Exhibit 10.2

 

SECOND AMENDMENT TO SETTLEMENT AGREEMENT

 

THIS SECOND AMENDMENT TO SETTLEMENT AGREEMENT (“Second Amendment”), dated as of
February 2, 2016 (the “Second Amendment Effective Date”), is entered into
between the Pension Benefit Guaranty Corporation (“PBGC”) and AMREP Corporation
(“AMREP” and collectively with PBGC, the “Parties”) and further amends the
Settlement Agreement entered into and effective on August 30, 2013 by the
Parties (“Settlement Agreement”).

 

WITNESSETH

 

WHEREAS, PBGC is a wholly-owned United States government corporation and agency
of the United States that administers the pension plan insurance program
established under Title IV of the Employee Retirement Income Security Act of
1974, as amended (“ERISA”), 29 U.S.C. § 1301 et seq.; and

 

WHEREAS, AMREP is an Oklahoma corporation and the sponsor of the Retirement Plan
for Employees of AMREP Corporation (“Pension Plan”); and

 

WHEREAS, in April 2010, AMREP ceased operations at its facility in Louisville,
Colorado (“First Cessation of Operations”). In January 2011, AMREP ceased
operations at its facility in Mount Morris, Illinois (“Second Cessation of
Operations” and collectively with the First Cessation of Operations, the
“Cessations of Operations”). As a result of the Cessations of Operations,
certain employees who were participants in the Plan were separated from
employment; and

 

WHEREAS, PBGC asserted that the Cessations of Operations were events described
in section 4062(e) of ERISA, and that AMREP and the other members of its
controlled group, within the meaning of section 4001(a)(14) of ERISA were
therefore subject to the provisions of section 4063 of ERISA and liable
thereunder to PBGC with respect to the Pension Plan (“Liability”); and

 

WHEREAS, the Parties entered into that certain Tolling and Forbearance Agreement
with respect to the Cessations of Operations on August 13, 2012, and the Parties
addressed the Liability by executing the Settlement Agreement, a copy of which
is attached hereto as Exhibit 1; and

 

WHEREAS, in the Settlement Agreement, AMREP agreed, among other things, to
secure all unpaid Liability by executing first lien mortgages (“Original PBGC
Mortgages”) in favor of PBGC on certain real properties (“Original Mortgaged
Properties”); and

 

WHEREAS, on April 24, 2015, AMREP entered into an agreement (the “Sale
Agreement”) to sell the surface of one of the Original Mortgaged Properties
located in Brighton, Colorado (such surface of the property being sold (which
does not include any mineral (e.g., oil and gas) rights), “Brighton Property”)
to Meritage Homes of Colorado, Inc. (“Buyer”) in four sale transactions
(collectively, the “Sale”); and

 

 

 

 

WHEREAS, on July 15, 2015, the Parties entered into that certain First Amendment
to the Settlement Agreement (“First Amendment”), a copy of which is attached
hereto as Exhibit 2. Under the First Amendment, PBGC accepted a mortgage on
property located at 11 Commerce Boulevard in Palm Coast, Florida (the “Palm
Coast Property”) in exchange for the release of the Original PBGC Mortgage
encumbering the Brighton Property in advance of the closing dates outlined in
the Sale Agreement. In further consideration thereof, AMREP agreed to continue
to make any payments to the Pension Plan in accordance with Section 2.5 of the
Settlement Agreement relating to the sale of the Brighton Property; and

 

WHEREAS, in October 2015, AMREP sought PBGC’s consent to the transfer of
ownership of the Palm Coast Property from Palm Coast Data, LLC f/k/a PCD
Acquisition LLC (“PCD”) to Commerce Blvd Holdings, LLC (“NewCo”), a newly formed
Florida LLC that is a wholly owned subsidiary of AMREP, for corporate governance
purposes. AMREP further sought PBGC’s consent to the transfer of ownership of
properties owned by PCD located at10 Commerce Boulevard and 13 Commerce
Boulevard (collectively, “Other PCD Properties”), which are subject to Original
PBGC Mortgages, to NewCo for similar reasons; and

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, AMREP and PBGC hereby agree as follows:

 

1.The Settlement Agreement and First Amendment are fully incorporated by
reference herein and shall, as amended hereby, continue in full force and
effect. For the avoidance of doubt, nothing in this Second Amendment releases
AMREP of any obligations or duties under the Settlement Agreement or First
Amendment. Initially capitalized terms used but not otherwise defined in this
Second Amendment have the meanings given to them in the Settlement Agreement.

