EXHIBIT 10.1
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement") is dated effective January 8, 2007, by
and between AMREP SOUTHWEST INC., a New Mexico corporation ("Borrower"), and
COMPASS BANK, ("Bank"). This Agreement replaces and supersedes the Loan
Agreement between the parties dated effective September 18, 2006.
SECTION ONE
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CREDIT TERMS
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SECTION 1.1 LINE OF CREDIT.
(a) Line of Credit. The Bank previously granted to Borrower on September
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18, 2006 the line of credit in the amount of TWENTY FIVE MILLION Dollars
($25,000,000.00) ("Line of Credit"), the proceeds of which shall be used for
Borrower's working capital and general corporate purposes. Borrower's obligation
to repay advances under the Line of Credit are evidenced by the promissory note
dated as of September 18, 2006 ("Line of Credit Note") (to include any
amendment, modification, renewal, or replacement thereof), all terms of which
are incorporated herein by this reference. The maturity date of the Line of
Credit and the Line of Credit Note is September 17, 2008, the "Line of Credit
Maturity Date."
(b) Borrowing, Repayment, and Limitation Based on Minimum Net Worth.
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Borrower may, subject to the additional terms and conditions including the
Borrowing Base, contained in subparagraph 1.1(c) below, from time to time during
the term of the Line of Credit borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions contained herein and in the Line of Credit Note; provided however,
that: the total outstanding borrowings under the Line of Credit shall not at any
time exceed the lesser of: 1) the Borrowing Base (defined below), or 2) the
maximum principal amount of:
i) $25,000,000 while Borrower's Minimum Tangible Net Worth is not
less than $37,500,000, and
ii) $20,000,000 if the Borrower's Minimum Tangible Net Worth is less
than $37,500,000 but not less than $30,000,000.
Bank shall not be obligated to make or fund any advance requested by Borrower if
Borrower's Minimum Net Worth is less than $30,000,000 or if an Event of Default
as defined in Section 6.1, below has occurred. Minimum Tangible Net Worth is
defined in Section 4.6, below.
(c) Borrowing Base. Advances of principal under the Line of Credit on the
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Line of Credit Note, including any Letters of Credit issued pursuant to this
Agreement, shall not at any time exceed the "Borrowing Base", defined as eighty
percent (80%) of the value of Borrower's unencumbered land holdings (the "Land
Holdings"). Land Holdings shall include the land holdings of Borrower's wholly
owned subsidiaries ("Subsidiaries") including Outer Rim Investments, Inc.
("Outer Rim" or "Grantor"). Land Holdings shall include all undeveloped,
partially developed, and fully developed land owned by Borrower and
Subsidiaries. Land Holdings shall not include any land improved with buildings.
Value as used to calculate the Borrowing Base shall be the cost basis of said
land and improvements shown on Borrower's financial statements, calculated
pursuant to Generally Accepted Accounting Principles. If the outstanding
principal balance under the Line of Credit, including any Letters of Credit
issued pursuant to this Agreement, shall at any time exceed the maximum
Borrowing Base amount, Borrower shall, within five (5) business days reduce the
outstanding principal balance on the Line of Credit to an amount not greater
than the Borrowing Base limit. Alternatively, Borrower may, at Borrower's sole
option, deposit with the Bank and pledge as collateral for the Line of Credit,
cash equal to the principal reduction that would be required pursuant to this
subparagraph 1.1(c).
(d) Letter of Credit Subfeature. As a subfeature under the Line of Credit,
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Bank agrees from time to time during the term thereof to issue or cause an
affiliate to issue one or more standby letters of credit for the account of
Borrower (each, a "Letter of Credit" and collectively, "Letters of Credit");
provided however, that the aggregate unfunded amount of all outstanding Letters
of Credit shall not at any time exceed Five Million Dollars ($5,000,000.00). The
form and substance of each Letter of Credit shall be subject to approval by
Bank, in its sole discretion. Each Letter of Credit shall be issued for a term
as designated by Borrower; provided however, that no Letter of Credit shall have
an expiration date subsequent to the Line of Credit Maturity Date. The unfunded
amount of all Letters of Credit shall be reserved under the Line of Credit and
shall reduce the amount which is available for borrowings thereunder. No
interest shall accrue on the unfunded amount of any Letter of Credit. Each
Letter of Credit shall be subject to the additional terms and conditions of the
Letter of Credit agreement required by Bank when issued, including any
application and any related documents required by Bank in connection with the
issuance thereof. Each drawing paid under a Letter of Credit shall be deemed an
advance under the Line of Credit and shall be repaid by Borrower in accordance
with the terms and conditions of this Agreement applicable to such advances;
provided however, that if advances under the Line of Credit are not available,
for any reason, at the time any drawing is paid, then Borrower shall immediately
pay to Bank the full amount drawn, together with interest thereon from the date
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such drawing is paid to the date such amount is fully repaid by Borrower, at the
rate of interest applicable to advances under the Line of Credit. In such event
Borrower agrees that Bank, in its sole discretion, may debit any account
maintained by Borrower with Bank for the amount of any such drawing.
