Exhibit 10.1

LOAN AGREEMENT

THIS LOAN AGREEMENT ("Agreement") is dated effective December 17, 2009, 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 January 8, 2007 as amended.

SECTION ONE
CREDIT TERMS
    SECTION 1.1.    CREDIT FACILITY.

(a)           Credit Facility.  Subject to the terms and conditions of this
Agreement, Bank hereby agrees to refinance the existing September 18, 2006
promissory note in the original principal of $25,000,000, upon receipt by
Borrower of a $2,500,000 capital contribution from its parent company and
establishment of an interest reserve account, as provided below.  Such refinance
is evidenced by the replacement promissory note dated December 17, 2009, in the
principal amount of $22,500,000.00 (the “Note”) with a maturity date of December
16, 2010, (the “Maturity Date.”)  This Agreement applies to all amendments,
modifications, replacements, and renewals of such Note.

SECTION 1.2.       INTEREST/FEES.

(a)           Interest. The outstanding principal balance of the Note shall bear
interest from the date of origination on such note at the rate set forth in the
Note.

(b)           Computation and Payment.  Interest shall be computed on the basis
of a 360-day year, actual days elapsed.  Interest shall be payable at the times
and place set forth in the note or other instrument or document required hereby.

(c)           Documentation Fees.  Borrower shall pay to Bank at closing a loan
documentation fee of $2,500.00, plus all attorney fees and costs incurred by
Bank for the negotiation and preparation of this Agreement, the Note, Mortgage
and all other related loan documents, including recording fees and title
insurance premiums.  Borrower agrees that all loan fees and other prepaid
charges are earned fully as of the date of this agreement and will not be
subject to refund, except as required by law.

SECTION 1.3.    NOTE PRINCIPAL PAYMENT.  The Note principal balance is payable
as provided in the Note, which includes payments based on a percentage of net
cash from land sales received by Borrower in fiscal years 2010 and 2011, with
the balance due and payable in full at the Maturity Date.

SECTION 1.4     LOAN DOCUMENTS.  This Agreement, the Note, the Mortgage
described below, 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.”

 
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SECTION 1.5.    COLLATERAL.  As security for the Note, Borrower grants to Bank
the Mortgage dated December 17, 2009 as a first and superior lien on all land
and improvements that comprise the Lomas Encantadas, Hawksite, Paseo Gateway,
and Enchanted Hills master-planned developments.  The developments are comprised
of approximately 448+/- acres, 387+/- acres, 276 +/- acres, and 80 +/- acres,
respectively.

SECTION TWO
REPRESENTATIONS AND WARRANTIES

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 Investments, Inc.

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.

 
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   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
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 MISREPESENTATION.  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.

 
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SECTION THREE
CONDITIONS
 

SECTION 3.1.    CONDITIONS OF INITIAL EXTENSION OF CREDIT.  The obligation of
Bank to fund the 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 of credit by Bank shall be satisfactory to Bank's counsel.

(b)           Documentation.  Bank shall have received, in form and substance
satisfactory to Bank, each of the following, duly executed:

 
(i)
This Agreement, the Note, the Mortgage, and other instrument or document
required hereby,

 
(ii)
Resolutions authorizing borrowing and the pledge of collateral,

 
(iii)
An ALTA mortgage title policy in form satisfactory to Bank insuring the Mortgage
in the amount of $22,500,000.

 
(iv)
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 the
Note 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 Note.

(d)           Capital Contribution.  Borrower shall have received from its
parent company a capital contribution of not less than $2,500,000.

(e)           Interest Reserve.    Borrower shall establish in a Bank controlled
interest bearing deposit account, a reserve for payment of interest on the Note
(“Interest Reserve”) in the initial amount of $1,100,000.  Interest on the
deposit account shall accrue to the benefit of Borrower.  Additional
requirements for the Interest Reserve are contained in Section 4.11, below.

