Exhibit 10.1

CREDIT AGREEMENT

 

 

THIS CREDIT AGREEMENT (this "Agreement") is entered into as of April 1, 2005, by
and between AMREP SOUTHWEST, INC, a New Mexico corporation ("Borrower"), and
WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank").

 

RECITALS

 

Borrower has requested that Bank extend or continue credit to Borrower as
described below, and Bank has agreed to provide such credit to Borrower on the
terms and conditions contained herein.

 

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Bank and Borrower hereby agree as follows:

 

ARTICLE I

CREDIT TERMS

 

SECTION 1.1.

LINE OF CREDIT.

 

(a)       Line of Credit. Subject to the terms and conditions of this Agreement,
Bank hereby agrees to make advances to Borrower from time to time up to and
including October 1, 2008, not to exceed at any time the aggregate principal
amount of TEN MILLION Dollars ($10,000,000.00) ("Line of Credit"), the proceeds
of which shall be used as working capital and general corporate purposes.
Borrower's obligation to repay advances under the Line of Credit shall be
evidenced by a promissory note dated as of the date of this Agreement ("Line of
Credit Note"), all terms of which are incorporated herein by this reference.

 

(b)       Limitation on Borrowings. Outstanding borrowings under the Line of
Credit, to a maximum of the principal amount set forth above, shall not at any
time exceed an aggregate of Fifty percent (50%) of the cost of un-encumbered
real estate assets owned by the Borrower (the “Borrowing Base”). “Un-encumbered
real estate assets” means all of Borrower’s real estate inventory not subject to
a mortgage or other monetary lien. For the purposes of this definition, the
minimum real estate assets requirement contained in Section 1.3 herein below is
not considered an encumbrance.

 

(c)       Letter of Credit Subfeature. As a subfeature under the Line of Credit,
Bank agrees from time to time during the term thereof to issue or cause an
affiliate to issue standby letters of credit for the account of Borrower (each,
a "Letter of Credit" and collectively, "Letters of Credit"); provided however,
that the aggregate undrawn amount of all outstanding Letters of Credit shall not
at any time exceed Seven Million and no/100 Dollars ($7,000,000.00). 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 maturity date of the Line of Credit. The
undrawn amount of all Letters of Credit shall be reserved under the Line of
Credit

 

 

-1-

 

 

 

 

and shall not be available for borrowings thereunder. No interest shall accrue
on the undrawn amount of any Letter of Credit. Each Letter of Credit shall be
subject to the additional terms and conditions of the Letter of Credit
agreements, applications 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 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.

 

(d)       Borrowing and Repayment. Borrower may 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 or 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 maximum principal amount available thereunder, as set forth
above.

 

SECTION 1.2.

INTEREST/FEES.

 

(a)       Interest. The outstanding principal balance of the Line of Credit
shall bear interest, and 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 each
promissory note or other instrument or document executed in connection
therewith.

 

(b)       Prime Rate. The term "Prime Rate" shall mean at any time the rate of
interest most recently announced within Bank at its principal office as its
Prime Rate, with the understanding that the Prime Rate is one of Bank's base
rates and serves as the basis upon which effective rates of interest are
calculated for those loans making reference thereto, and is evidenced by the
recording thereof in such internal publication or publications as Bank may
designate. Each change in the rate of interest shall become effective on the
date each Prime Rate change is announced within Bank.

 

(c)       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 each promissory note or other instrument or document required
hereby.

 

(d)       Unused Commitment Fee. Borrower shall pay to Bank a fee equal to two
tenths of a percent (0.2%) 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 Revolving Credit utilized for a Standby Letter of
Credit will count as a used portion when calculating the Unused Fee. If the
average usage of the Revolving Credit facility for any quarter is equal to
one-half of the committed amount, no Unused Fee will be assessed during that
quarter.

 

 

 

-2-

 

 

 

 

 

(e)       Letter of Credit Fees. Borrower shall pay to Bank (i) fees upon the
issuance of each Letter of Credit equal to ninety-five one hundredths percent
(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 any Letter of
Credit, and (ii) fees upon the payment or negotiation of each drawing 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 1.3

MINIMUM REAL ESTATE ASSETS.

 

Borrower will maintain un-encumbered real estate assets having a minimum book
value equal to two times the sum of the outstanding balance of the Line of
Credit plus the total of the undrawn amounts under all outstanding Letters of
Credit.

 

ARTICLE II

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.

 

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 and each promissory note and other document required
hereby (the “Loan Documents”) have 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

 

 

-3-

 

 

 

 

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 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.

 

 

 

-4-

 

 

 

 

 

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.

