EXHIBIT 10.1
DEVELOPMENT LOAN DISBURSING
AGREEMENT
Cincinnati, Ohio
August 18 , 2009
National City Bank
One East Fourth Street
Cincinnati, Ohio 45202
Attention: BRENT E. JOHNSON
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Re:
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$1,385,544.00 Development Loan
to NTS/VIRGINIA DEVELOPMENT COMPANY , a Virginia corporation
and NTS/LAKE FOREST II RESIDENTIAL CORPORATION, a Kentucky
corporation for the Development of Eighteen (18) Single Family
Residential Lots in Section 21A of the Fawn Lake Community,
Spotsylvania County, Virginia
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Gentlemen:
The
undersigned, NTS/VIRGINIA DEVELOPMENT COMPANY , a Virginia
corporation (“NTS Virginia”) and NTS/LAKE FOREST II
RESIDENTIAL CORPORATION, a Kentucky corporation (“NTS
Lake Forest”) (NTS Virginia and NTS Lake Forest collectively
referred to as the “Borrowers”), hereby request that
you (the “Bank”) make a development mortgage loan (the
“Loan”) to the Borrowers in accordance with the terms
and conditions of this Agreement, for the purpose of financing the
development of the property more fully described in Exhibit
A which is attached hereto and incorporated by reference as if
fully rewritten herein (“Improvements Site”) in City of
Fredericksburg, Spotsylvania County, Virginia for the purpose of
developing single family lots in accordance with the plans and
specifications approved by Bank (the
“Improvements”).
ARTICLE 1.
COMMITMENT AND PROMISSORY NOTE
Section
1.1 NTS Virginia may obtain advances
from the Bank up to the amount of One Million Three Hundred
Eighty-Five Thousand Five Hundred Forty-Four and 00/100 Dollars
($1,385,544.00) from time to time until September 1, 2010 for the
development of the Improvements. All of the advances shall be
evidenced by the Note (defined below), which shall be executed and
delivered to the Bank prior to the initial advance. Notwithstanding
the expressed principal amount of the Note, the Borrowers shall in
no event be obligated to repay more than the unpaid balance of
advances made to or for the benefit of the Borrowers by the Bank,
together with interest at the rate specified below computed on each
advance from the date it is made by the Bank.
Section
1.2 It is a condition precedent to
the making of the Loan that Bank shall disburse the Loan proceeds
pursuant to the terms, conditions and provisions of the Note and
this
Agreement in order to assure that
the Deed of Trust will, at all times during the term of the Loan,
constitute a first and best lien under the provisions of the
Virginia statutes.
Section
1.3 The Borrowers shall pay to the
Bank interest computed at the rate of Bank’s LIBOR Loan Rate
as defined in the Note on the outstanding unpaid principal amount
of advances made under this Agreement.
Section
1.4 The Borrowers shall pay the Bank
an origination fee in the amount of Six Thousand Nine Hundred
Twenty-Seven and 72/100 Dollars ($6,927.72), all appraisal fees,
environmental review fees, title insurance or review fees,
Bank’s reasonable legal counsel fees, recording fees and
other customary and usual fees incurred by Bank and chargeable to
Borrowers in accordance with this Agreement.
Section
1.5 The Loan, Note and Loan
Documents as defined above and in Section 2.2 below is a companion
loan to a Six Million Seven Hundred Ninety-Nine Thousand Four
Hundred Sixty-Eight and 00/100 Dollar ($6,799,468.00) loan made by
Bank to NTS Virginia and NTS Lake Forest pursuant to a Seventh
Mortgage Loan Modification Agreement dated of even date herewith
(“Seventh Mortgage Loan Modification”) as evidenced by
a Seventh Amended and Restated Promissory Note Construction
Mortgage Loan from NTS Virginia and NTS Lake Forest to Bank in like
amount and dated of even date herewith (“Fawn Lake
Note”) and secured by the loan and security documents
referenced in the Seventh Modification Agreement (“Fawn Lake
Loan Documents”). Pursuant to Article 8 hereof, the Loan,
Note and Loan Documents shall be cross-collateralized and
cross-defaulted with the Fawn Lake Note, Seventh Mortgage Loan
Modification and Fawn Lake Loan Documents.
ARTICLE 2.
