NOTICE TO: All Valley of Lakes Property Owners FROM: Frank M. Cedrone, Managing General Partner C.B.G. Limited SUBJECT: Cost Conservation Measures Recently, as a result of opposition led by our primary lender, First Eastern Bank, C.B.G. was unable to gain court approval for a $3.5 Million Loan commitment to be funded in two stages by Kennedy Funding, Inc. Stage One - Emergency Funds $600,000.00 (Immediately Fundable) Stage Two - Balance of Funds $2,900,000.00 (Fundable within 2-3 weeks later) The reasons for First Eastern Bank's opposition are many and complex. The primary reasons are listed as follows: 1. First Eastern Bank is experiencing financial difficulties due to a variety of failed or non-performing loans. 2. First Eastern Bank cannot permit any lender to gain a "Super Priority" position, nor is it able to lend additional funds to C.B.G. 3. First Eastern Bank is not in the same lender operational status as it was prior to the financial crisis. However, First Eastern Bank has indicated its willingness to work with C.B.G. Limited to achieve a mutually beneficial solution. Chief among the requirements to achieve such a solution are that: 1. C.B.G. carry all of its overhead and expenses without assistance from First Eastern Bank or "Super Priority Loans" 2. C.B.G. provide an action plan that will show development of profit centers without financial assistance from First Eastern Bank. 2 3. Proving immediate cost conservation measures to dramatically reduce overhead and cut costs to a minimum. Accordingly, the following measures have been introduced to conserve working capital and allow time for preparation and approval of the plan, accumulation of the immediate basic capital needs and gaining the investor approvals required to proceed. 1. A reduction in personnel to the absolute minimum level required to maintain operations, for the next three (3) weeks. 2. Closing of the Eagle Rock Entrance, Eagle Rock Lodge and certain other facilities for the next three (3) weeks. Eagle Rock Lodge is scheduled to reopen during the first week of August for banquets and weddings. Eagle Rock entrance and Walden drive may be open sooner. 3. A meeting of all Valley of Lakes property owners, is requested by C.B.G. to be held in the Fireside Base Lodge at which time future operations will be discussed, planned and implemented. For any additional information, please contact Robin Gagliano at 717-384-6103. Your cooperation is requested. FMC/va
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