-------------------------------------------------------------------------------
AMENDED AND RESTATED DEVELOPMENT AND
CONSTRUCTION LOAN AGREEMENT
-------------------------------------------------------------------------------
October 31, 2000
TABLE OF CONTENTS
Section Page
1. Amount of Loan.............................................................2
2. Note and Security..........................................................2
3. Release of Letter of Credit................................................3
4. Initial Disbursement.......................................................3
5. Procedure and Policy for Loan Advances.....................................3
5.1 Proof of Improvements................................................3
5.2 Affidavits of Materialmen............................................4
5.3 Overall Cost Breakdown...............................................4
5.4 Lien Waivers.........................................................4
5.5 Purpose of Subsequent Advances.......................................4
5.6 New Sections of Lots.................................................4
5.7 Special Limitations..................................................5
5.8 Sufficient Funds for Lot Sections....................................5
5.9 Optional Disbursement of Funds Through Title Company.................5
5.10 Disbursement by Bank to Contractors and Subcontractors..............5
5.11 Limitations; Holdback...............................................6
5.12 Sufficient Funds for Completion.....................................6
5.13 Release of Retained Funds...........................................6
5.14 Frequency of Advances...............................................6
5.15 Limitation on Aggregate Amount of Advances..........................7
5.16 Inspection Fees.....................................................7
5.17 Lot Releases........................................................7
5.18 Loan Fee............................................................7
6. Conditions Precedent to Initial and Subsequent Advances....................7
6.1 Initial Advance......................................................7
6.2 Subsequent Advances.................................................10
7. Covenants of Borrowers and Guarantors.....................................10
8. Representations and Warranties............................................13
8.1 Corporate Existence of Borrowers; Ownership.........................13
8.2 Corporate Existence of Income Fund..................................13
8.3 Authorization and Execution.........................................13
8.4 Enforceability......................................................13
8.5 No Liens............................................................13
-i-
TABLE OF CONTENTS
Section Page
8.6 No Litigation.......................................................14
8.7 Zoning and Permits..................................................14
8.8 Plans and Specifications............................................14
8.9 Restrictions on Transfer............................................14
8.10 Tax Returns........................................................14
8.11 Truthfulness of Statements.........................................14
8.12 Utility Services...................................................14
8.13 Access ............................................................15
8.14 Environmental Matters..............................................15
8.15 Purposes of Disbursements..........................................15
8.16 Declaration and Common Areas.......................................16
9. Events of Default.........................................................17
9.1 Monetary Default....................................................17
9.2 Nonmonetary Default.................................................17
9.3 Breach of Covenant..................................................17
9.4 Cross Default.......................................................17
9.5 Interruption of Construction........................................17
9.6 Bankruptcy..........................................................17
9.7 Death of ▇▇▇▇▇▇▇....................................................17
10. Partial Release..........................................................18
11. Miscellaneous............................................................18
11.1 Delivery of Materials..............................................18
11.2 No Waiver; Cumulative Remedies.....................................18
11.3 Construction.......................................................18
11.4 Survival of Agreements.............................................19
11.5 Successors.........................................................19
11.6 Counterparts.......................................................19
11.7 Cost of Loan.......................................................19
11.8 Guaranty...........................................................19
11.9 Notices............................................................20
-ii-
EXHIBITS
Description Exhibit
Legal Description of Fawn Lake Land............................................A
Legal Description of Lake Forest II Land.......................................B
Initial Disbursement...........................................................C
Cost Budget for Project........................................................D
Minimum Release Price..........................................................E
-iii-
AMENDED AND RESTATED DEVELOPMENT AND
CONSTRUCTION LOAN AGREEMENT
THIS AMENDED AND RESTATED DEVELOPMENT AND CONSTRUCTION LOAN AGREEMENT
("Agreement") is made and entered into and effective as of the 31st day of
October, 2000, by and among: (i) NTS/VIRGINIA DEVELOPMENT COMPANY
("NTS/Virginia"), a Virginia corporation, whose address is ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and NTS/LAKE FOREST II RESIDENTIAL
CORPORATION, a Kentucky corporation ("NTS/Lake Forest II"; NTS/Virginia and
NTS/Lake Forest II are sometimes hereinafter collectively referred to as the
"Borrowers"), (ii) THE PROVIDENT BANK ("Bank"), an Ohio banking corporation,
whose address is ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, and (iii) ▇.▇.
▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇"), an individual of Louisville, Kentucky, and NTS MORTGAGE
INCOME FUND ("Income Fund"), a Delaware corporation (▇▇▇▇▇▇▇ and Income Fund are
sometimes hereinafter collectively referred to as the "Guarantors").
RECITALS:
A. NTS/Virginia owns and is developing a residential and golf course
community known as Fawn Lake (the "Fawn Lake Project"), on land located in
Spotsylvania County, Virginia, as more fully described on Exhibit A attached
hereto and made a part hereof (the "Fawn Lake Land"), in accordance with plans
and specifications which have been provided to Bank (the "Fawn Lake Plans and
Specifications").
B. Bank has previously extended a revolving credit loan to NTS/Virginia in
an amount not to exceed Ten Million Seven Hundred Thousand Dollars
($10,700,000.00) (the "Fawn Lake Loan"), which Fawn Lake Loan is evidenced by a
Revolving Promissory Note dated December 30, 1997, and which Fawn Lake Loan is
secured by a Deed of Trust and Security Agreement pertaining to the Fawn Lake
Land and all improvements thereon, and such other security documents as are
described in a Development and Construction Loan Agreement among NTS/Virginia,
Bank and Guarantors dated as of December 30, 1997.
C. NTS/Lake Forest II owns and is developing a residential community known
as Lake Forest (the "Lake Forest II Project) (the Fawn Lake Project and the Lake
Forest II Project are sometimes hereinafter collectively referred to as the
"Projects"), on land located in Jefferson County, Kentucky, as more particularly
described on Exhibit B attached hereto and made a part hereof (the "Lake Forest
II Land") (the Fawn Lake Land and the Lake Forest II Land are sometimes
hereinafter collectively referred to as the "Land"), in accordance with plans
and specifications which have been provided to Bank ("Lake Forest II Plans and
Specifications").
D. Bank of Louisville, a Kentucky banking corporation ("Bank of
Louisville") has previously extended a revolving credit loan to NTS/Lake Forest
II in an amount not to exceed Eight Million Dollars ($8,000,000.00) (the "Lake
Forest II Loan"), which Lake Forest II Loan is evidenced by a Revolving
Promissory Note dated January 6, 1998, and which Lake Forest II Loan is secured
by a
Mortgage and Security Agreement (Fixture Filing Statement) pertaining to the
Lake Forest II Land and all improvements thereon, and such other security
documents as are described in a Revolving Loan Development Agreement between
Bank of Louisville and NTS/Lake Forest II dated January 6, 1998.
E. Bank has now agreed to extend a revolving credit loan to Borrowers in a
total amount not to exceed Eighteen Million Dollars ($18,000,000.00) (the
"Loan"), which Loan represents a consolidation of both the Fawn Lake Loan and
the Lake Forest II Loan, and which Loan shall be secured by a first priority
mortgage lien upon and security interest, in both the Fawn Lake Project and the
Lake Forest II Project, all in accordance with the terms and conditions of this
Agreement.