CONDITIONS OF BORROWING
Section
2.1 The Bank shall not be required to
make any advances hereunder unless (a) the conditions set forth
below shall have been completed to the satisfaction of the Bank,
and (b) at all times there remains undisbursed in the Loan an
amount sufficient with which to fully pay the cost of Completion
(hereinafter defined) of the Improvements. However, the Bank may,
in its discretion, make advances prior to fulfillment of all such
conditions, without waiving its right to require such fulfillment
before additional advances are made. If, at any time, the
undisbursed Loan proceeds are insufficient to fully pay the cost of
Completion of the Improvements (a “Deficiency”), the
Borrowers shall deposit with the Bank in escrow an amount equal to
the Deficiency, which amount shall be disbursed prior to the
disbursement of additional Loan proceeds.
Section
2.2 The phrase “Completion of
the Improvements”, as used in this Agreement, means full
completion of the development of the Improvements in accordance
with the Plans and Specifications. The Borrowers shall execute and
deliver, or cause to be executed and delivered to the Bank the
following instruments, all of which shall be dated of even date
herewith: the Promissory Note (the “Note”); a Deed of
Trust, Assignment and Security Agreement granted by NTS/Virginia
Development Company (the “Deed of Trust”), the
Unconditional and Continuing Guaranties (the
“Guaranties”) of J.D. Nichols, NTS Mortgage Income
Fund, a Delaware corporation and NTS Guaranty Corporation, a
Kentucky corporation (collectively, the “Guarantors”),
an Assignment of Contracts and Income granted by Borrowers, an
Environmental
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Indemnity Agreement executed by
Borrowers and Guarantors and security agreements or instruments
(collectively, the “Loan Documents”).
Section
2.3 The Bank shall have received the
preliminary title report and commitment (the “Title
Commitment”) of Lawyers Title Insurance Corporation (the
“Title Company”), Commitment No. 2887916 to issue a
mortgagee’s loan policy of title insurance (ALTA-2006) in the
amount of the Note, insuring the Bank and its successors and
assigns that the Deed of Trust is a first lien on the Improvements
Site, subject only to those matters contained in the Title
Commitment that have been approved by Bank (“Permitted
Exceptions”) with all so-called “standard
exceptions” deleted, containing such endorsements and
affirmative insurance as Bank may require and otherwise in form and
substance satisfactory to Bank.
Section
2.4 The Borrowers shall deliver to
the Bank:
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(a) Certified
copies of each Borrower’s Articles of Incorporation, Bylaws
and NTS Virginia’s and NTS Lake Forest’s Certificates
of Good Standing in the state of their incorporation or any other
organizational documentation;
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(b) Certified
copies of each entity Guarantor’s Articles of Incorporation,
Bylaws and NTS Guaranty Corporation’s Certificate of Good
Standing in the state of their incorporation;
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(c)
Evidence that each
Borrower and each entity Guarantor has taken all action necessary
to authorize the Loan and the execution and performance of its
obligations under the Loan Documents;
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(d)
Executed copies of the
Loan Documents;
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(e) Receipt
and review of an appraisal in form and substance satisfactory to
Bank and receipt of Bank’s appraisal fee;
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(f) Evidence
that the Improvements, when built, will meet zoning, subdivision
and all building code requirements and other legal requirements.
Bank may engage independent persons or entities, at
Borrowers’ expense, to verify that all such permits and
approvals have been secured and are being complied with, after
written notice to NTS Virginia and NTS Virginia’s failure to
provide appropriate verification;
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(g) Copies
of plans and specifications constituting the Improvements
(“Plans and Specifications”), in the form approved and
signed by NTS Virginia and the Contractor, as defined hereafter.
The Plans and Specifications shall contain a certification by the
design professional preparing same that the Improvements, if
developed in accordance with such Plans and Specifications, will
comply with all governmental rules and regulations.
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(h) A
copy of the recorded plat for Section 21A which constitutes the
Improvements Site.
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(i) A
copy of all site development permits for the
Improvements.
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(j) Evidence
that the Improvements Site has been zoned to permit the
development, use and occupancy of the Improvements.
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(k) Written
evidence that sanitary and storm sewers, gas, telephone, water and
electrical services are available to the Improvements and in
sufficient quantity.