SECTION 1.2. TERM LOAN.
(a) Term Loan. Subject to the terms and conditions of this Agreement, Bank
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hereby agrees to make a loan to Borrower in the principal amount not to exceed
Fourteen Million One Hundred Eighty Thousand Four Hundred Fifty-Five and 30/100
Dollars ($14,180,455.30) ("Term Loan"), substantially all of the proceeds of
which shall be used to provide cash for Borrower to dividend, loan or otherwise
upstream to its parent company AMREP Corp. Borrower's obligation to repay the
Term Loan shall be evidenced by a promissory note dated as of January 8, 2007
("Term Note"), all terms of which are incorporated herein by this reference.
(b) Repayment. Principal and interest on the Term Loan shall be repaid in
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accordance with the provisions of the Term Note.
SECTION 1.3. INTEREST/FEES.
(a) Interest. The outstanding principal balances of the Line of Credit Note
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and the Term Note shall bear interest from the date of advance on such note at
the rate set forth in the respective note. The amount of each drawing paid under
any Letter of Credit shall bear interest from the date such drawing is paid to
the date such amount is fully repaid by Borrower, at the rate of interest set
forth in the Line of Credit Note or other instrument or document executed in
connection therewith.
(b) Computation and Payment. Interest shall be computed on the basis of a
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360-day year, actual days elapsed. Interest shall be payable at the times and
place set forth in each promissory note or other instrument or document required
hereby.
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(c) Origination Fee. Borrower shall pay to Bank at closing for the Term
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Note an origination fee of $35,451.13. Borrower agrees that all loan fees and
other prepaid charges are earned fully as of the date of the Term Note and will
not be subject to refund, except as required by law.
(d) Unused Commitment Fee. Borrower shall pay to Bank a fee equal to 00.25%
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per annum (computed on the basis of a 360-day year, actual days elapsed) on the
average daily unused amount of the Line of Credit, which fee shall be calculated
on a quarterly basis by Bank and shall be due and payable by Borrower in arrears
within ten (10) days after each billing is sent by Bank. Any portion of the Line
of Credit utilized for a Standby Letter of Credit will count as a used portion
when calculating the Unused Fee. Such fee is waived in any quarter during which
the average outstanding principal balance of the Line of Credit Note for such
quarter exceeds $10,000,000.
(e) Letter of Credit Fees. Borrower shall pay to Bank: (i) a fee upon the
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issuance of each Letter of Credit equal to 0.95% per annum (computed on the
basis of a 360-day year, actual days of term) of the face amount thereof, but in
no event less than $250.00 for such Letter of Credit, and (ii) fees for each
draw, payment, or negotiation of each drawing or payment under any Letter of
Credit and fees upon the occurrence of any other activity with respect to any
Letter of Credit (including without limitation, the fronting transfer,
amendment, negotiation or cancellation of any Letter of Credit) determined in
accordance with Bank's standard fees and charges then in effect for such
activity.
SECTION 1.4. LINE OF CREDIT EXTENSION REQUEST. Borrower may request, prior
to any Line of Credit Maturity Date, that Bank extend such Maturity Date for an
additional period of time so that the resulting Line of Credit maturity will be
24 months from the date any such extension. If such request is made, Bank will
evaluate such request in accordance with its then applicable credit and other
underwriting standards. Bank may in its sole discretion grant such request but
is not required or obligated to grant such extension if requested, nor required
to offer an extension on any then existing rates or other terms.
SECTION 1.5 LOAN DOCUMENTS. This Agreement, the Line of Credit Note, the
Term Note, and all other documents previously, contemporaneously, or hereafter
executed in connection with the loans and credit facilities referenced herein or
hereafter made pursuant to this Agreement are, collectively, the "Loan
Documents."
