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Nile Leatham (NY Bar No. 002838)

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KOLESAR & LEATHAM

Wells Fargo Financial Center 3320 W. Sahara Ave.

Las Yegas, NY 89 i 02
Telephone: 702.979.2357
Facsimile: 702.362.9472

Electronically Filed October 27, 2009

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E-Mail: nleathamklnevada.com

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Philip C. Dublin (NY Bar No. 2959344) Abid Qureshi (NY Bar No. 2684637)
AKIN GUMP STRAUSS HAUER & FEW LLP

One Bryant Park New York, NY 10036

Telephone: 212.872.1000
Facsimile: 212.872.1002

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E-Mail: odublin(cakingumo.com

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aqureshiakingump.com
Counsellor ihe Firsl Lien Sleering Commilee

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UNITED STATES BANKRUPTCY COURT DISTRICT OF NEVADA

In re:

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

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THE RHODES COMPANIES, LLC, aka

"Rhodes Homes," et aI.,

Chapter 1 1

Debtors.

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Affects: ~ All Debtors

Hearing Date: October 30, 2009

Hearing Time: 1 :30 p.m.

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'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

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Concrete LLC (Case No. 09-14822): Bravo, Inc. (Case No. 09-14825): Elkhorn Partners. A Nevada Limited

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Partnership (Case No. 09-14828): Six Feathers Holdings. LLC (Case No. 09-14833); Elkhorn Investments. Inc. (Case No. 09-14837); Jampa, 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 IlL, LLC (Case No. 09-14850); Tuscany Acquisitions II. LLC (Case No. 09-14852): Tuscany Acquisitions. LLC (C"e No. 09-14853): Rhodes Ranch GoirCountry Club. LLC (Case No. 09-14854); Overfow, LP (Case No. 09-14856); Wallboard, LP (Case No. 09-14858): Jackkife. 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): RJiodes 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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1 0 Affects the following Debtor(s)

Courtroom I

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FIRST AMENDED DISCLOSURE

STATEMENT FOR THE FIRST 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 PLAN OF

REORGANIZATION PURSUANT TO CHAPTER 11 OF THE UNITED STATES
BANKRUPTCY CODE FOR THE RHODES COMPANIES, LLC, ET AL. (THE "PLAN"), CERTAIN STATUTORY PROYISIONS, CERTAIN DOCUMENTS RELATED TO THE PLAN, CERTAIN EYENTS IN THE DEBTORS' CHAPTER 11 CASES AND CERTAIN

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FINANCIAL INFORMATION. ALTHOUGH THE FIRST LIEN STEERING

COMMITTEE BELIEYES THAT THESE SUMMARIES ARE FAIR AND ACCURATE, THESE SUMMARIES ARE QUALIFIED IN THEIR ENTIRETY TO THE EXTENT THAT

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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

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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 EYENT OF ANY INCONSISTENCY OR DISCREPANCY BETWEEN A DESCRIPTION IN THE DISCLOSURE STATEMENT AND THE TERMS AND PROYISIONS OF THE PLAN OR THE OTHER DOCUMENTS AND FINANCIAL INFORMATION INCORPORATED

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HEREIN BY REFERENCE, THE PLAN OR THE OTHER DOCUMENTS AND

FINANCIAL INFORMATION, AS THE CASE MAY BE, SHALL GOYERN FOR ALL

PURPOSES. FACTUAL INFORMATION CONTAINED IN THE DISCLOSURE

STATEMENT HAS BEEN PROYIDED BY THE DEBTORS' MANAGEMENT EXCEPT

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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.

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THE STATEMENTS AND FINANCIAL INFORMA TION 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 HAYE BEEN NO CHANGES IN THE FACTS SET FORTH HEREIN BETWEEN THE DATE HEREOF AND THE TIME OF SUCH REYIEW. EACH HOLDER OF A CLAIM ENTITLED TO YOTE ON THE

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PLAN SHOULD CAREFULLY REYIEW THE PLAN, THE DISCLOSURE STATEMENT, AND EXHIBITS TO THE PLAN IN THEIR ENTIRETY BEFORE CASTING A BALLOT.

THE DISCLOSURE STATEMENT DOES NOT CONSTITUTE LEGAL, BUSINESS, FINANCIAL OR TAX ADVICE. ANY PERSONS DESIRING ANY SUCH ADYICE OR
OTHER ADYICE SHOULD CONSULT WITH THEIR OWN ADVISORS.

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NO PARTY IS AUTHORIZED TO GIVE ANY INFORMATION WITH RESPECT TO THE PLAN OTHER THAN THAT WHICH IS CONTAINED IN THE DISCLOSURE STATEMENT. NO REPRESENT A TIONS CONCERNING THE DEBTORS OR THE Y ALUE OF THEIR PROPERTY HA YE BEEN AUTHORIZED BY THE FIRST LIEN STEERING COMMITTEE OTHER THAN AS SET FORTH IN THE DISCLOSURE

STATEMENT. ANY INFORMATION, REPRESENTATIONS OR INDUCEMENTS

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MADE TO OBTAIN AN ACCEPTANCE OF THE PLAN THAT ARE OTHER THAN, OR INCONSISTENT WITH, THE INFORMATION CONTAINED HEREIN AND IN THE

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PLAN SHOULD NOT BE RELIED UPON BY ANY HOLDER OF A CLAIM OR

INTEREST.

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WITH RESPECT TO CONTESTED MATTERS, ADYERSARY PROCEEDINGS AND OTHER PENDING, THREATENED OR POTENTIAL LITIGATION OR ACTIONS, THE DISCLOSURE STATEMENT DOES NOT CONSTITUTE AND MAY NOT BE

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CONSTRUED AS AN ADMISSION OF FACT, LIABILITY, STIPULATION OR

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W AIYER, BUT RATHER AS A STATEMENT MADE IN SETTLEMENT

NEGOTIATIONS AND PROTECTED BY RULE 408 OF THE FEDERAL RULES OF EYIDENCE.

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THE DISCLOSURE STATEMENT HAS NOT BEEN APPROYED OR DlSAPPROYED BY THE UNITED STATES SECURITES AND EXCHANGE
COMMISSION (THE "SEC), NOR HAS THE SEC PASSED UPON THE ACCURACY
OR ADEQUACY OF THE STATEMENTS CONTAINED HEREIN.

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ALTHOUGH THE FIRST LIEN STEERING COMMITTEE HAS USED ITS BEST EFFORTS TO ENSURE THE ACCURACY OF THE FINANCIAL INFORMATION PROYIDED IN THE DISCLOSURE STATEMENT, THE FINANCIAL INFORMATION
CONTAINED IN, OR INCORPORATED BY REFERENCE INTO, THE DISCLOSURE STATEMENT HAS NOT BEEN AUDITED.

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THE PROJECTIONS PROYIDED IN THE DISCLOSURE STATEMENT HAYE

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BEEN PREPARED BY THE FIRST LIEN STEERING COMMITTEE WITH THE

ASSISTANCE OF ITS ADYISORS. THESE PROJECTIONS, WHILE PRESENTED WITH

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NUMERICAL SPECIFICITY, ARE NECESSARILY BASED ON A YARIETY 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, COMPETITYE, INDUSTRY, REGULATORY, MARKET AND FINANCIAL UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND THE FIRST LIEN STEERING COMMITTEE'S CONTROL. THE FIRST LIEN STEERING COMMITTEE CAUTIONS

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THAT NO REPRESENTATIONS CAN BE MADE AS TO THE ACCURACY OF THESE PROJECTIONS OR TO THE ABILITY TO ACHIEYE THE PROJECTED RESULTS.

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SOME ASSUMPTIONS INEYITABLY WILL NOT MATERIALIZE. FURTHER, EYENTS AND CIRCUMSTANCES OCCURRING SUBSEQUENT TO THE DATE ON WHICH THESE PROJECTIONS WERE PREPARED MAY BE DIFFERENT FROM THOSE ASSUMED OR, ALTERNATIYELY, 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 YI OF THE DISCLOSURE STATEMENT, ENTITLED "CERTAIN

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FACTORS TO BE CONSIDERED PRIOR TO YOTING," FOR A DISCUSSION OF

CERTAIN CONSIDERATIONS IN CONNECTION WITH A DECISION BY A HOLDER OF AN IMP AIRED CLAIM TO ACCEPT OR REJECT THE PLAN.

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THE DISCLOSURE STATEMENT HAS BEEN DETERMINED BY THE

BANKRUPTCY COURT TO CONTAIN ADEQUATE INFORMATION AS REQUIRED BY SECTION 1 125 OF TITLE 11 OF THE UNITED STATES CODE, 11 U.S.C. 101 -

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1532 (THE "BANKRUPTCY CODE"), WHICH DETERMINATION DOES NOT

CONSTITUTE A RECOMMENDATION OR APPROY AL OF THE PLAN.

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UNLESS OTHERWISE STATED, ANY CAPITALIZED TERM USED HEREIN SHALL HA YE THE MEANING ASSIGNED TO SUCH TERM HEREIN OR, IF NO MEANING IS SO ASSIGNED, THE MEANING ASSIGNED TO SUCH TERM IN THE
PLAN.

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THE BANKRUPTCY COURT HAS SCHEDULED THE CONFIRMATION

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HEARING TO COMMENCE ON DECEMBER 17), 2009 AT 19:30 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 I 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

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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 3), 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

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SOLICITATION NOTICE, THEY MAY NOT BE CONSIDERED BY THE

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BANKRUPTCY COURT.

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TABLE OF

CONTENTS

ARTICLE i. SUMMARY ................................................................................................................1

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A. Rules of Interpretation ............................................................................................1 the Plan ...................................................................................... C. The Debtors' Principal Assets and Indebtedness .....................................................3 Claims and Interests ..........................................................................3
B. The Purpose of D. Treatment of

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E. Claims Estimates. .... ...... ... ... ......... ................. .... ............ ...................... ................ ..... F. Certain Factors to Be Considered Prior to Yoting.................................................

G. Yoting and Confirmation.........................................................................................8 the Plan...................................................................................

H. Consummation of

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ARTICLE II. BACKGROUND ...................................................................................................1 A. Deseription of the Debtors' Business Operations ..................................................1 B. Pending Litigation..................................................................................................13

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ARTICLE II THE CHAPTER 11 CASES................................................................................1 A. Events Leading to the Chapter I J Cases.............................................................1

B. Initiation of

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the Chapter 11 Cases.........................................................................1

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C. Stabilization of Operations ..................................................................................1 D. Appointment oftlie Creditors' Committee ............................................................1 E. Claims Bar Dates .................................................................................................1 F. Other Postpetition Events and Negotiations ........................................................ J
ARTICLE IV SUMMARY OF THE PLAN...............................................................................2

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A. Overview of Chapter 11.......................................................................................2 B. Administrative and Priority Claims .......................................................................25 C. Classification and Treatment ofCJaims...............................................................2
D. Cramdown ........... .......... ... ..... .... ....... ...... ..... .... ....... ..... ...... ... ......... .... ..... ... .............2
E. Means for Implementation of F. Treatment of

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the Plan..................................................................2 Executory Contracts and Unexpired Leases.....................................4

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G. Procedures for Resolving Disputed Claims .........................................................4 H. Provisions Governing Distributions......................................................................48 the Plan.......................................................................5
I. Effect of Con fin nation of

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J. Allowance and Payment of Certain Administrative Claims ................................6 i K. Conditions Precedent to Confinnation and Consummation of the Plan................63 1. Modification, Revocation, Or Withdrawal oftlie Plan ..........................................6

M. Retention of Jurisdiction .......................................................................................6

ARTICLE V. STATUTORY REQUIREMENTS FOR CONFIRMATION OF THE PLAN ........6

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A. The Confinnation Hearing..................................................................................6 B. Confirmation Standards .......................................................................................68

C. Financial Feasibility.............. .......................... ......... ........................ ......................6 D. Best Interests of Creditors Test ..............................................................................6 E. Acceptance by Impaired Classes ..........................................................................72 F. Confinnation Withoul Acceptance by All Impaired Classes ................................7
ARTICLE YI. CERTAIN FACTORS TO BE CONSIDERED PRIOR TO YOTING ..................73

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A. Cei1ain Bankruptcy Considerations .......................................................................7

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B. Other Considerations ..........................................................................................7 C. Plan Risk Factors ...................................................................................................7

ARTICLE YLL. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.................................8

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B. Certain Federal

A. Certain U.S. Federal Income Tax Consequences to Reorganized Debtors ............81 Income Tax Consequences to Holders ofClaims.........................83 C. Other Tax Matters ................................................................................................93

ARTICLE VLL. RECOMMENDATION ....................................................................................9

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ARTICLE IX. CONCLUSION ......................................................................................................95

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ARTICLE i.
1

SUMMARY

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The following summary is qualified in its entirety by the more detailed information
contained in the Plan and elsewhere in the Disclosure Statement.

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On either March 31, 2009 or April, I, 2009 (collectively, the "Petition Date"), The
Rhodes Companies, LLC and certain of its affiliates and subsidiaries (collectively, the "Debtors") each filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code in the Bankruptcy Court. Prior to and after the Petition Date, the Debtors operated one of the largest independent homebuilding businesses in Las Yegas and Nevada.

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The Disclosure Statement is being furnished by the First Lien Steering Committee pursuant to section 1125 of the Bankruptcy Code in connection with: (a) the solicitation of

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9 votes for the acceptance or rejection of the Plan and (b) the confirmation hearing (the "Confirmation Hearing"), which is scheduled for (December 17), 2009 at (9:30 a.m.) Pacific

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10 Time (the "Confirmation Hearing Date"). A copy of the Plan is annexed hereto as Exhibit A
and incorporated by reference herein.

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The Disclosure Statement describes certain aspects of the Plan, including the treatment of Claims and Interests, and describes certain aspects of the Debtors' operations, projections
and other related matters.
Rules oflnteroretation

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The following rules for interpretation and construction shall apply to the Disclosure Statement: (1) capitalized terms used in the Disclosure Statement and not otherwise defined shall have the meanings ascribed to sueh terms in Article L.A of the Plan; (2) 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 masculine, feminine and the neuter gender; (3) unless

otherwise specified, any reference in the Disclosure Statement to a contract, instrument,

release, indenture or other agreement or document being in a particular fonn or on particular

20 tenns and conditions means that such document shall be substantially in such form or substantially on such terms and conditions; (4) unless otherwise specified, any reference in the 21 Disclosure Statement 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 22 or supplemented; (5) any reference to an Entity as a Holder of a Claim or Interest includes that 23 Entity's successors and assigns; (6) unless otherwise specified, all references in the Disclosure

Statement to Articles are references to Articles of the Disclosure Statement or to the

Statement to exhibits are references to exhibits in the Plan Supplement; (8) the words
"herein," "hereof," and "hereto" refer to the Disclosure Statement in its entirety rather than to a particular portion of the Disclosure Statement; (9) 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 Disclosure Statement; (10) unless otherwise set forth in the Disclosure Statement, the rules of construction set forth in Bankruptcy Code section 102 shall apply; (1 J)

24 Disclosure Statement; (7) unless otherwise specified, all references in the Disclosure
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any term used in capitalized fonn in the Disclosure Statement that is not otherwise defined in the Disclosure Statement or the Plan but that is used in the Bankruptcy Code or the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules") shall have the meaning assigned to such tenn in the Bankruptcy Code or the Bankruptcy Rules, as applicable; (12) all references to docket numbers of documents Filed in the Chapter i i Cases are references to the docket
numbers under the Bankruptcy Court's Case Management/Electronic Case Filing

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("CM/ECF") system; (13) all references to statutes, regulations orders, rules of courts and the like shall mean as amended from time to time, unless otherwise stated; (14) in computing any period of time prescribed or allowed, the provisions of Bankruptcy Rule 9006(a) shall apply, and if the date on which a transaction may occur pursuant to this Disclosure Statement shall occur on a day that is not a Business Day, then such transaction shall instead occur on the next succeeding Business Day; and (15) unless otherwise specified, all references in the Disclosure Statement to monetary figures shall refer to currency of the United States of America.
B. The Purpose of

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the Plan

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The Plan effectuates a reorganization of the Debtors through the issuanee of debt and equity in Newco, and the preservation of their business operations and going concern value. Holders of Old Equity Interests will neither receive, nor retain, any property under the Plan, and any potential Causes of Action not released under the Plan wil be preserved (subject to any available defenses to such Causes of Action) and prosecuted and litigated, as may be

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appropriate, by the Reorganized Debtors or the Litigation Trust, and/or their respective
successors. The Plan wil be funded by way of the issuance of

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the Debtors' Cash on hand, existing assets, and the New First Lien Notes and Newco Equity Interests.

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The Plan contemplates and is predicated upon the substantive consolidation of the the Chapter 11 Cases and Chapter II Cases into a single proceeding solely for the purposes of

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all actions with respect to confirmation, consummation and implementation of the Plan as set forth in more detail in ARTICLE IY below.

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As set forth herein and in the exhibits hereto, the First Lien Steering Committee has estimated, based on certain hypothetical operating projections and an assessment of other
available assets, the value to be realized from the Debtors' Estates under the Plan. Pursuant to
the Plan, Holders of

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Allowed First Lien Lender Claims will receive their pro rata share of$I.5 million in Cash, the New First Lien Notes, Newco Equity Interests and the Litigation Trust the First Lien Lender Claims as set forth in ARTICLE IY Interests allocable to the Holders of
Holders of Allowed Second Lien Lender Claims will receive a portion of the proceeds from the Stanley Engineering Litigation and their pro rata share of the Litigation Trust Interests allocable to the Holders of the Second Lien Lender Claims if such Holders vote in favor of the Plan; or if such Holders do not vote in favor of the Plan, their pro rata share of the

below.

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Litigation Trust Interests allocable to the Holders of the Second Lien Lender Claims.
Holders of Allowed General Unsecured Claims will receive their pro rata share of Litigation Trust Interests allocable to the Holders of General Unsecured Claims.

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All Old Equity Interests will be extinguished and the Holders of such Old Equity Interests wil not receive or retain any property on account of such Old Equity Interests.
Intercompany Claims of the Debtors will be extinguished through the Plan and such Holders will not directly receive or retain any property under the Plan on account of such Old Equity

Interests unless the Reorganized Debtors elect to reinstate such Claims. Holders of
Subordinated Claims will not receive or retain any property on account of their Claims.

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Finally, all other Allowed Claims, such as Administrative Claims, Priority Tax Claims, Priority Non-Tax Claims and Other Secured Claims, will be Unimpaired pursuant to the terms
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the Plan.

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C. The Debtors' Princioal Assets and Indebtedness

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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 Claims; (2) Second Lien
Lender Claims; (3) Other Secured Claims; (4) Priority Non-Tax Claims; (5) General

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Unsecured Claims; (6) Rhodes Entities Claims; (7) Insured Claims; (8) Subordinated Claims; and (9) Intercompany Claims.
D. Treatment of Claims and Interests

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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

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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

20
21

general principles of equitable subordination, section 510 of the Bankruptcy Code or

otherwise. Pursuant to section 5 10 of the Bankruptcy Code, the Reorganized Debtors reserve

the iight to reclassify any Allowed Claim or Interest in accordance with any contractual, legal or equitable subordination relating thereto.
I. Summary and Treatment of Allowed Unclassified Claims.

22
23

24
25

26
27 28

DESCRIPTION BASIS)
Administrative Claims $750,000

ESTIMATED AMOUNT OR VALUE OF CLAIMS (CONSOLIDATED

TREATMENT FOR ALLOWED 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 Bankrptcy Court enters an order allowing such Allowed Administrative Claim, or (c) the date on which the

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2
3

4
5

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 Bankrptcy 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

6
7

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'

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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.
Priority Tax Claims

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$125,000

Allowed Priority Tax Claims shall be paid in fulL, in Cash,

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upon the later of (a) the Effctive Date, (b) the date upon \vhich 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 I i 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

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Committee (and in consultation with the First Lien Agent

and Second Lien Agent), and any Holder of an Allowed

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Priority Tax Claim; orovided, 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

l
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1129(a)(9) of the Bankruptcy Code and, in such event,

19

unless otherwise provided herein, interest shall be paid on

the unpaid portion of such Allowed Priority Tax Claim at the Federal statutory rate; orovided, 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.

20
21

22
23

24
25

26 27
28

CLASS NO. A-I

ESTIMATED AMOUNT OR VALUE OF CLAIMS (CONSOLIDATED

DESCRIPTION
First Lien Lender Claims

BASIS $325.947.566
Deficiency Claim:

TREATMENT FOR ALLOWED CLAIMS/PROJECTED RECOVERY/ST A TUSIYOTING RIGHTS On the Effective Date aT such other date as set forth herein, each of the F iTst Lien Lenders (or its
Perniitted Nominee) shall receive on account of its

$231,649,680

Claims, (w) its pro rata share of $ L.5 milion in

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3

CLASS NO.

DESCRIPTION

ESTIMATED AMOUNT OR VALUE OF CLAIMS (CONSOLIDATED BASIS)

TREATMENT FOR ALLOWED CLAIMS/PROJECTED RECOVERY/ST ATUS/VOTING RIGHTS

Cash, (x) its pro rata share of 1 00% of

4
5

the New First

Lien Notes, (y) its pro rata share of 100% of the

6
7

Neweo Equity Interests (subject to dilution for any Nev.:co Equity Interests issued pursuant to a Management and Director Equity Incentive Plan);
and (z) its pro rata share of the Litigation Trust

Interests allocable to the Holders of the First Lien

Lender Claims. The $ 1.5 million payment to the

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First Lien Lenders shall be allocated and deemed paid to the First Lien Lenders in accordance with
Aricle VII.F. of

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the Plan.

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Proiected Recoverv: 28.9%

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Status: Impaired V otin.: Entitled to Vote

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Second Lien
lender Claims

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Principal Amount:

On the Effective Date, only if the Class of Second

lien lender Claims votes in fvor of the Plan. each

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$70,665,402.38

of the Second Lien Lenders (or its Permitted

14
15

Interest (as of
3131/09):

Nominee) shall receive (x) its pro rata share of 50%

of the net proceeds of the Stanley Engineering

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$2,182,955.27
Interest (as of 4/1/09): $2,202,944.34
Deficiency Claim:

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16 17

Litigation; and (y) its pro rata share of the Litigation Trust Interests allocable to the Holders of the Second Lien Lender Claims on account of its deficiency

claims, \\'ithout a reduction on account of the

reasonable fees and expenses of Ropes & Gray LLP and local counsel for the Second Lien Agent, subject

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18 19

$70,800,000

to an aggregate cap of $500,000. If the Class of

Second Lien lender Claims votes against the Plan,
each of the Second Lien Lenders shall receive its pro rata share of the Litigation Trust Interests allocable to

20
21

the Holders of the Second Lien Lender Claims on account of its deficiency claims, subject to payment
of the reasonable fees and expenses of Ropes & Gray LLP and local counsel for the Second Lien Agent.
Proiected Recoverv: 2.8%% Status: Impaired V otine.: Entitled to Vote

22 23

24
25

A-3

Other Secured Claims

$2.3 million

To the extent not satisfied by the Debtors, pursuant to

Bankuptcy Court order, in the ordinary course of

business prior to the Effective Date, at the option of
the Reorganized Debtors on or after the EfTective

26 27 28

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

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ESTIMATED AMOUNT OR
V ALUE OF

2
3

CLASS NO.

DESCRIPTION

CLAIMS (CONSOLIDATED BASIS)

4
5

TREATMENT FOR ALLOWED CLAIMS/PROJECTED RECOVERY/ST A TUS/VOTING RIGHTS 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

6
7

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

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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), othenvise agree.
Proiected Recoverv: 100%

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Status: Unimpaired

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V otine.: Deemed to Accept

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Priority Non-Tax Claims

$0

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

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17
18

19

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), othcnvise agree.
Proiected Recoverv: N/ A

20
21

Status: Unimpaired

22 23
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V otine.: Deemed to Accept

General
Unsecured Claims

Estimated asserted
amount $15 milion +

On the Effective Date, each Holder of an Allowed

24
25

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 AlIO\ved Claim.
Projected Recoverv: less than i %

26
27 28
C-2

Status: Impaired
V otim?: Entitled to Vote

Subordinated

$0

Claims subordinated under applicable law (including

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2
3

CLASS NO.

DESCRIPTION
Claims

ESTIMATED AMOUNT OR VALUE OF CLAIMS (CONSOLIDATED BASIS)

4
5

TREATMENT FOR ALLOWED CLAIMS/PROJECTED RECOVERY/STATUS/VOTING RIGHTS any Rhodes Entities Claims that are subordinated) shall not receive any recovery on account of their
Claims.
Proiected Recoverv: N/ A

6 7

Status: Impaired Voting: Deemed to Reject

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Old Equity lnterests

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.

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lntercompany Claims

$500,000,000

At the election of the Reorganized Debtors,

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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

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property on account of such portion under the Plan.

Projected Recoverv: 0%

Status: Impaired

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V oiinE:: Deemed to Reject

20
21

E. Claims Estimates

22
23

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

24
25

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

26
27 28

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 chart in Ai1icle J.D.

I.

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2
3

These estimates are approximate and based upon numerous assumptions and represent significant reductions in the aggregate face amount of Claims Filed. There is no guarantee

4
5

that the ultimate amount of each eategory of Claims will confonn to the estimates stated herein, and the majOlity 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 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.
F. Certain Factors to Be Considered Prior to Voting

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Holders of Claims entitled to vote on the Plan should carefully consider the risks set forth in ARTICLE YI herein prior to accepting or rejecting the Plan.
G. Yoting and Confirmation

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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 halfin 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 Heaiing scheduled to commence
The Classes entitled to vote will

on (December 17), 2009 at (9:30 a.m.) prevailing Pacific Time, before the Bankruptcy Court.

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Section I i 29(a)(l 0) of the Bankrptcy 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.

19

20
21

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 RESERYES THE RIGHT TO DO SO WITH RESPECT TO ANY OTHER REJECTING CLASS OR TO MODIFY THE PLAN.
The Bankruptcy Court has established (October 30), 2009 (the "Record Date"), as the
date for detennining which Holders of Claims are eligible to vote on the Plan. Ballots, along

22
23

24
25

with this Diselosure 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

26
27

requirements for voting to aceept 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 wil also process and tabulate Ballots for each Class entitled to vote to
accept or rejeet the Plan. The address for the Claims and Solicitation Agent is:

28

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3

Omni Management Group

Attn: Rhodes Homes Claims Agent

4
5

1650 I Yentura Boulevard, Suite 440 Encino, CA 91436

Or if by email to scottomnimgt.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 RESPECTIYE NOMINEE HOLDER, IF APPLICABLE) INDICATING ACCEPTANCE OR REJECTION OF THE PLAN MUST BE RECEIYED BY THE CLAIMS AND SOLICITATION AGENT NO LATER THAN 4:00 P.M. PREVAILING PACIFIC TIME ON (DECEMBER 3), 2009 (THE "VOTING DEADLINE"). ANY BALLOT RECEIYED AFTER THE VOTING DEADLINE SHALL NOT BE COUNTED.

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THE FIRST LIEN STEERING COMMITTEE BELlEYES THAT THE PLAN IS IN
12
13

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THE BEST INTEREST OF ALL CREDITORS. THE FIRST LIEN STEERING COMMITTEE RECOMMENDS THAT ALL HOLDERS OF CLAIMS AGAINST THE DEBTORS WHOSE YOTES ARE BEING SOLICITED SUBMIT BALLOTS TO ACCEPT
THE PLAN.
H. Consummation of

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the Plan

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It will be a eondition to Confinnation of the Plan that all provisions, teims, and
eonditions of the Plan are approved in the Confirmation Order unless otherwise satisfied or
waived pursuant to the provisions of Article X of

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the Plan. Following Confirmation, the Plan

20
21

wil be consummated on the Effective Date, which will be no earlier than the eleventh day following entry of an order, in form and substanee acceptable to the First Lien Steering Committee, by the Bankruptcy Court confinning the Plan and satisfaction of all conditions to Confinnation and the Effeetive Date having been satisfied or waived in accordance with the
tenns of

the Plan.

22

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24
25

26
27 28

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ARTICLE II.
BACKGROUND2
A.
Description of

2
3

the Debtors' Business Operations

4
5

1.

Organizational Structure

The Debtors' organizational chart is attached hereto as Exhibit B. In addition to the

6 7

Debtor entities below, the Debtors are affliated with several other companies that are not
Debtors in these Chapter J I Cases.

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Rhodes Ranch GP is the primary holder of land associated with the Rhodes Ranch the Rhodes Ranch master-planned community. The Rhodes Ranch master-pJanned community consists of several developments, including developments built by non-Debtor affliated developers.
master-planned community and also owns some commercial properties outside of

10
11

Rhodes Design and Development Corp. holds the Debtors' contractor's license in Nevada

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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.

12
13

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The Rhodes Companies, LLC is a real estate development holding company.

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The following Debtors hold parcels ofland associated with the Tuscany development: Rhodes Design and Development; Tuscany Acquisitions, LLC; Tuscany Acquisitions II, LLC; Tuscany Acquisitions II, LLC; and Tuscany Acquisitions IY, LLC. Tuscany Golf Country Club, LLC owns and operates the golf club located at the Tuscany development.

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The following Debtors own land in Arizona: Rhodes Homes Arizona, LLC; Rhodes Arizona Properties, LLC; and Elkhom Investments. Rhodes Homes Arizona, LLC also holds the Debtors' Arizona contractor's 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 ofland primarily located in Nevada: Tick, LP;
Glynda, LP; Chalkline, LP; Batcave, LP; Jacknife, LP; Wallboard, LP; and Overfow LP.

19

20
21

22
23

The Debtors are also involved in land acquisition, development, and some utility and

24
25

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 the Debtors. C & J Holdings, Inc. is the homeowners assoeiation management company for
Rhodes Ranch, Tuscany, and three other smaller eommunities.

26 27 28
, ARTICLE il is based primarily on representations made by the Debtors.

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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.

4
5

6 7

Elkhorn Investments, Inc. is a holding company for Elkhorn Pai1ners, LP. Elkhorn Pai1ners, LP is a limited partnership that was formed for the construction and sale of several communities in Northwest Las Yegas. As of the Petition Date, only one home remained
unsold.
2. Historv 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 Yegas Yalley 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 Yilage. Both communities are

10

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recognized for their accessible location to employment centers and the Las Yegas Strip, for their community amenities, country club lifestyle, and for the quality and value of home
design and construction.
Rhodes Ranch is located in southwestem Las Yegas and opened in 1997. It has a

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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 multimilion 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 i ,993 lots to be developed.

20
21

Tuscany Residential Yillage is located in southeast Las Yegas 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

22
23

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.

24
25 26 27 28

Spanish Hills is a high-end development located in southwest Las Vegas. The

community is built on over i 00 acres and features many custom homes in excess of 5,400
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 aeres of undeveloped land.
The Debtors homebuilding operations in Arizona ("Arizona'") will be transfelTed 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,

11

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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 Tenn Sheet. The Arizona Assets do not include any assets owned by Pinnacle Grading located in Arizona,
except for Pinnacle Grading offce equipment, furniture, computers located in Arizona, which

4
5

6
7

is set forth on Attachment D to the Mediation Tenn Sheet.

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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,

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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 First Lien Credit Agreement, pursuant to which there was
approximately $302 million in principal amount outstanding as of

12
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the Petition Date. The First Lien Steering Committee is comprised of certain lenders under the Debtors' First Lien Credit

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Agreement that hold, in the aggregate, approximately 60% of the outstanding first lien debt.3

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Three of the Debtors are primary obligors under the First Lien Credit Agreement. The
remainder of the 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 Debtors are also party to a swap transaction, pursuant to which there was approximately $20.2 million outstanding on the Petition Date. Obligations outstanding under the swap transaction are equal in priority with obligations outstanding under the First Lien Credit Agreement.
In addition, the Debtors are pai1y to a Seeond Lien Credit Agreement, pursuant to

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which there was approximately $70.7 milion in principal amount outstanding as of the
Petition Date. The Second Lien Lenders are subject to the terms of an intercreditor agreement
that, among other things, prohibits the Second Lien Lenders from receiving a recovery from

19

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21

the collateral securing the first lien and second lien debt unless the First Lien Lenders are
repaid in full.
The Debtors are also obligated to approximately nine equipment lenders who hold

22
23

purchase money security interests in various offce equipment and equipment used in the the Petition Date, the Debtors estimate that they are obligated to
Debtors' operations. As of

these equipment lenders in the approximate amount of $2.5 million.

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25 26 27 28
3 The members of the First Lien Steering Committee are Credit Suisse Asset Management, Candlewoo

business, the Debtors are required to post bonds, either on an unsecured or partially secured basis backed by collateral, as support for the Debtors'
In the ordinary course of

Special Situations Master Fund, Credit Suisse Loan Funding LLC, CypressTree Investment Management LLP General Electric Capital Corporation, Highland Capital Management, LP., and Sorin Capital Management,

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completion of certain performance and/or payment obligations for the benefit of vaiious third

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party beneficiaries, generally governental 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 cUlTently have approximately $31

4
5

million in outstanding bonds, none of which amounts have been called.

4. The Rhodes Entities Claims

6 7

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 affliates, collectively the "Rhodes Entities" are directly or indirectly owned by James M. Rhodes, the founder and President of the Debtors. The Rhodes Entities have alleged pre-petition Claims on an aggregate basis against the Debtors for approximately
$10.598 million consisting primarily of

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tax payments allegedly made by the Rhodes Entities

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on behalf ofthe 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

12 13

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the Debtors
the Debtors. Upon the Effective Date, it

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James Rhodes leads the management team of

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is contemplated that James Rhodes will not have a management role with the Reorganized
Debtors.
B. Pending Significant Litigation

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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 unusuable. Damages have been itemized to counsel for Stanley in the amount

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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 infonnation and belief, no trial date has been set.
Claim against Rhodes Homes Aiizona, LLC, Rhodes Design and Development Corporation and Rhodes Ranch General Pattnership asserting Claims in the total aggregate amount of pre petition services allegedly rendered $4,609,249.00 on account of pursuant to agreements entered into with (i) Rhodes Homes Arizona, LLC and (ii) Rhodes
Stanley Filed Proofs of

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25

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Design and Development Corporation and Rhodes Ranch General Paitnership. 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.

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2
3

ARTICLE ~i.4 THE CHAPTER i I CASES

The following is a general summary of the Chapter 11 Cases, including the events
leading up to the chapter II fiings, the stabilization of the Debtors' operations following the

4
5

chapter 11 filings, certain administrative matters addressed during the Chapter 11 Cases and the Debtors' restructuring initiatives since the chapter II filings.
A. Events Leading to the Chapter 11 Cases
At the end of the fourth quarter of 2008, sales in the Las Yegas market of new,

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detached homes were down 93% (to 522 net sales) from the peak (7,731 quarterly net sales) that occun'ed in the second quarter of 2005. The median base price for a detaehed single family home dropped 39% from the peak achieved in the fourth quarter of2005.

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Although the Debtors had made cost reductions in general overhead and other areas, including employee layoffs, many tctors, including the severe downturn of the Las Yegas 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 tenns of a forbearance agreement and consensual restructuring with the Debtors after it

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became apparent that the Debtors would not be able to make their regularly scheduled interest and amortization payments on the first lien debt.

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On March 31, 2009, an interest payment in the amount of approximately $9 milion and a principal payment in the amount of$io.75 milion was due and owing on the First Lien Credit Agreement and an interest payment in the amount of approximately $2.4 million was

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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.
B. Initiation of

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the Chapter 11 Cases

22 23

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 propeiiies as debtors in possession pursuant to sections
1107(a) and 1108 of the Bankruptcy Code. On April 13, 2009, the Bankiuptcy Court entered an order jointly administering the Chapter 11 Cases pursuant to Bankruptcy Rule lOI5(b). No
trustee or examiner has been appointed in the Chapter 1 1 Cases.

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4 ARTICLE II includes information that is based on representations made by the Debtors.

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C. Stabilization of

Operations

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After commencing the Chapter I i 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 summaiized below.
1. Cash Collateral Motion

4
5

6
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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")

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authorizing the Debtors to use eash collateral through April 17, 2009 (Heritage Docket No. 125). On April 17, 2009, the Court entered a second stipulated intetim order (the "Second Stipulated Cash Collateral Order"), which extended the Debtors' authorization to use cash

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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.