AGREEMENT:
NOW, THEREFORE, to induce Bank to make the Loan, and in consideration
thereof, and in order to provide a contractual commitment for the making of
future advances under the provisions of Virginia and Kentucky law, Borrowers,
Bank and Guarantors hereby agree as follows:
1. AMOUNT OF LOAN. Borrowers may borrow and reborrow from Bank, and Bank
agrees, in its sole discretion, to lend and relend to Borrowers from time to
time in accordance with the terms and provisions of the "Note" (as hereinafter
defined) and this Agreement, sums not to exceed Eighteen Million and 00/100
Dollars ($18,000,000.00) outstanding at any time ("Maximum Credit").
Notwithstanding the foregoing, in no event shall the total outstanding advances
under the Loan exceed the "Maximum Amount of Available Credit" (as hereinafter
defined). The "Maximum Amount of Available Credit" shall be an amount equal to
the lesser of (i) seventy-five percent (75%) of the then current total aggregate
appraised value of the Projects, or (ii) the following:
Year 1 (through December 31, 2000): $18,000,000.00
Year 2 (through December 31, 2001): $ 16,500,000.00
Year 3 (through December 31, 2002): $ 11,000,000.00
Year 4 (through December 31, 2003): $ 7,000,000.00
Year 5 (through December 31, 2004): $ 4,000,000.00
2. NOTE AND SECURITY. The Loan will be evidenced by that certain Revolving
Promissory Note of even date herewith, made by Borrowers payable to the order of
Bank in the face principal amount of Eighteen Million Dollars ($18,000,000.00)
(the "Note"), and shall be secured by all of the following: (i) a first priority
mortgage lien upon, and a first priority security interest in, the Fawn Lake
Project, pursuant to that certain Credit Line Deed of Trust and Security
Agreement dated December 30, 1997, of record in Deed Book 1521, Page 447 in the
Office of the Recorder of Spotsylvania County, Virginia, and pursuant to a
Conditional Assignment of Leases, Rents, Contracts, Income and Proceeds dated
December 30, 1997, of record in Deed Book 1521, Page 501 in the aforesaid
Office, both as amended by an Amendment to Security Documents of even date
herewith; (ii) a first priority mortgage lien upon, and a first priority
security interest in, the Lake Forest II Project, pursuant to that certain
Mortgage and Security Agreement (Fixture Filing Statement) dated January 6,
1998, of record in Mortgage Book 4555, Page 594, in the Jefferson County Clerk's
office, and pursuant to that certain Assignment of Rents and Leases dated
January 6,
-2-
1998, of record in Deed Book 6983, Page 662, in the aforesaid Office, both as
amended by an Amendment to Security Documents of even date herewith, both of
which were assigned by Bank of Louisville to Bank pursuant to an Assignment of
even date herewith; (iii) Stock Pledge Agreements made by Income Fund in favor
of Bank, pertaining to all of the issued and outstanding shares of stock of
Borrowers (the "Stock Pledge Agreements"); (iv) a $2,000,000 Letter of Credit
(the "Letter of Credit") issued for the benefit of Bank by a financial
institution (the "Letter of Credit Bank") satisfactory to Bank; (v) a first
priority security interest in all personal property, agreements, and intangibles
pertaining to the Fawn Lake Project, including, but not limited to, all accounts
receivable, golf and pro-shop inventory and equipment, golf carts, signage,
licenses, permits, historical use agreements, and all rights of Borrowers as the
"developer" of the Projects, pursuant to Security Agreements; (vi) two separate
Guaranty Agreements of even date herewith, made by Guarantors in favor of Bank
(collectively, the "Guaranty Agreements"); (vii) various UCC-1 Financing
Statements (the foregoing Deed of Trust, the Mortgage, the Assignments, the
Stock Pledge Agreement, the Letter of Credit, the Security Agreement, the
Guaranty Agreements, the Fixture Filings, and the Financing Statements are
hereafter collectively referred to as the "Security Documents"), and by
Environmental Indemnity Agreements from Borrowers and Guarantors pertaining to
the Fawn Lake Project and the Lake Forest II Project, respectively (the
"Environmental Agreements"). The Security Documents, together with the Note, the
Environmental Agreements and this Agreement, all as the same may be further
amended, extended or modified, are sometimes hereinafter collectively referred
to as the "Loan Documents."
3. RELEASE OF LETTER OF CREDIT. Bank agrees that it shall release the
Letter of Credit and return the original thereof to Borrowers at such time as
the total outstanding advances under the Loan are equal to or less than Eight
Million Dollars ($8,000,000.00); provided, however, that upon a release of the
Letter of Credit, the Maximum Amount of Available Credit shall thereafter be
$8,000,000.00, or such lesser amount as is set forth in Section 1 above. Bank
further agrees that prior to drawing the Letter of Credit, Bank will give
Borrowers written notice of any "Default" (as hereinafter defined) to Borrowers,
and shall give Borrowers a period of thirty (30) days following Borrowers'
receipt of such notice within which to cure such Default.
4. INITIAL DISBURSEMENT. As of the date of this Agreement, Bank has made an
initial disbursement of loan proceeds as described on Exhibit C attached hereto
and made a part hereof, and Borrowers expressly acknowledge the receipt thereof.
5. PROCEDURE AND POLICY FOR LOAN ADVANCES. The procedure and policy for
making Loan advances for either or both of the Fawn Lake Project and the Lake
Forest II Project, subject to satisfaction of the conditions precedent in
Section 6, shall be as follows:
5.1 Proof of Improvements. The applicable Borrower shall submit an AIA form
G-702 Application and Certificate for Payment, and AIA form G-703 Continuation
Sheet certified by the applicable Borrower, the applicable Project Architect, if
any, and the applicable General Contractor, if any, for the applicable Project,
pertaining to the ongoing development of the applicable Project, including the
construction on the applicable Land of residential subdivision sections, common
area amenities, and other improvements in accordance with the applicable Plans
and Specifications (collectively, the "Improvements"), indicating that they have
inspected the Improvements and agree
-3-
that the Improvements, the cost of which payment is being requested, have been
installed on the Land.
5.2 Affidavits of Materialmen. Borrowers shall submit, with each advance
request, original or certified copies of affidavits listing the name, trade and
requested materialman who has done work or supplied materials to the applicable
Project for the Improvements, and invoices from suppliers and
contractors/subcontractors, which contain each of the following: (i) name of
supplier, contractor/subcontractor; (ii) address of supplier,
contractor/subcontractor; (iii) date of invoice; (iv) identification of
applicable Project; and (v) amount and itemized list of materials supplied or
work performed.
5.3 Overall Cost Breakdown. Borrowers shall submit an overall cost
breakdown for both of the Projects, including all construction soft costs, in an
AIA G-703 format.
5.4 Lien Waivers. After the first advance of Loan proceeds, Borrowers shall
submit lien waivers for each contractor/subcontractor or material supplier
corresponding to the disbursements made for the immediately prior advance and
corresponding to the invoices, and an AIA form G-703 for such advance, which
shall verify that such contractors/subcontractors and material suppliers have
been paid up to the amounts set forth on such invoices and such AIA form G-703.