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(l) To
the extent any amenities are to be constructed at the Improvements,
a copy or certificate of the policy of Builder’s Risk,
Completed Value Non-Reporting Form of fire, extended coverage,
vandalism, malicious mischief, temporary storage, coverage for
items in transit and hazard insurance covering the Improvements, in
an amount adequate to cover the full completed value of the
buildings and improvements, with loss payable endorsements in favor
of the Bank. The policy shall be converted to a standard fire and
extended coverage policy meeting the requirements of Bank upon
completion of development. All insurance policies shall be issued
by a company or companies with a Best’s Insurance
Reports rating of A or better and a financial size category of
Class X or better and shall be otherwise satisfactory to Bank, and
shall name Bank as first mortgagee and shall contain the Virginia
standard mortgagee clause. If it is determined the Improvements
Site is located in a federally identified flood hazard zone and
Bank determines flood insurance is required, NTS Virginia will
provide flood insurance coverage in a minimum amount not less than
the Loan amount; copies of such policies shall be delivered to
Bank.
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(m) A
copy of (i) the site development contracts for the Improvements if
any, and (ii) the names of subcontractors whose bids are relied
upon by Contractor in development of the Improvements.
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(n) A
detailed cost breakdown for development of the Improvements and
Completion of the Improvements prepared by NTS Virginia. This
detailed cost breakdown shall contain not less than a source and
use of funds for the total cost of the Improvements and shall be
updated and resubmitted to Bank as soon as possible after any
information becomes known to NTS Virginia which changes such cost
breakdown.
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Section
2.5 All documents and other evidences
required to be delivered in connection with this financing must be
satisfactory to Bank and shall have been approved as to form and
substance by counsel for the Bank. The Borrowers shall furnish such
additional documents and certificates as may be reasonably
requested by the Bank or its counsel which are related to this
financing or development of the Improvements.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
Section
3.1 The respective Borrower
referenced in each subsection below represents and warrants to the
Bank that:
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(a) NTS
Virginia is the owner of the Improvements Site as of the time of
execution and delivery of the Loan Documents. The Improvements Site
is not subject to any lien, charge, mortgage, restriction or
encumbrance except liens for current real and personal property
taxes and assessments not delinquent, easements and restrictions of
record, customary homeowner association declaration and easements,
the interests herein
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granted to Bank and the other
matters set forth in the loan policy of title insurance from the
Title Company issued to Bank pursuant to the Title Commitment and
accepted by Bank in connection herewith (“Permitted
Exceptions”).
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(b) To
the best of NTS Virginia’s knowledge, the boundary lines of
the Improvements are within the boundary lines of the Improvements
Site, and the Improvements and their proposed operation do not
violate any applicable zoning or use statute, ordinance, building
code, rule or regulation or any covenant or agreement which is
binding upon the Improvements Site or NTS Virginia. NTS Virginia
has not received any notice of violation of any ordinance, rule or
regulation of any governmental authority with respect to the
Improvements or the Improvements Site.
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(c) NTS
Virginia has not received any notices of actions, suits or
proceedings pending or, to the knowledge of NTS Virginia,
threatened against it or the Improvements, at law or in equity, or
before any governmental department, commission, board, bureau,
agency or instrumentality which involve the possibility of any
judgment or order which may result in any material, adverse effect
upon NTS Virginia or the Improvements Site.
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(d) NTS
Virginia has not received, nor is NTS Virginia aware of, any
notice, summons, citation, directive or any other communication,
written or oral, from the Virginia Department of Environmental
Protection, the United States Department of Environmental
Protection, Army Corps of Engineers or other federal, state or
local agency or authority concerning the presence of wetlands,
hazardous substances, hazardous wastes, toxic or solid wastes, or
other hazardous or adverse environmental situation or condition
(collectively, “Environmental Matters”), at or
terminating from the Improvements Site. There is not pending or, to
the best knowledge of NTS Virginia after diligent investigation,
any threatened civil or criminal litigation, notice of violation or
lien, or administrative proceeding relating to Environmental
Matters involving NTS Virginia or the Improvements Site.
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(e) From
and after NTS Virginia’s ownership through the date hereof,
the Improvements Site has not been substantially and adversely
affected in any way as a result of any fire, explosion, earthquake,
accident, labor disturbance, requisition or taking of property by
any governmental authority, flood, riot or act of God.
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(f) Each
Borrower has full power and authority to conduct business as
presently conducted, NTS Virginia has the power and authority to
own and develop the Improvements, and each Borrower has the power
and authority to execute this Agreement, and to perform all of its
duties and obligations under this Agreement and the other Loan
Documents.