SECTION FOUR
AFFIRMATIVE COVENANTS

Borrower covenants that so long as Borrower remains obligated to Bank under the
Note, this Agreement, or any other obligations or liabilities (whether direct or
contingent, liquidated or unliquidated) 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.

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

 
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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.    FINANCIAL REPORTING REQUIREMENTS.  Borrower will provide the
following information to Bank:

 
(a)
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 and real estate inventory report,
certified by a senior financial officer of Borrower, within 60 days after the
end of each quarter.

 
 
(b)
Annual consolidated financial statements as described above, with an unqualified
opinion from a nationally or regionally recognized independent accounting firm
acceptable to Bank, 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.

 
 
(c)
Projections of consolidated financial statements for each fiscal year through
the maturity of the credit facilities, no later than 60 days after the first day
of the fiscal year.

 
 
(d)
Copy of Quarterly 10Q Report for AMREP Corporation within 30 days of filing.

 
(e)
Copy of Annual 10K Report for AMREP Corporation within 30 days of filing.

 
 
(f)
All other information reasonably requested by the Bank.

   SECTION 4.4   FINANCIAL RATIO REQUIREMENTS.  Borrower will maintain at all
times:

 
(a)
a minimum Tangible Net Worth at the end of each fiscal quarter of not less than
$57,500,000.00.  “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.

 
(b)
a Debt Service Coverage Ratio of not less than 1.50 to 1.00, tested quarterly
beginning 1/31/10.  The 1/31/10 ratio test will be performed on a 9-month
basis.  Beginning 4/30/10, this ratio test will be performed on a rolling
12-month basis.  Debt Service Coverage is defined as the quotient of Modified
Gross Cash Flow divided by Debt Service.  Modified Gross Cash Flow is defined as
[Net Income + Cost of Sales – Development Spending + Collection of Receivables –
Receivables from New Term Sales + Depreciation + Interest Expense +/- Non-Cash
Items + Net Cash Proceeds from the 1031 Exchange Funding + Cash from AMREP Corp.
(or ARIC) – Cash paid to AMREP Corp. (or ARIC) excluding management fees paid to
AMREP Corp. (or ARIC) which have been recognized as an expense during the period
incurred] for the respective period.  Debt Service is defined as [Cash Paid for
Interest + Regular Principal Payments for any Amortizing Debt] for the
respective period.
 
Proceeds from the 1031 exchange funding represent a one-time cash source for
covenant purposes, to be funded by mortgaging a commercial property in Florida
purchased with 1031 monies that is leased to the Borrower’s related company,
Palm
 

 
 
 
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Coast Data, LLC.  Principal payments by Borrower resulting from excess cash from
land sales (required by Section 1.3 above) shall not be considered as Regular
Principal Payments for the purposes of this Loan Agreement.
 
In the event the Borrower fails to meet this Debt Service Coverage Ratio
requirement in any quarter, but within sixty (60) days after the end of such
quarter AMREP Corporation makes a cash contribution to the Borrower sufficient
to allow Borrower to meet the requirement for such quarter, then the Borrower
shall be deemed to have met the Debt Service Coverage Ratio for such quarter.
 
SECTION 4.5.    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 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 4.6.    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 4.7.    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 where adequate reserves have been
provided and written disclosure of such contest has been made to Bank.

 
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SECTION 4.10   MAXIMUM LOAN TO VALUE COLLATERAL RATIO.  Borrower shall maintain
sufficient Collateral for the Note such that the Note balance does not exceed
40% of the Current Fair Market Value.  “Current Fair Market Value” of any
Collateral means the value as determined solely by the Bank based on an
appraisal(s) in form acceptable to Bank and conforming to applicable regulatory
requirements, at any time and from time to time, or other qualifying values
acceptable to the Bank.  In the event such ratio exceeds 40%, Borrower shall
within 30 days of receipt of notice from Bank; 1) reduce the Note balance or 2)
provide additional Collateral acceptable in form and value to Bank, sufficient
to conform to such 40% loan to value ratio.