5.5 Purpose of Subsequent Advances. After the first advance of Loan
proceeds, advances under the Loan shall be made only to fund those costs and
expenses related to continued development and operation of the Projects,
including, but not limited to, the following: Fawn Lake Country Club clubhouse;
operating deficit at Lake Forest Country Club; Texas Gas line repairs at the
Lake Forest golf course (not to exceed $150,000); preliminary clearing and
grading; lot development costs; architectural and engineering fees; common area
development costs; property taxes; liability insurance; all-risk insurance on
the Fawn Lake sales center and guard house; marketing and overhead expenses;
interest expenses related to the Loan; and operating deficits relating to the
operation of the "Homeowner's Associations" (as hereinafter defined) and the
Fawn Lake golf course.
5.6 New Sections of Lots. Prior to any advance for development of a new
section of lots in either Project, Bank shall be satisfied that sufficient
unadvanced Loan funds and/or other revenue sources exist for the completion of
development (i.e., site preparation) of such new lot section. With respect to
the Fawn Lake Project, NTS/Virginia must have obtained "Lot Reservations" for a
minimum of 80% of the total development cost of each new phase prior to the
commencement of construction of each such new phase. The term, "Lot
Reservation," shall mean a binding written agreement for the sale of a lot to a
third party purchaser, with such third party purchaser having paid a good faith
deposit of at least One Thousand Dollars ($1,000.00). Notwithstanding the
foregoing, prior to obtaining the required Lot Reservations for a new phase of
the Fawn Lake Project, NTS/Virginia may request disbursements of the Loan which
in the aggregate may not exceed the lesser of $150,000, or 16% of the total
development costs with respect to such new phase, in order to pay for
predevelopment costs and expenses, including, but not limited to, engineering
costs, presale marketing, preliminary clearing, grading, roadway, and utility
construction costs.
-4-
Also with respect to the Fawn Lake Project, a maximum of up to $2,300,000
of the Loan may be disbursed for construction of the Fawn Lake Country Club,
Phase I. No further disbursements may be made for Phases II and III without
Bank's prior specific written approval.
With respect to the Lake Forest II Project, NTS/Lake Forest II can have a
maximum of ninety (90) lots developed or under development in the Lake Forest
II Project at any one time.
5.7 Special Limitations. Disbursements of the Loan for General Overhead and
MIF Expenses shall be limited, as follows: Bank has initially allocated $400,000
of the Loan for General Overhead and MIF Expenses for the first three (3) months
of the term of the Loan. Thereafter, as long as there are funds allocated to the
General Overhead and MIF Expenses category of Borrowers' budget as a result of
the sales of "Lots" as described in Section 5.17, Borrowers may request and
receive disbursements of the Loan for General Overhead and MIF Expenses. If
there are no funds allocated to the General Overhead and MIF Expenses category
of Borrowers' budget at the time of Borrowers' request for an advance for such
items, than Borrowers shall not be entitled to receive such disbursement, and
Borrowers must pay for such items from their own funds. If subsequent closings
of Lot sales result in the allocation of additional funds to the General
Overhead and MIF Expenses category, Borrowers shall then be entitled to the
disbursement by Bank of one (1) previous month's General Overhead and MIF
Expenses plus the then-current month (for a maximum of two (2) months).
5.8 Sufficient Funds for Lot Sections. In the event Bank determines that
there are insufficient funds to complete a new section of lots in either Project
under construction, or that the value of Borrowers' lot inventory either under
development or fully developed is less than $5,000,000.00 as calculated on a
gross retail basis, than Bank shall not be obligated to make any further
advances under the Loan, and Bank shall have the option to require that
Borrowers deposit funds with Bank within fifteen (15) days following receipt of
written notice from Bank which are sufficient to complete construction of any
lot section then under development.
5.9 Optional Disbursement of Funds Through Title Company. Bank hereby
reserves the right to disburse all loan proceeds through the title insurance
company providing the title policy as set forth in Section 6.1(d), at Borrowers'
expense.
5.10 Disbursement by Bank to Contractors and Subcontractors. Subject to
Borrowers' prior right not to pay a claim, and provided Borrowers have provided
written notice of such dispute to Bank, which claim is disputed in good faith,
Bank shall have the right to pay any contractor/subcontractor or supplier
directly without Borrowers' consent, and to charge the amount of such payment to
Borrowers' account as though such amount had been advanced pursuant to request
by Borrowers, if such disbursement is deemed necessary by Bank to aid in the
progress of construction. Bank shall, in no event, be responsible or liable to
any person other than Borrowers for its disbursement of or failure to disburse
the Loan proceeds or any part thereof, and no contractor, subcontractor,
supplier or laborer shall have any right or claim against Bank under this
Agreement or by virtue of Bank's administration hereof.
-5-
5.11 Limitations; Holdback. Each request for advance submitted by Borrowers
shall constitute a representation that the work and materials for which payment
is being requested have physically been incorporated into the Improvements, free
of any security interest, lien or encumbrance other than the liens in favor of
Bank created as security for the Loan. The amount to be disbursed by Bank on the
date set for each disbursement shall be an amount equal to that percent of the
total construction work to be done that has been completed to date in accordance
with the Plans and Specifications for the Projects, less the total amount
disbursed by Bank prior to the disbursement date, less five percent (5%) thereof
as a retainer. Notwithstanding the foregoing, nothing herein shall obligate Bank
to disburse any portion of the Loan for work performed where such disbursement
request is for amounts in excess of the amounts set forth on the cost budget
required to be provided to Bank, a copy of which is attached hereto as Exhibit
D.
5.12 Sufficient Funds for Completion. Borrowers shall provide such evidence
as is satisfactory to Bank to establish that there are sufficient funds
available under the Loan to complete the Improvements. In connection therewith,
Bank may require that either: (i) within fifteen (15) days after notification,
Borrowers deposit funds into the "UBA," as hereinafter defined, into which Bank
may disburse all Loan proceeds for the purpose of segregating such funds for the
construction of the Improvements, in an amount which is necessary in addition to
the Loan to complete the Improvements; and/or (ii) a sufficient amount be
retained from the Loan proceeds to assure, at all times, that the construction
of the Improvements can be completed.
In order to determine whether additional funds shall be required under this
Section 5.12, Bank shall determine: (i) whether the costs to complete the
Improvements and pay all Project related costs and expenses exceed the amounts
budgeted therefor as set forth in Exhibit D, after a review of Borrowers'
requests for advances of Loan proceeds and Bank's construction reports; and/or
(ii) whether the sale of Project lots and the corresponding production of income
from such sales, after consideration of Loan debt service costs, costs of sales,
and the Project operating expenses, is sufficient to (a) repay the Loan, and (b)
establish that the Project's interest reserve, as described on Exhibit D, is
sufficient to service the Loan to maturity, based upon Bank's then-revised sales
projections. In making such determination, Bank shall give appropriate
consideration to any cost savings realized by Borrowers during construction in
regard to the amounts budgeted therefor.
5.13 Release of Retained Funds. The funds retained from the Loan proceeds
to assure the completion of the construction of the Improvements shall be
advanced to Borrowers upon final acceptance of the work by Bank or its
representative and the delivery to Bank of all of the affidavits, certificates,
waivers, releases and receipts required under this Agreement and/or under
Virginia or Kentucky law, to protect the Land and Improvements and the Deed of
Trust and the Mortgage against mechanics liens.
5.14 Frequency of Advances. Loan advances shall be made not more than once
a month.