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(g) Each
of the Loan Documents, when executed and delivered, will constitute
the duly authorized, legal, valid and binding obligations of each
party executing the same, and will be enforceable strictly in
accordance with their respective terms.
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(h) NTS
Virginia represents that the Improvements Site, the present use and
occupancy of the Improvements Site, the Plans and Specifications,
the development of the Improvements and the use and occupancy of
the Improvements upon its completion,
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will not violate or conflict with
any applicable law, statute, ordinance, rule, regulation or order
of any kind, including, without limitation, zoning, building,
environmental, land use, noise abatement, occupational health and
safety or other laws, any building permit or any condition, grant,
easement, covenant condition or restriction, whether recorded or
not. Any such violation shall be corrected by NTS Virginia within
sixty (60) days of receipt of notice of the same.
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(i) The
financial information submitted in connection with the application
for the Loan accurately reflects the financial condition of each
Borrower and each Guarantor as of the date thereof and has been
prepared in accordance with generally recognized accounting
principles consistently applied. There has been no materially
adverse change in the financial condition, business, or operations
of each Borrower or each Guarantor since the date of such
information that has not been disclosed to Bank. Each Borrower and
each Guarantor is solvent.
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(j) NTS
Virginia represents that this Agreement and all financial
statements, budgets, schedules, opinions, certificates,
confirmations, applications, rent rolls, affidavits, agreements,
development contracts, and other materials submitted to the Bank in
connection with or in furtherance of this Agreement by or on behalf
of NTS Virginia, fully and fairly state the matters with which they
purport to deal, do not misstate any material fact, nor, separately
or in the aggregate, fail to state any material fact necessary to
make the statements made not misleading. Non-material changes in
the Plans and Specifications are excluded from this
representation.
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(k) NTS
Virginia represents that, subject only to payment of fees reflected
in the Improvements budget, all utility and municipal services
required for the development, occupancy and operation of the
Improvements are available for use and tap-in at the boundaries of
the Improvements Site, and, upon request of Bank, copies of written
permission obtained from the applicable utility companies or
municipalities to connect the Improvements into each of said
services and to thereafter provide the Improvements with such
services to the extent necessary for operation of the Improvements
will be supplied to Bank following receipt of same by NTS
Virginia.
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(l) NTS
Virginia represents that, all permits and licenses required by
applicable law to construct, occupy and operate the Improvements
have been issued and are in full force or, if the present stage of
development of the Improvements does not allow such issuance, then
such permits and licenses will be issued if and when the
Improvements are constructed pursuant to the Plans and
Specifications.
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(m) NTS
Virginia represents that, the storm and sanitary sewage disposal
system, water system and all mechanical systems of the Improvements
do, or when constructed will, comply with all applicable
environmental, pollution control and ecological laws, ordinances,
rules and regulations. The applicable environmental protection
agency, pollution control board and/or other governmental agencies
having jurisdiction of the Improvements have issued their permits
for the development, tap-in and operation of those systems, or if
the present stage of the development of the Improvements does not
allow such issuance, then such permits and licenses will be issued
when the Improvements are completed.
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(n) NTS
Virginia represents that, all utility, parking, vehicular access
(including curb cuts and highway access), development, recreational
and other permits and easements required for the development, use
and operation of the Improvements have been granted and
issued.
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(o) NTS
Virginia represents that, when completed in accordance with the
Plans and Specifications (and except where permitted by easements
customary in residential developments or permitted by the
applicable zoning authority), the Improvements will not encroach
upon any building line, set back line, side yard line, or any
recorded or visible easement, or other easement of which NTS
Virginia is aware or has reason to believe may exist, affecting the
Improvements Site.
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(p) NTS
Virginia represents that, the Plans and Specifications proposed for
the Improvements will be complete in all respects, containing all
detail requisite for the Improvements which, when built and
equipped in accordance therewith, shall be ready for the intended
use thereof.
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(q) NTS
Virginia represents that, all driveways and roads necessary for
ingress and egress to the Improvements and for the full utilization
of the Improvements for their intended purposes will be completed
in accordance with the Plans and Specifications.
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(r) NTS
Virginia represents that, no condemnation of any portion of the
Improvements, no condemnation or relocation of any roadways
abutting the Improvements, and no denial of access to the
Improvements from any point of access to the Improvements, has
commenced, or to the best of the NTS Virginia’s knowledge, is
contemplated by any governmental authority.
