FHLMC Loan No. 002697238
REPLACEMENT RESERVE AGREEMENT
(REVISION DATE 08-01-2002)
This REPLACEMENT RESERVE AGREEMENT ("Agreement") is made and entered
into, to be effective as of this ____ day of ______________________, 2002, by
and between XXXXXXX PROPERTIES RESIDENTIAL, L.P., a limited partnership
organized and existing under the laws of the State of Georgia ("Borrower"), and
PRIMARY CAPITAL ADVISORS LC, a limited liability company organized and existing
under the laws of State of Georgia ("Lender") and its successors and assigns.
W I T N E S S E T H:
WHEREAS, Lender has agreed to make and Borrower has agreed to accept
the Loan, which is to be evidenced by the Note and secured by the Security
Instrument encumbering the Land and the Improvements. The Land is described on
Exhibit "A" attached to this Agreement; and
WHEREAS, as a condition of making the Loan, Lender is requiring
Borrower to establish the Replacement Reserve Fund for the funding of Capital
Replacements throughout the Loan term.
NOW, THEREFORE, for and in consideration of the Loan, the mutual
promises and covenants herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Lender and Borrower agree as follows:
1. Definitions. The following terms used in this Agreement shall have the
meanings set forth below in this Section 1. Any term used in this
Agreement and not defined shall have the meaning given to that term in
the Security Instrument.
(a) "Capital Replacement" means the replacement of those items
listed on Exhibit "B" of this Agreement and such other
replacements of equipment, major components or capital systems
related to the Improvements as may be approved in writing or
required by Lender.
(b) "Disbursement Period" means the interval between disbursements
from the Replacement Reserve Fund, which interval shall be no
shorter than once a month.
(c) "Improvements" means the buildings, Personal Property and
improvements situated upon the Land, currently constituting a
multifamily apartment project known as Highland Park
Apartments.
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(d) "Initial Deposit" means the amount of Zero Dollars ($0.00)
made as of the date of this Agreement.
(e) "Inspection Fee" means a fee for performing any inspection
required by this Agreement in an amount not to exceed Five
Hundred and No/100 Dollars ($500.00) per inspection.
(f) "Investment Fee" means a one time fee for establishing the
Replacement Reserve Fund in the amount of Two Hundred Fifty
and No/100 Dollars ($250.00).
(g) "Loan" means the loan from Lender to Borrower in the original
principal amount of Ten Million and No/100 Dollars
($10,000,000.00), as evidenced by the Note and secured by the
Security Instrument.
(h) "Minimum Disbursement Request Amount" means Two Thousand and
No/100 Dollars ($2,000.00).
(i) "Monthly Deposit" means the amount of Three Thousand One
Hundred Two and No/100 Dollars ($3,102.00) per month to be
deposited into the Replacement Reserve Fund in accordance with
this Agreement.
(j) "Property" means the Land and Improvements.
(k) "Replacement Reserve Deposit" means the Initial Deposit, the
Monthly Deposit and/or the Revised Monthly Deposit, as
appropriate.
(l) "Replacement Reserve Fund" means the account established
pursuant to this Agreement to defray the costs of Capital
Replacements.
(m) "Review Period" means the period ending 120 months after the
first monthly payment date.
(n) "Revised Monthly Deposit" means the amount per month that
Lender determines Borrower must deposit in the Replacement
Reserve Fund during any Subsequent Review Period.
(o) "Security Instrument" means the mortgage, deed of trust, deed
to secure debt, or other similar security instrument
encumbering the Property and securing Borrower's performance
of its Loan obligations.
(p) "Subsequent Review Period" means the period of 120 months
commencing either (i) at the termination of the Review Period
or (ii) at the termination of a prior
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Subsequent Review Period. There may be more than one
Subsequent Review Period.
2. Replacement Reserve Fund
(a) Establishment; Funding.
(i) Upon the closing of the Loan, the parties shall
establish the Replacement Reserve Fund and, if
required by Lender, Borrower shall pay the Initial
Deposit to Lender for deposit into the Replacement
Reserve Fund.
(ii) Commencing on the date the first installment of
principal and/or interest is due under the Note and
continuing on the same day of each successive month
until the end of the Review Period, Borrower shall
pay the Monthly Deposit to Lender for deposit into
the Replacement Reserve Fund, together with its
regular monthly payments of principal and interest as
required by the Note and Security Instrument.
