in an aggregate principal amount not to exceed

$7,000,000 at any time outstanding, issued by purchasers in connection with Asset Sales permitted under subsections 6.9(i) and 6.9(ii); provided that not more than $2,000,000 in aggregate principal amount of any such Restricted Seller Carry-Back Notes at any time outstanding may havc a maturity date latcr than (3) years following the date of original issuance thereof; provided that notwithstanding the foregoing that Borrowers and their Subsidiaries may not make and own Investments in Restricted Seller Carr-Back Notes relating to the sale of single family homes, rcsidcntial buildings or other housing units;
and
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(x) The Borrowers and their Subsidiaries may make other Investments not
otherwise pennitted above so long as the total amount of all of such Investments does not exceed $3,000,000 in the aggregate at anyone time outstanding; provided that no Default Detult has occurred and is continuing or would result therefrom. or Event of
6.4 Contingent Obligations.
The Borrowers shall not, and shall not pcnnit any of their Subsidiaries to, directly or indirectly, create or become or remain liable with respect to any Contingent Obligation, except:
(i) The Subsidiary Guarantors may become and remain liable with respect to
Contingent Obligations arising under the Guaranty;

(ii) The Borrowers and their Subsidiaries may become and remain liable with
respect to Contingent Obligations in respect of customary indemnification and purchase

price adjustment obligations of any such Person incUITed in connection with Asset Sales
permitted by this Agreement;

(iii) The Borrowers and their Subsidiaries may become and remain liable with
respcct to Contingent Obligations in respect of any Indebtedness, that if outstanding,

would be permitted under subsection 6. i;
(iv) The BOlTowers and their Subsidiaries may become and remain liable with
respect to Hedge Agreements entered into pursuant to subsection 5.12 and any other Hedge Agreemcnts that arc entcred into for bona fide hedging activities and arc not for
speculative purposes;
(v) The BOlTowers and their Subsidiaries may become and remain liable with
respect to letters of credit permitted under subsection 6.1 (v);

(vi) TI1C Borrowers and thcir Subsidiaries may become and remain liable with
respect of Contingent Obligations arising in connection with operating leases entered into by a Bon.ower or any Subsidiary Guarantor from time to time; and
(vii) The Borrowers and their Subsidiaries may become and remain liable with
rcspeet to Contingent Obligations granted in favor of
title insurers in the Ordinary Course
of Business; provided that any such Contingent Obligations entered into by the BOlTowers and Subsidiary Guarantors shall apply to Real Property Assets of the
Borrowers and Subsidiary Guarantors.

6.5 Restricted Payments.
The Borrowers shall noi, and shall not pel1nit any of their Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart any sum for any Restricted Payment; provided
that:
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(i) The Borrowers and their Subsidiaries may make Restricted Payments to
Capital Stock of INcwcoj for the purposes ofpcnnitting such holders to pay their respective United States federal, state or local income tax obligations with respect to nct income allocated to them from the Borrowers and their Subsidiaries; provided that the amount of such Restricted Payments with respect to any Fiscal Year shall not exceed the Consolidated Net Income of the Borrowers and their Subsidiaries for such Fiscal Year (calculated in accordance with GAAP) multiplied by the Applicable Tax Rate. For purposes of this provision, the net income allocated to the direct or indirect holders of Capital Stock of INewcol from the Borrowers and their Subsidiaries for any Fiscal Year shall be calculated by applying any prior year allocations or losses and credits of the Borrowers and their Subsidiaries not previously used to offset the Borrowers and their Subsidiaries; taxes in respect of allocations ornet income of
the direct or indirect holders of
(ii) The Borrowers may make Restricted Payments to other Borrowers; and
(iii) Any Subsidiary or a Borrower may make Restricted Payments to the
holders of its Capital Stock on a pro rata basis.

6.6 Financial Covenants.
A. Total Debt LTV Ratio. The Borrowers shall not peniiit the ratio (the 'Total
Debt LTV Ratio") of (i) Total Consolidated Indebtedness as of
the last day of each Fiscal Quarter the then remaining Real (any such day being a "Calculation Date"), to (ii) the Appraised Value of Property Collateral as of the Calculation Date (giving effect to Assets Sales and dispositions of Real Property Collateral prior to such Calculation Date) to exceed the following ratios:
-_..-
Fiscal Quarter Ending
Total Debt LTV Ratio

i
(
After the Etleciive Date and on or prior to I Thereafter

B. (Intentionally Omitted).
180%1
i
C. (Interest Coverage Ratio. The Borrowers shall not permit the ratio (the
'~Intcrcst Coverage Ratio") of (i) Consolidated EBITDA for any Test Period to (ii)
Consolidated Interest Expense for such Test Period to be less than the following ratios:)
(TO
BE DISCUSSED IN LIGHT OF THE BUSINESS OPERATIONS OF THE

Fiscal Quarter Ending
-
BORROWERS)
Interest Coverage Ratio
1
A.!'l.~r the Effective Date and on or prior to (
14.00) to 1.00 ___

r
Thereafter
i to 1.00
D. (Intentionally Omitted).
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6.7 Restriction on Fundamental Chanecs.
Neither any of the Borrowers nor any of their Subsidiaries shall, directly or indirectly, (a) enter into any merger, consolidation, reorganization or recapitalization, or liquidate, wind up
(If dissolve, or cause or consent to any other Borrower Of Subsidiary to enter into any merger, consolidation, reorganization or recapitalization, or to liquidate, wind up or dissolve, or (b) sell all or substantially all of the assets of the Borrowers and their Subsidiaries, on a consolidated
basis, in a single transaction or sciics of related transactions; provided that, notwithstanding the
foregoing, 0) any Subsidiary may sell all or substantially all of its assets to a Subsidiary
Guarantor or any Borrower, (ii) any Subsidiary Guarantor may merge or consolidate with and into a Borrower; provided such Borrower shall be the continuing or surviving Person, (iii) any Subsidiary Guarantor may merge or consolidate with and into or another Subsidiary Guarantor;
provided that a Subsidiary Guarantor that is wholly-owned (directly or indirectly) by the

Borrowers shall be the continuing or surviving Person, (iv) any BOITower may merge or consolidate with and into another Borrower, (v) any Subsidiary Guarantor may be liquidated, wound up or dissolved if the continued existence of such Subsidiary Guarantor is not necessary to the continued conduct of the business of the Borrowers and their Subsidiaries as evidenced by an Offcer's Certificate delivered to the Administrative Agent, and the assets of such Subsidiary Guarantor are distributed to the Loan Parties, and (vi) a Borrower or a Subsidiary may consummate any merger if such merger is in furtherance of an Investment pennitted by
subsection 6.3(vi) and, if such transaction involves a Borrower, such Borrower shall be the
continuing or surviving Person.
6.8 Sale or Discount of Receivables.
The BOITowers shall not, and shall not permit any of their Subsidiaries to, directly or
indirectly, sell with recourse, or discount or otherwise sell for less than the face value thereof, any of its notes or accounts receivable.
6.9 Asset Sales.
The BOITowers shall not, and shall not permit any of their Subsidiaries to, engage in any
Asset Sales, except as follows:

(i) With respect to Real Propei1y Collateral, a Pemiitted Collateral Asset
Sale, provided that each of
the following conditions has been satisfied:
(a) the Real Property Collateral subject to such Asset Sale, and the
remaining Real Property Collateral after giving effect to such Asset Sale, shall constitute a legal subdivision in accordance with all Applicable Laws and
Govemmental Authorizations;
(b) to the extent required by the Collateral Agent, the Collateral Agent
shall have received such title endorsements. date downs or other evidence
reasonably satisfactory to the Collateral Agent that (i) the priority of the Liens
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evidenced by the Mortgages with respect to the remaining Real Property
Collateral after giving effect to such Asset Sale shall be maintained following
such Asset Sale and (ii) the remaining Real Property Collateral is not subject to any Liens other than Liens perniitted by subsection 6.2;
(c) the consideration received from such Asset Sale shall be paid
solely in Cash, Restricted Seller Carry-Back Notes (provided that not more than $7,000,000 in aggregate principal amount of Restricted Seller Carr-Back Notes
may be outstanding at any time);
(d) the Borrowers shall have paid all reasonable out-or-pocket costs
and expenses incurred by the Collateral Agent and all reasonable fees and
expenses paid to third party consultants (including reasonable attorneys' fees and
expenses) by the Collateral Agent in connection with the release of
the applicable
portion of the Real Property Collateral from the Lien of the Mortgages, to the
extent invoices therefor have been presented; and
(e) the Borrowers shall have obtained all applicable consents required
by the LLC Agreement relating to such Pennitted Collateral Asset Sale.

(ii) With respect to Real Property Collateral, a Major Collateral Asset Sale,
provided that each of the following conditions has been satisfied (as certified by a
Responsible Officer):
(a) no Default or Event of Default shall have occurred and be
continuing (other than a Default or Event of consummation of
Default that wil be cured through the the proposed Asset Sale) or would result therefrom;
(b) not less than thii1y (30) days' (or such shorter period as is
acceptable to the Collateral Agent) prior written notice of the closing of such sale
has been provided to the Collateral Agent, together with a true, correct and
complete copy of
the relevant Qualified Sales Agreement;
(c) the Real Property Collateral subject to such Asset Sale, and the
remaining Real Property Collateral after giving effect to such Asset Sale, shall constitute a legal subdivision in accordance with all Applicable Laws and
Governmental Authorizations;
(d) to the extent required by the Collateral Agent, the Collateral Agent
shall have received such title endorsements, date downs or other evidence
reasonably satisfactory to the Collateral Agent that (i) the priority of the liens
evidenced by the Mortgages with respect to the remaining Real Property
Collateral after giving elIect lo such Asset Sale shall be maintained following
such Asset Sale, and (ii) the remaining Real Property Collateral is not subject to any Liens other than Liens peniiitted by subsection 6.2;
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(e) the Borrowers shall have paid all reasonable out-of-pocket costs
the applicable
extent invoices therefor have been presented;
(f) the consideration received from such Asset Sale shall be paid
solely in Cash, Restricted Scller Carry~Back Notes (provided that not more than $7,000,000 in aggregate principal amount of Restricted Seller Carr-Back Notes
may be outstanding at any time);
(g) the Collateral Agent shall have received an Acceptable Appraisal
demonstrating the Appraised Value of the remaining Real Property Collateral
assuming such Major Collateral Asset Sale is consummated, together with

calculations based on the Appraised Value contained in such Acceptable
Appraisal, demonstrating compliance, on a pro fonna basis to give effect to the
Major Collateral Asset Sale, with the financial covenants set forth in subsection 6.6; provided that the Requisite Lenders may instruct the Collateral Agent to waive the requirements of this subsection 6.9(ii)(g); and
(h) the Borrowers shall have obtained all applicable consents required
by the LLC Agreement relating to such Major Collateral Asset Sale.

(iii) With respect to Real Property Collateral, a Required Dedication, provided
that each of the following conditions has been satisfied (as certited by a Responsible
Officer):
(a) no Default or Event of Default shall have occurred and be
continuing (other than a Default or an Event of Default that will be cured ihrough the proposed Assel Sale) or would result therefrom; the consummation of
(b) not less than thirly (30) days' (or such shorter period as is
acceptable to the Collateral Agent) prior written notice of the closing of such
Required Dedication has been provided to the Collateral Agent, together with a true, correct and complete copy of the documentation proposed to consummate the Required Dedication;
(c) the Real Property Collateral subject to such Asset Sale, and the
remaining Real Property Collateral after giving eftct to such Asset Sale, shall
constitute a legal subdivision in accordance with all Applicable Laws and

Governmental Authorizations;
(d) to the extent required by the Collateral Agent, the Collateral Agent
shall have received a title endorsements or other evidence reasonably satisfactory
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to the Collateral Agent that the priority of the Liens evidenced by the Mortgages with respect to the remaining Real Property Collateral after giving effect to such
Required Dedication shaii be maintained following such Required Dedication;
and
(c) the Borrowers shall have paid all reasonable out-or-pocket costs
the applicable
extent invoices therefor have been presented.
6.10 Transactions with Shareholders and Affiiates.
111e Borrowers shall not, and shall not pemiit any of their Subsidiaries to, directly or
indirectly, enter into or permit to exist any transaction (including, without limitation, the
purchaseo sale, lease or exchange of any property or the rendering of any service or the payment of any management fees, consulting fees or the making of other disbursements) with any holder of lO% more of any class of equity Securities of the Borrowers or their Subsidiaries or with any
Affliate of the Borrowers or of any such Subsidiaries or holder (each, an '"Affiiate

Transaction"), on terms that are less favorable to the Borrowers or the Subsidiaries, as the case may be, than those that might be obtained reasonably at the time from Persons who are not such a holder or Affliate; provided that the foregoing restriction shall not apply to (i) transactions
between or among the Borrowers and any wholly-owned Subsidiary Guarantor or between or
among any wholly-owned Subsidiary Guarantors, (ii) reasonable and customary fees paid to, and the boards of directors (or other governing bodies) of customary indemnification of, members of the Borrowers and their Subsidiaries, (iii) Restricted Payments pennitted under this Agreement, (iv) transactions effected pursuant to this Agreement, and (v) transactions described on Schedule 6.10; and provided, further, that (a) with respect to any Affliate Transaction or series of related
Affliate Transactions for aggregate consideration in excess of $5,000,000 solely involving the
purchase and/or sale of interests in real property or the Capital Stock of a Person whose principal
assets are comprised of interests in real property, prior to tbe consummation of such Affliate Transaction or series of related Affliate Transactions an appraisal of the interests in real property
to be acquired (which shall be an "'as is" appraisal) or other consideration to be provided in such
Affliate Transaction shall be provided to the Administrative Agent, together with an Offcer's Certificate from the Borrowers certifying that the tenns of such Affliate Transaction arc no less favorable to the Borrowers and their Subsidiaries than those that might be obtained reasonably at
that time from Persons that are not holders of 1 0% or more of any class of equity securities of
the
Borrowers or their Subsidiaries or an Afiliate of the Borrowers or of any such Subsidiaries or holder and (b) with respect to any Afiliate Transaction or series ofrclated Affliate Transactions 1r aggregate consideration in excess of $5,000,000 (other than any Affiliate Transaction
described in the preceding clause (3) of this proviso), prior to the consummation of
such Affliate
Transaction or series of related Affliate Transactions the Borrowers shall provide to the
Administrative Agent a fairness opinion in fomi and substance reasonably satisfctory to the
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Administrative Agent that provides, and an Officer's Certificate from the Borrowers certifying,
that the terms of such Affiliate Transaction are no less favorable to the Bon'owers and their Subsidiaries than those that might be obtained reasonably at that time from Persons that arc not holders of 10% or more oraiiy class of equity securities oftlie Borrowers or their Subsidiaries or
an Atliliate of the Borrowers or of any such Subsidiaries or holder.
6.11 Conduct of
Business.
The Borrowers shall not, and shall not permit any of their Subsidiaries to, engage in any business other than (i) the businesses engaged in by the Borrowers and their Subsidiaries on the business as may be reasonably related thereto. Effective Dale and Oi) such other lines of
6.12 (Intentionally Omittedl.

6.13 Amendments or \Yaivers of Certain A2reements.
None of to, or waive any of
the Borrowers nor their Subsidiaries shall tenninatc or agree to any Modification its rights under, any (i) Material Contract or (ii) Organizational Certificates or
other Organizational Documents of any of the Borrowers or their Subsidiaries, if such

tcnnination, Modification or waiver would reasonably be expected to be materially adverse to the Borrowers and their Subsidiaiies, taken as a whole, or any Agent, Lender or other Secured
Party.
6.14 Fiscal Year.

Neither any BOIlower nor any Subsidiary shall change its Fiscal Vear-end from
December 31.
6.15 Hed2c A2rccments.
Neither any of the Borrowers nor any Subsidiary shall enter into any Hedge Agreement, except Hedge Agreements entered into in order to effectively cap, collar or exchange interest rates (from floating to fxed rates) with respect to any interest-bearing liability or investment of any Borrower or any Subsidiary.
6.16 Intentionally Omitted).

6.17 Limitation on Unentitled Properties.
Neither any of the BOllowers nor any Subsidiary shall expend more than $5,000,000 in
any Fiscal Year (on an aggregate eombincd basis for thc Borrowers and their Subsidiaries
collectively) toward the purchase of Real Property Assets which (i) require any Entitlements (other than customary mapping and subdivision approvals to be obtained in the Ordinary Course
of Business pursuant to cxisting zoning or Development Agreements) for the development and residential single family housing or multi-family housing thereon which have not yet been sale of obtained at the time of purchase by or for the beiieft orany Borrower or any of their Subsidiaries
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and (ii) arc located further than five miles from any real property development that has all Major Entitlements and that has an existing use (such existing use to be in accordance with Applicable Law and as pcnnittcd by all necessary Govenmiental Authorizations) similar to the intended use of the Real Property Assets proposed to be purchased.
6.18 Limitation on Purchase of
Real Property Assets.
Neither any of the Borrowers nor any Subsidiary shall purchase any Real Property Asset that is not located in Arizona, California, Colorado, Idaho, Nevada, New Mexico or Utah.
SECTION 7. EVENTS OF DEFAULT

IF any of the following conditions or events ("Events of
DefaulC) shall occur:
7.1 Payment of
Obligations_
The Borrowers shall fail to pay any of the Obligations on the due date thereof (whether due at stated maturity, on demand, upon acceleration or otherwise) and, in the case oftlie failure to pay accrued interest (subject to the pennitted capitalization of interest pursuant to subsection 2.2C), such amount remains unpaid for five (5) Business Days thereafter; or
7.2 Misrepresentations.
Any representation, walTanty or other written statement to any Agent or any Lender by or on behalf of any Loan Party, whether made in or furnished in compliance with or in reference to any of the Loan Documents, proves to have been false or misleading in any material respect when made or furnished; or
7.3 Breach of Certain Covenants.
The Borrowers shall fail or neglect to perlnn, keep or observe any covenant contained in subsections 5.1, 5.3(xi), 5.4 (but solely to the extent of a Borrower's continued existence,
subject to subsection 6.7), 5. i 5, 5. i 8 or Section 6 hereof: or
7.4 Breach of
Other Covenants.
A Borrower shall fail or neglect to perfnn, keep or observe any covenant contained in this Agreement not otherwise addressed in this Section 7 and the breach of such other covenant is
not cured to the Administrative Agents satisfaction within thirty (30) days afler the sooner to
occur of any Responsible Offcer's receipt of notice of such breach from the Administrative
Agent or the date on which such failure or neglect first becomes actually known to any
Responsible OJlcer; provided that such notice and opportnity to cure shall not apply in the case
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of any failure to perform, keep or observe any covenant which is not capable of
being cured at all
or within such 30-day period; or

7.5 Default Under Loan Documents.
Any Borrower or any other Loan Party shall default in the due and punctual observance or performance (taking into account any applicable grace periods) of any liability or obligation to be observed or perfonned by it under any of the Loan Documents (except as provided in
subsections 7.1,7.2, 7.3 or 7.4); and the breach of such other covenant is not cured to the
Administrative Agents satisfaction within thirty (30) days after the sooner to occur of any Responsible Offcer's receipt of notice of such breach from the Administrative Agent or the date
on which such failure or neglect first becomes actually known to any Responsible Offcer; provided that such notice and opportunity to cure shall not apply in the case of any failure to
pcrfomi, keep or observe any covenant which is not capable of being cured at all or within such
30~day period; or
7.6 Other Defaults.
A. Intentionally Omittedl; or
B. Any Borrower or any other Loan Party shall (i) default in making any payment of
any principal of any Indebtedness (including, without limitation, any Contingent Obligation in respect of Indebtedness, but excluding Obligations of the Borrowers under the Loan Documents)
on the scheduled or original due date with respect thereto, or (ii) default in making any payment
of any interest on any such Indebtedness beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created, or (iii) defuIt in the
observance or perfonnance of any other agreement or condition relating to any such

Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall oecur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or beneficiary of such Indebtedness (or a trustee or agent on behalf of such holder or beneficiary) to cause, with the giving of notice if
required, such Indebtedness to be demanded or to become due, or to be required to be

repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to
repurchase, prepay, dcfeasc or redeem such Indebtedness to be made, prior to its stated maturity or (in the case of any such Indebtedness constituting a Contingent Obligation) to become payable or cash collateral in respect thereof to he demanded; provided, that a default, event or condition described in clauses 0), Oi) or (iii) of this subsection 7.6B shall not at any time constitute an
Event of Default unless, at such time, one or more defaults, events or conditions of the type
described in clauses (i), (ii) and (iii) of this subsection 7.6B shall have occurred and be
continuing with respect to Indebtedness the outstanding principal amount of which exceeds in the aggregate $5,000,000; or
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7.7 Insolvency Procecdinf!s.
Any Insolvency Proceeding shall be commenced by any Loan Party; an Insolvency
Proceeding is commenced against any Loan Part and any of the following events occur: such
Loan Party consents to the institution of the Insolvency Proceeding against it; the petition
commencing the Insolvency Proceeding is not timely controverted by such Loan Party; the
petition commencing the Insolvency Proceeding is not dismissed within sixty (60) days atter the date of the fiing thereof (provided that, in any event, during the pendency of any such period, Lenders shall be relieved from their obligation to make Loans or otherwise extend credit to or for the benefit of the Borrowers hereunder); an interim trustee is appointed to take possession of all or a substantial portion of the properties of such Loan Party or to operate all or any substantial portion of the business of such Loan Party or an order for relief shall have been issued or entered
in connection with such Insolvency Proceeding; or any Loan Party shall make an offer of
settlement extension or composition to its unsecured creditors generally; or

7.8 Business Disruption~ Condemnation.
Any Loan Party shall be enjoined, restrained or in any way prevented by court,
govemmental or administrative order from conducting all or any material part of its business affairs; or any material part of the Collateral shall be taken through condemnation or a Required Dedication or the Appraised Value of such property shall be materially impaired through condemnation or a Required Dedication; or
7.9 ERISA.
An ERISA Event shall occur which could reasonably be expected to result in a Material Adverse Effect or which the Administrative Agent, in its reasonable discretion, shall detennine constitutes grounds ir the temlination by the PBGC of any Pension Plan or for the appointment by the appropriate United Slates district court of a trustee for any Pension Plan; or if any Pension Plan shall be terminated or any such trustee shall be requested or appointed; or if a Borrower or any Subsidiary is in '"default" (as defined in Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan resulting from a Borrower's or such Subsidiary's complete or partial withdrawal from such Pension Plan; or
7.10 Challen2:c to Loan Documents: Invaliditv.
Any Loan Pai1y or any of its Affliates shall challenge or contest in any action, suit or
proceeding the validity or enfrceability of any of the Loan Documents, the legality or
enforceability of any of the Obligations or the perfection or priority of any Lien granted to the Collateral Agent, or any Licn created by any of the Collateral Documents shall cease to be entrceable and of the same effect and priority, in eaeh case, to the extent purported to be created thereby, or any of the Loan Documents ceases to be in full force or effect for any reason other than a full or partial waiver or release by the applicable Agent and Lenders in accordance wh the terms thereof; or
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7.11 Jude.mcnt.
One or more judgments or orders for the payment of nioney (not covered by insurance as
to which an insurance company has acknowledged coverage) in an amount thaI exceeds,

individually or in the ag!:JTcgatc, $5,000,000 shall be entered against a Borrower or any other Loan Party and there shall be uny period of thirty (30) consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or
7.12 Repudiation of or Default Under Guarant\'.
Any Subsidiary Guarantor shall revoke or attempt to revoke the Guaranty signed by such Subsidiary Guarantor, shall repudiate such Subsidiary Guarantor's liability thereunder, or shall be in default under the tenns thereof, or shall fail to confinn in writing, promptly after receipt of
the Administrative AgenCs written request therefor, such Subsidiary Guarantor's ongoing
liability under the Guaranty in accordance with the tenns thereof; or
7.13 Criminal Forfeiture.