SECTION 1.6. COLLATERAL. As security for the Term Note, Borrower hereby
grants to Bank assignments and security interests of first priority to the
certain notes and mortgages ("Contracts Receivable") listed in Exhibit 1.6
hereto and further described in more detail in the Security Agreement and
Assignment executed in connection herewith. Such collateral liens and interests
shall be further evidenced by any additional assignments, security agreements,
financing statements, assignments of mortgage, and other documents as Bank shall
reasonably require, all in form and substance satisfactory to Bank. Borrower
shall reimburse Bank immediately upon demand for all costs and expenses incurred
by Bank in connection with any of the foregoing security, including without
limitation, filing and recording fees. Borrower shall have the right to require
Bank to issue releases or partial releases of the Contracts Receivable during
the term of this Agreement in exchange for: 1) payments from Borrower of
principal payments for lot purchases and other payments on Contract Receivable
made by Contracts Receivable obligors to Borrower in accordance with the
existing terms of the Contracts Receivable, or 2) payment from Borrower on the
Term Note for any Contract Receivable which is no longer eligible Collateral due
to modification or delinquency.
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SECTION TWO
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REPRESENTATIONS AND WARRANTIES
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Borrower makes the following representations and warranties to Bank, which
representations and warranties shall survive the execution of this Agreement and
shall continue in full force and effect until the full and final payment, and
satisfaction and discharge, of all obligations of Borrower to Bank subject to
this Agreement. As used in this Section 2, Borrower includes, to the extent
necessary as to any collateral Loan Document, Borrower's wholly owned subsidiary
Outer Rim.
SECTION 2.1. CORPORATE STATUS. The Borrower is a duly organized and validly
existing corporation in good standing and duly authorized to carry on its
business in the State of New Mexico as now conducted and to enter into and
perform its obligations under this Agreement and each of the Loan Documents.
SECTION 2.2. MAINTENANCE OF STATUS. The Borrower will maintain its
existence as a corporation which is duly authorized to do business in the State
of New Mexico, will comply with all statutes and rules and regulations
applicable to its organization and existence and its business in New Mexico or
elsewhere.
SECTION 2.3. DUE AUTHORIZATION. The execution, delivery and performance by
the Borrower of this Agreement, each Note and each Loan Document has been duly
authorized by all necessary corporate action by the Borrower and its Board of
Directors.
SECTION 2.4. VALIDITY AND BINDING EFFECT. The Loan Documents have been duly
and validly executed, issued and delivered by the Borrower and constitute valid
and legally binding obligations of the Borrower, enforceable in accordance with
their terms except as may be limited by bankruptcy, insolvency, reorganization
or other similar laws related to or affecting enforcement of creditors' rights.
SECTION 2.5. COMPLIANCE. The execution and delivery by the Borrower of the
Loan Documents and compliance by the Borrower with the terms thereof will not
violate (i) any law or regulation, including but not limited to any securities
law or regulation, (ii) Borrower's organizational documents, or (iii) any other
instrument or agreement binding upon the Borrower.
SECTION 2.6 INCOME TAX RETURNS. At the time of execution of this Agreement,
Borrower has no knowledge of any pending assessments or adjustments of its
income tax payable with respect to any year.
SECTION 2.7. NO SUBORDINATION. There is no agreement, indenture, contract
or instrument to which Borrower is a party or by which Borrower may be bound
that requires the subordination in right of payment of any of Borrower's
obligations subject to this Agreement to any other obligation of Borrower.
SECTION 2.8. ERISA. Borrower is in compliance in all material respects with
all applicable provisions of the Employee Retirement Income Security Act of
1974, as amended or recodified from time to time ("ERISA"); Borrower has not
violated any provision of any defined employee pension benefit plan (as defined
in ERISA) maintained or contributed to by Borrower (each, a "Plan"); no
Reportable Event as defined in ERISA has occurred and is continuing with respect
to any Plan initiated by Borrower; Borrower has met its minimum funding
requirements under ERISA with respect to each Plan; and each Plan will be able
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to fulfill its benefit obligations as they come due in accordance with the Plan
documents and under generally accepted accounting principles.
SECTION 2.9. OTHER OBLIGATIONS. Borrower is not in default on any
obligation for borrowed money, any purchase money obligation or any other
material lease, commitment, contract, instrument or obligation, in excess of
$300,000.00.
SECTION 2.10. ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to
Bank in writing prior to the date hereof, Borrower is in compliance in all
material respects with all applicable federal or state environmental, hazardous
waste, health and safety statutes, and any rules or regulations adopted pursuant
thereto, which govern or affect any of Borrower's operations and/or properties,
including without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act
of 1976, and the Federal Toxic Substances Control Act, as any of the same may be
amended, modified or supplemented from time to time. None of the operations of
Borrower is the subject of any federal or state investigation evaluating whether
any remedial action involving a material expenditure is needed to respond to a
release of any toxic or hazardous waste or substance into the environment.
Borrower has no material contingent liability in connection with any release of
any toxic or hazardous waste or substance into the environment.
