SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1998
----------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to _______________________
Commission File Number 1-4702
------
AMREP Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Oklahoma 59-0936128
- --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
641 Lexington Avenue, Sixth Floor, New York, New York 10022
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 705-4700
--------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has subject to such filing requirements
for the past 90 days.
Yes X No
--- ---
Number of Shares of Common Stock, par value $.10 per share, outstanding at
December 11, 1998 - 7,368,650.
<PAGE>
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
INDEX
-----
PART I PAGE NO.
- ------ --------
Consolidated Financial Statements:
Balance Sheets
October 31, 1998 (Unaudited) and
April 30, 1998 (Audited) 1
Statements of Operations and Retained Earnings (Unaudited)
Three Months Ended October 31, 1998 and 1997 2
Statements of Operations and Retained Earnings (Unaudited)
Six Months Ended October 31, 1998 and 1997 3
Statements of Cash Flows (Unaudited)
Six Months Ended October 31, 1998 and 1997 4
Notes to Consolidated Financial Statements 5
Management's Discussion and Analysis 6 - 8
PART II
- -------
Other Information 8
Signatures 9
Exhibit Index 10
<PAGE>
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
October 31, 1998 and April 30, 1998
(Dollar amounts in thousands, except par value)
October 31, April 30,
1998 1998
-------------- -----------
(Unaudited) (Audited)
ASSETS
- ------
Cash and cash equivalents $ 12,121 $ 20,517
Receivables, net:
Real estate operations 12,146 11,107
Magazine circulation operations 61,040 57,408
Real estate inventory 105,282 99,904
Other real estate investments 2,565 2,251
Property, plant and equipment, at cost,
net of accumulated depreciation and
amortization of $14,179 at October 31, 1998 17,921 17,658
and $13,260 at April 30, 1998
Other assets 14,820 14,719
Excess of cost of subsidiary over net assets
acquired net of accumulated amortization of
$122 at October 31, 1998 and $68 at April 30,
1998 6,150 6,204
---------- --------
Total Assets $ 232,045 $ 229,768
========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Accounts payable, deposits and accrued expenses $ 39,231 $ 40,352
Notes payable:
Amounts due within one year 35,180 28,511
Amounts subsequently due 52,643 55,737
Taxes payable:
Amounts due within one year 1,376 4,616
Amounts subsequently due 13,923 13,923
Deferred income taxes 2,429 2,589
---------- --------
Total Liabilities 144,782 145,728
---------- --------
Shareholders' equity:
Common stock, $.10 par value;
shares authorized -- 20,000,000; shares
issued and outstanding --7,398,677 at
October 31, 1998 and April 30, 1998 740 740
Capital contributed in excess of par value 44,928 44,928
Retained earnings 41,775 38,552
Treasury stock, at cost; 30,027 shares (180) (180)
---------- --------
Total Shareholders' Equity 87,263 84,040
---------- --------
Total Liabilities and Shareholders' Equity $ 232,045 $ 229,768
========== ========
See notes to consolidated financial statements.
1
<PAGE>
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations and Retained Earnings (Unaudited)
Three Months Ended October 31, 1998 and 1997
(Amounts in thousands, except per share amounts)
1998 1997
---- ----
REVENUES
- --------
Real estate operations:
Home and condominium sales $ 17,376 $ 19,499
Land sales 2,075 7,123
--------- --------
19,451 26,622
Magazine circulation operations 14,930 15,188
Interest and other operations 1,549 1,730
--------- --------
35,930 43,540
--------- --------
COSTS AND EXPENSES
- ------------------
Real estate cost of sales
Home and condominium sales 15,103 17,365
Land sales 939 2,485
Operating expenses:
Magazine circulation operations 11,554 11,309
Real estate commissions and selling 1,791 1,871
Other operations 826 1,536
General and administrative:
Real estate operations and corporate 2,302 1,963
Magazine circulation operations 1,585 1,622
Interest, net 1,261 1,157
--------- --------
35,361 39,308
--------- --------
INCOME BEFORE INCOME TAXES 569 4,232
PROVISION FOR INCOME TAXES 228 1,693
--------- --------
NET INCOME 341 2,539
RETAINED EARNINGS, beginning of period 41,434 30,851
--------- --------
RETAINED EARNINGS, end of period $ 41,775 $ 33,390
========= ========
EARNINGS PER SHARE - BASIC AND DILUTED $ 0.05 $ 0.34
========= ========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 7,369 7,369
========= ========
See notes to consolidated financial statements.
