Document:

INNOVATIVE HEALTH PRODUCTS, INC.
6950 BRYAN DAIRY ROAD
LARGO, FL 33777

BORROWER'S NAME AND ADDRESS
"I" includes each Borrower above, joint and severally.

FIRST COMMUNITY BANK OF AMERICA
6100 4TH STREET NORTH
ST. PETERSBURG, FL 33703

LENDER'S NAME AND ADDRESS
"You" means the lender, its successors and assigns.

Loan Number  22131
          -----------------------
Date DECEMBER 29, 1999
    -----------------------------

Maturity Date JANUARY 5, 2003
             --------------------
Loan Amount $89,530.60
           ----------------------
Renewal Of
          -----------------------

For value received, I promise to pay to you, or your order, at your address
listed above the PRINCIPAL sum of EIGHTY NINE THOUSAND FIVE HUNDRED THIRTY AND
60/100* * * * * * * * * * * * * * Dollars $89,530.60

[X] SINGLE ADVANCE: I will receive all of this principal sum on DECEMBER 29,
    1999. No additional advances are contemplated under this note.

[ ] MULTIPLE ADVANCE:  The principal sum shown above is the maximum amount of
    principal I can borrow under this note. On _______________ I will
    receive the amount of $___________________ and future principal
    advances are contemplated.

    CONDITIONS: The conditions for future advances are__________________________
    ____________________________________________________________________________
    [ ] OPEN END CREDIT: You and I agree that I may borrow up to the maximum
        amount of principal more than one time. This feature is subject to all
        other conditions and expires on _________________.
    [ ] CLOSED END CREDIT: You and I agree that I may borrow up to the maximum
        only one time (and subject to all other conditions).

INTEREST: I agree to pay interest on the outstanding principal balance from
    DECEMBER 29, 1999 at the rate of 9.500% per year until JANUARY 5, 2003.
[ ] VARIABLE RATE: This rate may then change as stated below.
    [ ] INDEX RATE: The future rate will be ___________ the following index
        rate:__________________________________________________________________
        _______________________________________________________.
    [ ] NO INDEX: The future rate will not be subject to any internal or
        external index. It will be entirely in your control.
    [ ] FREQUENCY AND TIMING: The rate on this note may change as often as
        __________________________________________________________________.
        A change in the interest rate will take effect ___________________.
    [ ] LIMITATIONS: During the term of this loan, the applicable annual
        interest rate will not be more than _______% or less than ______%. The
        rate may not change more than _______% each ________.
    EFFECT OF VARIABLE RATE: A change in the interest rate will have the
        following effect on the payments:
    [ ] The amount of each scheduled payment will change.
    [ ] The amount of the final payment will change.
    [ ] ______________________________________________.

ACCRUAL METHOD: Interest will be calculated on a ACTUAL/365 basis.

POST MATURITY RATE: I agree to pay interest on the unpaid balance of this note
owing after maturity, and until paid in full, as stated below:
    [ ] on the same fixed or variable rate basis in effect before maturity (as
        indicated above).
    [X] at a rate equal to 18.00%

[X] LATE CHARGE: If a payment is made more than 10 days after it is due, I agree
    to pay a late charge of 5.000% OF THE LATE PAYMENT.

[X] ADDITIONAL CHARGES: In addition to interest, I agree to pay the following
    charges which [X] are [ ] are not included in the principal amount above:
    DOC STAMPS - $313.60, UCC-I FILING FEE - $34.00, LOAN FEE - $125.00.

PAYMENTS: I agree to pay this note as follows:
[ ] INTEREST: I agree to pay accrued interest _____________________________
    _______________________________________________________________________.
[ ] PRINCIPAL: I agree to pay the principal _______________________________.
[X] INSTALLMENTS: I agree to pay this note in 36 payments. The first payment
    will be in the amount of $2,873.24 and will be due FEBRUARY 5,2000.
    A payment of $2,873.24 will be due ON THE 5TH DAY OF EACH MONTH thereafter.
    The final payment of this entire unpaid balance of principal and interest
    will be due JANUARY 5, 2003.

ADDITIONAL TERMS:

[X] SECURITY: This note is separately secured by (describe separate document by
    type and date); SECURITY AGREEMENT OF EVEN DATE.

(This section is for your internal use. Failure to list a separate security
document does not mean the agreement will not secure this note.)

Signature for Lender

____________________________________

____________________________________

PURPOSE: The purpose of this loan is
BUSINESS: PURCHASE EQUIPMENT.

SIGNATURES: I AGREE TO THE TERMS OF
THIS NOTE (INCLUDING THOSE ON PAGE 2).
I have received a copy on today's date.

INNOVATIVE HEALTH PRODUCTS, INC.
-------------------------------------

BY: /s/ KOTHA SEKHARAM
-------------------------------------
KOTHA SEKHARAM, PRESIDENT

BY: /s/ MIHIR TANEJA
-------------------------------------
MIHIR TANEJA, VP
<PAGE>

DEFINITIONS: As used on page 1, "[X]" means the terms that apply to this loan.
"I", "me" or "my" means each Borrower who signs this note and each other person
or legal entity (including guarantors, endorsers, and sureties) who agrees to
pay this note (together referred to as "us", "You" or "your" means the Lender
and its successors and assigns.

APPLICABLE LAW: The law of the state of Florida will govern this note. Any
term of this note which is contrary to applicable law will not be effective,
unless the law permits you and me to agree to such a variation. If any provision
of this agreement cannot be enforced according to its terms, this fact will not
affect the enforceability of the remainder of this agreement. No modification of
this agreement may be made without your express written consent. Time is of the
essence in this agreement.

PAYMENTS: Each payment I make on this note will first reduce the amount I owe
you for charges which are neither interest nor principal. The remainder of each
payment will then reduce accrued unpaid interest, and then unpaid principal. If
you and I agree to different application of payments, we will describe our
agreement on this note. I may prepay a part of, or the entire balance of this
loan without penalty, unless we specify to the contrary on this note. Any
partial prepayment will not excuse or reduce any later scheduled payment until
this note is paid in full (unless, when I make the prepayment, you and I agree
in writing to the contrary).

INTEREST: Interest accrues on the principal remaining unpaid from time to time,
until paid in full. If I receive the principal in more than one advance, each
advance will start to earn interest only when I receive the advance. The
interest rate in effect on this note at any given time will apply to the entire
principal advanced at that time. Notwithstanding anything to the contrary, I do
not agree to pay and you do not intend to charge any rate of interest that is
higher than the maximum rate of interest you could charge under applicable law
for the extension of credit that is agreed to here (either before or after
maturity). If any notice of interest accrual is sent and is in error, we
mutually agree to correct it, and if you actually collect more interest than
allowed by law and this agreement, you agree to refund it to me.

INDEX RATE: The index will serve only as a device for setting the rate on this
note. You do not guarantee by selecting this index, or the margin, that the rate
on this note will be the same rate you charge on any other loans or class of
loans to me or other borrowers.

ACCRUAL METHOD: The amount of interest that I will pay on this loan will be
calculated using the interest rate and accrual method stated on page 1 of this
note. For the purpose of interest calculation, the accrual method will determine
the number of days in a "year". If no accrual method is stated, then you may use
any reasonable accrual method for calculating interest.

POST MATURITY RATE: For purposes of deciding when the "Post Maturity Rate"
(shown on page 1) applies, the term "maturity" means the date of the last
scheduled payment indicated on page 1 of this note or the date you accelerate
payment on the note, whichever is earlier.

SINGLE ADVANCE LOANS: If this is a single advance loan, you and I expect that
you will make only one advance of principal. However, you may add other amounts
to the principal if you make any payments described in the "PAYMENTS BY LENDER"
paragraph below.

MULTIPLE ADVANCE LOANS: If this is a multiple advance loan, you and I expect
that you will make more than one advance of principal. If this is closed end
credit, repaying a part of the principal will not entitle me to additional
credit.

PAYMENTS BY LENDER: If you are authorized to pay, on my behalf, charges I am
obligated to pay (such as property insurance premiums), then you may treat those
payments made by you as advances and add them to the unpaid principal under this
note, or you may demand immediate payment of the charges.

SET-OFF: I agree that you may set off any amount due and payable under this
note against any right I have to receive money from you.
  "Right to receive money from you" means:
  (1) any deposit account balance I have with you;
  (2) any money owed to me on an item presented to you or in your possession for
      collection or exchange; and
  (3) any repurchase agreement or other nondeposit obligation.
   "Any amount due and payable under this note" means the total amount of which
you are entitled to demand payment under the terms of this note at the time you
set off. This total includes any balance the due date for which you properly
accelerate under this note.

   If my right to receive money from you is also owned by someone who has not
agreed to pay this note, your right of set-off will apply to my interest in the
obligation and to any other amounts I could withdraw on my sole request or
endorsement. Your right of set-off does not apply to an account or other
obligation where my rights are only as a representative. It also does not apply
to any Individual Retirement Account or other tax-deferred retirement account.

   You will not be liable for the dishonor of any check when the dishonor occurs
because you set off this debt against any of my accounts. I agree to hold you
harmless from any such claims arising as a result of your exercise of your right
of set-off.

REAL ESTATE OR RESIDENCE SECURITY: If this note is secured by real estate or a
residence that is personal property, the existence of a default and your
remedies for such a default will be determined by applicable law, by the terms
of any separate instrument creating the security interest and, to the extent not
prohibited by law and not contrary to the terms of the separate security
instrument, by the "Default" and "Remedies" paragraphs herein.

DEFAULT: I will be in default if any one or more of the following occur: (1) I
fail to make a payment on time or in the amount due; (2) I fail to keep the
property insured, if required: (3) I fail to pay, or keep any promise, on any
debt or agreement I have with you; (4) any other creditor of mine attempts to
collect any debt I ow him through court proceedings; (5) I die, am declared
incompetant, make an assignment for the benefit of creditors, or become
insolvent (either because my liabilities exceed my assets or I am unable to pay
my debts as they become due); (6) I make any written statement or provide any
financial information that is untrue or inaccurate at the time it was provided;
(7) I do or fail to do something which causes you to believe that you will have
difficulty collecting the amount I owe you; (8) any collateral securing this
note is used in a manner or for a purpose which threatens confiscation by a
legal authority; (9) I change my name or assume an additional name without
first notifying you before making such a change; (10) I fail to plant, cultivate
and harvest crops in due season; (11) any loan proceeds are used for a purpose
that will contribute to excessive erosion of highly erodible land or to the
conversion of wetlands to produce an agricultural commodity, as further
explained in 7 C.F.R. Part 1940, Subpart G, Exhibit M.

REMEDIES: If I am in default on this note you have, but are not limited to, the
following remedies:
   (1) You may demand immediate payment of all I owe you under this note
       (principal, accrued unpaid interest and other accrued charges).
   (2) You may set off this debt against any right I have to the payment of
       money from you, subject to the terms of the "Set-off" paragraph herein.
   (3) You may demand security, additional security, or additional parties to be
       obligated to pay this note as a condition for not using any other remedy.
   (4) You may refuse to make advances to me or allow purchases on credit by me.
   (5) You may use any remedy you have under state or federal law.

By selecting any one or more of these remedies you do not give up your right to
later use any other remedy. By waiving your right to declare an event to be a
default, you do not waive your right to later consider the an event as a default
if it continues or happens again.

COLLECTION COSTS AND ATTORNEY'S FEES: I agree to pay all costs of collection,
replevin, or any other or similar type of cost if I am in default. In addition,
if you hire an attorney to collect this note, I also agree to pay any reasonable
fee you incur with such attorney plus court costs (except where prohibited by
law). I agree that reasonable attorneys' fees shall be construed to mean 10% of
the principal sum named in this note, or such larger fee that the court may
determine to be reasonable and just. To the extent permitted by the United
States Bankruptcy Code, I also agree to pay the reasonable attorney's fees and
costs you incur to collect this debt as awarded by any court exercising
jurisdiction under the Bankruptcy Code.

WAIVER: I give up my right to require you to do certain things. I will not
require you to:
   (1) demand payment of amounts due (presentment);
   (2) obtain official certification of nonpayment (protest); or
   (3) give notice that amounts due have not been paid (notice of dishonor).
   I waive any defenses I have based on suretyship or impairment of collateral.

TO THE EXTENT PERMITTED BY LAW, I ALSO WAIVE MY RIGHT TO A TRIAL BY JURY IN
RESPECT TO ANY LITIGATION ARISING FROM THIS NOTE AND ANY OTHER AGREEMENT
EXECUTED IN CONJUNCTION WITH THIS CREDIT TRANSACTION.