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126). In response to fuiiher 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

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the eurrent cash collateral budget is attached hereto

as Exhibit C.
2. Cash Management Motion
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 fomis; (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 Doeket 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,

26 27 28

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

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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 Bankruptey 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. Customer Programs Motion

The Debtors Filed a motion (the "Customer Programs Motion") seeking entry of an order authorizing the Debtors to honor certain prepetition obligations to customers and continue customer practices and programs (the "Customer Practices and Programs") in the
ordinary course of

business (Rhodes Docket No. 12). The Customer Practices and Programs

included, among other things, (i) a one year limited warranty that was offered to all
homebuyers, (ii) customer sale incentives, (iii) payment of homeowner association dues, and (iv) ceiiain programs related to the Tuscany golf pro shop. On April 17,2009, the Bankruptcy Court entered an order approving the Customer Programs Motion (Rhodes Docket No. 75).
5. Utilities Motion

To comply with the requirements of section 366 of the Bankrptcy Code, the Debtors Filed a motion (the "Utilities Motion") seeking an order authorizing them to provide, within 20 days of the Petition Date, an adequate assurance deposit equal to one-half of the Debtors' estimated monthly charges, subject to certain provisions as set forth in the motion (Rhodes Docket No. 11). If any of the utility service providers believed that additional assurance of

payment for services was required, the Utilities Motion authorized such utility service
provider to request such additional adequate assurance. On April 30, 2009, the Bankruptcy Court granted the Utilities Motion on an interim basis with certain modifieations (Rhodes Docket No. 122). On May 18, 2009, the Bankruptcy COUli entered a final order granting the Utilities Motion (Rhodes Docket No. 181).
6. Emplovee Wages and Benefits Motion
As of the Petition Date, the Debtors' workforce consisted of approximately 124

employees. Given the critical functions performed by the Debtors' employees and their importance to the Debtors' businesses and efforts to reorganize, the Debtors Filed a motion
(the "Emplovee Wages and Benefits Motion") seeking entry of an order authorizing them, in accordance with their ordinary course policies and practices and in the Debtors' discretion, to (i) pay and/or honor prepetition wages, salaries, employee benefits, and other compensation or reimbursements, (ii) remit withholding obligations, (iii) maintain employee compensation and

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3

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benefits programs and pay related administrative obligations, and (iv) have applicable banks and other financial institutions receive, process, honor, and pay cetiain checks presented for payment and honor certain fund transfer requests (Rhodes Docket No. i 0). An interim order approving the Employee Wages and Benefits Motion was entered on April 10, 2009 (Rhodes Docket No. 19), and a final order approving the Employee Wages and Benefits Motion was entered on April 17, 2009 (Rhodes Docket No. 74), which required that any compensation for
postpetition wages to be paid to Rhodes or his relatives be made by separate motion for
insider compensation (the "Wages Orders'").
7. Sales and Use Tax Motion

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The Debtors Filed a motion (the "Sales and Use Tax Motion") seeking authority to pay ceiiain prepetition sales and use taxes. In connection with the normal operation of their homebuilding business, the Debtors incur sales and use taxes, which are not property of the Debtors" estates and must be paid in order for the Debtors to avoid any attempt by authorities to suspend the Debtors' businesses. On May 18,2009, the Bankruptcy Court entered an order granting the Sales and Use Tax Motion with certain modifications (Rhodes Docket No. 179).
8. Insider Compensation Motion

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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

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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.
9. Appointment of

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Claims and NotieingAgent

To relieve the Clerk's Office of the Bankruptcy Court of the significant burden as a result of the potential for having approximately 10,000 creditors in these cases, the Debtors
Filed an application (the "Claims and Notieing Agent Application"') seeking entry of an order

19

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appointing Omni Management Group, LLC COmni") as the Debtors' Claims and Solicitation Agent to, among other things: (i) prepare and serve notices required in the Debtors' Chapter 1 i Cases, including notice of the commencement of these cases and the initial meeting of creditors under section 341 of the Bankruptcy Code; (ii) maintain the offcial Claims Register;

22
23

and (iii) mail Ballots in connection with any vote to accept or reject a plan or plans of reorganization proposed in these cases (Heritage Doeket No. 63). The Bankruptcy Court entered an order approving the Claims and Noticing Agent Application on April 8, 2009
(Heritage Docket No. Ill). On April 10, 2009, the Bankruptcy COUli entered an amended

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order with a notation that Oinni shall maintain a separate Claims Register for each Debtor and

shall abide by the Guidelines for Claims Agents used in the District of Nevada (Heritage
Docket No. 123). Among other services, Omni maintains a website with case information and
www.omnimgt.com/rhodes.

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copies of all pleadings free of charge in these Chapter 11 Cases. See

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10. Retention of

Debtors' Professionals

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Throughout the Chapter i 1 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.
11. Ordinary Course Professionals

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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 Professionals") for the same purposes as such serviees were provided prior to the Petition the Bankruptcy Code and Bankruptcy Rule 20I4(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
Date. Accordingly, pursuant to sections 105(a), 327, 328 and 330 of

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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

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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 finn of

18 19

Parsons Behle & Latimer as counseL.

E. Claims Bar Dates

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21

22 23

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 "Sehedules") with the BanklUptcy Court. Interested parties may review the Schedules at the offce of the Clerk of the United States Bankruptcy Coui1 for the District of Nevada, Southern Division,

300 Las Yegas Boulevard South, Las Yegas, NY 89101 or by visiting

www.omnimgt.com/rhodes.

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25

26 27
28

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

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(ii) September 28, 2009 for all Holders of Claims of Governmental Units for

2
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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 Pinnae1e Grading, LLC (Case No. 09-14887);
Claims of Governmental Units for (iii) September 29, 2009 for all Holders of the following three Debtors: Rhodes Homes Arizona, L.L.c. (Case No. 09- 14882); Tuscany Golf Country Club, LLC (Case No. 09-14884); and Pinnae1e Grading, LLC (Case No. 09-14887).

4
5

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7

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

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Publication Notice Pursuant to FRBP 2002(1). 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 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
Publieation Order.

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The First Lien Steering Committee and the Debtors have been reviewing various Proofs of Claim and wil continue to review and evaluate eaeh 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 wil 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

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Allowed Claims in any Class may differ significantly from the First Lien Steering
Committee's estimates thereof and any variance from such estimates may affect distributions in certain Classes.
F. Other Postpetition Events and Negotiations

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1. The Trustee Motion

20
21

On April 7, 2009, the First Lien Steering Committee moved for the appointment of a

chapter 1 J trustee (the 'Trustee Motion"). The Trustee Motion was based, in part, on
allegations of questionable and unlawful business dealings, and suspicions concerning the Mr. Rhodes' eonduct 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
propriety of

22 23

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25

26 27
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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.

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3

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.
2. The Mediation Settlement

4
5

The negotiations for a plan of reorganization, which began prior to the Petition Date, continued in earnest during the Chapter 11 Cases until the negotiations reached a stalemate in
June. In June, the First Lien Steering Committee objected to the Debtors' request to extend

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their exclusive period to file a plan of reorganization and continue use of cash collateraL. The Debtors agreed to give up their exclusive right to file a plan of reorganization in exchange for an agreement by the parties to participate in non-binding plan mediation before a neutral third party mediator to attempt to work out a consensual plan. All parties did so agree to mediate

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and the mediation was held in Los Angeles on August 17, 24 and 25, 2009 before the
Honorable Richard Neiter, United States Bankruptcy Court, Central District of California.
During the mediation, the parties reached agreement in piinciple on a comprehensive

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settlement (the "Mediation Settlement").

a. The Tenns of the Mediation Settlement

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The terms of the Mediation Settlement are set forth on Exhibit 1 to the Plan (the
"Mediation Term Sheet") and provide for, among other things, the following:

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. The Rhodes Entities shall receive a full release for chapter 5 eauses of action
with respect to transfers made by the Debtors to the Rhodes Entities during the 2 years prior to the Petition Date provided, that, such release shall only apply to transfers expressly set forth in the Debtors' statements of financial affairs as

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fied with the Bankruptcy Court as of August 1, 2009 or as set forth on the
Mediation Tenn Sheet.
. To the extent pennitted by applicable law, the Plan shall provide that, but for

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(i) the Rhodes Entities and their affliates, (ii) insiders of any of the Rhodes Entities (except as to Thomas Robinson and Joseph Sehramm who were also employees of the Debtors), (iii) relatives of James Rhodes, the Debtors' offcers, employees (including Thomas Robinson and Joseph Schramm), and
professionals, as of the Petition Date, and Paul Huygens shall receive a general release from the Debtors' estates.
. The Plan shall provide for one of the following: (i) those performance bonds

22
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guaranteed by the Rhodes Entities in favor of the Debtors to be replaced on a renewal date by new perfonnanee bonds or, in the alternative, (ii) subject to the Rhodes Entities being reasonably satisfied with the creditworthiness of the Reorganized Debtors, whieh 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 to remain in place.

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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).

4
5

. The Rhodes Entities shall take commercially reasonable steps and/or enter into any agreements or similar documentation reasonably neeessary to ensure the
Reorganized Debtors' continued use of all of the Debtors' applicable

6 7

professional licenses at no cost to the Rhodes Entities for a period of up to

twelve months following the Effective Date.
. To the extent allowed, the Rhodes Entities' Claims shall be treated in the same

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class as and treated the same as General Unsecured Claims.

. The Heiitage Equity SecUlities shall be purchased by Newco, as described in

Article IY.E.6 herein and At1icle IY.F of the Plan.

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. On the Effective Date, the applicable Rhodes Entities shall transfer their interests in the Rhodes Ranch Golf Course to the Reorganized Debtors, subject to any outstanding debt on the Rhodes Ranch Golf Course. 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 Mr. Rhodes and the First Lien Steering Committee.
. The Rhodes Entities shall make a Cash payment to the Reorganized Debtors of

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$3.5 million in Cash on the Effective Date.

. On the Effective Date, the Debtors shall (i) transfer Pravada and the other Arizona Assets to the Rhodes Entities free and clear of all liens, claims and

encumbrances pursuant to section 363(f) of the Bankruptcy Code, and (ii)

assume and assign to the Rhodes Entities (or their designee) all executory

20
21

22
23

contracts and unexpired leases associated solely with the Arizona Assets at no cost to the Debtors or the Reorganized Debtors and all Cure costs associated therewith shall be borne by the Rhodes Entities.
For a more detailed discussion oftenns of

the Mediation Settlement, see Article IY.E.

of the Disclosure Statement. The provisions of the Plan encompassing the terms of the

24
25

Mediation Settlement shall, pursuant to section 363 of

the Bankruptcy Code and Bankrptcy Rule 9019 and in consideration for the distributions and other benefits provided pursuant to the Mediation Settlement, eonstitute a good faith compromise of all Claims, Interests, and
controversies relating to the subject matter of the Mediation Settlement.

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b. Approval of

the Mediation Settlement under Bankruptcy Rule 9019

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In order to determine whether a compromise may be approved under Bankruptcy Rule 9019, the Bankruptcy COUl1 must consider four factors: (i) the probability of cess of the sue litigation; (ii) the diffculties, if any, to be eneountered in the matter of collection; (iii) the complexity of the litigation involved, and the expense, inconvenienee 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 Properlies, 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 faetors 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

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possible outcomes. In re WCL Cable, Inc.,

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282 B.R. 457, 473-74 (Bankr. D. Or. 2002).

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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 ownership of the Rhodes Ranch Golf Course.
TIie 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 milion. With respect to the first factor articulated by the A&C Properlies COUl1, litigation over the potential preference payments identified herein would have been contentious and hard fought. TIie Rhodes Entities would likely have asserted a number of defenses to the preference e1aims, ine1uding that such payments were received in the ordinary course of business. Moreover, based on the First Lien Steering Committee's 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 eonversations 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 Settement also reflects a resolution of potential fraudulent eonveyance actions held by the Estates against the Rhodes Entities. The First Lien Steering Committee believes that these e1aims 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 of such e1aims, 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 e1aims and the preferenee e1aims 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 Properlies test also weighs in favor of the approval of the Mediation Settlement5
5 The second factor to be considered by the Bankruptcy Court in evaluating a settlement proposal Is the

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difficulties, if any, to be encountered in the matter of collection. The First Lien Steering Committee has not

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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 milion cash payment from the Rhodes Entities to the Reorganized Debtors, which payment will be used to fund working capital needs and the Arizona Assets, which distributions contemplated by the Plan, (ii) provides for the transfer of 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 which is paramount to Course, the maintenance and continued operation of Rhodes Ranch Golf the Reorganized Debtors' assets, to the Reorganized Debtos, (iv) avoids maximizing the value of 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 bankptcy 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 transfened 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 wil also ensure a smooth transition to new ownership under the Plan. The Mediation Settlement contemplates that stringent bond and licensing the Rhodes Entities, thus allowing requirements will be maintained through the cooperation of the Reorganized Debtors to continue operations without intenuption upon emergence. The Mediation Settlement also contemplates that new Qualified Employees and HOA board representatives wil 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 issues the Mediation Settlement is approved. Given the range of given to the Rhodes Entities if the disputes between the First Lien Steering involved, and the nature and eharacter of Committee, the Debtors and Rhodes, the First Lien Steering Committee believes that approval of the Mediation Settlement is appropriate. In addition, as set forth above, the Mediation Statement satisfies the fair and reasonable standards articulated by courts in this circuit. The entry of the the Confirmation Order shall therefore constitute the Bankruptcy Court's approval of 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

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the Debtors, their Estates, and Holders of Claims and Interests and is fair, equitable, and reasonable.

24 25 26
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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 detennInation as to whether each
such entity could have satisfied its obligations in connectIon \vith any judgment entered by the Bankuptcy Court but
believes that the Rhodes Entities may not have been able to comply financially with the tenl1S of

judgments received

28

in connection with successful litigation regarding the claims being released under the Plan.

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2
3

ARTICLE iv.
SUMMARY OF THE PLAN
THIS SECTION PROVIDES A SUMMARY OF THE STRUCTURE AND MEANS

4
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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 DEFINITONS THEREIN).

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THE STATEMENTS CONTAINED IN THE DISCLOSURE STATEMENT

INCLUDE SUMMARIES OF THE PROYISIONS 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 PROYISIONS 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 PROYISIONS OF THE PLAN OR DOCUMENTS REFERRED TO
IN THE PLAN.

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THE PLAN ITSELF AND THE DOCUMENTS IN THE PLAN CONTROL THE
ACTUAL TREATMENT OF CLAIMS AND INTERESTS UNDER THE PLAN AND WILL,

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UPON THE OCCURRENCE OF THE EFFECTIYE DATE, BE BINDING UPON ALL

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A. Overview of Chapter II

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HOLDERS OF CLAIMS AND INTERESTS, THE ESTATES, ALL PARTIES RECEIYING PROPERTY UNDER THE PLAN AND OTHER PARTIES IN INTEREST. IN THE EYENT OF ANY CONFLICT BETWEEN THE DISCLOSURE STATEMENT AND THE PLAN OR ANY OTHER OPERATIYE DOCUMENT, THE TERMS OF THE PLAN AND/OR SUCH OTHER OPERATIYE DOCUMENT SHALL CONTROL.

19

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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 i 1 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 debtor's assets.

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23

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25

The commencement of a chapter I i 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."

26 27
28

The consummation of a chapter 11 plan is the principal objective of a chapter II 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

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or interests in the debtor, whether or not such holder of claims or interests (1) is impaired

2
3

under or has accepted the plan or (2) receives or retains any property under the plan. Subjeet to certain limited exceptions and other than as provided in the plan itself or the confiimation 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.

4
5

6
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A chapter I I 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 eertain classes wil not receive any distribution of propei1y 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.

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Section 1123 of the Bankrptcy Code provides that a chapter 1 I plan shall classify claims against and interests in the debtor. In eompliance 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

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the provisions of section 1122 of the Bankruptcy Code, but it is possible that a Holder of a

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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 eonfirmed. In such event, the First Lien Steering Committee intends, to the extent permitted

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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

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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,

20
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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.

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B. Administrative and Prioritv Claims

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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 II of the Plan.
In accordance with section i 123(a)(1) of

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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
Allowed Administrative Claim, or (c) the date on which the Reorganized Debtors or the

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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 Piiority Tax Claim would have been due if the Chapter i 1 Cases had not been commenced, or (d) upon such other tenns 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 payment in full of Allowed Priority Tax Claims on the Effeetive 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 sueh 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
in consultation with the First Lien Agent and Second Lien Agent), in lieu of

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-I - First Lien Lender Claims

First Lien Lender Claims include any Claim on account of the First Lien Credit Agreement.

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2
3

4
5

6 7

Class A-I 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 Pemiitted its Claims, (w) its pro rata share of$1.5 million in Cash, Nominee) shall receive on aceount of (x) its pro rata share of 100% of the New First Lien Notes, (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); and (z) its pro rata share of the Litigation Trust Interests alloeable to the Holders of the First Lien Lender Claims. The $1.5 milion payment to the First Lien Lenders shall be alloeated and deemed paid to the First Lien Lenders in accordance with Article YIl.F. of the Plan.
2. Class A-2 - Second Lien Lender Claims

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Second Lien Lender Claims include any 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 Seeond Lien Lender Claims votes in favor of the Plan, each of the Second Lien Lenders (or its Permitted Nominee) shall receive (x) its pro rata share of 50% of

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the net proceeds of the Stanley Engineering Litigation; and (y) its pro rata share of the
Litigation Trust Interests allocable to the Holders of the Second Lien Lender Claims on

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account of its defieiency 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. If the Class of Second Lien Lender Claims votes against the Plan, each of the Second Lien Lenders shall receive its pro rata share of the Litigation Trust

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Interests allocable to the Holders of the Second Lien Lender Claims on account of its
deficiency claims, subject to payment of the reasonable fees and expenses of Ropes & Gray
LLP and loeal counsel for the Second Lien Agent.
3. Class A-3 - Other Secured Claims

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Other Secured Claims include any Secured Claim other than a: (a) First Lien Lender Claim; or (b) Second Lien Lender 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 Seeured Claim required to be paid pursuant to section 506(b) of the Banlauptcy Code, on the later of the Effective Date and the date such Other Secured Claim becomes an Allowed Other Seeured 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 the Bankruptey Code, or (iv) Secured Claim required to be paid pursuant to section 506(b) of a Holder of an Allowed Other Secured Claim shall receive such treatment as to which such

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Holder and the Reorganized Debtors or the Debtors, with the consent of the First Lien

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2 3

Steering Committee (and in consultation with the First Lien Agent and Second Lien Agent), otherwise agree.
4. Class B - Priori

tv Non-Tax Claims

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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.

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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, the First Lien Steering Committee (and in consultation with the First Lien with the consent of Agent and Second Lien Agent), otherwise agree.
5. Class C-1 - General Unseeured Claims (other than Rhodes Entities Claims)

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General Unsecured Claims include any Claim (including any Allowed Rhodes Entities the Debtors that is not a/n (a) Administrative Claim, (b) Priority Tax Claims) against any of

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Claim, (c) Priority Non-Tax Claim, (d) First Lien Lender Claim, (e) Second Lien Lender
Claim, (f) Other Secured Claim, (g) Subordinated Claim, or (h) Intercompany Claim.

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Class C-1 is Impaired and entitled to vote to aecept or reject the Plan. On the Effective Date, each Holder of an Allowed General Unsecured Claim (including any Allowed Rhodes the Litigation Trust Interests allocable to the Entities Claims) shall receive its pro rata share of Holders of General Unseeured Claims on account of its Allowed Claim.
6. Class C-2 - Subordinated Claims

19

Subordinated Claims include all Claims subject to subordination under Bankruptcy

Code section 510.

20
Class C-6 is Impaired and deemed to have rejected the Plan. Claims subordinated

21

under applicable law (including any Rhodes Entities Claims that are subordinated) shall not
receive any recovery on account of their Claims.
7. Class D - Old Equity Interests

22
23

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28

Old Equity Interests include all of the Interests in any of the Debtors and any rights, options, warrants, calls, subsciiptions 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.

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8. Class E -Intercompany Claims

2
3

Intercompany Claims include any Claim held by a Debtor against another Debtor.

4
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6
7

Class E is Impaired and deemed to reject the Plan. At the election of the Reorganized Debtors, Intercompany Claims wil 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.

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D. Cramdown
The Plan Proponent wil request Confirmation of the Plan under section ll29(b) of the Bankrptcy 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 Confinuation pursuant to section 1129(b) of the Bankruptcy Code requires modification.
E. Means for Implementation of

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the Plan

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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 eonsolidating 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

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for the purposes of the Plan and the distributions and transactions contemplated thereunder, all the Debtors' Estates shall be deemed consolidated into a single estate; assets and liabilities of (b) all cross-corporate guarantees made by the Debtors prepetition shall be deemed eliminated (regardless of whether sueh guaranty is secured, unsecured, liquidated, unliquidated, contingent, or dispute); (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 fied 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 1 I Case of any of the Debtors shall be deemed to be a single obligation of all of the Debtors under the
more than one of

24 25

Plan; (f) all duplicative Claims (identical in both amount and subject matter) Filed against the Debtors shall be automatieally 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 perfonuance made by the Debtors as to the obligations of another Debtor or of any other Person shall be discharged,

26
27 28

released and of no further force and effect; provided, however, that nothing in the Plan shall affect the obligations of eaeh 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.

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Substantive consolidation causes no harm to creditors and the benefits of substantive

consolidation are numerous. First, over $12 billion in duplicate secured debt 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 wil be deemed only one Debtor. Third, over $4.6 million of other duplicate Unsecured Claims that have been
filed in multiple Chapter 11 Cases wil 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.

Aecordingly, the Plan Proponent submits that substantive consolidation is warranted in the Chapter I 1 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 eash 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 offcers among parent and subsidiaries.

Because the Debtors all have the same director/managing member and

principal shareholder, Mr. Rhodes, there were no regular meeting 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 offce for their aceounting, 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 diffcult and time consuming

to disentangle. As of the Petition Date, the Debtors estimate that

approximately $500 milion in intercompany claims were owed between the

Debtors.
. The Debtors are all obligated, either as obligors or guarantors, on the First Lien

Lender Claims and Second Lien Lender Claims.

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. Based on the 461 Proofs of Claims Filed, at least 160 claimants have Filed Claims

2
3

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.
2. Sources of

4
5

Consideration for Plan Distributions

6
7

existing assets, and the issuance of

The Reorganized Debtors shall fund distributions under the Plan with Cash on hand, 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 Neweo Equity lnterests (based upon the Newco Total Enterprise Value) to the Holders of First Lien Lender 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.

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TIie economic rights of the Class A-l Equity Interests and Class A-2 Equity Interests shall be identicaL. TIie Class A-2 Equity Interests will not be entitled to general voting rights,
but wil be entitled to vote on an "as converted" basis (together with the holders of the Class

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A-I 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

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preference, including additional Newco Equity Interests, (ii) any amendment to the Newco's eertificate 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

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holders of Class A-I 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

20
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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-I 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

22 23

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-l Equity Interests. In any liquidation, dissolution or winding up of the Reorganized Debtors, all assets wil be distributed to holders of the Newco Equity Interests on a pro rata basis.
(i) Section 1145 Exemption

24
25

26
27 28

the Bankruptcy Code, the offering, issuance, and distribution of any Securities contemplated by the Plan and any and all settlement agreements incorporated
Pursuant to section 1145 of

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therein, including the Newco Equity Interests, shall, to the fullest extent pennitted by applicable
law, be exempt from, among other things, the registration requirements of section 5 of the

2
3

4
5

6
7

Securities Act and any other applicable law requiring registration prior to the offering, issuance, the Bankruptcy Code any distribution, or sale of Securities. In addition, under section 1145 of Securities eontemplated by the Plan, including the Newco Equity Interests and New First Lien Notes, wil 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)(1I) of the Securities Aet, 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 Stockholders Agreement; and (iii) applicable
regulatory approval.

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(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

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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 the documents goveming the New First to the Plan and as otherwise provided in the tenns of Lien Notes which shall be included in the Plan Supplement.
c. Exit Financing

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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

22
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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 lnterests and the New First Lien Notes will be necessary to fund distributions under the Plan on the Effective Date.
3.

24
25

Corporate Existence

26 27
28

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 fonn, 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 fOlmed and pursuant to the
respective certificate of incorporation and bylaws (or other fonnation documents) in effect

prior to the Effective Date, except to the extent such certificate of incorporation and bylaws

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2
3

(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.

4. Yesting of Assets in the Reorganized Debtors

Except for any Claims or Causes of Action transferred to the Litigation Trust and
5
unless otherwise provided in the Plan or any agreement, instrument, or other document

6 7

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

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eneumbrances. On and after the Effective Date, except as otherwise provided in the Plan,
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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

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supervision or approval by the Bankptcy Court and free of any restrictions of the
Bankrptcy Code or Bankruptcy Rules.
5. Cancellation of

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Equitv Securities and Related Obligations

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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

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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

20
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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

22 23

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 goveming agreement; (y) permitting such ServiceI' to maintain any rights and Liens

it may have against property other than the Reorganized Debtors' property for fees, costs, and

24
25

26 27
28

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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2
3

any obligations to any Servicer for any fees, costs, or expenses, exeept 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, effeetive the next day, the following transactions shall be deemed to have occurred in the order set forth below.

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a. Newco shall be formed as a new limited liability company. The First Lien Lender 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 Claims. At the option of a holder, membership interests in Newco may be transferred to a corporation prior to step (b).
b. Newco shall purchase all of

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the Heritage Equity Securities for $10.00.

c. Contemporaneous with or subsequent to Newco's purchase of

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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 Claims.

d. Newco's 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.

19

20
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22
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24
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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, Newco's purchase of the Heritage Equity Securities shall occur (a) eontemporaneously with or immediately before the membership interests of those entities described in Article IY.E.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 m.B, et seq., of the Plan. The holders of the Heritage Equity Securities and Newco wil report the sale and purchase of the Heritage
Equity Securities in accordance with revenue ruling 99-6, 1991-1 CB 432.
7. Restructuring Transactions

On the Effeetive 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)

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the execution and delivery of appropriate agreements or other documents of merger,

consolidation, or reorganization containing terms that are consistent with the terms of

2
3

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

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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 vehie1e to hold assets for sale that wil not be utilized in the business of the Reorganized Debtors; and (6) all other actions that the Reorganized Debtors determine are necessary or appropriate, ine1uding the making of filings or recordings in connection with the relevant Roll-Up Transactions. The form of each RollUp Transaction shall be detennined 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

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Eaeh 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 the Effective Date, be deemed to have oceurred and be effective as provided in the shall, as of 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 ine1ude: the adoption and filing of the

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Newco Charter and Newco Bylaws; the adoption and filing of amended organization
documents of the other Reorganized Debtors; the appointment of directors and offcers for the
Reorganized Debtors; the execution of the Stockholders Agreement; and the adoption,
implementation, and amendment of

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the Management and Director Equity Incentive Plan.

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9. Post-Confirmation Property Sales

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To the extent the Reorganized Debtors sell any of their property prior to or ine1uding the date that is one year after Confirmation, the Reorganized Debtors may elect to sell such
property pursuant to sections 363,1123, and 1 146(a) of

the Bankruptcy Code.

10.

Certificate of Incorporation and Bylaws

22
23

24
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 amended, in fonn and substance acceptable to the First Lien Steering Committee, as may be required to be consistent with the provisions of the Plan and the Bankruptcy Code. The Newco Charter and Newco Bylaws shall be in form and substance acceplable to the First Lien Steering Committee and shall be ine1uded in the Plan Supplement, which wil be Filed on the Plan Supplement Filing Date. The certificate of incorporation of 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 11 23(a)(6) of the Bankruptcy Code, ine1ude a provision

prohibiting the issuance of non-voting Equity Securities. On or as soon as reasonably

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3

practicable after the Effective Date, to the extent required, each of the Reorganized Debtors shall fie new ceiiificates of incorporation (or other formation documents relating to limited liability companies limited partnerships, or other fonns of Entity) in fonn and substance acceptable to First Lien Steering Committee, with the seeretary (or equivalent state offcer 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

4
5

6 7

required, Newco shall file the Newco Charter with the secretary (or equivalent state officer or Entity) of the state under which Newco is to be incorporated or organized. After the Effective incorporation and Date, each Reorganized Debtor may amend and restate its new certificate of other constituent documents as peniitted by the relevant state eorporate law.
1 1. Effectuating Documents. Further Transactions

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On and after the Effective Date, the Reorganized Debtors, and the offcers and
members of

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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

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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 I 146(a) of the Bankrptcy Code, any transfer from a Debtor to a Reorganized Debtor or to any Entity pursuant to, in contemplation of, or in conneetion with

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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

19

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 eonnection with, the
Plan, including any deeds, bils of sale, assignments, or other instrument of transfer executed

20
21

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,

22 23

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 govemmental officials or agents
shall forego the collection of any such tax or govemmental assessment and to aceept for filing and recordation any of the foregoing instruments or other documents without the payment of any sueh tax or govemmental assessment.
13. Directors and Offcers of

24
25

26 27
28

the Reorganized Debtors

On the Effective Date, the board of directors of the Reorganized Debtors or similar govemin

entities shall be composed of one or more members appointed by the First Lien Steerin Committee. On the Effective Date, a chief executive offcer or similar offcer selected by th

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3

board of directors of the Reorganized Debtors shall be appointed. The identity of sueh offcer and directors shall be disclosed prior to the Confirmation Hearing.
14. Management and Direetor Equitv Incentive Plan

4
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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 detennined by the Board of Directors of New

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15. The Litigation Trust

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On the Effective Date, the Litigation Trust wil be implemented pursuant to the terms 0 the Litigation Trust Agreement. On the Effective Date, pursuant to the terms of the Litigation Trust Agreement, the Debtors wil transfer the Litigation Trust Assets for and on behalf of th Litigation Trust Beneficiaries, which will be the Holders of Allowed Claims in Classes A-l, A-2 and C-1. For all federal income tax purposes, the beneficiaries of the Litigation Trust shall b treated as grantors and owners thereof and it is intended that the Litigation Trust be classified a a liquidating trust under Section 301.7701-4 of the Treasury Regulations and that such trust i owned by its beneficiaries. Accordingly, for federal income tax purposes, it is intended that th Litigation Trust Beneficiaries be treated as if they had received a distribution of an undivide interest in the Litigation Trust Assets and then contributed such interests to the Litigation Trust. The Litigation Trust will initially be funded by the Litigation Trust Funding Amount, whieh wil

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be transferred to the Litigation Trust on the Effeetive Date and which will be repaid to th
Reorganized Debtors from the first proceeds received by the Litigation Trust.

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The Litigation Trust shall issue non-transferable interests to Holders of Allowed Firs
Lien Lender Claims, Allowed Second Lien Lender Claims, and Allowed General Unsecure

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Claims (including any Allowed Rhodes Entities Claims) with each Holder of an Allowed Claii
in each of the foregoing Classes of Claims receiving its pro rata share of the Litigation Trus Interests allocable to each such Class of Claims.
16. Preservation of Causes of Action

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In accordance with section i 123(b) of the Bankruptcy Code, except as otherwise

provided in the Plan, the Reorganized Debtors and the Litigation TlUst shall retain and may

22 23

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 in the Plan Supplement, and the Reorganized Debtors' rights to commence,

24
25

prosecute, or settle such Causes of Action shall be preserved notwithstanding the occurrenee of the Effective Date. The Reorganized Debtors and the Litigation Trust, as applicable, may pursue such Causes of Aetion, 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, the Plan Supplement, or the Disclosure

26
27

Statement to any Cause of Action against them as any indication that the Debtors,

28

Reorganized Debtors or the Litigation Trust, as applicable, wil not pursue any and alI available Causes of Action against them. The Reorganized Debtors and the Litigation Trust, as applicable, expressly reserve alI rights to prosecute any and alI Causes of

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3

Action against any Entity, exeept 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 otheiwise), or laches, shall apply to such Causes of Action upon, after, or as a eonsequence of Confinnation 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 applieable, through its authorized agents or representatives, shall retain
and may exclusively enforce any and all such Causes of Action belonging to it. The

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Reorganized Debtors and the Litigation TlUst, as applicable, shall have the exclusive right, authority, and discretion to determine and to initiate, fie, 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 eonsent or approval of any third party or further
notice to or action, order, or approval of the Bankruptcy Court. Neither the Litigation TlUst

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nor the Reorganized Debtors shall commence any litigation against the Rhodes Entities until
the Bankruptcy Court IUles on the allowance of the Rhodes Entities Claims set forth in Proofs

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of Claim, included in the Debtors' Schedules or otheiwise 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 the allowance of the Rhodes Entities through the pending the Bankruptey Court's resolution of Claims, the Rhodes Entities shall be deemed to have consented to an extension of the

19

applieable statute of limitations until sixty days following the Bankruptcy Court's ruling on the allowance of the Rhodes Entities Claims. The Litigation TlUst shall have no liability to any entity for any Claims or Causes of Action it determines not to pursue.
17. HOA Board Seats

20
21

22
23

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

24
25

26 27 28

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, SageblUsh Enterprises, Inc. shall have rescinded by September 25, 2009 its revocation of its

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indemnity of the Nevada contractors' license held by Rhodes Design & Development
Corporation and such rescission did not negatively affect the general contractor's license held

2
3

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 Sagebrush's recission of its indemnity through the Effective Date, provided that the allowance of such
Administrative Claim shall be subjeet to resolution by the Bankptcy Court and/or such other

4
5

6 7

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 Contractor's Board license, and any other general business or similar

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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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On the Effective Date, the applicable Rhodes Entities shall transfer their equity interest in the entity that owns the Rhodes Ranch Golf Course to the Reorganized Debtors (together wit

any equipment, golf carts, contracts or other assets determined by the First Lien Steerin
Committee to be necessary for the operation of the Rhodes Ranch Golf Course) pursuant to th terms of a stock transfer agreement in form and substance acceptable to the First Lien Steerin Committee and Rhodes, subject to any outstanding debt on the Rhodes Raneh Golf Course. Th stock transfer agreement shall contain representations by the Rhodes Entities that the entity tha owns the Rhodes Ranch Golf Course does not have any liabilities other than ordinary cours liabilities related to the Rhodes Ranch Golf Course and indemnification provisions in favor 0

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the Reorganized Debtors by the Rhodes Entities for any non-ordinary course liabilities. i addition, prior to the deadline for filing objections to the Disclosure Statement, the Rhode
that owns the Rhodes Ranch Golf Rhodes Ranch Golf

19

Entities shall provide the First Lien Steering Committee with a list of all liabilities of the entit Course, a lien analysis and copies of all eontracts related to th
Course and to which the entity that owns the Rhodes Ranch Golf

Course is

20
21

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 0

22 23

before the Effective Date, for a period of no less than twelve (J 2) months from the Effectiv

24
25

Date, on terms and conditions acceptable to Rhodes and the First Lien Steering Committee. Th parties will work together in good faith to refinance the existing debt. The Reorganized Debtor shall pay the reasonable costs and expenses associated with the refinancing; provided, that th terms of such refinancing are acceptable to the First Lien Steering Committee. The First Lie

Steering Committee acknowledges that the loan documentation may provide that, upon th
transfer of the Rhodes Ranch Golf Course to the Reorganized Debtors on the Effective Date,

26 27 28

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 operatio of and revenue generated by any cell towers located on the property of the Rhodes Ranch Gol Course. Any funds received after July 31, 2009 from the Las Yegas Valley Water Distrct 01 other similar entity as an incentive for converting the golf course from a green course to a dese

39

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2
3

eourse shall be used for operating expenses associated with the Rhodes Ranch Golf Course, wit 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 Ranc Golf Course from the Reorganized Debtors at eight (8) years from the Effective Date for $5.
milion in cash. The Reorganized Debtors may require Rhodes to purchase the Rhodes Ranc

4
5

Golf Course any time between four (4) and eight (8) years from the Effective Date for $5.
6
7

milion in cash provided that the Reorganized Debtors shall provide Rhodes with at least on year advance notice of its intent to sell the Rhodes Ranch Golf Course back to Rhodes. SucJ transfer shall oceur on the applicable anniversary date of the Effective Date. For the avoidane
of doubt, if the Reorganized Debtors put the Rhodes Ranch Golf Course to Rhodes in accordanc

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with the terms hereof and Rhodes fails to comply with his obligation to purchase the Rhode Ranch Golf Course, Rhodes shall be deemed to have forfeited his option to purchase the Rhode'
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On the Effective Date, Rhodes's obligations to comply with the repurehase shall b secured by either (i) $500,000 in cash in an escrow account or (ii) property worth at least $
milion (the "Golf Course Securitv Property"), with the value of such property to be agreed to b Rhodes and the First Lien Steering Committee or otherwise valued by an independent third part
appraisal firm acceptable to both Rhodes and the First Lien Steering Committee (excep

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Cushman Wakefield). In the event that Rhodes does not meet the repurchase request, provide that the Rhodes Ranch Golf Course is in the standard condition (defined below), then th 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).

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So long as Rhodes has not defaulted on his obligation to repurchase the Rhodes Ranc Golf Course, Rhodes shall have the absolute and sole discretion to replace the Golf Cours 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 t Rhodes or his designee. Notwithstanding anything to the contrary contained herein, if th Rhodes Raneh Golf Course is not maintained with substantially the same performance and ratin criteria at the time of the repurchase request as verified by an independent third party ratin agency as it was on the Effective Date ("Standard Condition"), James Rhodes ean (i) require th Reorganized Debtors to cure any conditions to retum the Rhodes Ranch Golf Course to it
Standard Condition (provided, that the cost of such cure does not exceed $500,000), or (ii

22
23

choose not to purchase the Rhodes Ranch Golf Course. Upon either the repurchase of th Rhodes Raneh Golf Course or the written decision to not repurchase the Rhodes Ranch Gol Course (in accordance with the preeeding sentence), the Golf Course Security Property or th $500,000 Cash (if not applied to the repurchase of the Rhodes Ranch Golf Course) shall b
retumed to Rhodes within 30 days.

