Q: What is Chapter 11 reorganization?
A: Chapter 11 is a legal mechanism for a Court-supervised restructuring of a Company's financial obligations. Filing for Chapter 11 provides a way for Mercedes Homes to address its financial challenges while continuing day-to-day operations.

Q: Why did Mercedes Homes file for reorganization?
A: Mercedes Homes filed for reorganization as a consequence of the current economic climate. The recent turmoil in the credit markets resulted in the takeover of one of Mercedes Homes' lenders by the FDIC. This takeover strained the company's ability to access the financing needed to continue operations. The significant challenges related to operating in a economic downturn combined with the challenges imposed by the credit markets made restructuring the company’s financial obligations a crucial move to ensure the long term viability of Mercedes Homes.

Q: Does filing for reorganization mean that Mercedes Homes is going out of business?
A: No. Mercedes Homes filed for reorganization in order to restructure our financial operations; this will allow us to remain a successful homebuilding company. Our core business of building and selling quality homes remains strong. Filing for reorganization enables the company to re-position itself for the next business cycle. We believe the current market downturn will be short lived and we want to be ready for the next market upswing.

Q: How long will Mercedes Homes be in reorganization?
A: Mercedes Homes has announced that it has filed a plan of reorganization and a disclosure statement with the court and has reached agreements in principal, subject to court approval, with its secured creditors/banks and the official unsecured creditors committee. In light of these recent developments, the company hopes to emerge from Chapter 11 financial reorganization by September 30, 2009. Under the terms of the plan of reorganization, Mercedes Homes will continue to build homes of enduring value and design at competitive prices throughout Florida, Texas and the Carolinas. The company is moving forward with a focus on efficiency, new technology and new ideas, but with fewer product lines.

Q: What's going to happen while Mercedes Homes is still in reorganization?
A: Mercedes Homes will continue to conduct business as usual. In fact, we are stronger than we were before we filed because financial uncertainty has been removed and we can focus on what we do best… building homes of enduring value and quality.

Q: How can we be sure Mercedes Homes won't eventually file for Chapter 7?
A: Mercedes Homes filed for reorganization in order to ensure our continued success. Like several other companies before us who also had strong operations, financial reorganization is an effective means for addressing specific financial issues while continuing normal business activities. Our goal is to emerge as a stronger, better company.

Q: Will the reorganization have any effect(s) on home prices?
A: Pricing decisions will be based on market conditions. Our company remains committed to providing a high quality product at a reasonable price.

Q: Will the reorganization filing have any effect(s) on construction?
A: Mercedes Homes intends to continue construction as scheduled. We hope that construction delays, if any, will be minimal. Our lenders have agreed to continue financing the company to permit new home construction to be completed in a timely fashion.

Q: Will the reorganization have any effect(s) on my deposit?
A: Mercedes Homes will place any deposits receive after the filing in an escrow account with a company that is not part of the reorganization filing to ensure your deposits do not become involved in the bankruptcy. The reorganization has no effect on deposits received after the filing. As it states in your contract, earnest money will be applied toward the purchase price of your home at closing.

Q: How safe is my deposit?
A: We are seeking court authority to maintain customer deposits under existing procedures and refund customer deposits if warranted by the terms of the Home Purchase Agreement, consistent with our normal business practices. Bankruptcy Courts have granted similar relief to other homebuilders.

Q: Is my earnest money in a separate escrow account?
A: Yes. All earnest money and other deposits made after the filing will be held in a separate escrow account until closing, and will then be credited toward the final purchase price of your home.

Q: Will the reorganization have any effect(s) on my home warranty?
A: Mercedes Homes has contracted with a third party to provide home warranties to new home buyers. Because this warranty is not provided by Mercedes, the current reorganization filing should have no impact on the waranty. Mercedes Homes is seeking court approval to honor some warranties that were made before the filing.

Q: How do I know that I will have a clear title for my home at closing?
A: A federal court order is in place to make sure that the title for your new home will be transferred to you free and clear of mortgages and liens. This order applies to all homes deeded on or after January 26, 2009.

Q: Will the reorganization have any effect(s) on my property value?
A: We do not expect any impact on home prices or property values as a result of the filing. Your home and property values is separate and distinct from the financial reorganization of Mercedes Homes. We are committed to a competitive pricing structure, and we will continue to provide high-quality homes throughout the reorganization process.

Q: Will the reorganization affect whether I will qualify for financing or obtain a mortgage?
A: No. MHi Mortgage will continue to offer competitive financing. While a wholly-owned subsidiary of Mercedes Homes, MHI Mortgage is not included in the reorganization filing.

Q: Will the reorganization affect the quality of homes?
A: No. Mercedes Homes will continue to hold to the same quality and value standards as the company did before the reorganization filing.

Q: Will I receive all the options, upgrades and selections I made, or will you make substitutions because you had to switch suppliers?
A: It is our intention to honor every specific request as we know how important these personal choices are to our customers.

Q: Will Mercedes Homes continue to offer the same incentives it did before the reorganization filing?
A: Mercedes Homes is seeking a court order to permit it to continue to honor all customer programs and incentives offered prior to the filing. Our customers continue to be our number one priority.

Q: Do companies ever emerge from reorganization?
A: Yes. Many companies, including NVR, Inc. (Ryan Homes), WCI, Tousa, Delta Air Lines, United Airlines, The Tribune Company (The Orlando Sentinel), Macy's, The Southland Corp. (7- Eleven) and K-Mart have successfully reorganized. We are confident that we will emerge from reorganization a stronger homebuilder.

Q: How do I know that Mercedes Homes will still be around in a year?
A: Our operations are solid, and the Mercedes Homes brand is strong. Reorganization allows us to strengthen our finances by bringing our arrangement of assets in line with current market realities. We expect Mercedes Homes' daily business operations to continue as usual. We will continue to build the same high-quality homes and provide the highest levels of service to our customers.

Q: I would like to cancel my contract. May I have a refund of my deposit?
A: We are sorry you do not feel comfortable with the reorganization. Keep in mind that the reorganization process is a positive step forward for our company, as it is a chance to restructure our finances and emerge as a stronger and even more competitive business. As we go through the reorganization process, we are conducting business as usual. Therefore, a broken contract does not allow a refund of deposit. I assure you that the home quality, design and value remain the same. We would be happy to share more information with you regarding the reorganization. Perhaps that would make you feel more comfortable with the contract agreements as we go through the reorganization process. And, if you would like more details, then we would be glad to have our division president contact you.

Q: Where can I find more information about Mercedes Homes' reorganization?
A: You can call the Mercedes Homes' Reorganization hotline at 1-800-380-4631 or submit questions electronically to questions@merhomes.com.

Q: I have additional questions. Who can I speak with?
A: If you have any additional questions or concerns, please contact your sales representative. If you have any questions that he/she cannot answer fully, then he/she will find out the answer from the division president and will get back to you shortly.