Case lbr Doc 415 Entered 05/24/10 15:21:14 Page 1 of 17

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1 Case 0--lbr Doc Entered 0// :: Page of SULLIVAN, HILL, LEWIN, REZ & ENGEL Electronically Filed: May, A Professional Law Corporation James P. Hill, CA SBN 0 (Pro Hac Vice Christine A. Roberts, NV SBN Elizabeth E. Stephens, NV SBN South Fourth Street, First Floor Las Vegas, NV Telephone: (0-0 Fax Number: (0 - Attorneys for Chapter Trustee, William A. Leonard, Jr. UNITED STATES BANKRUPTCY COURT DISTRICT OF NEVADA In re CONSOLIDATED RESORTS, INC., et al., Debtor. Affects: All Debtors Destinations Unlimited, LLC, 0-0 Consolidated Realty, Inc., 0- Consolidated Media, LLC, 0- CRI Travel Holdings, LLC, 0- Consolidated Resorts Travel, LLC, 0- Consolidated Resorts, Inc., 0- Consolidated Maui, Inc., 0- Consolidated Kona, Inc., 0- Lahaina Ticket Company, Inc., 0- Soleil PS, LLC, 0- Soleil LV, LLC, 0-0 Consolidated Tahiti, Inc., 0- Consolidated Orlando, Inc., 0- Consolidated Tickets, LLC, 0- CASE NO. BK-S-0--LBR (Lead Case (Jointly Administered with Case Nos. 0-0 through 0- Chapter Date: June, Time: :0 p.m. Ctrm: LBR - Courtroom Foley Federal Building 00 Las Vegas Blvd. South Las Vegas, NV Judge: Hon. Linda B. Riegle DECLARATION OF WILLIAM A. LEONARD, JR. IN SUPPORT OF MOTION FOR ORDER (I APPROVING SALE PROCEDURES FOR THE SALE OF SUBSTANTIALLY ALL OF THE DEBTORS ESTATES UNENCUMBERED ASSETS AND CERTAIN ENCUMBERED ASSETS, (II AUTHORIZING THE SALE OF SUBSTANTIALLY ALL OF THE DEBTORS ESTATES UNENCUMBERED ASSETS AND CERTAIN ENCUMBERED ASSETS FREE AND CLEAR OF ALL LIENS, CLAIMS, INTERESTS AND ENCUMBRANCES, (III AUTHORIZING THE ASSUMPTION AND ASSIGNMENT OF CERTAIN EXECUTORY CONTRACTS AND UNEXPIRED LEASES IN CONNECTION THEREWITH, (IV APPROVING MUTUAL GENERAL RELEASES, AND (V GRANTING RELATED RELIEF ::ODMA\PCDOCS\PCDOCS\0\ - -

2 Case 0--lbr Doc Entered 0// :: Page of I, William A. Leonard, Jr., declare:. I am a member of the panel of bankruptcy trustees for the District of Nevada. I have been appointed as the Chapter trustee in the Consolidated Resorts, Inc. related bankruptcy cases, BK-S-0--LBR (Lead Case, jointly administered with case numbers 0-0 through 0-. Since my appointment, I have investigated the assets and liabilities of the Debtors. I make this declaration in support of the above-captioned Motion. All terms not defined herein shall have the meaning given them in the Motion.. I have direct and first-hand knowledge of the facts contained in this declaration. Such knowledge is based upon: a. My review of the Debtors bankruptcy petition, schedules of assets and liabilities, statements of financial affairs, and other pleadings in the bankruptcy cases and related proceedings; b. My review of the Debtors books and records; c. My review of other documents obtained through informal discovery; d. My interviews with various fact witnesses; and e. Other information obtained during my tenure as Trustee in these cases. Accordingly, if called upon to testify, I could and would competently testify to such facts.. Each of the Debtors and Other Debtors contemporaneously commenced their respective bankruptcy cases on July, 0 or July, 0 ( Petition Dates, by filing voluntary petitions under chapter of the Bankruptcy Code in the United States Bankruptcy Court, District of Nevada ( Bankruptcy Court.. Thereafter, I was appointed as chapter trustee of each of the Debtors and the Other Debtors estates and began my investigation of the assets and liabilities of the Debtors and the Other Debtors.. Prior to the Petition Dates, Debtors and the Other Debtors were in the business of developing, owning and operating timeshare and resort properties and related businesses located in the states of Nevada, Florida and Hawaii.. Among other business activities, timeshare interests in the resort properties were being marketed for sale to consumers, financing was being provided to consumer purchasers of ::ODMA\PCDOCS\PCDOCS\0\ - -

