CONSTRUCTION LOAN AGREEMENT

 

SunTrust Bank

211 Perimeter Ctr Pkwy Ste 100

Atlanta, GA 30346

(770) 352-5200 "LENDER"

 

 

                          CONSTRUCTION LOAN AGREEMENT

 

BORROWER:       REGAN HOLDING CORPORATION

 

ADDRESS:        2090 MARINA AVE.

 

TELEPHONE NO.:

 

IDENTIFICATION NO.: 68-0211359-015

 

<TABLE>

<CAPTION>

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    Officer       Interest     Principal     Funding   Maturity     Customer        Loan

Identification      Rate         Amount       Date       Date        Number        Number

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<S>               <C>        <C>             <C>       <C>            <C>           <C>

     020892       VARIABLE   $2,700,000.00   10/27/03  10/27/04

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Address of Real Property Securing the Loner

 

560 TECHNOLOGY PARKWAY.

ROME, GEORGIA 30165

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</TABLE>

 

 

1.  DEFINITIONS.  In this Agreement,  the following words and phrases shall have

the following meanings:

 

1 1  "Architect"  shall  mean the person or entity  who has  prepared  Plans and

Specifications for the construction of the improvements;

 

1.2  "Assignment  of Lease"  shall  mean the  Assignments  of Rents  and  Leases

executed  by  Borrower  which  creates a first  lien on the leases of, and rents

from, the Property;

 

1.3 "Borrower" shall mean the borrower identified above;

 

1.4 "Code" shall mean the Uniform  Commercial  Code as currently  enacted in the

state where the Property is located;

 

1.5 "Completion  Date" shall mean the earlier of October 27, 2004 or the date of

issuance  of  a  Certificate  of  Occupancy  by  the  appropriate   governmental

authority;

 

1.6  "Construction  Budget" shall mean the estimated cost of the construction of

the Improvements in accordance with the Plans and  Specifications as approved by

Lender;

 

1.7 "Contractor" shall mean the general contractor hired by Borrower to complete

construction of the Improvements;

 

1.8 "Guarantor" shall mean any a accommodation  maker,  guarantor or other party

liable for the payment of Borrower's obligations under the Loan;

 

1.9  "Improvements"  shall  mean  the  proposed  structure(s)  to be  placed  or

constructed upon the property by Borrower,  the cost of which shall be funded in

whole or in part by periodic  disbursements  of the proceeds of the Loan,  which

proposed structure(s) is (are) more fully described in Schedule C hereto;

 

1.10 "Lender" shall mean the Lender identified above;

 

1.11 "Loan" shall mean the  construction  loan made by Lender to Borrower in the

principal amount described above;

 

1.12 "Loan Documents"  shall  collectively  mean the Promissory  Note,  Security

Instrument  (as defined  herein),  Security  Agreement,  Consent of  Contractor,

Consent of Architect,  the construction  schedule,  this Agreement and any other

instrument executed in connection with or evidencing the Loan;

 

1.13 "Plans and Specifications" shall mean the plans and specifications approved

by Lender pertaining to the construction of Improvements upon the Property;

 

1.14  "Premises"  shall  mean the  Property,  together  with  the  Improvements,

fixtures and personal property located thereon;

 

1.15 "Promissory Note" shall mean that certain  Promissory Note in the aggregate

principal  amount of the Loan  payable to the order of the  Lender,  executed by

Borrower, evidencing the Loan;

 

1.16 "Property" shall mean the real property and Improvements thereon located at

the address described above the legally described in Schedule A, attached hereto

and incorporated herein by reference;

 

1.17 "Security Agreement" shall mean that certain security agreement executed by

Borrower  that  creates a first lien on all  chattels,  furniture,  furnishings,

fixtures, machinery,  equipment,  appliance and other personal property owned by

Borrower and used or to he used in the operation of the Premises; and

<PAGE>

 

1.18 "Security  Instrument" shall mean the deed to secure debt, mortgage or deed

of trust which evidences a first lien on the Property and secures the Promissory

Note.