Any Loan Party shall be convicted under any criminal
law that could lead to a forfeiture
of any property of such Loan Party; or
7.14 Change of Control.

A Change of Control shall occur.
THEN (1) upon the occurrence of any Event of
Default described in subsection 7.7, each
of (a) the unpaid principal amount of and accrued interest on the Loans, and (b) all other Obligations shall automatically become immediately due and payable, without presentment,
demand, protest or other requirements of any kind, all of which are hereby expressly waived by
the Borrowers, and the Commitments, if not previously terminated, shall terminate, and (ii) upon the occurrence and during the continuation of any other Event of Default, the Administrative
Agent may, or shall upon the written request of the Requisite Lenders, by writtcn notice to the Borrowers, declare the unpaid principal amount of and accrued interest on the Loans, and all other Obligations, to be, and the same shall forthwith become, immediately due and payable, and the Commitments, if not previously terminated, shall tenninate. Upon the occurrence and during
the continuance of any Event of Default the Administrative Agent or the Collateral Agent may
(and shall as directed by the Requisite Lenders) (A) exercise, on behalf of
the Lenders, any and
all rights and remedies under any Loan Documents; and/or (B) exercise any and all rights,
powers and remedies available to the Administrative Agent, the Collateral Agent or the Lenders at law, in equity or otherwise, all of whieh rights, powers and remedies are cumulative and not exclusive.
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SECTION 8. AGENTS
8.1 Appointment.
A. Appointment Authority. Each of the Lenders hereby appoints I l as
the Administrative Agent and the Collateral Agent hereunder and under the other Loan
Documents and autlioiizes I I, in such capacities, to take such actions on its behalf and
to exercise such powers as are delegated to I I, in such capacities by the tcnns hereof
or thereof, together with such actions and powers as arc reasonably incidental thereto. Each Agent agrees to act upon the express conditions contained in this Agreement and the other Loan Documents, as applicable. In perfomiing its functions and duties under this Agreement, each
the Lenders and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for the Borrowers
Agent shall act solely as an agent of
or any of their Subsidiaries. The provisions of this Section 8 are solely for the benefit of the Agents and the Lenders, and the Borrowers shall not have rights as third party beneficiaries of any of such provisions; provided that the Borrowers shall be obligated to perform their
obligations under this Section 8.
B. Appointment of Supplemental Collateral Agents. It is the purpose of this

Agreement and the other Loan Documents that there shall be no violation of any law of any jurisdiction denying or restricting the right of banking corporations or associations to transact business as agent or trustee in such jurisdiction. It is recognized that in case of litigation under
this Agreement or any of the other Loan Documents, and in particular in case of
the enforcement
of any of the Loan Documents, or in case the Administrative Agent or the Collateral Agent deems that by reason of any present or future law of any jurisdiction the Administrative Agent or the Collateral Agent may not exercise any of the rights, powers or remedies granted herein or in any of the other Loan Documents or take any other action which may be desirable or necessary in connection therewith, it may be necessary that the Administrative Agent or the Collateral Agent appoint an additional individual or institution as a separate trustee, co-trustee, collateral agent or collateral co-agent (any such additional individual or institution being referred to herein
individually as a ..Supplemental Collateral Aeenf' and collectively as "Supplemental
Collateral Aeents").
In the event that the Administrative Agent or the Collateral Agent appoints a
Supplemental Collateral Agent with respect to any Collateral, (i) each and every right, power,
privilege or duty expressed or intended by this Agreement or any of
the other Loan Documents to
be exercised by or vested in or conveyed to the Administrative Agent or the Collateral Agent with respect to such Collateral shall be exercisable by and vest in such Supplemental Collateral
Agent to the extent, and only to the extent, necessary to enable such Supplemental Collateral
Agent to exercise such rights, powers and privileges with respect to such Collateral and to
perfomi such duties with respect to such Collateral, and every covenant and obligation contained
in the Loan Documents and necessary to the exercise or pcrfonnance thereof by such
Supplemental Collateral Agent shall run to and be enforceable by either the Administrative Agent or the Collateral Agent or such Supplcinental Collateral Agent and Oi) the provisions of this
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Section 8 and of subsection 9.2 that refer to the Administrative Agent or the Collateral Agent
shall inure to the benefit of such Supplemental Collateral Agent and all references therein to the Administrative Agent or the Collateral Agent shall be deemed to be references to the Administrative Agent or the Collateral Agent and/or such Supplemental Collateral Agent, as the context may require.
Should any instrument in writing from the Borrowers or any other Loan Party be required by any Supplemental Collateral Agent so appointed by the Administrative Agent or the Collateral Agent for more fully and certainly vesting in and confirming to him or it such rights, powers,
privileges and duties. the Borrowers shall, or shall cause such Loan Party to, execute,
acknowledge and deliver any and all such instruments promptly upon request by the Administrative Agent or the Collateral Agent. In case any Supplemental Collateral Agent, or a successor thereto, shall dissolve, die, become incapable of acting, resign or be removed, all the
rights, powers, privileges and duties of such Supplemental Collateral Agent, to the extent pennitted by law, shall vest in and be exercised by the Administrative Agent or the Collateral Agent until the appointment of a new Supplemental Collateral Agent.
8.2 Riehts as a Lender.
The Persons serving as the Agents hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not an Agent and the term "Lender.' or '.Lenders'. shall, unless otherwise expressly indicated or unless
the context otherwise requires, include the Persons serving as the Agents hereunder in their individual capacity. Such Persons and their Affliates may accept deposits from, lend money to,
act as the financial advisor or in any other advisory capacity tor and generally engage in any kind of business with the Borrowers or any Subsidiary or other Allliate thereof as if such Persons were not Agents hereunder and without any duty to account therefor to the Lenders.
8.3 Exculpatorv Provisions.
The Agents shall not have any duties or obligations except those expressly set forth
herein and in the other Loan Documents. Without limiting the generality of the foregoing, the
Agents (i) shall not be subject to any fiduciary or other implied duties, regardless of whether a De1ult or an Event ofDefult has occurred and is continuing, (ii) shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Agents are required to exercise as directed in writing by the Requisite Lenders (or such other number or
percentage of the relevant Lenders as shall be necessary under the circumstances as provided in
subsection 9.5), provided that no Agent shall be required to iake any action that, in its opinion or the opinion of its counsel, may expose such Agent to liability or thaI is contrary to any Loan Document or applicable law and (iii) shall not, except as expressly set forth herein and in the
other Loan Documents have any duty to disclose, and shall not be liable for the failure to
disclose, any infoiination relating to the Bon.owers or any of their Aftliates that is
communicated to or obtained by the Person serving as an Agent or any of its Affliates in any capacity. No Agent shal1 be liable to the Lenders for any action taken or not taken by it with the
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consent or at the request of the Requisite Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in subsection 9.5) or in the absence of its own gross negligence or willful misconduct. No Agent shall be deemed to have knowledge of any Default or Event of Default unless and until notice thereof is given in writing to such Agent by the Borrowers or a Lender. The Agents shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate,
report or other document delivered hereunder or thereunder or in connection herewith or
the covenants, agreements or other tenns or conditions set forth herein or therein or the occurrence of any Default or Event of Default,
therewith, (iii) the performance or observance of any of (iv) the validity, enforceability, effectiveness or genuineness of
this Agreement or any other Loan
Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in Section 3 or elsewhere herein, other than to confirm receipt of items
expressly required to be delivered to the Agents.
8.4 Reliance bv the Ae.ents.
1110 Agents shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, posting or other distribution) believed by it in good faith to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Agents also may rely upon any statement made 10 it orally or by telephone and believed by it in good faith to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of such Loan that by its tenns must be fulfilled to the satisfaction of a Lender, the Agents may presume that such condition is satisfactory to such Lender unless the Agents shall have received notice to the contrary from such Lcndcr prior to the making of such Loan. The Agents may consult with legal counsel (who may be counsel for the Borrowers), independcnt accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.
8.5 Dclce.ation of Duties.
Each Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through anyone or more sub-agents appointed by such Agent. The Agents and any such sub-agent may perfonn any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of subsection 8.3 shall apply to any such sub~agent and to the Related
Parties of such Agent and any such sub-agent, and shall apply to their respective activities in
connection with the syndication of the credit facilities provided for herein as well as activities as such Agent.
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8.6 Rcsi2:nation of Administrative Ae.cnt and/or Collateral Ae.ent.
The Administrative Agent and/or Collateral Agent may at any time give notice of its resignation to the Lenders and the Borrowers, and the Administrative Agent and/or Collateral
Agent may be removed at any time with or without cause by the Requisite Lenders. Upon
receipt of any such notice of resignation or upon any such removal, the Requisite Lenders shall
have the right, with the written consent of the Borrowers if no Default or Event of Default shall have occurred and be continuing (such consent not to be unreasonably withheld or delayed), to
appoint a successor Administrative Agent and/or Collateral Agent, as applicable, which shall be a bank with an offce in New York, or an Affliate of any such bank with an offce in New York. If no such successor shall have been so appointcd by thc Requisitc Lcndcrs and shall have accepted such appointment within ten (10) days after (i) the retiring Administrative Agent and/or the Collatcral Agent as the casc may be, gives notice of its resignation, or (ii) after the removal of Administrative Agent and/or Collateral Agent, as the case may be, then such resignation or
removal shall nonetheless become effective in accordance with such resignation notice or
removal instructions by the Requisite Lenders and (I) the retiiing Administrativc Agcnt and/or Collateral Agent, as applicable, shall be discharged from its dutics and obligations hcreunder and
under the other Loan Documcnts (cxcept that in thc case of any Collateral held by the
Administrative Agcnt and/or Collateral Agent, as applicable, on behalf of the Secured Parties
under any of the Loan Documents, the retiring Administrative Agent and/or Collateral Agent, as
applicable, may continue to hold such Collateral until such time as a successor Administrative
Agent and/or Collateral Agent, as applicable, is appointed and such Collatcral is assigned to such successor Administrative Agent and/or Collateral Agent, as applicable) and (2) all payments, communications and determinations provided to be made by, to or through the Administrative Agent and/or Collateral Agent, as applicable, shall instead be made by or to each Lender directly,
until such time as the Requisite Lenders appoint a succcssor Administrative Agent and/or
Collateral Agent, as applicable, as provided for above in this paragraph (provided that the retiring Administrative Agent and/or Collateral Agent, as applicable, may elect to receive and distribute
payment as paying agent tr the Lenders (in such capacity, the "PaYine: Ae:enf') until such time
as a successor Administrative Agent and/or Collateral Agcnt, as applicable, is so appointed).

Upon tlic aceeptancc of a suceessor"s appointment as Administrative Agent and/or Collateral
Agent, as applicable hereunder, such successor shall succeed to and become vested with all of
the rights, powers, privileges and duties of the retiring (or retired) Administrative Agent and/or
Collateral Agent, as applicable, and the retiring Administrative Agent and/or Collateral Agent, as applicable shall be discharged from all of its duties and obligations hereunder or under the Loan Documents (if such rights and obligations were not earlier discharged as provided in the proviso
to the preceding sentence). The fees payable by the Borrowers to a successor Administrative
Agent and/or Collateral Agent, as applicable, shall be the same as those payable to its
predecessor unless otherwise agreed between the Borrowers and such successor. After the
retiring Administrative Agent's and/or Collateral Agent's resignation or removal hereunder and
under the other Loan Documents, the provisions of this Section 8 and subscction 9.2 shall
continue in effect for the benefit of such retiring Administrative Agent and/or Collateral Agent,
as applicable, its sub-agents and their respective Related Parties in respect of any actions taken or
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omitted to be taken by any of them while the retiring Administrative Agent and/or Collateral
Agent, as applicable was acting in such capacity or as Paying Agent.
8.7 Collateral Documents.
Each Lender hereby further authorizes the Collateral Agent to enter into each Collateral
Document, as secured pai1y on behalf of and for the benefit of the Lenders and the other
beneficiaries named therein and abrrces to be bound by the tcnns of each Collateral Document;
provided that the Collateral Agent shall not enter into or consent to any Modification,
termination or waiver of any provision contained in any Collateral Document without the prior
consent of the Requisite Lenders (or, if required pursuant to subsection 9.5, all the Lenders);
provided further, however, that, without further written consent or authorization from any Lender, the Collateral Agent may execute any documents or instruments necessary to (a) effect the subordination of the Lien of the applicable Collateral Document to an interest in any Real Property Collateral if required under this Agreement or any Collateral Document or (b) effeet the release of any aSSet constituting Collateral from the Lien of the applicable Collateral Document in the event that such asset is sold or otherwise disposed of in a transaction effected in accordance with subsection 6.9 or to the extent otherwise required by any Collateral Document. Anything contained in any of the Loan Documents to the contrary notwithstanding (other than Section 9.3), the Borrowers, the Administrative Agent, the Collateral Agent and each Lender agrees that (i) no Secured Pai1y other than the Collateral Agent shall have any right individually to realize upon any of the Collateral or to enforce any Collateral Document, it being understood and agreed that all powers, rights and remedies under the Collateral Documents may be exercised solely by the Collateral Agent for the benefit of the Secured Parties named therein in
accordance with the temis thereof~ and (ii) in the event of any exercise of remedies by the Collateral Agent upon an Event of Default, the Collateral Agent or any Lender may be the
purchaser of any or all of the Collateral at any private sale, public sale, or other disposition and the Collateral Agent, as agent for and representative of the Secured Parties (or any other Person
if the Requisite Lenders shall agree in writing that such Person, and not the Collateral Agent,
shall act as agent and representative of the Secured Parties for the purposes of such sale or disposition) shall be entitled, for the purpose of bidding and making settlement or payment of the
purchase price for all or any portion of the Collateral sold at any such sale or disposition, to use
and apply any of the Obligations as a credit on account of the purchase price for any Collateral
payable by the Collateral Agent (or such other Person, if so designated by the Requisite Lenders) at such sale.
8.8 Non-ReJiance on Agents and Other Lenders.
Each Lender acknowledges that it has, independently and without reliance upon any Agent or any other Lender or any of their Related Pai1ies and based on such documents and
information as it has deemed appropriate, made its own credit analysis and decision to enter into
this Agreement. Each Lender also acknowledges that it will, independently and without reliance
upon any Agent or any other Lender or any of their Related Parties and based on such documents
and information as it shall from time to time deem appropriate, continue to make its own
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decisions in taking or not taking action under or based upon this Agreement, any other Loan
Document or any related agreement or any document furnished hereunder or thereunder.
SECTION 9. MISCELLANEOUS
9.1 Assienments and Participations in Loans_
A. Successors and Assigns Generally. The provisions of this Agreement shall be
binding upon and inure to the benefit of the pai1ics hereto and their respective successors and assigns pem1tled hereby, except that the Borrowers may not assign or otherwise transfer any of their rights or obligations hereunder without the prior written consent of each Lender and the Administrative Agent and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Eligible Assignee in accordance with the provisions of subsection 9.1 B, (ii) by way of participation in accordance with the provisions of subsection 9.10 or (iii) by way of pledge or assignment of a security interest subject to the restrictions of subsection 9.1 F (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns pemitted
hereby, Participants to the extent provided in subsection 9.lD and, to the extent expressly
contemplated hereby, the Related Pai1ies of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.
. Assignments by Lenders.
(i) Any Lender may at any time assign to one or more Eligible Assignees all
or a portion of its rights and obligations under this Agreement (including al1 or a portion
of its Commitment and the Loans at the time owing to it) with the piior written consent of the the Administrative Agent and notice to the Bonowers; provided that (x) no consent of Administrative Agent shall be required for an assignment to a Lender or an Affiiate of a Lender or an Approved Fund with respect to a Lender and (y) failure to deliver notice to the Bonowers shall not affect the validity of any assignment; and provided, further, that
(a) except in the case of an assignment of entire remaining amount of
the assigning Lender's Loans or in the case of an assignment to a Lender or an Atlliate of a Lender or an Approved Fund with respect to a Lender, the aggregate amount ofthc Loans subject to each such assignment (detennined as ofthc date of the Assignment Agreement with respect to such assignment is delivered to the Administrative Agent) shall not be less than $1,000,000 or an integral multiple of $1,000,000 in excess thereof, unless the Administrative Agent otherwise consents;
(b) each partial assignment shall be made as an assignment of a
proportionate part of all the assigning Lender. s rights and obligations under this
Agreement with respect to the Commitments or Loans assigned; and
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(c) the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment Agreement via an electronic settlement system acceptable to the Administrative Agent (or, if previously agreed with the
Administrative Agent, manually), and shall pay to the Administrative Agent a processing and recordation fee of $3,500 (which fee may be waived or reduced in
the sole discretion of the Administrative Agent and provided that only one such fee shall be payable in connection with simultaneous assignments to or by two or more Approved Funds), and the Eligible Assignee, if it shall not be a Lender, shan deliver to the Administrative Agent an Administrative Questionnaire and if
required, applicable tax forms.
(ii) Subject to acceptance and recording thereof by the Administrative Agent
pursuant to subsection 9.1 C, from and after the effective date specified in each
Assignment Agreement, the Eligible Assignee thereunder shall be a party to this
Agreement and, to the extent of the interest assigned by such Assignment Agreement,
have the rights and obligations of a Lender under this Agreement, and the assigning
Lender thereunder shall, to the extent of the interest assigned by such Assignment Agreement, be rcleased from its obligations under this Agreement (and, in the case of an
Assignment Agreement covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to
be entitled to the benefits of subsections 2.7 and 9.2 with respect to facts and
cireumstanccs occurrng prior to the effective datc of such assignment. An Eligible
Assignee shall not be entitled to receive any greater payment under subsection 2.7 than the assigning Lender would have been entitled to receive with respect to the Loan or portion of the Loan assigned to such Eligible Assignee, unless the grant to such Eligible Assignee is made with thc Borrowers' prior written consent. Except in tlie ease of an assignment to a Lender, an Affiliate of a Lender, or an Approved Fund with respect to a Lender, any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with subsection 9.1D.
C. The Register. The Administrative Agent, acting solely for this purpose as an
agent of the Borrowers, shall maintain at one of iis offces in New York a copy of each
Assignment Agreement delivered to it and a register for the rceordation of the names and the Lenders and principal amounts of the Loans (each, a "'Rceistcrcd Loan") owing addresses of
to, each Lender pursuant to the tenns hereof from time to time (the "ReeIster"). The entries in the Register shall be conclusivc, and the Borrowers, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the tenns hereof as a this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrowers at any reasonable time and from time to time upon reasonable prior notice.
Lender hereunder for all purposes of
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D. Participations. Any Lender may at any time, without the consent of, or notice to,
the Borrowers or the Administrative Agent, sell participations to any Person (other than a natural
person or a Borrower or any of the Affliates or Subsidiaries of a Borrower) (each, a

"Participant") in all or a portion of such Lender's rights and/or obligations under this
Agreement (including all or a portion of
the Loans owing to it); provided that
(i) such Lender's obligations under this Agreement shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other pai1Ies hereto for
the perfomiance of such obligations,

(iii) the Borrowers, the Administrative Agent and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, and
(iv) in the event that any Lender sells participations in a Registered Loan, such
Lender shall maintain a register on which it enters the name of all participants in the
Registered Loans held by it (the "Participant Re!!ster"). A Registered Loan (and the
registered note, if anyo evidencing the same) may be participated in whole or In part only by registration of such participation on the Participant Register (and each registered note
shall expressly so provide). Any participation of such Registered Loan (and the
registered note, if anyo evidencing the same) may be efieeted only by the registration of such participation on the Participant Register.
Any agreement or instrument pursuant to which a Lender sells such a participation shall
provide that such Lender shall retain the sole right to enforce this Agreement and to approve any Modification or waiver of any provision of this Agreement; provided that such agreement or the Participant, agree to instrument may provide that such Lender will not, without the consent of
any Modification or waiver with respect to any action (i) increasing the Commitments,
(ii) eflecting the extension of the final maturity of the Loan allocated to such participation, . (iii) effecting a reduction of the principal amount of or affecting the rate of interest payable on any Loan or any fee allocated to such participation, (iv) releasing all or substantially all of the
Collateral or (v) releasing all or substantially all of the Subsidiary Guarantors from their
obligations under the Guaranties. Subject to subsection 9.1 E, the Borrowers agree that each
Participant shall be entitled to the benefits of subsection 2.6D and subsection 2.7 to the same extent as if it were a Lender and had acquired its interest by assignmcnt pursuant to subsection 9.IB; provided that such Participant agrees to be subject to subsection 2.8 as though it were a Lender. To the cxtent pennitted by law, each Participant also shall be entitled to the benefits of
subsection 9.3 as though it were a Lender, provided such Participant agrees to bc subject to
subsection 9.4 as though it were a Lender.
E. Limitations Upon Participant Rights. A Participant shall not be entitled to