3 Case 0--lbr Doc Entered 0// :: Page of timeshare interests, and the collection of the receivables arising out of these sales activities were being managed.. Consumers who purchased timeshare interests in the timeshare resorts often paid for such purchases, in part, by signing and delivering promissory notes to one of the developer entity Debtors for a portion of the purchase price.. The Debtors notes receivable, most of which are collateral for secured creditors' claims, total over $00,000,000 at face value.. Although the majority of the notes receivable in which any of the estates hold an interest constitute the collateral of the Debtors pre-petition secured lenders, certain of the notes receivable are unencumbered and are of significant value to the Debtors estates.. Other estate assets (some of which are unencumbered and others of which constitute the secured creditors collateral include the following: undeveloped and partially developed real property interests; recovered or otherwise unsold timeshare units; certain reserved rights of the Debtors as developers and as declarants of various timeshare resorts; and general intangible property rights, software, and related computer software equipment owned by various Debtors.. Attached as Exhibit hereto is a true and correct copy of the Asset Purchase Agreement.. The ASNY Company, LLC, a Delaware limited liability company ( Buyer and I, as Chapter trustee, have entered into an Asset Purchase Agreement ( Purchase Agreement which provides for Buyer s purchase, subject to overbids by qualified third party bidders, of certain assets, including substantially all of the Debtors' estates assets which are either unencumbered or underencumbered (meaning the estates enjoy equity in them and certain encumbered assets.. The Buyer has furnished a good faith deposit to me in connection with the Purchase Agreement in the amount specified in the Purchase Agreement.. The Purchase Agreement provides for a total purchase price of $,,0 for the assets to be sold (i.e., the Sale Assets, subject to overbid.. Approximately one-third of the Sale Assets (expressed in terms of total sales price are encumbered by security interests of GMAC Commercial Finance, LLC ( GMAC, which has ::ODMA\PCDOCS\PCDOCS\0\ - -

4 Case 0--lbr Doc Entered 0// :: Page of consented to the sale pursuant to the terms and conditions contained in the Purchase Agreement and Agreed Order re Motion to ( Approve Amended Stipulation re Coordinated Marketing Process and ( Retention of Investment Bankers [Docket No. ] ( GMAC Stipulation.. A portion of the assets to be sold are encumbered by security interests of Nevada State Bank, and all remaining unpaid secured claims of Nevada State Bank will be paid in full from the proceeds of the sale at closing.. The selling Debtor estates will receive approximately $. million (representing sale proceeds and other consideration to be paid to the selling Debtor estates from the sale of the unencumbered or under-encumbered assets and the granting of the release to the Buyer-related entities, a result that likely would not have been possible had these assets been marketed on their own, rather than in conjunction with GMAC's collateral.. Additionally, pursuant to the terms of the GMAC Stipulation, the selling Debtor estates will receive approximately $,000 from the sale proceeds payable to GMAC ($0,000 plus one-half of one percent (0.% of the selling price of GMAC's collateral.. These funds, aggregating over $. million, are not earmarked for secured creditors, but rather will represent free unencumbered cash of the Debtors' and Other Debtors' estates to be added to funds recovered and to be recovered from other sources, thus benefiting the estates and their general unsecured creditors.. Additionally, unsecured creditors benefit because GMAC has agreed to reimburse the selling Debtor estates for the majority of the fees and costs of Morgan Joseph, the estates investment bankers -- meaning that the estates enjoy the sale proceeds realized by the investment bankers' efforts, while bearing only a portion of the costs of those efforts (and at a time when the estates lacked the liquidity to retain such qualified professionals.. As Chapter trustee, on behalf of the selling Debtor estates, I seek to convey the Sale Assets. Unless the Purchase Agreement is approved without delay, the estates' assets subject to the sale will erode in value. I have determined the apportionment of the consideration among the Debtors' and the Other Debtors' estates. This is necessary as the estates have not been consolidated. - - ::ODMA\PCDOCS\PCDOCS\0\

