Kevin:

First off, thank you Kevin for the work that went into these drafts and for your efforts to move things forward. It finally feels like we may be moving out of the mudhole we’ve been stuck in for the last two months.

I submit my main objections of my review to the both of you for quicker resolution. I will discuss any other objections/questions with Bob directly. Bob has not yet reviewed these agreements and he may have other issues, one of which may be the one David Foraker brought up. There are a number of areas of legal wording that are confusing to me but I’m sure Bob will help me on that.

1) My spouse has informed me that she won’t be signing the Security Agreement, whether I want her to or not. I was surprised that she was expected to sign anything as there was never any indication of this. She says she “unknowingly” already signed the $5 million trust deed securing Inland with both residences and our Awbrey Butte lot (she says she didn’t understand or even remember signing this). She feels she gave up some of her own rights by doing this. She says she’ll sign a deed over on the properties given as security for Inland but not without being advised by her own legal counsel first. By signing the Inland trust deed, she effectively has no real estate interests left.

2) Security Agreement Graph 6: I don’t think I can agree to that and I think it is unreasonable to ask me to do so.

3) It seems to me we should have some sort of indeminification if the trustee does something with the assets that results in a lawsuit being filed against the principals. Security Agreement Graph B says “Debtor ratifies and approves all acts of such attorney-in-fact, and neither Debtor nor the attorney-in-fact will be liable for any acts or omissions nor for any error of judgment or mistake of fact or law”. I’m not exactly sure what this means but I feel there is no liability for any actions that could result in a suit against me personally. In fact, I still don’t see any provisions that protect me or the value of the investment from the trustee demanding that I assign my interest in Smith Bros or other interests/assets that have an issue. Maybe I missed it and you just need to point it out to me.

4) Who is going to be on the Advisory Committee? I am assuming that one of the principals will be on that committee. I think an Advisory Committee of 5 would be preferable to me (two principals, two creditor committee members and a neutral party).

5) Trust Agreement, Graph 6.3.2: This is unacceptable to me. Why would the trust have no duty to account for or report to the trustors until the termination date? We should get the same report each quarter that the Advisory Committee gets. I also think that the principals should have a right to call a meeting with the trustee at certain times. If there is good communication on things, there would be no reason to call a meeting. I have already learned my lesson with Sussman- the minute we signed the bankruptcy agreements they quit communicating with the principals which had bad results.

6) I see that the bankruptcy estate trustee’s compensation isn’t included under these agreements. I still don’t understand how the trustee gets paid. I understood that the trustee would get 1%. Is this correct?

7) Does Obsidian get 15% of the bond proceeds? If not, how does Obsidian get paid for its work on settling the bonding?

Overall I have some concerns. It seems there are three tranches of assets to be transferred as follows:

1) Inland Capital/Three Sisters

2) Assets that have Inland Loans

3) Assets that have nothing to do with Inland but which principals are willing to contribute to the bankruptcy estate

#1 is taken care of via the Transfer and Assignment Agreement that has been drafted. I don’t have any objections to this agreement and feel I can execute this immediately.

#2 these are assets that should be transferred immediately or secured however they needed to be secured, only subject to the nuances that any such action could impact the value of the investment. I’m ready to roll on these right away.

#3 I’m ready to commit these assets but criminal counsel has advised that I should not be turning over these assets at this time. I’ve asked him to confer with Bob V. to discuss. May I make a suggestion? How about a separate agreement for #2 and a separate agreement for #3. I’m not sure how to go about #3, but possibly a cooperation agreement to work at liquidating all those assets that we’re willing to contribute into individual trusts held by our own attorneys. Obsidian would have a power of attorney to liquidate and be compensated for these assets as well, but they remain in the trusts until criminal counsel is willing to turn these assets over. We would immediately assign those assets over (subject to the same issues I have addressed above) to those trusts. This way the creditors know where everything is at. Maybe there could be one trust for #3 with separate accounting for assets contributed by each principal to keep the costs down.

Further, I might suggest that we simplify things here. If we can sit down with the Tennants and get them to back off on the lawsuit subject to all these assets being delivered to the various trusts, couldn’t we scrap the S. 105 injunction altogether for now? I’m suggesting this to simplify all the attorney court arguments that seem to bog everything down.

My suggestions are subject to discussion with Bob V., but I wanted to lay this out in order for immediate consideration, especially if you both find merits to the suggestions and if they will move things along. Bob may respond to my suggestions with a 2X4 over my head, but I just want to help move things forward.

Mark