5.15 Limitation on Aggregate Amount of Advances. In no event shall the
total aggregate amount of advances disbursed pursuant to the Loan exceed Forty
Million Dollars ($40,000,000.00).
-6-
5.16 Inspection Fees. At Bank's option, from and after an Event of Default,
Bank may consign an independent contractor to make such reasonable inspections
of the Projects as Bank deems necessary. Borrowers shall pay the costs of such
inspections and Bank's reasonable out-of- pocket expenses incurred in connection
therewith, promptly upon receipt of an invoice therefor.
5.17 Lot Releases. As individual "Lots" in the Projects are ready to be
sold, Bank hereby agrees to provide a partial release from the lien of the Deed
of Trust or Mortgage, as the case may be, upon payment to Bank of an amount
equal to the greater of (i) ninety-one percent (91%) of the gross sales price of
such Lot, less discounts, or (ii) eighty-five percent (85%) of the original
sales price of such Lot as quoted by Borrowers and approved by Bank. The entire
amount of such payments to Bank shall be applied as a reduction of principal on
the Loan; provided, however, that sixteen percent (16%) of such payments shall
be allocated to the category in Borrowers' budget for future General Overhead
and MIF Expenses. Bank shall not be required to release any Lot from the lien of
the Deed of Trust and/or Mortgage if an Event of Default exists under the Loan
Documents. The term, "Lot," as used in this Section 5.17 and elsewhere in this
Agreement, shall be deemed to mean lots as shown on recorded plats of the Land
that have been filed of record in the applicable jurisdiction.
5.18 Loan Fee. Borrowers shall pay Bank a loan fee in the amount of
three-fourths of one percent (3/4%) of each advance made hereunder attributable
to the Fawn Lake Project, and a loan fee in the amount of one-quarter of one
percent (1/4%) of each advance made hereunder attributable to the Lake Forest II
Project, at the time of each such advance; provided, that such fee shall be
waived as to the initial amount disbursed to pay off the Bank of Louisville loan
secured by a lien on the Lake Forest II Project.
6. CONDITIONS PRECEDENT TO INITIAL AND SUBSEQUENT ADVANCES.
6.1 Initial Advance. Prior to the making of the initial advance of the
Loan, Bank shall have received the following, all of which shall be satisfactory
to Bank:
(a) Bank's appraisal fee, inspection fees, environmental review fees,
survey fees, title insurance or review fees, legal fees, settlement fees and
recording fees, if any, and other out-of- pocket expenses and customary and
usual fees incurred by Bank, but chargeable to Borrowers in accordance with the
terms hereof;
(b) Corporate resolutions of Borrowers, authorizing the Loan and the
execution and performance by Borrowers of their respective obligations under the
Loan Documents; corporate resolutions of Income Fund, authorizing the execution
and performance by Income Fund of the Loan Documents to which it is a party; and
consent resolutions of the "Joint Venture" (as hereinafter defined), authorizing
the execution and delivery of the agreement referred to in Section 6.1(s) below;
(c) Executed originals of the Loan Documents;
(d) Title insurance commitments from a title insurance company (or
companies) acceptable to Bank ("Title Company") for the issuance of an ALTA
mortgagee's title insurance
-7-
policy in the amount of the Loan, and copies of the source of title document(s)
and all exception documents described or referred to therein, evidencing that
title to the Land is marketable and free from liens and encumbrances, without
exception as to survey or mechanic's liens, and containing a pending
disbursements clause and other endorsements requested by Bank (including, but
not limited to, a Mortgagee's Comprehensive Endorsement), all in a form
satisfactory to Bank;
(e) Evidence that the Projects (specifically including the lake contained
within the Fawn Lake Project) are in full compliance with all applicable
licensing, building permits, zoning and building laws, ordinances and
regulations, sewer and utility regulations pertaining to availability, and other
legal requirements, including all applicable federal, state and local laws,
regulations and requirements, including environmental matters affecting property
and wetlands requirements, and including all requirements pursuant to any
historical use agreements. Borrowers agree to secure or cause to be secured at
their cost, from all applicable governmental agencies, all permits and approvals
necessary or advisable to be secured to permit the operation of the Projects and
completion of the Improvements. 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 Borrowers and
Borrowers' failure to provide appropriate verification within ten (10) days
thereafter;
(f) With respect to the Fawn Lake Project, all agreements and documents
relating to the Fawn Lake Homeowner's Association, and all agreements relating
to any easement, covenant, or restriction for the Fawn Lake Project, including,
but not limited to, any agreement relating to (i) the dam, flood control,
erosion control, or recreation, (ii) ingress, egress, utilities and permanent
and temporary construction easements, (iii) golf course operation and use,
including agreements which evidence proper access for golf carts, maintenance
equipment, and golfers, any agreements covering water and irrigation, any
marketing or other agreement with ▇▇▇▇▇▇ Golf Course Design, and any equipment
lease for golf carts of maintenance equipment, (iv) historical use and
environmental impact agreements, and (v) community standards agreements, minimum
and maximum building lot sizes, minimum and maximum building square footage
agreements, setback, etc.
(g) A preliminary survey of the new clubhouse being constructed at the Fawn
Lake Project certified by a licensed surveyor, showing the location and any and
all improvements located thereon, in form and substance satisfactory to Bank,
including certification that no portion of the Fawn Lake Land needed for
construction is in a HUD-designated flood hazard area, and prepared in a fashion
sufficient for the Title Company to delete the survey exception from its title
commitment;
(h) Evidence satisfactory to Bank that builder's risk, liability and
multi-peril insurance policies are being carried on the Projects (specifically
including the Fawn Lake community center, sales center, maintenance and guard
houses) in such amounts as are acceptable to Bank (but for no less than the
outstanding Loan amount), and naming Bank as an additional insured, mortgagee
and Bank loss payee, and which insurance shall provide for at least 30 days
advance notification to Bank prior to any cancellation, nonrenewal or amendment
of such policy(ies);
-8-
(i) A complete cost breakdown for the Projects in trade breakdown form from
each of Borrowers' contractors, itemizing the hard cost components of the
Improvements, construction period interest costs, all other soft costs, work to
be performed and the subcontractors and material suppliers, a copy of which
breakdown shall be attached hereto as Exhibit D;
(j) Plans and Specifications for both Projects;
(k) Executed copies of all contracts and subcontracts which have then been
let for the construction of the Improvements;
(l) All documents required under this Agreement, and reports which are
satisfactory to Bank from qualified consultants regarding the lake contained
within the Fawn Lake Project, soil, wetlands and flood conditions, and hazardous
waste and environmental matters;
(m) Evidence of the availability of the following utilities to the boundary
of the Land: electric, water, sanitary sewers, and telephone;
(n) Certified copies of Articles of Incorporation and Certificates of Good
Standing issued by the Secretary of State of Virginia for both NTS/Virginia and
Fawn Lake Community Association (the "Fawn Lake Homeowner's Association");
(o) Certified copies of Articles of Incorporation and certificates of Good
Standing issued by the Secretary of State of Kentucky for both NTS/Lake Forest
II and NTS/Lake Forest II Homeowners Association (the "Lake Forest II
Homeowner's Association"; the Fawn Lake Homeowners Association and the Lake
Forest II Homeowner's Association are sometimes hereinafter collectively
referred to as the "Homeowner's Associations");
(p) Certified copies of Income Fund's Articles of Incorporation, and a
Certificate of Good Standing of Income Fund issued by the Secretary of State of
Delaware;
(q) An opinion of counsel for Borrowers, and an opinion of counsel for
Income Fund, which opinion letters shall include the following: Borrowers/Income
Fund has the unrestricted right to execute all the Loan Documents; Borrowers and
Guarantors have not executed any document of any kind which would prohibit the
execution of the Loan Documents; the execution, delivery, and performance of the
Loan Documents have been authorized by all necessary actions; the Loan Documents
are valid and binding upon Borrowers and Guarantors and are enforceable in
accordance with their terms, subject to the laws of bankruptcy and principles of
equity affecting creditors' rights generally; the Loan is not usurious;
Borrowers and Guarantors are not a party to any lawsuit or other proceeding for
the collection of money, and have no knowledge of circumstances which might give
rise to such a lawsuit or other proceeding; Borrowers/Income Fund are properly
organized under the laws of the Commonwealths of Virginia and Kentucky and State
of Delaware respectively; specifically confirming the representations and
warranties contained in Section 8.4; and such other matters as Bank's counsel
may require;
-9-
(r) Narrative appraisals of the Land and Improvements by an appraisers
acceptable to Bank, in form and content satisfactory to Bank;
(s) An agreement made by Orlando Lake Forest Joint Venture, a Florida joint
venture, and an affiliate of Borrowers, in favor of Bank, pursuant to which such
Joint Venture agrees that at such time as the current outstanding mortgage made
by such Joint Venture in favor of Bank of America has been paid in full, such
Joint Venture shall remit fifty percent (50%) of the net sales proceeds realized
by such Joint Venture from sales of lots in the Orlando Lake Forest Project to
Bank, to be applied as a prepayment of the Loan; and
(t) Such other documents, instruments, opinions or assurances as Bank or
its counsel may request.