5 Case 0--lbr Doc Entered 0// :: Page of. With the support of my advisors and with the cooperation of GMAC and its advisors, I have taken reasonable steps on behalf of all of the Debtor estates at significant expense to insure that the Sale Assets have been thoroughly and adequately marketed and that the sale procedures proposed herein will result in the best possible price for the Sale Assets.. In my opinion as a trustee and receiver in almost,000 cases, the sale will provide significant benefits to unsecured creditors.. In my opinion as a trustee and receiver, the sums to be received by the estates under the Purchase Agreement are likely greater than would have been received had the sale of the estates unencumbered assets not been conducted in a coordinated fashion with the GMAC collateral.. It is further my opinion that by selling in this manner, as part of a consolidated sale process, in conjunction with the GMAC collateral -- rather than piecemeal -- the estates are receiving far more than they possibly could if the assets were sold separately from GMAC's collateral, and GMAC s collateral were instead sold through some other non-coordinated and consolidated sale process. This enhanced value for estates assets was my primary motivation in entering into the GMAC Stipulation for the coordinated marketing of assets, which now appears to be bearing fruit for unsecured creditors.. The bankruptcy estates do not include ownership of the timeshare resorts themselves.. I have worked cooperatively with the timeshare resorts management companies, the several secured creditors which hold collateral interests in timeshare related assets, and the Buyer, all with an aim of keeping the timeshare resorts open and operational, and very significantly, to make sure that the timeshare owners have desirable, well-maintained timeshare resorts that can be used without limitation or interference from the Cases.. This cooperative effort to ensure the continued proper & efficient operation of the resorts has had the salutary effect of leaving unaffected the more than 0,000 timeshare owners of the resorts and accordingly, preventing those owners from being involved in these proceedings.. This action has also maintained value in the core unencumbered and underencumbered assets of the estates, while at the same time preserving the values of the secured ::ODMA\PCDOCS\PCDOCS\0\ - -

6 Case 0--lbr Doc Entered 0// :: Page of creditors timeshare related asset collateral -- which minimized the deficiency claims of the secured creditors, which will in turn ultimately enrich the distributions paid to unsecured creditors. 0. The coordinated marketing process was designed to realize maximum value for the estates encumbered and unencumbered assets -- including realizing greater value for unencumbered assets than if those unencumbered assets were sold alone (rather than in conjunction with the secured creditors collateral. Under the GMAC Stipulation, GMAC agreed to make payments intended to compensate the estates for the costs associated with liquidating GMAC s collateral, allowing unsecured creditors to realize maximum value for the unencumbered assets through a coordinated sale, while ensuring that unsecured creditors do not pay the freight for the liquidation of GMAC s collateral.. The marketing process began in October 0.. These marketing efforts ultimately led to the purchase offer described herein -- which offer is not only the highest offered by any potential buyer, but also in my opinion as a trustee and receiver is significantly more than would have been possible had the estate assets been marketed alone, without GMAC s collateral, and without the assistance of qualified investment bankers and the Trustee s professionals and GMAC and its professionals.. This benefit to unsecured creditors was achieved at as little costs to the estates as possible, since GMAC has agreed to reimburse the Trustee for the majority of Morgan Joseph s fees. Such a positive result for unsecured creditors was made possible by the GMAC Stipulation.. The Purchase Agreement provides for Buyer s purchase, subject to overbid by qualified third party bidders, of the Sale Assets enumerated in the Purchase Agreement.. The Purchase Agreement provides for a total purchase price of $,,0 for the Sale Assets to be sold, subject to overbid.. Approximately one-third of the assets to be sold (expressed in terms of total sales price are encumbered by security interests of GMAC, which has consented to the sale pursuant to the terms and conditions contained in the Purchase Agreement and the GMAC Stipulation. ::ODMA\PCDOCS\PCDOCS\0\ - -