OBLIGATIONS INDEPENDENT: I understand that I must pay this note even if someone
else has also agreed to pay it (by, for example, signing this form or a separate
guarantee or endorsement). You may sue me alone, or anyone else who is obligated
on this note, or any number of us together, to collect this note. You may do so
without any notice that it has not been paid (notice of dishonor). You may
without notice release any party to this agreement without releasing any other
party. If you give up any of your rights, with or without notice, it will not
affect my duty to pay this note. Any extension of new credit to any of us, or
renewal of this note by all or less than all of us will not release me from my
duty to pay it. (Of course, you are entitled to only one payment in
full). I agree that you may at your option extend this note or the debt
represented by this note, or any portion of the note or debt, from time to time
without limit or notice and for any term without affecting my liability for
payment of the note, I will not assign my obligation under this agreement
without your prior written approval.

CREDIT INFORMATION; I agree and authorize you to obtain credit information about
me from time to time (for example, by requesting a credit report) and to report
to others your credit experience with me (such as a credit reporting agency). I
agree to provide you, upon request, any financial statement or information you
may deem necessary. I warrant that the financial statements and information I
provide to you are or will be accurate, correct and complete.

NOTICE: Unless otherwise required by law, any notice to me shall be given by
delivering it or by mailing it by first class mail addressed to me at my last
known address. My current address is on page 1. I agree to inform you in writing
of any change in my address. I will give any notice to you by mailing it first
class to your address stated on page 1 of this agreement, or to any other
address that you have designated.
<TABLE>
<CAPTION>
  DATE OF         PRINCIPAL        BORROWER'S     PRINCIPAL     PRINCIPAL     INTEREST      INTEREST        INTEREST
TRANSACTION        ADVANCE          INITIALS      PAYMENTS       BALANCE        RATE        PAYMENTS           PAID
                                 (NOT REQUIRED)                                                              THROUGH
---------------------------------------------------------------------------------------------------------------------
<S>              <C>               <C>            <C>            <C>          <C>           <C>             <C>
  /  /           $                                $              $                   %      $                  /  /
---------------------------------------------------------------------------------------------------------------------
  /  /           $                                $              $                   %      $                  /  /
---------------------------------------------------------------------------------------------------------------------
  /  /           $                                $              $                   %      $                  /  /
---------------------------------------------------------------------------------------------------------------------
  /  /           $                                $              $                   %      $                  /  /
---------------------------------------------------------------------------------------------------------------------
  /  /           $                                $              $                   %      $                  /  /
---------------------------------------------------------------------------------------------------------------------
  /  /           $                                $              $                   %      $                  /  /
---------------------------------------------------------------------------------------------------------------------
  /  /           $                                $              $                   %      $                  /  /
---------------------------------------------------------------------------------------------------------------------
  /  /           $                                $              $                   %      $                  /  /
---------------------------------------------------------------------------------------------------------------------
  /  /           $                                $              $                   %      $                  /  /
---------------------------------------------------------------------------------------------------------------------
  /  /           $                                $              $                   %      $                  /  /
---------------------------------------------------------------------------------------------------------------------
  /  /           $                                $              $                   %      $                  /  /
---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
INNOVATIVE HEALTH PRODUCTS, INC.
6950 BRYAN DAIRY ROAD
LARGO, FLORIDA 33777

TAXPAYER I.D. NUMBER: 59-2600232

DEBTOR'S NAME, ADDRESS AND SSN OR TIN
 ("I" means each Debtor who signs.)

FIRST COMMUNITY BANK OF AMERICA
6100 4TH STREET NORTH
ST. PETERSBURG, FL 33703

SECURED PARTY'S NAME AND ADDRESS
("You" means the Secured Party, its successors and assigns.)

I am entering into this security agreement with you on DECEMBER 29, 1999 (date).

SECURED DEBTS. I agree that this security agreement will secure the payment and
  performance of the debts, liabilities or obligations described below that
  (Check one) [X] / [ ] (name)_________________________________________________
  __________________________________________ owe(s) to you now or in the future:
  (Check one below):

     [X] Specific Debt(s). The debt(s), liability or obligations evidenced by
         (describe): NOTE OF EVEN DATE IN THE AMOUNT OF $89,530.60 and all
         extensions, renewals, refinancings, modifications and replacements of
         the debt, liability or obligation.

     [ ] All Debt(s). Except in those cases listed in the "LIMITATIONS"
         paragraph on page 2, each and every debt, liability and obligation of
         every type and description (whether such debt, liability or obligation
         now exists or is incurred or created in the future and whether it is or
         may be direct or indirect, due or to become due, absolute or
         contingent, primary or secondary, liquidated or unliquidated, or joint
         several or joint and several.

SECURITY INTEREST. To secure the payment and performance of the above described
  Secured Debts, liabilities and obligations, I give you a security interest in
  all of the property described below that I now own and that I may own in the
  future (including but not limited to, all parts, accessories, repairs,
  improvements, and accessions to the property), wherever the property is or may
  be located, and all proceeds and products from the property.

  [ ] INVENTORY: All inventory which I hold for ultimate sale or lease, or which
      has been or will be supplied under contracts of service, or which are raw
      materials, work in process, or materials used or consumed in my business.

  [ ] EQUIPMENT: All equipment including, but not limited to, all machinery,
      vehicles, furniture, fixtures, manufacturing equipment, farm machinery and
      equipment, shop equipment, office and recordkeeping equipment, and parts
      and tools. All equipment described in a list or schedule which I give to
      you will also be included in the secured property, but such a list is not
      necessary for a valid security interest in my equipment.

  [ ] FARM PRODUCTS: All farm products including, but not limited to:
      (a) all poultry and livestock and their young, along with their products,
          produce and replacements;
      (b) all crops, annual or perennial, and all products of the crops; and
      (c) all feed, seed, fertilizer, medicines, and other supplies used or
          produced in my farming operations.

  [ ] ACCOUNTS, INSTRUMENTS, DOCUMENTS, CHATTEL PAPER AND OTHER RIGHTS TO
      PAYMENT: All rights I have now and that I may have in the future to the
      payment of money including, but not limited to:
      (a) payment for goods and other property sold or leased or for services
          rendered, whether or not I have earned such payment by performance,
          and
      (b) rights to payment arising out of all present and future debt
          instruments, chattel paper and loans and obligations receivable.
          The above include any rights and interests (including all liens and
          security interests) which I may have by law or agreement against any
          account debtor or obligor of mine.

  [ ] GENERAL INTANGIBLES: All general intangibles including, but not limited to
      tax refunds, applications for patents, patents, copyrights, trademarks,
      trade secrets, good will, trade names, customer lists, permits and
      franchises, and the right to use my name.

  [ ] GOVERNMENT PAYMENTS AND PROGRAMS: All payments, accounts, general
      intangibles, or other benefits (including, but not limited to, payments in
      kind, deficiency payments, letters of entitlement, warehouse receipts,
      storage payments, emergency assistance payments, diversion payments, and
      conservation reserve payments) in which I now have and in the future may
      have any rights or interest and which arise under or as a result of any
      preexisting, current or future Federal or state governmental program
      (including, but not limited to, all programs administered by the Commodity
      Credit Corporation and the ASCS).

  [X] The secured property includes, but is not limited by the following:
      IMA 4OF INTERMITTENT CAPSULE FILLING MACHINE SERIAL #44506

If this agreement covers timber to be cut, minerals (including oil and gas),
fixtures or crops growing or to be grown, the legal description is:

I am a(n)   [ ] individual     [ ] partnership     [X] corporation
            [ ] __________________________________________________

[ ] If checked, file this agreement in the real estate records.
Record Owner (if not me): ________________________________________
__________________________________________________________________
__________________________________________________________________

The property will be use for   [ ] personal        [X] business
            [ ] agricultural   [ ] ______________________ reasons.

FIRST COMMUNITY BANK OF AMERICA
------------------------------------------------------------------
                 (Secured Party's Name)

By:_______________________________________________________________
     SCOTT C. BOYLE

Title: PRESIDENT/CEO
      ------------------------------------------------------------

I AGREE TO THE TERMS SET OUT ON BOTH PAGE 1 AND PAGE 2 OF THIS AGREEMENT. I have
received a copy of this document on today's date.

INNOVATIVE HEALTH PRODUCTS, INC.
------------------------------------------------------------------
                    (Debtor's Name)

By: /s/ KOTHA SEKHARAM
    ----------------------
    KOTHA SEKHARAM

Title: PRESIDENT
       -------------------

By: /s/ MIHIR TANEJA
    ----------------------
    MIHIR TANEJA

Title: VP
       -------------------
<PAGE>
GENERALLY - "You" means the Secured Party identified on page 1 of this
agreement. "I", "me" and "my" means each person who signs this security
agreement as Debtor and who agrees to give the property described in this
agreement as security for the Secured Debts. All terms and duties under this
agreement are joint and individual. No modification of this security agreement
is effective unless made in writing and signed by you and me. This security
agreement remains in effect, even if the note is paid and I owe no other debt to
you, until discharged in writing. Time is of the essence in this agreement.

APPLICABLE LAW - I agree that this security agreement will be governed by the
law of the state in which you are located. If property described in this
agreement is located in another state, this agreement may also, in some
circumstances, be governed by the law of the state in which the property is
located.

     To the extent permitted by law, the terms of this agreement may vary
applicable law. If any provision of applicable law may not be varied by
agreement, any provision of this agreement that does not comply with that law
will not be effective. If any provision of this agreement cannot be enforced
according to its terms, this fact will not affect the enforceability of the
remainder of this agreement.

OWNERSHIP AND DUTIES TOWARD PROPERTY - I represent that I own all of the
property, or to the extent his is a purchase money security interest I will
acquire ownership of the property with the proceeds of the loan. I will defend
it against any other claim. Your claim to the property is ahead of the claims of
any other creditor. I agree to do whatever you require to protect your security
interest and to keep your claim in the property ahead of the claims of other
creditors. I will not do anything to harm your position.

     I will keep books, records and accounts about the property and my business
in general. I will let you examine these records at any reasonable time. I will
prepare any report or accounting you request, which deals with the property.

     I will keep the property in my possession and will keep it in good repair
and use it only for the purpose(s) described on page 1 of this agreement. I will
not change this specified use without your express written permission. I
represent that I am the original owner of the property and, if I am not, that I
have provided you with a list of prior owners of the property.

     I will keep the property at my address listed on page 1 of this agreement,
unless we agree I may keep it at another location. If the property is to be used
in another state, I will give you a list of those states. I will not try to sell
the property unless it is inventory or I receive your written permission to do
so. If I sell the property I will have the payment made payable to the order of
you and me.

     You may demand immediate payment of the debt(s) if the debtor is not a
natural person and without your prior written consent (1) a beneficial interest
in the debtor is sold or transferred or (2) there is a change in either the
identity or number of members of a partnership or (3) there is a change in
ownership of more than 25 percent of the voting stock of a corporation.

     I will pay all taxes and charges on the property as they become due. You
have the right of reasonable access in order to inspect the property. I will
immediately inform you of any loss or damage to the property.

LIMITATIONS - This agreement will not secure a debt described in the section
entitled "Secured Debts" on page 1:
     1) if you fail to make any disclosure of the existence of this security
        interest required by law for such other debt;
     2) if this security interest is in my principal dwelling and you fail to
        provide (to all persons entitled) any notice of right or rescission
        required by law for such other debt;
     3) to the extent that this security interest is in "household goods" and
        the other debt to be secured is a "consumer" loan (as those terms are
        defined in applicable federal regulations governing unfair and deceptive
        credit practices);
     4) if this security interest is in margin stock subject to the requirements
        of 12 C.F.R. Section 207 or 221 and you do not obtain a statement of
        purpose if required under these regulations with respect to that debt;
        or
     5) if this security interest is unenforceable by law with respect to that
        debt.

PURCHASE MONEY SECURITY INTEREST - For the sole purpose of determining the
extent of a purchase money security interest arising under this security
agreement: (a) payments on any non-purchase money loan also secured by this
agreement will not be deemed to apply to the purchase money loan, and (b)
payments on the purchase money loan will be deemed to apply first to the
non-purchase money portion of the loan, if any, and then to the purchase money
obligations in the order which the items of collateral were acquired or if
acquired at the same time, in the order selected by you. No security interest
will be terminated by application of this formula. "Purchase money loan" means
any loan the proceeds of which, in whole or in part, are used to acquire any
collateral securing the loan and all extensions, renewals, consolidations and
refinancings of such loan.

AUTHORITY OF SECURED PARTY TO MAKE ADVANCES AND PERFORM FOR DEBTOR -  I agree to
pay you on demand any sums you advanced on my behalf including, but not limited
to, expenses incurred in collecting, insuring, conserving, or protecting the
property or in any inventories, audits, inspections or other examinations by you
in respect to the property. If I fail to pay such sums, you may do so for me,
adding the amount paid to the other amounts secured by this agreement. All such
sums will be due on demand and will bear interest at the highest rate provided
in any agreement, note or other instrument evidencing the Secured Debt(s) and
permitted by law at the time of the advance.