 

ARTICLE III

CONDITIONS

 

SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation of Bank
to extend the initial credit contemplated by this Agreement 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 and each promissory note or other instrument or document required
hereby.

(ii)

Certificate of Resolution, authorizing borrowing and negative pledge.

(iii)

Insurance notice.

 

(iv)

Such other documents as Bank may require under any other Section of this
Agreement, including Borrower’s organizational documents.

 

SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of Bank to
make each extension of credit requested by Borrower hereunder shall be subject
to the fulfillment to Bank's satisfaction of each of the following conditions:

 

(a)       Compliance. The representations and warranties contained herein and in
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
may be required in connection with such extension of credit.

 

 

 

-5-

 

 

 

 

 

ARTICLE IV

AFFIRMATIVE COVENANTS

 

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 upon demand by Bank, 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 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 Wells Fargo:

 

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 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 of the Revolving Credit facility, no later than 60 days after
the first day of the fiscal year.

 

4.

Borrowing Base certificates and accompanying real estate schedules quarterly,
within fifteen (15) days of the end of each fiscal quarter, and within ten (10)
days of a sales event in excess of $10,000,000.

 

5.

Copy of quarterly 10Q for Amrep Corporation within 30 days of filing.

 

 

 

 

-6-

 

 

 

 

 

6.

Copy of Annual 10K for Amrep Corporation within 30 days of filing.

 

7.

Other information reasonably requested by any 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
endorsements as Lender 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.  TANGIBLE NET WORTH. Borrower will maintain at all times Tangible
Net Worth 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
affiliates.

 

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.

 

ARTICLE V

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

 

 

-7-

 

 

 

 

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 Article I hereof.

 

SECTION 5.2. NO ASSIGNMENT. The Borrower shall not without the Bank’s prior
written consent, assign the Loan, the Loan proceeds or the Borrower’s rights
under the Loan Documents. Any such assignment without such consent shall be
void.

 

ARTICLE VI

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 when due any principal, interest, fees or
other amounts payable under any of the Loan Documents which failure shall
continue unremedied for five (5) days. 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 telephonic notice of
nonpayment to Borrower and Borrower shall fail to make the required payment(s)
within five (5) days of the notice of nonpayment.

 

(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 in the performance of or compliance with any obligation,
agreement or other provision contained herein or in any other Loan Document
(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.

 

 

 

-8-

 

 

 

 

 

(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)       The sale, transfer, hypothecation, assignment or encumbrance, whether
voluntary, involuntary or by operation of law, without Bank's prior written
consent, of all or any part of or interest in real property which causes the
book value of unencumbered real property owned by Borrower in fee simple to be
less than two times the sum of the outstanding balance of the Line of Credit
plus the total of the undrawn amounts under all outstanding Letters of Credit.

 

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
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.

 

 

 

-9-

 

 

 

 

 

ARTICLE VII

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.

 

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

 

 

333 Rio Rancho Drive S.W.

 

 

Rio Rancho, New Mexico 87124

 

Attn: Gary Sullivan

 

 

With a copy to:

Matthew W. Spangler, Esq.

 

 

P.O. Box 15698

 

 

Rio Rancho, New Mexico 87174-0698

 

BANK:

WELLS FARGO BANK, NATIONAL ASSOCIATION

 

200 Lomas Boulevard, NW

 

 

Albuquerque, New Mexico 87102

 

 

Attn: Mike Enmon

 

 

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 $15,000.00), 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

 

 

-10-

 

 

 

 

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, negotiation or grant of participations to
entities which are not Wells Fargo 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.

 

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.

 

 

 

-11-

 

 

 

 

 

SECTION 7.10.  GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New Mexico.

 

SECTION 7.11. ARBITRATION.

 

(a)       Arbitration. The parties hereto agree, upon demand by any party, to
submit to binding arbitration all claims, disputes and controversies between or
among them (and their respective employees, officers, directors, attorneys, and
other agents), whether in tort, contract or otherwise arising out of or relating
to in any way (i) the loan and related Loan Documents which are the subject of
this Agreement and its negotiation, execution, collateralization,
administration, repayment, modification, extension, substitution, formation,
inducement, enforcement, default or termination; or (ii) requests for additional
credit.