 

2. AMOUNTS AND TERMS OF LOAN.

 

2.1 Lender shall make the Loan to Borrower to construct the  Improvements on the

terms and  conditions set forth herein.  Borrower  agrees to execute and deliver

the Promissory Note. Advances under the Loan shall be made to Borrower or others

from  time to  time  pursuant  to the  terms  and  conditions  described  in the

Promissory  Note.  Interest  shall accrue on all sums  advanced from the date of

each  advance  at  the  rate  of  interest  described  in the  Promissory  Note.

Principal,  interest and any other sums owing under the Loan Documents  shall be

repaid to Lender in the manner described therein.

 

2.2  Borrower  agrees to pay to Lender a loan fee in the amount of  $5,000.00 on

the date of closing of the Loan.

 

3. COLLATERAL.

 

3.1 To secure  performance  of Borrower's  obligations to Lender under the Loan,

Borrower  agrees  promptly to execute  and deliver and cause to be executed  and

delivered  to Lender the Security  Instrument  Security  Agreements,  Consent of

Contractor, Consent of Architect, financing statements, title insurance or title

opinions and other appropriate documents deemed necessary or desirable by Lender

to provide Lender with the first lien and security interest on the Premises. The

Security  Instrument,  Security  Agreements,  financing  statements,  and  other

documents,  shall be in a form and  content  satisfactory  to Lender in its sole

discretion.

 

3.2 If required by Lender,  Borrower  agrees to execute and deliver to Lender an

Assignment  of Leases  in form and  content  satisfactory  to Lender in its sole

discretion.

 

3.3. As additional  collateral for the Loan,  Borrower hereby grants to Lender a

security  interest in and hereby  assigns  all of  Borrower's  right,  title and

interest in all monies,  instruments and deposit accounts of Borrower maintained

with Lender.

 

3.4 In the event  partial  releases  are to be  executed  by Lender from time to

time, Lender shall execute and deliver such partial releases upon the conditions

and under the terms described in the Security  Instrument.  However,  no partial

release  will be executed  by Lender if it would  otherwise  interfere  with the

development of the Property which remains encumbered by the Security  Instrument

or if Borrower is in default of any obligation  under this Agreement or the Loan

Documents.

 

4. DISBURSEMENT PROCEDURES.

 

4.1  Disbursement  of the Loan  shall he made by  Lender  for  construction  and

development costs in accordance with the approved  Construction Budget (covering

both  hard and soft  costs)  and the  approved  schedule  of  estimated  monthly

disbursements.

 

4.2 No extra work or changes in the Plans and Specifications or the Construction

Budget shall be ordered or authorized by Borrower  without a written  consent of

Lender.  If Lender approves of any extra work or changes,  Lender shall have the

right to  withhold  any  pending or future  disbursement  and may  require  that

Borrower pay the cost of these items from  Borrower's own funds and not from the

Loan proceeds.

 

4.3 At the time of any disbursement  request,  Borrower shall complete,  execute

and deliver to Lender a request for an advance on  Lender's  standard  form draw

request,  attached  hereto as Exhibit  1. Each  request  for an advance  must be

accompanied by evidence in form and content  satisfactory  to Lender,  which may

include,  but may not  necessarily  be  limited  to,  invoices  and  statements,

certificates,  affidavits,  title  endorsements and other declarations as Lender

may deem necessary of Borrower, Architect, Contractor, or title attorney, all of

which shall show:

 

         4.3.1    The value of the portion of the Improvements completed at that

                  time;

 

         4.3.2    That all outstanding claims for labor,  services and materials

                  through the previous draw request have been paid;

 

         4.3.3    That  there  are no liens  outstanding  against  the  Premises

                  except the lien  belonging  to Lender and  inchoate  liens for

                  property taxes not yet due; and

 

         4.3.4    That copies of all bills or statements  for expenses for which

                  the advance is requested are attached to such draw request.