7 Case 0--lbr Doc Entered 0// :: Page of. A portion of the assets are encumbered by secured interests of Nevada State Bank, and the remaining secured claims of Nevada State Bank (totaling approximately $,00,000 will be paid in full at sale closing out of the proceeds of the sale.. The selling Debtor estates will receive approximately $,,0 (representing sale proceeds and other consideration from the sale of the unencumbered or under-encumbered assets and the granting of the release to the Buyer-related entities -- a result that likely would not have been possible had the unencumbered assets been marketed on their own, rather than in conjunction with GMAC s collateral.. Additionally, pursuant to the terms of the GMAC Stipulation, the selling Debtor estates will also receive approximately $,000 ($0,000 plus one-half of one percent (0.% of the selling price of GMAC s collateral. 0. These funds aggregating approximately $,,0 -- are not earmarked for secured creditors, but rather will represent free unencumbered cash of the estates to be added to funds recovered and to be recovered from other sources, thus benefiting the estates and their general unsecured creditors.. Finally, unsecured creditors benefit further because GMAC has agreed to reimburse the selling Debtor estates for the majority of Morgan Joseph s fees -- meaning that the estates enjoy the enhanced sale proceeds realized by Morgan Joseph s efforts, while bearing only a portion of the costs of those efforts (and at a time when the estates lacked the liquidity to retain investment bankers.. Seller shall sell to Buyer substantially all of Debtors estates assets as set forth in the Purchase Agreement, including, but not limited to, the following: ( All timeshare intervals owned by the Debtors estates free and clear; ( All timeshare intervals owned by the Debtors estates and encumbered by a lien in favor of GMAC; ( All unencumbered receivables owned by the Debtors estates; ( All GMAC Seriously Delinquent Receivables; ::ODMA\PCDOCS\PCDOCS\0\ - -

8 Case 0--lbr Doc Entered 0// :: Page of ( The Debtors estates interests in the timeshare receivables securing the Debtors estates obligation to Liberty Bank; ( All the tangible and intangible personal property of the Debtor estates, and ( The Cornerstone Software.. The Debtors and their estates are the sole and lawful owners of the Sale Assets and no other person has any ownership right, title or interest therein. On behalf of the Debtors and the Other Debtors, as their Chapter trustee, I acknowledge and agree to the sale and will transfer any legal, equitable or beneficial right, title or interest they may have in or to the Sale Assets to the Buyer.. Certain of the Debtors estates assets are excluded from the sale -- including estate receivables which are both performing and encumbered by GMAC s security interest. The full description of the Sale Asset (and assets specifically excluded from the sale is detailed in the Purchase Agreement at Article. and... Substantially all of the Debtors estates unencumbered and under-encumbered assets are being sold for top dollar through the services of high-quality investment bankers, Morgan Joseph.. The Debtors maintained certain privacy policies that govern the use of personally identifiable information (as such term is defined by section (A of the Bankruptcy Code with respect to the Sale Assets. On behalf of the selling Debtor estates, I propose to sell the Debtor estates interests in certain assets containing personally identifiable information, but such sale shall be in a manner that is in compliance with their current existing privacy policies, and therefore the requirements of section (b((a has been complied with.. On behalf of the selling Debtor estates, I propose to convey all of Seller s right, title and interest in and to the Sale Assets to Buyer free and clear of all liens, claims, charges, pledges, assignments, security interests, and encumbrances of any kind or nature ( Liens, other than those Liens listed on Schedule H to the Purchase Agreement (the Permitted Encumbrances, provided, The sale will not be made free and clear of interests of Liberty Bank. Rather, the Buyer or any other purchaser will take these assets subject to the interests of Liberty Bank. - - ::ODMA\PCDOCS\PCDOCS\0\