     If I fail to perform any of my duties under this security agreement, or any
mortgage, deed of trust, lien or other security interest, you may without notice
to me perform the duties or cause them to be performed. I understand that this
authorization includes, but is not limited to, permission to: (1) prepare, file,
and sign my name to any necessary reports or accountings; (2) notify any account
debtor of your interest in this property and tell the account debtor to make the
payments to you or someone else you name, rather than me; (3) place on any
chattel paper a note indicating your interest in the property; (4) in my name,
demand, collect, receive and give a receipt for, compromise, settle, and handle
any suits or other proceedings involving the collateral; (5) take any action you
feel is necessary in order to realize on the collateral, including performing
any part of a contract or endorsing it in my name; and (6) make an entry on my
books and records showing the existence of the security agreement. Your right to
perform for me shall not create an obligation to perform and your failure to
perform will not preclude you from exercising any of your other rights under the
law or this security agreement.

INSURANCE - I agree to buy insurance on the property against the risks and for
the amounts you require and to furnish you continuing proof of coverage. I will
have the insurance company name you as loss payee on any such policy. You may
require added security if you agree that insurance proceeds may be used to
repair or replace the property. I will buy insurance from a firm licensed to do
business in the state where you are located. The firm will be reasonable
acceptable to you. The insurance will last until the property is released from
this agreement. If I fail to buy or maintain the insurance (or fail to name you
as loss payee) you may purchase it yourself.

WARRANTIES AND REPRESENTATIONS - If this agreement includes accounts, I will not
settle any account for less than its full value without your written permission.
I will collect all accounts until you tell me otherwise. I will keep the
proceeds from all the accounts and any goods which are returned to me or which I
take back in trust for you. I will not mix them with any other property of mine.
I will deliver them to you at your request. If you ask me to pay you the full
price on any returned items or items retaken by myself, I will do so.

     If this agreement covers inventory, I will not dispose of it except in my
ordinary course of business at the fair market value for the property, or at a
minimum price established between you and me.

     If this agreement covers farm products I will provide you, at you request,
a written list of the buyers, commission merchants or selling agents to or
through whom I may sell my farm products. In addition to those parties named on
this written list, I authorize you to notify at your sole discretion any
additional parties regarding your security interest in my farm products. I
remain subject to all applicable penalties for selling my farm products in
violation of my agreement with you and the Food Security Act. In this paragraph
the terms farm products, buyers, commission merchants and selling agents have
the meanings given to them in the Federal Food Security Act of 1985.

DEFAULT - I will be in default if any one or more of the following occur: (1) I
fail to make a payment on time or in the amount due; (2) I fail to keep the
property insured, if required; (3) I fail to pay, or keep any promise, on any
debt or agreement I have with you; (4) any other creditor of mine attempts to
collect any debt I owe him through court preceedings; (5) I die, am declared
incompetent, make an assignment for the benefit of creditors, or become
insolvent (either because my liabilities exceed my assets or I am unable to pay
my debts as they become due); (6) I make any written statement or provide any
financial information that is untrue or inaccurate at the time it was provided;
(7) I do or fail to do something which causes you to believe that you will have
difficulty collecting the amount I owe you; (8) I change my name or assume an
additional name without first notifying you before making such a change; (9)
failure to plant, cultivate and harvest crops in due season; (10) if any loan
proceeds are used for a purpose that will contribute to excessive erosion of
highly erodible land or to the conversion of wetlands to produce an agricultural
commodity, as further explained in 7 C. F. R. Part 1940, Subpart G, Exhibit M.

REMEDIES - If I am in default on this agreement, you have the following
remedies:
     1) You may demand immediate payment of all I owe you under any obligation
        secured by this agreement.
     2) You may set off any obligation I have to you against any right I have to
        the payment of money from you.
     3) You may demand more security or new parties obligated to pay any debt I
        owe you as a condition of giving up any other remedy.
     4) You may make use of any remedy you have under state or federal law.
     5) If I default by failing to pay taxes or other charges, you may pay them
        (but you are not required to do so). I will repay to you the amount you
        paid plus interest at the highest contract rate.
     6) You may require me to gather the property and make it available to you
        in a reasonable fashion.
     7) You may repossess the property and sell it as provided by law. You may
        repossess the property so long as the repossession does not involve a
        breach of the peace or an illegal entry onto my property. You may sell
        the property as provided by law. You may apply what you receive from the
        sale of the property to: your expenses; your reasonable attorneys' fees
        and legal expenses (where not prohibited by law); any debt I owe you. If
        what you receive from the sale of the property does not satisfy the
        debts, you may take me to court to recover the difference (where
        permitted by law).
        I agree that 10 days written notice sent to my address listed on page 1
        by first class mail will be reasonable notice to me under the Uniform
        Commercial Code.
        If any items not otherwise subject to this agreement are contained in
        the property when you take possession, you may hold these items for me
        at my risk and you will not be liable for taking possession of them.
     8) In some cases, you may keep the property to satisfy the debt. You may
        enter upon and take possession of all or any part of my property, so
        long as you do not breach the peace or illegally enter onto the
        property, including lands, plants, buildings, machinery, and equipment
        as may be necessary to permit you to manufacture, produce, process,
        store or sell or complete the manufacture, production, processing,
        storing or sale of any of the property and to use and operate the
        property for the length of time you feel is necessary to protect your
        interest all without payment or compensation to me.

     By choosing any one or more of these remedies, you do not waive your right
to later use any other remedy. You do not waive a default if you choose not to
use any remedy, and by electing not to use any remedy, you do not waive your
right to later consider the event a default and to immediately use any remedies
if it continues or occurs again.

FILING - A carbon, photographic or other reproduction of this security agreement
or the financing statement covering the property described in this agreement may
be used as a financing statement where allowed by law. Where permitted by law,
you may file a financing statement which does not contain my signature, covering
the property secured by this agreement.

CO-MAKERS - If more than one of us has signed this agreement, we are all
obligated equally under the agreement. You may sue any one of us or any of us
together if this agreement is violated. You do not have to tell me if any term
of the agreement has not been carried out. You may release any co-signer and I
will still be obligated under this agreement. You may release any of the
security and I will still be obligated under this agreement. Waiver by you of
any of your rights will not affect my duties under this agreement. Extending
this agreement or new obligations under this agreement will not affect my duty
under the agreement.Exhibit 10.1

                                PURCHASE CONTRACT
                                -----------------
                        (The Meadows-Phase II, Section I)

         THIS  AGREEMENT  made and  entered  into this 14th day of August  1997,
between  CORNERSTONE  REALTY  GROUP,  INC. or its nominee,  (hereinafter  called
"Purchaser") and MERIDIA/NEW LEICESTER,  LLC, a South Carolina limited liability
company, (hereinafter called "Seller").

                                    ARTICLE I
                                  THE PROPERTY

         1.1 Sale of Property.  Seller agrees to construct, sell and convey, and
Purchaser agrees to purchase, Seller's real property known as SECTION 1 OF PHASE
II OF THE MEADOWS  APARTMENTS  located in ASHEVILLE,  NC, with all buildings and
improvements  located thereon,  as more  particularly  described in the attached
legal  description  in EXHIBIT A  (approximately  13.39  acres,  which  shall be
mutually  agreed  upon  by  the  parties)  including,  but  not  limited  to 168
individually heated and air conditioned apartment units, with all appurtenances,
together  with  all  appliances,  drapes,  carpeting,  shrubbery  and all  other
personal property used in connection with the premises, including, the inventory
of personal  property to be supplied by Seller and attached  hereto as EXHIBIT B
(all such real and personal property hereinafter collectively referred to as the
"Property" unless the context clearly indicates otherwise).

         1.2  COMPLETE  CONSTRUCTION.  It is  understood  that  the  units to be
transferred as set forth in Paragraph 1.1 have not as yet been constructed.  The
Seller  agrees to file with the City of Asheville  within 60 days a set of Plans
and  Specifications,  as  exhibited to and  approved by the  Purchaser,  for the
construction  of not less than 168 units.  In the event that less than 168 units
are  approved  by the City of  Asheville,  then the price set forth  hereinafter
shall be adjusted accordingly.

         1.3  SECTION  2. It is  understood  that the  balance  of the  Property
remaining  after the  construction  of the 168 units and the amenities  shall be
used for the  construction  of an  additional  48 units.  The Seller agrees that
these units shall be constructed similar to the units completed in Section 1. In
the event that the Seller,  within one (1) year after the  completion of Section
1, does not commence  the  construction  and/or  enter into a contract  with the
Purchaser  to  construct  said  units,  it agrees to sell the vacant land to the
Purchaser  for One ($1.00)  Dollar with no further  obligation  by either  party
under this  Agreement.  This clause  shall  survive the delivery of the Deed for
Section 1.

         1.4  DESIGN.  The  design of the  project  would be as set forth in the
Plans  attached  hereto as EXHIBIT C. (The intent being to construct as close to
the Plans used for North Town Apartments in Spartanburg,  South Carolina,  a 204
unit project.)

<PAGE>

                  (A) The Purchaser and the Seller in the interest of expediting
the signing of this Agreement and clarifying their  understanding have agreed to
use the following procedure to effectuate Paragraph 1.4:

                  It is  understood  that the Seller is  currently  in the final
stages of getting municipal  approval of the Plans (Exhibit C), which may or may
not be attached to this Agreement.  However, the Seller agrees to deliver to the
Purchaser a set of Plans as approved by the municipality within thirty (30) days
from the date of this  Agreement and the  Purchaser  shall then have thirty (30)
days after the  delivery of Exhibit C in which to either  reject or approve said
Plans. Unless specifically  stated, this shall not affect any other part of this
Agreement  and the  Letter of Credit  set  forth in  Paragraph  2.2 shall not be
effective until the Plans are approved.

         1.5  LAND  CONTRACT.  It is  understood  that  simultaneously  with the
execution of this  Agreement,  the Seller herein shall purchase  certain land as
set forth in the contract attached hereto as EXHIBIT D ("the Land Contract"). In
the event that this Agreement and the attached  agreement are not simultaneously
executed  and the  purchase of the land  completed  as set forth in the attached
contract, this Agreement shall be terminated and the Purchaser shall be relieved
of any obligation hereunder.

         1.6  PURCHASER'S  OPTION.  Subject  to Force  Majeure  (as  hereinafter
defined), in the event that the construction is not completed by a date eighteen
(18) months after the acquisition of the Property,  the Purchaser shall have the
option to  terminate  this  agreement  or extend  the terms on a  month-to-month
basis.

         1.7  CONSTRUCTION  AGREEMENT.  Seller  shall  exhibit the  construction
agreement  to  the  Purchaser  prior  to the  execution  thereof  including  the
requirement set forth in Paragraph 7.2(S).

         1.8 UNITS.  Upon  completion,  Seller shall  deliver a  Certificate  of
Occupancy for 168 Units.

                                   ARTICLE II
                            PAYMENT OF PURCHASE PRICE

         2.1 PURCHASE  PRICE.  The total  purchase  price shall be EIGHT MILLION
THREE HUNDRED FIFTY THOUSAND  ($8,350,000)  DOLLARS as evidenced by cash or cash
equivalent at closing.

         2.2  DEPOSIT.  A Letter of Credit in the  amount of ONE  HUNDRED  FIFTY
THOUSAND  ($150,000)  DOLLARS to be placed in escrow upon the execution  hereof.
Said Letter of Credit shall be delivered to The Title Company of North  Carolina
in Raleigh or its  authorized  agent as an earnest  money  deposit  which at the
Purchaser's  option may be credited against the purchase price or applied as per
Article XI below. In the event of a default, Article IX shall apply.

                                       2
<PAGE>

                                   ARTICLE III

                                  TITLE MATTERS

         3.1 MARKETABLE TITLE. Seller, shall convey good and marketable title by
Special  Warranty  Deed,  subject only to general taxes for the current year not
yet due and  payable  and  matters  of title and  Survey,  which  Purchaser  has
approved  pursuant to the Land  Contract and such other matters as Purchaser may
approve in writing.

                  (A) Title  shall be free  from any and all liens or  mortgages
and Seller  shall be  responsible  for any  prepayment  penalties  necessary  to
deliver such free title.

         3.2 TITLE DEFECTS;  ELECTION TO CURE. Seller shall furnish to Purchaser
a commitment for Title  Insurance sixty (60) days prior to the closing date (the
commitment). If title is not marketable, except as stated above in the preceding
paragraph,  Purchaser  shall  give  written  notice of any  defects  in title to
Seller's  counsel within thirty (30) days after  Purchaser's  receipt of a title
report which report shall  include  copies of backup  documents  relating to any
title  exceptions,  a current survey,  a flood zone  certification  letter and a
Surveyor's  Certification  letter.  Seller may, at its option,  elect whether to
cure said defects or by written  notice to Purchaser  indicate its intention not
to cure. The commitment shall be furnished without cost to Purchaser, except and
unless  Purchaser  obtains a policy.  Seller will provide  Purchaser with an "as
built" Survey updated to completion of construction  to the extent  available to
Seller without incurring additional cost.

