Presentation of Raymond James & Associates, Inc.

Historical Situation

•

The homebuilding industry is in the midst of a dramatic, national downturn after years of

strong growth

•

In mid-2006, these conditions caused the Company’s bank lending group to become

uncomfortable and eventually trade their positions at a discount, primarily to two hedge funds

(Angelo, Gordon & Co. and Silver Point Capital L.P., together the “Lenders”)

•

In December 2006, the Company refinanced its revolving credit facility with the Lenders

providing a four-year maturity and additional borrowing capacity

–

Company elected to pay cash interest on the senior secured second-lien Term B debt

(“Term-B”) in March 2007 and June 2007 of approximately $3.4 million per quarter,

rather than let it PIK

•

The homebuilding market continued to deteriorate and in March 2007, the Company entered

into an amendment with the Lenders to waive certain financial covenant defaults

•

On July 25, 2007, the Company met with the Lenders in New York to discuss its financial

covenants, borrowing base and liquidity concerns

–

Management presented the Lenders with an overview of the state of the Company’s

markets, a cost-savings plan, and an updated financial forecast. The forecast assumed

that the market would stabilize and begin to recover within the next year (2008)

•

On August 10, 2007, the Lenders proposed terms of an amendment (the “Lenders’

Proposed

Amendment”), which included increased interest rates and fees, additional dilution and a

short-term overadvance facility expiring Q1 ‘08

•

In August, Raymond James & Associates, Inc. (“Raymond James”) was engaged by the

Restructuring Committee of the Board of Directors (“Restructuring Committee”), on behalf of

the Company to assist with Lender negotiations and provide other

financial advisory services

Executive Summary

Historical Situation (continued)

•

The Company and the Restructuring Committee, together with Raymond James and the

Company’s counsel Squire, Sanders & Dempsey LLP (“SSD”

and together with Raymond

James, the “Advisors”), determined that the Lenders’

Proposed Amendment did not address

the

Company’s

overall

liquidity

and

leverage

issues

and

would

only

provide

short-term

fix

•

Due in part to the impact from the mortgage market downturn beginning in August 2007,

conditions within the real estate market continued to deteriorate:

–

The top 10 national public homebuilders have taken over $9.5 billion of inventory

impairments and write-downs over the past 12 fiscal months, with over $4.0 billion in the

last fiscal quarter (see page 21)

–

Several large national and regional homebuilders have recently filed for Ch. 11

bankruptcy (e.g. Levitt Corporation, Dunmore Homes, Neumann Homes, Kara Homes,

etc.) and Ch. 7 bankruptcy (e.g. Meyer-Sutton Homes)

–

Some of the nation’s largest homebuilders are exhibiting various levels of distress

and

have recently defaulted or been forced to obtain waivers and amendments with respect

to their credit facilities (e.g. WCI, Technical Olympic, M/I Homes, Beazer, etc.)

•

On August 28, 2007, the Lenders gave the Company a standstill letter stating that the

Lenders had not elected to exercise their default remedies, yet reserved their rights to do so

as well as their ability to charge default interest

Executive Summary

Recent Situation

•

Based on the persisting sector challenges as well as the August mortgage crisis, the Company

provided a revised/updated forecast to Lenders which reflected additional deterioration in the

business and deferred the assumed market recovery to 2009 (the “Forecast”, see Appendix A)

•

Beginning late September 2007, Raymond James contacted approximately 21 potential capital

providers for the purpose of determining interest in a debt recapitalization or a Debtor-in-

Possession (“DIP”) financing facility (the “September Marketing Process”)

–

Process targeted investors and capital providers based on feedback from the marketing

process conducted at the end of 2006

–

Although several parties initially indicated a moderate level of

interest, no potential capital

provider conducted detailed due diligence. Except as discussed herein, no party provided

a term-sheet

•

In September 2007, based on the Forecast and other analyses prepared and discussed with the

Restructuring Committee, the Company initiated discussions with the Lenders regarding the

possibility of a debt-for-equity exchange of the Term B debt for common shares (the “Exchange

Proposal”)

–

On November 2, 2007, the Company provided the Lenders with a written Exchange

Proposal, which better addressed the Company’s liquidity and leverage issues than the

Lenders’

Proposed Amendment and included the following terms:

•

Exchange of entire $90 million Term B facility for common equity

•

Lender equity would represent 70% of the fully-diluted ownership of the Company

and Lenders would receive a majority of the board seats

•

Remaining debt held by the Lenders would be restructured to provide for sufficient

near-term liquidity and a lower interest rate

Executive Summary

Recent Situation (continued)

•

Throughout September and October, the Lenders performed significant due diligence for the

purposes of exploring potential restructuring transactions, including attending on-site due

diligence meetings with Management in Columbus on October 2, 2007 and October 3, 2007

•

During this period, the Company continued to enter into a variety of amendments and waivers

with the Lenders in order to address its short-term liquidity issues and covenant defaults:

–

On September 11, 2007, the Company entered into a third amendment whereby the

Company was allowed to borrow up to an additional $2.0 million in excess of the

borrowing base limitation, provided that any such borrowings were paid in full at

September 28, 2007

–

On September 27, 2007, the Company entered into a fourth amendment whereby the

Lenders increased the ‘overadvance’

amount from $2.0 million to $9.0 million, which

would expire at the Lenders’

sole discretion

•

On September 28, 2007, the Company was informed by the Lenders that, as a result of the

Company’s non-compliance with certain financial covenants, the Lenders would impose an

additional 2.0% default interest rate premium retroactive to July 1, 2007

–

Default interest resulted in an additional $600k of cash interest expense and $500k of

PIK interest expense for the third quarter of 2007

–

On October 29, 2007 the Company entered into a fifth amendment increasing the

‘overadvance’

amount from $9.0 million to $11.0 million in order to account for the

negative, unanticipated impact of the default interest on the borrowing base

Executive Summary

Current Situation

•

On November 21, 2007, the Lenders responded to the Exchange Proposal with a term sheet

that provided for a going private transaction (the “Going Private Proposal”), but provided no

indication of the cash amount that the Lenders were prepared to offer to the shareholders

