Highland Farms, Inc. and Subsidiary - Page 6

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          case of an already existing cluster home, the purchase agreement            
          required a deposit of 15 percent of the purchase price upon                 
          execution of such agreement and the balance at closing.  If the             
          cluster home were to be constructed, the initial deposit was 20             
          percent of the purchase price upon execution of the agreement, 40           
          percent within 5 days after notification that the house package             
          had arrived at the construction site, and the balance at closing.           
               Cluster home owners were responsible for payment of real               
          estate taxes on the cluster home and were billed by Buncombe                
          County individually for those taxes.  Cluster home owners were              
          responsible for maintaining homeowners' insurance on their units            
          and were individually billed by their homeowners' insurance                 
          company for the same.  Cluster home owners were also responsible            
          for payment of their utilities as billed to them individually by            
          the utility companies.  Petitioner was responsible for                      
          maintaining the lawns, driveways, exteriors of the structures,              
          and major repairs to appliances and their replacement.                      
               In the event of total destruction of the cluster home,6 the            
          cluster home reverted back to petitioner, and the owner was                 
          entitled to keep the proceeds of the insurance policy.  If the              
          destruction was only partial, the owner had the option to repair            
          the home or resell it to petitioner in its damaged condition.               
          Under the latter option, the repurchase price would be reduced by           
          the cost of restoring the home.                                             
               The purchase agreement placed the following restrictions on            

          6 Total destruction was defined as destruction of over 70                   
          percent of the cluster home.                                                



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Last modified: May 25, 2011