9 Case 0--lbr Doc Entered 0// :: Page of however, that any inability of the estates as Seller to convey any Sale Asset subject to a Permitted Encumbrance shall not release Buyer from any of its obligations under this Purchase Agreement and shall not result in any reduction in the Purchase Price.. The Purchase Agreement provides for the assumption by the Debtors estates and the assignment to Buyer of certain contracts and leases, including (i a June, 0 agreement between the Buyer and debtor Soleil, LV, LLC; and (ii a September, 0 Co-Location Lease between Switch Communications Group, LLC and debtor Consolidated Resorts, Inc. This list of the contracts and leases to be assumed and assigned as part of the sale, and the terms and conditions thereof (including a list of all cure amounts to be paid by Buyer, are detailed in Article of the Purchase Agreement.. The Buyer shall pay $,,0 as the purchase price, subject to final adjustment as provided in the Purchase Agreement. Buyer has provided Seller with an initial deposit in the amount of $,0, Upon entry of the Stalking Horse Confirmation Order, the Buyer will provide Seller with an additional deposit in the amount of $0,000.. Pursuant to the Purchase Agreement, $,,0 of the purchase price is allocated to unencumbered estate assets (and thus, to the estates and assets subject to Nevada State Bank s security interest, as follows: Consolidated Resorts, Inc. (0- $,0,00 Soleil LV, LLC (0-0 $,, Consolidated Tahiti, Inc. (0- $, Consolidated Maui, Inc. (0- $,,0 Consolidated Kona, Inc. (0- $, Consolidated Realty, Inc. (0- $,000 Release Consideration (To be prorated among the Estates $00,000 based on the consideration to be paid to each Estate as set forth above. Total $,,0.00 If the actual consideration received by the Debtor Estate were as set forth above (the final amounts are subject to some adjustments as set forth in the APA, the Release Consideration would be prorated as follows: Consolidated Resorts, Inc. would be paid, $,. of the Release Consideration ($,0,00/$,,0 x $00,000 = $,., and so forth for the other Debtor Estates. - - ::ODMA\PCDOCS\PCDOCS\0\

10 Case 0--lbr Doc Entered 0// :: Page of. Of the $,,0 in sale proceeds, approximately $,00,000 will be paid to Nevada State Bank in full satisfaction of its secured claims.. Thus, approximately $,,0 is allocated for payment to the estates on account of the unencumbered assets.. These funds are unencumbered, and are not earmarked in any way for secured creditors.. In my opinion as a trustee and receiver, I do not believe that such a positive result for unsecured creditors would have been possible absent the GMAC Stipulation.. The favorable purchase price of the Purchase Agreement, including the opportunity for overbid, was realized in part by (i the marketing and sale of unencumbered estates assets in conjunction with GMAC s collateral (as opposed to marketing unencumbered assets on their own, and (ii the marketing efforts of Morgan Joseph, which I would have been unable to retain absent the GMAC Stipulation, and the fees of which are being paid in large part by GMAC. For a full description of the terms and conditions regarding the purchase price and its allocation, see the Purchase Agreement at Article.. When the sale is approved and consummated, GMAC will receive $,00,000 of the sale proceeds. Pursuant to the terms of the GMAC Stipulation, GMAC has agreed to pay to the Debtors estates approximately $,000 of its sale proceeds, consisting of (a $0,000, plus (b one-half of one percent (0.% of that portion of the sale price allocable to GMAC s collateral.. Additionally, under the GMAC Stipulation, GMAC has agreed to reimburse the selling Debtor estates for the majority of the fees of Morgan Joseph.. Morgan Joseph s efforts have contributed significantly to the sale process. 0. In my opinion as a trustee and receiver, had GMAC not agreed in the GMAC Stipulation to pay the majority of the Morgan Joseph s fees, I as trustee would have been unable to retain an investment banking firm like Morgan Joseph to market the unencumbered assets of the estates -- and likely would be realizing substantially less in net sale proceeds to the estates.. My retention of Morgan Joseph under the Amended Engagement Agreement was approved by the Bankruptcy Court on an interim basis by order entered October, 0 [Docket ::ODMA\PCDOCS\PCDOCS\0\ - -