6.2 Subsequent Advances. In addition to the requirements of Sections 5 and
6.1, the following shall be additional conditions precedent to each advance
after the first advance:
(a) Borrowers shall not be in default in the performance of the terms and
provisions of the Loan Documents;
(b) Bank shall have received notice of title continuation or an endorsement
to the title insurance policy insuring the Deed of Trust and the Mortgage, to
the effect that since the date of the last preceding continuation or
endorsement, there has been no change in the state of title to the Land from the
state of title insured under such policy other than sales of lots as permitted
pursuant to the Deed of Trust and the Mortgage and such easements and
restrictions as are normal and customary in connection with the continuing
development of the Land, and which shall have the effect of increasing the
coverage of such policy by the amount of the advance then being made without any
further exception; and
(c) neither Borrowers nor Guarantors shall have experienced, in the opinion
of Bank, any "material adverse change in financial condition or
creditworthiness," which shall mean a reduction in net worth of twenty percent
(20%) or more.
7. COVENANTS OF BORROWERS AND GUARANTORS. Borrowers (and Guarantors, as
applicable) hereby covenant with Bank that Borrowers (and Guarantors, as
applicable) shall:
(a) pay promptly when due all claims for labor and materials and prevent
the filing of liens therefor against the Land and Improvements, provided
Borrowers need not pay such claims so long as the validity thereof is being
contested in good faith and provision for the payment thereof is made by
Borrowers in form and manner satisfactory to Bank;
(b) use the Loan proceeds solely for the payment of costs and expenses
which constitute Project costs, as contemplated by the Plans and Specifications
or otherwise under this Agreement;
(c) permit the duly authorized agents of Bank at any reasonable time to
enter upon and inspect the Land and Improvements, and all applicable books and
financial records of Borrowers for
-10-
purposes of assisting Bank in determining whether or not any particular advance
of Loan proceeds should be made, or otherwise;
(d) comply with all laws, ordinances or other governmental regulations
affecting the Land or the construction of the Improvements;
(e) maintain with Bank an unfinished building account (the "UBA") into
which Bank may disburse the proceeds of the Loan, to the extent that such
disbursements are not made directly to Borrowers or Title Company;
(f) upon demand by Bank, pay all costs and expenses required to satisfy the
conditions of this Agreement, including, without limiting the generality of the
foregoing, the following:
(1) all taxes and recording expenses, including stamp, intangibles and
documentary taxes, if any,
(2) the fees and commissions lawfully due to brokers in connection
with this transaction, including, but not limited to, the acquisition of
the Land,
(3) fees for title insurance, title updates, appraisals and
out-of-pocket expenses of Bank, and
(4) all fees and expenses of representatives of Bank and counsel for
Bank in connection with the Loan;
(g) at all times during the term of this Agreement, comply with all
applicable federal, state, and local laws, regulations, administrative rulings,
orders, ordinances, and the like, pertaining to Borrowers or the Land or the
construction of the Improvements, including, but not limited to, all historical
use agreements and all laws and regulations pertaining to wetlands;
(h) indemnify and hold harmless Bank against liability relating to
brokerage fees and other reasonable matters prescribed by Bank;
(i) deliver to Bank, in addition to the financial information set forth in
Section 3.8 of the Deed of Trust, the following:
(1) Within 45 days of the end of each of its fiscal quarters,
Borrowers shall each send to Bank quarterly and year-to-date "Financial
Statements," which may be internally prepared. The term, "Financial
Statements," shall include a balance sheet, income statement, a
comprehensive analysis which explains cash flows for each income property,
and itemizations and explanations of all capitalized items and inventory
valuations.
(2) Beginning with the year ending on December 31, 2000, and for each
successive year in which Borrowers have outstanding financial commitments
to Bank, within ninety (90) days thereafter (i.e., by March 31st), Bank
shall receive year-end (annual) Financial Statements
-11-
for Borrowers and their affiliates which have been audited by Borrowers'
certified public accounts, except that upon delivery of written notice to
Borrowers by Bank, such Statements shall be reviewed statements from Borrowers'
certified public accountants rather than audited statements from Borrowers'
certified public accountants.
(3) Monthly operating statements with respect to the Projects, and such
other information as may be requested by Bank from time to time, in form and
substance satisfactory to Bank.
Two (2) copies of the above information shall be sent to Bank as follows:
1 copy to: The Provident Bank
Three ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
1 copy to: The Provident Bank
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇
Further, Borrowers shall cause any guarantor of the Note to provide annual
financial statements and such other information as may be requested by Bank to
Bank in such form and substance as is satisfactory to Bank;
(j) maintain lot inventory included within the Land, either fully developed
or under development, having a value of at least Five Million Dollars
($5,000,000.00) as computed on a gross retail basis;
(k) Borrowers and Income Fund will maintain their respective corporate
existences, in good standing under the laws of the states of their respective
incorporation; and Income Fund shall permit any shares of stock of the Borrowers
to be sold, transferred, pledged, assigned, encumbered or otherwise alienated;
and
(l) Income Fund shall cause Orlando Lake Forest Joint Venture to remit
fifty percent (50%) of the net sales proceeds realized by such Joint Venture
from sales of lots in the Orlando Lake Forest Project to Bank following payment
in full by such Joint Venture to Bank of America, as described in Section 6.1(s)
hereof.