•

The Going Private Proposal was updated on December 11, 2007 and provided (see summary

terms on page 31):

–

The Lenders, together with the Company’s founding family shareholders (“BRC”), would

form a newly formed corporation (“Newco”) for the purpose of merging with (acquiring)

Dominion and taking the merged entity private

–

Participating shareholders, excluding BRC, would receive cash consideration of

$0.25/share

•

On November 29, 2007

the Board of Directors formed a new Special Committee of

independent directors for the purposes of evaluating the Going Private Proposal

•

On December 14, 2007, the Company provided the Lenders with a list of issues to clarify

•

On December 13, 2007, Raymond James initiated a broad marketing effort to determine the

interest from strategic and financial investors with regards to additional strategic alternatives,

in particular a merger/sale, joint venture or DIP financing transaction (the “December

Marketing Process”)

–

Contacted 64 financial and 10 strategic parties

–

Sent process letters to 11 parties subject to NDA’s

requesting proposals by January 10,

2008

–

No proposals were received

Executive Summary

Current Situation (continued)

•

On December 21, 2007, the Company and its Advisors, the Special Committee and its legal

counsel, Jones, Day, Reavis

and Pogue, L.L.P. (“Jones Day”), BRC and its legal counsel,

Vorys, Sater, Seymour and Pease LLP (“Vorys”) and the Lenders and their legal counsel, Paul,

Weiss, Rifkind, Wharton & Garrison LLP (“Paul Weiss”) met at the offices of Jones Day in New

York to negotiate the terms of the Going Private Proposal

–

Following significant negotiations between the Special Committee

and the Lenders, the

Lenders agreed to increase the merger consideration from $0.25/share to $0.65/share

–

Other financial and legal issues were also discussed and the parties agreed to work

towards the execution of definitive documentation regarding the Going Private Proposal,

following continued due diligence by the Lenders by January 18, 2008

•

Lenders have conducted further due diligence which the Company and the Advisors believe is

substantially complete

•

The first round of transaction documents relating to the Going Private Proposal were received

on January 8, 2008

•

On January 15, 2008, the Company executed its sixth amendment to

the senior secured credit

facility for an additional $3.0 million ‘overadvance’

facility in order to fund the short-term liquidity

shortfall over the next few weeks

–

Currently, the Company is operating in default, the ‘overadvance’

facility continues to be

extended at the Lenders’

sole discretion and the Company is paying/accruing default

interest

•

On January 16, 2008, the Company and its Advisors, Jones Day, BRC, Vorys

and Paul Weiss

met at the offices of Paul Weiss in New York to negotiate most of the remaining issues with

respect to the Going Private Proposal

Executive Summary

Maintain Status Quo

•

The Company’s financial situation continues to deteriorate and liquidity is severely

constrained (see Appendix A)

–

2007 net sales units of 708 are down 40% from 2006 levels and closings units of 754

are down 44% from 2006 levels; both are at the lowest level since becoming a public

company in 1994

•

In addition, Management has indicated that the negative publicity surrounding its

financial instability is having an increasingly negative impact on the business

–

Company’s 13-Week Cash Flow Forecast projects operating cash flow of $800k and net

cash flow after cash debt service (excl. PIK interest) of negative ($2.9 million) for the

period January 5, 2008 –

April 4, 2008

•

Despite cooperation to date from the Lenders to obtain amendments to the credit

facility, there is no certainty that the Lenders will continue to provide

‘overadvance’

facilities (which are being extended at the Lenders’

sole discretion)

•

The Company has continued to aggressively implement cost reduction initiatives and ‘right-

size’

expenses based on current market conditions

–

Executed lease modifications reducing space commitments in Kentucky and

consolidated all of the Columbus operations into a single building

–

In process of winding down the Columbus lumber and construction products distribution

center

–

Implemented additional headcount reductions, including Senior Management

•

The Company’s ability to sell land and its ability to generate liquidity through permitted land

sales is limited by the credit agreement with the Lenders

Strategic Alternatives: Maintain Status Quo

Refinancing / Capital Infusion Transaction

•

Parties contacted by Raymond James in both the September and December Marketing

Processes indicated that they were not interested in a recapitalization transaction, absent

purchasing the debt at a material discount, due to several reasons including:

–

The Company is highly leveraged and it is uncertain that it will

be able to sufficiently

service debt until the market significantly improves

–

Timing of

recovery

the

homebuilding

industry

unclear

and

investors

are

unwilling

to risk investing in a market that potentially has yet to hit the ‘bottom’

–

Company’s existing lenders are large, sophisticated investors and any other party would

likely employ similar strategies; yet with more limited resources

•

Lenders do not appear interested in a refinancing or sale transaction with a third-party that

would result in a discount to their principal investment in the Company

Strategic Alternatives: Refinancing / Capital Infusion Transaction

Key Credit Metrics

(1)

($'s in 000's)

FY2005A

FY2006A

Q1 '07A

Q2 '07A

Q3 '07A

Q4 '07E

FY2007E

Q1 '08E

Q2 '08E

Q3 '08E

Q4 '08E

FY2008E

EBITDA

29,612

(10,013)

(2,823)

(4,527)

(4,332)

(1,058)

(12,740)

(3,243)

(1,303)

(206)

906

(3,846)

Total RE Inventories

426,275

371,086

352,096

325,793

325,019

311,567

306,059

301,170

294,750

284,913

BV of Equity

195,533

168,464

156,745

127,005

111,678

96,892

86,169

75,683

66,965

59,021

Total Debt

214,540

225,546

211,150

207,634

216,648

219,976

222,712

225,001

226,120

225,199

Borrowing Base Debt

205,240

216,800

202,472

198,949

208,850

212,300

215,035

217,324

219,254

218,333

Total Debt / Total Cap.