         3.3 ELECTION NOT TO CURE DEFECTS. Should Seller elect not to cure title
defects, this Agreement,  at Purchaser's option, shall be void; each party shall
thereupon be released from all obligations hereunder;  and all deposits shall be
immediately  returned to Purchaser.  However,  Purchaser  shall have the further
option to remedy the title  defects and  receive a credit for any  expenditures,
including professional fees, at time of closing.

                                   ARTICLE IV
                                   PRORATIONS

         4.1 INCOME AND EXPENSE ALLOCATIONS. The following shall be prorated, on
a  calendar-month  basis, to the 1st day of the month of the closing:  rents and
other income from the Property;  operating  expenses (on such service  contracts
and other  obligations  as Purchaser may agree to assume);  and general and real
property taxes and personal and business  property taxes for the year of closing
(based on the most recent assessment and the most recent levy).

         4.2 CLOSING COSTS. Purchaser and Seller shall pay their customary share
of all  taxes,  recording  fees,  if any,  imposed  on the  Deed,  or any  other
documents  executed in connection  with the transfer of the Property.  Purchaser
agrees to pay cost of title insurance.  Seller shall pay any prepayment  penalty
charged by the holders of any existing notes.

         4.3  ALLOCATION  OF RENTS.  Rents  collected by Seller prior to Closing
shall be prorated as agreed in 4.1 above.  Purchaser  shall apply rents received
after  Closing  first to payment of the current rent due to  Purchaser,  then to
delinquent  rents  due to  Purchaser,  and last to rents due to Seller as of the
Closing but uncollected  prior to settlement.  Purchaser  agrees to use its best
efforts

                                       3
<PAGE>

in good faith to  collect  the amount of any rental  arrears  from  tenants  and
Purchaser  agrees to remit promptly to Seller any such arrears  actually paid by
such  tenants to  Purchaser.  Seller  shall  retain the right to commence  legal
action against a tenant for any delinquent rent apportioned to the Seller.

         4.4 PRIOR LEASE CONCESSIONS.  Seller shall pay to Purchaser,  in a lump
sum at  closing,  all  future  monetary  concessions  which  Seller has given to
tenants under leases existing at the time of closing, if any.

                                    ARTICLE V
                           POSSESSION OF THE PROPERTY

         5.1  POSSESSION.  Possession  of the  Property  shall be  delivered  to
Purchaser at closing, subject to the rights of the tenants under existing leases
and rental agreements.

                                   ARTICLE VI
                         CONDITIONS PRECEDENT TO CLOSING

         6.1 CONDITIONS PRECEDENT.  Purchaser's  obligation to purchase shall be
subject to and  contingent  upon the  satisfaction  of the following  conditions
precedent:

                  (A) Receipt by Purchaser at Seller's expense of (i) the design
architect's certification confirming that Seller has substantially completed its
improvements  for the  Property in  accordance  with the  agreed-upon  Plans and
Specifications  subject only to an immaterial "punch list" attached hereto;  and
(ii) an updated  Phase 1  environmental  review  with  respect  to the  Property
recommending no further environmental evaluation.

                  (B)  Completion  by  the  Seller  of the  construction  of the
premises as per the Plans and Specifications  attached hereto as Exhibit C or as
agreed to between Seller and Purchaser, as required under Paragraph 1.2.

                  (C) The receipt by Purchaser of Seller documents  described in
7.2 below.

                  (D)  On  the  condition  that  Sellers   representations   and
warranties described in Article VIII below remain materially true and correct.

                  (E) On the condition  that the Property and all leases conform
and agree with the schedules contained herein.

                  (F) Seller  acknowledges that Purchaser is a public entity and
that it is  required  to furnish  financial  statements  to the  Securities  and
Exchange  Commission in connection with this acquisition.  Seller agrees to make
the information available for Purchaser to audit the last 12 months of operation
of the Property so that a report can be  generated  that is in  compliance  with
accounting Regulation S-X of the Securities and Exchange Commission.

                                       4
<PAGE>

                  (G) Survey  which  shall show no  encroachments  onto the Land
from any adjacent  property,  no encroachments by or from the Land onto adjacent
property and no violation of or encroachments  upon any recorded building lines,
restrictions or easements  affecting the Property.  If the Survey  discloses any
such encroachment or violation,  Seller shall have sixty (60) days from the date
of delivery of the Survey (with a commensurate extension of the closing date) to
have the Title Insurer issue its endorsement  insuring  against damage caused by
such encroachment or violation and to provide evidence thereof to Purchaser, and
if Seller  fails to or is unable to have the same  insured  against  within such
sixty (60) day period,  Purchaser  may elect,  on or before the Closing Date, to
(i) terminate  this Agreement (in which case the Earnest Money shall be returned
to Purchaser)  and neither party shall have any further  liability or obligation
to the  other  hereunder,  or (ii)  accept  the  property  subject  to any  such
encroachment or violation.

         6.2  INSPECTION.  This  Agreement  shall  be  further  subject  to  and
contingent upon Purchaser's  satisfactory inspection as follows herein below. It
is understood  that the Inspection  Period shall commence upon  notification  by
Seller that it has  substantially  completed its obligation to construct,  rent,
etc. and is giving Purchaser notice that it will close within a specific time.

         6.2.1  PREPARATION FOR INSPECTION.  Upon substantial  completion of the
Property (substantial completion shall be certified by the architect or engineer
that  Seller and  Purchaser  have agreed upon as the  authority),  Seller  shall
deliver to  Purchaser  copies of the  following:  The current  rent roll for the
Property;  detailed  statements  of income  and  expenses  with  respect  to the
Property  for the past two years;  the most  recent tax bills for the  Property;
utility bills for the Property since initial  occupancy;  all insurance policies
applicable  to  the  Property  to  include  loss  runs;   "as-built"  Plans  and
Specifications for the Property,  service contracts,  Certificates of Occupancy,
to the extent reasonably  available;  a copy of the title policy and most recent
survey for the Property.  A copy of any environmental or engineering  reports on
the  property,  if any.  All  these  items  shall be  certified  by Seller to be
accurate  and  complete to the best of its  knowledge  and belief.  In addition,
Seller shall deliver a "notice of time for final inspection".

         6.2.2  INSPECTION  OF  BOOKS  AND  RECORDS;  ACCESS.  Upon  receipt  by
Purchaser  of the  notice and all  documents  requested  in the above  paragraph
6.2.1, Purchaser, its employees,  agents and contractors shall have 14 days (the
"Inspection  Period")  to enter upon the  Property  subject to the rights of the
tenants  during  normal  business  hours  for the  purpose  of  making  physical
inspections  thereof,  including  but not  limited to roofs,  heating,  cooling,
electrical  and plumbing  systems,  swimming  pool,  appliances,  and structural
elements of the buildings.  Upon the  conclusion of the  Inspection  Period this
contract  shall be deemed ready for Closing,  except as it may be  terminated by
other provisions and conditions  contained herein,  including but not limited to
the condition imposed by Paragraph 6.1(A) above.

                                       5
<PAGE>

         6.2.3 RIGHT OF TERMINATION  DURING INSPECTION  PERIOD.  Purchaser shall
also be permitted to review all original leases,  expense records,  tenant cards
and occupancy data  available.  If Purchaser is not  satisfied,  in its sole and
exclusive  discretion,  with the state of maintenance and repair of the Property
or the rents,  occupancy  or  expenses  of the  Property,  then  notwithstanding
anything  contained  herein to the contrary,  Purchaser  shall have the right to
adjourn  the  Closing  called  for in  this  Agreement  until  such  time as the
conditions  have been met by giving  written  notice to Seller before the end of
the Inspection Period or as an alternative,  the Purchaser shall have the option
to close with an adjustment of the Purchase Price.

         6.2.  "RENT READY".  During the  "Inspection  Period",  both Seller and
Purchaser will inspect an apartment unit at the Property and mutually agree that
said apartment shall be representative of a "rent ready" unit by which all other
units  shall be  judged  for "rent  ready"  condition  at  closing.  All  vacant
apartment units,  are to be in a "rent ready"  condition (as defined above),  at
the time of closing,  containing,  but not limited to the  following  amenities,
i.e.,  carpet,  refrigerator,  range,  garbage disposal,  heating,  plumbing and
electrical systems.

                  6.2.5 CONDITION OF PERSONAL PROPERTY AT CLOSING.  All personal
property  included  in the sale and all  mechanical,  electrical,  heating,  air
conditioning,  sewer,  water and plumbing systems will be materially in the same
working order at the time of closing and in the same condition as at the time of
the initial inspection by Purchaser.  If Seller fails to make reasonable efforts
to  conserve  the  property,  Purchaser  shall have the  option of waiving  such
requirement,  in  writing,  and  proceeding  to  closing,  or elect to receive a
financial adjustment at Closing to make any required repairs or modification.

                  6.2.6. NEW LEASES. Seller agrees to submit a monthly report to
Purchaser setting forth all new leases entered into attaching a copy of all such
new leases and showing that all minimum lease  qualifications  have been adhered
to as set forth in the attached  EXHIBIT E. Purchaser's sole remedy for Seller's
failure to comply with the  minimum  lease  qualifications  will be a ground for
cancellation  of this  Agreement by the Purchaser with the return of the deposit
or proceed to closing with an adjustment to the Purchase Price to compensate the
Purchaser for Seller's failure to comply.

                  6.2.7 RESULTS OF INSPECTION.  Purchaser shall prepare a "punch
list" as a result of its  inspection of the Property and Seller shall have up to
thirty (30) days with which to cure the deficiencies  noted in the "punch list".
If Seller, in Purchaser's  reasonable opinion,  fails to cure all or some of the
items on the "punch list",  Purchaser may correct the deficiencies which are not
cured and deduct the cost to cure from the  purchase  price of the  Property  at
time of Closing or shall  receive a deduction  for work to be done post  Closing
and sufficient escrow to correct the deficiencies on the "punch list".

                                       6
<PAGE>

                                   ARTICLE VII
                                     CLOSING

         7.1      CLOSING.

                  (A) Closing shall take place within thirty (30) days after the
following conditions shall have occurred:

                           (i)  Occupancy of the premises  shall be no less than
eighty-five  (85%)  percent  under the terms and  conditions as set forth in the
aforesaid Exhibit E, or 143 units (occupancy rate defined as physically occupied
units plus  pre-leased  units minus  notices to vacate)  with actual  annualized
rental on day of closing of $1,077,936.

                           (ii)  The  receipt  of  the  substantial   completion
Certificate  pursuant  to  Article  6.1(A)  unless the  municipality  requires a
Certificate of Occupancy for rental of each unit.

                           (iii) All of the  occupied  units  shall be leased at
such rents and without any rental  concessions which carry future monetary value
and said rent shall be no less than those outlined in EXHIBIT F.

                           (iv) The rent  roll  shall  indicate  that the  gross
annual potential rent shall not be less than $1,260,960.

                           (v) All tenants  executing a lease  subsequent to the
date of this  Agreement  shall  have been  qualified  for  rental  using  credit
qualifications that are not less than those outlined in Exhibit E.

                  (B) In the event that all of the occurrences do not transpire,
which would trigger the closing date as set forth above, the Purchaser may grant
an extension or series of extensions  to allow the events to  transpire,  or the
Purchaser  may waive any or all of the  conditions  and give  fifteen  (15) days
notice for a closing  date. In the event Closing does not occur on a date thirty
(30) months after the date of this  Contract,  either party may  terminate  this
purchase  agreement,  without  penalty,  and the deposit will be returned to the
Purchaser.  However,  the  Purchaser  at its option may accept  delivery  of the
premises with an adjustment of the Purchase Price.

         7.2 SELLER'S DELIVERIES.  At closing,  Seller shall execute and deliver
to Purchaser  the Special  Warranty  Deed  referred to in Paragraph 3 hereof and
shall also execute, where necessary, and deliver to Purchaser, the following:

                  (A) A Bill of Sale,  with warranty of title  transferring  the
personal  property  (as shown in  Schedule  B) to  Purchaser  free of all liens,
charges and encumbrances.

                  (B)  Originals  or  copies of all  signed  leases  and  rental
agreements in effect with tenants of the Property.

                                       7
<PAGE>

                  (C) All security  deposits made by such  tenants.  Seller will
give the tenants the required  notice of such  transfer in  compliance  with the
laws of NORTH CAROLINA.

                  (D) An  affidavit  of Seller  in such  form as will  cause the
Title Company to omit from the title insurance policy the exclusion  relating to
unrecorded mechanic's and materialmen's liens.

                  (E) A rent roll  certified by Seller to be true and correct as
of the date of closing  showing  the name of,  and the amount of monthly  rental
payable,  by each tenant of the Property,  the apartment occupied by the tenant,
the date to which  rent has been paid,  any  advance  payment  of rent,  and the
amount of any escrow, or security deposit of tenant.

                  (F) An affidavit of Seller that to the best of its information
and  belief  there  are,  on the  date of  closing,  no  unsatisfied  judgments,
creditor's claims, tax liens, or pending bankruptcies involving Seller.