11 Case 0--lbr Doc Entered 0// :: Page of No. ], and on a final basis by the GMAC Stipulation. The GMAC Stipulation allows payment of the following amounts to Morgan Joseph: (a a Monthly Fee plus actual, reasonable out-of-pocket expenses incurred by Morgan Joseph; (b a Sale Transaction Fee; and (c a Minimum Transaction Fee. See the Amended Engagement Agreement, (A, (B, (C and ; and the GMAC Stipulation, (, (,. At the hearing on entry of the Sale Order, I shall seek authorization from the Court, on a final basis, to pay all amounts payable to Morgan Joseph in connection with the sale. The Monthly Fee and certain expenses have been (or will be paid to Morgan Joseph with funds provided for that purpose by GMAC, pursuant to the earlier order of this Court. The portion of the Sale Transaction Fee payable by the Estates is limited to.% of the sale proceeds payable to the Estates, which will be approximately $,000 in this instance. The balance of the fees due and payable to Morgan Joseph will be paid by GMAC.. After extensive review, lengthy negotiation and ultimately compromise, I have agreed as Chapter trustee, subject to Court approval as part of this motion, to the allowance and payment of the claim of The ASNY Corporation for administrative expenses incurred and paid by it during the pendency of the bankruptcy estates of Debtor and Other Debtors, the principal amount of which claim has been compromised between Seller and The ASNY Corporation in the amount of $,... After extensive review, lengthy negotiation and, ultimately, compromise, I, as Chapter trustee, also agreed to allowance of the following priority wage claims to be paid, pari passu, from unencumbered assets of the applicable Debtor estates at the time other claims of similar priority are paid by the estates: (i wage claim of Carl Hardin against the Consolidated Resorts, Inc. estate (in the principal amount of $,0; (ii wage claim of Kenneth Chupinsky against the Consolidated Resorts, Inc. estate (in the principal amount of $,0; and (iii wage claim of Kevin Blair against the Consolidated Resorts, Inc. estate (in the principal amount of $,0.. The ASNY Corporation s claims arise out of services it provided to the estates at my request, including business operations, accounting, administrative support, information technology, and the provision of a vast quantity of often complex and detailed data, records and other information to me. ASNY Corporation s services allowed me to avoid the need to hire employees or ::ODMA\PCDOCS\PCDOCS\0\ - -

12 Case 0--lbr Doc Entered 0// :: Page of contractors. In my opinion as a trustee and receiver, I believe that the services actually performed by ASNY Corporation were necessary and benefited the estates, and that the charges therefore are reasonable. I know of no basis on which to object to these claims.. The specific amounts of these claims were heavily negotiated among the parties, including me, ASNY Corporation, the management companies, GMAC and Textron.. The other administrative claims are priority wage claims that do not exceed the wage cap in the Bankruptcy Code and formed part of the underlying bargain in the Purchase Agreement with respect to the mutual releases.. Upon Closing (assuming that Buyer is the Winning Bidder, (i the Debtor estates will release all claims they may hold against Buyer and numerous of its affiliated parties; and (ii the Buyer and its affiliated parties shall release all claims they may hold against the Debtors, the Other Debtors and their estates, me as trustee and my agents and attorneys, other than discrete claims identified above and as more specifically detailed in the Purchase Agreement in the Purchase Agreement. For a full description of the terms and conditions of these releases, see the Purchase Agreement at Article.. In this case, the Estates will receive $00,000, as part of the purchase price, on account of the releases from the Debtors and the Other Debtors in favor of Buyer and certain other parties, generally its insiders.. The Seller has reviewed the Debtors and the Other Debtors books and records and is unaware of any claims against Buyer or other released parties, but acknowledges that Buyer and certain of the other released parties are insiders of the Debtors and the Other Debtors and that as a result, the Buyer would not enter into the Purchase Agreement without the releases being granted. 0. In my opinion as a trustee and receiver in thousands of cases, the likelihood of any successful litigation against the Buyer and other released parties is very low, and the expenditure of estate funds to pursue litigation would exceed any expected recovery. Therefore, the approval of the releases is in best interest of the creditors and other parties in interest.. I was informed by the Buyer that it would not have entered into the Purchase Agreement and would not consummate the underlying sale transaction, thus adversely affecting the ::ODMA\PCDOCS\PCDOCS\0\ - -