52.3%

57.2%

57.4%

62.0%

66.0%

69.4%

72.1%

74.8%

77.2%

79.2%

Loan-to-Value

0.48x

0.58x

0.61x

0.64x

0.68x

0.70x

0.72x

0.74x

0.77x

Note:

(1)

Per Management estimates

Refinancing / Capital Infusion Transaction (continued)

•

One financial party provided a preliminary written proposal to provide a $20mm DIP facility

that would rank senior to the Lenders in the event of a voluntary bankruptcy filing by the

Company. The Advisors do not believe that a bankruptcy court would approve a transaction of

this nature without the consent of the Lenders

•

Raymond James also explored potential recapitalization transactions with two of the

Company’s existing equity holders

–

An individual investor contacted the Company through his advisors but never conducted

due diligence or submitted a proposal

•

The investor has had no further contact with the Company despite

numerous

efforts by the Company and Raymond James to engage the investor in a dialogue

•

Based on public filings as of November 2007, it appears that the

investor has sold

the majority of his common share position

–

Another investor group which asserts it owns approximately 4.9% of the outstanding

common shares of the Company met with Management at the end of September 2007

and Raymond James in the beginning of October 2007

–

On October 11, 2007 the investor group submitted a very preliminary going-private

proposal

$2.75/share

(stock

price

range

during

this

time

was

$3.10

$1.91)

•

The proposal contained a $75mm financing contingency related to a land banking

arrangement and was dependent on a debt-for-equity exchange by the Lenders

•

The investor group indicated they did not want to execute an NDA

or perform

detailed due diligence to refine its proposal absent direct discussions with the

Lenders

•

The

investor

group

has

been

unresponsive

regarding

its

continued

interest

despite several attempts to contact them

Strategic Alternatives: Refinancing / Capital Infusion Transaction

Sale Transaction

•

As discussed, in December 2007, Raymond James initiated a marketing process to explore

other potential alternatives for the Company including a sale of

the Company to a financial or

strategic buyer

•

From a financial buyer perspective, the issues deterring a sale transaction are similar to those

related to the refinancing / capital infusion transaction:

–

Investors are hesitant to risk investing in distressed residential real estate due to the

uncertain timing of a market recovery and the difficulty in being able to value real estate

inventories

–

Investors have indicated that there are / will be other opportunities to invest in the real

estate market at significant discounts

•

From a strategic perspective there are few, if any, likely buyers with sufficient liquidity,

stability and appetite to pursue a sale transaction with the Company

–

Market downturn is nationwide and homebuilders continue to take large real-estate

inventory impairments and dramatic drops in their stock prices (see pages 21 and 22)

–

Due to reduced absorption rates, most homebuilders hold sufficient / excessive land

inventory and would not be interested in the cost of carrying additional inventory

–

The difficult financing environment also creates significant challenges for a buyer to

finance an acquisition at this time

•

Raymond James requested written proposals by January 10, 2008 and no proposals were

received related to this marketing process

Strategic Alternatives: Sale Transaction

Sale Transaction –

Strategic Buyer Statistics

•

The chart below illustrates recent real-estate inventory impairments for the Company and the

top 10 national public homebuilders based on the most recently filed public SEC filings:

Strategic Alternatives: Sale Transaction

TTM Real Estate Impairments as % of Peak BV

(1)

Note:

(1)

TTM real estate impairments per the most recent quarter as of 1/10/08 over maximum BV of equity for the period: 1/1/2006 to 1/18/2008

42.8% ($1.4 billion)

30.7% ($664.8 million)

28.5% ($1.6 billion)

28.5% ($1.9 billion)

23.1% ($1.4 billion)

22.9% ($388.3 million)

20.2% ($457.8 million)

20.0% ($1.3 billion)

17.5% ($223.8 million)

15.7% ($30.2 million)

13.6% ($230.7 million)

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

KBH

MDC

CTX

PHM

LEN

RYL

HOV

DHI

NVR

DHOM

BZH

TTM Impairments / Peak Book Value

Bankruptcy Overview

•

Two bankruptcy scenarios were assessed: a plan of reorganization

(a “Plan”) and an orderly

liquidation

–

Plan: process in which Company reorganizes and recapitalizes via

a negotiated

outcome with its stakeholders through a Chapter 11 bankruptcy filing

–

Orderly liquidation: may be executed through one or more auctions or private sales

under section 363 of the Bankruptcy Code (“§363 Sale”) through a Chapter 11 or

Chapter 7 bankruptcy filing

•

Management has indicated that there are a number of significant operating risks that are

expected to arise in a bankruptcy, including:

–

Negative publicity will materially affect the Company’s ability to sell houses and retain

employees

–

Management anticipates a high number of cancellations immediately upon filing,

impacting sales and cash flows

–

Resulting reduction in scale and market share will further pressure operations

Strategic Alternatives: Bankruptcy

Bankruptcy –

Plan of Reorganization

•

The Company would attempt to use the reorganization process to determine whether a

restructuring of the Company's debt pursuant to a Plan, rather than a sale or liquidation of the

Company's assets, would be achievable and would result in a greater return for the

Company's stakeholders

•

However, in order to file and successfully confirm a Plan, the Company would need additional

DIP financing to fund negative cash flow from operations and bankruptcy costs

–

The Company applied certain bankruptcy cost and business interruption assumptions

against the Company’s Forecast

–

Analysis indicates that the Company would need additional financing of at least $30

million, and likely significantly more, to fund the cash shortfall incurred during the

bankruptcy process (see Appendix B)

Strategic Alternatives: Bankruptcy

Bankruptcy Financing Analysis

(1)

($'s in 000's)

Q1 '08E

Q2 '08E

Q3 '08E

Q4 '08E

FY 2008E

EBITDA

(11,774)

(7,129)

(10,570)

(8,582)

(38,056)

Plus: Changes in Working Capital (excl. RE Inv.)

(839)

(1,002)

1,129

(579)

(1,292)

Less: CapEx

(150)

(600)

Plus: Land Sales

Less: Land Acquisitions

Plus: Net Cash Change in Land and Land Development Costs

2,982

1,780

773

1,034

6,570

Plus: Reduction (Addition) to RE Inv. from Sales and Closings

5,293

(6,155)

(10)

3,560

2,688

Unlevered Free Cash Flow

(4,489)

(12,657)

(8,828)

(4,717)

(30,690)

Note:

(1)

Bankruptcy Financing Analysis is Managements estimate of financing requirements assuming a 12-month bankruptcy reorganization process.