2
<PAGE>
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations and Retained Earnings (Unaudited)
Six Months Ended October 31, 1998 and 1997
(Amounts in thousands, except per share amounts)
1998 1997
---- ----
REVENUES
- --------
Real estate operations:
Home and condominium sales $ 38,224 $ 38,368
Land sales 11,748 11,429
---------- ---------
49,972 49,797
Magazine circulation operations 29,180 28,194
Interest and other operations 3,001 3,344
---------- ---------
82,153 81,335
---------- ---------
COSTS AND EXPENSES
- ------------------
Real estate cost of sales
Home and condominium sales 33,250 33,586
Land sales 6,028 4,827
Operating expenses:
Magazine circulation operations 22,457 21,896
Real estate commissions and selling 3,567 3,599
Other operations 1,536 3,095
General and administrative:
Real estate operations and corporate 4,287 3,755
Magazine circulation operations 3,267 3,191
Interest, net 2,389 2,313
---------- ---------
76,781 76,262
---------- ---------
INCOME BEFORE INCOME TAXES 5,372 5,073
PROVISION FOR INCOME TAXES 2,149 2,029
---------- ---------
NET INCOME 3,223 3,044
RETAINED EARNINGS, beginning of period 38,552 30,346
---------- ---------
RETAINED EARNINGS, end of period $ 41,775 $ 33,390
========== =========
EARNINGS PER SHARE - BASIC AND DILUTED $ 0.44 $ 0.41
========== =========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 7,369 7,369
========== =========
See notes to consolidated financial statements.
3
<PAGE>
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended October 31, 1998 and 1997
(Amounts in thousands)
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 3,223 $ 3,044
------- -------
Adjustments to reconcile net income to net cash used
by operating activities -
Depreciation and amortization 1,528 1,686
Changes in assets and liabilities, net of effects
from purchase of assets of business:
Receivables, net (4,671) (17,793)
Real estate inventory (5,378) (1,256)
Other real estate investments (314) 1,526
Other assets (634) (842)
Accounts payable, deposits and accrued expenses (1,121) 12,092
Taxes payable (3,400) 1,341
------- -------
Total adjustments (13,990) (3,246)
------- -------
Net cash used by operating activities (10,767) (202)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,204) (1,598)
Purchase of assets of business, net of cash
acquired - (2,202)
------- -------
Net cash used by investing activities (1,204) (3,800)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt financing 49,032 17,948
Principal debt payments (45,457) (26,410)
Net cash provided (used) by financing
activities 3,575 (8,462)
------- -------
DECREASE IN CASH AND CASH EQUIVALENTS (8,396) (12,464)
CASH AND CASH EQUIVALENTS, beginning of period 20,517 16,178
------- -------
CASH AND CASH EQUIVALENTS, end of period $ 12,121 $ 3,714
======= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid - net of amounts capitalized $ 5,706 $ 2,237
======= =======
Income taxes paid $ 2,544 $ 688
======= =======
See notes to consolidated financial statements.
4
<PAGE>
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
Six Months Ended October 31, 1998 and 1997
Note 1:
- -------
The consolidated financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. The consolidated financial statements
reflect all adjustments which are, in the opinion of management, necessary to
reflect a fair presentation of the results for the interim periods presented.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
the Company believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these consolidated financial
statements be read in conjunction with the consolidated financial statements and
the notes thereto included in the Company's latest annual report on Form 10-K.
Note 2:
- -------
Certain amounts as previously reported in the April 30, 1998 Balance Sheet and
October 31, 1997 Statements of Operations and Statements of Cash Flows have been
reclassified to conform to the presentation used at October 31, 1998.
5
<PAGE>
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
October 31, 1998
RESULTS OF OPERATIONS
Total revenues decreased $7.6 million (17%) and increased $800,000 for the three
and six month periods ended October 31, 1998, respectively, compared to the
similar periods in the prior year.