 

2.PBGC consents to the transfer of the Palm Coast Property and Other PCD
Properties from PCD to NewCo, provided that AMREP abides by all terms and
conditions set forth herein.

 

3.AMREP shall, at its sole expense, provide to PBGC (i) an acceptable recordable
discharge and release of the Replacement Palm Coast Mortgage on the Palm Coast
Property (“Palm Coast Release”); and (ii) acceptable recordable discharge and
releases of the Original PBGC Mortgages on the Other PCD Properties (“Other PCD
Releases”, collectively with the Palm Coast Release, the “Releases”). PBGC will
promptly execute and return the Releases to AMREP via email to Christopher
Vitale at CVitale@amrepcorp.com. AMREP shall bear all responsibility for filing
the Releases at its sole expense. AMREP further agrees to provide PBGC with a
copy of the file-stamped, recorded Releases via email to Courtney Morgan at
morgan.courtney@pbgc.gov.

 

 

 

 

4.The form of Replacement PBGC Mortgages on the Palm Coast Property and the
Other PCD Properties are attached hereto as Exhibit 3 (collectively, the “NewCo
Replacement Mortgages”). AMREP shall, at its sole expense, file and record the
NewCo Replacement Mortgages. AMREP shall promptly provide PBGC with copies of
the file-stamped, recorded NewCo Replacement Mortgages via email to Courtney
Morgan at morgan.courtney@pbgc.gov.

 

5.AMREP represents and covenants to PBGC that the NewCo Replacement Mortgages
will be filed with the requisite recording authorities concurrently with the
filing of the Releases and any documents effectuating the transfer of ownership
of the Palm Coast Property and Other PCD Properties from PCD to NewCo. AMREP’s
failure to properly file the Releases and the NewCo Replacement Mortgages on the
same business day shall constitute an Event of Default under Section 6.1 of the
Settlement Agreement. Upon an Event of Default, PBGC may immediately take any
and all actions prescribed by the Settlement Agreement, in its sole discretion.

 

6.In accordance with Section 2.4 of the Settlement Agreement, the NewCo
Replacement Mortgages shall constitute first lien mortgages on the Palm Coast
Property and the Other PCD Properties, respectively. Failure to provide first
lien priority status to any of the NewCo Replacement Mortgages, under any
circumstances, constitutes an Event of Default under Section 6.1 of the
Settlement Agreement. Upon an Event of Default, PBGC may immediately take any
and all actions prescribed by the Settlement Agreement, in its sole discretion.

 

7.For the avoidance of doubt, nothing in this Second Amendment shall affect the
duties and obligations of AMREP under Paragraph 8 of the First Amendment with
respect to the Brighton Property.

 

8.All Original PBGC Mortgages and Replacement PBGC Mortgages, including the
NewCo Replacement Mortgages (once filed and recorded), shall continue to be
governed by the terms of the Settlement Agreement, as amended hereby.

 

IN WITNESS WHEREOF, the Parties have executed this Second Amendment, effective
as of the Second Amendment Effective Date.

 

Accepted and Agreed:

 

AMREP CORPORATION   Pension Benefit Guaranty         Corporation                
          By: /s/ Christopher V. Vitale   By: /s/ Robert D. Bacon              
Name:   Christopher V. Vitale   Name:   Robert D. Bacon               Title:
Executive Vice President   Title: Deputy Director, CFRD