13 Case 0--lbr Doc Entered 0// :: Page of Debtors, the Other Debtors, their estates, creditors and other parties in interest, if (i the releases in favor of Buyer and certain other released parties were not approved and enforceable or (ii if the sale of the Sale Assets was not free and clear of all Claims other than Permitted Encumbrances, or (iii if the Buyer would, or in the future could, be liable for any such Claims, including, without limitation and as applicable, certain liabilities that expressly are not assumed by the Buyer, as set forth in the Purchase Agreement.. The Buyer further informed me that it will not consummate the Sale Transaction unless the Purchase Agreement specifically provides and the Bankruptcy Court specifically orders that none of the Buyer, its affiliates, their present or contemplated members or shareholders (other than the Debtors as the holder of equity in Buyer, or the Sale Assets will have any liability whatsoever with respect to, or be required to satisfy in any manner, whether at law or in equity, whether by payment, setoff or otherwise, directly or indirectly, (a any claim other than a Permitted Encumbrance or (b any successor liability for any of the Debtors or Other Debtors.. In my opinion as a trustee and receiver, I believe the Purchase Agreement provides the Debtor estates with reasonably equivalent value and fair consideration (as those terms are defined in the Uniform Fraudulent Transfer Act, the Uniform Fraudulent Conveyance Act and the Bankruptcy Code, and was not entered into for the purpose or, nor does it have the effect of, hindering, delaying or defrauding creditors of any of the Trustee, Debtors, Other Debtors or Debtors or Other Debtors estates under any applicable laws.. Buyer and GMAC have executed a side agreement styled as a Consent, Acquisition and Transition Purchase Agreement, ( Side Agreement, detailing a number of post-closing understandings and agreements of the Buyer and GMAC. While the effectiveness of the Purchase Agreement is expressly conditioned upon the full execution and delivery of the Side Purchase Agreement, the Debtor estates are unaffected by its terms.. The sale procedures which will govern the sale have been heavily negotiated over an extended time by the parties, and are similar in structure to sale procedures approved in other cases in this Bankruptcy Court, including for sales in cases in which I have served as trustee. In my opinion as a trustee and receiver, I believe the Sale Procedures will allow for the highest and best ::ODMA\PCDOCS\PCDOCS\0\ - -

14 Case 0--lbr Doc Entered 0// :: Page of price to be obtained for the assets under the circumstances. I further believe that these efforts complete the thorough and adequate marketing of the sale assets commenced last October. Indeed, I believe that the marketing efforts and the exposure of the estates' assets to the market have been as extensive, if not more so, than in the almost,000 other cases in which I have served as a trustee or receiver. On this basis, I submit that these sale procedures and bidding qualification requirements are necessary for an orderly sale process by ensuring that only those entities that have the financial wherewithal and a demonstrated willingness to perform are permitted to bid and that all bidders are competing on the same terms.. In my opinion as a trustee and receiver, I believe that the Buyer's agreement to purchase under the Purchase Agreement is the best possible stalking horse bid under the circumstances. The auction will either prove that the stalking horse bid is the highest and best price for the assets, or it will reward the estates with a greater sale price for their assets than could be achieved otherwise.. The Seller will realize nearly $,000,000 from the proposed sale. These funds are not earmarked for secured creditors, but rather will represent free unencumbered cash of the estates to be added to funds recovered and to be recovered from other sources, thus benefiting the Debtors estates and their general unsecured creditors. Additionally, GMAC has agreed to reimburse me for the majority of the fees payable to Morgan Joseph. Morgan Joseph s efforts have contributed significantly to the sale process. Had GMAC not agreed in the GMAC Stipulation to reimburse these fees, I, as Chapter trustee, would have lacked liquidity to pay and would have been unable to retain an investment banking firm of Morgan Joseph's caliber to market the unencumbered assets of the estates -- and likely would be realizing substantially less in net sale proceeds to the estates.. This enhanced value for estate assets was my primary motivation in entering into the GMAC Stipulation for the coordinated marketing of assets, which now appears to be bearing fruit for unsecured creditors.. I have determined not to seek a surcharge against Liberty Bank in the event the Sale Order is entered. ::ODMA\PCDOCS\PCDOCS\0\ - -