(iii) Prior to the end of the Review Period, Lender will
assess the physical condition of the Property. Lender
may adjust the Monthly Deposit at the termination of
the Review Period to reflect Lender's determination
of the condition of the Property. Upon written notice
from Lender or Loan Servicer, Borrower shall begin
paying the Revised Monthly Deposit on the first
monthly payment date of the Subsequent Review Period
and shall continue paying the Revised Monthly Deposit
until Lender further adjusts the Replacement Reserve
Deposit during a Subsequent Review Period, if
applicable. If Lender does not provide Borrower with
written notice of a Revised Monthly Deposit, Borrower
shall continue to pay the Monthly Deposit or the
Revised Monthly Deposit then in effect.
(b) Investment of Deposits. Borrower and Lender agree that Lender
shall hold all moneys deposited into the Replacement Reserve
Fund in an interest bearing account, and any interest earned
on such moneys shall be added to the principal balance of the
Replacement Reserve Fund and disbursed in accordance with the
provisions of this Agreement. Borrower acknowledges and agrees
that it shall not have the right to direct Lender as to any
specific investment of moneys in the Replacement Reserve Fund.
Lender shall not be responsible for any losses resulting from
investment of moneys in the Replacement Reserve Fund or for
obtaining any specific level or percentage of earnings on such
investment. Lender shall be entitled to deduct the Investment
Fee from the Replacement Reserve Fund for establishing the
Replacement Reserve.
PAGE 3
(c) Use. Subject to the pledge and security interest and other
rights of Lender set forth in this Agreement, the Replacement
Reserve Fund shall be maintained for the payment of the costs
of the Capital Replacements identified on Exhibit B.
(d) Deferral of Deposits. Notwithstanding subsections 2(a) through
(c) above, Lender defers its right to require Borrower to make
the Replacement Reserve Deposit. However, at the end of the
Review Period or any Subsequent Review Period, Lender reserves
the right to require that Borrower begin making the
Replacement Reserve Deposit if Lender reasonably determines
that the physical condition of the Property warrants that
Borrower begin making such deposit. Lender's determination to
require such deposit shall not depend on the existence of any
of the events set forth in subsection (e) below.
(e) Reinstatement of Deposits. Notwithstanding subsection 2(d)
above, Lender reserves the right to require at any time, upon
written notice to Borrower, that Borrower begin making the
Replacement Reserve Deposit if Lender reasonably determines
that any of the following events have occurred:
(i) Borrower's default under the Note, Security
Instrument, or any other document delivered in
connection with the Loan, or
(ii) the occurrence of a Transfer which is prohibited
under the terms of the Security Instrument or which
requires Lender's consent, or
(iii) Borrower's failure to maintain the Property in a
satisfactory manner and/or in accordance with the
requirements of the Security Instrument.
3. Performance of Capital Replacements; Disbursements.
(a) Requests for Disbursement. Lender shall disburse funds from
the Replacement Reserve Fund, in its sole discretion,as
follows:
(i) Borrower's Request. If Borrower determines, at any
time or from time to time, that a Capital Replacement
is necessary or desirable, Borrower shall perform
such Capital Replacement and request from Lender, in
writing, reimbursement for such Capital Replacement.
Borrower's request for reimbursement shall include
(A) a detailed description of the Capital Replacement
performed, together with evidence, satisfactory to
Lender, that the cost of such Capital Replacement has
been paid and (B) lien waivers from each contractor
and material supplier supplying labor or materials
for such Capital Replacement, if required by Lender.
PAGE 4
(ii) Lender's Request. If Lender shall reasonably
determine at any time or from time to time, that a
Capital Replacement is necessary for the proper
maintenance of the Property, it shall so notify
Borrower, in writing, requesting that Borrower obtain
and submit to Lender bids for all labor and materials
required in connection with such Capital Replacement.
Borrower shall submit such bids and a time schedule
for completing each Capital Replacement to Lender
within thirty (30) days after Borrower's receipt of
Lender's written notice. Borrower shall perform such
Capital Replacement and request from Lender, in
writing, reimbursement for such Capital Replacement.
Borrower's request for reimbursement shall include
(A) a detailed description of the Capital Replacement
performed, together with evidence, satisfactory to
Lender, that the cost of such Capital Replacement has
been paid and (B) lien waivers from each contractor
and material supplier supplying labor or materials
for such Capital Replacement, if required by Lender.