SECTION 2.11. ACCURACY OF REPRESENTATIONS. No certificate, statement,
document, valuation, financial or other information delivered by or on behalf of
Borrower to the Bank in connection herewith or in connection with the Loan
contains any untrue statement of a material fact or fails to state any material
fact necessary to keep such information from being misleading. Borrower
represents and warrants all financial and other information hereafter furnished
to the Bank will be materially accurate and complete and acknowledges that such
information will be submitted to the Bank with the intent that the Bank will
rely upon such information.
SECTION 2.12. SOLVENCY. The Borrower is solvent, and has no actual
knowledge that there are any proceedings, pending or threatened, against it,
which could materially adversely affect its financial condition or its ability
to timely perform all obligations, nor are there any governmental or any
judicial proceedings of any kind pending or threatened against it except as
disclosed to the Bank in writing prior to closing.
SECTION 2.13. NO MISREPRESENTATION. No certificate, statement, information
or documents delivered by or on behalf of borrower, to the Bank in connection
with this Agreement or in connection with the Loan contains any untrue statement
of a material fact or fails to state any material fact necessary to keep the
statements contained in this Agreement from being misleading.
SECTION THREE
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CONDITIONS
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SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation of
Bank to fund the Term Note is subject to the fulfillment to Bank's satisfaction
of all of the following conditions:
(a) Approval of Bank Counsel. All legal matters incidental to the extension
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of credit by Bank shall be satisfactory to Bank's counsel.
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(b) Documentation. Bank shall have received, in form and substance
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satisfactory to Bank, each of the following, duly executed:
(i) This Agreement and each promissory note or other instrument or
document required hereby.
(ii) Resolutions authorizing borrowing and the pledge of collateral.
(iii) The Security Agreements and Collateral Assignments for the
Contracts Receivable.
(iv) Recording of the Collateral Assignments and filing of Financing
Statements for the Contracts Receivable.
(v) Such other documents as Bank may require under any other Section
of this Agreement, including Borrower's organizational documents.
(c) Participation. Bank shall have received its pro-rata share of funds for
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the Term Note and the commitment to fund its pro-rata share of future advances
under the Line of Credit Note from the participant pursuant to a participation
agreement in form and with a financial institution or institutional lender
acceptable to Bank, for not less than 25% of both the Term Note and the Line of
Credit Note.
SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of Bank
to make each extension of credit requested by Borrower under the Line of Credit
Note shall be subject to the prior fulfillment to Bank's satisfaction of the
requirements of Section 3.1 and the subsequent fulfillment to the Bank's
satisfaction of each of the following conditions:
(a) Compliance. The representations and warranties contained herein and in
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each of the other Loan Documents shall be true on and as of the date of the
signing of this Agreement and on the date of each extension of credit by Bank
pursuant hereto, with the same effect as though such representations and
warranties had been made on and as of each such date, and on each such date, no
Event of Default as defined herein, and no condition, event or act which with
the giving of notice or the passage of time or both would constitute such an
Event of Default, shall have occurred and be continuing or shall exist.
(b) Documentation. Bank shall have received all additional documents which
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may be required in connection with such extension of credit.
(c) Participation. Bank shall have received its pro-rata share of such
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advance from the participant pursuant to a participation agreement in form and
with a financial institution or institutional lender acceptable to Bank, for not
less than 25% of the amount to be funded on the Line of Credit Note and the Term
Note.
SECTION FOUR
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AFFIRMATIVE COVENANTS
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Borrower covenants that so long as Bank remains committed to extend credit
to Borrower pursuant hereto, or any liabilities (whether direct or contingent,
liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents
remain outstanding, and until payment in full of all obligations of Borrower
subject hereto, Borrower shall, unless Bank otherwise consents in writing:
SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay all principal, interest,
fees or other liabilities due under any of the Loan Documents at the times and
place and in the manner specified therein, and immediately repay the amount by
which the outstanding principal balance of any credit subject hereto at any time
exceeds any limitation on borrowings applicable thereto.
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SECTION 4.2. RECORDS. The Borrower will keep accurate records, in
accordance with generally accepted accounting principles, of all its
transactions so that at any time, and from time to time, its true and complete
financial condition may be readily determined and, at the Bank's reasonable
request, make such records available for the Bank's inspection and permit the
Bank to make and retain copies thereof.
SECTION 4.3. REPORTING REQUIREMENTS. Borrower will provide the following
information to Bank:
1. Quarterly consolidated balance sheets and consolidated statements of
income, retained earnings and cash flow, prepared in accordance with
generally accepted accounting principles, together with calculations
confirming Borrower's compliance with all financial covenants,
certified by a senior financial officer of Borrower, within 60 days
after the end of each quarter.
2. Annual consolidated financial statements as described above, with an
unqualified opinion from a nationally or regionally recognized
independent accounting firm, together with calculations confirming
Borrower's compliance with all financial covenants, certified by a
senior financial officer of Borrower, within 120 days after the end of
each fiscal year.