 

4.4 Subject to Paragraph 4.5 below, all disbursements  shall be made directly to

the Contractor  and applicable  subcontractors,  laborers and  materialmen  with

appropriate  lien  waivers  affixed  to each  check.  All  Loan  funds  shall be

considered  to be advanced to and received by Borrower upon their deposit in any

disbursement  account  or  direct  advance  by  Lender  to the  Contractor,  any

subcontractors,  laborers  or  materialmen,  or  charge  against  Loan  funds as

provided in Paragraph  4.5.  Interest on such funds shall be payable by Borrower

from and after such advance or receipt.

 

4.5  Notwithstanding  the  provisions of Paragraph 4.4 above,  Lender may elect,

without further notice to or authorization by Borrower, to use the Loan funds to

pay, as and when due, any Loan fees owing to Lender, accrued, unpaid interest on

the  Loan,  amounts  secured  by prior  liens on the  Property,  legal  fees and

expenses of Lender's  attorneys  which are payable by  Borrower,  and such other

sums as may be owing from time to time by Borrower to Lender with respect to the

Loan. On or before each interest payment date, Lender shall invoice Borrower for

the amount of the required interest  payment.  Borrower shall promptly make such

payments to Lender as and when due.  Notwithstanding  any of the  provisions  of

this  Paragraph,  Lender's  agreement  to make such advance for interest or loan

fees shall be subject to compliance  with the conditions  precedent set forth in

Paragraph 4.9 below.

 

4.6 If  Lender  at any time  determines  in good  faith  that the  amount of the

undisbursed  Loan  proceeds  shall not be  sufficient to pay fully for all costs

required  to  complete  the  Improvements  in  accordance  with  the  Plans  and

Specifications  as well as financing and development costs to be incurred by the

Borrower,  whether such  deficiency  is  attributable  to changes in the work or

construction or in the Plans and Specifications or to any cause, Lender may make

written demand on Borrower to deposit with Lender funds equal to the

<PAGE>

 

amount of the projected shortage. Borrower shall deposit the required funds with

Lender  within ten days after the date of Lender's  written  demand.  No further

disbursements  need to be made by Lender  until  those  funds are  deposited  by

Borrower  with  Lender.  Whenever  Lender  has any such  funds on  deposit,  all

disbursements  shall he made by Lender  first  from  those  fund  until they are

exhausted.

 

4.7  At no time and in no event shall Lender be obligated to disburse funds:

 

         4.7.1 In excess of the amount recommended by Lender's  architectural or

         engineering  representative,  who, at the option of Lender,  shall make

         periodic inspections of the Premises at Borrower's expense;

 

         47.2 If any  Event  of  Default  under  this  Agreement,  the  Security

         Instrument,  or any other Loan  Documents has occurred and has not been

         cured;

 

         4.7.3 If the  Improvements  have been damaged by fire or other casualty

         and Lender has not received insurance  proceeds  sufficient in the sole

         judgment of Lender to effect the  restoration  of the  Improvements  in

         accordance with Plans and  Specifications  and to permit the completion

         of the  improvements on or before the Completion Date described in this

         Agreement;

 

         4.7.4 For stored  materials until they are actually  incorporated  into

         the  improvements,  except on such conditions and such occasions as may

         be approved by Lender in its sole discretion;

 

         4.7.5 If Lender  believes  in good faith that the  priority of Lender's

         lien maybe adversely affected; or

 

         4.7.6 If the Lender concludes that the construction of the improvements

         has fallen behind any  construction  schedule  approved by Lender or if

         Lender  concludes  that  the  cost of  completing  construction  of the

         improvements at any time will exceed the amount  remaining  to be drawn

         under the Loan by a factor of more than ten percent (10%).