                  (G)  Seller  shall  provide,  a  certificate  from a  licensed
extermination  contractor,  who is  regularly  engaged in the  business  of pest
control,  that all  buildings  are free from any  termite  or other  wood-boring
insect  infestation.  Said certificate shall be dated within 90 days of closing,
bearing the Contractor's name,  contractors license number, the signature of the
party  authorized  to sign for the  Contractor  and the date of the  inspection.
Should damage exist,  Seller shall proceed to have any corrective work completed
prior to closing or Purchaser,  at its option,  may either proceed to settlement
and have such sums  required for repairs  deducted from  Seller's  proceeds,  or
leave sufficient funds in escrow to clear up damage.

                  (H) Assignments of all Seller's interest in the following: (1)
all assignable licenses,  and permits relating to the operation of the Property,
(2) the leases and  rental  agreements  with  tenants of the  Property,  (3) the
existing  Property  telephone  number and (4) the business and trade name as set
forth in Par. 1.1.

                  (I) Assignments of all warranties and guarantees to the extent
such  are  still  in  effect  and  provide  Purchaser  with  copies  of all such
warranties and guarantees  without  limitation for all appliances,  dishwashers,
disposals,  refrigerators,  heating  and air  conditioning  units,  washers  and
dryers.

                  (J) Evidence  satisfactory to Purchaser that all water, sewer,
gas,  electric,  telephone,  and  drainage  facilities  and all other  utilities
required by law or by the normal use and  operation  of the  Property are and at
the time of closing will be installed to the property  line, are and at the time
of closing will be connected pursuant to valid permits,  and are and at the time
of closing  adequate to service the Property and to permit full  compliance with
all  requirements of law and normal usage of the Property by the tenants thereof
and their licensees and invitees.

                                       8
<PAGE>

                  (K) Consent of the Seller's  authorized officer to the sale of
the  Property  and any other  approvals  required  under  Seller's  articles  or
by-laws, which may affect Seller's ability to convey marketable title.

                  (L)  Provide  documents  for the  transfer  of the  telephone,
electric, water and sewer, and gas utilities, as may be required by the utility,
for execution at closing.

                  (M) Satisfactory evidence of the power and authority of Seller
to enter into and consummate this agreement, including but not limited to:

                           (i)  An  opinion  of  Seller's  counsel,  in  a  form
satisfactory to Purchaser, stating that:

                                    (a) The individual(s) executing the deed and
related  documents  are duly  authorized to do all such acts as are necessary to
consummate this sale, without further consent of any other party.

                                    (b) That  the  member  can bind the  limited
liability company.

                  (N)  Affidavit  that  Seller  has no actual  knowledge  of the
presence of asbestos and/or any other hazardous material at the Property.

                  (O) Seller  shall  provide a  satisfactory  and valid  written
termination of the management  agreement executed by the existing management and
rental agent for the Property, without cost to the Purchaser.

                  (P) A notice  letter  to all the  residents  of the  apartment
complex as to change of ownership in the form prepared by the Purchaser.

                  (Q) All such other  documents as are normally  transferred  at
settlement  in  the  jurisdiction  in  which  the  property  is  located  or are
reasonably requested by Purchaser or its counsel.

                  (R) A representation  letter as normally  required by auditors
for a public company in the form attached hereto as EXHIBIT G. This clause shall
survive closing for one year.

                  (S) Seller shall deliver an  assignment  of all  warranties by
the  contractor  and Seller  agrees to insert a clause in its contract  with the
contractor  stating as a minimum the  following:  That the Seller and contractor
agree  that for (i) one (1) year  after  occupancy,  or (ii) one (1) year  after
issuance  by  the  architect  of  the  architect's  certificate  of  substantial
completion  and the  receipt  of all final  certificates  of  occupancy  for any
building,  whichever  shall first  occur,  contractor  shall make all  necessary
repairs  to  the  buildings   within  the  project   arising  out  of  defective
construction or building materials or any unapproved  substantial deviation from
the plans and  specifications.  All other  improvements shall be warranted for a
period  of one (1) year  commencing  with  Purchaser's  use of same,  such  that
contractor shall make all necessary repairs

                                       9
<PAGE>

to  those  improvements  arising  out  of  defective  construction  or  building
materials.  This one-year  period does not establish a period of limitation with
respect to other obligations or the time within which a breach of this agreement
may be enforced.

         7.3 PURCHASER'S  DELIVERIES.  At closing and contemporaneously with the
Seller's compliance with the provisions of Section 7.2, Purchaser shall:

                  (A) Pay to Seller  in cash or other  good  funds the  purchase
price  due less the  Deposit  in  escrow,  adjusted  for the  prorations  herein
provided for in Article IV.

                  (B) Execute and deliver an  assumption  of  obligations  under
leases,  any  contracts  which may be  accepted by the  Purchaser  and any other
obligations specifically set forth herein.

                  (C) Deliver to the Seller a resolution of the Purchaser that:

                           (i) This Agreement has been duly authorized, executed
and  delivered  by the  Purchaser  and  is a  valid  and  binding  agreement  of
Purchaser, and

                           (ii) Purchaser has complete unrestricted power to buy
the Property from the Seller and to execute any documents required to effectuate
the transfer.

                                  ARTICLE VIII
               SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS

         8.1  REPRESENTATIONS OF THE PARTIES.  Seller warrants (which warranties
shall not survive  settlement  unless designated to the contrary) that as of the
date of closing hereof:

                  (A) That  Seller,  is the owner in fee simple of the  Property
and has the power to convey same.

                  (B) That  Seller is not  subject  to any other  agreements  or
arrangements, which would prevent Seller from selling the Property to Purchaser.
This warranty shall survive for one year following closing.

                  (C) All necessary action has been taken by Seller to authorize
the  execution  of  this  Agreement  and  the  performance  of  the  obligations
contemplated  hereunder.  This  warranty  shall  survive for one year  following
closing.

                  (D) Except as disclosed  to  Purchaser in writing,  Seller not
been advised in writing that it is in default under any lease,  rental agreement
service or equipment contract, or mortgage or other encumbrances relating to the
Property. This warranty shall survive for one year following closing.

                  (E)  Seller  has no actual  knowledge  of any patent or latent
defect in the Property or any part thereof.  This warranty shall survive for one
year following closing.

                                       10
<PAGE>

                  (F)  Seller  has  no  actual  knowledge  of  any  existing  or
threatened litigation which relates to or which would affect the Property.  This
warranty shall survive for one year following closing.

                  (G) All  building and other  improvements  at the Property are
located entirely within the boundary lines of the Property.

                  (H)  Seller  has no  actual  knowledge  that  any  part of the
Property or the  operation of the  Property,  is in violation or may violate any
governmental statute,  regulation,  ordinance or building code or of any private
restriction,  that any governmental authority requires any work to be done on or
affecting  the  Property,  or that any  governmental  authority has expressed an
intent  to  condemn  or to make  special  improvements  for the  benefit  of the
Property  or any  part  thereof.  That  Seller  will  receive  approval  for the
construction as set forth in this Agreement. This warranty shall survive for one
year following closing.

                  (I) That to the best  knowledge  of the Seller,  the  drainage
within the project complies in all respects with the agreed-upon  Plans approved
by the municipality. This warranty shall survive for one year following closing.

                  (J) That Seller is not a "foreign  person"  within the meaning
of the Internal  Revenue Code of 1954, as amended (the "Code"),  and that Seller
will furnish to Purchaser prior to closing an affidavit in form  satisfactory to
Purchaser confirming the same.

                  (K) That to the best of Seller's  knowledge,  the Property was
never utilized as a disposal site for hazardous  waste products and will furnish
to Purchaser an affidavit confirming same.

                  (L) Seller  covenants  and agrees  that,  between  the date of
initial  occupancy and the date of closing,  Seller shall maintain,  operate and
manage  the  Property  in a  professional  manner.  Seller  shall not permit the
modification,   extension  or  cancellation  of  any  tenant  lease  (except  in
accordance  with the terms of such lease) or any dealing  with any tenant  other
than the ordinary  course of managing the  Property,  without the prior  written
consent of  Purchaser.  If the leases of any tenants  expire  before thirty (30)
days after the date of  closing,  Seller  shall,  up to the date of closing  and
without  cost to the  Purchaser,  continue its normal  course of operation  with
respect to causing tenants to be obtained for apartments which are unrented.

         8.2  CONTINUATION OF  REPRESENTATIONS,  WARRANTIES AND COVENANTS TO THE
DATE OF CLOSING.  Subject to Seller's  right to notice and cure,  if each of the
warranties  set forth in this section  does not remain true up to and  including
the time of closing as to any material matters,  this Agreement,  at Purchaser's
election,  shall  be  terminated,  Seller  shall  return  all  payments  made by
Purchaser,  or  Purchaser  may elect to close the sale and waive  failure of the
warranties.

                                       11
<PAGE>

         8.3   BREACH   OF    REPRESENTATIONS,    WARRANTIES    AND   COVENANTS.
Notwithstanding  the provisions of 8.2 above,  Seller shall indemnify  Purchaser
for all  reasonable  direct,  out-of-pocket  costs  incurred  as a result of the
willful  failure of any of Seller's  representations,  warranties  or  covenants
contained herein to remain true as of the date of closing.

                                   ARTICLE IX
                           CONDEMNATION; RISK OF LOSS

         9.1 (A) SUBSTANTIAL LOSS. In the event that the Property or any portion
thereof is damaged or  destroyed  after the date hereof and prior to the Closing
resulting in a loss in excess of Two Hundred Fifty Thousand  ($250,000)  Dollars
(whether by fire, flood, or other casualty), the Purchaser may elect:

                           (i) to  terminate  this  Agreement  and  any  and all
obligations,  contractual or otherwise, to purchase the Property (and to receive
back the earnest money), by giving written notice to the Seller,  within fifteen
(15) days after receipt by the Purchaser of a written  notice from the Seller of
(1) such damage,  destruction  or taking and (2) the amount of the award paid or
payable with respect to such damage, destruction or taking; or

                           (ii) to  consummate  the  purchase  of the  Property,
without reduction of the Purchase Price.

If the Purchaser shall elect to consummate the purchase of the Property pursuant
to clause (ii) immediately preceding, the Seller shall, on the Closing Date, pay
to the Purchaser all insurance proceeds,  deductible, loss of rent insurance and
other payments in connection with such damage, destruction or taking theretofore
actually  received  by the Seller less any  amounts  reasonably  expended by the
Seller for any repairs,  and, in addition,  the Seller shall transfer and assign
to the  Purchaser  all rights of the Seller  with  respect to payments up to the
amount of the Purchase Price by or from and with respect to recovery against any
party  whomsoever  for  damages  or  compensation  on  account  of such  damage,
destruction or taking.

                  (B) LESS THAN SUBSTANTIAL LOSS. In the event that the Property
or any portion  thereof is damaged or destroyed  after the date hereof and prior
to the Closing resulting in a loss of less than Two Hundred Thousand  ($200,000)
Dollars (whether by fire, flood, or other casualty), the Seller may elect:

                           (i) to repair and  restore  the  Property  so that it
shall be in substantially the same condition as immediately prior to such damage
or destruction or taking, and the Closing shall be appropriately delayed; or

                           (ii) to consummate the sale of the Property,  without
reduction of the Purchase Price. If Seller shall elect to consummate the sale of
the Property pursuant to clause (ii) immediately  preceding,  the Seller, shall,
on the Closing Date, pay to the Purchaser all insurance awards, deductible, loss
of rent insurance and other payments in connection with such damage, destruction
or taking  theretofore  actually  received by the Seller up to the amount of the
Purchase

                                       12
<PAGE>

Price less any amounts reasonably  expended by the Seller for any repairs,  and,
in addition, the Seller shall transfer and assign to the Purchaser all rights of
the Seller  with  respect to  payments  by or from or with  respect to  recovery
against  any party  whomsoever  for damages or  compensation  on account of such
damage, destruction or taking.

                  (C) NOTICE OF DAMAGE. The Seller and/or Purchaser shall notify
the other party promptly upon the occurrence of any damage, destruction,  taking
or threat of taking  with  respect  to the  Property,  as well as the  amount of
insurance  coverage or condemnation  award or awards,  as applicable,  and shall
promptly give all other notices contemplated under this Section.

         9.2  CONDEMNATION.  In the event of any  actual or  threatened  taking,
pursuant to the power of eminent domain, all or any part thereof,  or any actual
or proposed sale in lieu thereof,  the Seller shall give written  notice thereof
to the Purchaser promptly after Seller learns or receives notice thereof. Upon a
taking of a material part of the Property (any part of the building or more than
5% of the  parking  area),  Purchaser  may elect to either  (a)  terminate  this
Agreement, in which event the Deposit shall be immediately returned to Purchaser
and all other rights and  obligations of the parties  hereunder  shall terminate
immediately,  or (b) to waive its right to terminate  this Agreement and proceed
to closing,  in which event all proceeds,  awards and other payments arising out
of such  condemnation  or  sale  (actual  or  threatened)  shall  be paid to the
Purchaser at closing,  if such payment has been  received or Seller shall assign
to Purchaser the rights to such payments.