3. Projections of consolidated financial statements for each fiscal year
through the maturity date any existing credit facility, no later than
60 days after the first day of the fiscal year.
4. Copy of quarterly 10Q Report for AMREP Corporation within 30 days of
filing.
5. Copy of Annual 10K Report for AMREP Corporation within 30 days of
filing.
6. Monthly within 25 days of the end of each month, a report of the Term
Note collateral ("Contracts Receivable Report") including Contracts
Receivable of Borrower and of Outer Rim, in form and containing the
information acceptable to the Bank.
7. Monthly within 25 days of the end of each month a report of Borrower's
and Subsidiaries' unencumbered Land Holdings in a form and containing
information acceptable to Bank. On a quarterly basis, and concurrent
with the quarterly financial reporting of Borrower described under
4.3(1) above, Borrower will also provide a reconciliation of such Land
Holdings Value to Borrower's reported financial statement Value for
Land Inventory and Investment Land for financial reporting purposes.
8. All other information reasonably requested by the Bank.
SECTION 4.4. INSURANCE. Maintain fire and other risk insurance, public
liability insurance, and such other insurance as the Bank may require with
respect to Borrower's properties and operations, in form, amounts, coverages,
and with insurance companies reasonably acceptable to the Bank. Borrower, upon
request of the Bank, will deliver to the Bank from time to time the policies or
certificates of insurance in form satisfactory to the Bank, including
stipulations that coverages will not be canceled or diminished without at least
ten (10) days' prior written notice to the Bank. In connection with all policies
covering assets in which the Bank holds or is offered a security interest for
the Loans, Borrower will provide the Bank with such loss payable or other
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endorsements as Bank may require. Notwithstanding the preceding provisions of
this paragraph, the Bank has reviewed the Borrower's existing insurance
policies, and has determined that Borrower's existing insurance coverage is
acceptable to the Bank for the purposes of this Loan and that the Bank will not
require any additional insurance coverage from Borrower during the term of this
Loan, unless an event of default has occurred.
SECTION 4.5. IMPOSITIONS. The Borrower will comply with all legal
requirements and will pay all taxes, assessments, governmental charges and other
obligations which, if unpaid, might become a lien against the Borrower's
property, except liabilities being contested in good faith and against which, if
requested by the Bank, the Borrower will set up reserves to satisfy such
obligations as they become due.
SECTION 4.6. MINIMUM TANGIBLE NET WORTH. Borrower will maintain at all
times a Minimum Tangible Net Worth at the end of each fiscal quarter, beginning
with the quarter ending 10/31/06, of not less than Thirty Million Dollars
($30,000,000.00). Tangible Net Worth means stockholder's equity minus the
aggregate of any treasury stock, any intangible assets and any obligations due
from stockholders, employees and/or affiliated entities.
SECTION 4.7. NOTICE TO BANK OF ADVERSE CLAIMS. The Borrower will promptly
notify the Bank of (i) any litigation or any claim or controversy which might be
the subject of litigation against the Borrower, if such litigation or potential
litigation might, in the event of an unfavorable outcome, have a material
adverse effect on Borrower's financial condition or might cause an Event of
Default; (ii) any material adverse change in the financial condition or business
of the Borrower, (iii) any other matter which in the opinion of the Borrower
might materially adversely affect the financial condition of the Borrower; and
(iv) the occurrence of any Event of Default. As used in this paragraph, the
terms "material adverse effect," "material adverse change" and "materially
adversely affect" shall refer to an event which potentially could cause the
Borrower to be in violation of the Loan Agreement.
SECTION 4.8. NO CHANGE OF OWNERSHIP/CONTROL. No change of Borrower's
present majority ownership by, or control by, its parent company AMREP
Corporation shall occur.
SECTION 4.9. TAXES AND REPORTS. Borrower's tax returns that are or were
required to be filed, have been filed, and all taxes and any property
assessments or similar governmental charges, have been paid in full, except any
currently being contested in good faith were adequate reserves have been
provided and written disclosure of such contest has been made to Bank.
SECTION FIVE
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NEGATIVE COVENANTS
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Borrower further covenants that so long as Bank remains committed to extend
credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not without Bank's prior written
consent:
SECTION 5.1. USE OF FUNDS. Use any of the proceeds of any credit extended
hereunder except for the purposes stated in Section I hereof.
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SECTION 5.2. NO ASSIGNMENT. Assign any interest, complete or partial, in
this Agreement, the Line of Credit Note, the Loan, the Loan proceeds or any
other Loan Documents. Any such assignment without such consent shall be void.