Reflects normal-course operations in bankruptcy excluding any land sales, interest, fees and amortization

Bankruptcy –

Plan of Reorganization (continued)

•

Based on the marketing processes undertaken, the current market environment, and the

Company’s current and forecast financial situation the Company and Raymond James do not

believe that Dominion could successfully obtain a $30+ million DIP financing facility

–

SSD and Raymond James do not believe that the Company would be able to convince

the bankruptcy court of an ability to provide adequate protection to the Lenders in order

to obtain a ‘priming’

DIP facility (i.e. without consent of the Lenders)

•

The Lenders indicated that they would not consent to a ‘priming’

DIP facility

–

Company is very unlikely to find a lender willing to provide a junior / subordinated DIP

facility

–

Although

conceivable

that

the

Company

could

get

bankruptcy

court

approval

for

DIP facility that is not only sufficient to repay the Company’s existing senior secured

revolving credit facility (“Revolver”) and senior secured Term A debt (“Term A”) but also

provides sufficient additional liquidity to operate through a Plan, Raymond James does

not believe that investors would be willing to pursue this alternative

–

Most likely alternative is that the Lenders would provide the DIP facility

•

Providing the DIP facility would give Lenders significant control over the timing

and nature of the bankruptcy process

•

Lenders would most likely predicate their DIP facility on the filing of an expedited

§363 Sale

Strategic Alternatives: Bankruptcy

Bankruptcy -

§363 Sale

•

Given a bankruptcy scenario, the Lenders would likely push for a

shorter bankruptcy process

involving a §363 Sale in order to:

–

Minimize bankruptcy costs and potential new capital required to fund the bankruptcy

process

–

Minimize operational risks associated with bankruptcy

–

Expedite operational control over the Company

•

§363 Sale process is designed to maximize sale proceeds to the estate, however, the

Lenders could ‘credit-bid’

for the purchase of the Company’s assets

–

Based on the results of the December Marketing Process, Raymond James would not

expect significant interest from parties interested in purchasing the Company at a price

that approaches the value of the debt

•

Outcome would very likely result in no recovery for pre-petition equity holders and/or

unsecured claimants

Strategic Alternatives: Bankruptcy

Bankruptcy -

Liquidation

•

Based on discussions with Management and Raymond James’

discussions with financial and

strategic parties during the December Marketing Process, there are limited buyers for the

Company’s land inventory, and bulk sales would result in significant discounts to book value

–

The Columbus, Louisville and Lexington markets cannot efficiently absorb this amount of

land a) in a short time frame, and b) given the current market environment

–

Centex and Beazer have been rumored to be exiting the Columbus market for some time,

further saturating the market with land for sale

•

Centex recently entered into a bulk sale of 280 lots to a Cincinnati homebuilder

•

Based on discussions with Management, an orderly liquidation would leave no value to equity

holders and unsecured claimants and would impair other classes of creditors (see Appendix C)

Strategic Alternatives: Bankruptcy

Note:

(1)

Per Management estimates. See Appendix C for more detail

Summary

Liquidation

Analysis

11/30/07

(1)

($'s in 000's)

Est. NBV

Low

High

Low

High

Unrestricted Cash

686

100.0%

686

Restricted Cash

1,311

0.0%

Receivables

1,235

83.6%

100.0%

1,033

1,235

Prepaid Expenses and Other Current Assets

5,862

61.6%

62.1%

3,610

3,642

Real Estate Inventories

324,137

64.6%

74.7%

209,296

242,011

PP&E

2,632

8.6%

20.5%

227

540

Total Assets

335,863

64.0%

73.9%

214,853

248,114

Less: Secured Claims

231,458

Less: Administrative / Priority Claims

21,981

26,752

Total Proceeds Available to Unsecured Creditors

(38,587)

(10,096)

Unsecured Claims

6,229

Est. Recovery for Unsecured Claimants

0.0%

Est. Per Share Recovery for Shareholders

$0.00

Est. Recovery %

Est. Recovery $

Going Private Proposal –

Summary Terms

Strategic Alternatives: Going Private Proposal

Dominion Homes, Inc.

Term Sheet Comparision

(1)

December 11, 2007 Term Sheet

Current Draft of Merger Agreement

Newco will merge with/into the Company, with the Company being the surviving entity

Newco would acquire all outstanding shares of the Company's common stock (excl. those

exchanged for Newco shares and Dissenting Shares) for the right to receive cash

consideration of $0.25 per share ("Per Share Cash Merger Consideration")

Bidders will apply to delist the Company's common stock and thereby take the Company

private

Newco will merge with/into the Company, with the Company being the surviving entity

Newco would acquire all outstanding shares of the Company's common stock (excl. those

exchanged for Newco shares and Dissenting Shares) for the right to receive cash

consideration of $0.65 per share ("Per Share Cash Merger Consideration")

Bidders will apply to delist the Company's common stock and thereby take the Company

private

Company shall file a proxy and the holders of a majority of the common stock shall have

approved the merger

Total number of dissenting shares shall not exceed [TBD]% of the issued and outstanding

shares of common stock

Company would be permitted to seek a superior proposal for 35 days after entering into the

merger agreement (the go-shop period); thereafter, a customary no shop will apply

The Board will have a customary fiduciary out if a superior proposal is received by the

Company at any time

Company would be permitted to seek a superior proposal for 45 days after entering into the

merger agreement (the go-shop period); thereafter, a customary no shop will apply

The Board will have a customary fiduciary out if a superior proposal is received by the

Company at any time

Note:

(1)

Per merger agreement documents received January 17, 2008. Not a comprehensive summary, for details refer to the merger agreement documents

Silver Point Capital, LP and Angelo, Gordon & Co. (together, the “Bidders”) would agree to a “going private” transaction with respect to Dominion Homes, Inc. (the “Company”)

Lenders would agree to amend the Company’s existing credit facility to permit the Transaction, forbear/waive existing events of default, provide for a reduction in certain prepayment

penalties during the go-shop period and provide the Company with additional financial liquidity following the acquisition