receive any greater payment under subsection 2.7 than the applicable Lender would have been
entitled to receive with respect to the participation sold to such Participant, unless the sale of
the
participation to such Participant is made with the Borrowers' prior written consent. Without
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limiting the generality of the foregoing, a Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of subsection 2.7E unless the Borrowers are notified of the participation sold to such Participant and such Participant agrees, for the beneGt of the Borrowers, to comply with subsection 2.7E(v) as though it were a Lender.
F. Certain Pledges. Any Lender may, without the consent of the Borrowers or the
Administrative Agent, at any time pledge or assign a security interest in all or any portion of its
rights under this Agreement to secure obligations of such Lender, including without limitation
any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lcnder as a pai1y hereto. Notwithstanding anything to thc contrary contained herein, any Lender that is a Fund may, without the consent of the Borrowers or the Administrative Agent, create a security interest in all or any portion of the Loans owing to it and the Notes, if any, held by it to the trustee for holders of obligations owed,
or Securities issued, by such Fund as security for such obligations or Securities; provided that
unless and until such trustee actually becomes a Lender in compliance with the other provisions
of this subsection 9.1, (i) no such pledge shall release the pledging Lender from any of its
obligations under this Agreement and (ii) such trustee shall not be entitled to exercise any of the
rights of a Lender under this Agreement and the Notes even though such trustee may have
acquired ownership rights with respect to the pledged interest through foreclosure or otherwise.
G. SPV Lender. Notwithstanding anything to the contrary contained herein, any Lender (a "Grantin2 Lender") may grant to a special purpose funding vehicle (a "SPV"), identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrowers, the option to provide to the Borrowers all or any part of any Loan that such Granting Lender would otherwise be obligated to make the Borrowers pursuant to this
Agreement; provided that (i) nothing herein shall constitute a commitment by any Spy to make
any Loan, (ii) if an Spy elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the
tenns hereof. The making of a Loan by an SPY hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Loan were made by such Granting Lender.
Each party hereto hereby agrees that no SPY shall be liable for any indemnity or similar payment liability for which shall remain with the Granting Lender). obligation under this Agreement (all
An SPY shall not be entitled to receive any greater payment under subsection 2.7 thaI the
Granting Lender would have been entitled to receive with respect to the Loan or portion of the
Loan granted to such SPY, unless the grant to such SPY is made with the Borrowers' prior
written consent. In furtherance of the foregoing, each party hereto hereby agrees (which
agreement shall survive the termination of this Agreeinent) that. prior to the date that is one year
and one day after the payinent in full of all outstanding commercial paper or other senior
indebtedness of any SPY, it will not institute against, or join any other Person in instituting
against, such SPY any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings under the laws of the United States or any State thereof. In addition,
notwithstanding anything to the contrary contained in this subsection 9.1, any Spy may (i) with notice to, but without the prior written consent of: the Borrowers and the Administrative Agent
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and without paying any processing fee therefore, assign all or a portion of its interests in any Loans to the Granting Lender or to any financial institutions (consented to by the Borrowers and Administrative Agent) providing liquidity and/or credit support to or tor the account of such SPY to support the funding or maintenance of Loans and (ii) disclose on a confidential basis any non~ public infonnation relating to its Loans to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPY. nls
subsection 9.1 may not be Modified without the written consent of
the SPY.
9.2 Expenses~ Indemnitv: Damae.c Waiver.
A. Costs and Expenses. Each of the Borrowers shall pay all actual and documented
out~of-pocket expenses incurred by each Agent and its Affliates (and any Person designated by
the Requisite Lenders to act on behalf of the Secured Parties in accordance with Section 8.7
hereof), including the reasonable and documented fees, charges and disbursements of its
appraiser, counsel (including, without limitation, special and local counsel) for each Agent and
its Affliates (or any such Person) (and fees and time charges for attorneys who may be
employees of such Agent or Affliates or any such Person) and filing and recording fees and expenses, in connection with any syndication of the credit facilities provided for herein, the development, preparation, negotiation, execution, delivery, closing, funding, and administration
of this Agreement and the other Loan Documents, any Modifications or waivers of
the provisions
hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be
consummated), or in connection with the enforcement or protection of its rights in connection with this Agreement and the other Loan Documents, including its rights under this
subsection 9.2A, or in connection with the Loans made hereunder, including all such out~of-
pocket expenses incurred during any workout, restructuring or negotiations in respect of such
Loans.
B. Indemnifcation by the Borrowers. Each of
the BOlTowers shall indemnify each
Agent (and any sub~Agent thereof and any Person designated by the Requisite Lenders to act on
behalf of the Secured Parties in accordance with Section 8.7 hereof), each Lender, their
respective successors and assigns and each Related Party of any of the foregoing Persons (each
such Person being called an "Indemnitee'") against, and hold each Indemnitee harmless from,
any and all costs, losses, claims, damages, liabilities and expenses (including, without limitation,
the reasonable fees, charges and disbursements of any counsel and consultants for any
Indemnitee (and fees and time charges for attomcys who may be employees of any Indemnitee)) of any kind or nature whatsoever, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution, delivery, enforcement or administration of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby their respective obligations hereunder or the or thereby, the perfonnanee by the parties hereto of consummation of the transactions contemplated hereby or thereby, (ii) any Loan or the use of the proceeds therefrom, (ili) any actual or alleged presence or Release of Hazardous Materials on or from any property, any Environmental Claim or any Environmental Liabilities related in any way to any BOlTower or any of its Subsidiaries, (iv) any claim, demand or liability for any brokerage
commissions, or broker's or finder's tees or investment banking or similar fccs incurred or
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alleged to have been incurred in connection with the transaction contemplated hereby, and any claim, demand or liability relating thereto or (v) any actual or prospective claim, litigation, investigation or proceeding relating to any of the fJregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto (and regardless of whether such matter is initiated by a third party or by the Borrowers or any of their respective Affliates); provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such costs, losses, claims, damages, liabilities and expenses are dctcnnincd by a court of competent jurisdiction by final and nonappealable judgment to have resulted primarily from the gross negligence or willful misconduct of such Indemnitee.
C. Reimbursement by the Lenders. To the extent that a Borrower tils to pay any
amount required under subsection 9.2A or 9.2B to be paid by it to any Agent (or any sub-Agent
thereof and any Person designated by the Requisite Lenders to act on behalf of the Secured
Parties in accordance with Section 8.7 hereof) or any Related Party of any of the foregoing, each
Lender severally agrees to pay to the Agent (or any such sub-Agent or such Person) or such Related Party, as the case may be, such Lender's Pro Rata Share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount, provided that the unreimbursed expense or indemni1ed loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against such Agent (or any such subAgent) in its capacity as such, or against any Related Patty of any of the foregoing acting for such Agent (or any such sub-Agent) in connection with such capacity. The obligations of the Lenders under this subsection 9.2C are subject to the provisions of subsection 9.12.
D. Waiver of ConsequentiaJ Damages. To the fullest extent peiinitted by

Applicable Law, each of the Borrowers shall not assert, and hereby waives, any claim against
any Indemnitee, on any thcory of liability, tor special, indirect, consequential or punitive
damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result
of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transtlctions contemplated hereby or thereby, any Loan or the use of the proceeds thereof. No lndemnltee referred to in subsection 9.2B above shall be liable for any damages arising from the use by unintended recipients of any inliination or other materials distributed by
it through telecommunications, electronic or other information transmission systems in
connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby, unless such damages arc directly caused solely by the gross negligence or wilful misconduct of such Indemnitee as determined by a courl of competent jurisdiction by judgment. final and nonappealable
E. Payments. All amounts due under this subsection 9.2 shall be payable promptly
af1er demand therefor.
9.3 Right of Set-Off.
Without limitation of any other rights of the Agents or Lenders, if an Event of Default shall have occurred and be continuing, each Agent, Lender and each of their respective Affliates
is hereby authorized at any time and from time to time, to the fullest extent peiinitted by
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Applicable Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Agent, Lender, or any such Affliate to or for the credit or the account of a Borrower against any and all of the Obligations of the Borrowers now or hereafter existing under this Agreement or any other Loan Document to such Agent or Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement or
any other Loan Document and although such Obligations of
the Borrowers may be contingent or
unmatured or are owed to a branch or office of such Lender different from the branch or offce holding such deposit or obligated on such indebtedness. The rights of each Agent, Lender and their respective Aftliates under this subsection 9.3 are in addition to other rights and remedies (including other rights of seton) which such Agent, Lender or their respective Affliates may
have. Each Agent and Lender agrees promptly to notify the Borrowers and the Administrative
Agent after any such setoff and application; provided that the failure to give such notice shall not affect the validity of such setoff and application.
9.4 Sharin!! of Payments by Lenders.
If any Lender shalL by exercising any right of setoff or counterclaim or otherwise, obtain
payment iii respect of any principal of or interest on any of its Loans or other obligations
hereunder resulting in such Lender's receiving payment ofa proportion of
the aggregate amount
of its Loans and accrued interest thereon or other such obligations greater than its Pro Rata Share thereof as provided herein, then the Lender receiving such greater proportion shall (a) notify the Administrative Agent of such fact and (b) purchase (for Cash at face value) participations in the Loans and such other obligations of the other Lenders, or make such other adjustments as shall
be equitable, to the end that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and other amounts owing them; provided that (i) if any such participations are
purchased and all or any portion of the payment giving rise thereto is recovered, such
participations shall be rescinded and the purchase price restored to the extent of such recovery,
this paragraph shall not be construed to apply to (x) any payment made by the Borrowers pursuant to and in accordance with the express terms of this Agreement or (y) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant, other than to a Borrower
without interest and (ii) the provisions of
or any Subsidiary thereof (as to which thc provisions of this paragraph shall apply). Eaeh of the
Borrowers consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against any Borrower rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Borrower in the amount of
such participation.
9.5 Amendments and \\'aivers.
A. Amendment and \Vaiyers. No Modification, tcnnination or waiver of any

provision of this Agreement, of the Notes or of any other Loan Document, or consent to any departure by any Borrower or any other Loan Party therefrom, shall in any event be effective
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without the written concurrence of the Requisite Lenders and each Loan Party that is party to the relevant Loan Document; provided that any such Modification, teimImition, waiver or consent
which: (a) reduces or forgives the principal amount of any of the Loans; (b) reduces the
percentage specified in the definition of the "Requisite Lenders" (it being understood that, with
the consent of the Requisite Lenders, additional extensions of credit pursuant to this Agreement
may be included in the definition of the .'Requisite Lenders" on substantially the same basis as this the Loans arc included on the Effective Date); (c) changes in any manner any provision of
Agreement which, by its terms, expressly requires the approval or concurrence of all the
Lenders; (d) postpones the schedulcd final maturity date of any of the Loans; (e) postponcs the date or reduccs the amount of any scheduled payment (but not prepayment) of principal of any of the Loans; (t) postpones the date on which any interest, any fees or any amounts due under subsections 2.4B(i)(b), 2.4B(ii)(d) or 2.4B(ii)(f) arc payable; (g) decreases the interest rate borne any increase in the interest rate applicable to any the Loans (other than any waiver or by any of of the Loans pursuant to subsection 2.2E) or the amount of any fees payable hereunder or any amounts payable under subsections 2.4B(i)(b), 2.4B(ii)(d) or 2.4B(ii)(f); (11) increases the maximum duration of Interest Periods pcnnitted hereunder; (i) releases all or substantially all of
the Collateral; u) except as provided in any applicable Guaranty or in connection with Asset
Sales to the extent pemiitted under subsection 6.9, releases all or substantially all of the Subsidiary Guarantors from their obligations undcr the Guaranties; (k) changes subsections
2.4D(iii) or 9.4 or Modifies the definition of ".Pro Rata Share" in a manner that would alter the pro rata sharing of payments required thereby; or (I) changes in any manner the provisions contained in this subsection 9.5, shall be effective only if evidenced by a writing signed by or on
behalf of all the Lenders to \'.hom Obligations are owed being directly affected by such
Modification, termination, waiver or consent (the consent of the Requisite Lenders not being required for any such change); provided, further, that any Modification, terniination, waiver or consent which Modifies the dcfinition of "Approved Fund," "Eligible Assignee;" or '"Fund/' shall be effective only if cvidenced by a written concurrence of the Requisite Lenders and the Administrative Agent. In addition, (i) no Modification, tennination or waiver of any provision of any Note shall be effective without the written concurrence of the Lender which is the holder of that Note and (ii) no Modification, termination or waiver of any provision of Section 8 or of any
other provision of this Agreement which, by its terms, expressly requires the approval or
concurrence of the Administrative Agent or the Collateral Agent shall be effective without the
written concurrence of the Administrative Agent or the Collatcral Agent, as applicable. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for
which it was given. No notice to or demand on any Borrower in any casc shall entitle the
Borrowers to any other or further notice or demand in similar or other circumstances. Any Modification, termination, waiver or consent eficted in accordance with this subsection 9.5 shall be binding upon each Lender at the time outstanding, each future Lender and, if signed by the
Borrowers, on the Borrowers. Notwithstanding the foregoing, this Agreement may be Modified
the Requisite Lenders, the Administrative Agent and the Borrowers (a) to add one or more additional credit facilities to this Agreement and
(or amended and restated) with the written consent of
to permit the extensions of credit from time to time outstanding thereunder and the accrued
this Agreement and the other to share ratably in the benefits of interest and fecs in respect thereof Loan Documents with the Loans and the accrued interest and fees in respect thereof and (b) to
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include appropriately the Lenders holding such credit facilities in any determination of the
Requisite Lenders.
B. Non-Consenting Lenders. Each Lender grants to the Borrowers the right to cause an assignment of all (but not less than all) of such Lender's Loans owing to it, its
participations in the Notes held by it and all of
its rights and obligations hereunder and under the
other Loan Documents to Eligible Assignees, which fight may be exercised by the
Administrative Agent or the Borrowers, as the case may be, if
such Lender (a "Non-Conscntin2
Lender") refuses to execute any Modification, waiver or consent which requires the written
consent of Lenders other than Requisite Lenders and to which the Requisite Lenders, the
Administrative Agent and the Borrowers have otherwise agreed; provided that (i) such
Non-Consenting Lender (a "Terminated Lender") shall receive, in connection with such assignments, payment equal to thc aggregate amount of outstanding Loans owed to such
Tenninated Lender (together with all accrued and unpaid interest, fees and other amounts (other than indemnities) owed to such Terminated Lender), plus an amount equal to the prepayment premium, if any, that would be payable in respect of the Loans of such Tem1inated Lender upon prepayment thereof pursuant to subsection 2.4B(i), (ii) the Borrowers shall have exercised such right in respect of each such Non-Consenting Lender and (iii) each such Eligible Assignee shall consent, at the time of such assignment, to each matter in respect of which such Tenninated Lender was a Non-Consenting Lender. Each Lender agrees that if the Administrative Agent or the Borrowers, as the case may be, exercises their option hereunder, it shall promptly execute and deliver all agreements and documentation necessary to eflectuate such assignment as set
forth in subsection 9.1. The Borrowers shall be entitled (but not obligated) to execute and deliver such agreement and documentation on behalf of such Non-Consenting Lender and any such agreement and/or documentation so executed by the Borrowers shall be effective for
purposes of documenting an assignment pursuant to subsection 9.1.
9.6 Independence of Covenants.
All covenants hereunder shall be given independent effect so that if a particular action or condition is not permittcd by any of such covenants, thc fact that it would be pem1itted by an exception to, or would otherwise be within the limitations of: another such covenant shall not avoid tlie occurrence of a Default or Evcnt of Default if such action is taken or condition exists.
9.7 Notices.
A. Notices Generally. Except in the case of notices and other communications
expressly pcmiitted to be given by telephone (and except as provided in subsection 9.7B below),
all notices and other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or registered telecopier as follows: (i) if to the Borrowers, I I; (ii) if
mail or sent by to the Administrative Agent,
the Collateral Agent, or to I I at I 1; and (iii) if to a Lender, to it at its

address (or telecopicr number) set forth in its Administrative Questionnaire. Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by telecopier shall be deemcd to have been given
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when sent (except that, if not given during nom1al business hours for the recipient, shall be
deemed to have been given at the opening of
business on the next business day for the recipient).
Notices delivered through electronic communications to the extent provided in subsection 9.78 below, shall be effective as provided in said subsection 9.78.
B. Electronic Communications.
(i) Notices and other communications to the Lenders hereunder may be
delivered or furnished by electronic communication (including e~maii and Internet or intranct websites) pursuant to procedures approved by the Administrative Agent,
provided that the foregoing shall not apply to notices to any Lender pursuant to
subsection 2. i, if such Lender has notified the Administrative Agent that it is incapable of
receiving notices under such subsection by electronic communication. Each of the Administrative Agent and the Borrowers may, in their respective discretion, agree to
accept notices and other communications hereunder via electronic communications
pursuant to procedures approved by the Administrative Agcnt or the Borrowers,
respectively; provided that approval of such procedures may be limited to particular notices or communications. Unless the Administrative Agent otherwise prescribes,
(i) notices and other communications sent to an e-mail address shall be deemed received upon the sender's receipt of an acknowledgment from the intended recipient (such as by
the "return receipt requested" function, as available, return e-mail or other written
acknowledgment), provided that if such notice or other communication is not sent during
the nonnal business hours of
the recipient, such notice or communication shall be deemed
to have been scnt at the opening of business on the next Business Day for the recipient
and (ii) notices or communications posted to an Internet or intranct website shall be

deemed received upon the deemed receipt by the intended recipient at its e-mail address notification that such notice or communication as described in the foregoing elause (i) of is available and identifying the website address therefor.
(ii) Each of the Borrowcrs hereby agrees, unless directed otherv.lse by the
Administrative Agent or unless the electronic mail address referred to below has not been
provided by the Administrative Agent to the Borrowers, that it will, or will cause its
Subsidiaries to, provide to the Administrative Agent all information, documents and other materials that it is obligated to furnish to the Administrative Agent pursuant to the Loan
Documents, or to the Lendcrs under subsection 5.2, including all notices, requests,
financial statements, financial and other reports, eci1ificates and other infonnation materials, but cxcluding any such communication that (i) relates to the payment of any principal or other amount due under this Agreement, (ii) provides notice of any Default Default under this Agreement or any other Loan Document, (iii) is required to or Event of be delivered to satisfy any condition precedent to the effectiveness of this Agreement and/or the incurrence of the Loans or (iv) relates to Speci1ed Encumbrances (all such
non-excluded communications being referred to herein collectively as
"Communications"), by transmitting the Communications in an electronic/soft medium that is properly identifed in a fonnat acceptable to the Administrative Agent to
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( ) (or at such other electronic mail address as directed by the
the Bon"owers agrees, and agrees to cause its Subsidiaries, to continue to provide the Communications to the Administrative Agent or the Lenders, as the case may be, in the manner specified in the Loan Documents but only
Administrative Agent). In addition, each of
to the extent requested by the Administrative Agent. Each of the Borrowers irther agrees that the Administrative Agent may make the Communications available to the
Lenders by posting the Communications on Intralinks or a substantially similar electronic
transmission system.
c. Change of Address. Any party hereto may change its address or telecopier
number for notices and other communications hereunder by notice to the other parties hereto.
9.8 Survival of Representations. 'Varranties and Al!reements.
A. All representations, warranties and agreements made herein shall survive the
execution and delivery of this Agreement and the making of
the Loans hereunder.
B. Notwithstanding anything in this Agreement or implied by law to the contrary, the
agreements of the Borrowers set forth in subsections 2.60, 2.7, 9.2, 9.3 and 9.18 and the
agreements of the Lenders set forth in subsections 8.2, 8.3, 8.4, 9.2C, 9.3, 9.4 and 9.1 9 shall
survive the payment of the Loans and the reimbursement of any amounts drawn or paid thereunder, and the termination of this Agreement.
9.9 Failure or InduIl!ence Not Waiver: Remedies Cumulativc.
No failure or delay on the part of any Agent or any Lender in the exercise of any power, right or privilege hereunder or under any other Loan Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise
thereof or of any other power, right or privilege. All rights and remedies existing under this
Agreement and the other Loan Documents are cumulative 10, and not exclusive of, any rights or
remedies otherwise available.
9.10 MarshalInl!~ Payments Set Asidc.
Neither any Agent nor any Lender shall be under any obligation to marshal any assets in
favor of the Borrowers or any other party or against or in payment of any or all or the Obligations. To the extent that any Borrower makes a payment or payments to the
Administrative Agent or the Lenders (or to the Administrative Agent or Collateral Agent for the benefit of the Lenders), or any Agent or the Lenders enlrce any security interests or exercise their rights of setoff, and such payment or payments or the proceeds or such enforcement or
setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy Jaw, any other state or federal law, common law or any equitable cause, then, to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all
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Liens, rights and remedies therefor or related thereto, shall be revived and continued in full force and effect as if such payment or payments had not been made or such enforcement or setoff had not occurred.
9.11 Severabiltv.
In case any provision in or obligation under this Agreement or the Notes shall be invalid,
illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the
remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.
9.12 Oblie:ations ScveraI~ Independent Nature of
the Lenders' Rie:hts.
The obligations of the Lenders hereunder arc several and no Lender shall be responsible
for the obligations or Commitments of any other Lender hereunder. Nothing contained herein or
in any other Loan Document, and no action taken by the Lenders pursuant hereto or thereto, shall be deemed to constitute the Lenders as a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and each Lender shall be entitled to protect and enforce its rights arising out of
this Agreement and it shall not be necessary for any other Lender to be joined as an additional
party in any proceeding for such purpose.

9.13 Maximum Amount.
A. It is the intention of the Borrowers and the Lenders to confonn strictly to the
usury and similar laws relating to interest from time to time in force, and all agreements between the Loan Parties and their respective Subsidiaries and the Lenders, whether now existing or
hereafter arising and whether oral or written, are hereby expressly limited so that in no
contingency or event whatsoever, whether by acceleration of maturity hereof or otherwise, shall the amount paid or agreed to be paid in the aggregate to the Lenders as interest (whether or not designated as interest, and including any amount otherwise designated but deemed to constitute interest by a court of competent jurisdiction) hereunder or under the other Loan Documents or in any other agreement given to secure the Indebtedness or obligations of the Borrowers to the
Lenders, or in any other document evidencing, securing or pertaining to the Indebtedness evidenced hereby, exceed the maximum amount pemiissible under applicable usury or such
other laws (the '''Maximum Amount"). If under any circumstances whatsoever fulfillment of any
provision hereof, or any of the other Loan Documents, at the time perfonnance of such provision
shall be due, shall involve exceeding the Maximum Amount, then, ipso facto, the obligation to
be fulfilled shall be reduced to the Maximum Amount. For the purposes of calculating the actual amount of interest paid and/or payable hereunder in respect of laws pertaining to usury or such other laws, all sums paid or agreed to be paid to the holder hereof for the use, forbearance or detention of the Indebtedness of the Borrowers evidenced hereby, outstanding from time to time shall, to the extent permitted by Applicable Law, be amortized, pro-rated, allocated and spread from the date of disbursement of the proceeds of the Notes until payment in full of all of such
Indebtedness, so that the actual rate of interest on account of such Indebtedness is unifonn
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this subsection shall control and supersede every other provision of all agreements between the Borrowers or any endorser of the Notes and
through the term hereof. The terms and provisions of
the Lenders.
B. If
under any circumstances any Lender shall ever receive an amount which would
exceed the Maximum Amount, such amount shall be deemed a payment in reduction of the principal amount of the Loans and shall be treated as a voluntary prepayment under subsection
2.4B(i) and shall be so applied in accordance with subsection 2.4 hereof or jf such excessive
interest exceeds the unpaid balance of the Loans and any other Indebtedness of the Borrowers in favor of such Lender, the excess shall be deemed to have been a payment made by mistake and
shall be refunded to the Borrowers.
9.14 Headine.s.
reference only and shall not constitute a part of
Section and subsection headings in this Agreement are included herein for convenience of this Agreement for any other purpose or be given
any substantive effect.