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(s) NTS
Virginia represents that, the Improvements budget, when presented
to the Bank in accordance with the terms of this Agreement, shall
be true and correct in all material respects. The amounts set forth
in the Improvements budget shall present a full and complete
representation of all costs, expenses and fees which NTS Virginia,
after diligent inquiry and analysis by NTS Virginia and persons of
appropriate expertise on behalf of NTS Virginia, expects to pay or
anticipates becoming obligated to pay (other than from revenue
generated from the operation of the Improvements) to complete the
development of the Improvements.
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(t) The
Borrowers and Guarantors (i) have filed all tax returns which are
required to be filed by Borrowers or Guarantors; (ii) are not in
default in the payment of any taxes levied or assessed against
Borrowers or Guarantors or any of the Borrowers’ or
Guarantors’ assets; (iii) has paid all federal, state, and
local withholding taxes on wages and all F.I.C.A., unemployment and
workmen’s compensation taxes and premiums required to be
paid; and (iv) is not in default under any judgment, order, decree,
law, rule, or regulation of any governmental authority or tribunal
to which Borrowers or Guarantors may be subject.
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Section
3.2 With the exception of changes in
Plans and Specifications which are economic in impact and do not
alter the legal position between Borrowers and Bank
(“non-legal
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changes”), each Borrower,
with respect only to the representations and warranties made by
such Borrower, covenants, warrants and agrees that the
representations and warranties made in this Article 3 shall be and
shall remain true and correct in all material respects at the time
of the Borrowers’ execution of this Agreement and at all
times thereafter so long as any part of the Loan shall remain
outstanding. Each request for disbursement shall constitute a
reaffirmation that these representations and warranties are true in
all material respects on and as of the date of each such request
for disbursement and will be true in all material respects on the
date of the disbursement.
Section
3.3 Borrowers understand and agree
that, in making this Loan and in making further disbursements of
loan proceeds, Bank is relying upon a continuation of the financial
status of Borrowers and of the Guarantors of the Loan as of the
date of the latest financial statements of Borrowers and Guarantors
which Bank received prior to the execution and delivery of this
agreement. In the event of a material adverse change in the
financial status of Borrowers or of any Guarantor, Borrowers and/or
Guarantors shall promptly inform Bank of such change and Bank may
require the deposit of additional funds or may require additional
or substitute guarantors acceptable to Bank.
ARTICLE 4.
COVENANTS OF BORROWERS
While
this Agreement is in effect, and until the Bank has been repaid in
full for the principal of and interest on all advances made by the
Bank, each Borrower who is referenced in a particular subsection
below covenants with Bank as follows:
Section
4.1 NTS Virginia shall commence
development of the Improvements within thirty (30) days following
the date of this Agreement. NTS Virginia shall expeditiously
complete development of the Improvements on the Improvements Site
in accordance with the Plans and Specifications approved by NTS
Virginia, the Contractor and the Bank, and in compliance with all
applicable statutes, ordinances and regulations, so that such
development shall be fully completed in accordance with the Plans
and Specifications approved as above set forth, in any event, not
later than September 1, 2010.
Section
4.2 ______________________ (the
"Contractor") shall act as site developer for such
development.
Section
4.3 NTS Virginia shall post and
maintain copies of any required notices in a conspicuous place on
the Improvements Site during the entire course of development and
shall otherwise comply in all respects with the requirements of
state law as is currently in effect or as amended.
Section
4.4 [INTENTIONALLY LEFT
BLANK]
Section
4.5 NTS Virginia shall not make or
consent to any modifications involving an amount of Ten Thousand
and 00/100 Dollars ($10,000.00) or more for a single change or
Fifty Thousand and 00/100 Dollars ($50,000.00) or more in the
aggregate in the Plans and Specifications after they have been
approved by the Bank without the written consent of the Bank.
However, NTS Virginia may make modifications without the consent of
the Bank which
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do not constitute any substantial
modification which would adversely affect the value of the
completed Improvements or the cost of Completion of the
Improvements.
Section
4.6 NTS Virginia shall not transfer
any interest of NTS Virginia in the Improvements or the
Improvements Site and shall not create or permit to be outstanding
any mortgage, encumbrance or lien on the Improvements or the
Improvements Site, except Permitted Exceptions and except for the
sale of subdivided lots and payment of the release price as more
fully set forth in Section 7.1 hereof.
Section
4.7 NTS Virginia shall at all times
maint
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