Revenues from real estate operations decreased $7.2 million (27%) during the
three month period ended October 31, 1998, compared to the prior year, as a
result of decreases in both home and land sales and which, when combined with
first quarter revenues, resulted in generally comparable revenues for the six
month periods ended October 31, 1998 and 1997. Revenues from home sales
decreased $2.1 million (11%) and $100,000 (0.4%) in the three and six month
periods ended October 31, 1998, respectively, as compared to similar periods in
the prior year, resulting from a decrease in total unit deliveries from 169 to
146 in the second quarter and from 332 to 309 in the six month period due in
part to the impact of enhanced competition in the Rio Rancho housing market. The
average selling prices of homes increased to $119,000 and $123,700 in the three
and six month periods of the current year, respectively, compared to $115,400
and $115,600 in the comparable periods of the prior year. The gross profit
increased to 13% for both the three and six month periods of the current year
compared to 11% and 13% for comparable periods of the prior year resulting from
a number of factors, including certain cost reductions and a change in the mix
of homes delivered.
Revenues from land sales decreased by $5.0 million (71%) in the second quarter,
due to the absence of any commercial land sales in the current year period. As a
result of a large number of commercial land sales in the first quarter, however,
land sale revenues for the six month period ended October 31, 1998 were $300,000
(3%) greater than land sale revenues in the comparable period of the prior year.
The gross profit percentage on land sales was 55% in the second quarter compared
to 65% in the second quarter of the prior year, and 49% for the six month period
of the current year compared to 58% in the comparable period of the prior year.
Land sale revenues and related gross profits can vary from period to period as a
result of the nature and timing of specific transactions, and thus prior results
are not an indication of amounts that may be expected to occur in future
periods. As a result of these factors, gross profit from combined housing and
land sales decreased by approximately $3.4 million and $700,000 in the second
quarter and six month periods this year, respectively, as compared to the
similar periods last year.
Revenues from magazine circulation operations decreased approximately $300,000
(2%) and increased $1 million (3%) in the three and six months period ended
October 31, 1998, respectively, as compared to the similar periods last year.
Revenues from Fulfillment Services decreased approximately $700,000 (7%) and
$600,000 (3%) in three and six month periods this year, respectively, compared
to similar periods in the prior year due primarily to a lower
6
<PAGE>
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
October 31, 1998
volume of business. Revenues from the Newsstand Distribution Services increased
approximately $400,000 (9%) and $1.6 million (18%) in the three and six month
periods this year, respectively, compared to the prior year, due to a generally
higher volume of magazine sales. Magazine circulation operating expenses are
comparable to the prior year in both periods. As a result of these factors,
operating income from magazine circulation operations decreased by approximately
$500,000 and increased $400,000 in the second quarter and six months this year,
respectively, as compared to similar periods last year. Real estate commissions
and selling expenses were generally comparable to the prior year amounts in both
periods. Real estate and corporate general and administrative expenses increased
$300,000 and $500,000 in three and six month periods due in part to the costs of
the Company's California operation, which commenced operations in September
1997, as well as from higher legal expenses. General and administrative costs of
the magazine circulation operations were generally comparable to the prior year
amounts in both periods.
Revenues and expenses included in "Interest and other operations" decreased as a
result of the sale of the Rio Rancho Golf Course and Country Club during the
third quarter of the prior year. The revenue decrease was offset by the
inclusion of equity income from other real estate investments.
Interest expense increased moderately in both real estate and magazine
operations in both the second quarter and six month period this year as
compared to similar periods last year primarily due to higher average borrowings
and relatively lower interest capitalization, partially offset by reduced
interest rates.
FINANCIAL CONDITION
Receivables from magazine circulation operations increased from $57.4 million at
April 30, 1998 to $61.0 million at October 31, 1998, resulting from the higher
volume of magazine sales and the timing of monthly billings as well as from
delays in payments experienced by Kable from wholesalers. In addition, real
estate inventory and notes payable increased by approximately $5.4 million and
$3.6 million, respectively, at October 31, 1998, compared to April 30, 1998,
primarily due to land acquisitions, increases in construction inventory and
related financing at the northern California operations. Also, accounts payable,
deposits and accrued expenses decreased by approximately $1.1 million at October
31, 1998 compared to April 30, 1998. As a result, cash decreased by $8.4 million
at October 31, 1998, as compared to April 30, 1998.
YEAR 2000
The Company utilizes a number of software systems in conjunction with its real
estate and magazine circulation operations. The Company has and will continue to
make certain investments in it software systems and applications to ensure the
Company is year 2000
7
<PAGE>
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued) and Part II
October 31, 1998
compliant. The Company is also in the process of ascertaining the impact of year
2000 compliance in its relationship with vendors and suppliers. The financial
impact of becoming year 2000compliant has not been and is not expected to be
material to the Company's financial position or results of operations in a given
year.