24
25

26 27
28

against the Rhodes Raneh Golf

On the Effective Date, the Reorganized Debtors shall record a memorandum of agreemen Course to evidence the above.

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20. Cash Payment

The Rhodes Entities shall make a cash payment to the Reorganized Debtors of $3.5

million in Cash on the Effective Date.

21. Transfer of Arizona Assets

On the Effective Date, pursuant to an asset transfer agreement in fonn and substance acceptable to the First Lien Steering Committee and the Rhodes Entities, the Debtors shall transfer Pravada and the other Arizona Assets set forth on Attachment D to the Mediation Term Sheet, plus the Golden Yalley Ranch tradename to the Rhodes Entities free and clear of all liens, claims and encumbranees 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, that such assets shall not include assets owned by Pinnacle Grading located in

Arizona and related contracts associated with the assets. The Debtors shall provide James the Pinnacle assets, and James Rhodes shall be granted a right to bid on the sale of such assets within i 0 days of such notiee. The Rhodes Entities
Rhodes notice of any proposed sale of

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 all of thirty (30) days following: (i) upon completion of

the Reorganized Debtors' homebuilding assets and inventory (regardless of

the bui1dout of when such

assets and inventory were aequired), 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 Tern1

Sheet.
23. Se1f1nsured 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 subeontractors 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 creditwoithiness of which shall be satisfied solely as of

the Reorganized Debtors,

the Effeetive Date by the Court finding that the Plan is feasible, the existing performance bonds guaranteed by the Rhodes Entities and such guarantees

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shall remain in place. The applicable Rhodes Entity's 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 ofbond 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 ofthis paragraph.
Contingent Bond Indemnity Claims wil 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, sueh Contingent Bond Indemnity Claim shall be treated as a General Unsecured Claim.
25. 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 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 Seeond Lien Agent are unable to agree on the amount or form of such consideration, the parties wil 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).
F. 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' exeeutory eontraets or

unexpired leases not assumed or rejected pursuant to a Bankruptcy Court order prior to the Eftctive Date shall be deemed rejected pursuant to sections 365 and 1123 of the Bankrptcy Code, except for those executory contracts or unexpired leases: (l) listed on the schedule of "Assumed Exeeutory Contracts and Unexpired Leases" in the Plan Supplement; (2) that are
Intercompany Contraets, in which case such Intercompany Contracts are deemed
automatically assumed by the applieable 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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2
3

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 Bankptcy 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.

4
5

Unless otherwise indicated, all assumptions or rejections of such executory contracts and unexpired leases in the Plan are effective as of the Effeetive Date. Each such executory contract and unexpired lease assumed pursuant to the Plan or by Bankrptcy Court order but
not assigned to a third party prior to the Effective Date shall revest in and be fully enforceable by the applicable contraeting Reorganized Debtor in accordance with its terms, except as such tenns 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,

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amend, modify, or supplement the schedules of executory contracts or unexpired leases identified in the Plan Supplement 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 in the
Plan Supplement, at no eost to the Debtors or the Reorganized Debtors and all Cure costs

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associated with such scheduled Arizona eontracts or leases shall be borne by the Rhodes
Entities.
2. Cure of

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Defaults for Assumed Executory Contracts and Unexpired Leases

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With respect to eaeh 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

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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

20
21

22
23

24 25

26
27 28

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 applieable 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 Bankruptey Court, and any Claim for Cure shall be deemed fully satisfied, released, and the amounts listed on the proposed Cure schedule, discharged upon payment by the Debtors of 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

2
3

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

4
5

Bankruptcy Code, or any other matter pertaining to assumption, then Cure shall oecur as soon as reasonably practicable after entry of a Final Order resolving such dispute, approving such assumption (and, if applicable, assignent), or as may be agreed upon by the Debtors with the
consent of the First Lien Steering Committee, or the Reorganized Debtors and the

6
7

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 eontract 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

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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

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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 exeeutory 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 bonie by the Rhodes Entities.

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3. Preexisting Obligations to the Debtors Under Executorv Contracts and

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Unexpired Leases

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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

20
21

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

22
23

services, warranties, indemnity, guarantee of workmanship, or continued maintenanee 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

24
25

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.

26
27
28

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4. Claims Based on Reiection or Repudiation of Executory Contracts and Unexpired Leases

2
3

Unless otherwise provided by a Bankruptcy COUli order, any Proofs of Claim asserting

4
5

Claims arising fi'om 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

6
7

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

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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 business. perfonned by the applicable Reorganized Debtor in the ordinary course of
6. Home Sales
All pending home sale contracts shall be assumed by the applicable Reorganized
Debtor.
7. Warranties

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peifonned in the ordinary course of

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All eligible prepetition home sale contracts with one-year warranty obligations shall be the Reorganized Debtors. Upon the Effective business of 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 transfen'ed to the Reorganized Debtors. Warranty obligations that are not expressly assumed shall be rejected and treated as General Unsecured Claims.
8. Modification of

24
25

Executory Contracts and Unexpired Leases Containing Equity Ownership Restrictions

26
27 28

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 eftct and (2) any breaches that may arise

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3

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

4
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Unless otherwise provided in the Plan, each executory contraet 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.

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Modifications, amendments, supplements, and restatements to prepetition executory

contracts and unexpired leases that have been executed by the Debtors during the Chapter 11

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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

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Neither the exclusion nor inclusion of any contract or lease in the Plan Supplement, 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

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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.
11. Nonoccurrence of Effective Date

19

20
21

In the event that the Effective Date does not occur, the Banruptcy 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.

22
23

G. Procedures for Resolving Disputed Claims

1. Allowance of Claims

24
25

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 IY of

the Plan.

26
2. Claims Administration Responsibilities

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

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3

judgment, objections to Claims; (2) to settle or compromise any Disputed Claim without any further notice to or action, order, or approval by the Bankrptcy 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

4
5

Claims

Before or after the Effective Date, the First Lien Steering Committee or the

6
7

Reorganized Debtors, as applicable, may (but are not required to) at any time request that the Bankrptcy Court estimate any Disputed Claim that is eontingent 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

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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

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12
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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

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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.

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4. Adiustment to Claims Without Objection

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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 Obiections to Claims

20
21

22 23

24
25

26 27 28

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 notiee 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 fied 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
the Bankruptey Code or that is

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

a transferee of a transfer avoidable under section 522(f), 522(h), 544, 545, 547, 548, 549, or the the Bankruptcy Code, shall be deemed disallowed pursuant to section 502(d) of 724(a) of Bankruptcy Code, and Holders of such Claims may not receive any distributions on account of sueh 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 APPROYAL 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

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 COUli or the Reorganized Debtors, and any sueh new or amended Claim Filed shall be deemed disallowed in full and expunged without any further action.
H. Provisions Governing Distributions
1. Total Enterprise Yalue for Purposes of

Distributions Under the Plan

Distributions of Newco Equity Interests to Holders of Allowed First Lien Lender Claims shall be based upon, among other things, the Newco Total Enterprise Yalue. For purposes of distribution, the Newco Equity Interests shall be deemed to have the value

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3

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

4
5

6
7

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 (I) 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 tenns and conditions of any controlling agreements, course of dealing, course of

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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

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a. Payments and Distributions on Disputed Claims

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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, distrbutions 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

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ordinary course of business during the Chapter II Cases or assumed by the Debtors on or before the Effective Date that become Allowed after the Effective Date shall be paid or perfonned 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 praetice 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 fivethe Bankruptcy Code with annual interest
year period as provided in section 1129(a)(9)(C) of

19

20
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provided by applieable non-bankruptcy law.

22
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b. Special Rules for Distributions to Holders of

Disputed Claims

24
25

26
27 28

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 VLL.C.3 of the Plan. Subject

2
3

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.

4
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Reserve of Litigation Trust Interests

6 7

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

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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

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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

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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

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any Disputed Claim that is eontingent or unliquidated.

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Notwithstanding anything in the applicable Holder's Proof of Claim or otherwise to

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the contrary, the Holder of a Claim shall not be entitled to receive or recover a distribution

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under the Plan on account of a Claim in exeess of the lesser of the amount: (a) stated in the Holder's Proof of Claim, if any, as of the Distribution Record Date, plus interest thereon to the the Claim is denominated as contingent or unliquidated extent provided for by the Plan; (b) if as of the Distiibution Record Date, the amount that the Reorganized Debtors elect to withhold

on account of such Claim in the Disputed Claims Reserve and set foi1h in the Plan
Supplement, 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

20
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Disputed Claim Reserve to satisfy sueh Claim after such estimation.

4.
Delivery of Distributions

22
23

a.

Record Date for Distributions

24
25 26 27 28

On the Distribution Record Date, the Claims Register shall be closed and any party responsible for making distributions shall be authorized and entitled to reeognize 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 transfelTed twenty or fewer days before the Distribution Record Date, the Distribution Agent shall make distributions to the

transferee only to the extent praetieal and in any event only if the relevant transfer fonn
contains an unconditional and explicit certifieation and waiver of any objection to the transfer by the transferor.

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b. Distribution Agent

2
3

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 appropiiate 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.
Distributions in General

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6 7

c. Delivery of

Except as otherwise provided in the Plan, and notwithstanding any authority to the

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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

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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 ifno Proof of Claim is Filed or if the Debtors have been notified in writing ofa 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 I I Cases on the Holder's behalf. Except as otherwise provided in the Plan,

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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

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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

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For purposes of detennining 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 iights until distributions of the Newco Equity Interests and the Litigation Trust Interests, as applicable, actually take place.
e. Allocation Between Principal and Accrued Interest

20
21

22
23

24
25

Except as otherwise provided in the Plan, distributions on account of Allowed Claims shall be treated as allocated first to principal and thereater to any interest.
f. Compliance Matters

26 27 28

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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3

4
5

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 suffcient 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

6 7

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

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(i) Fractional Distributions

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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

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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, halfNewco Equity Interests or half Litigation Trust Interests or less
being rounded down.
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(ii) Undeliverable Distributions

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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 Holder's 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

20
21

22
23

24
25 26
27 28

Any distribution under the Plan that is an Unclaimed Distiibution for a period of six months after distribution shall be deemed unclaimcd 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 propei1y 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 and notwithstanding any otherwise applicable federal or state escheat, abandoned, or contrary
unclaimed property law.
h. Manner of

Payment Pursuant to the Plan

Any payment in Cash to be made pursuant to the Plan shall be made at the election ofth Reorganized Debtors by check or by wire transfer. Checks issued by the Distribution Agent 0 applicable Servicer on account of Allowed Claims shall be null and void if not presented withi J 20 days after issuance, but may be requested to be reissued until the distribution revests in th
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 affdavit 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 propei1y, 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 pai1y that is not a Debtor or

Reorganized Debtor. Further, to the extent a Holder of a Claim receivcs a distribution on

account of such Claim and receives payment from a party that is not a Debtor or a

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2
3

Reorganized Debtor on account of receipt such Claim, such Holder shall, within two weeks of thereof, repay or retum the distribution to the applicable Reorganized Debtor, to the extent the

Holder's 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 retul1 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 ater the two-week grace period specified above

4
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until the amount is repaid.

b. Claims Payable by Insurance

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Holders of Insured Claims that are covered by the Debtors' insurance policies shall
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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 immediatcly upon such insurers' agreement, such Claim may be expunged

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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

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c. Applicability oflnsurance Policies

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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

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19

20
21

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.

22 23

6. Pavment of $ 1.5 Million to First Lien Lenders

First Lien Lender Claims pursuant to Article III.B. I. shall be paid as follows: (i) $400,000 on the Effective Date and (ii) the remaining up to $ I, 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 a1l0unt(s) to be paid on the next quarterly payment date (and the amount scheduled to be paid on such quarterly payment date defen.ed for another quai1er; provided that the full $1.5 million payment shall be made to the Holders of First Lien Lender 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 temis and conditions
The $1,500,000 in Cash payable to the Holders of

24
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26
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acceptable to the First Lien Steering Committee and the Reorganized Debtors have unrestricted cash of at least $3.5 milion (ater taking into account any amounts required to be paid to reduce the amount of debt on the Rhodes Ranch Golf Course below $5.9 milion 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 1lillion, the $400,000 payment shall be increased to $1,000,000; and (iii) ifunrestiicted cash (as calculated above) is equal to or greater than $5.5 million, the $400,000 payment shall be increased to $ 1.5 milion, in each case with the subsequent quarterly installments reduced by a corresponding a1l0unt 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

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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 to be listed in a schedule to be included in the Plan Supplement (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. 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 Steeiing 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). 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; (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 milion has been used to purchase other Allowed Claims on the Claim Purchase Schedule before such Creditor's 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

26
27 28

Lender 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 C01lmittee may, in its sole discretion (but after consultation with the Debtors and the Creditors' Committee), add Claims to the Claim Purchase Schedule at any

55

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2
3

4
5

time; provided that the amount to be paid for all such Claims listed on the Claim Purchase Schedule does not exceed $1.5 milion 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 milion 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 i 00 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 Clai1l is purchased in accordance with Article VLi.G. of shall serve as the notice of transfer of Claim required under Bankruptcy Rule 3001

6 7

the Plan. The Plan

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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.
i. Effect of Confirmation of

the Plan

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I. Discharge of Claims and Tennination ofInterests

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Pursuant to section I 141 (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

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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 tennination of any employee, regardless of whether such termination occurred prior to or ater 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 fiing of the Chapter 1 I Cases shall be deemed Cured on the Effective Date. The Confinnation Order shall be a judicial detennination of the discharge of all Claims and Interests subject to the Effective Date occuning.
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 iights relating thereto, whether arising under

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general principles of equitable subordination, section 5 I O(b) of the Bankruptcy Code, or

2
3

otherwise. Pursuant to section 5 I 0 of the Bankruptcy Code, the Plan Proponent or

Reorganized Debtors, as applicable, reserve the right to re-c1assify any Allowed Claim or
Interest in accordance with any contractual, legal, or equitable subordination relating thereto.
3.
Compromise and Settlement of

4
5

Claims and Controversies

6 7

Pursuant to section 363 of the BanklUptcy Code and Bankrptcy 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 Court's 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

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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 Plan, pursuant to section 363 of

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4. Releases bv the Debtors of the Released Parties

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Pursuant to section II23(b) of the Bankruptcy Code, and except as otherwise specifically provided in the Plan or the Plan Supplement, for good and valuable
consideration, including the service of the Released Parties to faciltate the expeditious

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reorganization of the Debtors and the implementation of the restructuring contemplated by the Plan, 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 liabilties 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 II 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

22
23

24
25

contractual arrangements between any Debtor and any of the Released Parties, the
restructuring of Claims and Interests prior to or in the Chapter II Cases, the

26 27 28

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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5. Releases bv the Debtors ofthe Rhodes Entities

2
3

The Rhodes Entities shall be deemed released from any and all Claims, obligations, rights, suits, damages, Causes of Action, remedies, and liabilties 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,

4
5

however, that such release shall only apply to transfers expressly set forth in the
6 7

Schedules as Filed with the Bankruptcy Court as of August I, 2009 or as disclosed in Attachment B to the Mediation Term Sheet.
6. Releases bv First Lien Lenders of First Lien Lenders

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Pursuant to Bankruptcy Rule 9019, and except as otherwise specifically provided

in the Plan or the Plan Supplement, 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

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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 affiiates from any and all Claims, obligations, rights, suits, damages, Causes of Action, remedies, and liabilties 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 II Cases,
the subject matter of, or the transactions or events giving rise to any First Lien Lender

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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

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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

20
21

Civil code or other analogous state or federal law related to the matters being released;

provided, however, that Claims or liabilties arising out of or relating to any act or
omission of any First Lien Lender or any of its affiiates that constitutes gross negligence or wilful misconduct shall not be released.
7. Exculpation

22
23

24
25 26 27 28

Except as otherwise specifically provided in the Plan or Plan Supplement, no Exculpated Party shall have or incur, and each Exculpated Party is hereby released and exculpated from any Claim, obligation, Cause of Action, or liabilty to one another or to any Exculpating Party for any Exculpated Claim, except for gross negligence, wilful 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 responsibilties pursuant to the Plan. The Debtors, the First Lien Steering Committee and the Reorganized Debtors

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(and each of their respective agents, members, directors, officers, employees, advisors,
2
.J

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

4
5

6
7

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

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Debtors, and all Entities holding Interests, are permanently enjoined, from and after the
Effective Date, from: (I) commencing or continuing in any manner any action or other

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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

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against the Debtors or Reorganized Debtors 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

a;

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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 fie 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

19

20
21

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

22
23

Interests released or settled pursuant to the Plan.

9. Protection Against Discriminatory Treatment
Consistent with section 525 of the Bankruptcy Code and the Supremacy Clause of

24
25

the

26
27
28

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, pennit, 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

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debtor under chapter I I, has been insolvent before the commencement of the Chapter I I
2
3

Cases (or during the Chapter I I Cases but before the Debtor is granted or denied a discharge) or has not paid a debt that is dischargeable in the Chapter 1 I Cases.
10. Setoffs

4
5

6
7

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 acconnt of such

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Allowed Claim), any Claims, rights, and Causes of Action of any nature that such
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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

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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 ofthe 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

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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 fie 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).
11. Recoupment

16
17 18

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20
21

22
23

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

24
25

26 27
28

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

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2
3

concurrently with the applicable distributions made pursuant to the Plan, aJl mortgages, deeds of trust, Liens, pledges, or other security interests against any property of the Estates shall be fuJly released, and discharged, and aJl of the right, title, and interest of any Holder of such

mortgages, deeds of trust, Liens, pledges, or other security interests shaJl revert to the Reorganized Debtors and their successors and assigns. Upon the Effective Date, the
Confirniation Order shaJl be binding upon and govern the acts of aJl entities, including,

4
5

without limitation, all fiing agents, filing offcers, title agents, title companies, recorders of
mortgages, recorders of deeds, registrars of deeds, administrative agencies, governmental

6 7

departments, secretaries of state, federal and local offcials, and all other persons and entities
who may be required by operation of law, the duties of their offce, or contract, to release any

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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 Confinnation Order any and aJl of the documents and instruments necessary and
appropriate to effectuate the discharge.

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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,

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modified, or supplemented by the Reorganized Debtors in the ordinary course of business. Copies of aJl 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.
i 4. Reimbursement or Contribution

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If the Bankruptcy Court disaJlows a Claim for reimbursement or contribution of an Entity pursuant to section 502(e)(l)(B) of the Bankruptcy Code, then to the extent that such Claim is contingent as of the time of allowance or disaJlowance, such Claim shaJl be forever
disaJlowed notwithstanding section 502(j) of the Bankruptcy Code, unless prior to the

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19

Effective Date: (I) 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 detennining such Claim as no longer contingent.
J. AJlowance and Pavnent of

20
21

Certain Administrative Claims

I. Professional Claims

22
a. Final Fee Applications

23

24
25

AJI final requests for payment of Claims of a Professional shaJl be Filed no later than forty-five days after the Effective Date. Ater notice and a hearing in accordance with the

procedures established by the Bankruptcy Code and prior Bankruptcy Court orders, the
AJlowed amounts of such Professional Claims shaJl be detennined by the Bankruptcy Court.
b. Payment of Interim Amounts

26 27 28

Except as otherwise provided in the Plan, Professionals shaJl be paid pursuant to the Interim Compensation Order.

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c. Reimbursable Expenses

2
3

4
5

6 7

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 the Agreement (only to the extent the Class of Second Lien Lender Claims votes in favor of Plan), and (iii) the First Lien Steering Committee, including its professionals, in connection with the Chapter I I 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

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Except as otherwise specifically provided in the Plan, from and after the Effective

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Date, the Reorganized Debtors shall, in the ordinary course of business and without any fui1her 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 ConSU1lmation incurred by the Reorganized Debtors and First Lien Steering Committee.

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Upon the Effective Date, any requirement that Professionals comply with sections 327
through 33 I and II 03 of the Bankruptcy Code in seeking retention or compensation for

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services rendered after such date shall tenninate, and the Reorganized Debtors may employ and pay any Professional in the ordinary course of business without any fui1her notice to or action, order, or approval of the Bankruptcy Court.
e. Substantial Contribution Compensation and Expenses

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Except as otherwise specifically provided in the Plan, any Entity who requests

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compensation or expense reimbursement for making a substantial contribution in the Chapter I I 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

a;

19

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

20
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expense reimburse1lent.
2. Other Administrative Claims

22
23

24
25

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,

26 27
28

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

62

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2
3

payment of an Administrative Claim need be Filed with respect to an Administrative Claim previously Allowed by Final Order.
K. Conditions Precedent to Confirmation and Consummation of

the Plan

4
5

I. Conditions to Confirmation

The following are conditions precedent to Confinnation that must be satisfied or

waived in accordance with Article X.C of

6
7

the Plan:

A. The Bankruptcy Court shall have approved the Disclosure Statement, in

manner acceptable to the Plan Proponent, as containing adequat

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information with respect to the Plan within the meaning of section i 125 0 the Bankruptcy Code.

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B. The Confinnation Order shall be in fonn and substance acceptable to th

Plan Proponent.

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C. The tenns and conditions of employment or retention of any Person

proposed to serve as offcers or directors of Newco, including, withou

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limitation, as to compensation, shall be acceptable to the Plan Proponen and be set forth in the Plan Supplement.

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D. Any disclosures made pursuant to i i u.s.c. 1129(a)(5) shall b

acceptable to the Plan Proponent.

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E. The most current version of the Plan Supplement and all of the schedules documents, and exhibits contained therein (including the Newco Bylaw and the Newco Charter) shall have been Filed in fonn and substanc
acceptable to the Plan Proponent.
2. Conditions Precedent to the Effective Date

a;

19

20
21

The following are conditions precedent to Consummation that must be satisfied or

waived in accordance with Article X.C of

the Plan:

22
23

A. The Bankruptcy Court shall have authorized the assumption and rejectio

of executory contracts and unexpired leases by the Debtors a

contemplated by Article V of the Plan.
B. The Confinnation Order shall have become a Final

24
25

substance acceptable to the Plan Proponent.

26
27 28

C. The most current version of the Plan Supplement and all of the schedules documents, and exhibits contained therein shall have been Filed in fo
and substance acceptable to the Plan Proponent.

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D. The documents governing the New First Lien Notes, the Newco Charter,
the Newco Bylaws and the Stockholders Agreement shall be in form an substance acceptable to the Plan Proponent.
E. The Confinnation Date shall have occurred.

2
3

4
F. The First Lien Steering Committee shall have designated and replace

6
7

each existing Qualified E1lployee of the Debtors with a new Qualifie Employee for the Reorganized Debtors.

G. The debt outstanding on the Rhodes Ranch Golf Course shall b

refinanced on terms and conditions acceptable to Rhodes and the Firs
Lien Steering Committee.

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H. Copies of all Debtors' books and records shall have been delivered to th
Rhodes Entities at no cost to the Rhodes Entities.
i. The Arizona Assets shall

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have been transferred to the Rhodes Entities (0 their designee) free and clear of all liens and claims pursuant to sectio 363(f) of the Bankruptcy Code on the Effective Date; provided, that th
non-First Lien Lender/Second Lien Lender liens do not exceed $60,000.

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J. The Debtors shall have assumed and assigned all executory contracts an

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unexpired leases related solely to the Aiizona Assets to the Rhode

Entities (or their designee), at no cost to the Debtors or the Reorganize

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Debtors, with all Cure costs associated therewith to be bome by th

16 17 18 19

Rhodes Entities.

K. The tax structure set forth in Article IV.F of the Plan shall b
implemented.

L. The Rhodes Entities and First Lien Steering Committee shall have agree
on the Golf

Course Security Property.

20
M. The Rhodes Entities shall have performed all of

21

22
23

their obligations under th Plan including, without limitation, depositing $3.5 million in Cash in a account designated by the Debtors, with the consent of the First Lie Steering Committee, and transferred the Rhodes Ranch Golf Course an related contracts and assets as required by Article IV.S. of the Plan to th
Reorganized Debtors.

24
25
3. Waiver of

Conditions Precedent

26 27
28

The First Lien Steering Committee may waive any of the conditions to the Effective

Date at any time, without any notice to pai1ies in interest and without any further notice to or action, order, or approval of the Bankruptcy Court, and without any fonnal action other than

proceeding to confinn 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

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the Rhodes Entities shall have complied with all of

2
3

4
5

6 7

their obligations hereunder and in the Plan by the Effective Date (or such earlier date specifically set forth herein). In the event the their obligations under the Mediation Term Sheet Rhodes Entities fail to comply with any of 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) detennine 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

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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)
conSU1lmate the Plan, as modified. Upon entry of an order of the BanklUptcy 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

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Non-Occurrence of Conditions to Consummation

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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 by such later date established by Bankiuptcy Court order. If Consummation has not occurred

14
15

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within 180 days of Confirmation, then upon motion by a party in interest made before Consummation and a hearing, the Confinnation Order may be vacated by the Bankptcy
Court; provided, however, that notwithstanding the Filing of such motion to vacate, the

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Confirmation Order may not be vacated if Consummation occurs before the Bankruptcy Court enters an order granting such motion. If the Confiimation Order is vacated pursuant to Article X.D of the Plan or otherwise, then except as provided in any order of the Bankrptcy Court vacating the Confinnation Order, the Plan wil be null and void in all respects, including the discharge of Claims and termination of Interests pursuant to the Plan and section I 141 of the BanklUptcy Code and the assumptions, assignments, or rejections of executory contracts or

20
21

unexpired leases pursuant to Article V of the Plan, and nothing contained in the Plan or Disclosure Statement shall: (I) 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,

22 23

oftr, or undei1aking of any sort by the Debtors, the First Lien Steering Committee or any
other Entity.
5. Satisfaction of

Conditions Precedent to Confinnation

24
25

Upon entry of a Confinnation Order acceptable to the Plan Proponent, each of the
conditions precedent to Confinnation, as set forth in Ai1icle X.A of the Plan, shall be deemed to have been satisfied or waived in accordance with the Plan.

26 27 28

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L. Modification, Revocation, Or Withdrawal of the Plan

2
3

I. Modification and Amendments

4
5

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

6 7

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 Com1littee shall be entitled to file a motion on at least seven (7) days notice to
(i) determine that a breach has OCCUlTed (except that the failure of the parties to agree on the

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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

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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

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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 iight to modify the Plan and

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seek Confirmation consistent with the Bankruptcy Code. Subject to certain restrictions and
requirements set forth in section I 127 of the Bankruptcy Code and Bankruptcy Rule 3019 and

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those restrictions on modifications sct 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

16 17 18 19

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Debtor, one or more times, ater 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 Confinnation Order, in such matters as may be necessary to cany out the purposes and 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. Upon its Filing, the Plan Supplement may be inspected in the offce of the clerk of the Bankruptcy Court or its
intent of

20
21

designee during normal business hours, at the Bankruptcy Court's website at

http://www.nvb.uscourts.gov. The documents contained in the Plan Supplement are an

integral part of the Plan and shall be approved by the Bankruptcy Court pursuant to the Confirmation Order.
2. Effect of Confi111ation on Modifications

22
23

24
25

Entry of a Confirmation Order shall mean that all modifications or amendments to the
Plan since the solicitation thereof are approved pursuant to section 1 127(a) of

the Bankruptcy

Code and do not require additional disclosure or resolicitation under Bankruptcy Rule 3019.
3. Revocation or Withdrawal of

26
27

Plan

28

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

66

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2
3

4
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subsequently fied 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 Tenn Sheet. If the Plan Proponent revokes or withdraws the Plan, or if Confinnation or Consummation does not occur, then: (I) 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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M. Retention of Jurisdiction
Notwithstanding the entry of the Confinnation Order and the occurrence of the

16
17 18

Effective Date, the Bankruptcy Court shall retain exclusive jurisdiction over all matters
arising out o( or related to, the Chapter I I Cases and the Plan pursuant to sections 105(a) and 1142 of the Bankruptcy Code and as otherwise set forth in the Plan.

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ARTICLE V. STATUTORY REQUIREMENTS FOR CONFIRMATION OF THE PLAN

20
21

The following is a brief summary of the Plan Confinnation 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 Confinnation Hearing
Section 1128(a) of

22 23

the Bankruptcy Code requires the Bankrptcy Court, after notice, to

24
25

hold a hearing on Confirmation (the "Confinnation Hearing"). Section 1 I 28(b) of the

Bankruptcy Code provides that any party in interest may object to Confirmation.

THE BANKRUPTCY COURT HAS SCHEDULED THE CONFIRMATION

26 27
28

HEARING TO COMMENCE ON (DECEMBER 17), 2009 AT (9:30 a.m.) PREVAILING

PACIFIC TIME BEFORE THE HONORABLE LINDA B. RIEGLE, UNITED STATES BANKRUPTCY JUDGE, lN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF NEVADA, IN COURTROOM I IN THE FOLEY FEDERAL BUILDING

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2
3

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.

4
5

6
7

OBJECTIONS TO CONFIRMATION OF THE PLAN MUST BE FILED AND SERVED ON OR BEFORE DECEMBER 3), 2009, IN ACCORDANCE WITH THE SOLICITATION PROCEDURES ORDER FILED AND SERVED ON HOLDERS OF CLAIMS AND INTERESTS AND OTHER PART1ES 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. Confinnation Standards

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To confinn the Plan, the Bankruptcy Court must find, among other things, that the
requirements of section I 129 of the Bankruptcy Code have been satisfied. The requirements
of section 1129 of

II
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the Bankruptcy Code are listed below:

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I. the Plan complies with the applicable provisions of the Bankruptcy Code;

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2. the First Lien Steering Committee, as Plan Proponent, will have complied with

the applicable provisions of the Bankruptcy Code;

3. the Plan has been proposed in good faith and not by any means forbidden by

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4. any payment made or promised under the Plan for services or for costs and
expenses in, or in connection with, the Chapter I I 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 Confinnation 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;
5.

a;

18 19

20
21

22 23

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 wil 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 confinned without

24
25

6.

the approval of each voting Class pursuant to section 1 I 29(b) of the

Bankruptcy Code;

26 27 28

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7. except to the extent that the Holder of a particular Claim wil agree to a

different treatment of such Claim, the Plan provides that Allowed

2
3

Administrative and Allowed Priority Non-Tax Claims will be paid in full on the Effective Date, or as soon as reasonably practicable thereafter;
8. at least one Class of Impaired Claims or Interests wil accept the Plan,

4
5

detennined without including any acceptance of the Plan by any insider

holding a Claim or Interest of such Class;
9. Confinnation is not likely to be followed by the liquidation, or the need for
further financial reorganization, of

6 7

the Debtors or any successor to the Debtors

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under the Plan, unless such liquidation or reorganization is proposed in the Plan;
10. 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

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the Effective Date; and

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i I. the Plan addresses payment of retiree benefits, if any, in accordance with

section I I 14 of

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the Bankruptcy Code.

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The First Lien Steering Committee believes that the Plan satisfies the requirements of section I I 29 of the Bankruptcy Code, including that (1) the Plan satisfies or will satisfy all of the statutory requirements of chapter I I 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 ii 29(a)(1 I) of the Bankruptcy Code requires that the Bankruptcy Court find,
as a condition to Confinnation, that Confirmation is not likely to be followed by the

16
17

18 19

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.

20
21

With respect to the Reorganizing Debtors, based on one potential hypothetical scenario described in Exhibit D attached hereto and the operational, business and other assumptions set

22
23

forth therein, the First Lien Steering Committee believes that the Debtors will have the financial capability to satisfy their obligations following the Effective Date pursuant to the
Plan. Based on the analysis and related infonnation set forth in Exhibit D attached hereto, the First Lien Steering Committee will seek a ruling that the Plan is feasible in connection with
the Confinnation of

24 25

the Plan.

D. Best Interests of Creditors Test

Often called the "best interests" test, section i 129(a)(7) of the Bankruptcy Code requires that the Bankruptcy Court find, as a condition to Confiiination, that each Holder of a

26
27

28

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

69

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2
3

4
5

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) detennine 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 Holder's Liquidation Distribution to the distribution under the Plan ("Plan Distribution") that such Holder would receive if the Plan were Confirmed and consummated.

6 7

To assist the Bankruptcy Court in making the findings required under section
lI29(a)(7), the First Lien Steering Committee, through its financial advisor, Winchester

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Carlisle Partners ("WCP"), and it valuation consultant, Robert Charles Lesser & Co,
8

("RCLCO"), has prepared a liquidation analysis (the "Liquidation Analvsis") and a going
concern analysis (the "Going Concern Analvsis"). 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 concel1. These analyses employ a discounted cash flow ("DCF") methodology to anive at a range of values for the Debtors' real estate assets as of December
3 I, 2009, and incorporate various estimates and assumptions, including a hypothetical

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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 vary materially from the estimates provided in the Liquidation and Going Concern Analyses,
respectivel y.
1. Liquidation Analvsis

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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

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18 19

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

20
21

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

22
23

home sale prices relative to a going concem 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 rangc of assumptions relating to the risk and costs incurred dUling a liquidation. The DCF
analysis derives an estimated value of the Debtors' real estate assets by discounting the

24
25

26 27
28

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 scenaiio.

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2
3

considerations, and assumptions, RCLCO and WCP estimate that the liquidation value of

milion dollars, with a 1lidpoint of

Based on the methodologies described above, and after further review, discussions, the Debtors' real estate assets as of January 1, 2010, ranges from $44.2 million dollars to $55.0 $49.3 milion dollars.
2. Going Concern Analvsis

4
5

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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' assets; considered infonnation from qualified third party sources relating to revenue and cost
assumptions, and conducted such other analyses as deemed necessary to complete the analysis.

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The Going Concern Analysis assumes that various documents and data provided by
the Debtors, including cost info111ation, are reliable and accurate.

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In addition to the foregoing, RCLCO assumed in preparing the Going Concem

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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 wil 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 reaffnn its analysis following the Confinnation 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

16
17 18

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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

19

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

20
21

currently depressed levels, as detennined by an analysis of recent and historical sales data, to

22
23

more sustainable level of growth by 2011. Additional revenue is derived froIl the sale of certain land parcels at prices and dates suppoi1able 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 si1lilar transactions.
Based on the methodologies described above, and ater further review, discussions,

24
25

26 27
28

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 $11 1.5 million, with a midpoint of$99.6 million.

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E. Acceptance by Impaired Classes

2
3

The Bankptcy 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

4
5

6 7

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 (l) 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 oiiginal terms of the obligation.
Section 1126(c) of the Bankruptcy Code defines acceptance of a plan by a class of

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impaired claims as acceptance by holders of at least two thirds in dollar amount and more than
8

one half in nU1lber 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 1 I 26( d) of the Bankruptcy Code, a class of interests has

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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

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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 i1lpaired class.

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Section 1 129(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.

19

20
21

ln general, a plan does not discriminate unfairly if it provides a treatment to the class that is substantially equivalent to the treatiiient that is provided to other classes that have equal

rank. In determining whether a plan disciiminates 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.

22
23

24
25

26
27 28

The condition that a plan be "fair and equitable" with respect to a non-accepting class of secured claims includes the requirements that: (I) the holders of such secured claims retain the liens secUling 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 debtor's plan, at least equivalent to the value of the secured claimant"s
interest in the debtor.s propei1y 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: (I) the plan provides that each

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3

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 claiIl; or (2) the holder of any

claim or interest that is junior to the claims of such class wil not receive or retain any
property under the plan on account of such junior claim or interest.

4
5

The condition that a plan be "fair and equitable" with respect to a non-accepting class of interests includes the requirements that eithcr: (I) 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

6 7

any the plan, equal to the greater of the effective date of (a) the allowed amount of 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
receive such an amount as required under (J), no class of interests junior to the non-accepting class may receive a distribution under the plan.

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The First Lien Steering Com1littee shall seek Confirmation of the Plan pursuant to section 1129(b) of the Bankrptcy 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 1l29(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.

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The First Lien Steering Committee submits that if the First Lien Steering Com1littee
"crams down" the Plan pursuant to section I 129(b) of

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the Bankruptcy Code, the Plan wil be

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structured such that it does not "disciiminate 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

a;

with respect to Holders of Unsecured Claims because even though such Holders wil not
receive payment in full on account of the Allowed amount of their Claims, no junior Claim or

20
21

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 wil receive any distribution under the Plan either. Therefore, the requirements of section I 129(b) of the
Bankruptcy Code would be satisfied in the event that the First Lien Steering C01lmittee is required to "cram down."

