Loren F. Paullus and Donna Paullus - Page 17

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               Paullus counteroffered in a December 15, 1988, letter, which           
          proposed a restructured transaction under which Shen would                  
          acquire Ridgemark’s assets except the land, facilities, and                 
          equipment of Ridgemark Golf and Country Club.  Specifically,                
          Ridgemark offered to sell the unit 10 property for a price of $10           
          million, with Shen assuming the responsibility of completing the            
          improvements related to the subdivision of the property into                
          buildable lots.  An alternative offer for $11,500,000 was made              
          under which Ridgemark would complete the improvements.  The                 
          letter offered the unit 10 property for sale upon the terms and             
          conditions specified, which included Ridgemark’s tax-free                   
          exchange requirement.  The schematics associated with the offer             
          included the statement that the proposed transaction appeared to            
          qualify for a section 1031 exchange.  On December 21, 1988,                 
          Paullus sent a completed draft of the letter and schematic of the           
          proposed transaction.  Ridgemark obtained the approval of the               
          final subdivision map and constructed certain offsite                       
          improvements for the unit 10 property because Shen, through                 
          assignees, wanted to be able to build houses and sell lots as               
          soon as possible after closing.                                             
               On January 9, 1989, Ridgemark’s board of directors removed             
          the restriction that preferred4 memberships in Ridgemark Golf and           

               4 The preferred memberships (class A) entitled those members           
          to full privileges of the recreational facility.                            

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