(b) Conditions Precedent. Disbursement from the Replacement
Reserve Fund shall be made no more frequently than once every
Disbursement Period and, except for the final disbursement, no
disbursement shall be made in an amount less than the Minimum
Disbursement Request Amount. Disbursements shall be made only
if the following conditions precedent have been satisfied, as
reasonably determined by Lender:
(i) Payment for Capital Replacement. The Capital
Replacement has been performed and/or installed on
the Property in a good and workmanlike manner with
suitable materials (or in the case of a partial
disbursement, performed and/or installed on the
Property to an acceptable stage) and paid for by
Borrower as evidenced by copies of all applicable
paid invoices or bills submitted to Lender by
Borrower at the time Borrower requests disbursement
from the Replacement Reserve Fund.
(ii) No Default. There is no condition, event or act that
would constitute a default (with or without notice
and/or lapse of time) under this Agreement or any
other Loan Document.
(iii) Representations and Warranties. All representations
and warranties of Borrower set forth in this
Agreement and in the Loan Documents are true in all
material respects.
(iv) Continuing Compliance. Borrower is in full compliance
with the provisions of this Agreement, the other Loan
Documents and any request or demand by Lender
permitted hereby.
PAGE 5
(v) No Lien Claim. No lien or claim based on furnishing
labor or materials has been filed or asserted against
the Property, unless Borrower has properly provided
bond or other security against loss in accordance
with applicable law.
(vi) Approvals. All licenses, permits, and approvals of
governmental authorities required for the Capital
Replacement as completed to the applicable stage have
been obtained.
(vii) Legal Compliance. The Capital Replacement as
completed to the applicable stage does not violate
any laws, ordinance, rules or regulations, or
building lines or restrictions applicable to the
Property.
4. Right to Complete Capital Replacements. If Borrower abandons or fails
to proceed diligently to undertake and/or complete any Capital
Replacement in a timely fashion or is otherwise in default under this
Agreement for 30 days after written notice of such failure by Lender to
Borrower, Lender shall have the right (but not the obligation) to enter
upon the Property and take over and cause the completion of such
Capital Replacement. However, no such notice or grace period shall
apply in the case of such failure which could, in Lender's judgment,
absent immediate exercise by Lender of a right or remedy under this
Agreement, result in harm to Lender or impairment of the security given
under the Security Instrument or any other Loan Document. Any contracts
entered into or indebtedness incurred upon the exercise of such right
may be in the name of Borrower, and Lender is hereby irrevocably
appointed the attorney in fact of Borrower, such appointment being
coupled with an interest, to enter into such contracts, incur such
obligations, enforce any contracts or agreements made by or on behalf
of Borrower (including the prosecution and defense of all actions and
proceedings in connection with the Capital Replacement and the payment,
settlement or compromise of all bills and claims for materials and work
performed in connection with the Capital Replacement) and do any and
all things necessary or proper to complete any Capital Replacement
including signing Borrower's name to any contracts and documents as may
be deemed necessary by Lender. In no event shall Lender be required to
expend its own funds to complete any Capital Replacement, but Lender
may, in its sole discretion, advance such funds. Any funds advanced
shall be added to the outstanding balance of the Loan, secured by the
Security Instrument and payable to Lender by Borrower in accordance
with the provisions of the Security Instrument pertaining to the
protection of Lender's security and advances made by Lender. Borrower
waives any and all claims it may have against Lender for materials
used, work performed or resultant damage to the Property.
5. Inspection. Lender or any representative of Lender may periodically
inspect any Capital Replacement in process and upon completion during
normal business hours or at any other reasonable time upon reasonable
prior written notice to Borrower (except in an emergency, as determined
by Lender in its discretion or after an Event of Default, in which
event no
PAGE 6
such prior notice shall be require). Lender shall be entitled to deduct
the Inspection Fee from the Replacement Reserve Fund for performing any
such inspection. If Lender, in its sole discretion, retains a
professional inspection engineer or other qualified third party to
inspect any Capital Replacement, Lender also shall be entitled to
deduct from the Replacement Reserve Fund an amount sufficient to pay
all reasonable fees and expenses charged by such third party inspector.
6. Insufficient Account. If Borrower requests disbursement from the
Replacement Reserve Fund for a Capital Replacement in accordance with
this Agreement in an amount which exceeds the amount on deposit in the
Replacement Reserve Fund, Lender shall disburse to Borrower only the
amount on deposit in the Replacement Reserve Fund. Borrower shall pay
all additional amounts required in connection with any such Capital
Replacement from Borrower's own funds.