22 23

ARTICLE VI. CERTAIN FACTORS TO BE CONSIDERED PRIOR TO VOTING

HOLDERS OF CLAIMS ENTITLED TO VOTE ON THE PLAN SHOULD READ
AS THE

24
25
AND CONSIDER CAREFULLY THE FACTORS SET FORTH BELOW, AS WELL

26 27
28

OTHER INFORMATION SET FORTH IN THE DISCLOSURE STATEMENT AND RELATED DOCUMENTS, REFERRED TO OR lNCORPORATED BY REFERENCE IN
THE DISCLOSURE STATEMENT, PRIOR TO VOTlNG TO ACCEPT OR REJECT THE PLAN. THIS ARTICLE PROVIDES INFORMATION REGARDING POTENTIAL RISKS

IN CONNECTION WITH THE PLAN AND THE FINANCIAL PROJECTIONS IN THE

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3

PLAN SUPPLEMENT. THESE FACTORS SHOULD NOT, HOWEVER, BE REGARDED AS CONSTITUTING THE ONLY RISKS INVOLVED IN CONNECTION WITH THE PLAN AND ITS IMPLEMENTATION.
A. Certain Bankruptcy Considerations

4
I. The First Lien Steering Committee May Not Be Able to Obtain Confirmation of

the Plan.

6
7

The First Lien Steering C01lmittee cannot ensure that they will receive the requisite
acceptances to confirm the Plan. Even if the First Lien Steering Committee receives the

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requisite acceptances, the First Lien Steering Committee cannot ensure that the Bankruptcy
Court wil confinn the Plan. A non-accepting Holder of Claims and Interests might challenge

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the adequacy of the Disclosure Statement or the balloting procedures and results as not being
in compliance with the Bankuptcy Code or Bankruptcy Rules. Even if the Bankruptcy Court

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detennined that the Disclosure Statement and the balloting procedures and results were
appropriate, the Bankruptcy Coui1 could still decline to confirm the Plan if it found that any of the statutory requirements for Confinnation 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 I I 29 of the Bankruptcy

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Code sets forth the requirements for confinnation and requires, a1l0ng 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 fui1her 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

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debtors were liquidated under chapter 7 of the Bankruptcy Code. While there can be no
the Plan complies with section 1129 of

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assurance that these requirements will be met, the First Lien Steering Committee believes that the Bankruptcy Code.
Confinnation and Consummation also are subject to certain conditions described in

19

20
21

ARTICLE V herein. If the Plan is not confirmed, it is unclear what distributions Holders of
Claims or Interests ulti1late1y 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 Mav Not Approve the Compromise and Settlement

22
23

Contemplated By the Plan

24
25

As described in more detail in Article ARTICLE IV.U herein, the Plan constitutes a

26
27 28

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 51 O(b) or (c) of the Bankruptcy Code.

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This settlement, compromise and release requires approval by the Bankruptcy Court in the Confirmation Order. The First Lien Steering Committee cannot ensure that the Bankrptcy
Court will approve the settlement described in Article VIII.C. of

the Plan.

3. Parties in Interest Mav Obiect to the First Lien Steering Committee.s

Classification of

Claims

Section I I 22 of the Bankruptcy Code provides that a chapter I I 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 C01lmittee 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 Plan.s classification of Claims and lnterests complies with the Bankruptcy Code.
4. Failure to Satisfy Vote Requirement

If votes are received in number and amount sufficient to enable the Bankruptcy Court
to confinn the Plan, the First Lien Steering Committee intends to seek Confirmation as

promptly as practicable thereafter. In the event that suffcient votes are not received, the First Lien Steering Committee may propose an alternative chapter I I plan. There can be no assurance that the tenns of any such alternative chapter I I 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

Mav Obiect 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 Clai1l 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 Holder.s Proof of Claim, if any, as of Record Date; or (b) if

the Distribution

the ProofofClai1l does not ascribe a monetary value to such Holder's

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 )1 plan, a bankruptcy court may nevertheless confirm such plan at the plan proponent's 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

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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

2
3

classes. The First Lien Steering Committee believes that the Plan satisfies these requirements,

and the First Lien Steeiing Committee may request such nonconsensual Confirmation in
accordance with section I 129(b) of the Bankruptcy Code. Nevertheless, there can be no assurance that the Bankruptcy Court will reach this conclusion.
B. Other Considerations
I. Avoidance Action Analvsis

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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 mav be the subiect 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.

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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.

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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 are 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 Agent's 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

22
23

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, Affliates 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

24
25

26 27
28

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 pai1y to numerous lawsuits. A list of

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the pending litigation in which the Debtors were a party as of the Petition Date is attached
hereto as Exhibit F.

2
3

4
5

6
7

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 Affliates and Insiders; (c) all other Causes of Action and Defenses identified in the Plan Supplement; (d) any other Causes of Action against current or fonner offcers, directors, and/or employees of the Debtors, including without implied limitation, any pending or potential claims with respect to directors and offcers' insurance coverage for the Debtors' current or former offcers and directors; (e) any and all

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Causes of Action relating to the matters listed on the Debtors' Schedules; (f) any other
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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

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and cust01lers, 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 or Plan Supplement.
3. Estimation of Claims

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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 Clai1l 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

20
21

contingent or unliquidated Clai1l, that estimated amount shall constitute a 1laximum

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 BanklUptcy Code, in no event shall any Holder of a Claim that has been

22 23

24
25

estimated pursuant to section 502(c) of the BanklUptcy 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 aIer the date on which such Claim is estimated.
C. Plan Risk Factors

26
27 28

Although the First Lien Steering Committee believes that the Plan is confinnable, there are some risks to the perfonnance of the Plan. Certain specific risks to perfonnance of

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the Plan are described below. In particular, distributions to Holders of First Lien Lender 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 thereof. Additionally, because of the significant issues that must be addressed with respect to the

4
5

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.
I. The Chapter 7 Liquidation Analysis and Going Concern Analvsis Are Based on

6 7

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 Committee's or RCLCO's control. Accordingly, there can be no assurance that the values assumed in the chapter 7 Liquidation Analysis or Going Concern Analysis wil be realized.
2. The Reorganized Debtors May Lose the Services of

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Critical Employees with

Extensive Knowledge of Operations

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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 ater the Effective

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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

20
21

Claims

If the First Lien Steering Committee, the Reorganized Debtors, and/or their successors
22
23

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

24
25

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 Steeiing 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 Committee's objections and actions are not upheld by the

26 27 28

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

2
3

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. Furthennore, even if successful in the Causes of

4
5

6 7

Action, in some cases, the Litigation Trust, Reorganized Debtors and/or their respective successors or representatives under the Plan may encounter diffculty in collection. Although potential litigation recoveries are not included in the First Lien Steering Committee's Plan Distribution Analysis or chapter 7 Liquidation Analysis, such recoveries may have a
significant impact upon the distributions that may be made to Creditors.

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THESE CONSIDERATIONS CONTAIN CERTAIN STATEMENTS THAT ARE "FORWARD-LOOKING STATEMENTS" WlTHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. WORDS SUCH AS "EXPECT," "PLANS," "ANTICIPATES,'. "INDICATES," "BELIEVES,'. "FORECAST," "GUIDANCE,"

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"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

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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

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THE CONTROL OF THE DEBTORS, THE REORGANIZED DEBTORS OR THE FIRST

LIEN STEERING COMMITTEE INCLUDING, WlTHOUT LIMlTATlON, THOSE

DESCRIBED ELSEWHERE IN THIS DISCLOSURE STATEMENT, THE IMPLEMENTATION OF THE PLAN, THE CONTINUING AVAILABILITY OF SUFFICIENT BORROWING CAPAClTY OR OTHER FINANCING TO FUND
OPERATIONS, NATURAL DISASTERS AND UNUSUAL WEATHER CONDITIONS,
TERRORIST ACTIONS OR ACTS OF WAR, ACTIONS OF GOVERNMENTAL BODIES

19

20
21

AND OTHER MARKET AND COMPETITVE CONDITONS. HOLDERS OF CLAIMS

AND INTERESTS ARE CAUTIONED THAT THE FORWARD LOOKING STATEMENTS

22 23

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 COMMlTTEE SHALL BE REQUIRED TO UNDERTAKE OR HAVE ANY OBLIGATION TO UPDATE ANY SUCH STATEMENTS. ADDITIONAL R1SKS AND UNCERTAINTIES NOT PRESENTLY KNOWN TO THE FIRST LIEN STEERING COMMlTTEE 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

24
25

26
27 28

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LIEN STEERING COMMITTEE'S ABILITY TO CONSUMMATE THE PLAN, COULD

BE MATERIALLY ADVERSELY AFFECTED.

2
3

ARTICLE VII. CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The following discussion summarizes certain federal income tax consequences of the

4
5

implementation of the Plan to the Debtors and certain Holders of Claims. The following
summary is based on the 1nternal 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

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may have retroactive effect and could significantly affect the federal income tax consequences
described below.

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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 1nternal 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 Intemal Revenue Service wil 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

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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).

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Furtherniore, 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

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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 FOLLOW1NG SUMMARY OF CERTAIN FEDERAL

1NCOME TAX CONSEQUENCES IS FOR INFORMAT10NAL 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

22
23

24
25 26 27 28

FOR THE FEDERAL, STATE, LOCAL AND OTHER TAX CONSEQUENCES

APPLICABLE UNDER THE PLAN.
INTERNAL REVENUE SERVICE C1RCULAR 230 DISCLOSURE: TO ENSURE

COMPLIANCE WITH REQUIREMENTS 1MPOSED BY THE UN1TED STATES INTERNAL REVENUE SERVICE, ANY TAX ADVICE CONTAINED IN THIS
DISCLOSURE STATEMENT (INCLUDING ANY ATTACHMENTS) IS NOT 1NTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY ANY TAXPAYER FOR THE

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PURPOSE OF AVOIDING TAX RELATED PENALTIES UNDER THE INTERNAL REVENUE CODE. TAX ADV1CE 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.

4
5

EACH TAXPAYER SHOULD SEEK ADVICE BASED ON THE TAXPAYER'S

PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.
A. Certain U.S. Federal Income Tax Consequences to Reorganized Debtors

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i. Introduction

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The 1lajority of the Debtors are either partnerships (general or limited) or LLCs. For U.S. federal income tax purposes, the single member li1lited 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.
2. Partnership

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A partnership is not itself a taxpaying entity for U.S. federal income tax purposes, and a partnership's 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 pai1ner is not allowed

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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 pal1nership, determined as of the end of the partnership's taxable year in which the loss occurs. Any excess is allowed in any subsequent year in which the adjusted tax basis increases. A partner's 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

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22
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partner's share of taxable and tax-exempt income and gain, and tax basis decreases for such items as distributions and the partner's share of losses. An increase in a partner's share of partnership liabilities or a partner's assumption of partnership liabilities is treated as a cash contribution to the partnership that increases tax basis, and a decrease in a partner's share of partnership liabilities or the assumption by the partnership of a partner's liabilities decreases tax basis, but not below zero. (Cash distributions, including a decrease in a pal1ner's share of partnership liabilities, in excess of tax basis is taxable and generally treated as gain from the sale of a partnership interest.) A pai1ner 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 reimburscment from other partners or third parties that are related to other pai1ners. A partner also shares partnership nonrecourse liabilities.
3. Cancellation of Indebtedness Income

24
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26 27
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Under the Intel1al Revenue Code, cancellation of indebtedness ("'COD.') income is recognized by a pai1nership 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

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3

4
5

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 inc01le, 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 satisfction of such indebtedness
among the partners pursuant to the allocation provisions of

at the time of the exchange. COD income also includes any interest that the taxpayer
deducted under the accrual 1lethod of accounting but remains unpaid at the time the

6
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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.

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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

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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 the First Lien Lender 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 wil 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 t1erefor. This value cannot be known with
recognition of gain or loss to the members based on a sales piice of $ I 0 plus the a1l0unt of

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 wil be binding on the Intemal 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

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income that will be generated from the Plan wil 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 that income will u.s. federal income tax rules dealing with COD income, the tax treatment of
be detennined with respect to each member at the member leveL.

20
21

22 23

24
25 26

27 28

A member of Heritage Land Company LLC or other Reorganized Debtor will not be the member is (i) under the required to include any amount of COD income in gross income if jurisdiction of a court in a case under chapter i I 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 excluded from gross income pursuant to section i 08 of the IRC. In general, tax attributes wil 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 the first day 108(b)(5) of the IRe. Nonetheless, any attribute reduction wil be applied as of

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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.

4
5

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

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income the COD income with respect to such debt in equal installments in 2014 through 2018 the COD income in each such year). This election to (i.e., the taxpayer would report 20% of defer COD income is made separately with respect to each debt instrument on which COD income is realized, must be made on the taxpayer's 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

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respect to the COD income generated in connection with the consummation of the Plan.
B. Certain Federal lncome Tax Consequences to Holders of Claims

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the First Lien Lenders shall receive (i) its pro rata share the New First Lien Notes, (iii) its pro rata share of 100% of the Newco Equity Interests, and (iv) its pro rata share of the Litigation the First Lien Lender Claims. Trust Interests allocable to the Holders of
On the Effective Date, each of of$1.5 million in Cash, (ii) its pro rata share of 100% of

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a. New First Lien Notes

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(i) Significant Modification

The U.S. federal income tax consequences of the exchange of an Allowed First Lien

Lender Claim for an interest in the New First Lien Notes will depend on whether the
exchange results in a "significant modification" of whether the terms of

22
23

the Allowed First Lien Lender Clai1ls (i.e., the First Lien Lender Claims exchanged therefor). The Treasury Regulations under section 1001
the New First Lien Notes are significantly different from the teims of

24
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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

26 27
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instrument. Another rule provides that the defen.al of a scheduled payment wil be considered 'significant' unless the deferred payments are unconditionally payable during the period that begins on the initial due date for such pyment 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

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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 Claims. Therefore, the exchange of Allowed First Lien Lender the IRe. Claims for New First Lien Notes should be a taxable exchange under section 1001 of
modification of the First Lien Lender Claims because the terms of (ii) Recognition of

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Gain or Loss

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A Holder who receives New First Lien Notes with respect to an Allowed First Lien Lender 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 Holder's adjusted basis in its Allowed First

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Lien Lender 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 the New First Lender Claims were held for more than one year. To the extent that a portion of 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 Holder's 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 Holder, and a Holder's holding period

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for the New First Lien Notes should begin on the day following the exchange.
(iii) Stated Interest and Original Issue Discount
A Holder of

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the New First Lien Notes will be required to include stated interest on the

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New First Lien Notes in income in accordance with the Holder.s 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

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instruments of the issuer, such as PIK interest (discussed below)) at least annually wil be generally treated as "qualified stated interest". The amount of qualified stated interest and the amount of original issue discount COlD"), if any, that accrues during an accrual period on a New First Lien Note wil be calculated by assuming that L1BOR is a fixed rate equal to the value of L1BOR 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 accmal period exceeds

20
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(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
22
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paying Cash interest, the New First Lien Notes will be treated as issued with OlD. 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 instmment under the OlD 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 ofPIK interest.

24
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26
27
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Each Creditor will generally be required to include OlD in its gross income as such OlD accrues over the term of the New First Lien Notes without regard to the Creditor's regular method of accounting for u.S. federal income tax purposes and in advance of the

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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 OlD are complex and the rules described above may not apply in
all cases. Accordingly, Holders should consult their own tax advisors regarding their

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application.
b.

Newco Equity Interests

(i)
Exchange Treatment

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the exchange of Allowed First For U.S. federal income tax purposes, the treatment of Lien Lender 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

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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 Interests equal to the tax basis of the Claims deemed exchanged therefor. A Holder's holding period for the Newco Equity Interests should include the holding period of the Claims deemed
exchanged therefor.

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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 Claim wil 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

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received and (b) the Holder's adjusted basis in its Allowed First Lien Lender 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 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

19

20
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ordinary interest income (see discussion below). A Holder's 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 Holder's holding period for such instruments should begin on the day following the exchange.
(ii)
Certain Tax Aspects of

22
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Holding and Disposing Newco Equity

Interests

24
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the Newco Equity Interests to the First Lien Lenders, Newco wil 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
Upon the transfer of

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

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extent such distributions are in excess of the distributee's adjusted basis in the Newco Equity
Interests. In general, a holder's adjusted basis in Newco Equity Interests will be increased by

2
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its additional capital contributions, if any, to Newco and by such holder's distributive share of income or gains of New co, and the holder's adjusted basis in Newco Equity Interests will be decreased by the amount of distributions to such holder and such holder's distributive share of
losses or deductions of New

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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 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 Lender's basis in its First Lien Lender Claims. Moreover, since Newco will have engaged in a trade or business while treated as a partnership for tax purposes, its members wil have a fiing requirement to report such income of a U.S. federal income tax

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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.
Once the election is made to treat Newco as a corporation, the holders of the Newco

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Equity Interests generally carry forward their basis in their interests (or shares, if Newco is
converted to a corporation), and Newco generally carres forward its basis in its assets. To the extent Newco's basis in its assets is greater than their value as of the election/conversion, it

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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 lnterests reduce their basis in such interests by such amount.

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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 New

co, as determined under u.s. federal income tax principles. To the extent that a

19

u.s. Holder receives distributions that would otherwise constitute dividends for u.s. federal

20
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22
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income tax purposes but that exceed such current and accumulated eamings and profits, such distributions wil be treated first as a non-taxable return of capital reducing the u.s. Holder's basis in its shares. Any such distributions in excess of the U.S. Holder's 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.

24
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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 suffcient earnings and profits. However, the

26 27 28

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 shareholder's risk ofloss with respect to the stock is diminished by reason of the existence of certain options, contracts to sell, shoi1 sales or similar transactions. In addition, to the extent that a corporation incurs indebtedness that is directly attributable to an

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investment in the stock on which the dividend is paid, all or a poi1ion of the dividends received deduction may be disallowed.

4
5 6

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 i 059 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

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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 holder's 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 holder's adjusted tax basis in the stock, treating all dividends having ex dividend dates within a 365-day period as one dividend.

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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)

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generally wil 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 c1ai1l 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

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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.

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A holder wil 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 holder's 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

17
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Newco Equity Interest has been held in excess of 12 1l0nths), subject to the application of
certain "recapture" provisions that convert capital gain into ordinary income in cei1ain

20
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circumstances. The deductibility of capital loses is subject to limitations.

c. Litigation Trust Interests

22 23

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

24
25

26 27 28

extent it is not allocable to accrued interest) and (ii) the Holder's 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
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 Holder's tax basis in the Litigation Trust Interests received should equal their fair
Claims were held for more than one year by the Holder. To the extent that any portion of

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market value as of the Effective Date. A Holder's 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

4
5

6
7

deferred pending the determination of the amount of the Litigation Trust Interests received. 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.
2.

Consequences to Holders of Allowed Class A-2 Second Lien Lender Claims

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On the Effective Date, each of the Second Lien Lenders shall receive (i) its pro rata share of 50% of the net proceeds of the Stanley Engineering Litigation; and (ii) its pro rata share of the Litigation Trust Interests allocable to the Holders of the Second Lien Lender
Claims.

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A Holder who receives Cash with respect to an Allowed Second Lien Lender Claim
wil generally recognize income, gain or loss for u.S. federal income tax purposes in an

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amount equal to the difference between (a) the amount of Cash received and (b) the Holder's adjusted basis in its Allowed Second Lien Lender Claim. Such gain or loss iiay be capital in
nature (subject to the "market discount" rules described below) and may be long-tenn capital

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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.

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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 Holder's 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 Holder's tax basis in the Litigation Trust Interests received should equal their fair market value as of the Effective Date. A Holder's 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

20
21

22
23

24
25 26 27 28

deferred pending the detennination of the amount of the Litigation Trust Interests received. 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.

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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 i 221 of the IRe. 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 Clai1l 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 Clai1l 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. IfanAllowed 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 Holder's 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-tenn capital gain or loss if the Holder has held the debt instru1lent 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 1lay be, the amount of Cash received from the sale of such collateral), and (ii) the Holder's 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 Holder's tax basis in
the collateral should be equal to the fair market value of the collateral on the Effective Date,

and the Holder's holding period in the collateral should begin on the day following the Effective Date.
4. Consequences to Holders of

Class C-I General Unsecured Claims

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

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2
3

extent it is not allocable to accrued interest) and (ii) the Holder's 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 tenn 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 Holder's tax basis in the Litigation Trust Interests received should equal their fair market value as of the Effective Date. A Holder's holding period for the Litigation Trust Interests should begin on the day following the Effective Date.

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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

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deferred pending the determination of the amount of the Litigation Trust Interests received. The federal inc01le 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 tlUst or partnership for the benefit of certain creditors. Subject to

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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 fie returns for the Litigation Trust as a "grantor trust" and/or "liquidating trust" and therefore, for federal income tax purposes, the Litigation Trust's taxable income (or loss) should be allocated pro rata to its
beneficiaries.
The Litigation Trustee intends to take a position on the Litigation Trust's tax return that the Litigation Trust should be treated as a grantor tiust set up for the benefit of creditors.

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Holders of Claims that receive Litigation Trust Interests wil be required to report on
their U.S. federal income tax returns their share of the Litigation Trust's items of income,

22
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gain, loss, deduction and credit in the year recognized by the Litigation Trust whether or not the Litigation Trust is taxed as a pai1nership or a grantor trust. This requirement may result in
Holders being subject to tax on their allocable share of the Litigation Trust's 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

24
25 26 27 28

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

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2
3

4
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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 I, 1999, the IRS issued proposed Treasury Regulations that, if finalized in their current fonn, would specify the tax treatment of reserves of the type here involved that are established ater 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- I et seq. and thus subject to a separate

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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 pennitted by applicable
law, report consistently for state and local income tax purposes. In addition, pursuant to the

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Plan, all parties shall report consistently with such treatment.

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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 Clai1ls Reserve that is distributed to a Holder during the same taxable year wil be includible in such Holder's gross income.
6. Consequences to Holders of Allowed Class D Old Equity Interests

19

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

20
21

Old Equity Interests.

For U.S. federal income tax purposes, the tax consequences arising from the

22 23

24
25 26

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

27
28

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 Holder's gross income for United States federal income tax purposes. Conversely, it is possible that a Holder

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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. holder's 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 suffcient 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 I I 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 S01le way other than as provided
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 obligation's 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 holder's hands immediately ater 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 obligation's 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 Clai1ls (detennined as desciibed 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 caiTIed over to the property received
therefor and any gain recognized on the subsequent sale, exchange, redemption or other

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3

disposition of such property is treated as ordinary income to the extent of such accrued market discount.
9.

Issue Price

4
5

6
7

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 instru1lent will be treated as publicly traded and the

issue price of the debt instru1lent will equal the fair market value of that debt instrument on
the date of issuance. In general, a debt instrument wil be treated as traded on an established

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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, 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

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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.
i o. Claim Purchase

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For U.S. federal income tax purposes, the sale of an Allowed Class-C-I Claim for Cash should be a taxable exchange under section 1001 of the IRe. A Holder who receives Cash in exchange for its Allowed Class C- I 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 Holder's adjusted basis in its Allowed Class C- I Claim. Such gain or loss may be ordinary or capital in nature (subject to the "1larket discount" rules described above) and may be long-term capital gain or loss if the Class C- I 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).
Other Tax Matters
1.

22 e.
23

lnfonnation Reporting and Backup Withholding

24
25

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

26
27 28

payments made pursuant to the Plan unless that Holder: (a) C01les 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 peijury 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

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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

2
3

information is provided to the IRS.

4
5

The Debtors will withhold all amounts required by law to be withheld from payments of interest. The Debtors will c01lply 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.
2. Importance of Obtaining Professional Tax Assistance

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THE FOREGOING DlSCUSS10N IS INTENDED ONLY AS A SUMMARY OF

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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

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VARY DEPENDING ON A CLAIM HOLDER'S PARTICULAR CIRCUMSTANCES. ACCORDINGLY, HOLDERS OF CLAIMS ARE URGED TO CONSULT THEIR OWN
TAX ADVISORS ABOUT THE UNITED STATES FEDERAL, STATE, AND LOCAL, AND

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APPLICABLE FOREIGN INCOME AND OTHER TAX CONSEQUENCES OF THE

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ARTICLE VII.
RECOMMENDATION

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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.

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19

20
21

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 (jfPage lntentionanv Lefi Blank)

22
23

24
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26 27
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ARTICLE ix.
CONCLUSION

2
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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.

4
5

Dated: October 27,2009

THE FIRST LIEN STEERING COMMITTEE

By: Its Counsel

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By: Isl 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)

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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
Counselfor the First Lien Steering COl1l1illee

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LIST OF EXHIBITS
2

Exhibit
3

DesciiDtion
Plan of

4
5

A
B

Reorganization

Debtors' Organizational Chart

Current Cash Collateral Budget Going Concern Analysis Liquidation Analysis
Pending Litigation

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EXHIBIT A

EXHIBIT A

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Nile Leatham (NV Bar No. 002838)

KOLESAR & LEATHAM

2
3

Wells Fargo Financial Center 3320 W. Sahara Ave. Las Vegas. NV 89102
Telephone: 702.979.2357
Facsimile: 702.362.9472

4
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E-Mail: nJeathamklnevada.com

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Philip C. Dublin (NY Bar No. 2959344) Abid Qureshi (NY Bar No. 2684637)
AKIN GUMP STRAUSS HAUER & FEW LLP

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One Bryant Park New York. NY 10036

Telephone: 212.872.1000
Facsimile: 2 i 2.872.1 002

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E-Mail: Ddublin(aakingump.com

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IN RE:

UNITED STATES BANKRUPTCY COURT DISTRICT OF NEV ADA SOUTHERN DIVISION

Case

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THE RHODES COMPANIES. LLC. aka "Rhodes Homes." et 01..

Debtors. i

No. 09-14814-LBR

Jointly Administered

20
21

22
23

I The Debtors in these cases, along with the last four digits of each Debtor"s federal tax identification
number. if applicable. are: Heritage Land Company. LLC (29 I 8); The Rliodes Companies, LLC (3060):

24
25

Rhodes Ranch General Partne"liip (1760); Tick. LP (0707); Glynda. LP (5569): Chalkline. LP (0281): Batcave.
LP (6837): Jackkife. LP (6189): Wallboard. LP (1467): OverIlow. LP (9349): Rhodes Ranch Golfand Country

26 27
28

Club (9730): Tuscany Acquisitions, LLC (0206): Tuscany Acquisitions IL LLC (8693): Tuscany Acquisitions IlL. LLC (9777): Tuscany Acquisitions iv, LLC (0509): Parcel 20 LLC (5534): Rhodes Design and Development Corp. (1963); C&J Holdings, Inc. (13 I 5): Rhodes Realty, Inc. (0716): Jampa LLC (4090): Elkhorn Investments, Ine. (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:
i: All Debtors
o Affects the following

2
3

Debtor( s)

4
5

FIRST AMENDED PLAN OF REORGANIZA TION PURSUANT TO CHAPTER 1 I OF THE BANKRUPTCY CODE FOR THE RHODES COMPANIES, LLC, ET AL.

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2 3

TABLE OF CONTENTS
Page

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INTRODUCTION ................................................................................................................ I
ARTICLE i. DEFINED TERMS. RULES OF INTERPRETATION, COMPUTATION OF TIME, AND GOVERNING LAW.............................. I

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8

A. Defined Terms ................................................................................................ I B. Rules of Interpretation ................................................................................. 15 C. Reference to Monetary Figures......................................................................16

ARTICLE II. ADMINISTRATIVE AND PRIORITY CLAIMS..........................................

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A. Administrative Claims .............................................................................. 17 B. Priority Tax Claims..................................................................................... 17

ARTICLE Il CLASSIFICATION AND TREATMENT OF CLAIMS AND INTERESTS ............................................................................................... 17

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A. Classification of Claims and Interests......................................................... 17

B. Treatment of

Classes of Claims and Interests................................................ 18

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C. Class Voting Rights ............................................................................. 2 I the Plan.........................................................22

D. Acceptance or Rejection of

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ARTICLE IV. PROVISIONS FOR IMPLEMENTATION OF THE PLAN ................... 22 A. Substantive Consolidation ............. ... ..................... ................ .......... ........ .....22 B. Sources of Consideration for Plan Distributions ...........................................23 C. Corporatc Existence ...... ......... ................ ... ............ ...... .............. ........... ...... 24

D. Vesting of Assets in the Reorganized Debtors .......................................24

E. Cancellation of Equity Securities and Related Obligations ........................... 25

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23

F. Restructuring Steps and Transfer of Certain Interests to Newco................... 25 G. Restructuring Transactions .......................................................................26 H. Corporate Action........ ..... ........ ............................. .... ...... ................ .............. 27 i. Post-Confiimation Property Sales.................................................................. 27 J. Certificate of Incorporation and Bylaws................................................ 27 K. Effectuating Documents, Further Transactions ........................................ 27 L. Exemption from Cei1ain Transfer Taxes and Recording Fees....................... 28
M. Directors and Officers of the Reorganized Debtors...................................... N. Management and Director Equity Incentive Plan....................................

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25

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O. The Litigation Trust .......................................................................................28

P. Preservation of Causes of Action.................................................................

26 27
28

Q. HOA Board Seats........................................................................................30

R. Licensing.......... .......... ... ... ........ ......... ..... ... ..... ....... ..... ..................... ...... ........ 30
S. Transfer of

Rhodes Ranch Golf Course.................................................... 30

T. Cash Payment.. ..... ......... ......................................... .... ......... ... ............. ........... 32

U. Transfer of Arizona Assets ........................................................................ 32

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V. Trademarks and Trade Names .......................................................... 32

W. Self

Insured Retention Obligations................................................................33

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X. Bond Replacement or Indemnification ....................................................... 33 Y. Stanley Engineering Litigation ...................................................................... 33

ARTICLE V. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED
LEASES .... ........ ................ ........... .......... ... ........... .......... ......... ......... ...... 33
A. Assumption and Rejection of

4
5

Executory Contracts and Unexpired

6
B. Cure of

Leases............................................................................................................. 33

Defaults for Assumed Executory Contracts and Unexpired

Leases............................................................................................................. 34

7
8

C. Preexisting Obligations to the Debtors Under Executory Contracts and

Unexpired Leases ......... ....................... .... .............. ........... ............. .......... .... 35
D. Claims Based on Rejection or Repudiation of Executory Contracts and

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Unexpired Leases... ..... ....... ...... ........ ...... .......... ....... ..................... ......... ..... 36
E. Intercompany Contracts, Contracts. and Leases Entered Into After the

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Petition Date: ..... ................. ............... ............................................ ..... ......... 36

F. Home Sales ....................................................................................................36 G . Warranties ..... ......... .................. ........ .... ....... ..... .......... ............ ..... .... ....... 36
H. Modification of

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Executory Contracts and Unexpired Leases Containing Equity Ownership Restrictions ...................................................................... 36
Agreements .. ....... ...... ............ ................... ... ... ..... ...... ... ............. ......... .... ........ 37

i. Modifications, Amendments, Supplements. Restatements, or Other

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J. Reservation of Rights....................................................................................37 Effective Date............................................................ 37 K. Nonoccurrence of

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ARTICLE Vi. PROCEDURES FOR RESOLVING DISPUTED CLAIMS........................ 37 A. Allowance of Claims.... ...... ........ ........... ..... .... ... ...... ..... ... ....... .................... 37

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B. Claims Administration Responsibilities .............................................. 37 C. Estimation of Claims...................................................................................37

D. Adjustment to Claims Without Objection...................................................... 38
E. Time to File Objections to Claims ............................................................. 38 F. Disallowance of Claims ............................................................................... 38

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G. Offer of Judgment .......................................................................................... 39 H. Amendments to Claims..............................................................................39

ARTICLE VII. PROVISIONS GOVERNING DlSTRlBUTIONS.......................................39 A. Total Enterprise Value for Purposes of Distributions Under the Plan........... 39
B. Distributions on Account of Claims Allowed as of

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23

the Effective Date....... 39

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C. Distributions on Account of Claims Allowed After the Effective Date: ..... 39

D. Delivery of Distributions ............................................................................... 41 E. Claims Paid or Payable by Third Parties. ......................................................44 F. Payment of$I.5 Million to First Lien Lenders...........................................44

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G. General Unsecured Claims Purchase ...................................................... 45

ARTICLE VIII. EFFECT OF CONFIRMATION OF THE PLAN ......................................46 A. Discharge of Claims and Temiination of Interests ........................................46

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B. Subordinated Clairns. ....... ......... .... .......... ............ ....... ...... ....................... ....47 Claims and Controversies ...........................47 C. Compromise and Settlement of

D. Releases by the Debtors of the Released Parties ...................................47

E. Releases by the Debtors of

the Rhodes Entities.........................................48

F. Releases by First Lien Lenders of First Lien Lenders......................... 48

G. Exculpation ............ ....... ........... ......... ... ... .......... .......... .... ........ ...... ....... .......48 H. Injunction.... ..... ... ...... .... ....... ..... ..... ...... ....... ... ....... ..... ... ......... ...... ...... ...........49

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i. Protection Against Discriminatory Treatment ..............................................49

J. Setoffs .. .......... .............. .......... .... ....... ...... ...... .......... ..... ............. .................. 50

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K. Recoupment .. ........... ..... .................... ................. ......... .... ........... ....... ..... ... .... 50 L. Release of Liens.......... .... ........ ..... ............... ............... ...... ............................ 50

M. Document Retention ..................................................................................51 N. Reirnbursement or Contribution .................................................................51

ARTICLE ix. ALLOWANCE AND PAYMENT OF CERTAIN ADMINISTRATIVE
CLAIMS ... ........ ........... ............... ....... ..... ........................ ........... .......... ........ 5 I

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A. Professional Claims: ....................................................................................51 B. Other Administrative Claims ................................................................... 52

ARTICLE X. CONDITIONS PRECEDENT TO CONFIRMATION AND CONSUMMATION OF THE PLAN ....................................................52

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A. Conditions to Confirmation ....................................................................52 B. Conditions Precedent to the Effective Date............................................... 53 Conditions Precedent ............................................................ 54
C. Waiver of D. Effect of E. Satisfaction of

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Non-Occurrence of Conditions to Consummation ........................54 Conditions Precedent to Confirmation ............................ 55

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ARTICLE Xl. MODIFICATION, REVOCATION, OR WITHDRAWAL OF THE

PLAN............ .............. ........ ........ ..... ............. .............. .......... ......... ....... ...... 55

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A. Modification and Amendments...................................................................... 55 B. Effect ofConfinnation on Modifications .................................................. 56 C. Revocation or Withdrawal of Plan.............................................................. 56
ARTICLE XII. RETENTION OF JURISDICTION ........................................................56

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23

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ARTICLE XII MISCELLANEOUS PROVISIONS...................................................... 59 A. Immediate Binding Effect............................................................................. 59 B. Additional Documents ................................................................................... 59 C. Payment of Statutory Fees ........................................................................... 59 D. Dissolution of Creditors' Committee........................................................... 59 E. Reservation of Rights... ..................... .......... .... ............. ................. .......... ....... 59 F. Successors and Assigns..................................................................................59 G. Service ofDocumcnts: ................................................................................59 H. Term of Injunctions or Stays...................................................................... 61 I. Entire Agreement ........................................................................................6 i
J. Goveming Law ........................................................................................... 61 K. Exhibits .......... ........ ... ...... ............. ..... ..... ......... .......... ............. ...... .... .........62

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L. M. N. O.

Nonseverability of Plan Provisions..... .................... ... ............ ............. ... ....... 62

Closing of

the Chapter I I Cases ................................................................. 62

Waiver or Estoppel .....................................................................................62 Conflicts... .................... ............ ...... ......... ...... ............. ................. ........ ........ 62

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INTRODUCTION

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The First Lien Steering Committee proposes the following first 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 II cases pursuant to
title I I of

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the United States Code, I I U.S.c. 101-1532. Capitalized terms used in the Plan and not otherwise defined shall have the meanings ascribed to such terms in Article LA. of the Plan. Reference is made to the Disclosure Statement, Filed contemporaneously

6
7
8

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 the Bankruptcy Code. Plan within the meaning of section 1129 of

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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

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ESTATES FOR ALL PURPOSES ASSOCIATED WITH CONFIRMATION AND

DlSTRlBUTlONS UNDER THE PLAN.

ARTICLE i.
DEFINED TERMS, RULES OF INTERPRETATION, COMPUTATION OF TIME, AND GOVERNING LAW

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A. Defined Tenns: As used in the Plan, the capitalized tenns below have the following meanings, except as expressly provided or unless the context otherwise requires. Any teim used but not defined in the Plan. but that is used in the Bankruptcy Code or the Bankruptcy

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Rules, shall have the meaning ascribed to that term in the Bankiuptcy Code or the
BanklUptcy Rules.
I. Accrued Professional ComDensation: At any given moment, all accrued fees

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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

22
23

Order denying some or all of a Professional's fees or expenses. such denied amounts shall
no longer be considered AcclUed Professional Compensation.
2. Administrative Claim: A Claim for costs and expenses of administration

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25

pursuant to sections 503(b), 507(a)(2), 507(b), or 11 14(e)(2) of the BanklUptcy Code.

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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 BanklUptcy 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 the Bankruptcy Code. in the Chapter 11 Cases pursuant to sections 503(b)(3), (4), and (5) of
3. Administrative Claim Bar Date: The deadline for filing requests for payment

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3

4
5

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 affdavit of a representative or agent of a

6 7
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publisher of a periodical certifying that notice has been served through publication in the
publisher's periodicaL.