         9.3 RISK OF LOSS.  Prior to  closing,  all  risks of loss or  damage by
every casualty shall be borne by the Seller.

                                    ARTICLE X
                               BROKER'S COMMISSION

         10.1  COMMISSION.  Seller  agrees  to pay a  brokerage  fee to  McGUIRE
PROPERTIES,  pursuant to a separate  agreement between Seller and Brokers.  Said
brokerage  fee  shall be  deemed  earned  if,  and only  if,  settlement  occurs
hereunder,  and shall not be  deemed  earned  even if  Purchaser  and/or  Seller
wrongfully  fail(s) to  consummate  the purchase  and sale herein  contemplated.
Purchaser  shall not be  obligated  for any  brokerage  fees to any broker,  and
Seller agrees to hold Purchaser  harmless in connection  with such fees.  Seller
and Purchaser  represent and warrant to each other that no other  brokerage fees
are or shall be owing in connection with this transaction or in any way with the
Apartments and Seller and Purchaser hereby indemnify and hold the other harmless
from any and all claims of any other person so claiming.

                                   ARTICLE XI
                                     DEFAULT

         11.1 DEFAULT  DEFINED.  Default for the purpose of this Agreement shall
mean any failure by Seller or Purchaser to fulfill all the terms, conditions and
covenants  contained  herein,  however,  it shall not be an event of default for
either party to exercise its rights to terminate  this  contract as contained in
other provisions herein.

                                       13
<PAGE>

         11.2 DEFAULT.  Upon either Seller's or Purchaser's  default,  the other
party, at its election, may either (1) require specific performance of the other
party, or pursue its other remedies at law or equity,  (2) cancel this Agreement
and Purchaser  shall obtain a prompt  return of the deposit,  in which case this
Agreement  shall be terminated  and the parties  released  from all  obligations
hereunder,  however,  upon  Purchaser's  default  and  the  termination  of this
Agreement, the Seller shall retain the deposit as liquidated damages, or (3) the
parties may waive such  defaults and proceed to  settlement.  The parties  shall
indemnify each other for any reasonable  costs incurred by them if they elect to
pursue their option (1) noted above, to include reasonable attorney fees.

                                   ARTICLE XII
                            MISCELLANEOUS PROVISIONS

         12.1  ENTIRE   AGREEMENT.   This   Agreement   sets  forth  the  entire
understanding  between the parties;  it supersedes  all previous  agreements and
representations which are deemed merged herein and may not be modified except in
writing.

         12.2  ASSIGNMENT.  Purchaser  may assign  this  Agreement  without  the
consent of Seller.

         12.3 SEVERABILITY.  If any provision,  sentence, phrase or word of this
Agreement or the application thereof to any person or circumstance shall be held
invalid,  the remainder of this Agreement or the  application of such provision,
sentence,  phrase, or word to persons or  circumstances,  other than those as to
which it is held invalid, shall remain in full force and effect.

         12.4 BINDING EFFECT.  The parties to the Agreement  mutually agree that
it shall be binding  upon and inure to the  benefit of their  respective  heirs,
representatives, successors in interest and assigns.

         12.5  CONTROLLING  LAW. It is the intent of the parties hereto that all
questions with respect to the  construction of this Agreement and the rights and
liabilities of the parties shall be determined in accordance with the provisions
of the laws of the State set forth in Par. 1.1.

         12.6  COUNTERPARTS.  To  facilitate  execution,  this  Agreement may be
executed in as many  counterparts as may be required.  It shall not be necessary
that the signature on behalf of both parties  hereto appear in each  counterpart
hereof,  and it shall be sufficient that the signature on behalf of both parties
hereto  appear  on  one  or  more  such  counterparts.  All  counterparts  shall
collectively constitute a single contract.

         12.7 INCORPORATION BY REFERENCE. All of the Exhibits referred to herein
and/or attached hereto shall be deemed to constitute a part of the Agreement.

         12.8  HEADINGS.  The headings of the  Articles and sections  hereof are
inserted for  convenience  only and shall not be deemed to  constitute a part of
the Agreement.

                                       14
<PAGE>

         12.9  CONSTRUCTION  OF CONTRACT.  Each party  hereto have  reviewed and
revised (or  requested  revisions of) this  Agreement,  and therefore the normal
rule  of  construction  that  any  ambiguities  are  to be  resolved  against  a
particular party shall not be applicable in the construction and  interpretation
of this Contract or any amendments or exhibits hereto.

         12.10  RETURN  OF  ESCROW.  Whenever  the  escrow  is  returned  to the
Purchaser, it shall include interest thereon.

         12.11  NOTICE AND CURE.  In the event (i) any  contingency  which would
permit  Purchaser to terminate this Agreement has not been satisfied and has not
been waived by  Purchaser,  or (ii) Seller is in default  under this  Agreement,
Purchaser shall deliver  written notice to Seller  specifying the contingency or
contingencies  which  have not been  satisfied  and/or  the  nature of  Seller's
default. Thereafter,  Seller shall have a period of thirty (30) days to cure the
unsatisfied contingency and/or the default.

         12.12 FORCE MAJEURE. Seller's performance hereunder shall be subject to
delays caused by reasons beyond the control of Seller which are generally deemed
to be matters of "force majeure".

         12.13 NO PARTNERSHIP.  The relationship between Purchaser and Seller is
strictly  that of contract  parties and shall not be deemed or construed to be a
partnership,  joint venture,  unincorporated  association  or a  principal/agent
relationship.

         12.14   CONFIDENTIALITY.   The  parties  shall  keep  confidential  the
existence  of  this  Agreement,  the  transactions  described  herein,  and  all
information  obtained  from the other  party both during and  subsequent  to the
transaction.  However, the covenants contained in this paragraph shall not apply
in respect to any  information  which (a) was already known to either party when
such information was received from the other,  (b) was readily  available to the
general public at the time of such receipt,  (c)  subsequently  becomes known to
the  general  public  through no fault or omission  by the other  party,  (d) is
subsequently  disclosed  by a third  party which has the bona fide right to make
such  disclosure,  or (e) is required to be disclosed  by law or a  governmental
agency. This clause shall survive closing.

         12.15 EXHIBITS.  The following  exhibits are attached to this Agreement
and are  incorporated  into this  Agreement  by this  reference  and made a part
hereof for all purposes:

                  (a)      EXHIBIT A, the legal description of the Land.
                  (b)      EXHIBIT B, list of personal property.
                  (c)      EXHIBIT C, Plans and Specifications.
                  (d)      EXHIBIT D, the Land Contract
                  (e)      EXHIBIT E, Minimum Lease Qualifications
                  (f)      EXHIBIT F, Rent Schedule
                  (g)      EXHIBIT G, Representation Letter

                                       15
<PAGE>

                                  ARTICLE XIII
                                     NOTICE

         13.1 Notice.  All notices  required or permitted to be given under this
Agreement  shall be in writing and shall be sent or delivered to the address set
forth below (or such other address as may be hereafter specified in writing):

           To Seller:                   Meridia/New Leicester, LLC
                                        c/o Meridia, Inc.
                                        P.O. Box 10528
                                        Greenville, SC  29603
                                        Attention:  John H. Crabtree, III
                                        Fax: (864) 232-8146

             With a copy to
             Seller's Attorneys:        Marion M. Goodyear, Esq.
                                        Suite 1102, NationsBank Plaza
                                        7 N. Laurens Street
                                        Greenville, SC   29601
                                        Fax:  (864) 271-6684

           To Purchaser:                Mr. Gus Remppies
                                        Cornerstone Realty Group, Inc.
                                        306 E. Main Street
                                        Richmond, VA  23219
                                        Fax:  (804) 782-9302

           With a copy to
           Purchaser's Attorneys:       Harry S. Taubenfeld, Esq.
                                        Zuckerbrod & Taubenfeld
                                        575 Chestnut St., P.O. Box 488
                                        Cedarhurst, NY   11516
                                        Fax:  (516) 374-3490

                                              -and-

                                        Ted Oliver, Esq.
                                        Manning, Fulton & Skinner
                                        500 UCB Plaza
                                        3605 Glenwood Avenue
                                        Raleigh, NC  27612

                                       16
<PAGE>

         13.2 DELIVERY OF NOTICE. Notices sent either by Registered or Certified
Mail,  Return Receipt  Requested,  or by overnight  express mail shall be deemed
given when deposited in the United States Mail, postage prepaid,  delivered to a
reliable  overnight  courier or by fax  transmission.  Notices sent in any other
manner  shall be deemed  given only when  actually  delivered  at the  specified
address.

         IN WITNESS  WHEREOF,  the Seller and the  Purchaser  have  caused  this
Agreement to be executed this day and date first written above.

SELLER:

MERIDIA/NEW LEICESTER, LLC

By:  /s/  John H. Crabtree, III
   ----------------------------
Its:   Member
   ----------------------------

PURCHASER:

CORNERSTONE REALTY GROUP, INC.

By:    /s/  S. J. Olander, Jr.
   ----------------------------
Its:   S. V. P.
   ----------------------------

                                       17

<PAGE>

                    FIRST MODIFICATION TO PURCHASE CONTRACT
                        THE MEADOWS-PHASE II, SECTION I

         THIS FIRST MODIFICATION TO PURCHASE CONTRACT  ("Modification")  is made
and entered into this 14 day of August,  1997 between  CORNERSTONE REALTY INCOME
TRUST, INC. ("Purchaser") and MERIDIA/NEW LEICESTER, LLC ("Seller").

         WHEREAS,  Purchaser and Seller  entered into a Purchase  Contract dated
the 14th day of August, 1997 ("Agreement"); and

         WHEREAS,  Purchaser  and  Seller  now  desire to  modify  and amend the
Agreement as set forth herein.

         NOW,  THEREFORE,  in  consideration  of the premises and the respective
agreement hereinafter set forth, Seller and Purchaser agree as follows:

         1. All  terms  not  specifically  defined  herein  shall  have the same
meaning as ascribed to them in the Agreement.

         2. ARTICLE XII is hereby modified to add the following Paragraph 12.18:

                  "12.18  ASSIGNMENT OF CONTRACT.  The parties agree that Seller
         shall have the right to obtain a  construction  loan and the  Purchaser
         agrees to permit the  assignment  of this  contract to a bank  ("Bank")
         pursuant  to  a  Tri-party  Agreement  ("the  Collateral  Assignment"),
         subject to the  protection  of Seller's  interests.  The parties  shall
         negotiate  in  reasonable  good faith  with  Seller's  Bank  during the
         contingency  period of the Land  Contract  to agree  upon the terms and
         conditions of the Collateral Assignment.  If a satisfactory  Collateral
         Assignment  is not  agreed  to by the  parties,  either  party,  at its
         election, may terminate this Agreement and the Land Contract prior to a
         date  thirty (30) days after the date of this First  Modification.  The
         Seller shall deliver (i) copies of its payment and  performance  bonds;
         and  (ii)  draw  requests  and lien  waivers  for all  contractors  and
         material subcontractors at every draw."

          3.  Except  as  herein  modified,  the  terms  and  provisions  of the
Agreement shall remain in full force and effect.

          4.  In  the  event  there  is  any  conflict  in  the  terms  of  this
Modification  and the terms of the  Agreement,  the  terms of this  Modification
shall govern.

         5. This Modification may be executed in separate counterparts,  each of
which  shall  be  deemed  an  original  and all of  which  taken  together  will
constitute one agreement between the parties hereto.

<PAGE>

         IN WITNESS WHEREOF,  the parties hereto have executed this Modification
on the date first above written.
                                                CORNERSTONE REALTY GROUP, INC.,
                                                    a Virginia Corporation

                                                By: /s/ S. J. Olander
                                                   -----------------------------
                                                Name: S.J. Olander
                                                     ---------------------------
                                                Its:  S.V.P.
                                                    ----------------------------

                                                MERIDIA/NEW LEICESTER, LLC

                                                By: /s/ John H. Crabtree III
                                                   -----------------------------
                                                Name: John H. Crabtree III
                                                     ---------------------------
                                                Its: Member
<PAGE>

                    SECOND MODIFICATION TO PURCHASE CONTRACT
                        THE MEADOWS-PHASE II, SECTION I

         THIS SECOND MODIFICATION TO PURCHASE CONTRACT  ("MODIFICATION") is made
and entered into this 31st day of August, 1998 between CORNERSTONE REALTY GROUP,
INC. ("PURCHASER") and MERIDIA/NEW LEICESTER, LLC ("SELLER").

         WHEREAS,  Purchaser and Seller  entered into an Agreement of Sale dated
the    day of July 1997 ("AGREEMENT"); and

         WHEREAS,  Purchaser  and Seller  entered into a First  Modification  to
Purchase Contract on the    day of August 1997; and

         WHEREAS,  Purchaser  and Seller now desire to further  modify and amend
the Agreement as set forth herein.