7. Security Agreement. Borrower hereby conveys, pledges, transfers and
grants to Lender a security interest pursuant to the Uniform Commercial
Code of the Property Jurisdiction or any other applicable law in and to
all money in the Replacement Reserve Fund, as same may increase or
decrease from time to time, for the purpose of securing Borrower's
obligations under this Agreement and to further secure Borrower's
obligations under the Note, Security Instrument and other Loan
Documents.
8. Post Default. If Borrower defaults in the performance of its
obligations under this Agreement or under the Note, Security Instrument
or any other Loan Document, after the expiration of any applicable
notice or cure period, Lender shall have all remedies available to them
under Article 9 of the Uniform Commercial Code of the Property
Jurisdiction and under any other applicable law. In addition, Lender
may retain all money in the Replacement Reserve Fund, including
interest, and in Lender's discretion, may apply such amounts, without
restriction and without any specific order of priority, to the payment
of any and all indebtedness or obligations of Borrower set forth in the
Note, Security Instrument or any other Loan Document, including, but
not limited to, principal, interest, taxes, insurance, reasonable
attorneys' fees and costs (including those of Lender's in-house
counsel) and disbursements actually incurred and/or repairs to the
Property.
9. Termination. If not sooner terminated by written concurrence of the
parties, this Agreement shall terminate upon the payment in full of the
Loan and all indebtedness incurred in connection therewith and upon
such termination, Lender shall pay to Borrower all funds remaining in
the Replacement Reserve Fund.
10. No Amendment. Nothing contained in this Agreement shall be construed to
amend, modify, alter, change or supersede the terms and provisions of
the Note, Security Instrument or any other Loan Document; and, if there
is a conflict between the terms and provisions of this Agreement and
those of the Note, Security Instrument, or any other Loan Document
PAGE 7
then the terms and provisions of the Note, Security Instrument or such
other Loan Document shall control.
11. Release; Indemnity.
(a) Release. Borrower covenants and agrees that, in performing any
of its duties under this Agreement, none of Lender, any Loan
Servicer, or any of their respective agents or employees shall
be liable for any losses, claims, damages, liabilities and
expenses that may be incurred by any of them as a result of
such performance, except that no such party will be released
from liability for any losses, claim, damages, liabilities or
expenses arising out of the willful misconduct or gross
negligence of such party.
(b) Indemnity. Borrower hereby agrees to indemnify and hold
harmless Lender, Loan Servicer and their respective agents and
employees against any and all losses, claims, damages,
liabilities and expenses including, without limitation,
reasonable attorneys' fees and costs (including those of
Lender's in-house counsel) and disbursements, which may be
imposed or incurred by any of them in connection with this
Agreement except that no such party will be indemnified from
liability for any losses, claims, damages, liabilities or
expenses arising out of the willful misconduct or gross
negligence of such party.
12. Choice of Law. This Agreement shall be construed and enforced in
accordance with the laws of the Property Jurisdiction.
13. Successors and Assigns. Lender may assign its rights and interests
under this Agreement in whole or in part and upon any such assignment,
all the terms and provisions of this Agreement shall inure to the
benefit of such assignee to the extent so assigned. The terms used to
designate any of the parties herein shall be deemed to include the
heirs, legal representatives, successors and assigns of such parties;
and the term "Lender" shall also include any lawful owner, holder or
pledgee of the Note. Reference herein to "person" or "persons" shall be
deemed to include individuals and entities. Borrower may not assign or
delegate its rights, interests, or obligations under this Agreement
without first obtaining Lender's prior written consent.
14. Attorneys' Fees. In the event that Lender engages the services of an
attorney at law to enforce the provisions of this Agreement against
Borrower, then Borrower shall pay all costs of such enforcement,
including any reasonable attorneys' fees and costs (including those of
Lender's in-house counsel) and disbursements actually incurred.
15. Compliance with Laws; Insurance Requirements.
(a) Compliance with Laws. Borrower shall ensure that all Capital
Replacements comply with all applicable laws, ordinances,
rules and regulations of all
PAGE 8
governmental authorities having jurisdiction over the Property
and applicable insurance requirements including, without
limitation, applicable building codes, special use permits,
environmental regulations, and requirements of insurance
underwriters.