In addition, Borrowers shall not:
(m) permit control of the Fawn Lake Homeowner's Association to be
transferred from Borrowers; or
-12-
(n) permit NTS/Virginia's Class B membership in the Fawn Lake Homeowner's
Association to be converted to Class A membership in the Fawn Lake Homeowner's
Association; or
(o) mortgage, pledge, transfer, assign, or otherwise encumber any portion
of the "common areas" and/or "Club Facilities" of the Fawn Lake Project, except
for transfers from NTS/Virginia's to the Fawn Lake Homeowner's Association.
8. REPRESENTATIONS AND WARRANTIES. Borrowers and Guarantors jointly and
severally represent and warrant to Bank that:
8.1 Corporate Existence of Borrowers; Ownership. NTS/Virginia and Fawn Lake
Homeowner's Association each are, and will continue to be during the term of the
Loan, corporations organized and validly existing in good standing under the
laws of the Commonwealth of Virginia. NTS/Lake Forest II and Lake Forest
Homeowner's Association each are, and will continue to be during the term of the
Loan, corporations organized and validly existing in good standing under the
laws of the Commonwealth of Kentucky. Income Fund is the owner of all issued and
outstanding shares of stock of Borrowers.
8.2 Corporate Existence of Income Fund. Income Fund is, and will continue
to be during the term of the Loan, a corporation organized and validly existing
by virtue of the laws of the State of Delaware.
8.3 Authorization and Execution. Borrowers and Income Fund have taken all
necessary action to authorize the execution and delivery of the Loan Documents,
and none of the provisions of the Loan Documents contravenes or is in conflict
with Borrowers' or Income Funds's organizational documents or any existing
indenture or agreement by which either Borrowers or Income Fund or their assets
or properties are bound.
8.4 Enforceability. Each of the Loan Documents constitutes the legal, valid
and binding obligation of Borrowers and Guarantors, enforceable in accordance
with the terms thereof, except as the same may be limited by bankruptcy,
moratorium, insolvency or similar laws affecting the enforcement of creditors'
rights generally. Income Fund has obtained any and all approvals (including any
SEC approvals) that may be necessary for the enforceability of its Guaranty
Agreement and the Stock Pledge Agreement.
8.5 No Liens. The Land (including the Improvements) is not subject to any
mortgage, pledge, security interest, title retention lien or other encumbrance
except those matters set forth on the title evidence issued to Bank in
connection with the Deed of Trust and Mortgage and interests therein granted to
Bank.
8.6 No Litigation. No litigation or proceeding of any governmental body or
any other person, firm or corporation is presently pending or threatened which
would have a materially adverse effect upon the financial condition of Borrowers
or Guarantors, or affect the title to the Land.
-13-
8.7 Zoning and Permits. The Land is properly zoned for its intended
purpose, and prior to commencement of construction of the Improvements,
Borrowers shall obtain all necessary permits from federal, state and local
governments related to the construction and use of the Improvements, including,
but not by way of limitation, all necessary approvals, licenses or permits
issued or required by any federal, state or local authority whose jurisdiction
involves environmental protection.
8.8 Plans and Specifications. The Plans and Specifications for the Fawn
Lake Country club clubhouse furnished to Bank are true and correct and will not
be substantially changed or modified without the prior written consent of Bank.
8.9 Restrictions on Transfer. Except for the sale by NTS/Virginia to the
U.S. Government of a portion of the Fawn Lake Land which has been designated as
"historical," and except for the sales of Lots as described in Section 5.17,
Borrowers shall not, without the prior written consent of Bank, further
mortgage, assign, convey, sell, or otherwise dispose of the Land or any part
thereof or transfer any ownership interest in the Project (including all common
areas, except that common areas may be conveyed to the Homeowner's Associations
from time to time), or the income therefrom, or permit any such action to be
taken; notwithstanding the foregoing, Bank agrees that NTS/Lake Forest II shall
be permitted to grant Bank a second mortgage on the Lake Forest II Project, to
secure a $9,000,000 loan from Bank to NTS/Lake Forest II.
8.10 Tax Returns. All tax returns and reports of Borrowers required by law
to be filed have been duly filed and all taxes, assessments, contributions, fees
and other governmental charges (other than those presently payable without
penalty or interest and those currently being contested in good faith) upon
Borrowers, or their respective properties or assets which are due and payable
have been paid.
8.11 Truthfulness of Statements. None of the financial statements,
certificates, or the statements furnished to Bank by or on behalf of Borrowers
in connection with the Loan, and none of the representations and warranties in
this Agreement, contain any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements contained therein or
herein not misleading.
8.12 Utility Services. All utility services necessary for the construction
the Improvements and the operation thereof for its intended purpose are
available at the boundaries of the Land, including services for water supply,
sewer facilities, electricity and telephones, and Borrowers have the right to
connect to all utility services without restriction.
8.13 Access. The Land and Improvements have access to publicly dedicated
streets.
8.14 Environmental Matters.
(a) There have been no claims, notices, orders or directives based on
environmental grounds made or delivered to, pending or served on Borrowers or
their agents, or of which Borrowers or their agents after due investigation are
aware, issued by a governmental department
-14-
or agency having jurisdiction over the Project, affecting the Project or any
part thereof or requiring any work to be done upon or about the Project or any
part thereof, including, but not limited to, clean up orders, except as
contemplated under existing permits for the Project; or issued or claimed by any
private agency or individual affecting the Project or any part thereof.
(b) To the best of Borrowers' knowledge, after due investigation, there
have not been, and are not now any solid waste, hazardous waste, hazardous
substance, toxic substances, toxic chemicals, pollutants or contaminants,
underground storage tanks, purposeful dumps, substances, wastes, pollutants or
accidental spills in, on or about the Land and Improvements, and to the best of
Borrowers' knowledge, after due investigation, no solid waste, hazardous waste,
hazardous substances, pollutants, contaminants, wastes or toxic substances have
ever been stored on the Project either by Borrowers or by Borrowers' purchasers,
lessees, licenses, invitees or predecessors, except as disclosed in the
environmental assessment of the Project prepared in connection with the Loan,
and except for materials and substances used in the ordinary course of business
in accordance with applicable laws, rules and regulations.
(c) Borrowers agree and covenant that Bank shall not assume any liability
or obligation for loss, damage, fines, penalties, claims or duty to cleanup or
dispose of wastes or materials on or relating to the Project regardless of any
inspections of the Project made by Bank prior to the consummation of this
transaction or as a result of any conveyance of title of the Project to Bank by
foreclosure, deed in lieu of foreclosure, or otherwise. Borrowers agree to
remain fully liable and shall indemnify and hold harmless Bank from any costs,
expenses, cleanup costs, waste disposal costs, litigation costs, fees,
penalties, including, without limitation, those costs, expenses, penalties and
fines within the meaning of the Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA), the Superfund Amendments and
Reauthorization Act ("▇▇▇▇"), The Clean Water Act, The Clean Air Act, The
Resource Conservation Recovery Act as amended by the Hazardous and Solid Waste
Amendments of 1984, The Safe Drinking Water Act, The Toxic Substances Control
Act, The Hazardous Materials Transportation Act, all as amended and other
federal, state and local environmental laws, and from other related liabilities,
upon the occurrence of a breach of any of Borrowers' foregoing representations
and warranties.