 

4.8 Lender  shall not be  required  to make the first  disbursement  of the Loan

until Borrower has fulfilled to Lender's satisfaction all conditions of Lender's

written loan commitment to Borrower and all of Lender's customary and reasonable

loan closing and post-loan closing  conditions for construction  loans have been

met, which include, but are not limited to, the follows:

 

         4.8.1.  Lenders has  received the executed  Loan  Documents  (including

         without  limitation the Promissory Note and Security  Instrument),  and

         the Security Instrument,  Security Agreement,  Assignment of Leases and

         financing statements have been duly recorded or filed, as applicable;

 

         4.8.2 After recordation of the Security  Instrument,  a title insurance

         company  acceptable  to Lender  must have  issued,  at the  expense  of

         Borrower,  an ALTA (or equivalent) Lender's extended coverage policy of

         title  insurance in an amount and form  satisfactory  to Lender subject

         only to  exceptions  approved by Lender in writing,  together  with any

         endorsements required by Lender;

 

         4.8.3. Lender's security interest in all personal property and fixtures

         upon the Premises as described in the Security Agreement must have been

         duly perfected and has a lien priority in all respects  satisfactory to

         Lender;

 

         4.8.4 If Lender so  requests,  an  environmental  questionnaire  and/or

         assessment in such form and scope satisfactory to Lender performed by a

         firm acceptable to lender has been delivered to Lender, Borrower hereby

         agrees to indemnify Lender for any violation of any environmental  laws

         which concern the Premises;

 

         4.8.5 The Plans and  Specifications  must have been  approved by Lender

         and any other persons or agencies  whose prior  approval is required by

         law or any  covenants,  conditions  or  restrictions  applicable to the

         Property,  and all insurance  policies,  executed general contracts and

         performance  and payment  bonds  required by Lender must be approved by

         Lender and be in full force and effect;

 

         4.8.6  Lender's  loan fee must have been paid upon  recordation  of the

         Security Instrument;

 

         4.8.7 Lender shall have received  executed  copies of all of Borrower's

         agreement with the Contractor and the Architect of the  construction of

         the improvements and approved same;

 

         4.8.8 If Borrower or any accommodation maker, guarantor, or other party

         liable  for the  payment  of  Borrower's  obligations  under  the  Loan

         (collectively  "Guarantors")  is a  partnership,  corporation,  limited

         liability  company or  non-profit  association,  such parties must have

         delivered  to Lender  one or more  opinions  of  counsel  in a form and

         content acceptable to Lender stating among other things that such party

         is duly  organized,  validly  existing  and is in good  standing in the

         jurisdiction  of  its   incorporation   or  organization  and  in  each

         jurisdiction  where its  failure  to so  qualify  would have a material

         adverse effect on its business,  operations or its ability to carry out

         its obligation under the Loan Document,  and has duly authorized by all

         requisite   corporate,   member/manager   or  partnership   action  the

         execution, delivery and performance of the Loan Documents;

 

         4.8.9 If  Borrower  or any  Guarantor  is a  partnership,  corporation,

         limited liability company or non-profit association,  such parties must

         have  delivered  to Lender  such  certified  copies of  directors'  and

         stockholder's  resolution,  partnership,  operating  or  joint  venture

         agreements,  etc., as maybe  necessary,  in the Lender's  judgment,  to

         authorize  and  support  the  execution  and delivery  of all documents

         contemplated by the Loan;

 

         4.8.10 Borrower has satisfied  Lender and the title  insurance  company

         issuing the policy required under Paragraph 4.8.2 that no work has been

         commenced prior the recordation of the Security Instrument; and

 

4.9 Lender shall not be required to make any subsequent  disbursement  under the

Loan if:

<PAGE>

 

         4.9.1  Lender  does  not  receive,   at  Borrower's  expense,  a  title

         endorsement,  satisfactory to Lender prior to any disbursement  stating

         that  such   disbursement   shall  have  priority  over  mechanic's  or

         materialmen's  liens or any other  intervening or subordinate  liens on

         the Property.