 

(b)       Governing Rules. Any arbitration proceeding will (i) proceed in a
location in New Mexico selected by the American Arbitration Association (“AAA”);
(ii) be governed by the Federal Arbitration Act (Title 9 of the United States
Code), notwithstanding any conflicting choice of law provision in any of the
documents between the parties; and (iii) be conducted by the AAA, or such other
administrator as the parties shall mutually agree upon, in accordance with the
AAA’s commercial dispute resolution procedures, unless the claim or counterclaim
is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and
costs in which case the arbitration shall be conducted in accordance with the
AAA’s optional procedures for large, complex commercial disputes (the commercial
dispute resolution procedures or the optional procedures for large, complex
commercial disputes to be referred to, as applicable, as the “Rules”). If there
is any inconsistency between the terms hereof and the Rules, the terms and
procedures set forth herein shall control. Any party who fails or refuses to
submit to arbitration following a demand by any other party shall bear all costs
and expenses incurred by such other party in compelling arbitration of any
dispute. Nothing contained herein shall be deemed to be a waiver by any party
that is a bank of the protections afforded to it under 12 U.S.C. §91 or any
similar applicable state law.

 

(c)       No Waiver of Provisional Remedies, Self-Help and Foreclosure. The
arbitration requirement does not limit the right of any party to (i) foreclose
against real or personal property collateral; (ii) exercise self-help remedies
relating to collateral or proceeds of collateral such as setoff or repossession;
or (iii) obtain provisional or ancillary remedies such as replevin, injunctive
relief, attachment or the appointment of a receiver, before during or after the
pendency of any arbitration proceeding. This exclusion does not constitute a
waiver of the right or obligation of any party to submit any dispute to
arbitration or reference hereunder, including those arising from the exercise of
the actions detailed in sections (i), (ii) and (iii) of this paragraph.

 

(d)       Arbitrator Qualifications and Powers. Any arbitration proceeding in
which the amount in controversy is $5,000,000.00 or less will be decided by a
single arbitrator selected according to the Rules, and who shall not render an
award of greater than $5,000,000.00. Any dispute in which the amount in
controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel
of three arbitrators; provided however, that all three arbitrators must actively
participate in all hearings and deliberations. The arbitrator will be a neutral
attorney licensed in

 

 

-12-

 

 

 

 

the State of New Mexico or a neutral retired judge of the state or federal
judiciary of New Mexico, in either case with a minimum of ten years experience
in the substantive law applicable to the subject matter of the dispute to be
arbitrated. The arbitrator will determine whether or not an issue is
arbitratable and will give effect to the statutes of limitation in determining
any claim. In any arbitration proceeding the arbitrator will decide (by
documents only or with a hearing at the arbitrator's discretion) any pre-hearing
motions which are similar to motions to dismiss for failure to state a claim or
motions for summary adjudication. The arbitrator shall resolve all disputes in
accordance with the substantive law of New Mexico and may grant any remedy or
relief that a court of such state could order or grant within the scope hereof
and such ancillary relief as is necessary to make effective any award. The
arbitrator shall also have the power to award recovery of all costs and fees, to
impose sanctions and to take such other action as the arbitrator deems necessary
to the same extent a judge could pursuant to the Federal Rules of Civil
Procedure, the New Mexico Rules of Civil Procedure or other applicable law.
Judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction. The institution and maintenance of an action for judicial
relief or pursuit of a provisional or ancillary remedy shall not constitute a
waiver of the right of any party, including the plaintiff, to submit the
controversy or claim to arbitration if any other party contests such action for
judicial relief.

 

(e)       Discovery. In any arbitration proceeding discovery will be permitted
in accordance with the Rules. All discovery shall be expressly limited to
matters directly relevant to the dispute being arbitrated and must be completed
no later than 20 days before the hearing date and within 180 days of the filing
of the dispute with the AAA. Any requests for an extension of the discovery
periods, or any discovery disputes, will be subject to final determination by
the arbitrator upon a showing that the request for discovery is essential for
the party's presentation and that no alternative means for obtaining information
is available.

 

(f)        Class Proceedings and Consolidations. The resolution of any dispute
arising pursuant to the terms of this Agreement shall be determined by a
separate arbitration proceeding and such dispute shall not be consolidated with
other disputes or included in any class proceeding.

 

(g)       Payment Of Arbitration Costs And Fees. The arbitrator shall award all
costs and expenses of the arbitration proceeding.

 

(h)       Miscellaneous. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business or by applicable law or
regulation. If more than one agreement for arbitration by or between the parties
potentially applies to a dispute, the arbitration provision most directly
related to the Loan Documents or the subject matter of the dispute shall
control. This arbitration provision shall survive termination, amendment or
expiration of any of the Loan Documents or any relationship between the parties.

 

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

 

 

-13-

 

 

 

 

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.

WELLS FARGO BANK,

 

 

NATIONAL ASSOCIATION

 

By:

/s/ James Wall

By:

/s/ Michael Enmon

 

Name: James Wall

Mike Enmon, Vice President

Title: President

 

 

 

 

 

 

-14-