5. Affiiate: (a) An Entity that directly or indirectly owns, controls, or holds

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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 () 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

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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

14
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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

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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 I i of the Bankruptcy Code.

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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

20
21

unliquidated. and for which no Proof of Claim or Interest has been timely Filed; or (c) any 22 Claim Allowed pursuant to the Plan; provided, however. that with respect to any Claim or 23 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 24 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 25 Claim or Interest shall have been Allowed for distribution purposes only by a Final Order, or 26 (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
27 28

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

4 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
5

Bankruptcy Court.
7. Arizona Assets: The Debtors' homebuilding business in Arizona ("Arizona")

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8

that will be transfelTed to the Rhodes Entities on the Effective Date, including the real and
personal property (including general intangibles, contracts, and unexpired leases) of the

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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.
8. Ballot or Ballots: The ballots upon which Holders of Impaired Claims

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entitled to vote shall cast their vote to accept or reject the Plan.

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9. BankruDtCY Code: Title I I of the United States Code, II U.S.c. 1011532, as applicable to the Chapter 1 i Cases.

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10. Bankruptcy Court: The United States Bankruptcy Court for the District of Nevada or any other court having jurisdiction over the Chapter I I Cases.
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.
11. BankruDtcy Rules: The Federal Rules of

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12. Bar Date: August 5, 2009, except as otherwise provided in the Plan or by
Bankruptcy Court order.
13.

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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.

Interest.
14.
15.

22 23

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16. 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, 36 i, 362, 363, and 364 of Debtors'
Motion for Interim and Final Orders Pursuant to Sections 105,361,362,363 and 364 of

26
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the

Bankruptcy Code (A) Authoiizing 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
"

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Land Cornpany, LLC (Relates to Heritage Docket No. 35):- entered in the Chapter I I Cases the on April 30, 2009 (Rhodes Docket No. 126), as amended or extended with the consent of First Lien Steering Committee, from time to time and in accordance with the terms thereof.

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5

17. 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,

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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 pai1 upon acts or omissions

occurrng prior to or after the Petition Date; and (g) any claim listed in the Plan Supplement.
18. Certificate: Any instrument evidencing a Claim or an Interest.

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19. ChaDter I i Cases: The chapter II bankruptcy cases filed by the Debtors on

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the Petition Date in the Bankruptcy Court, with case numbers 09-14778-LBR. 09-148614837-LBR. 09-14828-LBR, 094865-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, 094854-LBR. 09-14841-LBR, 09-14814-LBR, 09-14833-LBR. 09-148667-LBR, 09-14853-LBR, 09-14852-LBR. 09-14850-LBR. 09-14849-LBR. 09LBR, 09-14825-LBR. 09-14843-LBR, 09-14862-LBR, 09-1 14820-LBR. 09-1 14844-LBR, 09-1 LBR, 09-1 I 48 I

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4858-LBR. 09-14884-LBR, 09-14887-LBR.

20. Claim: As defined in section 101(5) of

19

the Bankruptcy Code.

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21. Claims and Solicitation Agent: Omni Management Group, LLC.

21

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23

22. 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.
23. Claims Register: The official register of Claims and Interests maintained by
the Claims and Solicitation Agent.

24
25

26 27
28

24.

Class: A class of

Holders of

Claims or Interests as set forth in the Plan.

25. CM/ECF: The BanklUptcy Court.s Case Management and Electronic Case
Filing system. which can be accessed at https://ecf.nvb.uscourts.gov/.

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the Confirmation Order. subject to all conditions specified in Article X.A having been satisfied or waived pursuant to Article X.c.
26. Confirmation: The entry of

27. 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.

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5

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8

28. Confirmation Hearing: The hearing at which the Confirmation Order is first considered by the Bankruptcy Court.

29. Confinnation 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.

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9 30. Confirmation Order: The order of

the Bankruptcy Court confirming the Plan

the Bankrptcy Code.

lO pursuant to section 1129 of

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I I 31. Contingent Bond Indemnitv Claim: Any Claim asserted by a bonding

company due to a bond being called.

32. Consummation: The occurrence of

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the Effective Date.

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33.

Creditor: A Holder of a Claim.

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34. Creditors' Committee:

The Official Committee of Unsecured Creditors

appointed in the Chapter I I Cases.

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35. 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

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18 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

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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.

22 36. Cure Bar Date: The deadline for filing requests for payment of Cure, which
23 assumption of the applicable executory contract or

shall be the later of: (a) thirty days after the Effective Date or (b) thirty days after the
unexpired lease, unless otherwise ordered

24 counterparty to the applicable executory contract or unexpired lease.

by the Bankruptcy Court or agreed to by the First Lien Steering Committee and the

25

37. Debtors: The following Entities: Heritage Land Company, LLC; The

26 27 28

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 li, LLC; Tuscany Acquisitions Il, LLC; Tuscany Acquisitions LV, 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

2
3

Partnership; Bravo Inc.; Gung-Ho Concrete, LLC; Geronimo Plumbing. LLC; Apache
Frarning, LLC; Tuscany Golf

Country Club. LLC; and Pinnacle Grading, LLC.

the BanklUptcy Code.

4
5

38. Debtors in Possession: The Debtors. as debtors in possession m the

Chapter II Cases, pursuant to sections 1107 and 1108 of

6 7
8

39. Disclosure Statement: The disclosure statement for the Plan describing the

Plan, including all exhibits and schedules thereto. that is prepared and distributed in
I 26(b). and i 145 of the BanklUptcy Code. BanklUptcy accordance with sections 1125, I Rule 3018, and other applicable law, as may be amended from time to time.

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40. DisDuted: 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 foi1h on the Debtors'

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10
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Schedules and (iv) any Claim objected to by the applicable Claims Objection Deadline.
41. DisDuted Claims Reserve: The Litigation Trust Interests and distributions in

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respect thereof

held in reserve pursuant to Ai1icle VII.

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42. 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.
43. Distribution Date: The date occuning as soon as reasonably practicable after

14
15 16

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the Effective Date when distributions under the Plan shall commence, but not later than
thii1y days after the Effective Date, without further Bankruptcy Coui1 order.
44. Distribution Record Date: The date for detern1ining which Holders of

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Allowed Clairns are eligible to receive distributions pursuant to the Plan, which shall be the Confinnation Date or such other date as designated in the Plan or a Bankruptcy Court order.

20
21

45. 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 fonn and substance
acceptable to the First Lien Steering Committee. by the BanklUptcy Coui1 confirming the

22
23

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.
46. Entity: As defined in section 101 (15) of the Bankruptcy Code.

24
25

47. Equitv Security: Any equity security as defined in section 101(16) of the
48.

26 Bankruptcy Code in a Debtor.

27
28

Equity Securitv Holder: A Holder of an Interest.

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1
of

49. Estate: The bankruptcy estate of any Debtor created by vIitue of section 541 the Chapter 11 Cases. the Bankruptcy Code upon the commencement of

2
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50. ExcuIDated Clairn: 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.

4
5

confirming, or consummating the Plan, in each case other than claims for gross negligence. wilful misconduct or fraud.

6
7
8

51. ExcuIDated 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, attomeys.
professionals, consultants, agents, or other representatives, and (ii) the Debtors' CUlTent

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officers, employees, advisors. attorneys, professionals. consultants, agents, or other representatives.

52. Federal Judgment Rate: The federal judgment rate of .59%. which was in
effect as of

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the Petition Date.

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53. File: To file with the Bankruptcy Court in the Chapter I I Cases. or in the
case of Proofs of

Claim or Interest. to file with the Claims and Solicitation Agent.

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54. Final Decree: The decree contemplated undcr Bankruptcy Rule 3022.

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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
55, Final Order: As applicable, an order or judgment of

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from which certiorari was sought; Drovided. however. that the First Lien Steering
19

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Committee or Reorganized Debtors. as appropriate, reserve the right to waive any such
appeal or similar conditions of a Final Order.
56. First Lien Agent: The current and former agents, alTanger. and bookrunner

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21

with respect to, or under, the First Lien Credit Agreement.

57. First Lien Credit Agreement: The first lien Credit Agreement dated as of

22
23

November 21,2005 (as may have been amended from time to time) among Heritage Land 24 Company. LLC, Thc Rhodes Companies. LLC, and Rhodes Ranch General Partnership. as the Borrowers, the Lenders Listed Therein as Lenders. and Credit Suisse, Cayman Islands 25 Branch, as Administrative Agent, Collateral Agent, Syndication Agent, Sole Bookrunner and Sole Lead An'anger. and the other Loan Documents (as defined in the First Lien Credit 26 Agreement).
27 28

58. First Lien Lender Claim: Any Claim for principal or interest under the First Lien Credit Agreement or the SWAP Transaction.

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2 3

59. 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.
60. First Lien Steering Committee: Credit Suisse Asset Management,

4
5

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.
61. General Unsecured Claims: Any Claim against any of

the Debtors that is not

7
8

alan (a) Adrninistrative Claim. (b) Priority Tax Claim, (c) Priority Non-Tax Claim, (d) First
Lien Lender Clairn, (e) Second Lien Lender Claim, (f) Other Secured Claim, (g)

Subordinated Claim, or (h) Intercompany Claim.

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62. 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.

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63. Heritage Equitv Securities: Members' interests and/or the interests as a

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noneconomic member in Heritage Land Company, LLC, a Nevada limited liability

company.

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64. Holder: An Entity holding a Claim or Interest, as applicable.

65. HOA: A homeowners' association.

66. ImDaired: 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

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the Bankruptcy Code.

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67. Indemnification Obligation: A Debtor's obligation under an executory

contract or otherwise to indemnity 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 ornitted 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.
68. Insider: As defined in section 101(31) of

19

20
21

22

the Bankruptcy Code.

23

24
25

69. 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.

70.

26 27
28

IntercomDany Claim: A Claim held by a Debtor against another Debtor.

71
72.

Intercompany Contract: A contract between two or more Debtors.

IntercomDanv Interest: An Interest held by a Debtor.

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73. Interest: Any: (a) Equity Security, including all issued, unissued, authorized,

2
3

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.
74. Interim ComDensation Order: The Bankruptcy Court order entitled, "Order

4
5

6
7
8

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 rnodified by a Bankptcy Court order approving the retention of the
Professionals.
75.

Internal Revenue Code: Title 26 of

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the United States Code, 26 U.S.c. 1the United States Code. 28 U.S.c. 1-4001.
the Bankruptcy Code.

9833.
76.
Judicial Code: Title 28 of

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Lien: As defined in section 101(37) of

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78. 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.
79. Litigation Trust Advisory Board: The advisory board fonned pursuant to the

14
15 16 17 18 19

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Litigation Trust Agreement.

80. Litigation Trustee: The Person designated by the First Lien Steering

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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

20
21

Date to administer the Litigation Trust in accordance with the Plan and the Litigation Trust Agreernent, and any successor appointed in accordance with the Litigation Trust Agreement. The identity of the Litigation Trustee shall be disclosed in the Plan Supplement by the First Lien Steering Committee at or prior to the Confirmation Hearing.
8 i. Litigation Trust Agreement: That certain trust agreement. substantially on

22
23

24
25

the terms set forth in the Plan Supplement and in form and substance acceptable to the First Lien Steering Committee, in consultation with the First Lien Agent. 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 the proceeds thereof. Litigation Trustee, the Liquidation Trust Assets. and the distribution of
82. Litigation Trust Assets: All Claims and Causes of Action on which the First

26
27 28

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 be as set foi1h in the Plan
Supplement.

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2
3

Claims that are to be satisfied. 83. Litigation Trust Beneficiaries: The Holders of in whole or in part, by post-Effective Date distributions that are to be made by the Litigation Trust.
84. Litigation Trust Funding Amount: The amount of $100,000 to be used to

4
5

initially fund the Litigation Trust, which shall be repaid to the Reorganized Debtors from the first proceeds received by the Litigation Trust.

6
7
8

85. Litigation Trust Interests: The beneficial interests in the Litigation Trust to be distributed to certain Holders of Claims in accordance with the tenns of the Plan.

86. Management and Director Equity Incentive Plan: A post-Effective Date rnanagement and director compensation incentive plan intended for certain management. employees. consultants and directors of certain of the Reorganized Debtors.
87. Master Ballots: The master ballots upon which the applicable Nominee or

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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.
88. Mediation Settlement: The agreement in piinciple 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. Califomia
on August 17.24 and 25 of2009 before the Honorable Richard Neiter.

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15

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89. Mediation Term Sheet: The document attached as Exhibit I to the Plan. which sets forth the terms of the Mediation Settlement.

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company of

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91. Newco: An entity to be newly formed which wil be the ultimate holding
the Reorganized Debtors.
92. Newco Bvlaws: The bylaws of

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Newco. which shall be in form and substance acceptable to the First Lien Steering Cornmittee, substantially in the form contained in the Plan Supplement to be in effect upon the Effective Date.

93. Newco Charter: The certificate of incorporation of Newco or other

governing documents, which shall be in fom1 and substance acceptable to the First Lien
Steering Committee, substantially in the fonn contained in the Plan Supplement to be in effect upon the Effective Date.

22
23

24
25

94. 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-I Equitv Interests") and a separate class of limited-voting

26 27 28

equity interests (the "Class A-2 Equitv 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- I Equity Interests or Class A-2 Equity Interests.

10

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2
3

95. Newco Total Enterprise Value: $99.6 milion, which is the midpoint range of the Reorganized Debtors set forth in the Disclosure Statement or the total enterprise value of

such amount provided in the Confinnation Order as the total enterprise value of the
Reorganized Debtors.

4
5

96. New First Lien Notes: The term notes issued pursuant to Article IV.B hereof

in partial satisfaction of the First Lien Lender Claims, which shall have the tenns and
conditions described on Exhibit 2 and which shall be in substantially the form designated in
the Plan Supplement.

6
7

97.

New First Lien Notes Maturitv Date: The sixth anniversary of the Effective

Date.
8

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98. 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.
99. Notice of Confirmation: That certain notice pursuant to Bankruptcy Rule

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3020(c)(2) notifying Holders of Claims and Interests and parties in interest that the Bankruptcy Court has confirmed the Plan.
100. Old Equitv Interests: All of the Interests in any of

the Debtors and any rights.

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options, warrants, calls. subscriptions or other similar rights or agreements. commitments or outstanding securities obligating the Debtors to issue. transfer or sell any Interests.
101. Other Secured Claim: Any Secured Claim, other than a: (i) First Lien Lender Claim; or (ii) Second Lien Lender Claim.

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102. Periodic Distribution Date: The first Business Day that is as soon as
reasonably practicable occurrng approximately ninety days after the Distribution Date. and thereafter, the first Business Day that is as soon as reasonably practicable occurrng approximately ninety days after the immediately preceding Periodic Distribution Date.
103. Permitted Nominee: Any nominee of a First Lien Lender or Second Lien finned in writing to the Debtors and the First Lien Agent or

18 19

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Lender that such lender has con

Second Lien Agent (as applicable) that it is such lender's nominee for the purpose of
distribution of some or all of such lender's distribution hereunder. provided that such

22
23

norninee shall be an affiliate of such lender. 24

25
104. Person: As defined in section 101(41) of

the Bankruptcy Code.

105. Petition Date: March 31, 2009 or, for Tuscany Golf Club, LLC. Pinnacle

Grading. LLC and Rhodes Homes Arizona. LLC, April 1,2009.

106. Plan: This First Amended Plan of Reorganization for each of the Debtors

26
27 28
pursuant to chapter 11 of

the Bankruptcy Code. together with the Plan Supplement, either in

its present fonn or as it may be altered, amended, modified. or supplemented from time to

II

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1 time in accordance with the terms of the Plan. the Bankruptcy Code, and the Bankruptcy

2
o .)

Rules.
lO7. Plan Proponent: The First Lien Steering Committee.

4
5

108. Plan SupDlement: The compilation of documents and forms of documents,

schedules, and exhibits to the Plan, which shall be in form and substance acceptable to the First Lien Steering Committee and fied no later than the Plan Supplement Filing Date.
109. Plan SUDDlement Filing Date: (November 16,2009) or such later date as may

6 7
8
of

be approved by the Bankruptcy Court on notice to parties in interest.

110. Pravada: A Rhodes Hornes development located in Mohave County (vicinity Kingman, Arizona) on approximately 1.312 acres.
III. Priority Non-Tax Claim: Any Claim accorded priority in right of payment

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pursuant to section 507(a) of the Bankruptcy Code, other than a Priority Tax Claim or an
Administrative Claim.

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112. Priority Tax Claim: Any Claim of

the kind specified in section 507(a)(8) of

the Bankruptcy Code.

14
15
113. Professional: An Entity: (a) employed pursuant to a Bankruptcy Court order

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in accordance with sections 327 and 1103 of the Bankptcy 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

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the Bankruptcy Code or (b) awarded compensation and reimbursement 16 by the Bankruptcy Court pursuant to section 503(b)(4) of the Bankruptcy Code.
17
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114. Proof of Claim: A proof of Claim Filed against any of the Debtors in the
Chapter 11 Cases.

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115. Proof of Interest: A proof of Interest Filed against any of the Debtors in the
Chapter 11 Cases.

20
21
624.260 of

116. Oualified EmDloyee: An employee that satisfies the requirements of Chapter the Nevada Revised Statutes.
117. Record Date: (October 30.2009)

22
23

118. Reinstated: (a) Leaving unaltered the legal, equitable. and contractual rights

24
25 26 27
28

to which a Claim entitIes 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 occun'ed 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)

12

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compensating the Holder of such Claim or Interest for any damages incuned as a result of
any reasonable reliance by such Holder on such contractual provision or such applicable

2
3

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

4
5

subject to section 365(b)(I)(A) of the Bankrptcy Code, compensating the Holder of such Clairn 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 alteiing the legal, equitable
or contractual rights to which such Claim entitles the Holder.

6 7
8

119. Reiection Damages Claim: Any Claim on account of the rejection of an executory contract or unexpired lease pursuant to section 365 of the Bankruptcy Code.

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9
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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;

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(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' Comrnittee 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, offcers, members, directors. principals.
employees, agents, financial advisors, attorneys, accountants, investment bankers,

14
15

consultants, representatives. and other Professionals; (g) the Debtors' officers, employees
(including Thomas Robinson and Joseph Schramm) and Professionals. as of the Petition
16 17
18

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Date; and (h) Paul Huygens; Drovided. 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

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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.

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123. Rhodes: James M. Rhodes, in his individual capacity and any capacity related to any of the Debtors including, without limitation, as shareholder. general paiiner,
limited partner, agent. officer or principaL.

22
23
124. Rhodes Entities: The following Entities: Rhodes; Glynda Rhodes; John

Rhodes; James M. Rhodes Dynasty Trust i; James M. Rhodes Dynasty Trust II; JMR
Children's In'evocable 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 Cornpany, 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

24
25 26 27 28

13

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2
3

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. Rhodes Entities Claims: Claims asserted by the Rhodes Entities.

126. Rhodes Entities Release: As set forth in Article VIIL.E hereof.

4
5

127. Rhodes Ranch Golf Course: The golf course situated within the Rhodes
Ranch master-planned community located in the southwestern Las Vegas val1ey.

6
7
8
128. Rol1-UD 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 rnerges

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

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contracts, and statement of financial affairs, as amended from time to time, Filed by the Debtors pursuant to section 521 of the Banruptcy Code, the offcial bankruptcy forms, and
the Bankruptcy Rules.

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14 bookrunner with respect to, or under, the Second Lien Credit Agreement.
15
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

16 17 18

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Company. LLC. The Rhodes Cornpanies, 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

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Bookrunner and Sole Lead Arranger, and the other Loan Documents (as defined in the Second Lien Credit Agreement).
132.
Second Lien Lender Claim: Any Claim on account of

19

20
21

the Second Lien Credit

Agreement.
133. Second Lien Lenders: The Second Lien Agent and the entities that hold debt

22
23

under the Second Lien Credit Agreement.

134. Secured: When refelTing to a Claim: (a) secured by a Lien on property in which an Estate has an interest. which Lien is valid. peifected. 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 Creditor's interest in

24
25

the Estate's interest in such property or to the extent of the amount subject to setoff, as
applicable, as detennined pursuant to section 506(a) of

26
27 28

the Bankruptcy Code; or (b) Allowed

pursuant to the Plan as a Secured Claim.

135. Securities Act: The Securities Act of 1933. 15 U.S.c. 77a-77aa, or any

similar federal, state, or local law.

14

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136. Security: As defined in section 2(a)(I) of

the Securities Act.

Holders of

2
3

137. Servicer: An agent, servicer, or other authorized representative of

Claims or Interests recognized by the Plan Proponent.

138. Solicitation Procedures Order: That certain order entered by the Bankruptcy

4
5

Court on (October 30), 2009, approving certain solicitation procedures for solicitation of
votes on the Plan (Rhodes Docket No. (XX)).

6 7
8

139. Stanley Engineering Litigation: The litigation styled Rhodes Homes

Arizona. LLC v. Stanley Consultants, Inc.. No. CV2006-011358, currently pending in the
Superior COUli of Arizona, Maricopa County.

140. Stockholders Agreement: The stockholders agreement to be included in the

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Plan Supplement that shall be in form and substance acceptable to the First Lien Steering Committee in its sole discretion to be in effect on the Effective Date.

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141. Subordinated Claim: Any Claim that is subordinated pursuant to section 510
the Bankruptcy Code.
142. Supremacy Clause: Paragraph 2 of Article Vi of

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the U.S. Constitution.

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144. 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.

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145. Unclaimed Distiibution: Any distribution under the Plan on account of an

Allowed Claim or Interest 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

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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 infonnation necessary to facilitate a particular distribution; or (d) taken any
other action necessary to facilitate such distribution.

20
21

146. Unifonn Commercial Code: The Uniform Commercial Code as in effect on

the Effective Date, as enacted in the applicable state.

22 23

147. UnimDaired: 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.
148. Unsecured Claim: Any Claim that is not secured by a Lien on property in which the Debtor's Estate has an interest.
149. U.S. Constitution: The Constitution of

24
25

26
27 28

the United States of America.

151. Voting Deadline: (December 3),2009.

B. Rules of Interpretation:

15

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i. For Durooses of the Plan: (a) whenever from the context it is appropiiate.

2
3

4
5

7
8

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 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 Entity's 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;

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(f) unless otherwise specified, all references in the Plan to exhibits are references to exhibits in the Plan Supplement; (g) the words "herein," "hereof, and "hereto" refer to the Plan in its entirety rather than to a particular portion of the Plan; (h) 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 govemed by. and construed and enforced in accordance with

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applicable fderal law, including tlie Bankruptcy Code and Bankruptcy Rules; (i) 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; U) unless otherwise set forth in the
Plan. the rules of construction set forth in section 102 of the Bankruptcy Code sliall apply;

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(k) 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 tenn in the Bankruptcy Code or the Bankruptcy Rules. as applicable; (I) all refrences

to docket numbers of documents Filed in the Chapter II Cases are references to the docket

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numbers under the Bankrptcy Court.s CM/ECF system; (m) 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 1 I Cases, unless otherwise stated; and (n) any immaterial

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effectuating provisions rnay 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. ComDutation 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

22
23

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.

24
25

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)(I) of the Bankruptcy Code. Administrative

26 27 28

Claims and Priority Tax Claims have not been classified and thus are excluded from the Classes of Claims set forth in Article II.

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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

2
3

4
5

enters an order allowing such Allowed Administrative Claim or (c) the date on which the 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
Reorganized Debtors or the Debtors, with the consent of

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 6 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 7 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'

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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.

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B. Prioiity 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
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; Drovided, 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 Piiority Tax Claims defen'ed to the extent permitted by Section 1 1 29(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 would have been due if

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Priority Tax Claim at the Federal statutory rate; Drovided, further, that deferred Cash
payments on account of an Allowed Priority Tax Claim shall be paid quarterly over a period

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of six years commencing with the quarter after which such Priority Tax Claim has been
20
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Allowed.

ARTICLE II.
CLASSIFICATION AND TREATMENT OF CLAIMS AND INTERESTS

22
23

24
25 26 27 28

A. Classification of Claims and Interests: All Claims and Interests. except

Administrative Claims and Priority Tax Claims. are classified in the Classes set forth in Article III. A Claim or Interest is classified in a pai1icular Class only to the extent that the
Claim or Interest qualifies within the description of that Class and is classified iii other Classes to the extent that any portion of the Claim or Interest qualifies within the description of such other Classes. A Clairn 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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I. Class Identification: Below is a chart assigning each Class a letter and, in

2
3

some cases. a number for purposes of identifying each separate Class.

Class
Claim or Interest Type

A-I
A-2
A-3
B

First Lien Lender Claims

Second Lien Lender Claims
Other Secured Clairns

4
5

6
7
8

Priority Non-Tax Claim

General Unsecured Claims
Subordinated Claims Old Equity Interests
Intercompany Claims

C-I
C-2
D

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B. Treatment of Classes of Claims and Interests: To the extent a Class contains

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Allowed Claims or Interests with respect to a particular Debtor. the treatment provided to each Class for distribution purposes is specified below.
L. Class A-I-First Lien Lender Claims
a. Classification: Class A-I consists of all First Lien Lender Claims.

14
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b. Impairment and Voting: Class A-I is Impaired by the Plan. Each

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Holder of an Allowed Claim in Class A-I is entitled to vote to accept or reject the
Plan.

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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 Claims. (w) its pro rata share of $ 1.5 million in Cash, (x) its pro rata share of 100% of the New First Lien Notes, (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); and (z) its pro rata
share of the Litigation Trust Interests allocable to the Holders of the First Lien

22
23

Lender Claims. 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
VlI.F. of

the Plan.

24
25

2. Class A-2-Second Lien Lender Claims

a. Classification: Class A-2 consists of all Second Lien Lender Claims.

26
b. ImDainnent and Voting: Class A-2 is Impaired by the Plan. Each

27 28

Holder of an Allowed Claim in Class A-2 is entitled to vote to accept or reject the
Plan.

18

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2
3

c. Treatment: On the Effective Date, only if the Class of Second Lien Lender Clairns votes in favor of the Plan, each of the Second Lien Lenders (or its the net proceeds of Permitted Nominee) shall receive (x) its pro rata share of50% of
the Stanley Engineering Litigation; and (y) its pro rata share of the Litigation TlUst

Interests allocable to the Holders of the Second Lien Lender Claims on account of its

4
5

deficiency 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. If the Class of Second Lien Lender Claims votes

6
7
8

against the Plan, each of the Second Lien Lenders shall receive its pro rata share of the Litigation TlUst Interests allocable to the Holders of the Second Lien Lender
the reasonable fees its deficiency claims, subject to payment of and expenses of Ropes & Gray LLP and local counsel for the Second Lien Agent.
Claims on account of

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3. Class A-3-0ther Secured Clairns

a. Classification: Class A-3 consists of all Other Secured Claims.

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b. ImDainnent and Voting: Class A-3 is Unimpaired by the Plan. Each

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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.

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c. Treatment: To the extent not satisfied by the Debtors. pursuant to Bankrptcy 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 BanklUptcy Code. (ii) a Holder of an

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16
17
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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

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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,

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(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

20
21

22
23

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, the First Lien Steering Committee (and in consultation with the
with the consent of

First Lien Agent and Second Lien Agent), otherwise agree.

4. Class B-Prioritv Non-Tax Claims
a. Classification: Class B consists of all Priority Non-Tax Claims.

24
25

26
27 28

b. ImDaiiinent 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

2
3

4
5

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-I-General Unsecured Claims (including any Allowed Rhodes

6 7

Entities Claims)
a. Classification: Class C-I consists of all General Unsecured Claims

including any Allowed Rhodes Entities Claims.

b. IinDairment and Voting: Class C-L is Impaired by the Plan. Each

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Holder of an Allowed Claim in Class C-I is entitled to vote to accept or reject the
Plan.
c. Treatment: On the Effective Date, each Holder of an Allowed

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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-Subordinated Claims

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14
15
a. Classification: Class C-2 consists of all Subordinated Claims.

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b. Impairment and Voting: Class C-2 is Impaired by the Plan. Each

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Holder of an Interest in Class C-2 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 (including any

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20
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Rhodes Entities Claims that are subordinated) shall not receive any recovery on their Claims. account of
7. Class D-Old Equity Interests
a. Classification: Class D consists of all Old Equity Interests.

22
23
b. ImDainnent and Voting: Class D is Impaired by the Plan. Each

24
25

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: Eacli 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.
8. Class E-IntercomDanv Claims

26
27 28

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a. Classification: Class E consists of all Intercompany Claims.

2
3

b. IrnDairment 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

4
5

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.
C. Class Voting Rights: The voting rights of each Class are as follows.

6 7
8

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i. Classes Entitled to Vote: The following Classes are Impaired and thus

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entitled to vote to accept or reject the Plan.

Classes

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A-I
A-2

C-I
2. Presumed AcceDtance of Plan: The following Classes are Unimpaired and

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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

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3. Presumed Rejection of Plan: The following Classes are Impaired and

22
23

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

24
25

C-2

D
E

26 27
28

21

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D. Acceptance or Rejection of

the Plan

2
3
section I

I. AcceDtance bv ImDaired Classes of Claims: Pursuant to Bankruptcy Code

I 26(c) and except as otherwise provided in Bankruptcy Code section I I

26(e). an

4
5

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

6 7
8

determining whether the Plan satisfies Bankruptcy Code section I 129(a)(8) and (10).

3. Cramdown: The Plan Proponent requests Confirmation of the Plan under

section 1129(b) of the Bankruptcy Code with respect to any Impaired Class that does not the Bankruptcy Code. The First Lien Steering Committee reserves the right to modify the Plan to the extent, if any. that Confirmation
accept the Plan pursuant to section 1126 of

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pursuant to section I I 29(b) of the Bankruptcy Code requires modification.

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4. Controversv 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, detennine such controversy on or before the Confirmation Date.

I3
14
15 16 17 18 19

ARTICLE iV.
PROVISIONS FOR IMPLEMENTATION OF THE PLAN

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A. Substantive Consolidation: The Plan shall serve as a motion by the First Lien
Steering Committee seeking entry of a BanklUptcy Court order substantively consolidating
all of the Estates into a single consolidated Estate for all purposes associated with

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Confirmation and distributions to be made under the Plan.

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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 20 merged into the Estate of The Rhodes Companies, LLC for all purposes associated with
21

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

22 23

thereof by any other Debtor, as well as any joint and several liability of any Debtor with
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

24
25

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 II Cases. All duplicative Claims (identical in

26
27 28

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

22

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Debtors arising from substantive consolidation shaH be deemed Cured as of the Effective
2
3

Date.

B. Sources of Consideration for Plan Distributions: The Reorganized Debtors shall

4
5

fund distributions under the Plan with Cash on hand, existing assets, and the issuance of the New First Lien Notes and Newco Equity Interests.

I. Newco Equitv Interests: On the Effective Date, but not more than thirty days
6
7
8

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 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- I Equity Interest.

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The economic rights of the Class A-I Equity Interests and Class A-2 Equity Interests shaH 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-I
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

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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 Newco' s 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

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holders of Class A-I 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-I Equity Interests have the right to vote thereon, any redemption, purchase or other acquisition

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by the Newco of any of its capital stock (except for purchases from employees upon
tennination of employment).

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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

22
23

does not equally affect the Class A-I 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.

24
25

26
27

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
a. Section 1145 ExemDtion: Pursuant to section 1145 of

Securities Act and any other applicable law requiring registration prior to the
offering. issuance, distribution, or sale of Securities. In addition. under section 1145

28

of the Bankruptcy Code any Securities contemplated by the Plan, including the

23

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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

2
3

I i 45(b)(I) of the Bankruptcy Code relating to the definition of an underwriter in the Securities Act, and cornpliance with any rules and regulations section 2(a)(lI) of

4
5

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 Stockholders
Agreement; and (iii) applicable regulatory approval.
b. Issuance and Distribution of

6
7
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the Newco Equity Interests: The Newco

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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.

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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 tenns set forth on Exhibit 2 hereto and as otherwise provided in the terms of the documents governing the New First Lien Notes which shall be included in the Plan Supplement.
New co (or such other 3. Exit Financing: To the extent the board of directors of 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.

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C. Coroorate Existence: Except as otherwise provided in the Plan, each Debtor shall

20
21

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,

22

pursuant to the applicable law in the jurisdiction in which each applicable Debtor is
incorporated or fonned and pursuant to the respective certificate of incorporation and

23 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 24 amended by the Plan or otherwise, and to the extent such documents are amended. such

25

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 Clairns or Causes of

26 27 28

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

24

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of all Liens, Claims, charges, or other encumbrances. On and after the Effective Date,
2
3

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 EQuitv Securities and Related Obligations: On the Effective Date.

4
5

except as otherwise specifically provided for in the Plan: (1) the Old Equity Interests and

6 7
8

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

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thereunder and (2) the obligations of the Debtors pursuant. relating, or pertaining to any
agreements, indentures, cei1ificates of designation, bylaws. or certificate or articles of

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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

12
13

indebtedness or obligations of the Debtors that are specifically Reinstated pursuant to the
Plan) shall be released and discharged; Drovided, however, that notwithstanding

14
15

Confirmation, any such indenture or agreement that govems 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 goveming agreement; (y) permitting such Servicer

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to maintain any rights and Liens it may have against propei1y other than the Reorganized

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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 Iirnitation. 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); Drovided. further, however, that the preceding proviso shall not affect the discharge of Claims or Interests pursuant to the Bankruptcy

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Code, the Confinnation 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 SteDs and Transfer of Certain Interests to Newco: In the event the

24
25

their obligations pursuant to the Mediation Settlement step (4) below, effective the next day. the following transactions shall be deemed to have occurred in the order set forth below.
Rhodes Entities comply with all of and the Plan, on the Effective Date or, in the case of

26 27
28

1. Newco shall be foimed as a new limited liability company. The First Lien
Lender Claims shall be deemed to have been exchanged for the rnembership interests in
Newco. Newco shall be deemed to hold all of

the First Lien Lender Claims. At the option

25

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of a holder. membership interests in Newco may be transferred to a corporation prior to Step

2.
2
3

2. Newco shall purchase all of the Heritage Equity Securities for $ I 0.00.
3. Contemporaneous with or subsequent to Newco's purchase of the Heritage

4
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Equity Securities, The Rhodes Companies, LLC - the general partner of each of Tick, LP; Glynda, LP; Jackknife, LP; LP; Batcave, LP; Overfow, LP; Wallboard, LP; and Chalkline,

6 7
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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 Claims.
4. Newco's 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

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transactions under the Intemal Revenue Code, it shall be allocable to the holders of the Old Equity Interests as required by the Internal Revenue Code. To be clear, Newco's purchase of the Heiitage Equity Securities shall occur (a) contemporaneously with or immediately before the membership interests of those entities described in Ai1icle IV.B.3, immediately
above, are acquired; (b) before any debt or obligations of the Debtors are canceled or

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forgiven; (d) before any new notes are issued or existing debt is modified by the the other acts or events contemplated in Article
Reorganized Debtors; and (e) before any of

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iil.B, et seq., of the Plan. The holders of the Heritage Equity Securities and Newco wil

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report the sale and purchase of the Heritage Equity Securities in accordance with revenue 1991-1 CB432. ruling 99-6.

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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 20 necessary to effectuate the Plan, including: (l) the execution and delivery of appropriate
agreements or other documents of merger, consolidation, or reorganization containing terms
law; (2) the execution and delivery of appropriate instruments of transfer, assignment,

19

21

that are consistent with the tenns of the Plan and that satisfy the requirements of applicable

22
23

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 govemmental authorities
pursuant to applicable law; (4) the Roll-Up Transactions; (5) the establishment of a

24
25 26 27 28

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 detennine 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 detem1ined 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.

26

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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

2
3

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

4
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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 Chaiier and Newco Bylaws; the adoption

6 7
8

and filing of amended organization documents of the other Reorganized Debtors; the
appointment of directors and offcers for the Reorganized Debtors; the execution of the

Stockholders Agreement; and the adoption, implementation, and amendment of the Management and Director Equity Incentive Plan.
i. Post-Confirmation ProDerty 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

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Reorganized Debtors may elect to sell such property pursuant to sections 363, i 123, and
1146(a) of

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the Bankruptcy Code.

J. Certificate of Incorporation and Bvlaws: The certificates of incorporation and

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bylaws (or other formation documents relating to limited liability companies, limited partnerships or other forms of Entity) of the Debtors shall be amended. in fonn and substance acceptable to the First Lien Steeiing Cornmittee, as may be required to be consistent with the provisions of the Plan and the Bankrptcy Code. The Newco Charter and Newco Bylaws shall be in form and substance acceptable to the First Lien Steering Committee and shall be included in the Plan Supplement, which wil be Filed on the Plan Supplement Filing Date. The certificate of incorporation of Newco shall. among other
things: (I) authorize issuance of the extent required by section I

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the Newco Equity Interests; and (2) pursuant to and only to

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123(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 fie new ceiiificates of incorporation (or other formation documents relating to limited liability companies lirnited partnerships, or other fornis of Entity) in form and substance acceptable to First Lien Steering Committee, with the secretary (or equivalent state offcer 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 fie the Newco Charter with the secretary (or equivalent state offcer

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24
25 26 27

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.