         NOW,  THEREFORE,  in  consideration  of the premises and the respective
agreements hereinafter set forth, Seller and Purchaser agree as follows:

         1. All  terms  not  specifically  defined  herein  shall  have the same
meaning as ascribed to them in the Agreement unless previously modified.

         2. ARTICLE II, Paragraph 2.1 PURCHASE PRICE, is hereby amended to read:

                  "The total  purchase price shall be EIGHT MILLION FOUR HUNDRED
         TWENTY FIVE THOUSAND  ($8,425,000) DOLLARS as evidenced by cash or cash
         equivalent at closing."

         3.  ARTICLE  XII  is  hereby  further  amended  to  add  the  following
Paragraph 12.19:

                   "12.19  ENGINEERING  AND  SUPERVISION  FEE.  Seller agrees to
         retain the services of Lidge Johnson as a  supervising  engineer and to
         pay for his services in the amount of SEVENTY FIVE  THOUSAND  ($75,000)
         DOLLARS."

         4. Except as herein modified, the terms and provisions of the Agreement
shall remain in full force and effect.

         4. In the event there is any conflict in the terms of this Modification
and the terms of the Agreement, the terms of this Modification shall govern.

         5. This Modification may be executed in separate counterparts,  each of
which shall be deemed an original and all of

<PAGE>

which taken together will constitute one agreement between the parties hereto.

         IN WITNESS WHEREOF,  the parties hereto have executed this Modification
on the date first above written.

                                                CORNERSTONE REALTY GROUP, INC.,
                                                    a Virginia Corporation

                                                By: /s/ Gus G. Remppies
                                                   -----------------------------
                                                Name: Gus G. Remppies
                                                     ---------------------------
                                                Its:  V.P.
                                                    ----------------------------

                                                MERIDIA/NEW LEICESTER, LLC

                                                By: /s/ John H. Crabtree III
                                                   -----------------------------
                                                Name: John H. Crabtree III
                                                     ---------------------------
                                                Its: Manager
                                                    ----------------------------

<PAGE>

                    THIRD MODIFICATION TO PURCHASE CONTRACT
                       (THE MEADOWS-PHASE II, SECTION I)

         This Third Modification to Purchase Contract  ("MODIFICATION")  is made
and entered into this 14th day of January 1999 between CORNERSTONE REALTY GROUP,
INC. ("PURCHASER") and ASHEVILLE APARTMENTS ASSOCIATES, LLC

         WHEREAS,  Purchaser and Seller entered into a Purchase  Contract on the
14th day of August 1997 ("AGREEMENT"); and

         WHEREAS,  Purchaser  and Seller  entered into a First  Modification  to
Purchase Contract on the 14th day of August 1997; and

         WHEREAS,  Purchaser and Seller  entered into a Second  Modification  to
Purchase Contract on the 31st day of August 1998; and

         WHEREAS,  Purchaser  and Seller now desire to further  modify and amend
the Agreement as set forth herein.

         NOW  THEREFORE,  in  consideration  of the premises and the  respective
agreements hereinafter set forth, seller and Purchaser agree as follows:

         1. All  terms  not  specifically  defined  herein  shall  have the same
meaning as ascribed to them in the Agreement unless previously modified.

         2.  ARTICLE II,  Paragraph  2.1,  which was  previously  amended by the
Second Modification, is hereby further amended to read:

                  2.1 PURCHASE  PRICE.  The total  purchase price shall be EIGHT
         MILLION  SEVEN  HUNDRED  SIXTY ONE  THOUSAND  ($8,761,000)  DOLLARS  as
         evidenced by cash or cash equivalent at closing.

3. ARTICLE VII. Paragraph 7.1(A)(i), is hereby amended to read as follows:

                  7.1(A)(i)  Occupancy  of the  premises  shall be no less  than

                                       1

<PAGE>

         seventy-five  (75%) percent under the terms and conditions as set forth
         in the  aforesaid  Exhibit F (as amended and attached  hereto),  or 126
         units  (occupancy  rate  defined  as  physically  occupied  units  plus
         pre-leased units minus notices to vacate) with actual annualized rental
         on day of closing of $1,007,640.

         4. Except as herein modified, the terms and provisions of the Agreement
shall remain in full force and effect.

         5. In the event there is any conflict in the terms of this Modification
and the terms of the Agreement, the terms of this Modification shall govern.

         6. This Modification may be executed in separate counterparts,  each of
which  shall  be  deemed  an  original  and all of  which  taken  together  will
constitute one agreement between the parties hereto.

         IN WITNESS WHEREOF,  the parties hereto have executed this Modification
on the date first above written.

                          CORNERSTONE REALTY GROUP, INC.,

                          By: /s/ Gus G. Remppies
                             -----------------------------
                          Name: Gus G. Remppies
                               ---------------------------
                          Its:  Vice-President
                              ----------------------------

                          MERIDIA/NEW LEICESTER, LLC

                          By: /s/ John H. Crabtree, III
                             -----------------------------
                          Name: John H. Crabtree, III
                               ---------------------------
                          Its: Manager
                              ----------------------------
                                       2

<PAGE>

                    FOURTH MODIFICATION TO PURCHASE CONTRACT
                      (THE MEADOWS - PHASE II, SECTION 1)

         This Fourth Modification to Purchase Contract  ("Modification") is made
and  entered  into this 18th day of October,  1999  between  CORNERSTONE  REALTY
GROUP, INC. ("Purchaser") and ASHEVILLE APARTMENTS ASSOCIATES, LLC ("Seller").

         WHEREAS,  Purchaser and Seller entered into a Purchase  Contract on the
14th day of August, 1997 ("Agreement"); and

         WHEREAS,  Purchaser  and Seller  entered into a First  Modification  to
Purchase Contract on the 14th day of August 1997; and

          WHEREAS,  Purchaser and Seller entered into a Second  Modification  to
Purchase Contract on the 31st day of August, 1998; and

         WHEREAS,  Purchaser  and Seller  entered into a Third  Modification  to
Purchase Contract on the 14th day of January, 1999; and

         WHEREAS,  Purchaser  and Seller now desire to further  modify and amend
the Agreement as set forth herein.

         NOW,  THEREFORE,  in  consideration  of the premises and the respective
agreement hereinafter set forth, Seller and Purchaser agree as follows:

         1.   All terms not  specifically  defined  herein  shall  have the same
              meaning as ascribed  to them in the  Agreement  unless  previously
              modified.

         2.   Section 7.1 of the Agreement shall be amended to provide  that the
              final date upon which  closing  may occur  shall be  November  15,
              1999.

         3.   Purchaser  acknowledges  that all conditions  precedent to closing
              set forth under  Article VI of the Agreement  (including,  without
              limitation,   occupancy  and  inspection   conditions)  have  been
              satisfied by Seller,  and Purchaser hereby waives and releases any
              rights Purchaser may have under said Article VI.

         4.   Except  as  herein  modified,  the  terms  and  provisions  of the
              Agreement shall remain in full force and effect.

         5.   In  the  event  there  is  any  conflict  in  the  terms  of  this
              Modification  and the  terms of the  Agreement,  the terms of this
              Modification shall govern.

         6.   This Modification may be executed in separate  counterparts,  each
              of which  shall  be  deemed  an  original  and all of which  taken
              together will constitute one agreement between the parties hereto.

<PAGE>

         IN WITNESS WHEREOF,  the parties hereto have executed this Modification
on the date first above written.

                                    CORNERSTONE REALTY GROUP, INC.

                                    By: /s/ Gus G. Remppies
                                       --------------------------------
                                       Gus G. Remppies, Vice President

                                    ASHEVILLE APARTMENTS ASSOCIATES, LLC

                                    By: /s/ John H. Crabtree
                                       --------------------------------
                                       John H. Crabtree, III, Manager

<PAGE>

                    FIFTH MODIFICATION TO PURCHASE CONTRACT
                      (THE MEADOWS - PHASE II, SECTION I)

         This Fifth Modification to Purchase Contract  ("MODIFICATION")  is made
and  entered  into this 16th day of November  1999  between  CORNERSTONE  REALTY
GROUP, INC. ("PURCHASER") and ASHEVILLE APARTMENTS ASSOCIATES, LLC").

         WHEREAS,  Purchaser and Seller entered into a Purchase  Contract on the
14th day of August 1997 ("AGREEMENT"); and

         WHEREAS,  Purchaser and Seller   entered into a First  Modification  to
Purchase Contract on the 14th day of August 1997; and

         WHEREAS,  Purchaser and Seller  entered into a Second  Modification  to
Purchase Contract on the 31st day of August 1998; and

         WHEREAS,  Purchaser  and Seller  entered into a Third  Modification  to
Purchase Contract on the 14th day of January 1999; and

         WHEREAS,  Purchaser and Seller  entered into a Fourth  Modification  to
Purchase Contract on the ______ day of October 1999; and

         WHEREAS,  Purchaser  and Seller now desire to further  modify and amend
the Agreement as set forth herein.

         NOW,  THEREFORE,  in  consideration  of the premises and the respective
agreements hereinafter set forth, Seller and Purchaser agree as follows:

         1. All  terms  not  specifically  defined  herein  shall  have the same
meaning as ascribed to them in the Agreement unless previously modified.

          2. Section 7.1 of the  Agreement  shall be further  amended to provide
that the final date upon which closing may occur shall be January 20, 2000.

         3.  Section 2.2 of the  Agreement shall be amended to provided  that in
lieu of the Letter of Credit, the Purchaser shall deliver  immediately after the
execution of this Fifth Amendment

                                       1

<PAGE>

the sum of ONE HUNDRED FIFTY ($150,000)  DOLLARS  directly to the Seller,  which
sum shall be applied  towards the purchase  price.  In the event that the Seller
shall  default  for any  reason,  then said  $150,000  shall be  returned to the
Purchaser and in addition,  the Purchaser  shall have the option to exercise any
rights and remedies which it may have under the Agreement.

         4. Except as herein modified, the terms and provisions of the Agreement
shall remain in full force and effect.

         5. In the event there is any conflict in the terms of this Modification
and the terms of the Agreement, the terms of this Modification shall govern.

         6. This Modification may be executed in separate counterparts,  each of
which  shall  be  deemed  an  original  and all of  which  taken  together  will
constitute one agreement between the parties hereto.

         7. If Purchaser  elects to make this  transaction  as part of a Section
1031 exchange transaction,  Seller shall use its reasonable efforts to cooperate
provided that: (i) Seller shall not be responsible  for any costs related to the
exchange  aspects  of  the  transaction,  and  (ii)  nothing  contained  in  the
documentation  for the  exchange  shall be deemed to extend the closing date set
forth herein.

         IN WITNESS WHEREOF,  the parties hereto have executed this Modification
on the date first above written.

                              CORNERSTONE REALTY GROUP, INC.

                              By: /s/ Gus G. Remppies
                                 ----------------------------

                              Name:  Gus G. Remppies
                                    -------------------------

                              Its:       S.V.P.
                                   --------------------------

                              ASHEVILLE APARTMENTS ASSOCIATES, LLC

                              By: John H. Crabtree, III
                                 ----------------------------

                              Name:  John H. Crabtree, III
                                   --------------------------

                              Its:    Manager
                                   --------------------------

                                       2

<PAGE>

                    SIXTH MODIFICATION TO PURCHASE CONTRACT
                       (THE MEADOWS - PHASE II, SECTION I)

         This Sixth Modification to Purchase Contract  ("MODIFICATION")  is made
and entered into this 20th day of January 2000 between CORNERSTONE REALTY GROUP,
INC. ("PURCHASER") and ASHEVILLE APARTMENTS ASSOCIATES, LLC").

         WHEREAS,  Purchaser and Seller entered into a Purchase  Contract on the
14th day of August 1997 ("AGREEMENT"); and

         WHEREAS,  Purchaser  and Seller  entered into a First  Modification  to
Purchase Contract on the 14th day of August 1997; and

         WHEREAS,  Purchaser and Seller  entered into a Second  Modification  to
Purchase Contract on the 31st day of August 1998; and

         WHEREAS,  Purchaser  and Seller  entered into a Third  Modification  to
Purchase Contract on the 14th day of January 1999; and

         WHEREAS,  Purchaser and Seller  entered into a Fourth  Modification  to
Purchase Contract on the 18th day of October 1999; and

         WHEREAS,  Purchaser  and Seller  entered into a Fifth  Modification  to
Purchase Contract on the 16th November 1999; and

         WHEREAS,  Purchaser  and Seller now desire to further  modify and amend
the Agreement as set forth herein.

         NOW,  THEREFORE,  in  consideration  of the premises and the respective
agreements hereinafter set forth, Seller and Purchaser agree as follows:

         1. All  terms  not  specifically  defined  herein  shall  have the same
meaning as ascribed to them in the Agreement unless previously modified.