9.15 Applicable Law.
THIS AGREEMENT SHALL BE GOVERNED BV, AND SHALL BE

CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.
9.16 Successors and Assiens.
l11Is Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and the successors and assigns of
the Lenders (it being understood that the Lenders' rights of assignment are subject to
subsection 9.1). Neither the Borrowers' rights or obligations hereunder nor any interest therein may be assigned or delegated by any Borrower without the prior written consent of all Lenders.
9.17 Consent to Jurisdiction and Service of
Process.
A. SUBMISSION TO JURISDICTION. EACH OF THE PARTIES HERETO
IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE EXCLUSIVE JURISDICTION OF (i) THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK CITY AND OF THE UNITED STATES DISTRICT COURT SITTING IN NEW YORK CITY, (ii) THE COURTS OF THE STATE OF NEVADA SITTING IN CLARK COUNTY AND OF THE UNITED STATES DISTRICT COURT SITTING IN CLARK COUNTY, (ii) THE COURTS OF THE STATE OF ARIZONA SITTING IN KINGMAN AND OF THE UNITED STATES
DISTRICT COURT SITTING IN PHOENIX AND (iv) ANY APPELLATE COURT FROM
ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR

RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT TO THE
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EXTENT SUCH COURTS WOULD HAVE SUBJECT MATTER JURISDICTION WITH RESPECT THERETO, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR SUCH NEVADA STATE COURT OR SUCH ARIZONA STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN ANY SUCH FEDERAL COURT. EACH OFTHE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT, THE COLLATERAL AGENT OR ANY LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANV OTHER LOAN DOCUMENT AGAINST A BORROWER OR ITS PROPERTIES IN THE COURTS OF THE STATE OF NEW YORK OR THE STATE OF NEVADA OR THE STATE OF ARIZONA OR TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN ANY OF THE UNITED
STATES DISTRICT COURT SITTING IN NEW YORK CITY OR ANY UNITED

STATES DISTRICT COURT SITTING IN CLARK COUNTY OR ANY UNITED STATES
DISTRICT COURT SITTING IN PHOENIX. EACH OF THE PARTIES HERETO

IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT IT IS NOT SUBJECT

PERSONALLY TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK OR THE STATE OF NEVADA OR THE STATE OF ARIZONA, OR THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION.
B. WAIVER OF VENUE. EACH OF THE PARTIES HERETO

IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR

PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN SUBSECTION 9.17A. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT.
c. Service of Process. Each party hereto irrevocably consents to service of process
in the manner provided for notices in subsection 9.7. Nothing in this Agreement will affect the right of any party hereto to serve process in any other manner pcnnitted by applicable law.
9.18 Waiver of Jurv TriaL.
EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE

FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
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TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMI'LATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND

ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE LOAN DOCUMENTS BY,
(B)
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
9.19 Confidentialitv.
Each of the Agents and the Lenders agrees to maintain the confidentiality of the Infonnation (as defined below), except that lnfonnation may be disclosed (a) to it, its Affliates' and their respective partners, directors, offcers, employees, advisors and representatives (it being
understood that the Persons to whom such disclosure is made wil be infonned of the
confidential nature of such InfonnatIon and instructed to keep such Infonnation confidential as provided herein), (b) to the extent requested by any Governmental Authority (including, without
limitation, any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by Applicable Laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (c) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or
proceeding relating to this Agreement or any other Loan Document or the enforceinent of rights hereunder or thereunder, (t) subject to an agreement containing provisions substantially the same
as those of this subsection 9.19, lo (i) any assignee or pledgee of or Participant in, or any prospective assignee or pledgee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or
derivative transaction relating to the Borrowers and their obligations, (g) with the consent of the Borrowers or (h) to the extent such Infonnation (x) becomes publicly available other than as a result of a breach of this subsection or (y) becomes available to the Administrative Agent or any Lender on a nonconfidential basis from a source other than a Borrower or any of its Subsidiaries Affliates. or
For purposes of this subsection 9.19, "Information" means all written infonnation
received from a Borrower or any of its Subsidiaries or Affliates relating to a BOlTower or any of
its Subsidiaries or any of their respective businesses, other than any such infomiation that is
available to the Administrative Agent or any Lender on a non
confidential basis prior to
disclosure by a Borrower, which to the extent received on or after the date hereof: is identified as
confidential by the Borrowers. Any Person required to maintain the confidentiality of

Information as provided in this subsection 9.19 shall be considered to have complied with its
obligation to do so if such Person has exercised the same degree of care to maintain the
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confidentiality of such Information as such Person would accord to its own confidential information.
9.20 Borrowers' Responsibilty For Compliance With Environmental Laws.
Nothing in this agreement is intended, or shall be deemed, 10 relieve the Borrowers or any Subsidiary of their obligations under Environmental Laws, or to condone or encourage any the Lenders in any way responsible such obligations, or to make any Agent or any of disregard of under Environmental Laws or otherwise for the ownership or operation of the Real Property
Assets. The Borrowers shall retain all responsibility for compliance with Environmental Laws, including proper management of all Hazardous Materials.
9.21 Joint and Several Liabiltv.

The Borrowers shall be jointly and severally liable for all amounts due to the Agents and Lenders under this Agreement and the other Loan Documents, regardless of which Borrower the Loans or the manner in which any Agent or Lender accounts actually receives the proceeds of
for the Loans on its books and records. Each Borrower's Obligations, and each Borrower's
the Borrowers hereunder, shall be separate and distinct obligations, but all such Obligations shall be primary obligations of each
Obligations arising as a result of the joint and several liabilities of
liability oftlie Borrowers hereunder shall, to the fullest extent pennitted by law, be continuing, absolute and
Borrower. Each Borrower's Obligations arising as a result of the joint and several
unconditional irrespective of (a) the validity, regularity or enforceability, avoidance or
subordination of the Obligations of the other Borrowers or of any Loan Document evidencing all or any part of the Obligations of the other Borrowers, or of any other collateral security therefor or guaranty or right of offset with respect thereto at any time or from time to time held by the Collateral Agent or any other Secured Party, (b) any defense, set-olTor counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by
any of the other Borrowers against the Collateral Agent or any other Secured Party (e) the
absence of
the Obligations, (d) the absence of any attempt to collect the Obligations from the other Borrowers or any other security therefor, or the absence of any other action to enforce the same or to exercise any right of otfset, (e) the waiver, consent, extension, forbearance or granting of any indulgence by the Agents and the Requisite Lenders with respect to any provision of any instrument evidencing the Obligations the other Borrowers, or any part thereof, or any other agreement now or hereafter executed by of the other Borrowers and delivered to the Agents and the Lenders, (f) the failure by Collateral Agent to take any steps to perfect and maintain its security interest in, or to preserve its rights to, any security or Collateral of the other Borrowers, (g) any election in any proceeding instituted
notice of the creation, renewal, extension or accrual of ally of
under the Bankruptcy Code of the application of Section- i i 1 I (b)(2) of the Bankruptcy Code,
(h) any borrowing or grant of a security interest by the other Borrowers, as debtors-in-possession the Bankruptcy Code, (i) the disallowance of all or any portion of any claim under Section 364 of
by any Agent or Lender for the repayment of the Obligations of the other Borrowers under
Section 502 of the Bankruptcy Code or G) any other circumstances whatsoever (with or without notice to or knowledge of any of the Borrowers) whieh might constitute a legal or equitable the other Borrowers in bankruptcy or in any other instance. With respect
discharge or defense of
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to each Borrower's Obligations ansing as a result of the joint and several liability of the
Borrowers under this Agreement and the other Loan Documents, each Borrower waives
diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon any of the Borrowers with respect to the Obligations. With respect to each Borrower's
Obligations arising as a result of the joint and several liability of the Borrowers under ihis
Agreement and the other Loan Documents, each Borrower waives, until the Obligations shall
have been paid in full in immediately available funds and the Agreement shall have been
terminated, any right to enforce any right of subrogation or any remedy which any Agent or Lender now has or may hereafter have against such Borrower, any endorser or any guarantor of all or any part of the Obligations, and any benefit of, and any right to participate in, any security or collateral given to any Agent or Lender to secure payment of the Obligations or any other liability of the Borrowers to any Agent or Lender. Upon and during the continuance of any Event of Default, the Agents or any other Secured Party may proceed directly and at once, without notice, to pursue its rights and remedies against any Borrower to collect and recover the full amount, or any portion of the Obligations, without first proceeding against, or making a similar demand on, any other Borrower or any other Person, or against any security or collateral for the Obligations (or exercising any right of offset with respect thereto), and any failure by the Agents or any other Secured Party to make a similar demand on, or to pursue its rights and
remedies or to collect and recover the Obligations from, any other Borrower or any other Person, or against any security or collateral for the Obligations or right of offset, shall not relieve any Borrower of any obligation or liability hereunder, and shall not impair or effect the rights and remedies, whether express, implied or available as a matter of law, of the Agents or any other
Secured Party against any Borrower. Without limiting the generality of any other waiver contained herein, each Borrower waives any right to require any Agent or any other Secured
Party to: (i) proceed against any other BOlTower or any other Person; (ii) proceed against or
exhaust any collateral including, without limitation, the Collateral; or (iii) pursue any other right or remedy for such Borrower's beneft. Each Borrower agrees that each Agent and each other Secured Party may proceed against such BOlTower with respect to the Obligations without taking any actions against any other Borrower or any other Person and without proceeding against or exhausting any collateral including, without limitation, the CollateraL. Each Borrower agrees that each of the Agents and the other Secured Parties may unqualifiedly exercise in its sale discretion any or all rights and remedies available to it against any other Borrower without impairing such Agcnts or such other Secured Party's rights and remedies in enforcing the Loan Documents, under which such Borrower's liabilities shall remain independent and unconditionaL.
Each BOlTower agrees and acknowledges that any Agents or any other Secured Party.s exercise
of certain of such rights or remedies may affect or eliminate such Borrower's right of
subrogation or recovery against any other Borrower and that such Borrower may incur a partially or totally nonreimbursable liability in perfonning under the Loan Documents. Without limiting the generality of any other waivers hereunder, each Borrower expressly waives any statutory or other right that such Borrower might otherwise have to: (A) limit such Borrower"s liability alier a nonjudicial foreclosure sale to the difference between the Obligations and the fair market value
of the property or interests sold at such nonjudicial foreclosure sale or to any other extent;
(B) otherwise limit any Agent"s or any other Secured Party's right to recover a deficiency
judgment after any foreclosure sale; or (C) require any Agent or any other Secured Party to
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exhaust its collateral before any Agent or any Secured Party may obtain a personal judgment for
any deficiency. Without limiting the generality of any other waiver contained herein, each Borrower waives all rights and defenses that such Borrower may have because any other Borrower's Obligations are (or may he) secured by real property. This means, among other
things, (i) any Agent or any other Secured Party may collect from such Borrower without first foreclosing on any real or personal property collateral pledged by any other Borrower, and (ii) if any Agent forecloses on any real property collateral pledged by any Borrower, (A) the amount of the Obligations may be reduced only by that portion of the price tor which that collateral is sold at a foreclosure sale, even if the collateral is worth more than the sale price and (B) the Agents and the other Secured Parties may collect from such Borrower even if the Agents, by foreclosing on the real property collateral, has destroyed any right such Borrower may have to collect from
any other Borrower. The foregoing waiver is an unconditional and irrevocable waiver of any rights and detnses any Borrower may have because any other Borrower's Obligations are
secured by real property. Without limiting the generality of any other waiver contained herein, each Borrower waives all rights and defenses arising out of an election of remedies by any Agent or any other Secured Party, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for any Obligation has destroyed such Borrower's rights of subrogation and reimbursement against any other Borrower by operation of applicable law or
otherwise. Without limiting the generality of the foregoing, each Borrower expressly and irrevocably waives, to the fullest extent penl1itted by applicable Jaw, any and all rights and defenses including, without limitation, any rights of indemnification and contribution which
might otherwise be available to such Borrower under applicable law or otherwise; provided that notwithstanding the foregoing, any such rights of indemnileation and contribution shall be waived only until the Obligations shall have been paid in full in immediately available funds and the Agreement shall have been tenninated. Each Borrower consents and agrees that the Agents shall be under no obligation to marshal any assets in favor of such Borrower or against or in payment of any or all of the Ohligations. NOTWITHSTANDING ANYTHING IN ANY OF
THE LOAN DOCUMENTS TO THE CONTRARY, NO PARTNER, MEMBER,

SHAREHOLDER OR OTHER BENEFICIAL OWNER OFTHE BORROWERS (OTHER
THAN ANY LOAN PARTY) SHALL BE LIABLE FOR TIlE PAYMENT OR

PERFORMANCE OF
TIlE OBLIGATIONS.
9.22 Counterparts: lntee:ration: Effectiveness: Electronic Execution.

A. Counterparts; Integration; Effectiveness. ll1Is Agreement may be executed in
counterparts (and by different parties hereto in different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a single contract.
This Agreement and any separate letter agreements with respect to fees payable to I i
and the Administrative Agcnt constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating 10 the subject matter hereoJ: This Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agcnt shall havc rcceived counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto required pursuant to Section 3, and thereafter shall be binding upon and inure
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to the benefit of the parties hereto and their respective successors and assigns. Delivery of an
executed counterpart of a signature page of this Agreement or any document or instrument delivered in connection herewith by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement or such other document or instrument, as applicable.
B. Electronic Execution of Assignments. TIie words "execution," "signed,"
"signature," and words of like import in any Assignment Agreement shall be deemed to include electronic signatures or the keeping of records in electronic fonn, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.
9.23 USA Patriot Act Notifcation.

The following notification is provided to the Borrowers pursuant to Section 326 of the USA Patriot Act of2001, 31 U.S.C. Section 5318:
IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT.
To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each Person or entity that opens an account, including any deposit account, treasury management account, loan, other extension of credit, or other financial services product.
What this means for each Borrower: When a Borrower opens an account, if the Borrower is an
individual, the Administrative Agent and the Lenders will ask for the Borrower's name,
residential address, tax identification number, date of
birth, and other infonnation that will allow the Administrative Agent and thc Lenders to identify the Borrower, and, if the Borrower is not an
individual, the Administrative Agent and the Lenders will ask for the Borrower"s naine, tax
identification number, business address, and other infOimation that will allow the Administrative Agent and the Lenders to identify the Borrower. The Administrative Agent and the Lenders may
also ask, if the Borrower is an individual, to see the Borrower"s driver"s license or other
identifying documents, and, if the Borrower is not an individual, to see the Borrower"s legal
Organizational Documents or other identifying documents.

(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
121
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective offcers thereunto duly authorized as of the date first written above.
THE BORROWERS:
\NEWCOJ
By:
Name: Tiile:
THE RHODES COMPANIES, LLC

By:
Name: Title:
RHODES RANCH GENERAL PARTNERSHIP

By:
Name: Title:
RHODES RANCH GOLF AND COUNTRY CLUB, LLC

By:
Name:
Title
First Lien Credit Agreemeiij
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HERITAGE LAND COMPANY, LLC

By:
Name: Title:
TICK, LP
By:
Name: Title:
GLYNDA, LP
By:
Name: Title:
CHALKLINE, LP
By:
Name: Title:
BATCAVE, LP
By:
Name: Title:
JACKKIFE, LP
By:
Name: Title:
WALLBOARD, LP
By:
Name: Title:
OVERFLOW, LP
(Firsi Lien Credit Agreemenil 2
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By:
Name: Title:
TUSCANY ACQUISITIONS, LLC

By:
Name: Title:

By:
Name: Title:
(First Lien Credit Agrccmcni)

o "
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By;
Name: Title:
TUSCANY ACQUISITIONS IV, LLC

By;
Name: Title:
RHODES DESIGN AND DEVELOPMENT CORPORATION

By;
Name: Title:
C&J HOLDINGS INC.

By;
Name: Title;
(First Lien Credit AgreemenlJ
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RHODES REALTY, INC.

By:
Name: Title:
ELKHORN INVESTMENTS, INC.

By:
Name: Title:
BRAVO INC.
By:
Name: Title:

By:
Name: Title:
TRIBES HOLDINGS LLC

By:
Name: Title:
(Firsi Lien Credii AgreememJ 5
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PINNACLE GRADING, LLC

By:
Name: Title:
TUSCANY GOLF COUNTRY CLUB, LLC

By:
Name: Title:
GUNG-HO CONCRETE, LLC

By:
Name: Title:
GERONIMO PLUMBING, LLC

By:
Name: Title:
RHODES ARIZONA PROPERTIES, LLC

By:
Name: Title:
JARUPA LLC
By:
Name: Title:
PARCEL 20 LLC
By:
Name: Title:
SIX FEATHERS HOLDINGS, LLC

By:
First Lien Credit Agreemeni)
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Name: Title:
ELKHORN PARTNERS
By:
Name: Title:
APACHE FRAMING, LLC

By:
Name: Title:
rFiri-t Lien Crcdii Agrcemenll 7
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AGENTS AND LENDERS:

By:
Name: Title:
By:
Name: Title:
lFirsl Lien Credii AgreementJ 8
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EXHIBIT L
EXHIBIT L
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Exhibit L
Schedule of Causes of Action
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NON-EXCLUSIVE LIST OF RETAINED CAUSES OF ACTION
ARTICLE IV(P) OF THE PLAN PRESERVES ALL CAUSES OF ACTION NOT

EXPRESSLY WAIVED, RELINQUISHED, EXCULPATED, RELEASED, COMPROMISED, OR SETTLED IN THE PLAN OR A BANKRUPTCY COURT ORDER. THE ATTACHED LIST IS A NONEXCLUSIVE LIST OF ENTITIES AGAINST WHOM THE DEBTORS, OR THE LITIGATION TRUST OR REORGANIZED DEBTORS, AS APPLICABLE, SHALL
RETAIN CAUSES OF ACTION. FAILURE TO INCLUDE AN ENTITY ON THE ATTACHED LIST SHALL NOT CONSTITUTE A RELEASE OF SUCH ENTITY AND SHALL NOT INDICATE THAT CAUSES OF ACTION AGAINST SUCH ENTITY HAVE
NOT BEEN RETAINED.
THE DEBTORS AND THE LITGATION TRUST OR REORGANIZED DEBTORS, AS APPLICABLE, RETAIN ALL CAUSES OF ACTION OF ANY KIND WHATSOEVER AGAINST ALL ENTITIES NOT EXPRESSLY RELEASED PURSUANT TO THE PLAN OR A FINAL ORDER IN THEIR CAPACITES AS SUCH.
FOR A VOIDANCE OF DOUBT, UNLESS EXPRESSLY RELEASED PURSUANT TO
THE PLAN OR A FINAL ORDER IN THEIR CAPACITES AS SUCH, ENTITES NOT LISTED ON THE ATTACHED LIST ARE NOT RELEASED AND THE DEBTORS AND
THE LITIGATION RUST OR REORGANIZED DEBTORS, AS APPLICABLE, EXPRESSLY RETAIN ALL CAUSES OF ACTION OF ANY KIND WHATSOEVER AGAINST ALL SUCH ENTITIES, INCLUDING WITHOUT LIMITATION THE CATEGORIES OF CAUSES OF ACTION SET FORTH BELOW.
FAILURE TO ATTRIBUTE ANY SPECIFIC CAUSE OF ACTION TO A PARTICULAR ENTITY ON THE ATTACHED LIST SHALL NOT UNDER ANY
CIRCUMSTANCE BE INTERPRETED TO MEAN THAT SUCH CAUSE OF ACTION IS NOT RETAINED AGAINST SUCH ENTITY. ALL POSSIBLE CAUSES OF ACTION,
INCLUDING CAUSES OF ACTION NOT LISTED BELOW, ARE RETAINED AGAINST ALL ENTITES NOT EXPRESSLY RELEASED PURSUANT TO THE PLAN OR A FINAL ORDER IN THEIR CAPACITES AS SUCH.
IN THE EVENT OF ANY APPARENT INCONSISTENCY BETWEEN THE

RELEASES OF ENTITIES IN THEIR CAPACITIES AS SUCH PURSUANT TO THE PLAN OR A BANKRUPTCY COURT ORDER AND THE ATTACHED LIST, SUCH RELEASES GRANTED PURSUANT TO THE PLAN OR FINAL ORDER SHALL GOVERN.
Categories (in each case except as otherwise provided in the Plan):
I. Causes of Action against vendors, suppliers of goods or services, or other parties
for overpayments, back charges, duplicate payments, improper holdbacks,
deposits, warranties, guarantees, indemnities or setoff;
73203-002\DOCS _ LA:2 i 0331.1
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2. Causes of Action against utilities, vendors, suppliers of services or goods, or other
parties for wrongful or improper termination, suspension of services or supply of goods, or failure to meet other contractual or regulatory obligations;
3. Causes of Action against vendors, suppliers of goods or services, or other parties

for failure to fully perform or to condition performance on additional
requirements under contracts with anyone or more of the Debtors before the
assumption of rejection of
the subject contracts;
4. Causes of Action relating to any liens, including mechanic's, artisan's,

materialmen's, possessory or statutory liens fied by any contractor or third part
against the Debtors' estates;

5. Claims related to or arising from any warranty or indemnification against any
supplier or subcontractor or such supplier or subcontractor's insurance carriers;

6. Causes of Action against any current or former director, offcer, employee or
agent of the Debtors arising out of employment related matters, except the
Released Parties for the Claims released against them under the Plan;
7. Causes of Action against insurance carriers, reinsurance carriers, underwriters or

surety bond issuers relating to coverage, indemnity, contribution, reimbursement or other matters;
8. Counterclaims and defenses relating to notes, bonds or other contract obligations;
9. Counterclaims in connection with any warranty claims or deposit return claims
asserted against any of the Debtors; 10. Causes of Action against local, state, federal and foreign taxing authorities for refunds of overpayments or other payments;
i I. Causes of Action against attorneys, accountants, consultants or other professional
service providers relating to services rendered, except the Released Parties for the Claims released against them under the Plan;
12. Contract, tort or equitable Causes of Action that may exist or subsequently arise;
13. Causes of Action of the Debtors arising under section 362 of the Bankruptcy Code;
14. Equitable subordination Causes of Action arising under section 5 I 0 of the Bankruptcy Code or other applicable law;
15. Turnover Causes of Action arising under section 542 or 543 of the Bankruptcy Code;
73203-02\DOCS _ LA:2 1033 i.1
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16. Causes of Action ansmg under chapter 5 of the Bankruptcy Code, including preferences under section 547 of the Bankruptcy Code, except as set forth in the Plan;
17. Causes of Action for unfair competition, interference with contract or potential
business advantage, conversion, infringement of intellectual property or other

business tort claims.
73203-002\DOCS _ LA:21 0331. i
CURRENT AND POTENTIAL THIRD.PARTY CLAIMS

Claim Against
Debtor Entity
Case Caption, if applicable

Description of Claim
Breach of contract, defective design, professional negligence and other claims
Rhodes Homes Arizona, LLC
Rhodes Homes Arizona, LLC v Stanley Consultants Stanley Consultants, Inc; Ken Yamada and Jane Doe Yamada; Steve Hagel and Jane Doe Hagel; Dennis Brown and Jane Doe Brown; Denis Atwood
and Jane Doe Atwood; David
Case 09-14814-lbr
Frohnen and Jane Doe Frohen
Rhodes Design and
Breach of contract, defective design, professional negligence and other claims
Development/Rhodes Homes
GC Wallace Inc. v Rhodes GC Wallace Inc Design and Development Corp; O'Neil Construction Co of California
Sunland Asphalt
Doc 713-7
Pinnacle Grading, LLC
Dispute relating to amounts due under contract

Breach of contract--unfinished common areas, mechanics liens, defective workmanship, claims under the Purchase Agreement and Grant of Options betwen Commerce Associates, LLC and Rhodes Design and Development Corporation dated November 14, 2003 and related agreements
Breach of contract, defective workmanship
Rhodes Design and DevelopmenURhodes Homes