8.15 Purposes of Disbursements. All disbursements pursuant to the terms of
this Agreement will be utilized solely in accordance with the provisions hereof,
and each disbursement request submitted by Borrowers shall constitute:
(a) an affirmation that all representations and warranties set forth in
this Agreement and the other Loan Documents remain true and correct as of the
date thereof and, unless Bank is notified to the contrary prior to the requested
disbursement, will be true and correct on the date of such disbursement; and
(b) a representation and warranty that the information set forth in each
such disbursement request is true and accurate.
8.16 Declaration and Common Areas. With respect to the Fawn Lake
Declaration and Fawn Lake "common areas:"
-15-
(a) NTS/Virginia is the "Declarant" under the Declaration for Fawn Lake
dated July 16, 1990, of record in Deed Book 924, Page 131, in the Spotsylvania
Recorder's office, as amended (as amended, the "Declaration");
(b) NTS/Virginia is the Class B member of the Fawn Lake Homeowner's
Association;
(c) NTS/Virginia controls the Fawn Lake Homeowner's Association;
(d) Fee simple title to the land upon which the golf course, community
center, clubhouse, tennis courts and swimming pool are located is vested in
NTS/Virginia, and such facilities constitute "Club Facilities" as described in
Section 2.15 of the Declaration;
(e) As the Declarant under the Declaration, and as the Class B member of
the Fawn Lake Homeowner's Association, NTS/Virginia has the sole right to (i)
designate, maintain, control and construct all "common areas" of the Fawn Lake
Project, (ii) control all aspects of the "Club Facilities," and (iii) assess
charges against lot owners in the Fawn Lake Project;
(f) Pursuant to the Loan Documents, NTS/Virginia assigned all of its right,
title and interest as the "Declarant" under the Declaration, and all rights as
developer of the Project, to Bank, as collateral security for the Loan;
(g) Pursuant to the Loan Documents, upon a Default by NTS/Virginia
thereunder and exercise by Bank of its rights under the Loan Documents, Bank
shall succeed to all rights of NTS/Virginia as the "Declarant" under the
Declaration pursuant to Section 3.1(c) of the Declaration and all rights of
NTS/Virginia as developer of the Fawn Lake Project, including, but not limited
to, the right to maintain, control and construct all "common areas" and "Club
Facilities" of the Fawn Lake Project, the right to access charges against lot
owners in the Project in accordance with the Declaration, and the right to amend
the Declaration to provide that the undeveloped acreage shall be subject to the
benefits and duties described in the Declaration; and
(h) NTS/Virginia is the owner of more than 75% of the lots subject to the
Declaration, and so long as NTS/Virginia continues to own at least 75% of the
lots subject to the Declaration, NTS/Virginia shall have the sole right to
cancel or amend the Declaration pursuant to Section 5.3 of the Declaration.
9. EVENTS OF DEFAULT. Upon the occurrence of any of the following events of
default (each an "Event of Default"):
9.1 Monetary Default. Failure to pay any installment of interest or
principal on the Note within ten (10) days after receipt, whether by U.S. Mail,
certified mail or otherwise, of written notice from Bank or its agents to
Borrowers ("Written Notice") that such payment is delinquent; provided, however,
that Bank shall not be obligated to provide such Written Notice in the event
that Borrowers have been delinquent in the past and Bank has previously
delivered Written Notice of such delinquency on at least two (2) prior
occasions.
-16-
9.2 Nonmonetary Default. The occurrence of any event of default under the
Loan Documents other than a payment default as described in Section 9.1 above,
and such default shall continue for a period of thirty (30) days after the
receipt of Written Notice from Bank to Borrowers of such default; provided,
however, that if such default is curable, and if and so long as Borrowers is
proceeding with due diligence to cure such default, such period will be extended
to sixty (60) days.
9.3 Breach of Covenant. If any covenant, warranty or representation made by
Borrowers in this Agreement or any of the Loan Documents referred to herein is
incorrect in any material respect.
9.4 Cross Default. The occurrence of any event of default in any other
obligation of Borrowers to Bank and such default shall continue for a period of
thirty (30) days after the receipt of Written Notice from Bank to Borrowers of
such default; provided, however, that if such default is curable, and if and so
long as Borrowers are proceeding with due diligence to cure such default, such
period will be extended to sixty (60) days;
9.5 Interruption of Construction. If work on the Improvements stops for a
period of thirty (30) days (except for stoppages caused by strike, lockout,
labor disputes, fire, unusual delay in transportation, unavoidable casualty,
weather and acts of God, or any other event not within Borrowers' control) or is
not proceeding in a manner reasonably satisfactory to Bank or its
representatives.
9.6 Bankruptcy. If Borrowers make any assignment for the benefit of
creditors, files or has filed against Borrowers any proceedings under the
bankruptcy law, or if a receiver is appointed for the assets of Borrowers.
9.7 Death of ▇▇▇▇▇▇▇. If ▇▇▇▇▇▇▇ shall die, and one of the following shall
not have occurred within one hundred twenty (120) days following the death of
▇▇▇▇▇▇▇: (i) the Estate of ▇▇▇▇▇▇▇ shall execute and deliver a replacement
Guaranty Agreement in favor of Bank in an amount of at least Nine Million
Dollars ($9,000,000.00); or (ii) Borrowers shall pledge such additional
collateral to Bank as is acceptable to Bank, acting in its sole discretion; or
(iii) Borrowers shall reduce the outstanding principal balance of the Loan by
Nine Million Dollars ($9,000,000.00), and borrowers agree that they shall not be
entitled to reborrow such amount; or (iv) Borrowers shall provide a replacement
Guaranty Agreement acceptable to Bank in its reasonable discretion; and in any
of the foregoing events, the obligation of Bank to make any further advances
under this Agreement shall immediately terminate, and the outstanding principal
of the Note, together with interest accrued and unpaid thereon, shall become
immediately due and payable without notice or demand, except as provided above,
and Bank may take such action as it may deem appropriate to enforce payment of
the outstanding principal and/or interest due on the Note and apply any part of
any funds then in its hands to the payment of the Note; and Bank may, at its
election, proceed to complete the construction of the Improvements, if
applicable, using the unexpended proceeds of the Loan, and to that end, may
employ such contractors, agents and employees as it deems appropriate. Any such
action by Bank shall not relieve Borrowers of their responsibility to furnish
any additional funds needed to complete the Improvements. Upon the occurrence of
an Event of Default, Borrowers irrevocably constitute and appoint Bank to be its
true and lawful attorney for it and in its name, and to sign any and all
requisitions for disbursement of the Loan, as Bank in its sole discretion
-17-
reasonably exercised making necessary and proper to secure the continuance and
completion of the Improvements, according to the terms of this Agreement, and to
pay all sums necessary in connection therewith, all of which disbursements and
sums shall be considered a part of the Loan made by Bank to Borrowers under this
Agreement and shall be subject to the terms of the Note and secured by the
Security Documents. For purposes of this Section 9, Bank, and any contractor
authorized or employed by it, is hereby irrevocably authorized and empowered to
enter into and upon the Land and Improvements and take charge thereof, together
with, all the materials and appliances, and to proceed with the construction of
the Improvements, with such changes, alterations, additions or modifications as
may reasonably be deemed necessary or expedient by Bank, and do whatsoever in
the sole judgment of Bank it shall reasonably deem necessary to be to complete
the construction of the Improvements.