The Company will reimburse the Bidders for all reasonable out-of-pocket fees and expenses (including legal fees) incurred in connection with the Transaction

Bidders and founding family shareholders (BRC) will form a new corporation ("Newco")

BRC will contribute all of their shares of common stock in exchange for shares of Newco

Bidders will contribute all of their warrants, $20 million of Term B Notes and cash in exchange for shares of Newco

BRC will agree to vote their shares in favor of the merger and the related transactions

Break-Up Fee equal to 3% of the product of: (x) the number of common shares outstanding

and (y) the Per Share Cash Merger Consideration plus the total amount of indebtedness of the

Company

No Break-Up Fee; prepayment penalties may apply pursuant to the credit facility with the

Lenders, as amended

Company shall file a proxy and the holders of a majority of the common stock shall have

approved the merger

Shareholders owning at least 51% of the Company’s outstanding common stock (including

BRC Properties, Inc., David Borror, Douglas Borror and Terry George, among others) would

enter into a voting agreement pursuant to which the parties would agree to vote their shares in

favor of the merger and the related transactions

Shop Period and

Fiduciary Out:

Break-Up Fee:

Fee and Expenses:

Existing Credit Facility:

Proxy / Dissenting

Shareholders:

Transaction:

Newco:

Transaction Structure:

Voting Agreement:

Going Private Proposal –

General Terms

Strategic Alternatives: Going Private Proposal

•

38% premium to the

Company’s closing stock

price of $0.47 on

January 17, 2008

•

33% premium to the 30-

day trailing average

trading price

•

38% discount to the

60/90-day trailing

average trading price

The Lenders’

proposed

acquisition price of

$0.65/share to

Shareholders represents

an approximately:

BRC would own approx.

10% of the surviving

corporation, would no

longer have control of the

Company and would be at

risk of ultimately receiving

less than the $0.65 cash

consideration for their

12-Month Price / Volume Chart

30-Day Trailing Average: $0.49

60/90-Day Trailing Average: $1.05

Transaction Share Price: $0.65

25,000

50,000

75,000

100,000

125,000

150,000

175,000

200,000

225,000

250,000

275,000

300,000

325,000

350,000

375,000

400,000

$0.00

$0.25

$0.50

$0.75

$1.00

$1.25

$1.50

$1.75

$2.00

$2.25

$2.50

$2.75

$3.00

$3.25

$3.50

$3.75

$4.00

$4.25

$4.50

$4.75

$5.00

$5.25

$5.50

$5.75

$6.00

Recommendations and Next Steps

•

The Company has indicated that Management’s ability to operate the business as a going

concern and the resulting cash flows will be significantly impaired without a resolution prior to

its prime selling season beginning late January

•

Based on the Company’s efforts to evaluate strategic alternatives, it appears that the Going

Private Proposal is the only alternative that provides value to shareholders as well as

creditors

•

The Going Private Proposal provides for a ‘go-shop’

period in which superior offers may be

considered without incurring a break-up fee

–

During the ‘go-shop’

period, Raymond James would actively pursue solicitation of

superior offers

–

Even after the ‘go-shop’

period expires, the Board of Directors and the Company would

have a customary fiduciary out if the Company receives an unsolicited superior offer

Conclusion and Next Steps

13-Week Cash Flow Projections

Appendix A: Company Financial Information

Note:

(1)

Management estimates; version sent to lenders 1/11/08

13 Week Cash Flow Forecast

(1)

11-Jan

18-Jan

25-Jan

1-Feb

8-Feb

15-Feb

22-Feb

29-Feb

7-Mar

14-Mar

21-Mar

28-Mar

4-Apr

13 Week

Total

Weekly

Average

($'s in 000's)

Total Closing Units

119

Operating Cash Receipts:

Total Closings

518

665

2,221

3,291

1,114

1,052

1,242

543

1,029

1,155

3,244

3,162

3,461

22,697

1,746

Other Cash Receipts

Land Sales

1,500

115

Other Receipts

559

1,399

108

Total Other Cash Receipts

559

1,570

2,899

223

Total Cash Receipts

1,077

735

2,291

3,361

1,184

2,622

1,312

613

1,099

1,225

3,314

3,232

3,531

25,596

1,969

Operating Cash Disbursements:

Cost of Real Estate Sold

Land Costs

200

100

1,770

136

House Costs

701

1,087

1,613

1,400

1,300

1,200

1,000

14,301

1,100

Distribution Center Costs

Total Cost of Real Estate Sold

797

1,287

1,813

1,600

1,500

1,400

1,100

16,097

1,238

SG&A

Model Homes Cost

130

Lease Expense

260

Real Estate & Other Taxes

675

390

130

120

1,541

119

Professional Fees

600

100

1,140

Other Corporate Costs

140

150

1,940

149

Subtotal Corporate Costs

218

788

933

236

578

418

308

280

298

188

258

200

5,011

385

Payroll

500

450

425

2,982

229

Commissions & Bonuses

160

110

710

Subtotal Payroll & Benefits

660

560

535

3,692

284

Total SG&A

280

1,448

978

796

623

953

353

843

325

833

233

793

245

8,703

669

Total Operating Cash Disbursements

1,077

2,735

2,791

2,396

2,123

2,353

1,453

1,943

1,425

1,933

1,333

1,893

1,345

24,800

1,908

Total Operating Cash Flow

(2,000)

(500)

965

(939)

269

(141)

(1,330)

(326)

(708)

1,981

1,339

2,186

796

13-Week Cash Flow Projections (continued)

Appendix A: Company Financial Information

13 Week Cash Flow Forecast

(1)

11-Jan

18-Jan

25-Jan

1-Feb

8-Feb

15-Feb

22-Feb

29-Feb

7-Mar

14-Mar

21-Mar

28-Mar

4-Apr

13 Week

Total

Weekly

Average

($'s in 000's)

Debt Servicing:

Cash Interest Disbursements:

Revolver & Term Debt Interest & Fees

3,574

275

Other Note Interest

Total Cash Interest Disbursements

3,599

3,649

281

Net Cash Inflow (Outflow)

(2,000)

(500)

940

(939)

269

(141)

(1,330)

(351)

(708)

1,981

1,339

(1,412)

(2,852)

(219)

Debt / Borrowing Base

Beginning Debt Balance

207,138

209,138

209,638

208,698

209,637

209,368

209,509

210,839

211,190

211,898

209,917

208,578

Net Cash Inflow (Outflow)

(2,000)

(500)

940

(939)

269

(141)

(1,330)

(351)

(708)

1,981

1,339

(1,412)

Non-Cash PIK interest

Total Debt Outstanding

207,138

209,138

209,638

208,698

209,637

209,368

209,509

210,839

211,190

211,898

209,917

208,578

209,990

Borrowing Base

203,713

Availability Under the Borrowing Base

(3,425)

(5,425)

(5,925)

(4,985)

(5,924)

(5,655)

(5,796)

(7,126)

(7,477)

(8,185)

(6,204)

(4,865)

(6,277)

Discretionary Overadvance

(2)

7,287

7,037

Total Availability

3,862

1,612

1,112

2,052

1,113

1,382

1,241

(89)

(440)

(1,148)

833

2,172

760

Note:

(1)

Management estimates; version sent to lenders 1/11/08

(2)

Discretionary overadvance being provided at the sole discretion of the Lenders; total borrowings limited to the maximum of $14.0 million in excess of the borrowing base or $210,750 beginning the week of 1/18/08

Summary Historical and Projected Financials (IS)

Appendix A: Company Financial Information

Income Statement Summary

(1)

($'s in 000's)

FY2004A

FY2005A

FY2006A

Q1 '07A

Q2 '07A

Q3 '07A

Q4 '07E

FY2007E

Q1 '08E

Q2 '08E

Q3 '08E

Q4 '08E

FY2008E

Total Sales Units

2,450

1,944

1,171

218

206

153

136

713

220

258

169

135

782

Total Closing Units

2,837

2,146

1,335

165

206

197

185

753

125

175

208

227

735

Backlog Units

632

430

266

319

275

226

329

412

373

281

Gross Revenues

553,972

428,757

275,532

36,281

43,476

42,355

41,290

163,402

26,387

37,324

45,415

49,775

158,900

Sales Discounts

(12,002)

(13,057)

(18,772)

(2,483)

(4,664)

(4,235)

(3,597)

(14,979)

(1,986)

(2,851)

(3,401)

(3,643)

(11,882)

Net Revenues

541,970

415,700

256,760

33,798

38,812

38,120

37,693

148,423

24,400

34,472

42,014

46,131

147,018

Sales Discount %

2.2%

3.0%

6.8%

10.7%

10.0%

8.7%

9.2%

7.5%

7.6%

7.5%

7.3%

7.5%

Adj. Gross Profit

(2)

120,252

84,261

30,848

3,835

1,687

2,611

3,575

11,709

1,195

3,036

3,871

4,599

12,701

Adj. Gross Margin

(2)

22.2%

20.3%

12.0%

11.3%

4.3%

6.8%

9.5%

7.9%

4.9%

8.8%

9.2%

10.0%

8.6%

Impairments of RE Inventories

4,813

6,491

14,175

1,478

17,175

2,722

5,474

26,849

300

1,300

300

2,200

SG&A

77,936

64,475

50,082

8,728

8,944

8,883

6,365

32,920

5,934

6,179

6,039

5,967

24,119

SG&A Margin

14.4%

15.5%

19.5%

25.8%

23.0%

23.3%

16.9%

22.2%

24.3%

17.9%

14.4%

12.9%

16.4%

Interest Expense, net

4,032

7,745

11,248

5,430

5,450

6,141

6,574

23,594

5,927

6,094

6,335

6,416

24,772

Net Income

20,202

5,326

(34,009)

(11,458)

(29,705)

(15,256)

(14,640)

(71,059)

(10,967)

(10,536)

(8,803)

(8,084)

(38,390)

EBITDA

49,828

29,612

(10,013)

(2,823)

(4,527)

(4,332)

(1,058)

(12,740)

(3,243)

(1,303)

(206)

906

(3,846)

Notes:

(1)

Per Management estimates

(2)

Adj. gross profit and margin excludes impairments of real estate assets and any gain / loss on sale of land

Summary Historical and Projected Financials (BS)

Appendix A: Company Financial Information

Balance Sheet Summary

(1)

($'s in 000's)

FY2004A

FY2005A

FY2006A

Q1 '07A

Q2 '07A

Q3 '07A

Q4 '07E

Q1 '08E

Q2 '08E

Q3 '08E

Q4 '08E

Assets:

Unrestricted Cash

6,710

3,554

3,032

1,155

1,571

663

1,000

341

531

361

Accounts Receivable

4,521

4,889

2,329

1,962

1,937

1,408

1,770

1,650

1,850

1,750

1,800

Land and Land Develop. Costs

307,682

323,594

281,316

264,803

241,611

237,663

231,177

225,884

219,930

217,458

214,428

Homes Under Construction

102,224

86,980

67,585

60,793

57,437

60,365

56,126

58,048

62,448

60,748

57,398

Land Held for Sale

3,726

12,481

20,321

24,652

24,823

25,379

23,865

22,127

18,792

16,544

13,087

Other (Lumber Inventory)

2,887

3,220

1,864

1,848

1,922

1,612

400

Total RE Inventories

416,519

426,275

371,086

352,096

325,793

325,019

311,567

306,059

301,170

294,750

284,913

PP&E, net and Other Assets

16,730

16,839

27,769

17,962

16,595

16,162

15,631

14,851

14,463

14,333

14,220

Total Assets

444,480

451,557

404,216

373,175

345,896

343,252

329,968

322,901

318,014

310,890

301,294

Liabilities and Equity:

Accounts Payable

9,317

11,465

7,945

3,807

6,549

8,953

6,104

8,026

9,786

9,106

7,766

Note Payable, Banks

194,378

205,240

16,800

6,700

13,391

14,448

19,000

22,500

25,500

Term A Debt

110,000

105,772

102,249

101,596

100,000

95,000

90,000

85,000

80,000

Term B Debt

90,000

93,863

97,852

101,035

104,824

108,754

112,833

Subtotal Sr. Credit Facility

194,378

205,240

216,800

202,472

198,949

208,850

212,300

215,035

217,324

219,254

218,333

Other Debt

5,819

9,300

8,746

8,678

8,685

7,798

7,677

6,866

Other Liabilities

46,069

30,019

2,261

1,473

4,708

5,973

6,996

5,994

7,544

8,699

9,308

Total Liabilities

255,583

256,024

235,752

216,430

218,891

231,574

233,076

236,732

242,331

243,925

242,273

Total Equity

188,897

195,533

168,464

156,745

127,005

111,678

96,892

86,169

75,683

66,965

59,021

Total Liabilities & Equity

444,480

451,557

404,216

373,175

345,896

343,252

329,968

322,901

318,014

310,890

301,294

Note:

(1)

Per Management estimates

Bankruptcy Case Assumptions

Appendix B: Bankruptcy Financing Analysis

•

The Company applied certain bankruptcy cost and business interruption assumptions against

the Company’s 2008 Budget:

–

Bankruptcy costs over the 12-month Plan period were estimated to be $17.6 million

–

Company assumed that a large portion of the backlog would immediately cancel after

filing for bankruptcy

•

Backlog that had not been started would return to a developed lot status while

other cancellations would transfer into speculative inventory

–

Company adjusted monthly sales and closing assumptions to reflect lower demand

–

Company also assumed additional sales discounts of 15%-8%, decreasing (improving)

quarterly

–

Forecast assumes no proceeds from land sales as any proceeds from potential land

sales would be used to pay secured debt and would not provide additional liquidity to

the Company

–

Land development costs were adjusted to 60% of the Company’s 2008 budget to

account for slower sales and to conserve capital

Q1 '08E

Q2 '08E

Q4 '08E

Q3 '08E

FY '08E

Sales as % of 2008 Budget

22.8%

60.1%

67.2%

75.1%

53.7%

Closings as % of 2008 Budget

107.2%

49.7%

59.6%

54.6%

63.8%

Bankruptcy Financing Analysis

Appendix B: Bankruptcy Financing Analysis

•

Unlevered

free cash flow estimated to be approximately negative ($30 million) over 12-month

period

•

This amount represents the low end of the funding range, as it would not provide for the

following potential payments:

–

DIP closing fee

–

DIP interest

–

Prepayment penalty

–

Other financing related costs

Bankruptcy Financing Analysis

(1)

($'s in 000's)

Q1 '08E

Q2 '08E

Q3 '08E

Q4 '08E

FY 2008E

EBITDA

(11,774)

(7,129)

(10,570)

(8,582)

(38,056)

Plus: Changes in Working Capital (excl. RE Inv.)

(839)

(1,002)

1,129

(579)

(1,292)

Less: CapEx

(150)

(600)

Plus: Land Sales

Less: Land Acquisitions

Plus: Net Cash Change in Land and Land Development Costs

2,982

1,780

773

1,034

6,570

Plus: Reduction (Addition) to RE Inv. from Sales and Closings

5,293

(6,155)

(10)

3,560

2,688

Unlevered Free Cash Flow

(4,489)

(12,657)

(8,828)

(4,717)

(30,690)

Note:

(1)

Bankruptcy Financing Analysis is Managements estimate of financing requirements assuming a 12-month bankruptcy reorganization process.

Reflects normal-course operations in bankruptcy excluding any land sales, interest, fees and amortization

Liquidation Analysis

Appendix C: Liquidation Analysis

Note:

(1)

Per Management estimates; see pages 46 and 47 for footnotes

Detailed Liquidation Analysis - as of 11/30/07

(1)

($'s in 000's)

Est. NBV

Low

High

Low

High

ASSETS:

Cash

(2)

686

100.0%

686

Restricted Cash

(3)

1,311

0.0%

Receivables - Due from Closings

(4)

427

100.0%

427

Receivables - Other

(4)

808

75.0%

100.0%

606

808

Prepaid Expenses and Other Current Assets

(5)

5,862

61.6%

62.1%

3,610

3,642

Subtotal

9,094

58.6%

61.2%

5,329

5,563

Real Estate Inventories:

Land and Land Development Costs

(6)

262,457

67.9%

79.3%

178,136

208,194

Homes Under Construction

(7)

60,409

49.9%

53.9%

30,144

32,547

Other

(8)

1,271

80.0%

100.0%

1,017

1,271

Subtotal

324,137

64.6%

74.7%

209,296

242,011

PP&E, net:

Fixed Assets, net

(9)

2,395

7.7%

19.0%

185

456

Model Home Improvements, net

(10)

168

25.0%

50.0%

Capital Lease

0.0%

Subtotal

2,632

8.6%

20.5%

227

540

Total Assets

335,863

64.0%

73.9%

214,853

248,114

Est. Recovery %

Est. Recovery $

Liquidation Analysis (continued)

Appendix C: Liquidation Analysis

Note:

(1)

Per Management estimates; see pages 46 and 47 for footnotes

Detailed Liquidation Analysis - as of 11/30/07

(1)

($'s in 000's)

Est. NBV

Low

High

Low

High

LIABILITIES:

Secured Debt Claims:

Revolving Line of Credit

(11)

16,983

Term A Notes

(12)

101,314

Term B Notes

(13)

93,863

Accrued Interest

(14)

3,004

Other Notes Payable and Capital Lease Liability

(15)

4,124

Liened - Payables

(16)

12,171

Subtotal Secured Debt Claims

231,458

Est. Recovery for Secured Debt Holder

92.8%

100.0%

Administrative Claims:

Wind-Down Costs

(17)

8,785

12,058

Chapter 7 Professional & Trustee Fees

(18)

7,969

9,467

Subtotal Administrative Claims

16,754

21,525

Est. Recovery for Administrative Claimants

0.0%

77.4%

Priority Claims:

Priority Employee Wage Claims

(19)

1,083

Priority Deposit Claims and Medical Trust

(20)

927

Priority Tax Claims

(21)

3,217

Subtotal Priority Claims

5,227

Est. Recovery for Priority Claimants

0.0%

Total Secured, Administrative and Priority Claims

253,439

258,210

Total Proceeds Available to Unsecured Creditors

(38,587)

(10,096)

Unsecured Claims:

SERP Liability

(22)

2,653

Unsecured Employee Wage Claims

(23)

272

Unsecured Customer Deposits

(24)

300

Unsecured Accounts Payable and Accrued Liabilities

(25)

3,004

Unsecured Claims

6,229

Est. Recovery for Unsecured Claimants

0.0%

Total Proceeds Available to Equity Holders

(44,816)

(16,325)

Total Shares Outstanding

8,517

Estimated Per Share Recovery for Shareholders

$0.00

Est. Recovery %

Est. Recovery $

Liquidation Analysis (continued)

Appendix C: Liquidation Analysis

Notes:

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

(10)

Cash is unrestricted cash and cash equivalents which are assumed to have full value in a liquidation

To the extent restricted cash (L/C's) are called to satisfy an existing liability, they have been offset against such liability (accrued workers

comp and Ornstein note payable); cash deposits in lieu of performance bonds are assumed to have no recovery in a liquidation

Receivables due from closings consist of monies in escrow due to after-hours home closings and assumed to be fully collected in a

liquidation. Other receivables include misc. land, backbone electric and tap fee receivables which are estimated to have 75% - 100%

recovery in a liquidation

Prepaid expenses and other include prepaid loan fees, leases, IT fees, insurance and sales commissions and investments in Centennial

which are assumed to have a 0% recovery value in a liquidation. Also includes prepaid taxes which are assumed to have a 80% - 100%

recovery value and the cash surrender value of the executive life insurance policy which is assumed to have an 100% recovery value in a

liquidation

Management analyzed land and developed lots and assigned estimated low and high recovery values to each community based on

historical trends and stage of development. %'s represent weighted average liquidation recovery values of cost (before impairments) of

approx. 65%-76% of raw land held for development, 53% - 64% of lots under development, 59% - 69% of developed unsold lots and

60% - 72% of investment in joint ventures

Management analyzed homes under construction and assigned estimated low and high recovery values to each community based on

location and stage of completion. %'s represent weighted average liquidation values of approx. 50% - 54% of WIP, 47% - 50% of

speculative inventory and 80% - 85% of model homes. Homes not to the drywall stage estimated to be worth approximately $20k per

lot value, homes in the drywall stage estimated at 50%-55% and homes in the OC stage estimated at 65%-70% liquidation recovery

Other real estate inventories consists of lumber and other building materials at the Company's distribution center. As of 1/10/08, the

Company had liquidated the majority of these materials at a price close to book value

Fixed assets consist of a few automobiles and trucks which are estimated to have a 60-80% recovery value in a liquidation and

computers and office equipment which are expected to have a 0-10% recovery in a liquidation

Model home improvements consist of furniture, fixtures and other items in the Company's model homes which are expected to have a

25-50% recovery in a liquidation

Management estimates; net recovery could be materially lower based on changes in a number of factors, including national or local

market conditions, interest rates, capital market disruptions and the length of time required to complete the liquidation process

Liquidation Analysis (continued)

Appendix C: Liquidation Analysis

Notes:

(11)

(12)

(13)

(14)

(15)

(16)

(17)

(18)

(19)

(20)

(21)

(22)

(23)

(24)

(25)

Includes priority deposits on homes and land under contract based on Section 507 of the Bankruptcy Code. Deposit claims capped at

$2,425 per deposit in accordance with Section 507 of the Bankruptcy Code. Also includes accrued warranty and medical trust expenses

Represents unsecured corporate accounts payable and unsecured accrued expenses including marketing, audit and legal expenses as of

the book value on November 30, 2007. Contract damages, lease rejection claims and litigation claims are assumed to be immaterial

Represents employee wage claims exceeding the $10,950 cap per Section 507 of the Bankruptcy Code

Represents deposits on homes and land under contract exceeding the $2,425 cap per Section 507 of the Bankruptcy Code

Senior secured second lien Term B loan facility balance as of November 30, 2007. Secured by second liens granted by the Company

(and certain of its subsidiaries) on all of its tangible and intangible personal property and substantially all of its real estate holdings. The

Term B notes rank junior to the revolver and the Term A notes

Senior secured revolving line of credit and cash clearing account balance as of November 30, 2007. Secured by liens granted by the

Company (and certain of its subsidiaries) on all of its tangible and intangible property and substantially all of its real estate holdings

Senior secured Term A loan facility balance as of November 30, 2007. Secured by liens granted by the Company (and certain of its

subsidiaries) on all of its tangible and intangible property and substantially all of its real estate holdings

Consists of accrued real estate, personal property, sales, use, income and activity taxes as of November 30, 2007

Book value as of November 30, 2007

Accrued interest on the senior secured revolving credit facility, senior secured Term A facility, senior secured second lien Term B

facility and other notes payable as of November 30, 2007

Other notes payable consist of two seller financed mortgage notes of approximately $7.7 million and capital leases of $67k. One

mortgage of $3.6 million is fully secured by a cash collateralized letter of credit which has been offset by that amount; the other

mortgage is secured by land

Consists of land and house accounts payables with mechanics lien rights which are assumed to be perfected

Wind-Down costs are for the security, taxes, insurance, utilities, warranties, appraisal, brokers fees, etc. necessary to liquidate the assets

over the 12-month period

Chapter 7 Trustee Fees are assumed to be 3% of total assets available for distribution. Professional fees for the Trustees accounting and

legal professionals are estimated on a consolidated basis at $1.0 million - $1.5 million for the assumed 12-month liquidation period

Employee payroll, commissions, withholding taxes, workers compensation and related expenses which qualify for priority status based

on Section 507 of the Bankruptcy Code. Amounts capped at $10,950 per individual in accordance with Section 507 of the Bankruptcy