SECTION 5.3. LIMITATION ON OTHER BORROWINGS AND PLEDGE OF ASSETS.
1) obtain loans from or incur debts or obligations to third parties
for working capital or similar general financing, or
2) except as allowed below in this Section, grant or assign to any
third party any liens, mortgages, or other security interests in any
real property assets owned by Borrower at the effective date of this
Agreement.
3) pledge, ▇▇▇▇▇ ▇ ▇▇▇▇ or assignment of, or borrow money against or
in anticipation of payments from any notes, mortgages, real estate
contracts or similar seller financing from the sale of any real
property assets owned by Borrower.
The restrictions of this Section 5.3 do not prohibit:
a) purchase money financing incurred by Borrower to acquire
additional land secured by a lien on the land acquired,
b) construction and permanent financing for commercial and retail
construction, secured by liens on the land and improvements
constructed on:
i) commercial parcels in Enchanted Hills, Hawk Site, or
Southern Boulevard Business Park, or
ii) other projects or sites approved by Bank in writing.
c) any other third party borrowing or pledge of assets to which
Bank gives its prior written consent.
SECTION 5.4. LOANS, ACQUISITIONS, GUARANTIES. Make loans or advances to
third parties, or incur any liability or obligation for the benefit of any third
party (whether direct, indirect, as surety, or as guarantor), except: 1)
purchase money financing for the sale of land by Borrower, 2) loans to
affiliated entities, or 3) as specifically allowed by this Agreement, including
Section 5.3.
SECTION SIX
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EVENTS OF DEFAULT
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SECTION 6.1. The occurrence of any of the following shall constitute an
"Event of Default" under this Agreement:
(a) Borrower shall fail to pay within five (5) days of the date due any
amount due under the Line of Credit Note, the Term Note, this Agreement, any
other Loan Documents, or any other agreement with Bank. Provided however, the
first time in any calendar year Borrower fails to timely make a payment of
principal, interest, fees or other amounts payable under any of the Loan
Documents shall not be an Event of Default unless and until Bank shall give
notice of nonpayment to Borrower and Borrower shall fail to make such required
payment within five (5) days of delivery of such notice.
(b) Any financial statement or certificate furnished to Bank in connection
with, or any representation or warranty made by Borrower or any other party
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under this Agreement or any other Loan Document shall prove to be incorrect,
false or misleading in any material respect when furnished or made.
(c) Any default in the performance of or compliance with any obligation,
agreement or other provision contained herein or in any other Loan Document by
Borrower or by Outer Rim (other than those referred to in subsections (a) and
(b) above), and with respect to any such default which by its nature can be
cured, such default shall continue for a period of twenty (20) days from its
occurrence.
(d) Any default in the payment or performance of any obligation, or any
defined event of default, under the terms of any contract or instrument (other
than any of the Loan Documents) after the expiration of any applicable time or
grace period pursuant to which Borrower has incurred any debt or other liability
to any person or entity, including Bank, in excess of $300,000.00.
(e) Unless Borrower shall post a bond, which shall be in form and amount
acceptable to Bank, within twenty (20) days of such event, the filing of a
notice of judgment lien in excess of $300,000.00 against Borrower; or the
recording of any abstract of judgment in excess of $300,000.00 against Borrower
in any county in which Borrower has an interest in real property; or the service
of a notice of levy and/or of a writ of attachment or execution, or other like
process in excess of $300,000.00, against the assets of Borrower; or the entry
of a judgment in excess of $300,000.00 against Borrower.
(f) Borrower shall become insolvent, or shall suffer or consent to or apply
for the appointment of a receiver, trustee, custodian or liquidator of itself or
any of its property, or shall generally fail to pay its debts as they become
due, or shall make a general assignment for the benefit of creditors; Borrower
shall file a voluntary petition in bankruptcy, or seeking reorganization, in
order to effect a plan or other arrangement with creditors or any other relief
under the Bankruptcy Reform Act, Title 11 of the United States Code, as amended
or recodified from time to time ("Bankruptcy Code"), or under any state or
federal law granting relief to debtors, whether now or hereafter in effect; or
any involuntary petition or proceeding pursuant to the Bankruptcy Code or any
other applicable state or federal law relating to bankruptcy, reorganization or
other relief for debtors is filed or commenced against Borrower, or Borrower
shall file an answer admitting the jurisdiction of the court and the material
allegations of any involuntary petition; or Borrower shall be adjudicated a
bankrupt, or an order for relief shall be entered against Borrower by any court
of competent jurisdiction under the Bankruptcy Code or any other applicable
state or federal law relating to bankruptcy, reorganization or other relief for
debtors.