Commerce Associates, LLC; Isaac Building and Design
Rhodes Design and
Southwest Iron
DevelopmenURhodes Homes
Third-part work not paid for resulting in liens on debtots propert
Rhodes Design and
Commerce Associates, LLC; Integrity Masonry; Isaac Building and Design Commerce Associates, LLC; Isaac Building and Design; Performance Ready Mix Commerce Associates, LLC; Isaac Building and Design; MS
Rhodes Design and
Third-part work not paid for resulting in liens on debtor's propert
Rhodes Design and
Third-part work not paid for resulting in liens on debtor's propert
Entered 11/12/09 16:22:42
Concrete
Triton Grading
Rhodes Design and
Debtor's subcontractor failed to pay Las Vegas Paving resulting in liens on debtor's propert
Direct Paving
Debtor's subcontractor failed to pay Wilmar Contracting resulting in liens on debtor's propert
Rhodes Design and
Alternative Lawns
Defective workmanship--tot lot, Rhodes Ranch parcel 14
Page 6 of 61
Rhodes Design and
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EXHIBIT M
EXHIBIT M
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Exhibit M
Asset and Stock Transfer Agreement
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PRELIMINARY DRAFT SUBJECT TO MODIFICATION FINAL VERSION MUST BE ACCEPTABLE TO FIRST LIEN STEERING COMMITTEE AND RHODES ENTITIES PURSUANT TO MEDIATION SETTLEMENT
PRELIMINARY DRAFT SUBJECT TO MODIFICATION. FINAL VERSION MUST BE ACCEPTABLE TO FIRST LIEN STEERING COMMITTEE AND RHODES ENTITIES PURSUANT TO MEDIATION SETTLEMENT
ASSET AND SHARE TRANSFER
AGREEMENT
THIS ASSET AND SHARE TRANSFER AGREEMENT (this "Agreement", dated

( 1,2009, is by and among Rhodes Homes Arizona Properties, LLC, a (_) limited
liability company, Rhodes Homes Arizona, LLC, a ( ) limited liability company and Elkhorn Investments, Inc., a ( ) corporation (together, the "Arizona Entities"),
Entities"), and James M. Rhodes ("Rhodes", and, together with the Arizona Entities, and the Rhodes Entities, the "Parties").
RECITALS
(Newco), a Delaware limited liability company ("Newco"), ( 11 (the "Rhodes
A. On either March 31,2009 or April 1,2009, the Arizona Entities, as well as certain other affiliated entities, each filed voluntary petitions for relief under chapter 11 of the United
States Code, 11 U.S.c. 101-1532 (the "Bankruptcy Code"').
B. On September 25, 2009, a Plan of Reorganization and Disclosure Statement (the "Plan"') was filed on behalf of the Arizona Entities as well as certain other affliated entities
pursuant to the Bankruptcy Code.
C. Pursuant to the Plan, the Arizona Entities are required to transfer to the Rhodes
Entities the assets set forth on Schedule I to this Agreement (the "Arizona Assets").
D. Pursuant to the Plan, the Rhodes Entities are required to transfer to Newco all of the issued and outstanding Equity Interests (the "Tran~ferred Shares") of Rhodes Ranch Golf
Course, Inc., a ( ) corporation ("GCr"), and certain other assets relating to the
operation of the golf course situated within the Rhodes Ranch master-planned community located in the southwestern Las Vegas valley (the "Rhodes Ranch Golf Course". "Equity
Interests"' shall mean all capital stock, membership interests, options, warrants, exchangeable or
i IDENTITY OF OWNERS OF GCl STOCK TO BE DETERMINED. WILL THIS BE THE SAME PERSON
TO WHOM THE ARIZONA ASSETS WILL BE TRANSFERRED?
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convertible securities, subscription rights, exchange rights, preemptive rights, stock appreciation
rights, phantom stock, profit participation or similar rights, or any other right or instrument
pursuant to which any person may be entitled to purchase any security.
AGREEMENT
NOW, THEREFORE, in consideration of the premises, the respective representations, warranties, covenants and agreements contained in this Agreement, and other good and valuable consideration the receipt and suffciency of which are hereby acknowledged, and intending to be legally bound, the Parties agree as set forth below.
ARTICLE 1 TRANSFER OF ARIZONA ASSETS AND TRANSFERRED SHARES2

1.1 Transfer of Arizona Assets.
(a) Transfer. The Arizona Entities hereby transfer and deliver to the Rhodes
Entities, and the Rhodes Entities hereby accept all right, title and interest in and to all of
the Arizona Assets, free and clear of all claims, liens, pledges, restrictions, options, charges, rights of first refusal, preemptive rights, easements, security interests, deeds of trust, mortgages, rights-of-way, encroachments, or encumbrances, whether voluntarily incurred or arising by operation oflaw, (collectively, "Encumbrances'.), except for such
Encumbrances set forth on Schedule 1.I(a)3
(b) Assumed Liabilities. The Rhodes Entities hereby assume and become responsible for the following liabilities and obligations of the Arizona Entities
(collectively, the "Assumed Liabilties"): (i) all liabilities under the contracts listed on
Closing, (ii) all
Schedule 1.l(b)(i) (the "Assumed Contracts") whether arising before or after the
liabilities under the leases listed on Schedule l.l(b)(ii) (the "Assumed Leases") whether arising before or after the Closing and (iii) any amounts required by section 365(b)(I) of the Bankruptcy Code to cure any defaults by the relevant Arizona
Entities under an Assumed Contract or Assumed Lease and to pay any actual pecuniary losses that have resulted from such defaults under such Assumed Contract and Assumed
Leases.
1.2 Transferred Shares. The Rhodes Entities hereby transfer and deliver to Newco, and Newco hereby accepts, all of the Transferred Shares free and clear of all Encumbrances.
1.3 Transfer of Cell Towcr Contracts. The Rhodes Entities hereby assign to, and
Newco hereby assumes and becomes responsible for, all rights, benefits and obligations under any agreements, contracts, leases, licenses, obligations, or other commitments, whether oral or written, and any and all amendments thereto (each, a "Contract") relating to the operation of and
2 AGREEMENT SUBJECT TO FURTHER REVIEW BY AKIN TAX COUNSEL.
3 SCHEDULE 1.I(a) TO IDENTIFY LIENS TO THE FIRST LIEN LENDERS IN AN AMOUNT NOT TO
EXCEED $60,000.
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revenue generated by any cell towers located on the Rhodes Ranch Golf Course, including, but not limited to, those Contracts listed on Schedule 1.3 (the "Cell Tower Contracts").
1.4 Closing. The closing (the "Closing") of the transactions contemplated hereby (the "Transactions") will take place on the date hereof (the "Closing Date") at the offces of
Akin Gump Strauss Hauer & Feld LLP, One Bryant Park, New York, NY 10036.
1.5 Deliveries. On the Closing Date,4
(a) the applicable Arizona Entities shall deliver or cause to be delivered to the
Rhodes Entities:
(i) a bill of sale and an assignment and assumption agreement, each
duly executed by the applicable Arizona Entity in the forms of Exhibits A and . hereto; and
(ii) such other bills of sale, certificates of title or ongm, deeds,
assignments and other instruments of transfer or conveyance or as may be

otherwise necessary to evidence and effect the assignent and delivery of the
Arizona Assets to the Rhodes Entities;

(b) Entities:
the Rhodes Entities shall deliver or caused to be delivered to the Arizona
(i) an assignment and assumption agreement duly executed by each
Rhodes Entity in the form of Exhibit B;

(ii) certificates representing the Transferred Shares, duly endorsed in
blank (or accompanied by duly executed stock powers);

(ii) a certificate of good standing of GCI in the State of ( 1,
dated no earlier than five (5) days prior to the Closing Date;
(iv) resignations from each director and offcer of GCI effective as of
the Closing Date;

(v) all necessary third party consents in connection with the transfer of
the Cell Tower Contracts;

(vi) an affdavit of non-foreign status that complies with section 1445
of the Internal Revenue Code of i 986, as amended, executed by each of GCI and each Rhodes Entity;
4 THIS AGREEMENT CONTEMPLATES A SIMULTANEOUS SIGNING AND CLOSING. IF AN EXECUTORY PERIOD IS NEEDED, CUSTOMARY COVENANTS AND CONDITIONS WILL BE
ADDED.
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(vii) all original minute books and stock transfer ledgers of GCI;
(viii) a secretary's certificate of GCI certifying as to the organizational
documents of GCI, and the resolutions of the board of directors of GCI approving and authorizing this Agreement and the Transactions; and
5 (as defined below), duly
(ix) a (Mortgage/Escrow Agreement)
executed by Rhodes.
(c) The documents listed m (a) and (b) above shall be referred to as the
"Transaction Documents".
1.6 (Non-Assignment of Contracts. Anything contained herein to the contrary notwithstanding, (i) this Agreement shall not constitute an agreement to assign any Assumed Contract or Cell Tower Contract if, after giving effect to the provisions of sections 363 and 365 of the Bankruptcy Code, as applicable, an attempted assignment thereof, without obtaining a consent, would constitute a breach thereof or in any way negatively affect the rights of the Arizona Entities or the Rhodes Entities, as the assignee of such Assumed Contract or Cell Tower
Contract and (ii) no breach of this Agreement shall have occurred by virtue of such
nonassignment. If, after giving effect to the provisions of sections 363 and 365 of the
Bankruptcy Code, as applicable, such consent is required but not obtained, the parties shall, at
the sole cost and expense of the assigning party, cooperate with the non-assigning party in any
reasonable arrangement designed to provide for the non-transferring party the benefits and obligations of or under any such Assumed Contract or Cell Tower Contract, including enforcement for the benefit of the non-assigning of any and all rights of the assigning party
against a third party thereto arising out of the breach or cancellation thereof
by such third party.)6
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF RHODES AND THE RHODES ENTITIES
Rhodes and each Rhodes Entity, jointly and severally, represents and warrants to the Arizona Entities and Newco that the statements contained in this ARTICLE 2 are true, correct
and complete on the Closing Date.
2.1 Organization of Rhodes Entities. Each Rhodes Entity is an entity duly organized, validly existing and in good standing under the Laws of the jurisdiction of its organization. There is no pending, or threatened, action, suit, arbitration, mediation, investigation or similar proceeding (an "Action"') that would prohibit, materially delay or
negatively affect the consummation of the Transactions contemplated hereby. "Law" shall mean
5 THE RHODES ENTITIES TO ADVISE WHETHER IT WILL PROVIDE $500,000 IN CASH OR $2.0 MILLION OF REAL PROPERTY AS COLLATERAL FOR THE PUT RIGHT OBLIGATIONS IN
SECTION 4.4. 6 TO BE DELETED IF ALL APPLICABLE CONSENTS TO ASSIGN THE CONTRACTS ARE OBTAINED
PRIOR TO THE CLOSING DATE.
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any law (statutory, common or otherwise), constitution, ordinance, rule, regulation or executive
order of any Govermental Body.
2.2 Authority of Rhodes Entities; Enforceabilty. Each Rhodes Entity has the
relevant entity power and authority necessary to execute and deliver each Transaction Document to which it is a party and to perfonn and consummate the Transactions. Each Rhodes Entity has taken all action necessary to authorize its execution and delivery of each Transaction Document to which it is a pary, the performance of its obligations thereunder and its consummation of the
Transactions. Each Transaction Document to which Rhodes or any Rhodes Entity is a party has
been duly authorized, executed and delivered by it and is enforceable against it in accordance with its terms.
2.3 No Violation. The execution and the delivery by Rhodes and each Rhodes Entity
of this Agreement and the other Transaction Documents to which any of Rhodes or any Rhodes
Entity is a pary, the performance by it of its obligations hereunder and thereunder, and the
consummation of the Transactions by it wil not (a) with or without notice or lapse of time, constitute or create a breach or violation of, or default under, any (i) Law enacted, adopted, promulgated or applied by any legislature, agency, bureau, branch, department, division,
commission, court, tribunal or other similar recognized organization or body of any federal, state, county, municipal, local or foreign government or other similar recognized organization or body
exercising similar powers or authority (a "Governmental Body"), (ii) order, ruling, decision, award, judgment, injunction or other similar determination or finding by, before or under the supervision of any Governmental Body or arbitrator (an "Order"), (iii) Contract, or (iv) permit, license, authorization, registration, franchise, approval, certificate, exemption, variance and similar right obtained, or required to be obtained from a Governmental Body (a "Permit") to which, in the case of (i), (ii), (iii) or (iv), Rhodes, GCI or any Rhodes Entity is a party or by which it or its assets are bound, or (v) organizational document of any Rhodes Entity as in effect
on the Closing Date, (b) require any consent, approval, notification, waiver or other similar
action (a "Consent") under any Contract or organizational document to which Rhodes, ocr or by which it or its assets are bound or (c) require any Permit under
any Rhodes Entity is a party or
any Law or Order.

2.4 Capitalization of GCI; Subsidiaries. As of
the Closing, GC1 has ( 1
authorized shares of common stock, of which ( J shares are issued and outstanding,
and ( J authorized shares of preferred stock, of which ( J shares are issued and
outstanding. Each Rhodes Entity holds of record and owns beneficially the number of
Transferred Shares as set forth next to its name in Schedule 2.4, free and clear of any
Encumbrances (other than any restrictions on transfer under the Securities Act of 1933, as amended, and state securities Laws). No Rhodes Entity is a party to any Contract that could require it to sell, transfer, or otherwise dispose of any of the Transferred Shares. No Rhodes
Entity is a party to any other Contract with respect to any capital stock of GCI. The Transferred Shares make up all of the issued and outstanding capital stock of GCI. All of the Transferred Shares: (a) have been duly authorized and are validly issued, fully paid, and nonassessable, (b) were issued in compliance with all applicable state and federal securities Laws, and (c) were not
issued in breach or violation of, or did not cause as a result of the issuance thereof a default
under, any Contract with or right granted to any other person. There are no outstanding options,
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PRELIMINARY DRAFT SUBJECT TO MODIFICATION FINAL VERSION MUST BE ACCEPTABLE TO FIRST LIEN STEERING COMMITTEE TO MEDIATION SETTLEMENT AND RHODES ENTITIES PURSUANT
warrants, exchangeable or convertible securities, subscription rights, exchange rights, statutory

pre-emptive rights, preemptive rights granted under GCl's organizational documents, stock
appreciation rights, phantom stock, profit participation or similar iights, or any other right or
instrument pursuant to which any person may be entitled to purchase any security of GCI, and no obligations to issue any rights or instruments. There are no Contracts with respect to the voting or transfer of any of GCI's capital stock. GCI is not obligated to redeem or otherwise acquire any of its Equity Interests. GC1 has no subsidiaries and owns no Equity Interests in any other Person, or any other right or instrument pursuant to which GCI may be entitled to purchase any security of any other person.
2.5 Organization of GCI. GCI (a) is a corporation duly organized, validly existing
and in good standing under the Laws of ( J, (b) is duly qualified to do business as a
foreign corporation and is in good standing under the Laws of each jurisdiction in which either the ownership or use of the properties owned or used by it, or the nature of the activities
conducted by it, requires such qualification, ( c) has the relevant entity power and authority necessary to own or lease its properties and to carr on its businesses as currently conducted and
(d) is not in breach or violation of, or default under, any provision of its organizational
documents. GCI has never approved or taken any action, nor is there any pending or threatened Action, seeking or otherwise contemplating GCl's dissolution, liquidation, insolvency or rehabilitation.
2.6 Power and Authority of GCI; Enforceabilty. GCI has the corporate power and
authority necessary to execute and deliver each Transaction Document to which it is a party and to perform and consummate the Transactions. GCI has taken all action necessary to authorize
the execution and delivery by it of each Transaction Document to which it is a party, the
performance of its obligations thereunder, and the consummation by it of the Transactions. Each Transaction Document to which GCI is a party has been duly authorized, executed and delivered by GCI and is enforceable against it in accordance with its terms.
2.7 No Violation; Necessary Approvals. The execution and the delivery by GCI of
the Transaction Documents to which it is a party, the performance by GCI of its obligations the Transactions by it will not (a) with or without notice or
thereunder and the consummation of lapse of time, constitute, create or result in a breach or violation of, default under, loss of
benefit
or right under or acceleration of performance of any obligation required under any Law, Order, Contract or Permit to which GCI is a party or by which it is bound or any of its assets are subject, or under any provision of GCl's organizational documents as in effect on the Closing Date, (b) require any Consent under any Contract or organizational document to which it is a party or by which it is bound or any of its assets are subject, (c) require any Pennit, (d) trigger any rights of first refusal, preferential purchase or similar rights or (e) cause the recognition of gain or loss for tax purposes with respect to GCI or subject it or its assets to any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, occupation, customs, ad valorem, duties, franchise, withholding, social security, unemployment, real property, personal property, sales, use, transfer, registration, estimated or other tax of any kind whatsoever, including any interest, penalty or addition thereto, whether disputed or not ("Taxes").
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2.8 Records. The copies of GCls organizational documents that were provided to Newco are true, correct and complete and reflect all amendments made through the date hereof. GCls minute books and other records made available to Newco for review were true, correct and complete as of the date of such review, no further entries have been made through the date of this
Agreement, such minute books and records contain the true signatures of the persons purporting
to have signed them, and such minute books and records contain an accurate record of all actions of the stockholders, the board of directors and committees of the board of directors of Gei taken by written consent, at a meeting, or otherwise since fonnation.
2.9 No Indebtedness. Except as set forth on Schedule 2.9, GCI has no (a)
indebtedness for borrowed money, (b) obligations for a deferred purchase price, (c) obligations
evidenced by notes, bonds, debentures or other similar instruments, (d) indebtedness or

obligations created or arising under any conditional sale or other title retention agreement with respect to property acquired by GCI, (e) obligations under capital leases, (I) obligations,
contingent or otherwise, as an account party or applicant under or in respect of acceptances,
letters of credit, surety bonds or similar arrangements, whether or not drawn, (g) obligations payable under any rate, currency, commodity or other swap, option or derivative agreement, (h)
obligations secured by (or for which the holder of such obligation has an existing right,
contingent or otherwise, to be secured by) any Encumbrance on property (including accounts and
contract rights) owned by GCI, whether or not Gei has assumed or become liable for the
payment of such obligation or (i) any obligations of others guaranteed by GCI ((a) through (i),
collectively, "Indebtedness").
2.10 No Undisclosed Liabilties. GCI does not have any liability or obligation,
whether accrued or fixed, absolute or contingent, matured or unmatured, detennined or
undeterminable or known or unknown, including those arising under any Law, Action, Contract, commitment, obligation, undertaking or otherwise (collectively, "Liabilties"), and there is no basis for any present or future Action or Order against GCI giving rise to any Liability, except for
(a) the Liabilities set forth on Schedule 2.10 as of( 1,2009 (the "Schedule Date"), and (b)
Liabilities that have arisen since the Schedule Date in the ordinary course of business (none of which relates to breach of contract, breach of warranty, tort, infingement, violation of Law, Order or Permit, or any Action (including any Liabilities under any Environmental, Health and Safety Requirements (as defined below)) ("Ordinary Course Liabilties"). GCI has not assumed or guaranteed any Liabilities of any other person.
its predecessors has complied with all Laws them alleging any failure to so comply. No material expenditures are, or based on any Law, Order or Permit will be, required of GC1 for it and its business and operations to remain in compliance with all Laws, Orders and Permits immediately following the Closing.
2.11 Legal Compliance. GCI and each of and Orders, and no Action is pending or threatened against any of
2.12 Taxes. For purposes of this Section 2.12, the following terms shall have the following meanings:
charges, fees, imposts, levies or other assessments, including income, gross receipts,
(a) "Tax" or "Taxes" means (i) all federal, state, local and foreign taxes,
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excise, employment, sales, use, transfer, license, payroll, franchise, severance, stamp, withholding, Social Security, unemployment, disability, real property, personal property,
registration, alternative or add on minimum, estimated or other taxes, charges, fees,

imposts, levies or other assessments, including any interest, penalties or additions thereto, whether disputed or not, and (ii) any liability for any items described in clause ii) payable by reason of contract, transferee liability, operation of law (including Treasury Regulation
Section 1.1502-6) or otherwise.
(b) "Tax Return" means any report, return, information return, election,
filing, declaration, statement, claim for refund or other information, including any schedules or attachments thereto, and any amendments to any of the foregoing required to
be supplied to a taxing authority in connection with the determination, assessment,
collection or administration of any Taxes, and, to the extent relevant, any report, return,
information return, election, fiing, declaration, statement, claim for refund or other
infOlmation to be provided to any other pary (e.g., an employee or other payee or
distributee).
(c) GCI has fied all Tax Returns required to be filed by it on or before the
Closing Date with any Tax authority (collectively, the "Pre-Closing Returns"). The Pre-
Closing Returns have been filed in accordance with all applicable Laws and, as of the time of filing, were correct and complete in all material respects regarding the income, costs, business, assets, operations, activities and status of GCI and any other items of information shown therein. GCI has timely paid, withheld or reserved all Taxes due and
payable except for such Taxes that are being contested in good faith by appropriate
proceedings and which are listed on a schedule attached hereto. GCI has timely paid all estimated taxes for any Pre-Closing Period.
(d) GCI has withheld and paid all Taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party, and all Forms W-2 and 1099 required with respect thereto have been properly completed and timely filed.
(e) GCI is not delinquent in the payment of any Tax due and payable as
shown on any Pre-Closing Return, nor has GCI requested an extension of time within which to file or send any Pre-Closing Return which has not since been fied or sent. GCI has not granted any extension or waiver of the limitation period applicable to any PreClosing Returns to any Tax authority.
(f) There is no claim, audit, action, suit, proceeding, or investigation pending
or, to the knowledge of the Rhodes Entities or GCI, threatened, against or with respect to
GC1 in respect of any Tax, and there are no pending adjustments by any Tax authority to
assess additional Taxes in connection with any Tax Return filed (or that should have been
fied) by GCl.
(g) GCI has no pending requests for a ruling with any Taxing Authority.
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PRELIMINARY DRAFT SUBJECT TO MODIFICATION FINAL VERSION MUST BE ACCEPTABLE TO FIRST LIEN STEERING COMMITTEE AND RHODES ENTITES PURSUANT TO MEDIATION SETTLEMENT
(h) There are no liens for Taxes upon the assets of GCl except liens for
current Taxes not yet due.