10. PARTIAL RELEASE. Bank agrees that upon written request from Borrowers,
Bank will release any lot in the Projects from the lien of the Deed of Trust,
the Mortgage, and Security Documents upon receipt of the amount set forth in
Section 5.17 hereof, and, in the case of partial releases of portions of the
Projects other than developed lots, in the amount set forth as Minimum Release
Price on Exhibit E attached hereto and made a part hereof.
11. MISCELLANEOUS.
11.1 Delivery of Materials. All materials delivered upon the Land for the
purpose of being incorporated in the work shall be free of any security interest
and shall be considered to be annexed thereto and to have become a part thereof,
and shall be subject, as against Borrowers and all parties acting or claiming
under them, to the rights of Bank under this Agreement and under the Security
Documents.
11.2 No Waiver; Cumulative Remedies. No failure by Bank to exercise and no
delay by it in exercising any right, power or privilege hereunder shall preclude
any other further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies under this Agreement are cumulative and not
exclusive of any rights or remedies provided by law.
11.3 Construction. The Loan Documents and the rights and obligations of the
parties hereto thereunder, shall be construed in accordance with the laws of the
State of Ohio; provided, however, that to the extent required by law, matters
pertaining to the enforcement of the Security Documents shall be governed by the
laws of the Commonwealths of Virginia and Kentucky, respectively.
11.4 Survival of Agreements. All agreements, representations and warranties
made in this Agreement shall survive the making of the advances hereunder.
11.5 Successors. This Agreement shall be binding upon and inure to the
benefit of Borrowers and Bank and to their respective successors and assigns.
Borrowers shall not have the right to assign this Agreement or any rights
hereunder without the prior written consent of Bank.
11.6 Counterparts. This Agreement may be executed in any number of
counterparts and each such counterpart shall be deemed to be an original.
-18-
11.7 Cost of Loan. Borrowers shall pay all the reasonable costs incurred by
Bank in the making of the Loan and the administration thereof, including title
examination and title insurance fee, including all title examination update fees
necessary in connection with the title policy issued hereunder, appraisal fees,
survey fees, inspection fees, and reasonable attorney's fees, and shall have the
right to automatically charge the UBA to pay such fees and expenses.
11.8 Guaranty. Guarantors hereby, jointly and severally, personally and
unconditionally guaranty each and every covenant, agreement, warranty,
representation and obligation of Borrowers under this Agreement, the Note, the
Security Documents, and the other instruments referred to herein or related
hereto, and consent to all of the terms hereof and thereof and hereby waive all
suretyship and guarantors' defenses generally. This is a guaranty of payment and
not of collection. All obligations of Borrowers and Guarantors under this
Agreement shall be joint and several, and also all obligations hereunder of
Guarantors are joint and several. The liability of Guarantors hereunder and in
connection herewith shall not in any way be diminished, released, voided or
adversely affected as a result of the invalidity of this Agreement, any or all
of the Security Documents, the Note, or any other Loan Documents and/or any or
all security for the Note and/or the modification or termination of this
Agreement or any other Loan Document and/or the release of any or all security
for any or all of the Indebtedness or as a result of Bank's not requiring any or
all of the Security Documents to be executed or properly perfected and filed or
as a result of any defect in the lien of Bank on any or all of the collateral
for the Note even if through the fault or negligence of Bank. Guarantors
acknowledge that Bank may perfect its security interest and/or lien on some, but
not all, of the collateral described in the Security Documents, and may or may
not, at its sole option, require any or all of the Security Documents referred
to herein to be executed and delivered. Guarantors hereby waive any and all
claims and defenses arising out of, or in any way related to, such failure on
the part of Bank to perfect its security interest in, and/or lien on, all, or
any portion, of such collateral and/or Bank not requiring any or all of the
Security Documents. This guaranty is supplemented by two separate Guaranty
Agreements of even date with this Agreement executed by Guarantors in favor of
Bank.
Notwithstanding the foregoing or anything contained herein to the contrary,
the total maximum aggregate liability of ▇▇▇▇▇▇▇ hereunder and pursuant to the
Loan shall not exceed fifty percent (50%) of the outstanding principal balance
of the Loan at the time of default, plus the applicable pro- rata share of
interest and costs pertaining thereto.
11.9 Notices. All notices, requests, consents, notifications, approvals,
waivers, demands and other communications required or permitted to be given or
made under this Agreement shall be in writing and shall be deemed delivered to
the parties (a) on the date of personal delivery or transmission by facsimile
transmission, (b) on the first business day following the date of delivery to a
nationally recognized overnight courier service, or (d) or the third business
day following the date of deposit in the United States Mail, postage prepaid, by
certified mail, in each case, addressed as follows, or to such other address as
any party may designate by notice to the others in accordance herewith:
-19-
If to Bank: The Provident Bank
Attn: Mr. ▇▇▇▇▇ ▇▇▇▇▇▇▇
Three ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇ fax
With a copy (which ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
shall not constitute ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇ PLLC
notice) to: 3300 National City Tower
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇ fax
If to Borrowers and/or NTS Development Company
Guarantors: Attn: Legal Department
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇ or ▇▇▇-▇▇▇-▇▇▇▇ fax
With a copy (which ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ LLP
shall not constitute Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
notice) to: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇ fax
[SIGNATURE PAGE FOLLOWS]
-20-
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
date first written above.
NTS/VIRGINIA DEVELOPMENT COMPANY
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------------------
Title: Vice President
NTS/LAKE FOREST II RESIDENTIAL
CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------------------
Title: Vice President
("Borrowers")
THE PROVIDENT BANK
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------------
Title: Vice President
("Bank")
/s/ ▇.▇. ▇▇▇▇▇▇▇
---------------------------------------------------
▇.▇. ▇▇▇▇▇▇▇
NTS MORTGAGE INCOME FUND
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------------------
Title: Secretary/Treasurer
("Guarantors")
-21-
LIST OF EXHIBITS
A - Legal Description of Fawn Lake Land
B - Legal Description of Lake Forest II Land
C - Initial Disbursement
D - Cost Budget for Project
E - Minimum Release Price
-22-
EXHIBIT A
Legal Description of Fawn Lake Land
-23-
EXHIBIT B
Legal Description of Lake Forest II Land
-24-
EXHIBIT C
Initial Disbursement
Current balance of existing Provident Bank $10,700,000 Loan: $10,494,496.93
***** ***** *****
DISBURSEMENTS:
Payoff Bank of Louisville $5,930,397.55
Closing Expenses:
o ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇ PLLC: 11,500.00
o Recording fees:
Clerk, Spotsylvania County 14,855.80
Clerk, Jefferson County 165.00
o Title premium fees:
Lawyers Title Insurance Corp. (VA) 15,496.50
Lawyers Title Insurance Corp. (KY) 7,350.00
o Provident Bank - Loan Fee:
(Fawn Lake: 3/4% of each amount drawn;
Lake Forest II: 1/4% of each amount drawn) 303.94
------
TOTAL DISBURSED: $5,980,068.79
Total Receipts from Provident Bank: $5,980,068.79
-25-
EXHIBIT D
Cost Budget for Project
See attached "Application and Certificate for Payment, AIA Document G702" and
related schedules.
-26-
EXHIBIT E
Minimum Release Price
-27-