28

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 goveming 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
27

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in the name of and on behalf of the Reorganized Debtors, without the need for any

2
3

approvals, authorizations, or consents except for those expressly required pursuant to the Plan.
L. ExemDtion from Certain Transfer Taxes and Recording Fees: Pursuant to section

4
5

6
7
8

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,

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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,

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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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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
cornposed of one or more members appointed by the First Lien Steering Committee. On the Effective Date, a chief executive officer or similar offcer selected by the board of directors of the Reorganized Debtors shall be appointed. The identity of such officers and directors shall be disclosed prior to the Confirmation Hearing.

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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 New

co.

22
23

O. The Litigation Trust: On the Effective Date, the Litigation Trust wil be
implemented pursuant to the terms of the Litigation Trust Agreement. 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

24
25 26 27 28

the Holders of Allowed Claims in Classes A-I, A-2 and C-1. 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

beneficiaiies. 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 wil initially be funded by the Litigation Trust Funding Amount, which will

28

Case 09-14814-lbr

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2
3

be transferred to the Litigation Trust on the Effective Date and which wil 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 Claims, Allowed Second Lien Lender Claims, and Allowed General Unsecured Claims (including any Allowed Rhodes Entities Claims) with each Holder of an Allowed

4
5

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.
P. Preservation of Causes of Action: In accordance with section I I 23

6 7
8

(b) of the

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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 in the Plan Supplement. 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

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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, the Plan

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Supplement, 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. wil not pursue any and all available Causes of Action against them. The Reorganized Debtors 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 Bankrptcy Court order. the Reorganized Debtors and the Litigation Trust. as applicable. expressly reserve all Causes of Action for later adjudication and. therefore, no

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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

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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 I I Cases or pursuant to the Plan. In accordance with section 1 123(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

24
25

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

26 27 28

Reorganized Debtors and the Litigation Trust, as applicable, shall have the exclusive right, authOlity. and discretion to detennine 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 Coui1. Neither the Litigation Trust nor the Reorganized Debtors shall comrnence any litigation against the Rhodes Entities until the Bankruptcy Court rules on the allowance of the Rhodes Entities

29

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2
3

4
5

Claims set forth in Proofs of Claim, included in the Debtors' Schedules or otherwise set forth in the Mediation Tenn 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 the Mediation Tenn Sheet through the pending the Bankruptcy Court's 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
date of

the Bankruptcy Court.s ruling on the allowance of the Rhodes Entities Claims. The
6 7
8

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).

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R. Licensing: The Rhodes Entities shall take commercially reasonable steps and/or
enter into any agreements or similar documentation reasonably necessary to ensure the

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the Debtors' applicable professional licenses at no cost to the Rhodes Entities for a period of up to twelve months following the Effective
Reorganized Debtors' continued use of all of

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Date. To the extent, Sagebrush Enterpiises, 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 contractor's license held by Rhodes Design & Development Corporation. Sagebrush

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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 its indemnity through the Effective Date. provided effectiveness of Sagebrush's recission of that the allowance of such Administrative Claim shall be subject to resolution by the

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Banlauptcy Couii and/or such other comi(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.

19

20
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Professional licenses include, but are not limited to the Nevada State Contractor's 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 cornmercially 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

22
23

24
25

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 detennined 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 fonn and substance acceptable to the First Lien Steering Committee and

26

27
28

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.

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In addition, prior to the deadline for fiing objections to the Disclosure Statement, the

2
3

4
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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 rnust be acceptable to the First Lien Steering Committee.

6 7
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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 tenns 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 tenns of such refinancing are acceptable to the First Lien Steering

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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

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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 fi'om a green course to a desert course shall be used for operating

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expenses associated with the Rhodes Ranch Golf Course, with any excess to become
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property of

the Reorganized Debtors on the Effective Date.

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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.

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For the avoidance of doubt, if the Reorganized Debtors put the Rhodes Ranch Golf Course

20
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to Rhodes in accordance with the tenns 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.

22
23

24
25

On the Effective Date. Rhodes's 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 milion (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 pai1y appraisal firn1 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

26
27 28

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).

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So long as Rhodes has not defaulted on his obligation to repurchase the Rhodes Ranch Golf
2
3

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

4
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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

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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 retumed 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.

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T. Cash Pavment: The Rhodes Entities shall make a payment to the Reorganized
Debtors of$3.5 milion in Cash on the Effective Date.

U. Transfer of Arizona Assets: On the Effective Date, pursuant to an asset transfer

agreement in fonn and substance acceptable to the First Lien Steering Cornmittee and the Rhodes Entities, 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 that such assets shall not include assets owned by Pinnacle Grading located in Arizona and related contracts associated with the assets. The any proposed sale of the Pinnacle assets, and Debtors shall provide James Rhodes notice of 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.

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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

24
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the Reorganized Debtors and all cure costs associated therewith shall be borne by the
Rhodes Entities.

26 27
28

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 Attachrnent E to the Mediation Tenn Sheet.
V. Trademarks and Trade Names: Within the earlier of

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W. Self Insured Retention Obligations: The Reorganized Debtors shall indemnity

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.

2
3

4
5

X. Bond Replacernent or Indemnification: Those perfonnance bonds guaranteed by the Rhodes Entities in favor of the Debtors shall be replaced on a renewal date by new
perfonnance 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 perfonnance bonds guaranteed by the Rhodes Entities and such guarantees shall remain in 7 place. The applicable Rhodes Entity's agreement to remain a guarantor under the existing 8 performance bonds as such performance bonds may be renewed shall be at no cost to the bond premiums). In the event
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the Reorganized Debtors fail to perform their obligations underlying such renewed

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performance bonds after the Effective Date. the Reorganized Debtors will indemnity 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 the Reorganized Debtors' failure to perfonn such obligations subsequent to the Effective
of

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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 Clairns will be released in the ordinary course of business as

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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.

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Y. Stanlev Engineering Litigation In the event the Stanley Engineering Litigation is

resolved either by judgment or settlement in a manner favorable to the Reorganized Debtors

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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 shall engage in good faith negotiations to ensure that the Second Lien Lenders receive consideration equivalent to 50% of the net value of such resolutioaand 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 pai1ies 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 the Stanley Engineering Litigation). Lenders on account of

20
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22
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24 25 26 27
28

ARTICLE V. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES

A. AssumDtion and Reiection of Executory Contracts and Unexpired Leases: Except

as otherwise provided in the Plan. the Debtors' executory contracts or unexpired leases not

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2
3

assumed or rejected pursuant to a Bankruptcy Court order prior to the Effective Date shall be deemed rejected pursuant to sections 365 and iin of the Bankrptcy Code. except for those executory contracts or unexpired leases: (l) listed on the schedule of "Assumed Executory Contracts and Unexpired Leases" in the Plan Supplement; (2) that are
Intercompany Contracts. in which case such Intercompany Contracts are deemed

4
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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

6 7
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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 assurnption or rejection and the effective date thereof shall remain subject to a
Bankruptcy Coui1 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 Confinnation Order shall constitute a Bankruptcy

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9 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 lO Bankruptcy Code. Unless otherwise indicated. all assurnptions or rejections of such

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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

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accordance with its tenns. except as such tenns may have been modified by such order.
Notwithstanding anything to the contrary in the Plan, the Plan Proponent and the

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Reorganized Debtors, as applicable, reserve the right to alter. amend. modify. or supplement the schedules of executory contracts or unexpired leases identified in the Plan Supplement at any time through and including fifteen days after the Effective Date. All executory contracts

16 17
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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 in the Plan Supplement, 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 UnexDired Leases: With

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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

22
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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

24
25

26
27 28

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,
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released. and discharged upon payment by the Debtors of

2
3

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 the Bankruptcy Court. notice to or action. order, or approval of

4
5

If the Debtors or Reorganized Debtors. as applicable, or First Lien Steering

Comrnittee object to any Cure or any other matter related to assumption, the Bankruptcy there is a such Cure and any related issues. If Court shall determine the Allowed amount of

6 7
8

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 assurnption, 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

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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

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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.

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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 nomnonetary, 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.

20
21

All Cure costs associated with Executory Contracts related to the Arizona Assets
shall be bome by the Rhodes Entities.
C. Preexisting Obligations to the Debtors Under Executory Contracts and UnexDired

22
23

Leases: Rejection or repudiation of any executory contract or unexpired lease pursuant to

24
25

the Plan or otherwise shall not constitute a tennination of pre-existing obligations owed to

the Debtors under such contracts or leases. In particular, notwithstanding any bankruptcy law to the contrary, the Reorganized Debtors expressly reserve and do not
non

26
27
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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

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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

2
3

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 Reiection or Repudiation of Executorv Contracts and Unexpired

4
5

6 7
8

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
the Debtors' executory contracts or unexpired leases that are not timely Filed by the Rejection Damages Claim Deadline shall
Proofs of Claim arising from the rejection orrepudiation of

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be disallowed automatically, forever barred from assei1ion, and shall not be enforceable
against any Reorganized Debtor without the need for any objection by the Reorganized

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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 frorn the rejection or repudiation of the Debtors' executory contracts and unexpired leases shall be classified as General Unsecured Claims.

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E. IntercomDanv 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.

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F. Home Sales: All pending home sale contracts shall be assumed by the applicable
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G. Warranties: All eligible prepetition home sale contracts with one-year warranty
obligations shall be perfonned in the ordinary course of business of the Reorganized

20
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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

22 23

Unsecured Claims.
H. Modification of Executorv Contracts and UnexDired Leases Containing Equity

24
25

OwnershiD Restrictions: All executory contracts and unexpired leases to be assumed, or

conditionally assumed, under the Plan pursuant to sections 365 and 1 123 of the Bankruptcy

26 27
28

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 (I) any such restrictions shall be deemed of no further force and effect and
(2) any breaches that may arise thereunder as a result of Confinnation or Consummation

shall be deemed waived by the applicable non-Debtor counterparty.

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i. Modifications, Amendments. SUPDlements. Restatements, or Other Agreements:

2
3

4
5

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 rnanner affect such executory contract or unexpired lease. and all executory contracts and unexpired leases related thereto, if any. including all easements, other interests. unless any of the foregoing agreements has been previously rejected or repudiated
licenses. permits, rights, privileges. immunities, options, rights of first refusal, and any

or is rejected or repudiated under the Plan.

6 7
8

Modifications, amendments, supplements. and restatements to prepetition executory contracts and unexpired leases that have been executed by the Debtors during the Chapter I I 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

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in the Plan Supplement, 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.

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K. Nonoccurrence of Effective Date: In the event that the Effective Date does not
occur, the BanklUptcy Court shall retain jurisdiction with respect to any consensual request

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to extend the deadline for assuming or rejecting unexpired leases pursuant to section
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ARTICLE Vi.
PROCEDURES FOR RESOLVING DISPUTED CLAIMS

20
21

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 Clairn immediately prior to the Effective Date, including the Causes of Action referenced in Article
IV.

22
23

B. Claims Adrninistration Responsibilities: Except as otherwise specifically provided

in the Plan. after the Effective Date. the Reorganized Debtors shall have the sole authority:
(I) to File, withdraw. or litigate to judgment, objections to Claims; (2) to settle or

24
25

26
27 28

compromise any Disputed Claim without any further notice to or action, order. or approval by the BanklUptcy 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

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time request that the Banlauptcy Court estimate any Disputed Claim that is contingent or
unliquidated pursuant to section 502(c) of

the Bankruptcy Code for any reason, regardless of

2
3

whether any party previously has objected to such Claim or whether the Bankruptcy Court

4
5

6
7
8

has ruled on any such objection, and the Bankrptcy 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 estirnates any contingent or unliquidated Claim, that estimated amount shall constitute a maximum lirnitation 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

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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

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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. Adiustment to Claims Without Obiection: Any Claim that has been paid or

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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

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the Bankruptcy Court.

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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 Clairns that have been paid. satisfied, amended. or superseded during such prior
calendar quarter.

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E. Time to File Obiections 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 1 I 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

24
25

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,

26 27
28

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.

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2
3

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

4
5

6
7
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Holder of a Clairn 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

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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.

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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 Bankrptcy 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

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A. Total Enterprise Value for Purposes of Distributions Under the Plan: Distributions of Newco Equity Interests to Holders of Allowed First Lien Lender Claims shall be based
upon, among other things. the Newco Total Enterprise Value. For purposes of distribution.

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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

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otherwise provided in the Plan, a Final Order, or as agreed to by the First Lien Steering Cornmittee, initial distributions under the Plan on account of Claims Allowed on or before
the Effective Date shall be made on the Distribution Date; Drovided, however, that (I)

22
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Allowed Administrative Claims with respect to liabilities incurred by the Debtors in the ordinary course of business during the Chapter I I Cases or assumed by the Debtors prior to
the Effective Date shall be paid or perfonned in the ordinary course of business in

accordance with the tenns and conditions of any controlling agreements, course of dealing.

24
25

course of business, or industry practice and (2) Allowed Priority Tax Claims, unless
period as provided in section I 1

otherwise agreed. shall be paid in full in Cash on the Distribution Date or over a five-year 29(a)(9)(C) of the Bankruptcy Code with annual interest
Claims Allowed After the Effective Date:

26
27 28

provided by applicable non-bankruptcy law.

C. Distributions on Account of

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I. Payments and Distributions on DisDuted Claims: Except as otherwise

provided in the Plan, a Final Order, or as agreed to by the First Lien Steering Committee
2
3

4
5

6
7
8

prior to the Effective Date or the Reorganized Debtors after the Effective Date, distiibutions under the Plan on account of Disputed Claims that become Allowed after the Effective Date shaIl be made on the Periodic Distribution Date that is at least thirty days after the Disputed Claim becomes an AIIowed 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 i i 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 controIling agreements,

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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, shaIl be paid in full in Cash on the Periodic Distribution Date that is at least thirty days after the Disputed Claim becomes an AIIowed Claim or over a five-year period as the Bankruptcy Code with annual interest provided by
provided in section i i 29(a)(9)(C) of

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applicable non-bankruptcy law.

2. SDecial Rules for Distributions to Holders of DisDuted Claims:

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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 shaIl not receive any distiibution 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 AIIowed. 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 VI1.C.3.

Subject to Ai1icle 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 AIIowed Claim had been an Allowed Claim on the dates distributions were previously made to Holders of AIIowed Claims included in the applicable Class.
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 AIIowed 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
3. Reserve of

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any payments or other distributions made on account of, as well as any obligations arising

trom. the Litigation Trust Interests initiaIly 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.
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2
3

Notwithstanding anything in the applicable Holder's 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 Clairn in excess of the lesser of the amount: (a) stated in the Holder"s 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

4
5

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 and set forth in
the Plan Supplement. or such other amount as may be estimated by the Bankruptcy Court

6
7

prior to the Confirniation Hearing; or (c) if a Claim has been estimated, the amount
deposited in the Disputed Clairn Reserve to satisfy such Claim after such estimation.
D. Delivery of Distributions

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I. Record Date for Distributions: On the Distribution Record Date, the Claims

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Register shall be closed and any party responsible for making distributions shall be authoiized 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
Distiibution Agent shall make distributions to the transferee only to the extent practical and
in any event only if the relevant transfer fonn contains an unconditional and explicit

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certification and waiver of any objection to the transfer by the transferor.

2. Distribution Agent: The Distribution Agent shall make all distributions

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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

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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 Civil Distribution Agent or a Servicer, as appropriate: (a) in accordance with Federal Rule of 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 Distiibution Agent has not received a written notice of a change of address; or (e) on any counsel that has appeared in the Chapter I i Cases on the Holder's 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 inqir any liability whatsoever on account of any distributions under the Plan.

22
23

24 25 26 27 28

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4. Accrual of Distributions and Other Rights: For purposes of determining the

2
3

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

4
5

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

6 7 8

provided in the Plan, distributions on account of Allowed Claims shall be treated as

allocated first to principal and thereafter to any interest.

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6. ComDliance 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

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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

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allocate all distributions made under the Plan in compliance with all applicable wage
garnishments, alirnony, 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

18 19

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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 distrbutions or payments of fi'actions of Newco Equity

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Interests. Litigation Trust Interests or dollars. Whenever any payment of Cash of a

t'action of a dollar or payment of a fraction of Newco Equity Interests or fraction of

22 23 24
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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 rctumed 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 Holder's 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

26

27
28

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2
3

distribution reverts to the Reorganized Debtors pursuant to Ai1icle VIl.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

4
5

Distribution shall revest in the Reorganized Debtors and, to the extent such
6
7 8

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. rnade pursuant to any

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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

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Certificate and not with respect to Entities to whom those recognized Holders
distribute), notwithstanding any provision in such indenture or Certificate to the
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contrary and notwithstanding any otherwise applicable federal or state escheat,

abandoned, or unclaimed property law.
8. Manner of Payment Pursuant to the Plan: Any payment in Cash to be made

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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 VILD.7.c.
pursuant to the Plan shall be made at the election of

9. Surrender of Cancelled Instruments or Securities: On the Effective Date or

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as soon as reasonably practicable thereafter, each Holder of a Certificate shall surrender such Certificate to the Distiibution Agent or a Servicer (to the extent the relevant Claim or 19 Interest is governed by an agreement and administered by a Servicer). Such Certificate shall 20 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 21 such Certificate. No distribution of property pursuant to the Plan shall be made to or on 22 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 23 reasonably established to the satisfaction of the Distribution Agent or the Servicer. Any
24
25

18

26 27 28

Holder of a Claim who fails to surrender or cause to be sUITendered such Cei1ificate or fails to execute and deliver an at1davit 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; fui1hennore, all property with respect to such forfeited distributions, including any
dividends or interest attributable thereto, shall revert to the Reorganized Debtors,

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notwithstanding any federal or state escheat, abandoned, or unclaimed property law to the
2
3

contrary.
E. Claims Paid or Payable by Third Parties.

4
5 6 7
8

i. Claims Paid bv 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 Holder's 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.
2. Claims Payable by Insurance: Holders of Insured Claims that are covered by

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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

16
17 18

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

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Allowed Claim has exhausted all remedies with respect to such insurance policy. To the
extent that one or more of

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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

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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 Bankiuptcy Court.
3. ADDlicabilitv of Insurance Policies: Distiibutions to Holders of Allowed

20
21

22
23

24
25

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

26
27

constitute or be deemed a waiver by such insurers of any defenses. including coverage

defenses, held by such insurers. F. Payment of $1.5 Milion to First Lien Lenders: The $ I ,500,000 in Cash payable to the Holders of First Lien Lender Claims pursuant to Article iii.B.1. shall be paid as follows:

28

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(i) $400,000 on the Effective Date and (ii) the remaining up to $1,100.000 in five quarterly

2
3

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 milion payment shall be made to the Holders the Effective Date). Notwithstanding of First Lien Lender Claims within eighteen months of the Effective Date, the debt on the Rhodes Ranch Golf the foregoing. in the event that, as of

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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 milion (after 7 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 8 amounts that may have been borrowed under any exit facility unless such amounts were 9 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 wil be deemed to reduce unrestricted 10 cash on a dollar for dollar basis), then the initial $400,000 payment to the First Lien Lenders wil be increased as follows: (i) if unrestricted cash (as calculated above) is equal to or ii greater than $3.5 million but less than $4.5 milion, the $400.000 payment shall be increased 12 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; 13 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 14 quarterly installments reduced by a corresponding amount to provide for equal payments 15 over the payout periods discussed above. In no event shall the aggregate Cash payments to the First Lien Lenders exceed $1.5 million.
6
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G. General Unsecured Claims Purchase: The First Lien Lenders have agreed to use the

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aggregate $ 1.5 million Cash payment provided to them under the Plan to acquire those General Unsecured Claims of the Creditors to be listed in a schedule to be included in the
Plan Supplement (the "Claim Purchase Schedule") to the extent such Claims remain

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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
20

Purchase Schedule shall delineate whether such Claims are Allowed or Disputed and Claims

may be purchased only to the extent ultimately Allowed. Payments on account of the 21 purchased Allowed Claims listed on the Claim Purchase Schedule shall be made on the 22 same time frame as the First Lien Lenders receive their allocable Cash payments under
23

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). The First Lien Lenders reserve the right to rnodify

24 25

26
27 28

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; (iii) such Creditor sells its Claim to a party other than the First Lien Lenders pursuant the Plan or (iv) the full $1.5 million has been used to purchase other Allowed Claims on the Claim Purchase Schedule before such Creditor's 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
to this Article VII.G of

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purchased by the First Lien Lenders shall be distributed pro rata to the Holders of

First Lien

2
3

Lender 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 milion payable to the First Lien

Lenders. Under no circumstances shall the First Lien Lenders (either directly or through the

4
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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

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(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 milion 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 milion 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 i 00 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 authorizcd upon the Effective Date to effectuate the foregoing Claim purchase transactions.
ARTICLE VII. EFFECT OF CONFIRMATION OF THE PLAN

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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

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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,

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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 perfonned by employees of the Debtors prior to the Effective Date and that arise from a termination of any employee, regardless of whether such tennination 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 fiing of the Chapter II Cases shall be deemed Cured on the Effective Date. The Confinnation Order
46

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shall be a judicial determination of the discharge of all Claims and Interests subject to the
2
3

Effective Date occurrng.

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 piiority 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,

4
5

6
7
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section 5 I O(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.

C. Compromise and Settlement of Claims and Controversies: Pursuant to section 363

the Bankruptcy Code and Bankruptcy Rule 90 19 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,
of

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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 Confinnation Order shall constitute the Bankruptcy

Court's 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 the Bankruptcy Code and Bankruptcy Rule 9019(a), without
Plan, pursuant to section 363 of

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any further notice to or action, order, or approval of the Bankruptcy Court, after the

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Effective Date, the Reorganized Debtors may compromise and settle Claims against them and Causes of Action against other Entities.

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D. Releases bv the Debtors ofthe Released Parties: Pursuant to section 1l23(b) of the Bankruptcy Code, and except as otherwise specifically provided in the Plan or the
Plan Supplement, for good and valuable consideration, including the service of the

20
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Released Parties to facilitate the expeditious reorganization of the Debtors and the implementation of the restructuring contemplated by the Plan, 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,

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suits, damages, Causes of Action, remedies, and liabilties 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

26 27
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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
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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, 01' other documents, upon any other act 01' omission,
tlansaction, agreement, event, or other OCCUlrence taking place on or before the

Effective Date.
E. Releases by the Debtors of the Rhodes Entities: The Rhodes Entities shall be

4
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deemed released from any and all Claims, obligations, rights, suits, damages, Causes of
Action, lemedies, and liabilities whatsoever arising under chapter 5 of the Bankruptcy

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Code with respect to transfers made by the Debtols to the Rhodes Entities during the 2 yeals pliol 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 Filst Lien Lenders of First Lien Lenders Pursuant to Bankruptcy Rule 9019, and except as otherwise specifically plovided in the Plan or the Plan

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Supplement, to the extent a First Lien Lender elects on its Ballot to release the Filst

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Lien Lenders in accordance with this Section Viii.F., fOl good and valuable
consideration, on and after the Effective Date, each of the First Lien Lenders electing

to glant this release, shall be deemed to release each of the othel First Lien Lenders

that has elected to grant this release and each of their affiiates from any and all
Claims, obligations, rights, suits, damages, Causes of Action, remedies, and liabilties

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whatsoever, whether known or unknown, foreseen 01' unforeseen, existing or hereinaftel arising, in law, equity, or otherwise, that such First Lien Lender would
have been legally entitled to asselt against any other First Lien Lender that elected to glant this lelease, based on or relating to, or in any manner arising flom, in whole or

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in part, the First Lien Credit Agreement, the Filst Lien Lender Claims, any other claims arising undel or related to the Filst Lien Credit Agreement, the Debtols, the
Chaptel 11 Cases, the subject matter of, or the transactions or events giving rise to any

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Filst Lien Lender Claim, the restructuring of the First Lien Lendel Claims prior to or during the Chapter 11 Cases, the negotiation, formulation, or preparation of the Plan
and Disclosule Statement, 01' lelated agreements, instruments, 01' other documents, upon any other act or omission, transaction, agreement, event, 01' other occullence

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taking place on or before the Effective Date; with such leleases constituting an expless waiver and lelinquishment by each Filst Lien Lender electing to grant this release of any claims, whether known or unknown that such First Lien Lender may have undel
Section 1542 of the California Civil code 01' othel analogous state or federal law related

24
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to the matters being leleased; provided, however, that Claims or liabilties arising out of or relating to any act or omission of any First Lien Lender or any of its affiiates that constitutcs gloss ncgligence or wilful misconduct shall not be lcleased.

G. Exculpation: Except as othcnvise specifically provided in the Plan or Plan

Supplement, no Exculpated Palty shall have or incur, and each Exculpatcd Party is heleby leleased and exculpated from any Claim, obligation, Cause of Action, or 27 liabilty to one another or to any Exculpating Party fOl any Exculpated Claim, except
26 28

for gross negligence, wilful misconduct 01' flaud, but in all respects such Entities shall be entitled to leasonably rely upon the advice of counsel with respect to their duties

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and responsibilties pUl'uant to the Plan. The Debtors, the First Lien Steering

2
3

Committee and the Reolganized Debtors (and each of theil respective agents, members, directors, offcers, 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 therefole are not, and on

4
5

account of such distributions shall not be, liable at any time for the violation of any

applicable law, rule, or legulation governing the solicitation of acceptances or

rejections of the Plan or such distributions made pursuant to the Plan.
H. Injunction Except as othelwise expressly provided in the Plan or for

6 7
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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, flom and after thc Effectivc Date, flom: (1) commencing or continuing in any manner any action or other proceeding of any kind against the Debtors or Reorganized

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Debtols on account of 01' in connection with or with lespect to any such Claims or Interests; (2) enforcing, attaching, collecting, or recovering by any manner or means any judgment, award, decree 01' ordel against the Debtols or Reorganized Dcbtors 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 Debtols 01' the ploperty 01' estates of the Debtors 01' Reorganized Debtors on account of or in connection with or with respect to any such Claims or
Interests; (4) asserting any right of setoff, sublogation, 01' recoupment of any kind
against any obligation duc from the Debtols 01' Reorganized Dcbtols 01' against the

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plopelty 01' Estates of the Debtors or Reorganized Debtors on account of or in

connection with or with respect to any such Claims or Inteiests unless such Holder has
Filed a motion lequesting the right to pelfolm such setoff on or before the

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Confilmation Datc, and notwithstanding an indication in a Proof of Claim or Interest or othenvise that such Holder asserts, has, or intends to preserve any right of setoff
pursuant to section 553 of the Bankruptcy Code or othenvise (provided, that, to the

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extent the Rhodes Entitics Claims are Allowed, the Rhodes Entities, without the need to fie any such motion, shall letain the right to assert a setoff against any Claims or 20 Causes of Action that the Reorganized Debtors 01' Litigation Trust may assert against the Rhodes Entities, with the Reorganized Dcbtols and Litigation Trust, as applicable, 21 reselving the right to challenge the propriety of any such attempted setoff, with any 22 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 23 in connection with 01' with respcct to any such Claims 01' Interests released 01' settled
24
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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

26 27
28

Governmental Units, shall not discriminate against the Reorganized Debtors 01' deny,

revoke, suspend, or refuse to renew a license, pennit, 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 II, has been
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3

insolvent before the commencement of the Chapter I I Cases (or during the Chapter II Cases but before the Debtor is granted or denied a discharge) or has not paid a debt that is
dischargeable in the Chapter I i Cases.
J. Setoffs: Except as otherwise expressly provided for in the Plan, each Reorganized

4
5

6 7
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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

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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
perfonn such setoff on or before the Confinnation Date, and notwithstanding any indication

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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 assei1 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.

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19

K. Recoumnent: 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 perfonned such recoupment and provided notice thereof in wiiting 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 ofrecoupment.
L. Release of Liens: Except as otherwise provided in the Plan or in any contract,

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24
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instrument, release, or other agreement or document created pursuant to the Plan, on the Effective Date and concurrently with the applicable distiibutions made pursuant to the Plan,
all mortgages, deeds of trust, Liens, pledges, or other security interests against any propei1y

26 27 28

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, fiing offcers, title agents, title companies,
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3

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

4
5

directed to accept for filing the Confinnation Order any and all of the documents and
instrments necessary and appropriate to effectuate the discharge.

6 7
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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.

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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 Bankptcy 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.

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ARTICLE IX.
15

ALLOWANCE AND PAYMENT OF CERTAIN ADMINISTRATIVE CLAIMS

A. Professional Claims:
1. Final Fee Applications: All final requests for payment of Claims of a

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Professional shall be Filed no later than forty-fivc days after the Effective Date. After notice and a hearing in accordance with the procedures established by the Bankruptcy Code and prior Bankrptcy Court orders, the Allowed amounts of such Professional Claims shall be determined by the Bankruptcy Court.
2. Pavinent of Interim Amounts: Except as otheiwise provided in the Plan,

Professionals shall be paid pursuant to the Interim Compensation Order.

22
23
3. Reimbursable Expenses: The reasonable fees and expenses incurred by (i)

24
25

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 Claims votes in favor of the Plan), and (iii) the First Lien Steeiing Committee,
including its professionals, in connection with the Chapter I I 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

26 27
28

provided in the Plan, from and after the Effective Date, the Reorganized Debtors shall, in the
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ordinary course of

business and without any fui1her notice to or action, order, or approval of

2
3

the Bankruptcy Court, pay in Cash the reasonable legal, professional, or other fees and expenses related to implementation and Consummation incun'ed by the Reorganized Debtors and First Lien Steering Committee. Upon the Effective Date, any requirement that Professionals comply with sections 327 through 33 land 1103 of the Bankruptcy Code in
seeking retention or compensation for services rendered after such date shall tenninate, 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 Coui1.
5. Substantial Contribution Compensation and Expenses: Except as otherwise

4
5

6 7

specifically provided in the Plan, any Entity who requests compensation or expense

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reimbursement for making a substantial contribution in the Chapter II Cases pursuant to 8 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 9 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 10
Date or be forever barred from seeking such compensation or expense reimbursement.
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B. Other Administrative Claims: All requests for payment of an Administrative Claim

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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

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ordinary course of

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Committee. The Reorganized Debtors may settle and pay any Administrative Claim in the 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 detennine the Allowed amount of such Administrative

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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.

19

ARTICLE X.
CONDITIONS PRECEDENT TO CONFlRMA TION AND CONSUMMATION OF THE PLAN

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20
21

22 23

A. Conditions to Confirmation: The following are conditions precedent to

Confirmation that must be satisfied or waived in accordance with Articl X.C:
I. The Bankruptcy Court shall have approved the Disclosure Statement, in a

24
25 26 27

manner acceptable to the Plan Proponent, as containing adequate information with respect to the Plan within the meaning of section I 125 of the Bankruptcy Code.
2.

The Confirniation Order shall be in fonn and substance acceptable to the Plan

Proponent.
3. TIie temis and conditions of employment or retention of any Persons

28 proposed to serve as officers or directors of Newco, including, without limitation, as to

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i
2
3

compensation, shall be acceptable to the Plan Proponent and be set forth In the Plan

Supplement.
4. Any disclosures made pursuant to 1 I U.S.c. 1 1

29(a)(5) shall be acceptable

to the Plan Proponent.

4
5 6 7
8

5. The most current version of the Plan Supplement and all of the schedules, documents, and exhibits contained therein (including the Newco Bylaws and the Newco
Charter) shall have been Filed in foim 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:

I. The Bankruptcy Court shall have authorized the assumption and rejection of

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executory contracts and unexpired leases by the Debtors as contemplated by Article V.

2. The Confinnation Order shall have become a Final Order in fonn and

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substance acceptable to the Plan Proponent.

3. The most current version of the Plan Supplement and all of the schedules,

documents, and exhibits contained therein shall have been Filed in fonn and substance
acceptable to the Plan Proponent.
4. The documents governing the New First Lien Notes, the Newco Charter, the

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Newco Bylaws and the Stockholders Agreement shall be in fonn and substance acceptable to the Plan Proponent.
5. The Confinnation Date shall have occurred.

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6. The First Lien Steering Committee shall have designated and replaced each

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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

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on tenns and conditions acceptable to Rhodes and the First Lien Steeiing Committee.
8. Copies of all Debtors' books and records shall have been delivered to the

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Rhodes Entities at no cost to the Rhodes Entities.

9. The Arizona Assets shall have been transfelTed to the Rhodes Entities (or

24
25 26 27 28

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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i I. The tax structure set forth in Article IV.F shall be implemented.

2
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the Golf

12. The Rhodes Entities and First Lien Steering Committee shall have agreed on
Course Security Property.

4
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6
7

13. The Rhodes Entities shall have perfonned 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

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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

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Court, and without any formal action other than proceeding to confirm or consummate the Plan; provided, that the First Lien Steering Committee wil 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 Tem1 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 (I 0) days' written notice to the Rhodes Entities, then the First Lien Steeiing Comrnittee 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

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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 Bankptcy 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
unreasonably or in bad faith shall not be deemed a failure of

20
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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 Ai1icle X.C, and 22 Consummation must occur within 180 days of Confirmation, or by such later date
23

24
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established by Bankruptcy Court order. If Consummation has not occurred within 180 days of Confinnation, then upon motion by a party in interest made before Consummation and a hearing, the Confiimation Order may be vacated by the Bankruptcy Court; provided, however, that notwithstanding the Filing of such motion to vacate, the Confnnation Order may not be vacated if Consummation occurs before the Bankruptcy Court enters an order

26
27 28

granting such motion. If the Confinnation Order is vacated pursuant to Article X.D. or
otherwise, then except as provided in any order of the BanklUptcy Court vacating the

Confinnation 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 1 14 I of the Bankruptcy Code and the assumptions, assignments, or rejections of executory contracts or unexpired

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2
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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 Confinnation: Upon entry of a

4
5

6 7
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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 Xl.
MODIFICA TION, REVOCATION, OR WITHDRAWAL OF THE PLAN

9
10

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 Tenn Sheet or the Plan by the Effective Date

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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 paities to agree on the refinancing of the Rhodes
Ranch Golf Course solely as a result of the First Lien Steering Committee acting

(or such other date set forth herein) and fail to cure such alleged breach within ten (10) days'

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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
unreasonably or in bad faith shall not be deemed a failure of

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Entities and authorizing the modifications to the Plan to remove any provisions that were
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included for the benefit of the Rhodes Entities, the First Lien Steering shall be authorized to make such modifications and consummatc the Plan. Except as otherwise specifically

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provided in the Plan, the Plan Proponent reserves the right to modify the Plan and seek Confinnation 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 Confinnation, and, to the extent necessary,
may initiate proceedings in the Bankruptcy COUlt to so alter, amend, or modify the Plan, or remedy any defect or omission, or reconcile any inconsistencies in the Plan, the Disclosure

24
25

Statement, or the Confirmation Order, in such matters as may be neeessaiy to carry out the purposes and intent of the Plan. Any such modification or supplement shall be considered a
Court or its designee during nonnal business hours, at the Bankruptcy COUltS website at

modification of the Plan and shall be made in accordance with Aiticle Xi.A. Upon its 26 Filing, the Plan Supplement may be inspected in the offce of the clerk of the Bankruptcy
27
28

http://www.nvb.uscourts.gov. The documents contained in the Plan Supplement are an

integral part of the Plan and shall be approved by the Bankruptcy Court pursuant to the
Confinnation Order.