(i) Since its organization, GCI has not been a member of an affiliated group filing any return with any Tax authority, or fied or been included in a combined,
consolidated or unitary return. GCI is not under any contractual obligation to indemnify
any other Person with respect to Taxes nor is GC1 a party to any material agreement
providing for payments with respect to Taxes.
0) GC1 has received all appropriate forms from payees (employees,

independent contractors, creditors, stockholders, or other third parties) including, but not limited to, Forms W-4, W-8,W-9, and 1-9.
(k) GCI has not engaged in any reportable transaction under Treasury
Regulation Section 1.6011 -4.
2.13 Title to, Suffciency and Condition of Assets. GCl has good, marketable and
indefeasible title to, or a valid leasehold interest in, all the assets necessary for the conduct of its
business as currently conducted and as currently proposed to be conducted, including, without
limitation, the Rhodes Ranch Golf Course (together, the "Golf Assets"), in each case free and clear of all Encumbrances other than the Encumbrances set forth on Schedule 2.13 ("Permitted Encumbrances"). All tangible assets included as part of the Golf Assets, whether owned or
leased, are free from defects (patent and latent), have been maintained in accordance with normal
industry practice, are in good operating condition (subject to normal wear and tear) and are
suitable for the purposes for which they are currently used and currently proposed to be used.
2.14 Real Property. (a) Schedule 2.l4(a) lists all real property owned by GCI (the "Owned Real Propert"). GCI has good, marketable, and indefeasible title to the Owned Real
Property, subject to no Encumbrances other than Permitted Encumbrances. (b) Schedule 2.14(b)
the Leased Real Property is held subject to written leases or other agreements which are valid and effective in accordance with their respective terms, and there are no existing defaults or events of default, or events which with notice or lapse of time or both would constitute defaults thereunder. True, correct and complete copies of all such leases, together with any amendments thereto, have been delivered to Newco. GCI has not received any oral or written notice to the effect that any lease will not be renewed at the tennination of the term thereof or that any such lease will be renewed only at a substantially higher rent.
lists all of the real property leased by GCI (the "Leased Real Property"). All of
2.15 Contracts. Schedule 2.1 5 lists each Cell Tower Contract and each Contract to
which GCI is a party or any of its assets are bound (the "Material Contracts"). GC1 has
delivered to Newco a true, cori'ect and complete copy of each written Material Contract and a
summary of each oral Material Contract (as amended to date) listed in Schedule 2.15. Each Material Contract is legal, valid and enforceable and wil continue to be legal, valid and
enforceable on identical teims following the consummation of the Transactions. There are no
existing defaults or events of default, or events which with notice or lapse of
time or both would
constitute defaults under any Material Contracts.
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2.16 Litigation. Schedule 2.16 sets forth each instance in which GCI (a) is subject to
any outstanding Order or (b) is a party to, the subject of or threatened to be made a party to or the
subject of, any Action. No Order or Action required to be set forth in Schedule 2_16 questions
the validity or enforceability of any Transaction Document or any Transaction, or could result in any material adverse effect on GCI, and no Rhodes Entity has any basis to believe that any such Action may be brought or threatened against GCI.
2.17 Environmental, Health and Safety Matters. Except as set forth in

Schedule 2.1 7, (a) Gei and each person for whose conduct Gei may be held liable is, and has at
all times been, in compliance with all Environmental, Health and Safety Requirements in
connection with owning, using, maintaining or operating its business, operations and assets; (b) each location at which GCI currently operates, or has operated, any portion of its business or currently maintains, or has maintained, any of its properties or assets is, and has at all times been, in compliance with all Environmental, Health and Safety Requirements; and (c) there are no pending or threatened allegations by any person that any of GCls properties, assets or businesses
is or has not been conducted in compliance with all Environmental, Health and Safety
Requirements. "Environmental, Health and Safety Requirements" means all Laws, Orders,
Permits, Contracts and programs (including those promulgated or sponsored by industry associations, insurance companies and risk management companies) concerning or relating to public health and safety, worker/occupational health and safety and pollution or protection ofthe environment, including those relating in any way to noises, radiation or chemicals, toxic or hazardous materials, substances or wastes, each as amended and as now in effect.
2.18 Permits. GCI possesses all Perinits required to be obtained for its businesses and operations. Schedule 2.18 sets forth a list of all such Permits. With respect to each such Permit: (a) it is valid, subsisting and in full force and effect; (b) there are no violations of such Permit that would result in a termination of such Permit: and (c) GCI has not received notice that such
Permit wil not be renewed.
2.19 Related Party Agreements. Except as set forth on Schedule 2.1 9 (the "Related
Party Transactions"), no Rhodes Entity or any of Affliate of any Rhodes Entity or any of their respective current or former employees, offcers, directors, members, partners, managers or shareholders is a party to any Contract or other arangement with GCI. "Affliate" means any specified person who, directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, the specified person.
2.20 Transfer of Course Conversion Funds. All funds received after July 31, 2009
by GCI or any of the Rhodes Entities from the Las Vegas Valley Water District or similar entity
as an incentive for converting the Rhodes Ranch Golf Course from a green course to a desert course (the "Course Conversion Funds") have been used in the ordinary course of operating the
Rhodes Ranch Golf
Course.
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ARTICLE 3 REPRESENT A TIONS AND WARRANTIES OF THE ARIZONA ENTITIES AND NEWCO
Each Arizona Entity and Newco, jointly and severally, represents and warrants to the Rhodes Entities that the statements contained in this ARTICLE 3 are true, correct and complete
on the Closing Date.
3.1 Organization of Arizona Entities and Newco. Each Arizona Entity and Newco
is an entity duly organized, validly existing and in good standing under the Laws of the
jurisdiction of its organization. There is no pending, or (to the knowledge of the Arizona
Entities) threatened, Action that would prohibit, materially delay or negatively affect the
consummation of
the transactions contemplated hereby.
3.2 Authority of Arizona Entities and Newco; Enforceabilty. Each Arizona Entity
and Newco has the relevant entity power and authority necessary to execute and deliver each Transaction Document to which it is a party and to perform and consummate the Transactions. Each Arizona Entity and Newco has taken all action necessary to authorize its execution an.d delivery of each Transaction Document to which it is a party, the performance of its obligations
thereunder and its consummation of
the Transactions. Each Transaction Document to which any
Arizona Entity or Newco is a party has been duly authorized, executed and delivered by it and is enforceable against it in accordance with its tenns.
3.3 No Violation. The execution and the delivery by each Arizona Entity and Newco
of this Agreement and the other Transaction Documents to which any Arizona Entity or Newco is a pary, the performance by it of its obligations hereunder and thereunder, and the consummation time, constitute or create a of the Transactions by it will not (a) with or without notice or lapse of breach or violation of, or default under, any (i) Law enacted, adopted, promulgated or applied by any Governmental Body, (ii) Order, (iii) Contract, or (iv) Permit to which, in the case of (i), (ii), (iii) or (iv), any Arizona Entity or Newco, respectively, is a party or by which it or its assets is bound, or (v) organizational document of any Arizona Entity or Newco, respectively, as in effect on the Closing Date, (b) require any Consent under any Contract or organizational document to which any Arizona Entity or Newco is a party or by which it or its assets is bound or (c) require any Permit under any Law or Order.
3.4 Title to Arizona Assets. The Arizona Entities have good, marketable and
indefeasible title to, or a valid leasehold interest in, all of the Arizona Assets, in each case free
and clear of all Encumbrances except as set forth on Schedule 1.1( a).
ARTICLE 4 COVENANTS
4.1 General. If any time after the Closing any further action is necessary or desirable
to carry out this Agreement's purposes, each Party wil take such further action (including
executing and delivering any further instruments and documents, obtaining any Permits and
Consents and providing any reasonably requested information) as any other Paiiy may
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reasonably request, all at the requesting Party's sole cost and expense (unless the requesting
Party is entitled to indemnification therefor under ARTICLE 5).
4.2 Confidentiality. The Rhodes Entities wil, and will cause each of its respective
Affliates, directors, offcers, employees, agents, representatives and similarly situated persons to
(a) treat and hold as confidential, and not use or disclose, all of the information concerning the
Transferred Stock and GCI ("Confidential Information"), except for (i) disclosures to the
person's professional advisors, the actions for which the disclosing person will be responsible and (ii) disclosures required for such person to perform obligations it may have under this
Agreement, and (b) deliver promptly to Newco, all tangible embodiments (and all copies) of
the
Confidential Infonnation which are in such person's possession. If any person subject to these confidentiality provisions is ever requested or required (by oral question or request for information or documents in any Action) to disclose any Confidential Infonnation, such person
will notify Newco promptly of the request or requirement so that Newco may seek an
appropriate protective Order or waive compliance with this Section 4.2.
4.3 Call Right. On the eighth anniversary of the Closing Date (assuming a Put
Notice has not been previously delivered), Rhodes or a permitted designee of Rhodes shall have the right (the "Call Right") to repurchase the Transferred Shares for an amount in cash equal to Rhodes may exercise the Call Right by providing $5,900,000. Rhodes or a permitted designee of at least thirty (30) days' prior written notice to Newco stating his intent to exercise the Call Right (the "Call Notice"). Except as set forth in Section 4.6, the Call Notice shall be irrevocable. The parties shall consummate the sale at the time and place designated in the Call Notice, but in any
event within sixty (60) days of Newco's receipt of the Call Notice, subject to reasonable
extension as necessary to obtain any required approvals in connection therewith. At the closing of such sale, (a) Newco shall deliver to Rhodes (or its designee) the Transferred Shares, free and clear of all Encumbrances and duly endorsed for transfer and (b) Rhodes shall deliver to Newco
an amount in cash equal to $5,900,000. Notwithstanding anything to the contrary contained herein, neither Rhodes nor any of his designees shall be pern1itted to exercise its Call Right
under Section 4.3 if Rhodes has defaulted, at any time, on its obligations under this Agreement.
4.4 Put Right. At any time after the fourth anniversary of the Closing Date and prior
to the eighth anniversary of the Closing Date, Newco shall have the right (the "Put Right") to require Rhodes to repurchase the Transferred Shares for an amount in cash equal to $5,900,000. Newco may exercise the Put Right by providing written notice to Rhodes at least one (1) year prior to the intended closing date of such transaction (the "Notice Period') stating its intent to exercise the Put Right (the "Put Notice"). The Parties shall consummate the sale at the time and place designated by Newco in the Put Notice, but in any event within fifteen (15) days of the expiration of the Notice Period. At the closing of such sale, (a) Newco shall deliver to Rhodes
the Transferred Shares, free and clear of all Encumbrances and dul y endorsed for transfer and (b)
Rhodes shall deliver to Newco an amount in cash equal to $5,900,000. If fifteen (15) days after the expiration of the Notice Period, Rhodes has not consummated the transaction, (i) Rhodes
shall be deemed to have permanently waived the Call Right and (ii) (the Escrow Amount (as
defined below) shall be distributed to Newco/Newco shall be entitled to foreclose on the

Mortgage) as liquidated damages.
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4.5 (Escrow/Mortgagef
(a) Simultaneously with the execution hereof, Rhodes shall (deposit into an
escrow account (the "Escrow Account") established in accordance with the terms of an
escrow agreement in the form attached as Exhibit C (the "Escrow Agreement") an amount in cash equal to $500,000 (the "Escrow Amounf')/ deliver to Newco a fully
executed and notarized mortgage in the form attached as Exhibit C on property with a fair market value of at least $2,000,000), (the "Mortgage")).
(b) (For so long as Rhodes is not in default of its obligations under Section
4.4, Rhodes shall have the right, upon thirty (30) days' prior written notice to Newco, to terminate the Mortgage and simultaneously therewith deposit an amount in cash equal to $500,000 in the Escrow Account.)
(c) (Upon Rhodes' exercise of the Call Right or Newco's exercise of
the Put
Right, (i) if the Escrow Amount consists of cash equal to $500,000, then such amount shall be distributed to Newco as a credit towards the purchase price thereof and (ii) if the Escrow Amount consists of the Mortgage, such Mortgage shall be terminated upon the transactions contemplated by the Call Right.)
consummation of
4.6 Maintenance of Rhodes Ranch Golf Course. At all times prior to the earliest of
(x) the eighth anniversary of the Closing Date, (y) the exercise of the Call Right, and (z) the exercise of the Put Right, Newco shall maintain the Rhodes Ranch Golf Course in substantially the same performance and rating criteria as in effect on the date hereof, as verified by an
independent third party rating agency acceptable to Newco and Rhodes (the "Standard
Condition"). If, upon the date specified as the closing date in any Call Notice, the Rhodes Ranch Golf Course is not in the Standard Condition, Rhodes may, at his option (a) require Newco to
return the Rhodes Ranch Golf Course to the Standard Condition, provided, that the cost of such
improvements does not exceed $500,000 or (b) revoke his Call Notice, in which case, (the
Escrow Amount shall be returned to Rhodes/ the Mortgage shall be terminated) within thirty (30)
days of such notice of evocation of the Call Notice.8
4.7 Related Party Transactions. Except for the Transaction Documents, all Related
Party Transactions are hereby automatically tenninated as of the Closing and GCI shall not have any Liability for any Related Party Transactions after the Closing.
4.8 Transfer of Course Conversion Funds. All Course Conversion Funds which
have not been used in the ordinary course of operating the Rhodes Ranch Golf Course as of the Closing Date shall be hereby transferred to GCI.
7 THE RHODES ENTITIES TO ADVISE WHETHER IT WILL PROVIDE $500,000 IN CASH OR $2.0 MILLION OF REAL PROPERTY AS COLLATERAL FOR THE PUT RIGHT OBLIGATIONS IN
SECTION 4.4 8 TO BE DISCUSSED WHETHER AGREEMENT NEEDS TO INCLUDE COVENANT BY RHODES TO
CONTINUE OPERATING THE PROPERTY AS A GOLF COURSE AFTER THE EXERCISE OF THE
CALL RIGHT OR PUT RIGHT.
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ARTICLE 5 INDEMNIFICATION
5.1 Survival of Representations, Warranties and Covenants. Each representation,
warranty, covenant and obligation of the Parties contained herein will survive the Closing and continue in full force and effect.
5.2 Indemnification Provisions for Newco's Benefit. Rhodes and the Rhodes
Entities, jointly and severally, will indemnify and hold Newco and its Affliates, and their
respective offcers, directors, managers, employees, agents, representatives, controlling persons, stockholders and similarly situated persons, hannless from and pay any and all Damages directly
or indirectly resulting from, relating to, arising out of or attributable to any of the following: (a) any breach of any representation or warranty Rhodes or any Rhodes Entity has made in this
Agreement; (b) any breach, violation or default by Rhodes or any Rhodes Entity of any
obligation of Rhodes or such Rhodes Entity in this Agreement; (c) any and all Indebtedness or other Liabilities of Gei as of the Schedule Date not expressly set forth on Schedule 2.9 or 2.1 0 or in excess of the amount of such Indebtedness or other Liabilities set forth on Schedule 2.9 or 2.1 0 and (d) all Liabilities incurred after the Schedule Date which are not Ordinary Course Liabilities. "Damages" means all losses (including diminution in value), damages and other costs and expenses of any kind or nature whatsoever, whether known or unknown, contingent or vested, matured or unmatured, and whether or not resulting from third-party claims, including
costs (including reasonable fees and expenses of attorneys, other professional advisors and the relevant person's internal costs) of investigation, expert witnesses and the allocable portion of preparation and litigation in connection with any Action or threatened Action.
ARTICLE 6 MISCELLANEOUS
6.1 Entire Agreement. This Agreement, together with the other Transaction
Documents and all schedules, exhibits, annexes or other attachments hereto or thereto, and the certificates, documents, instruments and writings that are delivered pursuant hereto or thereto,
constitutes the entire agreement and understanding of the Parties in respect of the subject matter
hereof and supersedes all prior understandings, agreements or representations by or among the
Parties, written or oral, to the extent they relate in any way to the subject matter hereof. Except
as provided in ARTICLE 5, there are no third party beneficiaries having rights under or with
respect to this Agreement.
6.2 Assignment; Binding Effect. No Party may assign either this Agreement or any of its rights, interests or obligations hereunder without the prior written approval of the other Parties, and any such assignment by a Party without prior written approval of the other Parties will be deemed invalid and not binding on such other Parties. All of the terms, agreements, covenants, representations, warranties and conditions of this Agreement are binding upon, inure to the benefit of and are enforceable by, the Parties and their respective successors and pennitted
assigns.
6.3 Notices. All notices, requests and other communications provided for or
pennitted to be given under this Agreement must be in writing and must be given by personal
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delivery, by certified or registered United States mail (postage prepaid, return receipt requested), by a nationally recognized overnight delivery service for next day delivery, or by facsimile transmission, to the intended recipient at the address set forth for the recipient on the signature
page (or to such other address as any Party may give in a notice given in accordance with the
provisions hereof). All notices, requests or other communications will be effective and deemed given only as follows: (i) if given by personal delivery, upon such personal delivery, (ii) if sent by certified or registered mail, on the fifth business day after being deposited in the United States mail, (iii) if sent for next day delivery by overnight delivery service, on the date of delivery as confirmed by written confirmation of delivery or (iv) if sent by facsimile, upon the transmitter's
confirmation of receipt of such facsimile transmission, except that if such confirmation is
received after 5:00 p.m. (in the recipient's time zone) on a business day, or is received on a day
that is not a business day, then such notice, request or communication wil not be deemed
effective or given until the next succeeding business day. Notices, requests and other
communications sent in any other manner, including by electronic mail, will not be effective.
6.4 Specific Performance; Remedies. Each Party acknowledges and agrees that the other Parties would be damaged irreparably if any provision of this Agreement were not
perfornied in accordance with its specific terms or were otherwise breached. Accordingly, the
Parties wil be entitled to an injunction or injunctions to prevent breaches of the provisions of
this Agreement and to enforce specifically this Agreement and its provisions in any action or proceeding instituted in any federal court sitting in Nevada having jurisdiction over the Parties and the matter, in addition to any other remedy to which they may be entitled, at law or in equity.
Except as expressly provided herein, the rights, obligations and remedies created by this
Agreement are cumulative and in addition to any other rights, obligations or remedies otherwise available at law or in equity. Nothing herein wil be considered an ejection of remedies.
6.5 Headings. The article and section headings contained in this Agreement are
inserted for convenience only and will not affect in any way the meaning or interpretation of
this
Agreement.
6.6 Governing Law. This Agreement will be governed by and construed in

accordance with the laws of the State of Nevada, without giving effect to any choice of law
principles.
6.7 Amendment; Extensions; Waivers. No amendment, modification, waiver,

replacement, termination or cancellation of any provision of this Agreement wil be valid, unless the same is in writing and signed by all of the Parties hereto. Each waiver of a right hereunder does not extend beyond the specific event or circumstance giving rise to the right. No waiver by any Party of any default, misrepresentation or breach of warranty or covenant hereunder, whether intentional or not, may be deemed to extend to any prior or subsequent default, misrepresentation or breach of warranty or covenant hereunder or affect in any way any rights arising because of any prior or subsequent such occurrence. Neither the failure nor any delay on the par of any Party to exercise any right or remedy under this Agreement wil operate as a waiver thereof, nor does any single or partial exercise of any right or remedy preclude any other or further exercise of the same or of any other right or remedy.
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this Agreement will be deemed severable and the invalidity or unenforceability of any provision wil not affect the validity or enforceability of the other provisions hereof; provided, however, that if any provision of this Agreement, as applied to any Party or to any circumstance, is judicially detennined not to be enforceable in accordance with its terms, the Parties agree that the court judicially making such determination may modify
6.8 Severabilty. The provisions of
the provision in a manner consistent with its objectives such that it is enforceable, and/or to
delete specific words or phrases, and in its modified form, such provision will then be
enforceable and will be enforced.
6.9 Expenses; Transfer Taxes. Except as otherwise expressly provided in this Agreement, each Party will bear its own costs and expenses incurred in connection with the
preparation, execution and perfonnance of this Agreement and the Transactions, including all
fees and expenses of agents, representatives, financial advisors, legal counsel and accountants.
Any and all transfer taxes, stamp taxes or similar taxes payable in connection with the
Transactions shall be paid by the Rhodes Entities.
6.10 Counterparts; Effectiveness. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which together wil constitute one and the same instrument.
6.11 Construction. This Agreement has been freely and fairly negotiated among the Parties. If an ambiguity or question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the Paries and no presumption or burden of proof will arise tvoring or disfavoring any Party because of the authorship of any provision of this Agreement. Any reference to any law will be deemed to refer to such law as in effect on the date hereof and all rules and regulations promulgated thereunder, unless the context requires otherwise. The words "include," "includes," and "including" wil be deemed to be followed by "without
limitation." The word "person" includes individuals, entities and Governmental Bodies.
Pronouns in masculine, feminine and neuter genders will be construed to include any other gender, and words in the singular fonn wil be construed to include the plural and vice versa,
unless the context otherwise requires. The words "this Agreement," "herein," "hereof," "hereby,"
"hereunder," and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. The Parties intend that each representation, warranty and covenant contained herein will have independent significance. If any Party has breached any representation, warranty or covenant contained herein in any respect, the fact that there exists another representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not breached will not detract
from or mitigate the fact that the Party is in breach of the first representation, warranty or
covenant.
(SIGNATURE PAGES FOLLOW)
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IN WITNESS WHEREOF, the Parties have caused this Asset and Share Transfer
Agreement to be executed as of the date stated in the introductory paragraph of this Agreement.
RHODES HOMES ARIZONA PROPERTIES, LLC
By:
Name:
Title:
Address:
By:
Name:
Title:
Address:
ELKHORN INVESTMENTS, INC.
By:
Name:
Title:
Address:
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INEWCO)
By:
Name:
Title:
Address:
(RHODES ENTITIES)
By:
Name:
Title:
Address:
J ames Rhodes
Address:
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SCHEDULE I
ARIZONA ASSETS
RHODES ARIZONA PROPERTIES LLC RHODES ARIZONA PROPERTIES LLC RHODES ARIZONA PROPERTIES LLC
RHODES ARIZONA PROPERTIES LLC
306-24-115
20.25
I 825 S AZTEC RD
Model Home
306-24-116
306-63-0J 7
20.24
7.35 6.83
19.92
J 807 AZTEC RD
Model Home
Model Home Model Home
Dirt Dirt
4536 W DORA DR
4528 W DORA DR
1 J56 S AZTEC RD
306-63-01 8
RHODES ARIZONA PROPERTIES LLC RHODES ARIZONA PROPERTIES LLC
306-42-008A
306-42-00J
40 10-94 S AZTEC
RD
Total Acreage
114.59
Inside Pravada Pravada and all parts ofPravada lying within Sections 2,3,4,9 and JO, in all Township 20 North, Range 18 West of the Gila and Salt River Base and Meridian, Mohave County, Arzona and within the following APN numbers.
Rhodes Arzona Properties

Rhodes Arizona Properties Rhodes Arizona Properties Rhodes Arizona Properties
215-0J-1 J6
215-0J-I13
215-01-114
2J5-01-11 J
Partially Graded Partially Graded Partially Graded Partially Graded
Total Acreage
i,306x
Arizona Personal Propert
Computers
HP5J50
I-IP 5150
Serial Number
2UA603OJ6N
MXL6l5027R
2UA603OJ57
2UA 70608F7
HP 5150 HPWX4400
Case 09-14814-lbr
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Entered 11/12/09 16:22:42
Page 28 of 61
HP WX4400 HP XW4200 Dell
2UA70608HV 2UA54215GL GZOGR61
Laptops
HPNX6125 HPNX9600
Serial Number
CND54803L Y
CNF607lGBR CNBX006564 USLGY26030 USLGY42771 CNHC6201 68 CNGC64ClKC JPBG532058 JPOC4D2072 CN639BGOYK MY67G1JOOC 890CSTB 890 CD3N J8141101150
Printers
HP Laser Jet 4250
HP Laser Jet 4 J 01
HP Laser Jet 4100

HP Laser Jet 1320
HP color Laser Jet 2600 HP color Laser Jet 2804 HP color Laser Jet 5550 jet 6310 HP office HP Photosmart 05160
Lexmark 7001 -001 Lexmark 7001-001
Super G3 Printer-Scanner
Fax Machines
2-HP office jets 7310 6 of the printers and the fax machines have copier capabilities
Miscellaneous Equipment
Dell Power Edge Server 2850
HP Design Jet 1055CM Plus Plotter
85172579422
10 Battery Surge boxes and 10 power strips 1 i computer monitors 20" flat screen
4 calculators
14 telephones owned by Rhodes
Offce Furniture
2 - drafting tables
3 - work tables with open shelves for plans 12 - file cabinets 2 - 5 drawer 63 x 18
J - 3 drawer 36 x 20
7 - 4 drawer J 8 x 48
2 - 4 drawer 20 x 48
2 - 3 shelf wood bookcases 4 - 4 shelf bookcases: (2) metal, (2) wood 1 - hanging file for plans
1 - metal storage cabinet: 2-door, 4 shelves
2 - wooden storage cabinets: 2-door, 1 shelf
Case 09-14814-lbr
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Entered 11/12/09 16:22:42
Page 29 of 61
11 - desks: (1) metal, (10) wood

12 - desk chairs
12 - guest chairs
5 - stacking chairs
I - 4 x 6 rotating white board

1 - garbage can
10 - waste baskets
3 - 6 foot tables
2 - metal storage shelves - dimensions 5' h x 3' w x l8.5"d 2 - plastic storage shelves - dimensions 6' h x 3' w xi 8"d
Trademarks and Tradenames

Rhodes Arizona Properties
Rhodes Arizona
Golden Valley Ranch Pravada
Intan2ibles
All architectural and engineerng drawings, plus work product associated with Pravada and Golden Valley Ranch. Arizona general contractor's license.
Case 09-14814-lbr
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Entered 11/12/09 16:22:42
Page 30 of 61
EXHIBIT A
BILL OF SALE
Case 09-14814-lbr
Doc 713-7
Entered 11/12/09 16:22:42
Page 31 of 61
EXHIBIT B
ASSIGNMENT AND ASSUMPTION AGREEMENT
Case 09-14814-lbr
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Entered 11/12/09 16:22:42
Page 32 of 61
PRELIMINARY DRAFT SUBJECT TO MODIFICATION FINAL VERSION MUST BE ACCEPTABLE TO FIRST LIEN STEERING COMMITTEE TO MEDIATION SETTLEMENT AND RHODES ENTITIES PURSUANT
EXHIBIT C
(ESCROW AGREEMENT/MORTGAGE)
Case 09-14814-lbr
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Entered 11/12/09 16:22:42
Page 33 of 61
SCHEDULE l.(a)
LIENS
Liens in an amount not to exceed $60,000 held by the First Lien Lenders.
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Entered 11/12/09 16:22:42
Page 34 of 61
SCHEDULE l.(b)(i)
ASSUMED CONTRACTS
Executory Contracts and Unexpired Leases
To be provided by Plan Supplemental Date but shall include, but not be limited to all development agreements and subcontractor agreements)9
All agreements with municipalities and utilities with respect to Pravada and Golden Valley Ranch .10
9 THE DEBTORS SHOULD PROVIDE LIST.

