Loren F. Paullus and Donna Paullus - Page 14

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               for the benefit of him and his associates in the                       
               Paicines Ranch project and, in order to implement such                 
               structure, he and his associates are willing to                        
               purchase the shares of the capital stock of the                        
               Corporation from the other shareholders at the same                    
               price per share as that paid by the purchaser, less a                  
               prorata [sic] share of the brokers’ commission, and                    
               with an interest rate of 10% per year on the deferred                  
               portion of the purchase price and providing each                       
               selling shareholder the security given by the                          
          On August 23, 1988, the board further discussed the Drosihn                 
          proposal.  Paullus reported that he had reached an agreement with           
          Drosihn that once approval of the final map for unit 10 was                 
          obtained, the sales of lots in unit 10 would commence.  The                 
          minutes contain the notation that there were 97 people interested           
          in purchasing lots in unit 10.                                              
               In an August 27, 1988, letter, Shen’s representative was               
          informed that Ridgemark’s board had authorized its corporate                
          officers to engage in negotiations to sell Ridgemark.  The letter           
          provides that neither the assets nor the stock of Construction or           
          Financial were involved in any proposed sale.  Initially,                   
          negotiations contemplated a straightforward sale of all of                  
          Ridgemark’s stock to Shen.                                                  
               An agreement with San Benito County recorded on                        
          September 22, 1988, reflects that Ridgemark was “in the process             
          of developing or improving” the unit 10 property.  Ridgemark was            
          required to make improvements, including the necessary paving,              
          curbs, gutters, catch basins, pipes, culverts, water mains, storm           

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