 

4.10 Lender shall not be obligated to make its final  disburse of Loan  proceeds

for the  improvements  hereto  unless and until the  following  conditions  are

satisfied:

 

         4.10.1  The  Lender   determines  that  the   Improvements   have  been

         substantially  completed by the Completion  Date in accordance with the

         Plans and Specifications. Completion must be verified to the reasonable

         satisfaction of Lender;

 

         4.10.2  Borrower has obtained for Lender,  at Borrower's  expense,  any

         title insurance endorsements to the title policy required by Lender;

 

         4.10.3  Borrower has obtained and  delivered to Lender for its approval

         copies of all temporary or permanent  certificates of occupancy for any

         portion of the Improvements and Lender has approved such certificates.

 

4.11 At the option of the Lender, each request for an advance shall be submitted

to Lender at least ten (10)  business  days  prior to the date of the  requested

advance.  All such  advances,  regardless  of to whom made,  shall  satisfy  the

obligations of Lender hereunder and shall be secured by the Security  Instrument

and other Loan Documents as fully as if made to Borrower.

 

4.12 Any waiver by Lender of any  condition  of  disbursement  must be expressly

made in writing.  The making of a  disbursement  prior to  fulfillment of one or

more conditions therefore shall not be construed as a waiver of such conditions,

and Lender reserves the right to require their  fulfillment  prior to making any

subsequent disbursements.

 

5.  COVENANTS OF  BORROWER.  Borrower  covenants  with and warrants to Lender as

follows:

 

5.1 Borrower shall provide Lender with a detailed  Construction  Schedule (which

shall be in such detail as Lender shall  require) prior to the execution of this

Agreement and shall meet all deadlines described herein. Borrower shall commence

construction of the Improvements within 10 days from the date of this Agreement.

Borrower shall  substantially  compete  construction by the Completion Date. All

construction work shall be performed in substantial compliance with the approved

Plans and  Specifications,  any change  orders  approved by Lender and with this

Agreement.  All construction work shall be completed  without liens,  claims, or

assessments  (actual  or  contingent)  asserted  against  the  Premises  for any

material, labor or other items furnished in connection therewith (except as such

liens,  claims or assessments  are insured or bonded to Lender's  satisfaction),

and all are in full compliance with all construction,  use, building, zoning and

other similar  requirements  of any  governmental  jurisdiction.  Borrower shall

provide Lender with  satisfactory  evidence of such  compliance  upon request by

Lender.

 

5.2  Borrower  agrees that no  modification  of or  amendments  to the Plans and

Specifications  shall be made without first obtaining the approval in writing of

Lender and all necessary governmental authorities.  In addition, Borrower agrees

to deposit  with Lender such  additional  sums or take such action as Lender may

require to ensure payment of the cost of any such changes.

 

5.3 Borrower shall not,  without the prior written consent of Lender,  mortgage,

convey,  transfer,  sell or otherwise dispose of or encumber its interest in the

Property  or any part thereof or the income to be derived therefrom.

 

5.4  Borrower  shall  comply with and keep in effect all  permits and  approvals

obtained from any governmental  bodies that relate to the lawful construction of

the  Improvements.  Burrower  shall  comply with all  existing  and future laws,

regulations,  orders and  requirements  of all  governmental,  judicial or legal

authorities  having  jurisdiction  over the Property or  Improvements.  Borrower

shall comply with all existing or future  recorded  restrictions  affecting  the

Property.  The  Improvements  shall be constructed  entirely on the Property and

shall not encroach upon or over any known easement or right-of-way, nor upon the

land of others, and when erected shall be wholly within any building restriction

lines.

 

5.5 Borrower  shall furnish from time to time upon request by Lender,  in a form

acceptable to Lender,  a correct list of the Contractors and all  subcontractors

employed  in  connection  with  construction  of the  Improvements  and true and

correct copies of all executed  contracts and  subcontracts.  Lender may contact

the Contractor or any  subcontractor  to verify any facts disclosed in the list,

and all contracts and subcontract  relating to construction of the  Improvements

must require the disclosure of the listed information to Lender.