         2.  Section 7.1 of the  Agreement  shall be further  amended to provide
that the final date upon which closing may occur shall be February 3, 2000.

                                       1

<PAGE>

         3. Except as herein modified, the terms and provisions of the Agreement
shall remain in full force and effect.

         4. In the event there is any conflict in the terms of this Modification
and the terms of the Agreement, the terms of this Modification shall govern.

         5. This Modification may be executed in separate counterparts,  each of
which  shall  be  deemed  an  original  and all of  which  taken  together  will
constitute one agreement between the parties hereto.

         IN WITNESS WHEREOF,  the parties hereto have executed this Modification
on the date first above written.

                              CORNERSTONE REALTY GROUP, INC.

                              By: /s/ Gus G. Remppies
                                 ----------------------------

                              Name:  Gus G. Remppies
                                    -------------------------

                              Its:       S.V.P.
                                   --------------------------

                              ASHEVILLE APARTMENTS ASSOCIATES, LLC

                              By: John H. Crabtree, III
                                 ----------------------------

                              Name:  John H. Crabtree, III
                                   --------------------------

                              Its:    Manager
                                   --------------------------

                                       2

<PAGE>

                    SEVENTH MODIFICATION TO PURCHASE CONTRACT
                      (THE MEADOWS - PHASE II, SECTION I)

         This Seventh Modification to Purchase Contract ("MODIFICATION") is made
and entered into this 1st day of February 2000 between CORNERSTONE REALTY GROUP,
INC. ("PURCHASER") and ASHEVILLE APARTMENTS ASSOCIATES, LLC ("SELLER").

         WHEREAS,  Purchaser and Seller entered into a Purchase  Contract on the
14th day of August 1997 ("AGREEMENT"); and

         WHEREAS,  Purchaser  and Seller  entered into a First  Modification  to
Purchase Contract on the 14th day of August 1997; and

         WHEREAS,  Purchaser and Seller  entered into a Second  Modification  to
Purchase Contract on the 31st day of August 1998; and

         WHEREAS,  Purchaser  and Seller  entered into a Third  Modification  to
Purchase Contract on the 14th day of January 1999; and

         WHEREAS,  Purchaser and Seller  entered into a Fourth  Modification  to
Purchase Contract on the 18th day of October 1999; and

         WHEREAS,  Purchaser  and Seller  entered into a Fifth  Modification  to
Purchase Contract on the 16th November 1999; and

         WHEREAS,  Purchaser  and Seller  entered into a Sixth  Modification  to
Purchase Contract on the 20th day of January 2000; and

         WHEREAS,  Purchaser  and Seller now desire to further  modify and amend
the Agreement as set forth herein.

         NOW,  THEREFORE,  in  consideration  of the premises and the respective
agreements hereinafter set forth, Seller and Purchaser agree as follows:

         1. All  terms  not  specifically  defined  herein  shall  have the same
meaning as ascribed to them in the Agreement unless previously modified.

                                       1

<PAGE>

         2.  Section 7.1 of the  Agreement  shall be further  amended to provide
that the final date upon which closing may occur shall be February 17, 2000.

         3. Section 2.2 of the Agreement,  which was  previously  amended by the
Fifth  Modification  dated the 16th day of  November  1999,  is  hereby  further
amended  to  provide  that  upon the  execution  of this  Seventh  Modification,
Purchaser  shall deliver an additional  TWO HUNDRED  FIFTY  THOUSAND  ($250,000)
DOLLARS directly to the Seller,  which sum shall be applied towards the purchase
price,  making a total of FOUR HUNDRED THOUSAND ($400,000) DOLLARS to be applied
towards the purchase  price.  Said amount shall be returned to the  Purchaser in
the event of a default by the Seller. In addition thereto,  Purchaser shall have
the option to exercise any rights and remedies it may have under the Agreement.

         4. Except as herein modified, the terms and provisions of the Agreement
shall remain in full force and effect.

         5.  In  the  event  there  is  any   conflict  in  the  terms  of  this
Modification  and the  terms of the  Agreement,  the terms of this  Modification
shall govern.

         6. This Modification may be executed in separate counterparts,  each of
which  shall be  deemed   an  original  and all of  which  taken  together  will
constitute one agreement between the parties hereto.

         IN WITNESS WHEREOF,  the parties hereto have executed this Modification
on the date first above written.

                                            CORNERSTONE REALTY GROUP, INC.

                                            By:  /s/ Gus G. Remppies
                                               ---------------------------
                                            Name     Gus G. Remppies
                                               ---------------------------
                                            Its:     S.V.P.
                                               ---------------------------

                                            ASHEVILLE APARTMENTS ASSOCIATES, LLC

                                            By:
                                               ---------------------------
                                            Name:
                                               ---------------------------
                                            Its:
                                               ---------------------------

                                      2
<PAGE>

                    EIGHTH MODIFICATION TO PURCHASE CONTRACT
                      (THE MEADOWS - PHASE II, SECTION I)

         This Eighth Modification to Purchase Contract  ("MODIFICATION") is made
and  entered  into this 14th day of February  2000  between  CORNERSTONE  REALTY
GROUP, INC. ("PURCHASER") and ASHEVILLE APARTMENTS ASSOCIATES, LLC ("SELLER").

         WHEREAS,  Purchaser and Seller entered into a Purchase  Contract on the
14th day of August 1997 ("AGREEMENT"); and

         WHEREAS,  Purchaser  and Seller  entered into a First  Modification  to
Purchase Contract on the 14th day of August 1997; and

         WHEREAS,  Purchaser and Seller  entered into a Second  Modification  to
Purchase Contract on the 31st day of August 1998; and

         WHEREAS,  Purchaser  and Seller  entered into a Third  Modification  to
Purchase Contract on the 14th day of January 1999; and

         WHEREAS,  Purchaser and Seller  entered into a Fourth  Modification  to
Purchase Contract on the 18th day of October 1999; and

         WHEREAS,  Purchaser  and Seller  entered into a Fifth  Modification  to
Purchase Contract on the 16th November 1999; and

         WHEREAS,  Purchaser  and Seller  entered into a Sixth  Modification  to
Purchase Contract on the 20th day of January 2000; and

         WHEREAS,  Purchaser and Seller entered into a Seventh  Modification  to
Purchase Contract on the 1st day of February 2000; and

         WHEREAS,  Purchaser  and Seller now desire to further  modify and amend
the Agreement as set forth herein.

         NOW  THEREFORE,  in  consideration  of the premises and the  respective
agreements hereinafter set forth, Seller and Purchaser agree as follows:

         1. All  terms  not  specifically  defined  herein  shall  have the same
meaning as ascribed to

                                       1
 <PAGE>

them in the Agreement unless previously modified.

         2.  Section 7.1 of the  Agreement  shall be further  amended to provide
that the final date upon which closing may occur shall be FEBRUARY 29, 2000.

         3. Section 2.2 of the  Agreement, which was  previously  amended by the
Fifth and the Seventh  Modifications dated the 16th day of November 1999 and the
1st day of February 2000,  respectively,  is hereby  further  amended to provide
that upon the execution of this Eighth Modification.  Purchaser shall deliver an
additional ONE HUNDRED THOUSAND ($100,000) DOLLARS directly to the Seller, which
sum shall be applied towards the purchase price,  making a total of FIVE HUNDRED
THOUSAND  ($500,000)  DOLLARS to be applied  towards the  purchase  price.  Said
amount  shall be  returned  to the  Purchaser  in the event of a default  by the
Seller.  In addition  thereto,  Purchaser  shall have the option to exercise any
rights and remedies it may have under the agreement.

         4. Except as herein modified, the terms and provisions of the Agreement
shall remain in full force and effect.

         5. In the event there is any conflict in the terms of this Modification
and the terms of this Agreement, the terms of this Modification shall govern.

         6. This Modification may be executed in separate counterparts,  each of
which  shall  be  deemed  an  original  and all of  which  taken  together  will
constitute one agreement between the parties hereto.

         IN WITNESS WHEREOF,  the parties hereto have executed this Modification
on the date first above written.

                                           CORNERSTONE REALTY GROUP, INC.

                                           By: /s/ Gus G. Remppies
                                              ---------------------------
                                           Name    Gus G. Remppies
                                              ---------------------------
                                           Its:     S.V.P.
                                              ---------------------------

                                           ASHEVILLE APARTMENTS ASSOCIATES, LLC

                                           By:  /s/ John H. Crabtree, III
                                              ---------------------------
                                           Name:    John H. Crabtree, III
                                              ---------------------------
                                           Its:     Manager
                                              ---------------------------
<PAGE>

                    NINTH MODIFICATION TO PURCHASE CONTRACT
                      (THE MEADOWS - PHASE II, SECTION I)

         This Ninth Modification to Purchase Contract  ("MODIFICATION")  is made
and  entered  into this 29th day of February  2000  between  CORNERSTONE  REALTY
GROUP, INC. ("PURCHASER") and ASHEVILLE APARTMENTS ASSOCIATES, LLC ("SELLER").

         WHEREAS,  Purchaser and Seller entered into a Purchaser Contract on the
14th day of August 1997 ("AGREEMENT"); and

         WHEREAS,  Purchaser  and Seller  entered into a First  Modification  to
Purchase Contract on the 14th day of August 1997; and

         WHEREAS,  Purchaser and Seller  entered into a Second  Modification  to
Purchase Contract on the 31st day of August 1998; and

         WHEREAS,  Purchaser  and Seller  entered into a Third  Modification  to
Purchase Contract on the 14th day of January 1999; and

         WHEREAS,  Purchaser and Seller  entered into a Fourth  Modification  to
Purchase Contract on the 18th day of October 1999; and

         WHEREAS,  Purchaser  and Seller  entered into a Fifth  Modification  to
Purchase Contract on the 16th November 1999; and

         WHEREAS,  Purchaser  and Seller  entered into a Sixth  Modification  to
Purchase Contract on the 20th day of January 2000; and

         WHEREAS,  Purchaser and Seller entered into a Seventh  Modification  to
Purchase Contract on the 1st day of February 2000; and

         WHEREAS,  Purchaser and Seller  entered into an Eight  Modification  to
Purchase Contract on the 14th day of February 2000; and

         WHEREAS,  Purchaser  and Seller now desire to further modify and amend
the

                                        1

<PAGE>

Agreement as set forth herein.

         NOW,  THEREFORE,  in  consideration  of the premises and the respective
agreements hereinafter set forth, Seller and Purchaser agree as follows:

         1. All  terms  not  specifically  defined  herein  shall  have the same
meaning as ascribed to them in the Agreement unless previously modified.

         2.  ARTICLE II,  Paragraph  2.1,  which was  previously  amended by the
Second and Third Modifications, is hereby further amended to read:

                  2.1 PURCHASE PRICE. The total purchase price shall be
              EIGHT   MILLION  SEVEN  HUNDRED  EIGHTY  SIXTY   THOUSAND
              ($8,786,000)  DOLLARS  as  evidenced  by  cash  or   cash
              equivalent at closing.

         3. Section 2.2 of the Agreement,  which was  previously  amended by the
Fifth, Seventh and Eighth Modifications dated the 16th day of November 1999, the
1st day of February  2000,  and the 14th day of February 2000  respectively,  is
hereby  further  amended  to  provide  that  upon the  execution  of this  Ninth
Modification,  Purchaser  shall deliver an additional TWO HUNDRED FIFTY THOUSAND
($250,000)  DOLLARS  directly to the Seller,  which sum shall be applied towards
the purchase  price,  making a total of SEVEN HUNDRED FIFTY THOUSAND  ($750,000)
DOLLARS to be applied towards the purchase price.  Said amount shall be returned
to the Purchaser in the event of a default by the Seller.  In addition  thereto,
Purchaser  shall have the option to exercise any rights and remedies it may have
under the Agreement.

         4.  Section 7.1 of the  Agreement  shall be further  amended to provide
that the final date upon which closing may occur shall be MARCH 15, 2000.

         5. Except as herein modified, the terms and provisions of the Agreement
shall remain in full force and effect.

         6. In the event there is any conflict in the terms of this Modification
and the terms of the Agreement, the terms of this Modification shall govern.

         7. This Modification may be executed in separate counterparts,  each of
which  shall  be  deemed  an  original  and all of  which  taken  together  will
constitute one agreement between the parties hereto.

                                       2

<PAGE>

         IN WITNESS WHEREOF,  the parties hereto have executed this Modification
on the date first above written.

                              CORNERSTONE REALTY GROUP, INC.

                              By: /s/ Gus G. Remppies
                                 ----------------------------

                              Name:  Gus G. Remppies
                                    -------------------------

                              Its:       S.V.P.
                                   --------------------------

                              ASHEVILLE APARTMENTS ASSOCIATES, LLC

                              By: /s/ John H. Crabtree, III
                                 ----------------------------

                              Name:  John H. Crabtree, III
                                   --------------------------

                              Its:    Manager
                                   --------------------------

                                       3

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