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B. Effect of Confirmation on Modifications: Entry of a Confinnation Order shall mean

2
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that all modifications or amendments to the Plan since the solicitation thereof are approved the Bankruptcy Code and do not require additional disclosure pursuant to section 1127(a) of or resolicitation under Bankruptcy Rule 3019.
C. Revocation or Withdrawal of Plan: The Plan Proponent reserves the right to revoke

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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 7 notice to the 8 Rhodes Entities, in which case the First Lien Steering Committee shall be entitled to fie a motion on at least seven (7) days notice to (i) deteimine that a breach has occurred (except 9 that the failure of the parties to agree on the refinancing of the Rhodes Ranch Golf Course 10 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 II hereunder or under the Plan), and the Rhodes Entities reserve their right to object to such
forth herein) and fail to cure such alleged breach within ten (10) days' written

or withdraw the Plan prior to the Confiiination Date and to File subsequent plans of reorganization; provided, that, any subsequently fied plan shall be consistent with the

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motion; (ii) revoke or withdraw the Plan as a result of such breach; and (ii) 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 Confinnation or

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Consummation does not occur, then: (I) 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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ARTICLE XII.
RETENTION OF JURISDICTION
Notwithstanding the entry of the Confirmation Order and the occurrence of the

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Effective Date, the Bankruptcy Court shall retain exclusive jurisdiction over all matters arising out of, or related to, the Chapter 1 I Cases and the Plan pursuant to sections 105(a)
and 1142 of the Bankruptcy Code, including

jurisdiction to:

24
25

1. Allow, disallow, detennine, liquidate, classify, estimate, or establish the

priOlity, 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

26
27 28

and all objections to the Secured or unsecured status, priority, amount, or allowance of
Claims or Interests;

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2
3

2. Decide and resolve all malleI's 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

4
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party or with respect to which a Debtor may be liable and to hear, detennine, 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

6
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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

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5. Adjudicate, decide, or resolve any motions, adversary proceedings, contested

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or litigated matters, and any other matters, and grant or deny any applications involving a

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Debtor that may be pending on the Effective Date;

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Adjudicate, decide, or resolve any and all matters rclated to Causes of

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Action;
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7. Adjudicate, decide, or resolve any and all matters related to section 1141 of

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the Bankruptcy Code;

8. Enter and implement such orders as may be necessary or appropriate to

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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,
i 123, or 1146(a) of

20
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the Bankruptcy Code;

22
23

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 Entity's obligations incurred in connection with the Plan;
II. Resolve any disputes with respect to the Debtors or Reorganized Debtors

24
25

performance bonds guaranteed by the Rhodes Entities or other malleI'S contemplated by Article IV.W.
i 2. Issue injunctions, enter and implement other orders, or take such other

26 27 28

actions as may be necessary or appropiiate to restrain interference by any Entity with

Consummation or enforcement of

the Plan;

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i
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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 Vll and enter such orders as may be necessary or appropriate to implement such releases, injunctions, and other provisions;

4
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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 Vli.E;

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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;
i 6. 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,
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release, indenture, or other agreement or document created in connection with the Plan or io the Disclosure Statement;

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18. the Plan;

Enter an order or Final Decree concluding or closing the Chapter II Cases;

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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;

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section 507 of

20. Determine requests for the payment of Claims entitled to priority pursuant to the Bankruptcy Code;

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21. Hear and determine disputes ansiig 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;

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22. Hear and determine matters concerning state, local, and federal taxes in
accordance with sections 346, 505, and 1146 of

the Bankruptcy Code;

22
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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 tennination
occurred prior to or after the Effective Date;
24. Enforce all orders previously entered by the Bankruptcy Court; and

24
25

26 27
28

25. Hear any other matter not inconsistent with the Bankruptcy Code.

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2
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ARTICLE XII. 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

4
5

terms of the Plan and the Plan Supplement 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,

6 7
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compromises, releases, discharges, and injunctions desciibed 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.

9
10

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

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the Plan.

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C. Payment of Statutory Fees: All fees payable pursuant to section I 930(a) of the
Judicial Code, as detennined by the Bankruptcy Court at a hearing pursuant to section i 128

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of the Bankruptcy Code, shall be paid for each quarter (including any fraction thereof) until the Chapter I I Cases are converted, dismissed, or closed, whichever occurs first.
D. Dissolution of Creditors' Committee: Upon the Effective Date, the Creditors'

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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 II Cases and under the Bankruptcy Code.

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22
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E. Reservation of Rights: Except as expressly set forth in the Plan, the Plan shall have no force or effect unless the Bankrptcy Court shall enter the Confinnation 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 the Plan
Supplement shall be or 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

24
25

26 27

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, offcer, director, agent, representative,
attorney, beneficiaries, or guardian, if any, of each Entity.
G. Service of

Documents:

28

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I. After the Effective Date, any pleading, notice, or other document required by

2
3

the Plan to be served on or delivered to the Reorganized Debtors shall be served on:

4
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6 7
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The Rhodes Companies, LLC 4730 South Fort Apache Road Suite 300 Las Vegas, NV 89147

Pachulski Stang Ziehl & Jones LLP

10100 Santa Monica Boulevard #1 100

Los Angeles, CA 90067

Attn: James i. Stang

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Shirley S. Cho Werner S. Disse

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Larson & Stephens

810 S. Casino Center Boulevard

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Suite 104 Las Vegas, NV 89J 01

Attn: Zachariah Larson

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United States Trustee - LV-II 300 Las Vegas Boulevard S. Suite 4300 Las Vegas, NV 89101
Attn: Edward M. McDonald

Akin Gump Strauss Hauer & Feld One Bryant Park New York, NY 10036
Attn: Philip C. Dublin

Abid Qureshi

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Kolesar & Leatham, Chtd.

3320 West Sahara A venue

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Suite 380 Las Vegas, NV 89102

Attn: Nile Leatham

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Parsons Behle & Latimer 201 S. Main St., Suite 1800

Salt Lake City, Utah 841 I 1
Attn: J. Thomas Beckett

Skadden, Arps, Slate, Meagher & Flom LLP 300 South Grand Avenue, Suite 3500 Los Angeles, CA 90071
A ttn: Van C. Durrer II

26
27 28

Ramon M. Naguiat

Parsons Behle & Latimer 50 West Liberty Street, Suite 750

Reno, Nevada 89501

Atln: Rew Goodenow

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2. After the Effective Date, the Reorganized Debtors have authority to send a

2
3

4
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notice to Entities that to continue to receive documents pursuant to Bankruptcy Rule 2002, they must fie a renewed request to receive documents pursuant to Bankruptcy Rule 2002. 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

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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
ovemight 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

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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 Entity's 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 Confinnation 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 Bankruptcy Rules 2002 and 3020(c), and no further notice is necessary. requirements of

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H. Tenn of Injunctions or Stays: Unless otherwise provided in the Plan or in the

Confinnation Order, all injunctions or stays in effect in the Chapter II Cases pursuant to
sections 105 or 362 of the Bankruptcy Code or any order of the Bankruptcy Court, and

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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

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injunctions or stays contained in the Plan or the Confinnation Order shall remain in full
force and effect in accordance with their terms.
i. Entire Agreement: Except as otherwise indicated, the Plan and the Plan Supplement

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supersede 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.

22
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24
25

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 goveniance matters; provided, however,

26 27 28

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

61

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state of incorporation or organization of the applicable Debtor or Reorganized Debtor, as

applicable.
K. Exhibits: All exhibits and documents included in the Plan Supplement are

2
3

incorporated into and are a part of the Plan as if set forth in full in the Plan. Except as 4 otherwise provided in the Plan, such exhibits and documents included in the Plan Supplement shall be Filed with the Bankruptcy Court on or before the Plan Supplement
5
Filing Date. After the exhibits and documents are Filed, copies of such exhibits and

documents shall have been available upon written request to the First Lien Steering
Committee's counsel at the address above or by downloading such exhibits and documents from the Bankruptcy Court's 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 tenn or provision

7
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of the Plan is held by the Bankruptcy Court to be invalid, void, or unenforceable, the
Bankrptcy Court shall have the power to alter and interpret such term or provision to make

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it valid or enforceable to the maximum extent practicable, consistent with the original
purpose of the tenn 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

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by such holding, alteration, or interpretation. The Confinnation Order shall constitute a judicial determination and shall provide that each tenn and provision of the Plan, as it may

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have been altered or interpreted in accordance with the foregoing, is: (J) valid and
enforceable pursuant to its terms; (2) integral to the Plan and may not be deleted or modified without the Plan Proponent's consent; and (3) nonseverable and mutually dependent.
M. Closing of

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the Chapter II Cases: The Reorganized Debtors shall, promptly ater the

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full administration of the Chapter II Cases, File with the Bankruptcy Coui1 all documents required by Bankptcy Rule 3022 and any applicable order of the Bankruptcy Court to 19
close the Chapter II Cases.
20
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N. Waiver or Estoppel: Each Holder of a Claim or an Interest shall be deemed to have waived any iight 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.

24
25

O. Conflicts: Except as set forth in the Plan, to the extent that any provision of the
Disclosure Statement, the Plan Supplement, the Mediation Term Sheet or any order (other than the Confirmation Order) referenced in the Plan (or any exhibits, schedules, appendices,

26 27 28

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 govem and control.

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2
3

Las Vegas, Nevada Dated: October 27, 2009

4
5

FIRST LlEN STEERING COMMITTEE

By: Isl Philiv 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)

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Nleatham(fklnevada.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) pdub1in(fakingump.com aqureshi(fakingump.com

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LIST OF EXHIBITS
Exhibit

Description
Mediation Tenn Sheet

4
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Tenn Sheet for New First Lien Notes

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EXHIBIT i

EXHIBIT i

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i

r=--- fi)r Rhodes Entites: Releases

RHODES ENTiTlES' ME))ATION SETTLEMENT PROPOSAL

,

the RJiodes Entities (as set fort on Attachment A) shaH receive a full release

fpr chapter 5 causes of actioJl with respect to transfers made by the Debtors to ~ie Rhodes Entitie... during the 2 years prior to the Petition Date provided. that, such release shall only apply to transfers expressly set forth in the Debtors' statements of financial affairs as fied with the Bankruptcy Cour as 6f August 1. 2009 Qr as disclosed in Attachment B.
I

Releases for Debtors' offcers, employees and professionals

To the extent permitted by applicable Jaw, the Plan shall provide that, but for the Rhodes (i~ the Rhdes Entities and their affiliates; (ii) insiders of any of Entities (except as to Thomas Robinson and Joseph Schramm who were also
etplOyeCS ofihe Debwrs), (i) relatives of James Rhodes. the Debtors'
o cers. employees (including Thomas Robinson

, I , I I ! I 1 I

i
I

Joseph Schramm). and p~ofesiona's. as oflhe Petition Date, and Paul Huygens shall receive a gtneral release from the Debtors' estates.
and

~;cuipation:
Bond Replacement or Indemnification:

Tne Plan shall contain standard exculpation provisions.

, i ,

Tne Plan shall provide for oue of the fonowing: (j) those pedonnance bonds i
gti1aranteed by the Rliodes Emilie:; in favor of

i'

the Debtors to be replace on a !

retlwal date by new performance bonds or. in the altemative. () subjecllo the Rhodes Entities being reasonably satisfied with the creditworthines of th Reorganized Dcbtors, which shall be satisfied solely as of the Effective Datc by the Cour finding that the Plan is feasible. the existing performance bonds guaranteed by lhe Rhodes Entities and such guarantees to remain in
I 1 1

phice. The applicable Rhodes Entity's agreement to remain a guarantor under

thq existing perfomiance bonds as such penormance bonds may be renewed

shall be at no cost to the Rhodes Entities (including, bur not limited to, the 1

payment of bond premiums). In the event the Reorganized Debtors fail to 1 petiorm their obligations underlying such renewed perfomiance bonds after! thd. Effective Date: the Reorganized Debtors wil indemnify the Rhodes
Entities under such ou(stading pcrformance bonds for damages incurrcd by tlieRhodes Entities on account of their guarantee of such perfonnancc bonds

solly as a result of the Reorganized Debtors'

failure to perform such

obligations subsequent (0 the Effective Date. The Reorganized Debtors shall

use; commerciallv reasonable efforts to replace an outstandig pedormance

L~

bond... backstopped by Rhodes Entities within 30 months of the Effective Dare. The Bankptcy Cour shall retain juris.diction to resolve any disputes
arising out oftt~ paragraph.
!

HOA Board Seats:

Th Rhodes Entities shaH ensure that de...gnees identified by the Reorganized

Debtor. shall replace the Rhodes Entities on any HOA Boards that in any way are related 10 the Debtors, Reorganized Debtors or iheir businesses and
Declarant rights or t1ie like shall be trans.ferred to the Reorganized Debtors or

lheil deignee(s).

Licensing:

Thc:Rhodes Entities ~ha() take conuercially reaonable steps and/or enter intolany agreements or similar documentation reasonably necessar to ensure
the k.corganied Debtors' continued use of

all oft~ Debtors' arplicable

up to twelwe months following the Effective Date. Additionally, provided that the partibs have executed this Mediation Settlement lenD Sheet, Sagebrush
protstional licenses at no cost to the Rhodes Entitles for a penod of

L._
82D02i7 v.13

Ente~rises. Inc. shall rescind by September 25, 2009 its revocation of its
indehmity of

the Nevada Contractors' license held by Rhodes Design & Devqlopment Co oration to the extent such rescission does .~ot negatively

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I i i

Mfecl the general contractor's license held by Rhodes Design & Development orporation provided that Sagebrush shall be enlided to fie an administrative ,laini on behalf of any and all claims assened against Sagebrush as a result of
Sagebruh being the indemnitor that arQe from and after lhe effectiveness of

Sagebrush"s recission of its indemnity through the Effective Date, provided t~at the allowance of such administrative claim shall be subject to resolution ~ the Bankrptcy Coun and/or such other cour1(8) of competent jurisdiction. ; e Reorganized DebLors shall indemnify Sagebrush for any and all claims afserted againSt Sagebrush as a result of Sagebrush being the indemntor that arise from and afwr the Effective Date. Professional licenses include, but are npt limited to the Nevada State Contractor's Board license, and any other

griicral business or similar Jicenses in any county, stale. municipality or other Nrisdiction in which the Reorganized Debtors conduct business or O\i. assets a~ of the Effective Date. The Rhodes Entities shall use commercially reasonable effort to maintain thrd party agreements with their real estate i
bi;okers and sales agents.
,

i Rhodes Entities' Claim Treatment:

Tl the extent allowed, the Rhodes: Entities' Claims shall be treated in the saIe class as and treated pari passii with General Unseured Claims,
e~cluding Trade Claims. The i:irs.t Lien Steerig Committee, any First Lien

Lender and/or the Reorganized Debtors shall have until sixty days following tb~ Effective Date to object to the proofs of claim filed by the Rhoes Entities io:the Debtors' chapter I i caes (provided, that, such objecton shall not seek
I

to~ubordinate the Rhodes Entities Claim, fallowed). Neither U1c Litigation

T rpst nor the Reorgaized Debtors shan commence any litigation against the RHodes Entities until the Bankptcy Court rules on the aIJowatice of the
~odes Entities Claims set forth in such proofs of claim (for the avoidance of do bt, U1e Firsl Lien Lende~ are not bound by trus pro""sion). To the extent
I

I I

ant statute of limitations to pursue any claims belonging to the Debtors aga.nst the Rhodes Entities would lapse, from ex.ecution of this term sheet aml prior to the Bankruptcy Court's resolution of the allowance of the Rhodes Entties CJaims, as set forth in filed proofs of claim, the Rhodes Entities hall be deemed to have consented to a lolIng of the applicable slalute of
alldwance of

Im~tations until six.ry days following the Bankruptcy Court's ruling on the the Rhodes Enrities Claim:-.
i

Tax Treatment:

Th~ Plan sball be :'tJctured in a tax efficent manner to the Rhodes EnttIes i to dffeciuate the benefits set forth in item 4 on Attchment C; provided, that thef shall be no adver::c j~~act on the Re~rga~zcd Deb~ors or the ~irst Lien Len.ders. The Rhodes Entitles and the First Lien Steenng Commltee shaH agr~e on the structure necessary to implement the tax treatment on or before
Sep!ember 25.2009.

Effective Date:

The!Plan Effective Date shall occur no earlier ilan January 4, 2010.

The: term Rhodes Ranch Golf Course, as referred to hcrejIi~ shall mean the goif~i course stuated within the Rhodes Ranch master-planned community located in the soulhweslcm Las Vegas valley.
1. l1e Bankrptcy Court shall have authorized the assumption and rejection

Rhodes Ranch Golf Course:

Conditions Precedent t.o Effective

Date:
I

of e~ecutofY contracts and unexpired leases by the Debtor..

,

2. the Confirmation Order shall have become a Final Order in fann and

substmce acceptable to ie First Lien Steering Commiuee. l

-3. Je most current version of

the Plan Supplement and all ofthc schedules, I

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EXECUTION COPY
dbcumems. and exhibits contained therein shall have been Filed in fonn and sbstance acceptable to the Fir:-( Lien Steering Committee.
4; The documents govering the New First Lien Noies. the Newco Charter, I

tle Newco Bylaws and the StockJlOlders Agreement shall be in form and s~bstance acceptable to the First Lien Steering Committee. ii
5J The Confrration Date shall have occurred.
i I ,

6.1 The First Lien Steerig Committee shall have de...ignated and replaced
e~ch existing Qualified Employee with a new Qualified Employee.
I 7.; The current debt outstanding on the Rhodes Ranch Golf

Course shall be refinanced on terms and conditions acceptable to Rhodes and the First Lien
R. Copies of all Debton;' books and records shall have been delivered to the
roodes Entities at no cost to the Rhodes EntIties.

I Strring Committee.

9. \

'i th~.ir designee) free and clear of all

I!

TIie Arzona Asset." shall have been transferred to the Rhodes Entities (or liens. and claims p~r.mant to section 36~(f) of ~lhe Bankptcy Code on the Effective Date provided, that the non-First Lin Lender/Secnd Lien Lender liens do not exceed $60,000.

unxpired lease related solely lo the Arizona Assets to the Rhodes Entities 110_: The Debtors shall have assumed and assigned al1 executory contrct." and I
(orjtheir designee), at no cost to the Debtors or lhe Reorganized Debtors, with I
aU Fure costs associated therewith to be borne by the Rhodes Entities I

i Li 11ie Rhodes Entities and the First Lien Steering Commi.ttee shall have agrfed on the strClUre necessary to implement the tax structine benefits set i
fort iii Exhibt C.
, ,

12.; The Rhodes Entities and Firt Lien Steering Committee shall have agreed
on the Golf

Course Securty Propert.

13. j The Rhodes Entities shall have ensured that designees identified by the Reoanized Debtors shall have replaced the Rhodes Entities on any nOA . Boards that in any way are related to the Dt:btors, Reorganized Debtors or
Reotganizcd Debtors Declarant rights or I thcit: busineses and or their designce(s) the like shall be transferred to the
the Plan including, without limitation, depositing of their obligations under 114. The Rhodes Entities shall have perfonned aU $3.5 milion in Cash in an'i'
! acco~nt designated by the Debtors, with the consent of the First Lien Steerig I

: i
;

Committee and transferring the equity in lle entity that own the Rhodes Ranch Golf Cours and related contracts and assets to the Reorganized Debtors pursuant 10 the terms of a stock transfer agreement in fonn and
gubstance acceptable to the Rhodes Entities and the First Lien Stccrng

Committee.

15. j All other customary Conditions Precdent to the Effective Date as

detcijined by and acceptable (0 tbe First Lien Steeg Committee, in its sole l
di.~crflion.

Waiver of Conditions Precedent

The First Len Steering Committee may waive any or the conditions to Lhe

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I to the Effective Date

Effective Date at any tme, without any notice to parte.i: in interest and without any further noiice to or action, order, or approval of the Bankrptcy Court, and wiiout any formal action other (han proceeding to confirm or
. cqsummate the Plan; provided, that (he Firt Lien Steerig Conulttee wil
i nt waive the conditions precedent in items 6 through 12 above if

I Er;tities shall have complied with aU of their obligations hereunder and in the
i
!

the Rhodes

Pl~n by the Effective Date (or such earlier date specifically set forth herein). In! the event the Rhode~ Entities fail to comply with any of their obligations

i i
I i I

hdreunder or under the Plan by the Effective Date and fail to cure such alleged breach within ten (10) days' written notice (0 the Rhodes Entities,
thn the First Lien Steering Committee shall be entitled to fie a mol ion on at l~st seven (7) days notice to (i) determine that a breach has occured (except that the failure of the parties 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

Entities to comply with their obligations hereunder or under the Plan), and the

R.odes Entities reserve their right to object to such motion; (ii) modify the Phln to remove any provisions hereof that were included for the benefit of the ~odes Entities; and (ii) conswnmate the Plan, as modified. Upon entr of an Order of the Bankptcy Court rmding a breach by the Rhod~ Entities and
aut;oriing the modifications to ihe Plan to remove any provisions that were

! included for the benefit of the Rhodes Entities, the First Lien Steering shan be ~utbonzed to make such modifications and consummate the Plan.

1 Modifcation of the Plan

I

Th* First Lien Steering Committee shall not modify materially the tenns of
the~ Plan without the prior consent of the parties to this temi sheet so long as

suc:h parties have complied with an of their obligations hereunder and under

rI ,

thePlan by Jaliu3I' 4, 2010 (or

such other date specifically set fort herein).

Plan Support:

The Debtors and Rhodes Entities shall only support a plan of reorganization fie4 by the First Lien Steering Committee containing all of the provisions of
ths; Mediation Settlement -T enn Sheet and consistent with the Plan to which

i
i

tbisl tenn sheet is an exhibit and wiB not file a competing plan of reo~anization or support any other plan of reorganization filed in the
De~tors' chapter i i cases.
!

I Golf Course Transfer:

I ;

On ~he Effective Date. lhe applicable Rhodes Entities shaH transfer their equity interests in the entity that own th Rhodes Rancb Golf Course to the Reoganzed Debtors (together with ~y equipment, golf cart.., contracts or other assets determined by the First Lien Steerig Committee to be necessary

for 'Pc operation of the Rhodes Ranch Golf Cours) pursuant to the ters of a I stocf transfer agreement in form and substnce acceptable to the First Lien
Steeng Committee and Rhodes, subject to any outstanding debt on the I

Rhodes Ranch Golf Course. The stock transfer agreement shall contain reprsentations by the Rhodes Entities that the entity that owns the Rhodes Ranth Golf CC\urse docs not have any liabiJities other than ordinary course liabilities related to the Rhodes Rach Golf Course and indemnification
prov',isions in favor of the Reorganized Debtors by the Rhodes Entities for any

non-brdinar counie liabilities. In addition, prior to le deadline for fiing objections to the Disclosure Statement, the Rhodes Entities shall provide the First, Lien Steering Committee with a list of all liabiliies of the entity that
ownS the Rhodes Ranch GolfCourse, a lien analysis and copies of

all

contiacts related to th Rhodes Ranch GolfCouTS and to which the entity

that ~wns the Rhodes Ranch Golf Course is a pary, each of which mu.c:t be acce~lable to the First Lien Steering Committee.

The xisting debi outstanding on the Rhodes Ranch Golf Course shall be

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II I

EXECUTION COPY
i-tfinanced on or before the Effective Date, for a period of no less than iwel'vc

() 2) month from the Effective Date, on terms and conditions acceptable to R)odes and the First Lien Steerng Committee. The parties wil work together
iQ good faith to refinance the e;iIsling debt The Reorganized Debtors shall

p~y the resonable costs and expenses associated with the refinancing; Steenng Committee. The First Lien Steering Committee acknowledges that t. loan documemation may provide that, uxn the trasfer of the Rhodes R~nch Golf Course (0 the Reorganized Debtors on the Effective Date, aqditonal collateral from the Reorganized Debtors may be required. The Rhodes Entities shall transfer to ile Reorganized Debtors on the Effective - Dtbt any contracts related to the opeation of and revenue generaled by any
provided, that the terms of

such refinancing are acceptable to the First Lien

i'
I

c~ii towers located on the property of the R1odes Ranch Golf

Course. ..\ny

fuhds received after July 31, 2009 from the Las Vegas VaHey Water District
orother similar emily as an incentive for converting the golf course from a

grten course to a desrt course shall be used for operating expenses asSociated with the Rliodes Ranch Golf Course. witb any excess to become pr~pert of the Reorganized Debtors on the Effective Date.
RIodes and/or his designee shall have the absolute right to repurcha~ the
~odes Ranch Golf Course from the Reorganzed Debtors at eight (8) years

frdp the Effective Date for $5.9 millon 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 milion in ash provided that the Reorganized Debtoni shaH provide Rhodes with at least one year advance notice of its intent to sell the Rhodes Ranch Golf
Co~rse back to Rhodcs. Such transfer shan occur on the applicable

aiuiiversary date of the Effective Date. For the avoidance of doubt, if lhc Rerganized Debtors put the Rhodes Ranch Golf Course to Rhodes in
accprdace with the teml.S hereof and Rhodes fails to comply with his

oblIgation to purchase the Rhodes Ranch GolfCour:e, Rhodes shall be deemed to have forfeited his option to purcbase the Rhodes Ranch Golf

COJrs.
i

On the Effective Date, Rhodes's obligations to comply with the repurchase shan be secured by either (i) $500,000 in cah in an escrow account or () propery worth at least $2 million (the "GolfCourc Security Prooerty"), with
the

Value of :mch property to be agreed to by Rhodes and th first Lien

Steenng Conuiuee or otherwise valued by an indepeiidc:nt third part appiaisa firm acceptable to both Rhodes and the First Lien Steeiing Cornmittee (except Cushman Wakefield). In the event that Rhodes does not
meet the repurhase request, provided that the Rhodes Ranch Gulf Course is in tl~e standard ondition (defined below), then the Reorganized Debtors shall i

be d.titled to liquidated damages in the form of security pledged (i.e., the

$500.000 or the Golf Coure Security Property).
!

So long as Rhodes has not defaulted on his obligation to repurchase the RJI0~es Ranch Golf Course Rhodes sha11 have the absolute and sole
disc(etion 10 replace (he Golf ourse Security Property with $500,000 in cash on 30 days wrtten notice to the Reorganized Debtors. Upon deposit of the

s50d~ooo in cash, the Golf Course Se(;urity Property shall be released to

Rh~es or his designee. Notwithstanding anything to the contrar contained herein, if the Rhode... Ranch Golf Course is not maintained with substantially

the s4ine performance and rating criteria at the time of the repurchase request as \'~rified by an indepndent third pary ratng agency as it was on th Effeclive Date ("Standard ondition"), James Rhodes can (i) re.quire tbe

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I R!eorganized Debtors to cure any conditions. to return the Rhodes Ranch Golf .
('ure (0 ils Standard Condition (provided, that the cost of such cure does

nb. exceed $500,000), or (ii) choose not to purchase lhe Rhodes Ranch Golf C:urse. Upon either the repurchase of the Rhodes Ranch Golf Course or the

"'itten decision to nor repurchase ihe Rhodes Ranch Golf Course (in
aqcordance with lhe precedmg sentence). the Golf Course Security Property
Gplf Coure) shall be returned to Rhodes the repurchase I or, the $500,000 Cash (if not applied to wiihin 30 days. of the Rhodc, Ranch

I ,

I o~ the Effective Date, ihe Reorganized Debtors shall record a memorandum I. agreement againstihe Rhod"" Ranch Golf Course to evidence Oie above.
I OJ

I Golf Course Audit:

t?~ring the period from Sep(cmber 1. 2009 lhaugh September 23, 2009, the

RIodes Entities shaH provide access to the 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 Lien Steering Committee in its sole discretion and evidence, among other thipgs, that the financial penonnance of the Rhodes Ranch Golf Course is sufficient to pay operating expenses and serice the debt on the Rhodes Rap.ch Golf Course without the need for additionallquidity.
Tht Rhodes Entities shall make a cash payment to the Reorganized Debtors
of$3.5 million in cash 011 the Effective Dale.

Cash Payment:

Ar-i7.ona;

On: the Effective Dale, pursuant to an asset transfer agreement in fonn and

sUGstance acceptable to the First lien Steering Committee and the Rhodes Entities, (be Debtors shall lransfer Pravada and the other Arizona assets set forf on Attachment D hereto, plus the Golden Valley Ranch tradcname to thelRhodes Entities free and clear of an liens, claims and encumbrances
i pur~uant to section 363(1) of

th Banptcy Code; provided, that the nOD-

than such assets shall not nclude asts o\\'ed by Pinnacle Grading located in
I Fi~( Lien Lender/Second Lien Lender Jiens do not exceed $60,000; provided Aritona and related contracts asociated with the assets,. Debtors shaH
proYide James Rhodes notice of any proposed sale of tIie Pinnacle assets. and Ja~C$ Rhodes shall be granted a right to bid on the sale of such assets within

i 0 4ays of such notice. Rhodes Entities shall permt storage of Pinnacle Graning equipment at cun'cut locations at n cost to the ReQrganizd Debtors

for ~ period through six months following the Effective Date.

All j:xecutory contracts and unexpired leases associated solely with Arzona shaH be assumed and assigned to the Rhodes Entities (or their designee), at
no ost to the Debtors or the Reorganized Debtors and all cure costs

i-

asstiated therewith shall be home by the Rhodes Entities. -__J

Plan Filng:

The peblOTSi the Rhodes Entities, the First Lien Steering Committee, the First i Liei Agent. the Second Lien Ageni and the Creditors Committee shall agree not to file a plan of reorganization until the earlier of (i) the date the parties
agre~ on the temis of a plan of reorganization (and accompanying disclosure

statetent) or (ii) September 25. 2009.

i

Casb Collateral:

The first Lien Steering Committee, first Lien Agent and Second Lien Agent
wil ttree to the continued use of cash coJIateral on existing terms and subject I

to an agred upon budget, though January 11, 20 i o. I

~ -6

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i Trademarks and Trade Names
I I

Within Ille eiirJcr or thiny (30) days following: (i) upon completion of (he
b~ldout of all of the RI."Or,gnnizcd Debtors' homcbtJilding asset:; and illVCU!ory (reg-ardloi's of when ~,"ch assets and 'in..entory were acquired), or

the Rcrgiiriized Debtors. aie R'orgnniied Debtors i-lmlllflii,fer to Jnme.i. Rhodes (or h$ designee) th
Oi) t,ulk sale.of the remaining inventory of

ubdeniark.o and trdcnamo; ~I forth on Allncliment E.

hrade ClaIm. Anniy.is

i I

The fir-ii Lien Steering Committee. tbc.Ueblors and the Crcditor.s Cmmuce wil agree, prior to lhe Ii~ring on the Disclo:iure Statement" (i) which fied or sCheduled clajin~slui:ll be classified as Trade Claims and (ij) on aprotedure for the rcconciliution OrTflidc Claim!\ If the pnics are uniihle to agre on (i)
oz'(I) abcwe in advance: of

the Disclosur.Sialemnt hcanng, the Bnnptcy

lrererence Claims Agains!

f--

C~urt shalt resolve nny disputes tit (he' Disclosure Slatement hennng.
Tbe Reorganized Debtors shall -Oi seek to avoid prcpctition irarLlfers t-'---

I Holders uf Allowed Tnde Cliiims

.
i

holders of tJllowd T fade ClainlS under Bankruptcy Code section 547 to the
eXlent he reslting claim from the av~idric~ o.fstich a preferential tr8.fer

would likewise be an alluwc:d T rode: Claim,

SlOnk)" Engineenng
I ;

(n ;thc. evt.'11 ,the Sumley Erigineerng Ljtigrtion is rcsolv:ed either by judgment or Scuh:me.t in a manner favorable lO t.e Reorgnni:i.e Debtors and st,ch re.~ohltiol\ doCj not pro..idc for Cniih consideraiion (0 be receved by the and R~rganized Debtor. and Second Lien Lenders.. the Reorgnni7.. Debtors
l~ Si:nd Lien Ag~nt sluiJJ cgngc in good faith negotiatiQns to cm.ure Wat the SC'oiid Lien Lenders reive consideration equivalent to 50% or the net
value of such,rt.'r1l1tion nnd (0 derenninc die ,iiming of paymi.'lt of any.

such

cOsidcrntion. In the event the Reo"rriruzed Debtor. mi the Second Lien

I

IA~cnt arc umiblc to agree on tlie.nfOuJ1 or fomior ~.ich considcr.iioo..thc

be. '. 1'Jil .eveniy among he Rcorgani7cd. De,b.w. rs and die Second Lien Ag.'cnt

i i

("'ith the Q~ts of tbe Second Lien Agent 10 be reimburd frm the
co~~idcr..l1ion to be dii-ribiifcd to'the Second Lien Li.ndt;: nil ~ccoirl of the I

L_._

JIDCS S..~~ the matter to binding arbilration with d\~ costs thereof to-wI subniii Enl.ineeJin~ -L.i~igatjon)
~'

Dated: September 25. 2009

.~. . ,~,p';i.;,. .: .
ride; 4A"." 1J~';;V'7f;"J l.. if /i1U,??
'COIIn_,,'elIQ ihe f.''S1 Lie1l Slc.(!rhrgCommi1ri'i', ii';ili

y - ------

oudu):"yjram each nfihl! members iJr('re~

APPROVEP
By; N;Jlc;

,\I'PROVF.D

:-': __,___
Name: Tiile: CviUlsei to ihi' Official Cmn1iiiltei! of
UrJ,~ccilled Cn.~tlitl)r-t

Tide;
CO!ln:i;; 10 IVdh Fm't.o. N..4.. (lsAgcmfiir/!u.'Seconrl
Lie', Lel1r1i!r~'

APPROVED
By:

NaIl rille

% (llL
7

APPllOVED

B)":_- ?n_~
NaIlC~. es M. Rhodes

Tiile B ';;jdcnt
Dcbi 'S t1ndDi''/ors.ili.Po...~esj1J

nie
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EXECUTION COPY
Trademarks aDd Trade Names
Withn the ealie of thy (30) da)' followin: () upn completon of th buldout of all of th Rerganxed Detois' homebuildin asts mi
invcutory (regarles. of when such ..ts an inventory were acqre), or

(ii) bulk sae of the remaiuing inventor of th Reorgan Debtois, th Reoized Debtois shall trfer to James Rles (or hi. deignC() the
trark and trdenames sel fort on Altachmnt E.

Trade Claims Analysis

The FiISt Lien Steng Committee, the Deblor an the Credito Conuttee

will egre, prior 10 the heang on the Dilose Statent, () whch filed or schedled clai shall be classified as Tree"Clai and () on "procere
for th renciliation of Trade Clai. If th pll ar iible 10 agee on (i) or (ii) ahove in advllUce of the Disclosure Stattent lig, th Baptcy

Cour shall reolve any disputes at the Disclos Stalement being.

Preference CJaimli Against
Holders of The Reorgaied DebtOis .baIt not holder of

se tOavoidpreptition trfer to

Allowed Trade Claims

allowed Trade Claims unde Bantcy Code setion 547 to the

exlent th reltig clam from the avojdace of

such " prfetti iner

Stanley Engineerig

would likewise bean allowed Tree Clim

Tn the eVent lli Stay Engineerig Litigaton is resolv" either by judgmt

,or'seemt, in a inerJavorablo t,o the R.rg8D~ Debtors' and 'SUch
reofution does DI provide for Cash consderation 10 be reive by the

Rergan Debtors and Send Lien Leder, the Reorg; Debtors and
the Secnd Lieu Agent shal engage in good futh negotitions 10 ensur tht
th

Second Lien Lender reive co"ideraIon eqlent to 50% of th net

value of such resfution and to detemiin tle tig of paymen of any such
constion. In the event the ReorganudDebtors aidth Second Lien
Agent are unble

to agr on the amunt or .form of such copsertion. th

partt; win siblit the mattr to bin~ ~iirt~ with th c~ thf 10

be split eveny (with the cost of

among ihe Reorgan Debto an the Secnd Lien Agen

the Second Lien Agent to

be reimbu frm the

consideiti to be distbuted to the Secd Lien Lender on account of the

Stale"En~ince. Liti.aIo~;"
Dated: SeDtember 25. 2\19

APPROVED
By, Name; Title:
Counsel to the Fir~t Lien Steering ommitlee, with

authority from each ofihe members,thereof

APP
By:

..

APPROVED
By: Name: Title: Counsel to the Offcial Cammtee of
Unsecured Creditor

Title: ~Y"
Lien Lenders

Name: ...
COWlelto Wel/sFargo, N.A., as Agentfor the

Second

APPROVED
By:
Name: James M. Rhod..
Title: President

APPROVED
By:
Name: James M. RJio

Title: Presdent

The Rhodes Enties

Dwro~ Md Dww~m~o~~~
7

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EXECUTION COpy
With tbe ea of thirt (30) day following: (i) upon completion (lfthe

b~dou~ ofalofthe ReorgMlze Debto' homebildig asset and

I Trademarks and Trade Names
i~'Ventory (reardles ofwben such ns."elS and invento were acquired), or

L
I

tl-) bulk sale of the remaining inventory of the Rerganized Detors, the
Rfrganzed Debtors shall trfer to Jams Rhod (or his desgnee) th

trdema and trdenames set fort on Attaclunen E. ,

The Fif8t Lien Steerin Commitee, the Debtors and the Creditol1 COmDiiUee
wju agr, prior to the heag on the Disclosure Statement, (i) which file or

! Trade Claims Anaysis

I

scheduled clas shall be clasifed as Trade Claims and '(ij) on a procedtlc

fo~ the reConcilation of Trae Clanu_ If

the pares ar unble to agr on (1)

or: (ii) above in advac of the Disclosur Statement hearng, the Bankrptcy
Cfur shall relve any disputes at the Disclosure Stateent heanng.

