EXHIBIT 10.2

 

GUARANTY AGREEMENT

 

THIS GUARANTY AGREEMENT, (the “Agreement”) is made as of March 31, 1989 between
NTS Mortgage Income Fund (the “Fund”) and NTS Guaranty Corporation (the
“Guarantor”).  All capitalized terms used herein shall have the meaning set
forth in the Fund’s Registration Statement No. 33-25217, as amended, filed with
the Securities and Exchange Commission on Form S-11.

 

WITNESSETH

 

                WHEREAS, the Fund has filed the Registration Statement, covering
its shares of common stock, par value $0.001 per share, to be offered to the
public, and the Fund may thereafter sell additional securities or otherwise
raise additional capital; and

 

                WHEREAS, the Fund intends to qualify as a “real estate
investment trust,” as defined in the Code, and to invest its funds in
investments permitted in the Prospectus and Sections 856-860 of the Code; and

 

                WHEREAS, the Fund intends to make Mortgage Loans to, among
others, Affiliated Borrowers; and

 

                WHEREAS, the Fund is willing to make such Mortgage Loans only on
the condition, among others that the Guarantor execute and deliver these
Guatanties described herein.

 

                NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained, it is agreed as follows:

 

                A.  Escrow Guaranty.  The Guarantor has agreed to pay the Fund’s
subscribers, directly or indirectly, the amount necessary to supplement the cash
generated by investing the Fund’s Gross Proceeds in the escrow account or in
temporary investments so as to provide subscribers with a return on their
Original Capital Contributions equal to an 8.0% per annum, noncompounded, for
the period from the date the subscriber’s proceeds were deposited in the escrow
account through the 89th day following the Initial Closing Date or, if the
Minimum Number of Shares are not sold through the date on which the proceeds are
released from the escrow account.  To the extent the Fund’s investments yield
more than such an 8.0% return to the subscribers, the excess will be applied to
amounts otherwise due under the Cash Flow Guaranty.  Any amount so provided
pursuant to the Escrow Guaranty will be repaid in the event funds are available
after satisfaction of the Cash Flow Guaranty and the requirements of the Code
relating to REIT qualification.

 

                B.  Cash Flow Guaranty.  The Guarantor will provide the
Affiliated Borrowers with funds sufficient to make any payments of Supplemental
Interest necessary to enable the Fund to make quarterly distributions to
Stockholders equal to an annual 12% noncompound return on their Original Capital
Contributions for the period beginning on the 90th day following the Initial
Closing Date and terminating upon the later of two years thereafter or one year
from the Offering Termination Date.  The Fund agrees that in the event the
Guarantor pays any money pursuant to the Cash Flow Guaranty, such amounts will
be credited against 50% of the amounts later due by the Affiliated Borrowers as
Incentive or Gross Receipts Interest, thereby reducing the amount of Incentive
or Gross Receipts the Fund will receive from Affiliated Borrowers in later
years.

 

                C.  Junior Mortgage Loan Guaranty.  The Guarantor hereby
unconditionally and irrevocably guarantees to the Fund, and its successors,
endorsees, transferees and assigns, that, in the event any Junior or Temporary
Mortgage Loan made to any Affiliated Borrower should become a Defaulted Junior
or Temporary Mortgage Loan (as defined below), the Guarantor will make payment
to the Fund of the Principal amount of the Junior or Temporary Mortgage Loan. 
The Guarantor’s obligation hereunder is limited to the Principal balance
outstanding on the Junior or Temporary Mortgage Loan and does not include the
Interest Reserve.  A “Defaulted Mortgage Loan” is a Junior or Temporary Mortgage
Loan on which an Affiliated Borrower has defaulted on the repayment of Principal
when due, or defaults on the payment of interest or other payment which default
gives rise to the acceleration of such Junior or Temporary Mortgage Loan.  The
Guarantor shall make payment on any such Defaulted Junior or Temporary Mortgage
Loan within ten days after written demand to do so by the Fund.

 

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                D.  Purchase Price Guaranty.   The Guarantor has guaranteed that
Stockholders will receive during the life of the Fund aggregate distributions
from all sources in an amount at least equal to their Original Capital
Contributions without regard to the source of characterization of such cash
flow.  Any amount due pursuant to the Purchase Price Guaranty will be paid
promptly after the complete dissolution and liquidation of the Fund and the
distribution of the proceeds from the sale of its assets to Stockholders.

 

                E.  Limitation.  The Escrow Guaranty, the Cash Flow Guaranty,
the Junior Mortgage Loan Guaranty and the Purchase Price Guaranty are binding on
the Guarantor, but are limited to its assets.

 

                F.  Delegation.  The Guarantor shall have the right to delegate
and be released from its obligations under this Agreement; provided, however: 
(i) that no delegation shall be effective to release the Guarantor from its
obligations hereunder unless the delegate shall have a net worth at least equal
to $10,000,000 and (ii) a majority of the Independent Directors of the Fund
shall consent to such delegation and release.

 

                G.  Termination.   If the Advisory Agreement is terminated
without the consent of the Advisor, the obligations of the Guarantor under this
Agreement will immediately terminate, but will remain in effect with regard to
any Junior or Temporary Mortgage Loan having been made by the Fund to an
Affiliated Borrower as of the date of such termination.

 

                H.  Governing Law.  This instrument and the rights and
obligations of all parties hereunder shall be governed by and construed under
the substantive laws of the State of Kentucky, without regard to conflicts of
law or rules.

 

                IN WITNESS WHEREOF, the undersigned have executed this Agreement
as of the date set forth above.

 

NTS GUARANTY CORPORATION

 

 

 

By:

/s/    W.D. Parr

 

W.D. Parr

 

Its:

Executive Vice President

 

 

 

NTS MORTGAGE INCOME FUND

 

 

By:

/s/    R.L. Good

 

R.L. Good

 

Its:

Executive Vice President

 

 

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