10 THE DEBTORS SHOULD PROVIDE LIST.
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Entered 11/12/09 16:22:42
Page 35 of 61
SCHEDULE 1.(b)(ii)
ASSUMED LEASES
Case 09-14814-lbr
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Entered 11/12/09 16:22:42
Page 36 of 61
EXHIBIT N
EXHIBIT N
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Entered 11/12/09 16:22:42
Page 37 of 61
Exhibit N
Schedule of Assumed Executory Contracts and Unexpired Leases
Schedule of Assumed Executory Contracts and Unexpired Leases

DEBTOR
CONTRACT COUNTER-
PARTY NAME & SERVICE ADDRESS

FMV Lease
Agreement (copiers)
TYPE OF CONTRACT
Rhodes Ranch Golf Club
$0.00
PROJECTIDEVELOPMENT
CURE AMOUNT (LESS RETAINER OR DEPOSIT
Toshiba Business Solutions
PO Box 3083 Cedar Rapids, IA 524063083

Rhodes Ranch
Rhodes Design and Development
Case 09-14814-lbr
Taylor Made Golf
Company
$0.00
Inc. d/b/a TaylorMade-adidas
Golf
Company
Rental Product Agreement (golf equipment)
5545 Fenni Court
Doc 713-7
Carlsbad, CA 92008 National City Golf Finance

Rhodes Ranch Golf
Lease Agreement
(2007 EZGO Electric
Golf Carts) Rhodes Ranch Golf Club
$0.00
996 Dalton A venue

Rhodes Ranch Golf
Country Club, LLC
EZGO Refresher
Gasoline vehicles
$0.00
Cincinnati, OH 45203 EZGO, A Textron Company 1475 Sampson Avenue Corona, CA 92879 National City Commercial Capital Company, LLC 995 Dalton Avenue Cincinnati, OH 46203
Country Club, LLC
Rhodes Ranch Golf
Ecolab Inc.
Entered 11/12/09 16:22:42
370 Wabash Street St. Paul, MN 55102

Rhodes Ranch Golf
Country Club, LLC
Ecotemp Lease Agreement
Rhodes Ranch Golf
Club
$0.00
Advantage Financial
Rhodes Ranch Golf
Club
$0.00
Services, LLC i 08 Foxcroft Road

Rhodes Ranch Golf
Country Club, LLC
Rental Agreement (GPS Units)
West Hartford, CT 061 19
Page 38 of 61
Country Club, LLC

Rhodes Ranch Golf
Product license agreement
Rhodes Ranch Golf
Club
$0.00
EZLinks Golf, Inc. 40 i S. LaSalle, Suite 500 Chicago, IL 60605 Textron Financial
Country Club, LLC

Lease Agreement (gas vehicles)
$0.00
i i 575 Great Oaks Way,
Suite 210
7320J-002\DOCS ~LA:2 0795. i
CONTRACT COUNTER-
DEBTOR
PROJECTIDEVELOPMENT
PARTY
NAME
&
TYPE OF CONTRACT
SERVICE ADDRESS
$0.00
Alpharetta, GA 30022 Cybergolf

Rhodes Ranch Golf
Email marketing
110 W. Dayton, Suite 103
Country Club, LLC

Tuscany Golf Club
Edmonds, W A 98020
Brink's U.S., a division of

Tuscany Golf Club
Services Agreement
$0.00
Brink's Incorporated
Case 09-14814-lbr
3200 E. Charleston Blvd.

Tuscany Golf Club
Equipment Lease
Tuscany Golf Club
$0.00
(Club House)
Tuscany Golf Club
Las Vegas, NV 89104 Modular Space Corporation 5950 Emerald Ave Las Vegas, NV 89122 Modular Space Corporation
Equipment Lease
Doc 713-7
Tuscany Golf Club
$0.00
5950 Emerald Ave
(Office Trailer)
Tuscany Golf Club
Las Vegas, NV 89122 Modular Space Corporation

Equipment Lease
Tuscany Golf Club
$0.00
5950 Emerald Ave
(Restroom Trailer)
Las Vegas, NV 89122
National City Golf
Finance,
Tuscany Golf
Equipment Lease
Tuscany Golf Club
$0.00
Division of
National City
Country Club, LLC
(EZGO Refreshers)
Commercial Capital Company, LLC
Entered 11/12/09 16:22:42
995 Dalton Avenue Cincinnati, OH 45203 National City Golf Finance,
Tuscany Golf
Country Club, LLC
Equipment Lease
Tuscany Golf
Club
$0.00
Division of
National City
(Gas utility vehicle)
995 Dalton Avenue Cincinnati, OH 45203
Page 39 of 61
National City Golf Finance,
Tuscany Golf
Country Club, LLC
Equipment Lease
Tuscany Golf
Club
$0.00
Division of
National City

2
(EZGO electric golf cars)
7320J-002\DOcS_ LA:2 i 0795. i
CONTRACT COUNTER-
DEBTOR
TYPE OF CONTRACT
PROJECTIDEVELOPMENT
CURE AMOUNT (LESS RET AINER OR DEPOSIT
995 Dalton Avenue Cincinnati, OH 45203 Golflogix Systems 3960 E. Expedition Way
Tuscany Golf Country Club, LLC

GPS System
Tuscany Golf Club

$0.00
Phoenix, AZ 85050 Alannco

Tuscany Golf
Country Club, LLC
Alarm Monitoring
Tuscany Golf Club
$0.00
Case 09-14814-lbr
2007 Las Vegas Bl So
Las Vegas, NV 89104

Maintenance
U ni fonn
Unifirst Corporation
Tuscany Golf Club
$0.00
568 Parkson Rd
Tuscany Golf Country

Club, LLC Rhodes Design and Development Corporation
Doc 713-7
Henderson, NV 89011 Alyssa 1. and Roger 1. Frank

1036 Via Camelia Street Henderson, NV 89011
Service Company Lease Agreement
$0.00
i 01 i West 27th Street
Lease Agreement
i 040 Via Camelia Street

Henderson, NV 8901 i
Scottsbluff, NE 69361 3609 Bison Street, Scottsbluff, NE 69361 Alyssa 1. and Roger 1. Frank
Rhodes Design and Development Corporation
$0.00
i 0 i I West 27th Street
Entered 11/12/09 16:22:42
Lease A greem en t
i 044 Via Camelia Street Henderson, NV 8901 i
$0.00
Page 40 of 61
Scottsbluff, NE 69361 3609 Bison Street, Scottsbluff, NE 6936 I Alyssa 1. and Roger 1. Frank i 0 II West 27th Street Scottsbluff, NE 69361 3609 Bison Street, Scottsbluff, NE 69361 Alyssa 1. and Roger 1. Frank
Lease Agreement
i 048 Via Camelia Street Henderson, NV 8901 i
$0.00
101 i West 27th Street
Scottsbluff, NE 69361
3
7320J-002\DOcS_LA:2 i 0795. i
CONTRACT COUNTER-
DEBTOR
TYPE OF CONTRACT
PROJECT/DEVELOPMENT
3609 Bison Street, Scottsbluff, NE 69361 Hua Hui Tseng Huang 534 N. Orange #A
Lease Agreement
765 Orchard Course Dr.
$0.00
Las Vegas, NV 89148
La Puente, CA 9 I 744 1-Chieh E. Wang and Da
Lease Agreement
$0.00
Case 09-14814-lbr
Ching P. Wang 52 Redwood Lane
Rhodes Design and Development Corporation Rhodes Design and Development Corporation
Las Vegas, NV 89148
South Glastonbury, CT 06073
Lease Agreement
$0.00
Doc 713-7
Xijuan Xu and Xikui Xu 12845 Crestfield Court Rancho Cucamonga, CA
Las Vegas, NV 89148
91739-801 I Elena Elamparo
Lease Agreement
i Ii Sandy Bunker Lane Las Vegas, NV

101 Sandy Bunker Lane Las Vegas, NV
22 Indian Run Way
$0.00
526 i Polis Drive La Palma, CA 90623 Tin Kerine Cheung 2346 Indian Creek Rd Diamond Bar, CA 91765
Lease Agreement
$0.00
Glynda Rhodes
Lease Agreement
$0.00
Entered 11/12/09 16:22:42
5068 Spanish Heights
Las Vegas, NV
Lease Agreement
8525 West Flamingo Road, Unit

2258 Las Vegas, NV 89147
Las Vegas, NV 89148 Flamingo Self Storage 8525 West Flamingo Road Las Vegas, NV 89147
Rhodes Design and Development Corporation Rhodes Design and Development Corporation Rhodes Design and Development Corporation Rliodes Design and Development Corporation Rhodes Design and Development Corporation
Rhodes Design and Development
4
$0.00
Page 41 of 61
Fort Apache Self Storage 9345 W. Flamingo Road Las Vegas, NV 89147
Lease Agreement
9345 W. Flamingo Rd Unit 2228 Las Vegas, NV 89147

Lease Agreement
$0.00
Fort Apache Self Storage 9345 W. Flamingo Road
9345 W. Flamingo Rd Unit 2543 Las Vegas, NV
$0.00
73203-()()2\DOCS ~ LA:2 i 0795. i
CONTRACT COUNTER-
DEBTOR

Corporation
89147
TYPE OF CONTRACT
PROJECT/DEVELOPMENT
Las Vegas, NV 89147
Lease Agreement
9345 W. Flamingo Rd Unit 1012
$0.00
Rhodes Design and Development Corporation Las Vegas, NV 89147
Rhodes Realty, Inc.
Case 09-14814-lbr
Lease Agreement
1428 Pama Lane
Las Vegas, NV 891 18
Lease Agreement
9345 W. Flamingo Rd Unit 2135 Las Vegas, NV 89147
$0.00
Doc 713-7
Recall Inforniation Management
$0.00
1428 Pama Lane

Lease Agreement
Las Vegas, NV 89118
Silverado Self Storage II
9545 West Russell Road Las Vegas, NV 89148

Rhodes Realty, Inc.
9545 West Russell Rd, Unit 3016 Las Vegas NV 89148

92 i Olsen Street, Unit 136 Henderson, NV 890 15
$0.00
Stow Away 921 Olsen Street Henderson, NV 89015
Lease Agreement
$0.00
Entered 11/12/09 16:22:42
Lease Agreement
Unit DOl & W44 721 Cape Horn

A venue
Wann Springs R.V. & Mini Storage

Tribes Holdings, LLC
$0.00
721 Cape Horn A venue
Henderson, NV 890 II
Page 42 of 61
Rhodes Realty, Inc.
Lease Agreement
850 Olivia Parkway Henderson, NV 89011

Home sale contract
A vellino
$0.00
Rhodes Design and

Development Corp
5
Tuscany Master Association 133 Rhodes Ranch Parkway Las Vegas, NV 89148 Tyler Dion 452 Punto Vallata Dr Henderson, NV 89011
$0.00
7J20J-002\DOCS _ LA:2 i 0795. i
CONTRACT COUNTERCURE AMOUNT (LESS RETAINER OR DEPOSIT
DEBTOR

Home sale contract
Collections
$0.00
TYPE OF CONTRACT
PROJECTIDEVELOPMENT
Ernesto N. Tumbaga
Rhodes Ranch General Partnership
6 i 0 Over Par Ct.
Las Vegas, NV 89148 Jen Chieh Wang 351 Center Green Dr Las Vegas, NV 89148
Home sale contract

Collections
$0.00
Edward Vien
Acquisitions II,
Case 09-14814-lbr
Tuscany
Home sale contract
Fiori Townhomes
$0.00
1072 Via Corto St

LLC
Doc 713-7
Eunji Ko 312 Trailing Putt Way Las Vegas, NV 89148
Home sale contract

Greens
$0.00
Jenilee Andres
Rhodes Ranch General Partnership Rhodes Ranch
Home sale contract

Greens
$0.00
Home sale contract

Greens
$0.00
283 Trailing Putt Way Las Vegas, NV 89148 Xu Xuan Huang 271 Trailing Putt Way Las Vegas, NV 89148
General Paiinership
Rhodes Ranch
Josephine J. So
Home sale contract
Greens
$0.00
General Paiinership
Rhodes Ranch General Partnership Rhodes Ranch General Partnership
Entered 11/12/09 16:22:42
Home sale contract
Greens
$0.00
Home sale contract
Greens
$0.00
265 Trailing Putt Way Las Vegas, NV 89148 Maridel D. Rivera 382 Broken Par Drive Las Vegas, NV 89148 Allison S. Brodish 304 Ladies Tee Couii Las Vegas, NV 89148 Yana Z. Fayad
Home sale contract
Greens
$0.00
Page 43 of 61
384 Cart Crossing Way

Las Vegas, NV 89148 Maher Mark Awar
Home sale contract
Greens
$0.00
386 Dog Leg Dr
Las Vegas, NV 89148

6
73203.002\DOCS _LA:2! 0795. 1
CONTRACT COUNTER-
DEBTOR

TYPE 0 F CONTRACT
Home sale contract
Greens
$0.00
PROJECTIDEVELOPMENT
Chun Hong Wang
385 Dog Leg Diive Las Vegas, NV 89148

Rhodes Ranch
Home sale contract

Greens
$0.00
Chun Hong Wang 381 Dog Leg Drive
General Paiinership
Rhodes Ranch General Partnership Rhodes Ranch General Partnership Rhodes Ranch General Partnership Rhodes Ranch General Partnership
Las Vegas, NV 89148
Case 09-14814-lbr
Chun Hong Wang 377 Dog Leg Drive
Home sale contract
Greens
$0.00
Doc 713-7
Home sale contract

Greens
$0.00
Las Vegas, NV 89148 Melba P. Page 259 Trailing Putt Way Las Vegas, NV 89148 David L. Downer
Home sale contract
Greens
$0.00
382 Dog Leg Drive
Las Vegas, NV 89148
Ruben P. Deang Jr.
Home sale contract
Greens
$0.00
Home sale contract
Irons
$0.00
Entered 11/12/09 16:22:42
378 Dog Leg Drive Las Vegas, NV 89148 Christopher & Li Yun Zhang 126 Cooks Creek Court Las Vegas, NV 89148 Suzanne Z. Broadbent 933 Via Stellato
Tuscany Acquisitions, LLC Tuscany Acquisitions, LLC

Home sale contract
Home sale contract
LaLuna
$0.00
Roy M. Brown 976 Via Stellato
La Luna
$0.00
Matthew Lewis
Home sale contract
LaLuna
$0.00
929 Via Doccia Ct
Tuscany Acquisitions, LLC
Page 44 of 61
Henderson, NV 89011
Rhodes Ranch
Danilo B. Mupas 93 Honors Course Drive
Home sale contract
Majors
$0.00
General Paiinership
7
732()3~O()2\DOCS _LA:21 0795.1
CONTRACT COUNTER-
DEBTOR

Home sale contract
Majors
$0.00
TYPE OF CONTRACT
PROJECTIDEVELOPMENT
Las Vegas, NV 89148 Patrick M. Cheng

81 Honors Course Dr
Las Vegas, NV 89148 Jeffrey Chung
Home sale contract
Majors
$0.00
77 Honors Course Dr
Case 09-14814-lbr
Las Vegas, NV 89148
Nobuhiko 1kushima
Home sale contract
Majors
$0.00
i i 5 Honors Course Dr
Doc 713-7
Las Vegas, NV 89148 Eleanor Louise Charboneau
945 Rue Grand Paradis Ln Henderson, NV 8901 i
Tuscany Acquisitions iV LLC

Home sale contract
Home sale contract
Melani
$0.00
Rui Ling Huang Chang Pacific Mist
Pacific Mist
$0.00
211 Fairway
Woods Dr
Rhodes Ranch General Partnership Rhodes Ranch General Partnership Rhodes Ranch General Partnership
Home sale contract
$0.00
Home sale contract
Palms Bay
$0.00
Entered 11/12/09 16:22:42
Las Vegas, NV 89148 Jin Huang 217 Fairway Woods Dr Las Vegas, NV 89148 Hao Zhang 555 Halloran Springs Rd Las Vegas, NV 89148 Won Kyung Lee 579 Halloran Springs Rd Las Vegas, NV 89148
Home sale contract
Palms Bay
$0.00
Joel P. Laurel
Home sale contract
Palms Bay
$0.00
71 Myrtle Springs Ct Las Vegas, NV 89148 Peter K. Lee
Home sale contract
Palms Bay
$0.00
Page 45 of 61
86 Myiile Springs Ct
Las Vegas, NV 89148 Christopher S. Rogers

8
Home sale contract
Palms Bay
$0.00
94 Myrtle Springs COUli
7320.1-002\DOCS _LA:21 07(J). i
CONTRACT COUNTER-
DEBTOR
TYPE OF CONTRACT
PROJECTIDEVELOPMENT
Las Vegas, NV 89148 David J. Braucher 1073 Via Saint Andrea

Home sale contract
$0.00
Terrazzo
Case 09-14814-lbr
Henderson, NV 8901 I Elise Imbert-Sielaw

Home sale contract
T en-azzo
$0.00
1070 Via Saint Andrea Henderson, NV 89011 Wendy Butensky
i 038 Via Nandina

Home sale contract

Terrazzo
$0.00
Doc 713-7
Henderson, NV 89011 Manuel A. & Jessica N. Del Toro
Home sale contract

Terrazzo
$0.00
i 066 Via Nandina Henderson, NY 8901 I
Bruno Van Dierendonck 580 Via Colmo
Home sale contract
Terrazzo
$0.00
Wilfredo DeLeon 1006 Via Nandina

Home sale contract
Rhodes Ranch
General Partnership
Terrazzo
$0.00
Henderson, NV 8901 i Gale Genevieve Glepa
Home sale contract
West 57th
$0.00
Entered 11/12/09 16:22:42
Home sale contract
West 57th
$0.00
6442 Aether St Las Vegas, NY Jennifer Thomas 6448 Aether St Las Vegas, NV Stanley Schiff 988 Via Canale Dr Henderson, NV 89011

Rhodes Homes
Home sale contract
Zanetti
$0.00
Page 46 of 61
Neopost Leasing
P.O. Box 45840 San Francisco, CA 941450840

9
Postage machine lease
$0.00
7J20J-002\DOcS _ LA:21 0795.1
CONTRACT COUNTERPROJECTIDEVELOPMENT
DEBTOR
PARTY
NAME
&
TYPE OF CONTRACT
SERVICE ADDRESS
Equipment Lease
$0.00
Insight Direct USA, Inc. P.O. Box 550599 Jacksonville, FL 32255-0599 Tuscany Master Association 850 Olivia Pkwy
Rhodes Design and Development/Rhodes Homes C&J Holdings (Neighborhood
Tuscany
$0.00
Case 09-14814-lbr
Association Group)
Rhodes Ranch Association,

C&J Holdings (Neighborhood
Rhodes Ranch
$0.00
Inc. 133 Rhodes Ranch Pkwy.
Association Group)
Doc 713-7
Las Vegas, NV 89148 X-IT Homeowners Association
C&J Holdings (Neighborhood

X-IT
Association Group)
Rhodes Ranch GP
$0.00
9050 W. Tropicana Avenue
Las Vegas, NV 89147 Clark County Nevada Development Services 500 S. Grand Central Pkwy
(computer equipment) Homeowners association management agreement Homeowners association management agreement Homeowners association management agreement Off-Site Improvements Agreement
Rhodes Ranch Parcel 20 Unit 2, HTE 05-46722/HTE 09-2990
$0.00
i st Floor
Box 551799
Entered 11/12/09 16:22:42
Las Vegas, NV 89155-1799 Clark County Nevada Development Services 500 S. Grand Central Pkwy
Rhodes Ranch GP
Off-Site Improvements Agreement
Seeliger Street, HTE 06-51550 (APN 176-17-310-002)
$0.00
1 st Floor
Page 47 of 61
Box 551799 Las Vegas, NV 89155-1799 Clark County Nevada Development Services 500 S. Grand Central Pkwy
Rhodes Ranch GP
Seeliger Street Phase, 2 HTE 068770
$0.00
i st Floor
Box 551799
Las Vegas, NV 89155-1799

10
7320J-002\DOcS ~ LA:21 0795.1
CONTRACT COUNTER-
DEBTOR

Rhodes Ranch GP
TYPE OF CONTRACT
$0.00
PROJECTIDEVELOPMENT
Clark County Nevada Development Services 500 S. Grand Central Pkwy
Rhodes Ranch Parcel 10 Unit i I, HTE 06-37497 (APN 176-08-201-
Oil)
1 st Floor
Box 551799
Case 09-14814-lbr
Las Vegas, NV 89155-1799 Clark County Nevada Development Services 500 S. Grand Central Pkwy
Rhodes Design and Development/Rhodes Homes