Fr~rence Clas Against Holders of Allwed Trade Claims

Stanley Engineering

Tne Reorganized Debtoni shall not seek to avoid prcltion trnsfer to

halders of aUo.wed Trade Claim under Bantcy Coe setin 547 to We

cxtenl the retig claim from the avoidace of such a preferetial trfer

wQuld likc\l;se be an allowed Trade daim In'hc evet the Staey Engineering Liiigntion is resolve4 either by judgment or settlement in a ma.er favorable 10 th Reorganized DetO and such

reSlution doe not provide for Cash com,;dertio to be reive'by th

Re9rganiie Debtors an Second Lien l., th Reorganze Debtors an
th Second Lien Agent shal engage in goo faith negotitins to enur tht

~ Second Lien Lender recive considertion equii to 50% oflle D"e

value fsuchTC8bitionaod to deteiith tiing ofpaymen ofany-sueh

.co4sderntion In the event the Reorganed Debtors and th Seond Lien Ag:et are unable to agree on the amout or form of su coidemtion th

pai wil subnt the matter to bining arbtiion with the cost" therfio
be ~lit evely an th Rergani7.e Debtol5 an the Secnd Lien Agent
(~the costs of

tiie Secnd Lien Agent to be reribi.d from th

coi::eration to be disrribuJcd 10 ihe Secnd Lien Lenden .on accunt of the

Sta ey En~inee:rjug litigation) . ___

A~~V~
Title:' aA__ t)~V '...f/i" .;~ 4 N rCounsel fa he h'r.1 1J,-~ ~!elrrin(J Commiee with

Dated: Seteber 25. 2009

N',2 .,.p Vui' ;

ilutluiriiyfrom each ofilie ;c.'7bers the~e~/

APPROVED
By: Name: Title:
Counsel to Wells FCi"lO. iV.A.. asAgenlfoOheSeco1U

AP~~By:
Counsel

Name: ::..,. ~Oll ?:_'.!~

Tide:~_""I~' -s~ - . .
10 rhe Offu;ial Commitee of
Unseci"ei Creuirs

Lien I.enders -,

APPROVW

APPROVED
By: _

By: ____ ______

Name: James M. Rhodes
Title: President

Name: James M. Rhodes Title: PresdeOl

Debtors and DeblOrs-in-Poss.e~sIo1J

The RJiodes Entiies

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EXECUTION COpy

AT1ACHMENT A - RHODES ENTITlES

,

James M. Rhodes
Glynda Rhodes

John Rhodes
James M. Rhodes Dyna9.ty Trut I James M. Rhodes Dynasty Trust II
i JMR Children's Irrevocable Educational llrust , i Truckee Springs Holdings, Inc.

Sedara Holdings LLC

Gypsum Resources, LLC
Tulare Springs Holdings, lnc_

Escaiante~Zion Investments, LLC

HH Trust
Hanony Homes, LLC

Tock, LP
Tapemcasure, 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

Pinacle Equipment Rental, LtC

Desert Communities, Inc.

Spirit Underground, LLC

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EXECUTION COPY
Tropicana Durango Investments, Inc.
Tropicana Durango, Ltd. I

Dirt Investments, LLC

Underground T echnologcs, LLC
i South Dakota Aggregate and Engineering, LLC I

Freedom Undergrowid, LLC

Jerico Trust

Canberra Holdings, LLC

Custom Quality Homes, LLC Rhodes Ranch Golf, Inc.

lD Interior Design, LLC

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EXECUTION COPY
ATTACHMENT B
I. The following distributions 'lere made and pem1iUed purnuant to terms of Credit Agreement:

i Date
411 712007

Amount
$,42.705

Distribution Comments
I

Heritage -t Sedora
Heritage -7 Sagebru..h

4/17/2007
5/412007

$!O7,295
i

$~6,939

Heritage -7 Sedora

~---- - 514i2007
TOTAL

$?43,06 i

Heritage ~ Sagebrush

$1,750,000
,

.-1

2. Trasactions with Spirit UndJrground and Freedom Underground (as set forth helmv):
!

(ATTACHED)

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EXECUTION COPY

! ATTACHMENTC
1. The lenders would form a new ~ltity ("Newco'O). Newco would be either a corporation or a limied

liablity company. The First Lien loans ,*ould be deemed contributed to Newco.
I

2. Newco would purchas all Oflc! interests in Heritage frm its members for $10.00.
3. Revenue Ruling 99-6 provides tLt on a s.le of all of

the interests of a parership for tax puroses (which

would include a limited liabilty compan~). the sellers are treate as setJng ~'parersbip interests". On the other

hand, the buyer is deemed to he buying ~e assets of the parinership. As a resull, from the Heritage members' perspetive they would be trte as seHing all of the interests in Heritage. Newco would be treated for federal income lax purposes as purchasing the 99ix partnership interests in each of the limited parerships held by Heritage the and the 1% partership interest held byT~ckee Springs. Furter, a&..uming tbat the general partner of each of limited parerships in turn ~ns its genertt parership interests to Newco. Newco would be deemed to have owned the real estate owned by the limited partrships (since each of the parterships would have terminated for federal
income tax purposes). At that point New~ would own all of I

the real estate.

4. For federal income tax purpses, each Heritage member would have a gain equal to the excess of the
liabilities of

Hertage allocable to such m~ber (which the traosacon relieves the member of) minus the member's

tax basis in its Heritage mterest This gairl would be treated as long-term capital gain (except to the extent Heritage

holds, directly or indirectly, asset.. snbject!to Section 751 of the Code, generally inventory or receivables arising from the sale of inventory). !
5. Therefore, contemporaneous WitJ or subsequent to Newco's purcbase of the Heritage membership
interess, TIie Rhodes Companies, LLC - uthe general parner of each of

Tick, LP; Glynda, LP; Jackkife, LP; LP;

Batcave, LP; Overflow, LP; Wallboard. L~; and Challine, LP, - shall sell its ge0e1 parership interests in such entities to Newco for $1.00. Altemativelyl the membership interi; in The Rhodes Companie..., LLC may be acquired from its sole member - Sagebru Enterprises, Inc. - in consideratiou for releae of it.. obligations under

the First Lien Lender Claims. j

6. :Newco's members may agree to ~ntinue Newco as an LLC, fue a check the box election effective the day after the Effective Date to treat Newco as ~ corpration for ta purpses, or convert into a corporation as of the day

after the Effective Date. 1

7. The holders of the Heritage membership interests and Newco will report the sale and purchase of the

Heritage membership interests in accordanlc with Revenue Ruling 99-6. 1999-1 CB 432.
i ! i !

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EXECUTION COPY
,

IATTACHMENTD- ARIZONA

RHODES ARIZONA PROPERTIES ,

!

1825 S AZTEC

RHODES ARIZONA PROPERTIES LiC

RHODES ARIZONA PROPERTIES LiC RHODES ARIZONA PROPERTIES LlC
RHODES ARIZONA PROPERTIES LlC
,

306-24-115 306-24-116 306-63-017 306-63-018

306-42-008A
306-42-001

20.25 RD

20.24 1807 AZEC RD 'Model Home

7.35 4536 W DORA DR Model Home

RHQi:ES ARIZONA PROPERTIES ~LC

RHODES ARIZONA PROPERTIES ~LC
I

19.92 S AZEC Dirt RD 1094

114.59

6.83 4528 W DORA DR Model Home 1156SAZTEC

40 RD Dirt

Total Acreage

Inside Pravada
Pravada and all parts 01 Pravada 'yn~ 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 wilhin the following APN

numbers: I
Rhodes Arizona Pro erties

Partially

215-01-16
215-01-113
215-01-114
215-01-111

Graded
Partially

~ Rhodes_Arizona Properties

Graded
Partially

Rhodes Arizona Pro rties

Rhodes Arizona Pro erties

Graded
Partially

Graded

Total Acreage 1,30B:!

Arizona ~ersonal Property

ComDuters
HP 5150 HP 5150 HP 5150 HP WX4400
HP WX4400 HP XW4200 Dell

Serial Number
2UA6030J6N MXl615027R 2UA6030J57
2UA 70608F7

2UA70608HV

2UA54215Gl
GZOGR61

Laotops

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EXECUTION COPY
HPNX6125 HPNX9600

CND5403L Y CNF6071GBR

Printers
HPLaser Jet

4250
41 00

HPLaser Jet 4101

HPLaser Jet

HPLaser Jet 1320 HP coor Laser Jet 2600 HP color Laser Jet 2804 HP color Laser Jet 5550

CNBXD06564 USLGY26030 USLGY42771 CNHC620168 CNGC64C1KC

JPBG532058 JPDC4D2072
CN639BGOYK MY67G11ODC 890CSTB 890CD3N

HP ofce jet 6310

HP Photosmarl D5160

Lexmark 7001-001 Lexmark 7001-001

Super G3 Piinter -Scanner

J8141101150

Fax Machines

2 - HP offce jets 7310

6 of the printers and the tax machine~ have copier capabilities
,

Miscllaneous Eauioment
Dell Power Edge Server 2850 I

85172579422

HP Design Jet 1055M Plus Plotter:

4 calculators \
14 telephone owned by Rhodes

10 Battery Surge boxes and 10 powef strips 11 -computer monitors 20" flat scree~

Offce Furniture

2 - drafting tables ,
3 ~ "vork tables with open shelves for gfans

12 - file cabinets 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 - 3 shelf wood bookcases 4 - 4 shelf bookcases: (2) metal (2) w90d

1 - hanging fie for plans I

11-desks: (1) metal (10)

1 - metal storage cabinet. 2-toor. 4 s~elves 2- wooen storage cabinets 2-door, 1 shelf

12 - desk chairs '

12 - guest chairs

wood !

5 - stacking chairs
1 - 4 x 6 rotating white board 1 - garbage can

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EXECUTION COpy
I ,

10 - waste baskets 'i

3 - 6 foot tables
,

2 - metal storage shelves- dimensioi,s S'h x 3'w x 18.S"d

2 - plastic storage shelves- dimensidns 6'h x 3'W x 18" d ,

To be provided by Plan Supplement pate but shall include, but not

limited to all development agreements and subcontractor
,

be iI agreements
i

Executory Contracts and UnexDir~d Leases

Trademarks and Tradenames

Rhodes Arizona Properties Rhodes Anzona

Golden Valley Ranch

Pravada

All architectural and engineering dra~ings. plus work product associated with Pravada and Gotden Valley Ranh.

IntanQibles I

All agreements with municipaliies anti utilities with respect to Pravada and Golden Valley Ranch. ,
Arizona general contractots license.

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EXECUTION COPY
A IT ACHMENT E - TRENAMESirRAEMARKS
j

RlodeMaster ~

R(logo) ,
All Rhodes Lead Home! Rhodes Homes

R (logo) Rhodes Homes (owned by Rhodt Homes. Inc.)

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EXHIBIT 2

EXHIBIT 2

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EXHIBIT 2
Summary of

Terms and Conditions ("Term Sheet") fOl

$50 Milion New First Lien Notcs ("New First Lien Notes")
TERMS

Borrowcrs:

Newco, Heritage Land Company. LLC; The Rhodes Companies, LLC; Rhodes Ranch General Pai1nership; Tick, LP; Glyida, LP; Chalkline, LP; Batcave, LP; Jackknife, LP; Wallboard, LP; Overflow, 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.; Jaiupa LLC; 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, each as may be reorganized pursuant to a joint plan of reorganization to be proposed by the First Lien Steering Committee.
New First Licn Notes:

$50 million in first lien secured notes. Once repaid, the New First Lien Notes
may not be reborrowed.
the Borrowers.

Guarantors:
Agcnt:

All of

To be detennined ("Agent").

Lcnders:

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 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) (as may
have been ainended from time to time, the "Existing Credit Facility").
Maturity Date:
The date that is the sixth aniversary of

the Effective Date ("Maturty Date").

Purpose:

To retinance a portion of the Existing Credit Facility and satisfy a portion of the Lenders' claims under the Existing Credit Facility.

Sccurity:

The New First Lien Notes and all guarantees thereof will be secured by first
priority perfected liens on substantially all existing and after acquired property of
the Borrowers.

Interest Rate:

"Cash Pay Rate": LlBOR plus 2.00% per annum; or

WEST 6371746 v11

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"PIK Rate": LlBOR plus 5.00% per annum,

Interest Payments:

Interest on the New First Lien Notes shall be payable in Cash quarterly in anears

at the Cash pay rate of LlBOR +2%; provided that if the average of the
Rcorganized Debtors' unrestricted consolidated Cash as of the last day of each of the two immediately preceding consecutive quarters is less than $ I 5 million 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 LlBOR 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 othenvise elect. All capitalized interest not previously paid shall be paid on the Maturity Date. LlBOR shall be subject to a cap of2%.

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 quarters is greater than $ i 5 million or if the unrestricted consolidated Cash as of the last day of the immediately preceding quarter is greater than $15 million, in each case, after the payment of interest due on the New First Lien Notes.

Covenants:

Customary affimative 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 agrecd by the parties.
Senior Revolving

Loan and Letter of

Credit Facility:

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 fonn 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:

Customar for tcilities of this type, including but not limited to failure to make

payments when due, defaults under othcr agreements or instruments of indebtedness, noncompliance with covenants, breaches of representations and

warranties, bankruptcy, judgments, invalidity of guaranties, impairment of

security interests, and change of ownership.

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Othel Terms:

The New First lien Notes shall include without limitation a default rate of interest. optional, increased costs or reduced returns, conditions precedent to closing,
representations and warranties, assignments/participations, amendment, waiver,

and required lender provisions, in each case, customary for facilities otthis type.

Documentation:

The New First Lien Notes Documentation shall be in form and substance
acceptable to the First Lien Steering Committee.

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EXHIBIT B

EXHIBIT B

Rhodes Homes - Organizational Structure

Sagebrush
~ Ranch,llC

100%
(Non-debtor)

Rhodes

Sedora
Holdings,LLC (Non-debtor)

Enterprises, Inc.

(Non-debtor)

100%

94.363%
5.637%

5.694%

94.306%

Case 09-14814-lbr

//Rhodes "-" . ,-.-'," '" _~anch, G~/"

100%

Doc 650-4

100%

.
Rhodes
Tuscany Golf
CoUntry Club~

-i
Tuscariy Acquisili:ns~
LLC

Designand'
.-Development Corp,-'-

Rhodes Arzona Properties,

Rhodes Homes
Arzona, LLC

Tuscany Acquisitions

LLC

lLC

Tuscany ACuisitions

TusCaY

Part120,

n,llC
1%

Il, LLC

AcquIsitions IV,LLC

LLC

___'__n.....n_...._.______

)%

'-JericoTrust--

.~_~on-debto~t_

100%

100%

99%

Entered 10/27/09 19:13:46

50%

Plrinacle ~mdlng, lLCI

~
GP

Qi
Holding

lP

I Investment
Enlity
Non-Operating

Page 2 of 26

LLC

S Corporation

= Wind-down Enliy

Trust

Operating Enlity

8:46:36 AM 4/15/2009

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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 feasibility 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 "Projections") for the fiscal years 2010 to 2014 (the "Projection
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 million to $111.5 millon.

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 1,2010; 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 BY THE 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, EXCEPT FOR PURPOSES OF THE DISCLOSURE STATEMENT, THE DEBTORS DO NOT PUBLISH PROJECTIONS OF THEIR ANTICIPATED FINANCIAL POSITION OR RESULTS OF OPERATIONS, THE PROJECTIONS ARE
OR ANY OTHER FORM OF ASSURANCE WITH RESPECT

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 SECURITIES 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 SUBSEQUENTTO 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 INITIALLY 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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ASSURANCE OF THE ACTUAL RESULTS THAT 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,

Pro Forma Balance Sheet

Esimated
PreEffective ate' .
(12/31/09) Balance Sheet
Efective Date

Pro Forma Balance Sheet of

. Rl:~r"9~_nized

Adjustents
1,625.000 (a)
(160.368) (b)

Accounting

Debtors

ASSETS

Cash
Accounts receivable-net

,pue fr()ni.related parties

Inventories
Land Held for Investment
j=rc?'p~ny_,_,pl_ant, and equipment-n~t

Deposits and other asstsnet

TOTAL ASSETS
LIABILITIES Notes Piyable,~.\N~II_s_i=ar90

823,099 160.368 678,697 162,449,747 13.i:~~478 3,707,997 9,584.063

2.448,099
108,704,638 87,253.053
,~~7~!'_~_~!m

(678.697) (e)
(53,745.109) (d) 73,488,575 . (d)

(6,301.039)' (e)

3,283,024
205,396,811

191,168,449

14,228,362

Notes payable - Credit Suiss Interest rate ,~edge - Credit Suiss

72..868,346 30t).!5~,?25. 20,195,341

(72.868,346UI)
(305,752.225) (I) (20.195,341) (I)

Notes payable - Pre..ffective date

Notes payable - New 'First Lien

Accounts pc)yable and accme~ liabilities

Due to related parties Customer deposits
TOTAL LIABILITIES

5,25~,547 10,753.010 231,439

50,000,000 (9) (1,580,061) (h) (10.753,010) (e)

(361,148,983)

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

Minority Partners Equity

TOTAL L1ABLILITIES .ND EQUITY

(240,,690) (e) 375.618,035 (i) 14,228,362

NOTES TO PRO FORMA PROJECTED BALANCE SHEET

(a) 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 millon to be received from the Rhodes Entities consistent with the terms of the Mediation Settlement. Additionally, this balance reflects $87S,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 will be exclusively homebuilding and will 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 million 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 milion interest rate hedge on first lien debt, and (ii) $72,9 million of second lien

debt.
(g) Represents the New First Lien Notes of $50 million,

(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 will 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
2011

2012

2013

2014

Plan
ASSETS

Plan
15,000,000 175,751,785
3,470,638
194,222,423

Plan
15,000,000
160,9~i-~,!;6,6 ..

Plan
15,000,000 . ,144,940,865

Plan
66,386,990 103,910,082
3,470,638
173,767,709

C.'"

9,626,43
186,731,254 963,945 4,221,092 201,542,724

Inventories and land

Propert, plant, and equipment-net Deposits and other ass~net

TOTAL ASSETS

2,720,183

4,221,092
164,161,957

178,702,748

LIABILITES

Notospayabl -New First Lion

Accounts payablo and accruod Iiabiltios Custmer doposits

TOTAL LIABILITES

!i~,199,,008

4,582,904 263,089

48,6~2,572 3,749,369 346,169

52,788,111

30,284,168 2,862,426 482,659 33,629,252

145,073,496

2,2.28,098 :

4,280,253 565,740
7,074,092

3,430,893 664,645 4,095,539

169,672, 171

68,045,001

Equity
TOTAL LIABLILIlES AND EQUITY

143,497,723 201,542,724

141,434,312
194,222,423

157,087,866
164,161,957 :

178,702,748

173,767,709

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Projected Statement of Cash Flows

2010

Plan
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income

2011 PI;n

2012

2013

2014

Plan
3,63'3,184

Plan
12,014,36'3

Plan
12,684,306

Adjustents to reconcile net income to net cash provided by

(use~ n) operating acti,vites:
Depreciation and amortization

(7,111,163)

(1,843,411)
963,'346

Interesteicpense
Changes in opllrating aS5ts and liabilities: Inventories and land
Nllt cash provided (used) by operating activites
CASH FLOWS FROM INVESTING ACTIVITES:

2,744,062 3,199,008 9,226,437

2,118,630
10,979,469 12,218,633

1,374,161

638,274

18,103

14,769,220 19,782,666

16,041,700

41,030,783 63,633,152

8,068,336

28,694,34

Net cash provided (used) by investng activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Oebtpayncnts
Payments

to General Unsecured Creditors

16;624"S66)

(1'3,782,666)

(28,694,344)

(2,246,202)

(880,000) (880,000)

(220,000)

Netcash provided (used) by financing activities

~E:r I,NCR,EASE/IOECREASE) IN CASH

(6,84,566)
6,373,666 9,626,434
16,000,000

(19,782,666)

i28,6544)

(2,246,202)

?,178,~36
2,448,099 9,626,434

61,386,990
16,000,000 16,000,000 16,000,000 16,000,000 16,000,000

CASH. 8eginning of PerIod

CASH. End of Period

66,386,990

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Pro Forma Statement of Operations

2010

2011

2012

2013

2014

Plan
Home Closings
133

Plan
175

Plan
244

Plan
285

Plan
335

Revenues
Sales of inventory Sales of land

28,655,038

41,378,058

Green fees and other golf revenues

Contract sales Total revenues
Cost and expenses:

8,221,40
36,876,442
14,588,377 8,541,260 3,837,774

8,472,839
49,850,897 19,758,075 11,238,500 4,718,096

62,000,761 1,366,909 8,132,154

82,815,340

104,006,797
1.~,7~~r~~~.

8,999,610
91,814,950

9,275,261

72,098,824

128,065,686

Cost of sales - inventory (homes)

Land cost of sales~. inYEln"t?'YJh()mes)

27,54,029
15,669,680 7,118,557 1,037,337 7,750,095
7,961,781 67,085,479

Cost of sales. land development Cost of sales -land sales

Sellng, general and administrative

33,968,084 18,366,9?~. 8,269,260

10,351,918

41,189,976

21,~7,920
9!9~3,259 21,273,300 13,000,850

Depreciation and 'amrti:iation

Golf cours cost and expenses

Total cost and e,xpenses

Operating Income (Loss)

3,581,880 2,.74:,0~2 7,495,254 40,788,696

(3,912,155)

5,172,257 963,945 7,724,904 49,575,778

275,119

8,206,126 79,162,307

8,45,973 115,453,2n
12,602,409
18,103

5,013,345
1,374,161
3,639,1 B4

12,652,64
638,~74.

Other (income) expense Interest expense

3,199,008
(7,111,163)

2,118,530

Net Income/(Loss)

(1,84,411)

12,014,369

12,58,306

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KEY ASSUMPTIONS
A. General

1. Methodology: The Projections were developed based on inputs from the Debtors, WCP,
and RCLCO. The Projections are based on assumptions and initiatives, including

expectations on market stabilization. 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 family 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 millon to $111.5 million with a midpoint of
$99,6 million,

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 millon 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 ofthe 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 million, Interest on the New First lien Notes shall be payable in Cash quarterly in
arrears at the Cash pay rate of L1BOR +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 million 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 L1BOR 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. L1BOR shall be subject to a cap of 2%.

C. Projected Statements of Operations

1. Total Revenue: Consolidated Revenues consist of Homebuilding Revenue, Land Sales,

and Golf Course Revenue, Home sales absorptions are projected to remain static in 2010 and 2011 and increase slowly throughout the remaining forecast period. Average
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 wil 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, Sellng, 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 million, Interest on the New First Lien Notes shall be payable in Cash quarterly in arrears at the Cash pay rate of UBOR +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 million 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 UBOR 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,
UBOR shall be subject to a cap of 2%.

6, Taxes: The Projections assume the Reorganized Debtor will not have income tax liabilty

throughout the projection period based on the utilization 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 property 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 $SS,O million,
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 WARRANTY 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 wil 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 will 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) Propertv. Plant & Eauipment. This includes furniture and fixtures, leasehold improvements, office 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, utility

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 prepetition period, the Debtors routinely used performance
and improvement bonds tD provide assurance tD municipalities that certain infrastructure wDrk wDuld be cDmpleted in conjunctiDn with development Drders tied tD the DebtDrs' real estate develDpments. The prDjects assDciated with these bDnds include prDjects fDr "onsite" improvements (i.e., within the DebtDrs' develDpments) and "Dffsite" imprDvements (i.e" within the municipality but outside Df the DebtDrs' develDpment). In a hYPDtheticalliquidatiDn, it is assumed that the DebtDrs prDceed Dnly with Dnsite improvements that have a direct impact Dn the value Df the real estate assets and the ability tD sell such real estate assets, It is assumed that the CDSt tD cDmplete such Dnsite projects is treated as an Administrative Claim (by expending cash tD complete) and that nD prepetitiDn Claims frDm the bDnd issuers arise given that these projects are completed. It is assumed the Dffsite projects are nDt 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 Exoenses. 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 - Preoetition Secured Debt. These liabilties 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 liabilities includes prepetition 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,

RhooesHomes
lIquld.atl,onAna!vsis
Asset

Scedule
RHoveryFactor
RecoveryValue
Avera,!!
100.0%
Cow

Baal: Value Adiu,~tmt'nh Adjusted 6/30/09(1) (2) BookValue

.:,751,307 (ash A(COUnISRe(eivable Pinna(leGiadinc 2,771,951 A(COUnlsRe(eivable-Oiher 159,417 D"e from Related Parties 678,697 Invenl,ori_e:5: 177,715,545 Property, Plant & Equipment 7,336,958
(4~8,i081 4,323,099

Cow

Hih
100.0% 100.0%
20.0''

Hi h

Avera e

100.0%

4,323,09
2,222.361

4,323,09
2,777,951 31,883

I)eposil",a~~ _Other A~sets

i_o.~59,38_3

2,777,951 159,417 678,697 177,715,545 7,336,958 10,359,383

(428,208) 203,351,050

"",,"
0,'"

"',,"
10.0".. 0,0% 22.9%
23.8"",

4,323,09 2,50,156
15,942

0,,"
20.5% 16.2%

0,,"
25.7%

31.'%

36,506,169 1.191,599

45,60,923
2,303,999

40,731,669 1,747,799

0,'"
31.0%

0,'"
39.6%

0,'"
35.2%
114,243,228

lotalllssets
'TotalAssebAvailabletoCrediiors

203,779,258

55,043,855

49,318,665

44,243,228

55.043,855. 49,:mi,G&S

Notes:
BOOK v"lues ar~,pe~ Rhode~Hom_",s.6(30!09.cnsoldated fjna!,dalslaieme~_ls

Amount ,efleas ihe adjustments to roll-forward the esiimated (ashbalan(e,IO 12!31!09,in(ludincS3.5millon t,o be ,e(eived from Rhodes (ntiiies al the eftec-ive dai!

Case 09-14814-lbr

Doc 650-4

Entered 10/27/09 19:13:46

Page 20 of 26

Rhodes Homes

,liqljidation Analysis
Claims Recovery Schedule

Amount
:

Total Assets Available to Creditors

Total Wind Down Expenses Total Administrative Claims Total Priority Claims
Estimated Recovery (Administrative and Priority Claims) Net Estimated Recovery

49,318,665
2,450,000 750,000 125,000

3,325,000
100.0%

,Assets Available to Creditors Holding ()ther Secured Claims

Total Other Secured Claims
Estimated Recovery (Other Secured Claims)

45,993,665
2,300,000

2,300,000
100,0%

Net Estimated Recovery

Assets Available to Secured Creditors

Secured Claims - First lien

43,693,665

325,947,566
43,693,665
13.4%

Estimated Recovery (Secured Claims - First lien)

Net Estimated Recovery

Assets Available to Secured Creditors

Secured Claims - Second lien

72,868,347

Estimated Recovery(Secured Claims - Second lien)

Net Estimated Recovery
0,0%

Assets Available to Unsecured Creditors

Total Unsecured Claims
Estimated Recovery (Unsecured Claims)
Net Estimated Recovery

15,000,000

0.0%

Case 09-14814-lbr

Doc 650-4

Entered 10/27/09 19:13:46

Page 21 of 26

EXHIBIT F

EXHIBIT F

CLAIMS AND ALL PENDING CASES

SEPTEMBER 18, 2109

PENDING CASES

CASE NUMBER

CDURT

PlaIntifs attomy
ADDRESS
NATURE OF THE

STATUS
DISCOVERY STAGE

G, c. WACE, fNC.

0856WO
Rt1bettAvita,Es.
CONTRCT CLAIM

CASE
50 So Jc 8/v,

NiradOistec
"')3
La Vegll NV 89107

vs RHODES DS(;

AN DEvLOPMENT

Case 09-14814-lbr

CORPQRTION

09....'..'
NBYsdaDlslCo Cr~grhil'Elq.
820 Ea

AI METHODS CORP. VS. RHODES DeSIGN AND DEVLOPMENT

B'"
LbS Vag, NVB9ID4

Chto

BREACH Of LEASE

CASEFlLE03l8l&SERV4'I. NOP05T COMINTPLEDlNS OR DISCOVERY,

Doc 650-4

lNGRtTMASONRY, INC. VS. TUCA

09.se20S
NlMdaOislrCo Riits(ciOrailer,Eiq
BulNmil,Hou&
UEW FORClOSURE

CASE FILED JUST PRlOR TO STAV ORDER NO

ACQUISTIONS N, LLC
La Vega&. NY 891$9

~~

38 HO' l-ugli~

Ba,PC

_,CONTRACT CLAIl1I

RESPoNsie PLEAINGS FieD.

T.I. RESIDENiA,INC.

VS. RHOOES DESIGN

""..
NovacOliriClXn
Da J. Wiiz Esq.
Rllin. ObO.

..""of
Ca. Gtomky ~

CASE SERVED POS PETION AND NO RE5PONSIV.e PLEADINS ON FlLE

AND DEVEOPMENT & RHODes RANCH GENERAL

OlSru5NX
99SOW.Cheynn
A""

PARTNERIP

llsVegas.NV89129

PENDING CASES

CASE NUMBER

NATURE OF THE

Entered 10/27/09 19:13:46

LESLIE BLASCO, NEIL SCELSA NA.NCY

lJ1Bl
NovadaOiSlCotu1

ShiicJRy&Rii* 281 &rIHPer P,C.

Coun$1210

STATUS CASE CONSTCTON DEFECT SUIT FILED Bur NOT SERVEO

"\'LSON.sCfiLSlI eMltle c. UAO,

Page 22 of 26

VlRGIUO nERTO, JOHN

luVeg,NV "'28

DOCS_LA 201

Page 1

CLAIMS AND ALL PENDING'CASES SEPTE"'BER 18:. 2009

JlMMY L BOONE,

NONE-NEVADA tHAF

CONSTRUCTN QEFEOT
IN INmAlCH"PTER 010 NcmeE PERiOD

HA2lM. BOONE.

-4 NOnc OF CQNTAUCnON

YV DANG. JOe ARDO RIQUE,

DEfeCT NO SUITFIlO

JOHN A. HERM, PlA FLOFtHERMANN, ALl

JORDON, KEN

MUMBl V. PEL H NEAL aetiJA

OVVOUG, ~ENCE

J. R1CHWSKtV.

Case 09-14814-lbr

CHENG, GREGOIO cORTez, DONNA

OmONG \/OLETA

CORTEZ, DEVIES.

PRAGUPT.

RUPAlI GUPTE.

AOREWTAXlACHS,

AlEADRA

Doc 650-4

TAXlACHJAMES HAFEllLESLIE

HAEFELt YoUD VOUSIF. FAl YOUSIF,

ROM E. GAON. YVONNE SKROlY

JAES E.REMMERT, ROLaND GARCIA HANJ(MAZEVS.

RHODES RANCH

uMmeo

PARTNERSHIP, RHDES OEstGN AND DEVELOPMENT

PALM HILLS FNE HOM

NONE-lEVADA CHAP.

CONSTRnON

CONSTRUCTlON DEFECT

-4 Honce OF

IN INITAL. CHAP'JR'O NOTice PERIOO

DEFECT VS. DEseRT

CONSTRUCITON

COMMlJes. INC,
FLEO

OEFECT ClMS

Entered 10/27/09 19:13:46

RECEI'O NO SUIT

IN RE' iorec FITTG

UTlGATiON (CLAS ACTON 1N RE KIC"J

..493
NiWdliOisl~CM

CONsrnUCTION DEfECT SETTLED AlO PENDING semEMENT BAKRUPTCY APPROVAl RE 25 HOMES:

REMANING PORTIN' OF

CASE STAVEO

PENDING CASES I CASE NUMBER

NATURE Of

THE

STATUS

Page 23 of 26

CASE

OCS_tA2oa2C1

Page 2

ClAMS AND ALL PENDING CASES SEPTEMBER 18. 2009

CONSTUCTION DEFECT

KeISER VS. RHODES

OF

NONE-NElADACHA.

:NiActe

HOeS~ Avalinl
FftD

40 NOTlE

CONSTRUCTION

DEFECTC1IMS RECEIV NO SU1

"""".
ChRflesCCl

CASIM1ROVS. RHODES

HONE.NEADA CHA, 40 NOnCE

RobM8dEsq,
3&lIW.
CONSTRUCTION DefECT

NOlACl

CONSTRuCTON

DEFECT ClA

Blvd..NllO

RECEIV NO SUIT

LosVegos.N\
89$21

Case 09-14814-lbr

FlLo

RHODES HOMES

MACOPA CCUN. MMica CQU. Ati

EXl8nivO~iypcIOS\y

ARizONA. LtC VS.

COUNTERClIM FOR

/J SUPERIOR COUR

SupCot
BREACH OF CONTRAC

STANLEY

r-o. CV965

RHODES COMLAINT FOR PROFESSIONAl NEGlGENCEAND

CONSULTANVS. RHODES RACH GENERA

PARERSHIP

&RHODESOESIGNANO

DEVOPME "'NO

Doc 650-4

DESeRT

COMMUlUTlES, \,LC

OIA CUSTOM

QUAnl1'Y HOMES. LLC

MATINEZ & TUEK,

San BerrwinCO

SAN BERINO

BREACH OF CONTRCT OQlOtlre noUiteldef8fenlsmdrnfsbeit

INC. VS. RHODES

COUN, CLAFOANlA

HOMES MlZONA, LLC, THE RHODES

NO. C/V 8004

defen ~ Cvom Qiit Ho&S.

COMPANIES. LLC, &.

DSffT

COMMUNITES, LtC

D/8A.CUSlOM

QUAiUTY HOMS, U.c

PENDING CASES

CASE NUMBER

NATURE OFTHE CASE

AUTO ACCIDENT
PERSONA INJURY

STATUS
CASE FILE06l. CAS STAYED, NO RESPONSI PLEADING ON FILE.

VIRGINIA SPRIN"GAL.

00..93
NeyacfCla/fCcll

Entered 10/27/09 19:13:46

SMITH MC StAN

SMITVS.ROBERTO GUZMtHAUGUNAS, GUNG-O CONCRETE,

iiC
09A-S98S
NovllG& CIli1 COnt
EMPLOYEE MATTR
SEXUAL HAARASSMENT,

DEBORA GENATO VS.

NlEL PARFJ,

THOMAS ROBINSON.

HOSTLE \"JK

JAMES RHODES AN

E~RONENr GENOR
DISCRIMINATIN

FILl:D POSTPETlTlON; PLNTIFF'S INJUNc.nON

REI.EF ~N1r:. NO OJSCOVERV OR RESPONSI\

C& HOLDINGS, INC.

Page 24 of 26

SlNDER PER SE

PLEING TO THE UNDERL V1NG COMPlNT. CAE IS SUBJECT TO STAY.

OOCS_tA209200." Page 3

.,._...._~..__...."~....__~_~.,,w....___...."_...~_.......~_.~u.._...__.__._....._......__.._.._._.._...~.._._..__,_'._''',,'_.'n.

CLAIMS AND ALL PENDING CASES SEPTEMBER 18, 209

IA ROSE \/5.
OS.:A-.s7DS
ROSEN FORMER: TRIBE EMPlOveE SUIT FOR

HACH INS
PERSOALINURY ON BRAVO PREMises, HASCH lADLORD surr FOR INDEMNIFlCA11N
IN Pl.ING STAGE. STAVED, MonON TOUFT
ST..V PENDING ON 10lTO LIFT$TAY 10

NlWadCtrCo
PERSoNA-i'JuRY

7 BRAVO. INC:. AND

HACH lNSme
PUsue NSURACE POLLCY ONLY

Ivs. BRAVO,INC.

PENDING SETTLED CASES

Case 09-14814-lbr

WITH IlURACE

FULKS \I. i:uaOR

~lIad OIIl Cort

',M""
CONSTRUCTION DEFeCT

134 HOMES)-,OO,OO INSURED SETMeNT

PRESERVES AT

S.A.s3&
Nead Olslr Cor1
CONSTRUCTION DEfECT

EORN HOA VS.

Doc 650-4

RHODES ~es

(COMON EtEMENTSI

$191.00 INSURED

5eTTMENT

In Re ~4C (25 Hoes. il

Nevada QistiCl Co

f'l$20000

....CONSTRCTION DEFECT

INSlJReO SETTLEMEN

NOTICE OF CLAIMS NO SUIT

ILEO

INATURE OF CLA
INSURED
I

CLAIMANT
Comme~ Asl(ll, LLC

I AMOUNT CLAIMED

CONl CLAIM
UNISURED

""0",

lUCA OPitor
UNISURED

ARISING FROM

Entered 10/27/09 19:13:46

AGREEMENT

BRACH OF CONTf

Xaou SJ&C FamilTrul V~.

FAILURE 10 COMPLETE POST Cc.OS1NG

RIDllnar

APPROXATELY$1~~

DiveOpml5ntColilO

COlTRUCTlOK IN

Page 25 of 26

SPMlJSH HILLS

OO-i.A..20a05~

Page A

CLAMS AND ALL PENDING CASES SEPTEMBER 1a, 2009

Case 09-14814-lbr

UNISURED
Th Rob Badw Tn lI.

Doc 650-4

Rho De~ m:

UNlOYi

6RACH OF CONTRCT FAlWRETO COMPlETE POST ClOSIN(;

OM!lOmllCo-iicri

CONSTRUCTION IN

SPANlSH HILlS

Bl18/2NOTCEOF
INSURED

Ci.$A.anS~&.Md
UNKNOIM
Fam,lir

MOLD ClM

NO CAS

Entered 10/27/09 19:13:46

PENDING

Page 26 of 26

DOCS_LA"20a2Ot

PageS