(g) The dissolution or liquidation of Borrower; or Borrower, or any of its
directors, stockholders or members, shall take action seeking to effect the
dissolution or liquidation of Borrower.
(h) Borrower's Tangible Net Worth is less than $30,000,000 at the end of
any fiscal quarter.
SECTION 6.2. REMEDIES. Upon the occurrence of any Event of Default: (a)
Borrower shall not make any distributions to its parent company, Amrep
Corporation unless and until the default has been cured to the satisfaction of
the Bank (b) all indebtedness of Borrower under each of the Loan Documents, any
term thereof to the contrary notwithstanding, shall at Bank's option and without
notice become immediately due and payable without presentment, demand, protest
or notice of dishonor, all of which are hereby expressly waived by each
Borrower; (c) the obligation, if any, of Bank to extend any further credit under
any of the Loan Documents shall immediately cease and terminate; and (d) Bank
shall have all rights, powers and remedies available under each of the Loan
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Documents, or accorded by law, including without limitation the right to resort
to any or all security for any credit subject hereto and to exercise any or all
of the rights of a beneficiary or secured party pursuant to applicable law. All
rights, powers and remedies of Bank may be exercised at any time by Bank and
from time to time after the occurrence of an Event of Default, are cumulative
and not exclusive, and shall be in addition to any other rights, powers or
remedies provided by law or equity.
SECTION SEVEN
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MISCELLANEOUS
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SECTION 7.1. NO WAIVER. No delay, failure or discontinuance of Bank in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any
kind by Bank of any breach of or default under any of the Loan Documents must be
in writing and shall be effective only to the extent set forth in such writing.
Whenever the consent of Bank is required under this Agreement, the granting of
such consent by Bank in any instance shall not constitute continuing consent to
subsequent instances where such consent (required and in all cases such consent
may be granted or withheld in the sole discretion of Bank.)
SECTION 7.2. NOTICES. All notices, requests and demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following address:
BORROWER: AMREP Southwest Inc.
▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇.▇., ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ 87124
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.A.
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
BANK: Compass Bank
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇. ▇▇▇▇▇, President
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy,
upon receipt.
SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to
Bank immediately upon demand the full amount of all payments, advances, charges,
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costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of Bank's in-house counsel), expended or
incurred by Bank in connection with (a) the negotiation and preparation of this
Agreement and the other Loan Documents (to a maximum of $16,500 plus costs and
taxes), Bank's continued administration hereof and thereof, and the preparation
of any amendments and waivers hereto and thereto; provided, however, Bank will
not charge an annual, quarterly, or other periodic fee for loan administration,
(b) the enforcement of Bank's rights and/or the collection of any amounts which
become due to Bank under any of the Loan Documents, and (c) the prosecution or
defense of any action in any way related to any of the Loan Documents, including
without limitation, any action for declaratory relief, whether incurred at the
trial or appellate level, in an arbitration proceeding or otherwise, and
including any of the foregoing incurred in connection with any bankruptcy
proceeding (including without limitation, any adversary proceeding, contested
matter or motion brought by Bank or any other person) relating to any Borrower
or any other person or entity.
SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Borrower may not assign or transfer its interest hereunder without Bank's prior
written consent. Bank may sell, assign, transfer, negotiate or grant
participations in all or any part of, or any interest in, Bank's rights and
benefits under each of the Loan Documents and in connection therewith, the Bank
may receive servicing, brokerage or other fees. In connection with such sale,
assignment, transfer, negotiation or grant of participations, Bank may disclose
all documents and information which Bank now has or may hereafter acquire
relating to any credit subject hereto, Borrower or its business, or any
collateral required hereunder, but only to the extent necessary for bank
purposes. Provided however, so long as no Event of Default has occurred, any
such sale, assignment, transfer, or grant of participations to entities which
are not Bank entities affiliated with the Bank shall be subject to Borrower's
prior written approval, which shall not be unreasonably withheld or delayed. The
Bank and its successors and assigns shall have no obligation to disclose to
Borrower the receipt, or contemplated receipt, of any such fees, nor shall the
Borrower have any claim or right to the same. In the event the Bank sells or
transfers its entire interest in the Loan and the Loan Documents, the Bank or
such purchaser or assignee will notify Borrower of such event within 30 days.
Borrower further agrees that the purchaser of any such participation interests
may enforce its interests irrespective of any personal claims or defenses that
Borrower may have against Bank.
SECTION 7.5. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other Loan
Documents constitute the entire agreement between Borrower and Bank with respect
to each credit subject hereto and supersede all prior negotiations,
communications, discussions and correspondence concerning the subject matter
hereof. This Agreement may be amended or modified only in writing signed by each
party hereto.
SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This Agreement is made and
entered into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action
or claim in connection with, this Agreement or any other of the Loan Documents
to which it is not a party.