Off-Site Improvement Agreement
Spanish Hills SA, HTE 01-3 1446
$0.00
i st Floor
Doc 713-7
Box 551799
Tuscany Maintenance Facility (APN 160-32-210-001) #2002705001
$0.00
Tuscany Maintenance Water/Sewer
$0.00
Rhodes Design and Off-Site Development/Rhodes Improvement Homes Agreement

#2004870064
Entered 11/12/09 16:22:42
Tuscany Parcel 6A #2006870049
$0.00
Tuscany Parcell 0 (APN 160-32-
$0.00
Rhodes Design and Off-Site Development/Rhodes Improvement Agreement Homes
612-001) #2005870194
Page 48 of 61

Rhodes Design and
Tuscany Parcel 1 i #2006870000
$0.00
Las Vegas, NV 89155-1799 City of Henderson 240 Water Street P.O. Box 95050 Henderson, NV 89009-5050 City of Henderson 240 Water Street P.O. Box 95050 Henderson, NV 89009-5050 City of Henderson 240 Water Street P.O. Box 95050 Henderson, NV 89009-5050 City of Henderson 240 Water Street P.O. Box 95050 Henderson, NV 89009-5050 City of Henderson 240 Water Street P.O. Box 95050 Henderson, NV 89009-5050 City of Henderson Off-Site
Tuscany Parcel 12 #2004870179
$0.00
73203-002\DOCS _LA:2 i 0795. i
Ii
DEBTOR
PROJECT/DEVELOPMENT
PARTY
NAME
&
TYPE OF CONTRACT
Improvement Agreement
SERVICE ADDRESS
240 Water Street P.O. Box 95050 Henderson, NV 89009-5050
City of
Henderson
Tuscany Parcel 14 (APN 160-32$0.00

610-00 i) #200687000 I
Case 09-14814-lbr

Tuscany ParcellS #2005870136
Rhodes Design and Off-Site Development/Rhodes Improvement Homes Agreement

$0.00
Doc 713-7
240 Water Street P.O. Box 95050 Henderson, NV 89009-5050 City of Henderson 240 Water Street P.O. Box 95050 Henderson, NV 89009-5050 City of Henderson 240 Water Street P.O. Box 95050 Henderson, NV 89009-5050
Tuscany Parcels 16 & 17 #2002702075
$0.00
City of
Henderson
Rhodes Design and Development/Rhodes Homes Rhodes Design and Off-Site Development/Rhodes Improvement Agreement Homes Rhodes Design and Development/Rhodes Homes
Off-Site Improvement Agreement Off-Site Improvement Agreement
Tuscany Parcel 18#2002705132
$0.00
Tuscany Parcell 9 #2002405133
$0.00
Entered 11/12/09 16:22:42
Tuscany Parcels 23 & 25 #2005870045
$0.00
Page 49 of 61
240 Water Street P.O. Box 95050 Henderson, NV 89009-5050 City of Henderson 240 Water Street P.O. Box 95050 Henderson, NY 89009-5050 City of Henderson 240 Water Street P.O. Box 95050 Henderson, NV 89009-5050 City of Henderson 240 Water Street P.O. Box 95050 Henderson, NV 89009-5050
Rhodes Ranch
12
Tuscany Parcel 24 #2002705045
$0.00
Lexon Insurance Company
Bond
Bond # 5020298 (Rhodes Ranch
$0.00
7J20J-002\DOCS _ LA:21 0795.1
DEBTOR

Limited Partnership
Parcel 20 Unit 2)
TYPE 0 F CONTRACT
PROJECTIDEVELOPMENT
Bond Safeguard Insurance Company 1919 S. Highland Dr. Bldg.
Case 09-14814-lbr
Suite 300 Lombard, IL 60148 Zurich American Insurance 60 I Oakmont Lane, Ste. 400
Bond
Bond # 8842781 (Seeliger Street)
$0.00
Westmont,IL 60559
Bond
Phase 2)
Zurich American Insurance 601 Oakmont Lane, Ste. 400

Bond # 8825616 (Seeliger Street
$0.00
Doc 713-7
Westmont,IL 60559

Bond
Bond
Bond # 8840999 (Rhodes Ranch Parcel 10 Unit 1 1)

Bond # 5018764 (Spanish Hills SA)
$0.00
Westmont,IL 60559
Lexon Insurance Company Bond Safeguard Insurance Company 1919 S. Highland Dr. Bldg.
$0.00
Entered 11/12/09 16:22:42
Suite 300 Lombard, IL 60148 Lexon Insurance Company Bond Safeguard Insurance Company 1919 S. Highland Dr. Bldg.
Bond
Bond # 5014307 (Tuscany Maint. OS Imp.)
$0.00
Page 50 of 61
Bond
Bond # 5014306 (Tuscany Maint.

Water Sewer)
Suite 300 Lombard, IL 60148 Lexon Insurance Company Bond Safeguard Insurance Company
13
$0.00
73203-002\DOcS_LA:2!0795.!
CONTRACT COUNTER-
DEBTOR
TYPE OF CONTRACT
PROJECTIDEVELOPMENT
1919 S. Highland Dr. Bldg.
Tuscany
Bond
Bond # 5029286 (Tuscany 6A)

$0.00
Acquisitions IV,
Case 09-14814-lbr
LLC
Doc 713-7
Suite 300 Lombard, IL 60148 Zurich American Insurance 60 I Oakmont Lane, Ste. 400
Bond
Bond # 8826397 (Tuscany 10)
$0.00
Westmont,IL 60559

Bond
Bond
Bond # 8865454 (Tuscany i I)
$0.00
Westmont,IL 60559
Zurich American Insurance 60 I Oakmont Lane, Ste. 400

Bond
$0.00
Westmont,IL 60559
Entered 11/12/09 16:22:42
Rhodes Design and Development Corporation Rhodes Design and Development Corporation Rhodes Design and Development Corporation Rhodes Design and Development Corporation
$0.00
Tuscany
Acquisitions Il,
Bond
Bond # 502 i 428 (Tuscany 15)
$0.00
Page 51 of 61
LLC
Suite 300
14
7J2OJ-002\DOcS _ LA2 i 0795. i
CONTRACT COUNTER-
DEBTOR

Bond # 5019816 (Tuscany 16 & 17)
TYPE OF CONTRACT
PROJECT/DEVELOPMENT
Lombard, IL 60 I 48

Bond
$0.00
Case 09-14814-lbr

Bond
$0.00
Doc 713-7
Bond
Bond # 501 7134 (Tuscany 23 & 25)
$0.00
Entered 11/12/09 16:22:42
Suite 300 Lombard, IL 60148 Zurich American Insurance 601 Oakmont Lane, Ste. 400
Bond
$0.00
Westmont,IL 60559

Bond
Bond # 5034264 (Mohave AZSheriffs Offce Detention)
Page 52 of 61
Pinnacle Grading, LLC
$0.00
Lexon Insurance Company Bond Safeguard Insurance Company 1919 S Highland Dr. Bldg. A Suite 300 Lombard, IL 60148 Lexon Insurance Company
Tuscany Golf
15
Bond
Bond # 1008343 (NV DeDt Tax
$0.00
7J20J-002\DOcS _LA:2 i 0795.1
CONTRACT COUNTER-
DEBTOR

Country Club, LLC
Sales Tax Tuscany Golf Course)
TYPE OF CONTRACT
PROJECT/DEVELOPMENT
Bond Safeguard Insurance Company 1919 S. Highland Dr. Bldg.
Case 09-14814-lbr
Rhodes
Framing/Bravo, Inc.
Bond
Bond # 5019324 (State Contractors
$0.00
Board-Bravo)
Doc 713-7

Rhodes Ranch Parcel
Rhodes Ranch
Rhodes Ranch
$0.00
Suite 300 Lombard, lL 60148 County of Clark 500 S. Grand Central Pkwy Las Vegas, NV 89155 Las Vegas Valley Water District
10 Unit i i
$0.00
1001 South Valley
View
Development Agreement ConstlUction agreement for water facilities
Las Vegas, NV 89153

Construction agreement for water facilities
Entered 11/12/09 16:22:42
City of
Henderson Dept of
Rhodes Design and Development Corporation/Rhodes Homes Rhodes Design and Development Corporation/Rhodes Homes
Tuscany Parcel 6A
$0.00
Page 53 of 61
Rhodes Design and Development Corporation/Rhodes Homes

Rhodes Design and Development Corporation/Rhodes
16
Tuscany Parcel 10
$0.00
Utility Services 240 Water Street P.O. Box 95050 Henderson, NV 89009-5050 City of Henderson Dept of Utility Services 240 Water Street P.O. Box 95050 Henderson, NV 89009-5050 City of Henderson Dept of Utility Services 240 Water Street
Tuscany Parcel 11
$0.00
7J203-002\DOcS _LA:211l95.1
DEBTOR

Homes
TYPE 0 F CONTRACT
PROJECTIDEVELOPMENT
Case 09-14814-lbr

Tuscany Parcel 14
$0.00

Tuscany ParcellS
$0.00
Doc 713-7
Water supply
Rhodes Ranch Parcel 20 Unit 1
$0.00
agreement and/or application for water service

Water supply
P.O. Box 95050 Henderson, NV 89009-5050 City of Henderson Dept of Utility Services 240 Water Street P.O. Box 95050 Henderson, NV 89009-5050 City of Henderson Dept of Utility Services 240 Water Street P.O. Box 95050 Henderson, NV 89009-5050 Las Vegas Valley Water District 1001 South Valley View Las Vegas, NV 89153 Las Vegas Valley Water District
$0.00
1001 South Valley
View
Las Vegas, NV 89 153

Water supply
Entered 11/12/09 16:22:42
$0.00
Rhodes Design and Development Corporation/Rhodes Homes Rhodes Design and Development Corporation/Rhodes Homes Rhodes Design and Development Corporation/Rhodes Homes

Water supply agreement and/or
Rhodes Ranch Parcel 12
Las Vegas Valley Water District 1001 South Valley View Las Vegas, NV 89153 Las Vegas Valley Water District
Rhodes Design and
$0.00
1001 South Valley
View
application for water

servi ce
Development Corporation/Rhodes Homes

Rhodes Design and
Page 54 of 61
Water supply
Rhodes Ranch Parcel 14
$0.00
agreement and/or application for water

servi ce Water supplv
West 57"
Las Vegas, NV 89153 Las Vegas Valley Water District i 00 i South Valley View Las Vegas, NV 89153 Las Vegas Valley Water
Development Corporation/Rhodes Homes Rhodes Design and
17
$0.00
73203-002\DOCS _ LA:21 0795.1
CONTRACT COUNTERCURE AMOUNT (LESS RET AINER OR DEPOSIT
DEBTOR
TYPE OF CONTRACT
PROJECTIDEVELOPMENT
District
1001 South Valley
View

Las Vegas, NV 89153 Las Vegas Valley Water District

Spanish Hills
$0.00
1001 South Valley
View
application for water service

Case 09-14814-lbr
Spanish Hills multi-family/X-IT
$0.00
Las Vegas, NV 89153 Las Vegas Valley Water District i 00 I South Valley View Las Vegas, NV 89153
Tuscany Parcel 6A
Doc 713-7
City of
Henderson Dept of
Development Corporation/Rhodes Homes Rhodes Design and Development Corporation/Rhodes Homes Rhodes Design and Development Corporation/Rhodes Homes Rhodes Design and Development Corporation/Rhodes Homes
$0.00

Water supply
Tuscany Parcel 10
$0.00

Tuscany Parcel I I
Entered 11/12/09 16:22:42
Utility Services 240 Water Street P.O. Box 95050 Henderson, NV 89009-5050 City of Henderson Dept of Utility Services 240 Water Street P.O. Box 95050 Henderson, NV 89009-5050 City of Henderson Dept of Utility Services 240 Water Street P.O. Box 95050 Henderson, NV 89009-5050
$0.00

Tuscany Parcel 12
City of
Henderson Dept of
$0.00
Uti li ty S ervi ces
Page 55 of 61
240 Water Street P.O. Box 95050 Henderson, NV 89009-5050 Rhodes Design and Development
18

Water supply
Tuscany Parcel 14
City of
Henderson Dept of
$0.00
Utility Services
agreement and/or
7:203-002\DOCS_LA:21 079:), i
CONTRACT COUNTER-
DEBTOR

Corporation/Rhodes Homes
Water supply
Tuscany ParcellS
TYPE OF CONTRACT
$0.00
PROJECTIDEVELOPMENT

servi ce
Case 09-14814-lbr

Water supply
Tuscany Parcel 16
$0.00

servi ce

Water supply
Tuscany Parcel 17
Doc 713-7
$0.00

Water supply
Tuscany Parcel 18
$0.00

servi ce

Entered 11/12/09 16:22:42
Tuscany Parcel 19
$0.00

Water supply

Tuscany Parcel 23
Page 56 of 61
$0.00
240 Water Street P.O. Box 95050 Henderson, NV 89009-5050 City of Henderson Dept of Utility Services 240 Water Street P.O. Box 95050 Henderson, NV 89009-5050 Henderson Dept of City of Utility Services 240 Water Street P.O. Box 95050 Henderson, NV 89009-5050 City of Henderson Dept of Utility Services 240 Water Street P.O. Box 95050 Henderson, NV 89009-5050 City of Henderson Dept of Utility Services 240 Water Street P.O. Box 95050 Henderson, NV 89009-5050 City of Henderson Dept of Utility Services 240 Water Street P.O. Box 95050 Henderson, NV 89009-5050 City of Henderson Dept of Utility Services 240 Water Street P.O. Box 95050 Henderson, NV 89009-5050
73203-002\DOCS _LA:2 i 0795.1
19
CONTRACT COUNTER-
DEBTOR

Rhodes Design and
TYPE OF CONTRACT
Tuscany Parcel 24
PROJECTIDEVELOPMENT
City of
Water supply
$0.00

servi ce
Development Corporation/Rhodes Homes
Water supply
agreement and/or
Case 09-14814-lbr
Tuscany Parcel 25
$0.00
application for water

servi ce
Henderson Dept of Utility Services 240 Water Street P.O. Box 95050 Henderson, NV 89009-5050 Henderson Dept of City of Utility Services 240 Water Street P.O. Box 95050 Henderson, NV 89009-5050
Nevada Power
Doc 713-7
6226 West Sahara Avenue
Feeder line agreement
Rhodes Ranch RR2 MP A 90777
$0.00
Las Vegas, Nevada 89146
Nevada Power
Rhodes Ranch RR3 MPA 175637
$0.00
Nevada Power
Palm Hils MPA 84071
$0.00
Rhodes Design and Development Corporation/Rhodes Homes Rhodes Design and Development Corporation/Rhodes Homes Rhodes Design and Development Corporation/Rhodes Homes
Feeder line agreement Feeder line agreement
Tuscany 172531
Entered 11/12/09 16:22:42
Nevada Power
$0.00
Las Vegas, Nevada 89146 Nevada Power
Tuscany 177546
$0.00
6226 West Sahara Avenue Las Vel!as, Nevada 89146
Page 57 of 61
Health Plan of
Nevada
P. O. Box 15645 Las Vegas, NV 891 14-5645
Health insurance agreement
$0.00
Ceridian
Rhodes Design and Development Corporation/Rhodes Homes Rhodes Design and

20
Cobra and HIPPA
$0.00
73203-002\DOCS_LA:210795.1
CONTRACT COUNTER-
DEBTOR

services
TYPE OF CONTRACT
PROJECTIDEVELOPMENT
320 I 34' i Street South
St. Petersburg, FL 3371 1
American Family Life Assurance Company (AFLAC) 2990 Sunridge Heights Pkwy
Development Corporation/Rhodes Homes Rhodes Design and Development Corporation/Rhodes Homes
Reimbursement services agreement
$0.00
Case 09-14814-lbr
Suite 140
Henderson, NV 89052
Software license agreement
$0.00
Doc 713-7
Sage Software, Inc.
15195 NW Greenbrier Pkwy Beaverton, OR 97006
Builder MT
$0.00
200 Union Boulevard
Suite 500 Lakewood, CO 80228 Builder 1440, Inc. 2000 W. 41s' Street Baltimore, MD 212 i i
$0.00
Entered 11/12/09 16:22:42
BNA P.O. Box 17009 Baltimore, MD 21297-1009
$0.00
ICB Consulting, Inc.
$0.00
2855 N. Speer Suite #B
Page 58 of 61
Denver, CO 802 i 1
Software license agreement (Crystal Reports)
Strata Systems LC
$0.00
PO Box 91358
Austin, TX 78709-1358
Rhodes Design and Development Corporation/Rhodes Homes Rhodes Design and Development Corporation/Rhodes Homes Rhodes Design and Development Corporation/Rhodes Homes Rhodes Design and Development Corporation/Rhodes Homes Rhodes Design and Development Corporation/Rhodes Homes Rhodes Design and Development Corporation/Rhodes
Software license agreement (Punchlist Manager)
21
7J20J-002\DOC'S .LA:2 i 0795. i
DEBTOR
TYPE OF CONTRACT
PROJECT/DEVELOPMENT
Microsoft Licensing, GP 6100 Neil Road, Suite 210 Reno, NV 8951 1-1137 Microsoft Corporation One Microsoft Way
Software license agreement/volume licensing program
$0.00
Homes Rhodes Design and Development Corporation/Rhodes Homes
Case 09-14814-lbr
Redmond, W A 98052
De Lage Landen Financial Services, Inc.
Rhodes Design and Loan Agreement Development/Rhodes Homes
$0.00
Doc 713-7
Software license
$0.00
i II i Old Eagle School Road Wayne,PA 19087 Symantec P.O. Box 202475 Dallas, TX 75320 Piracle
Software license
agreement (Create-a-
$0.00
556 Confluence Avenue
Murray, UT 84123
Rhodes Ranch
Rhodes Design and Development/Rhodes Homes Rhodes Design and Development Corporation/Rhodes Homes
check)
Declaration of CC&Rs
Rhodes Ranch
$0.00
Entered 11/12/09 16:22:42
Limited Partnership/Rhodes Homes Declaration of Rhodes Design and Development/Rhodes CC&Rs Homes
Tuscany
$0.00
Page 59 of 61
7J2OJ-002\DOCS_LA:21 0795. i
22
RHODES ARIZONA CONTRACTS TO BE ASSUMED AND ASSIGNED TO THE RHODES ENTITIES
CONTRACT COUNTER-
DEBTOR

Rhodes Homes
TYPE OF CONTRACT
$0.00
PROJECT/DEVELOPMENT
UNS Electric, Inc.
(UniSource Services) 2498 Airway Ave Kingman, AZ 86409

Rhodes Homes
Master Consulting
Case 09-14814-lbr
Arizona, LLC
Extension of power distribution line
Golden Valley Ranch, Mohave County, AZ
Slater Hanifan Group, Inc.
$0.00
5740 Soutli Arville St. #216 Las Vegas, NV

and Professional
Rhodes Homes
Arizona, LLC
Utilities Inc.
Services Agreement Provision of water

servi ce
Doc 713-7
2335 Sanders Rd Northbrook, IL 60062-6108

Rhodes Homes
Arizona, LLC

$0.00
Arizona Corporation
Commission Utilities Division 1200 West Washington Phoenix, AZ 85007-2996

Rhodes Homes
Arizona, LLC
Approval for master plan
$0.00
Arizona Department of
Arizona, LLC
$0.00
Water Resources
Proof of adequate water supply
3550 N. Central Ave.

Rhodes Homes
Entered 11/12/09 16:22:42
Phoenix, AZ 85012 Arizona Depaiiment of Environmental Quality Phoenix Main Offce i I 10 W. Washington St. Phoenix, AZ 85007
Arizona, LLC
Water and sewer master plan for Pravada
$0.00
County of
Mohave
Rhodes Homes
Page 60 of 61
Development Services Attn: Nicholas S. Hont, PE 3675 E. Andy Devine Ave
Arizona, LLC
Development agreement/specific zoning agreement
$0.00
Kingman, AZ 86401
73203-002\DOCS _LA:2 i 0795. i
23
CONTRACT COUNTER-
DEBTOR

Rhodes Homes
TYPE OF CONTRACT
PROJECTIDEVELOPMENT
Mohave County
$0.00
Development Services Attn: Nicholas S. Hont, PE 3675 E. Andy Devine Ave

Rhodes Homes
Arizona, LLC
Mohave Co, AZ - Golden Valley Ranch Phase 1 Grading #B0601258K
Kingman, AZ 86401
Bond
$0.00
Case 09-14814-lbr
Lexon Insurance Company Bond Safeguard Insurance Company 1919 S Highland Dr. Bldg. A Suite 300 Lombard, IL 60148
Arizona, LLC
Bond # 5022081 (Mohave AZgolden Valley Ranch Phase i Grading)
Doc 713-7 Entered 11/12/09 16:22:42 Page 61 of 61
73203"002\DOCS_ LA:2 i 0795. i
24

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Case 09-14814-lbr

Entered 11/12/09 16:22:42

Electronically Filed November 12, 2009

Case No.: BK-S-09-14814-LBR (Jointly Administered) Chapter 11

Hearing Date: November 16, 2009 Hearing Time: 1:30 p.m.

Entered 11/12/09 16:22:42

Affects the following Debtor(s)

Entered 11/12/09 16:22:42

Entered 11/12/09 16:22:42

Entered 11/12/09 16:22:42

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Entered 11/12/09 16:22:42

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Entered 11/12/09 16:22:42

Summary and Treatment of Allowed Classified Claims

DESCRIPTION First Lien Lender Secured Claims

Projected Recovery on Account of Secured Claims:

Entered 11/12/09 16:22:42

ESTIMATED AMOUNT OR VALUE OF CLAIMS (CONSOLIDATED BASIS)

Entered 11/12/09 16:22:42

ESTIMATED AMOUNT OR VALUE OF CLAIMS (CONSOLIDATED BASIS)

Estimated asserted amount $15 million +

Entered 11/12/09 16:22:42

ESTIMATED AMOUNT OR VALUE OF CLAIMS (CONSOLIDATED BASIS)

Entered 11/12/09 16:22:42

Entered 11/12/09 16:22:42

Entered 11/12/09 16:22:42

Entered 11/12/09 16:22:42

Entered 11/12/09 16:22:42

Entered 11/12/09 16:22:42

Entered 11/12/09 16:22:42

Entered 11/12/09 16:22:42

Entered 11/12/09 16:22:42

Entered 11/12/09 16:22:42

Entered 11/12/09 16:22:42

Article II is based primarily on representations made by the Debtors.

Entered 11/12/09 16:22:42

Entered 11/12/09 16:22:42

Entered 11/12/09 16:22:42

Entered 11/12/09 16:22:42

Entered 11/12/09 16:22:42

Entered 11/12/09 16:22:42

Initiation of the Chapter 11 Cases

Entered 11/12/09 16:22:42

Home Sale Motion

Entered 11/12/09 16:22:42

Entered 11/12/09 16:22:42

Entered 11/12/09 16:22:42

Entered 11/12/09 16:22:42

Entered 11/12/09 16:22:42

Entered 11/12/09 16:22:42

Class B Priority Non-Tax Claims

Entered 11/12/09 16:22:42

Entered 11/12/09 16:22:42

Entered 11/12/09 16:22:42

Entered 11/12/09 16:22:42

Sources of Consideration for Plan Distributions

Entered 11/12/09 16:22:42

Entered 11/12/09 16:22:42