 

5.6 No  materials,  equipment,  fixtures or  articles  of  personal  property of

Borrower placed in or on the Improvements  shall be purchased or installed under

any security  agreement or other agreement where the seller reserves or purports

to reserve title or the right to remove or repossess the items,  or the right to

consider such items as personal  property after their  incorporation in the work

of construction, unless authorized by Lender in writing; provided, however, this

paragraph is not intended to prevent  Borrower  from  granting a purchase  money

security  interest in computer  equipment or software acquired after the date of

this Agreement.

 

5.7  Lender  and its  agents  and  representative  shall  have the  right at any

reasonable  time to enter  the  Premises  and  inspect  he  construction  of the

Improvements  and all plans,  specifications,  change orders,  and other matters

pertaining thereto.  Lender shall also have the right to examine, copy and audit

the  books,  record,  accounting  data  and  other  documents  of  Borrower  and

Borrower's   Contractor   relating  to  the  property  or  construction  of  the

Improvements.  If Lender in good faith  determines that any work or materials do

not  conform  to  the  approved  Plans  and  Specifications  or  sound  building

practices,  or otherwise  depart form any other  requirements of this Agreement,

Lender may require the work to be stopped and withhold  disbursements  until the

matter is corrected.  In such event, Borrower shall promptly correct the work to

Lender's  satisfaction.  No  such  action  by  Lender  shall  affect  Borrower's

obligation  to complete the  Improvements  of any phase of  construction  by the

deadlines  designated in Paragraph  5.1. Any inspection or examination by Lender

of books and records of Borrower is for the sole purpose of protecting  Lender's

collateral and preserving  Lender's rights under this  Agreement.  No default of

Borrower  shall be waived by any  inspection  by Lender,  and no  inspection  by

Lender shall be construed  as a  representation  that there has been or shall be

compliance with the Plans and  specifications  or that construction is free from

defective materials or workmanship.

<PAGE>

 

5.8 Excluding only such liabilities,  claims,  damages,  costs and expenses that

are solely and proximately  caused by willful  misconduct or gross negligence by

Lender,  Borrower shall  indemnify and hold Lender harmless from and against all

liabilities, claims, damages, costs and expenses (including, but not limited to,

legal  fees,  costs,  and  expenses)  arising  out  of  or  resulting  from  the

construction of the Improvements.  Upon demand by Lender,  borrower shall defend

any action or proceeding brought against Lender. Lender may elect to conduct its

own defense at the expense of Borrower.  The provisions of this Paragraph  shall

survive the termination of this Agreement and repayment of the Loan.

 

5.9 If Borrower is a corporation,  limited liability company or partnership,  it

shall not  amend or modify or permit  any  amendment  or  modification  of,  its

Articles of Incorporation  or its partnership or operating  agreement during the

term of the Loan without the prior written  approval of Lender,  which  approval

shall not be unreasonably withheld.

 

5.10 Borrower  shall not without the prior written  consent of Lender (i) commit

any  default  under  the  terms of the  Construction  Contract  (as  hereinafter

defined), (ii) waive any of the obligations of the Contractor thereunder,  (iii)

do any act which would relieve the  Contractor  from its obligation to construct

the  Improvements  according to the Plans and  Specifications,  or (iv) make any

amendment to the  Construction  Contract  resulting in additional costs which by

themselves  or in  conjunction  with other  amendments  exceed the  Construction

Budget,  or (v) take  any  action  which  would  cause  the  costs of  competing

construction  of the  Improvements  to exceed  the  undisbursed  Loan funds by a

factor of more than ten percent (10.0%).

 

5.11 Borrower  shall not without the prior written  consent of Lender (i) commit

any  default  under  the  terms  of the  Architect's  Contract  (as  hereinafter

defined),  (ii) waive any of the obligations of Architect  thereunder,  (iii) do

any act which would relieve the Architect from any  obligations  thereunder,  or

(iv) make an amendment to the Architect's Contract.

 

5.12 Borrower shall obtain such insurance or evidence of insurance as Lender may

require, including but not limited to, the following:

 

         5.12.1  Title  Insurance.  An ALTA (or  equivalent)  mortgagee's