(b) Insurance Requirements. In addition to any insurance required
under the Loan Documents, Borrower shall provide or cause to
be provided workers' compensation, builder's risk (if required
by Lender), and public liability insurance and other insurance
required under applicable law in connection with any of the
Capital Replacements. All such policies that can be endorsed
with standard mortgage clauses making losses payable to Lender
or its assigns shall be so endorsed. The originals of such
policies shall be deposited with Loan Servicer.
16. Remedies Cumulative. In the event of Borrower's default under this
Agreement, Lender may exercise all or any one or more of its rights and
remedies available under this Agreement, at law or in equity. Such
rights and remedies shall be cumulative and concurrent, and may be
enforced separately, successively or together, and Lender's exercise of
any particular right or remedy shall not in any way prevent Lender from
exercising any other right or remedy available to Lender. Lender may
exercise any such remedies from time to time as often as Lender
chooses.
17. Determinations by Lender. Unless otherwise provided in this Agreement,
in any instance where the consent or approval of Lender may be given or
is required, or where any determination, judgment or decision is to be
rendered by Lender under this Agreement, the granting, withholding or
denial of such consent or approval and the rendering of such
determination, judgment or decision shall be made or exercised by
Lender (or its designated representative) at its sole and exclusive
option and in its sole and absolute discretion.
18. Completion of Capital Replacements. Lender's disbursement of moneys
from the Replacement Reserve Fund or other acknowledgment of completion
of any Capital Replacement in a manner satisfactory to Lender shall not
be deemed a certification by Lender that the Capital Replacement has
been completed in accordance with applicable building, zoning or other
codes, ordinances, statutes, laws, regulations or requirements of any
governmental authority or agency. Borrower shall at all times have the
sole responsibility for ensuring that all Capital Replacements are
completed in accordance with all such governmental requirements.
19. No Agency or Partnership. Nothing contained in this Agreement shall
constitute Lender as a joint venturer, partner or agent of Borrower, or
render Lender liable for any debts, obligations, acts, omissions,
representations or contracts of Borrower.
20. Entire Agreement. This Agreement and the other Loan Documents represent
the final agreement between the parties and may not be contradicted by
evidence of prior,
PAGE 9
contemporaneous or subsequent oral agreements. There are no oral
agreements between the parties. All prior or contemporaneous
agreements, understandings, representations and statements, oral or
written, are merged into this Agreement and the other Loan Documents.
Neither this Agreement nor any of its provisions may be waived,
modified, amended, discharged or terminated except in writing signed by
the party against which the enforcement of the waiver, modification,
amendment, discharge or termination is sought, and then only to the
extent set forth in writing; provided, however, that in the event of a
Transfer requiring Lender's consent under the terms of the Security
Instrument, one or more or all of the Modifications to Agreement set
forth in Exhibit C (if any) may be modified or rendered void by Lender
at Lender's option by notice to Borrower/transferee.
21. Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall constitute an original document and all of which
together shall constitute one agreement.
ATTACHED EXHIBITS. The following Exhibits are attached to this
Agreement:
[X] Exhibit A Legal Description of the Land (required)
[X] Exhibit B Capital Replacements (required)
[X] Exhibit C Modifications to Agreement
{Signatures on next page}
PAGE 10
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first written above.
BORROWER:
XXXXXXX PROPERTIES RESIDENTIAL,
L.P., a Georgia limited partnership
By: XXXXXXX REALTY INVESTORS,
INC., a Georgia corporation
Its General Partner
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: President
[Corporate Seal]
Taxpayer ID No: 00-0000000
LENDER:
PRIMARY CAPITAL ADVISORS LC
By: /s/ Xxxxx X. Xxxxxxxx (Seal)
--------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Managing Director
Commercial Mortgage Banking
PAGE 11
EXHIBIT A
LEGAL DESCRIPTION OF THE LAND
PAGE A-1
EXHIBIT B
CAPITAL REPLACEMENTS
Carpet/Vinyl Flooring Window Treatments
Roofs Furnaces/Boilers
Air Conditioners Ovens/Ranges
Refrigerators Dishwashers
Water Heaters Garbage Disposals
Seal and stripe asphalt pavement Resurface pool shell
Replace pump and filters Resurface tennis court
PAGE B-1
EXHIBIT C
MODIFICATIONS TO REPLACEMENT RESERVE AGREEMENT
The following modifications are made to the text of the Instrument that precedes
this Exhibit:
1. No Subsequent Review Period will apply to this transaction.
PAGE D-1
