Loren F. Paullus and Donna Paullus - Page 18

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          Country Club be sold only to owners of lots who resided in                  
          Ridgemark Estates.  At the same time, Paullus offered to purchase           
          the shares of Ridgemark’s shareholders who did not wish to                  
          participate in the development of the Paicines area properties.             
          On January 23, 1989, the Loan, Option and Purchase Agreement                
          (Purchase Agreement) was approved by the board of directors.  The           
          Purchase Agreement provided that Ridgemark, as the seller, would            
          diligently complete, at its expense, all offsite improvements for           
          unit 10.  Ridgemark completed the offsite improvements after the            
          Purchase Agreement execution at a cost of about $1,600,000.  The            
          Purchase Agreement provided that Ridgemark had the right to                 
          structure a tax-deferred exchange, and Shen was required to                 
          cooperate to effectuate such an exchange.  Moreover, Ridgemark              
          agreed to make golf and country club memberships available to               
          purchasers of homes in the unit 10 property on the same terms and           
          conditions as to the preferred members.                                     
               The Purchase Agreement also provided that Shen had two                 
          options to purchase, in increments, any remaining developable               
          land owned by Ridgemark.  The first option was exercisable in               
          1991, and the second in 1993.  Each option was worth                        
          approximately $7 million.  Neither option was exercised.                    
          Ultimately, the optioned land reverted to Ridgemark.                        
               Shen was expected to complete the purchase of the unit 10              
          lots by March 27, 1989.  If Shen did not complete the purchase of           

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