SECTION 7.7. TIME. Time is of the essence of each and every provision of
this Agreement and each other of the Loan Documents.
SECTION 7.8. SEVERABILITY OF PROVISIONS. If any provision of this Agreement
shall be prohibited by or invalid under applicable law, such provision shall be
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ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or any remaining provisions of this
Agreement.
SECTION 7.9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed to be an
original, and all of which when taken together shall constitute one and the same
Agreement.
SECTION 7.10. BANK/BORROWER RELATIONSHIP. The relationship between Borrower
and Bank created by this Agreement is strictly a debtor and creditor
relationship and not fiduciary in nature, nor is the relationship to be
construed as creating any partnership or joint venture between Bank and
Borrower. Borrower is exercising Borrower's own judgment with respect to
Borrower's business. All information supplied to Bank is for Bank's protection
only and no other party is entitled to rely on such information. There is no
duty for Bank to review, inspect, supervise or inform Borrower of any matter
with respect to Borrower's business. Bank and Borrower intend that Bank may
reasonably rely on all information supplied by Borrower to Bank, together with
all representations and warranties given by Borrower to Bank, without
investigation or confirmation by Bank and that any investigation or failure to
investigate will not diminish Bank's right to so rely.
SECTION 7.11. INDEMNIFICATION OF BANK. Borrower agrees to indemnify, to
defend and to save and hold Bank harmless from any and all claims, suits,
obligations, damages, losses, liabilities, costs and expenses (including,
without limitation, Bank's attorneys' fees) of any nature whatsoever that may be
asserted by a third party against Bank, its officers, directors, employees, and
agents, arising out of, or relating to Borrower and its relationship to Bank
under this Agreement, including the lender/borrower relationship arising
hereunder or the exercise of the rights and remedies granted Bank under this
Agreement or any related loan document. The foregoing indemnity provisions shall
survive the cancellation of this Agreement as to all matters arising or accruing
prior to such cancellation and the foregoing indemnity shall survive in the
event that Bank elects to exercise any of the remedies as provided under this
Agreement following default hereunder. Borrower's indemnity obligations under
this section shall not in any way be affected by the presence or absence of
covering insurance, or by the amount of such insurance or by the failure or
refusal of any insurance carrier to perform any obligation on its part under any
insurance policy or policies affecting the Borrower's business activities.
Should any claim, action or proceeding be made or brought against Bank by reason
of any event as to which Borrower's indemnification obligations apply, then,
upon Bank's demand, Borrower, at its sole cost and expense, shall defend such
claim, action or proceeding in Borrower's name, if necessary, by the attorneys
for Borrower's insurance carrier (if such claim, action or proceeding is covered
by insurance), or otherwise by such attorneys as Bank shall approve. Bank may
also engage its own attorneys at its reasonable discretion to defend Borrower
and to assist in its defense and Borrower agrees to pay the fees and
disbursements of such attorneys.
SECTION 7.12. NO WAIVER BY BANK. Bank shall not be deemed to have waived
any rights under this Agreement unless such waiver is given in writing and
signed by Bank. No delay or omission on the part of Bank in exercising any right
shall operate as a waiver of such right or any other right. A waiver by Bank of
a provision of this Agreement shall not prejudice or constitute a waiver of
Bank's right otherwise to demand strict compliance with that provision or any
other provision of this Agreement. No prior waiver by Bank, nor any course of
dealing between Bank and Borrower or between Bank and any Grantor, shall
constitute a waiver of any of Bank's rights or of any of Borrower's or any
Grantor's obligations as to any future transactions.
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SECTION 7.13. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Mexico.
BORROWER ACKNOWLEDGES THAT IT IS AWARE OF THE PROVISIONS OF SECTION 58-6-5 OF
THE NEW MEXICO STATUTES WHICH PROVIDES THAT A CONTRACT, PROMISE OR COMMITMENT TO
LOAN MONEY OR TO GRANT, EXTEND OR RENEW CREDIT OR ANY MODIFICATION THEREOF, IN
AN AMOUNT GREATER THAN $25,000, NOT PRIMARILY FOR PERSONAL, FAMILY OR HOUSEHOLD
PURPOSES, MADE BY A FINANCIAL INSTITUTION SHALL NOT BE ENFORCEABLE UNLESS IN
WRITING AND SIGNED BY THE PARTY TO BE CHARGED OR THAT PARTY'S AUTHORIZED
REPRESENTATIVE.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
AMREP SOUTHWEST INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Treasurer
COMPASS BANK
By: /s/ W. ▇▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------
W. ▇▇▇▇▇▇▇ ▇▇▇▇▇, Vice President
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