SECTION 4.11   INTEREST RESERVE.  At any time the Interest Reserve balance is
reduced to less than $500,000, Borrower shall immediately deposit not less than
$250,000 into such Interest Reserve account.   Bank shall debit (charge) such
Interest Reserve account for any interest payments due on the Note.  Borrower’s
obligation to pay the Note are not reduced or limited by this
provision.  Borrower grants Bank a right of setoff as to all amounts in the
Interest Reserve account.

SECTION 4.12   RELEASE OF COLLATERAL.  Provided no Event of Default has
occurred, Borrower may request a release of a portion of the Collateral subject
to: 1) continued compliance with all requirements of this Agreement, 2) the
maximum loan to value ratio in Section 4.10, and 3) the Bank’s sole
determination (and any necessary approval by any participant), that the proposed
remaining collateral is of sufficient value, based on current approved
appraisals, to support the requested release.

SECTION FIVE
NEGATIVE COVENANTS

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.

SECTION 5.2.    NO ASSIGNMENT.  Assign any interest, complete or partial, in
this Agreement, the 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 or other borrowings from third parties, with the exception of
Borrower’s parent/affiliated corporations: AMREP Corporation and/or American
Republic Investment Co. (however, the proposed financing in an amount not to
exceed $4,000,000 (“1031 Exchange Financing”) of the 1031 exchange property,
located at 2 Commerce Blvd, Palm Coast, Florida (“1031 Property”) will be
permitted),

 
2)
grant or assign to any third party any liens, mortgages, security interest, or
interest in any assets owned by Borrower at the effective date of this Agreement

 
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without the prior written consent of Bank. (however, a lien on the 1031 Property
to secure the 1031 Exchange Financing will be permitted), or

 
3)
make any distributions to its parent company, AMREP Corporation.  [However,
provided no Event of Default has occurred, Borrower may pay to AMREP Corporation
an amount not to exceed $58,000 per month as reimbursement for expenses incurred
by AMREP Corporation on behalf of Borrower.

SECTION 5.4.    LOANS, ACQUISITIONS, GUARANTIES. Borrower shall not 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, or 2) as specifically allowed by this Agreement including Section 5.3.
above.

SECTION SIX
EVENTS OF DEFAULT

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 Note, the Mortgage, 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 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 by Borrower in the performance of or compliance with
any obligation, agreement or other provision contained herein, including any
requirement or restriction in Sections 2, 3, 4, or 5 hereof, or in any other
Loan Document,

(d)           Any default by Borrower’s subsidiary Outer Rim Investments, Inc.
(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.

(e)           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.

(f)           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

 
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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.

(g)           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.

(h)           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.

SECTION 6.2.    REMEDIES.  Upon the occurrence of any Event of Default:  (a)
Borrower shall not make any payments to its parent company, Amrep Corporation,
allowed under Section 5.3(3), 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 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
MISCELLANEOUS

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

 
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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.
333 Rio Rancho Drive S.W., Suite 400
Rio Rancho, New Mexico 87124
Attn:  Gary Sullivan
Fax:  (505) 896-9180

With a copy to:   Matthew W. Spangler, Esq.
Lastrapes, Spangler & Pacheco, P.A.
P.O. Box 15698
Rio Rancho, New Mexico 87174-0698
Fax:  (505) 892-1864

BANK:                Compass Bank
505 Marquette, NW
Albuquerque, New Mexico 87102
Attn: Rick White, Senior Vice President
Manager Residential Real Estate – New Mexico and El Paso
Fax:  (505) 888-9021

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,
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 $5,800 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.

 
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   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.  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
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

 
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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.
 
            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 §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.

 
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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/ James H.
Wall                                                                                                                        
       James H. Wall, President

COMPASS BANK

By:    /s/ Rick
White                                                                                                                                    
       Rick White, Senior Vice President
       Manager Residential Real Estate – New Mexico and El Paso

 
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