15 Case 0--lbr Doc Entered 0// :: Page of 0. I am unaware of any other interests in the assets being sold under the Purchase Agreement.. As a condition of the sale, Buyer has required that the Sale Order provide that the sale is being made free and clear of all claims of creditors in the bankruptcy case, other than as specified as a Permitted Exceptions. I believe in my experience as a trustee and receiver that such a provision is reasonable and justified, given the benefits to the estates of having a definitive agreement, and the risk to Buyer that a third-party offer may ultimately be accepted. I was informed by the Buyer that the Breakup Fee was a material inducement for, and condition of, Buyer s entry into the Purchase Agreement. The Purchase Agreement and the Breakup Fee are the product of extended good faith, arms length negotiations between me and the Buyer, free of self-dealing or manipulation of any kind. Based on my experience as a trustee and receiver in almost,000 cases, I believe that the Breakup Fee is fair and reasonable in amount in view of Buyer s efforts to date and the risk to it of being used as a stalking horse.. I further believe based on my experience as a trustee and receiver that Buyer s efforts and the risk undertaken by it as a stalking horse bidder will likely yield significant value for unsecured creditors. In my opinion, the Breakup Fee has already encouraged competitive bidding, in that Buyer would not have entered into the Purchase Agreement without such a fee, and that Buyer s current offer provides a minimum bid on which other bidders can rely, thereby increasing the likelihood that the price at which the rights sold will reflect their true worth. The mere existence of the Breakup Fee permits me to insist that competing bids for the assets be materially higher or otherwise better than Buyer s current bid -- a clear benefit to the estates. And finally, in my opinion based on my experience as trustee and receiver in thousands of cases, the Breakup Fee represents an approximately. percent of the purchase price -- within the range of break-up fees commonly approved by bankruptcy courts.. In my business judgment, the assumption and assignment of the contracts provided in the Purchase Agreement is in the best interests of the estates and their creditors. The assumption and assignment is desired by the Buyer, and is an integral part of the sale. After sale closing, the estates will have no further need for them. The assumption and assignment will relieve the estates of any ::ODMA\PCDOCS\PCDOCS\0\ - -

16 Case 0--lbr Doc Entered 0// :: Page of liability associated therewith. Accordingly, in my opinion as a trustee and receiver, I believe that the assumption and assignment of the contracts is in the best interests of the estates, and should be approved.. Morgan Joseph s marketing efforts ultimately led to the purchase offer described herein -- which offer I believe includes significantly more consideration for unencumbered estate assets than would have been possible has the estate assets been marketed alone, without GMAC s collateral, and without the assistance of qualified investment bankers.. This benefit to unsecured creditors was achieved at as low a cost to the estates as possible, since GMAC will pay the vast majority of Morgan Joseph s fees. Such a positive result for unsecured creditors was made possible by the GMAC Stipulation.. My advisors and I have carried out our duties in these Cases, including the investigations of estate claims. I am unaware of any claims that the estates may have against the released parties, who are for the most part insiders of the Debtors and the Other Debtors. I and my professionals negotiated additional consideration for the releases and made that additional consideration a condition of the sale.. In my opinion as a trustee and receiver in thousands of cases, the Purchase Agreement is the product of extended good faith, arms' length negotiations between me, Buyer and GMAC. In light of the significant sale consideration I am receiving for the estates, in my opinion as a trustee and receiver, the releases being granted to the released parties are fair and reasonable under the circumstances, and are in the best interests of creditors and the estates, particularly in view of their reciprocity.. In my opinion as a trustee and receiver, and to the best of my knowledge, the Purchase Agreement was not entered into, and none of the Seller, the Buyer or the Buyer s present or contemplated owners, have entered into the Purchase Agreement or propose to consummate the underlying transaction, for the purpose of hindering, delaying or defrauding the Debtors or the Other Debtors present or future creditors. And further, to the best of my knowledge, none of the Seller, the Buyer nor the Buyer s present or contemplated owners is entering into the Purchase Agreement, or proposing to consummate the Sale Transaction, fraudulently for the purpose of ::ODMA\PCDOCS\PCDOCS\0\ - -

17 Case 0--lbr Doc Entered 0// :: Page of statutory and/or common law fraudulent conveyance and fraudulent transfer claims whether under the Bankruptcy Code or under the laws of the United States, any state, territory, possession thereof, or the District of Columbia or any other applicable jurisdiction with laws substantially similar to the foregoing. I declare under penalty of perjury that the foregoing is true and correct, and that this declaration was executed on the th day of May, at Las Vegas, Nevada. /s/ William A. Leonard, Jr. William A. Leonard, Jr., Chapter Trustee ::ODMA\PCDOCS\PCDOCS\0\ - -