PART II
Other Information
-----------------
Item 4. Submission of Matters to Vote of Security Holders
- ------- -------------------------------------------------
The Annual Meeting of Shareholders was held on September 24, 1998.
At the meeting, Daniel Friedman, Samuel N. Seidman and Mohan Vachani
were elected as directors. The terms of office as directors of Jerome Belson,
Edward B. Cloues, II, Nicholas G. Karabots, Albert Russo, and James Wall
continue.
Shareholders cast votes for the election of directors as follows:
Nominee "For" "Withheld"
------- ----- ----------
Daniel Friedman 6,769,702 21,890
Samuel N. Seidman 6,769,530 22,062
Mohan Vachani 6,770,311 21,281
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits:
---------
4(a) Loan Agreement dated as of September 15, 1998 between
Kable News Company, Inc., and American National Bank and
Trust Company of Chicago as Agent and all the Lenders as
defined therein.
4(b) Commitment Agreement dated as of February 20, 1998 between
AMREP Southwest, Inc., and Residential Funding Corporation
27 Financial Data Schedule.
(b) Reports on Form 8-K.
--------------------
No reports on Form 8-K were filed by Registrant during the
quarter ended October 31, 1998.
8
<PAGE>
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
AMREP Corporation
(Registrant)
Dated: December 11, 1998 By: /s/ Mohan Vachani
-----------------------
Mohan Vachani
Senior Vice President,
Chief Financial Officer
Dated: December 11, 1998 By: /s/ Peter M. Pizza
------------------------
Peter M. Pizza
Vice President, Controller
9
<PAGE>
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
-------------
4(a) Loan Agreement dated as of September 15, 1998 between
Kable News Company, Inc., and American National Bank and
Trust Company of Chicago as Agent and all the Lenders as
defined therein.
4(b) Commitment Agreement dated as of February 20, 1998 between
AMREP Southwest, Inc., and Residential Funding Corporation.
27 Financial Data Schedule.
10
EXHIBIT 4(a)
LOAN AGREEMENT
BETWEEN
KABLE NEWS COMPANY, INC.,
AN ILLINOIS CORPORATION
AND
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, AS AGENT
AND ALL LENDERS AS DEFINED HEREIN
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS................................................1
ARTICLE II THE CREDITS...............................................17
2.1. Commitment................................................17
2.2. Required Payments; Termination............................17
2.3. Ratable Loans.............................................17
2.4. Types of Advances.........................................17
2.5. Commitment Fee; Reductions in Aggregate Revolving Loan
Commitment................................................17
2.6. Minimum Amount of Each Advance and Maximum Number of
Outstanding Eurodollar Advances...........................18
2.7. Optional Principal Payments...............................18
2.8. Method of Selecting Types and Interest Periods for New
Advances..................................................18
2.9. Conversion and Continuation of Outstanding Advances.......19
2.10. Changes in Interest Rate, etc.............................19
2.11. Rates Applicable After Default............................20
2.12. Method of Payment.........................................20
2.13. Noteless Agreement; Evidence of Indebtedness..............20
2.14. Telephonic Notices........................................21
2.15. Interest Payment Dates; Interest and Fee Basis............21
2.16. Notification of Advances, Interest Rates, Prepayments
and Commitment Reductions.................................22
2.17. Limitation on Outstanding Amount of Revolving Loan........22
2.18. Installment Loan..........................................22
2.19. Term Loan.................................................22
2.20. Lending Installations.....................................23
2.21. Periodic Funding by Lenders...............................23
2.22. Non-Receipt of Funds by the Agent.........................25
ARTICLE III YIELD PROTECTION TAXES....................................25
3.1. Yield Protection..........................................25
3.2. Changes in Capital Adequacy Regulations...................26
3.3. Availability of Types of Advances.........................26
3.4. Funding Indemnification...................................27
3.5. Taxes.....................................................27
3.6. Lender Statements; Survival of Indemnity..................28
<PAGE>
ARTICLE IV CONDITIONS PRECEDENT......................................29
4.1. Initial Advance...........................................29
4.2. Each Advance..............................................31
ARTICLE V REPRESENTATIONS AND WARRANTIES............................32
5.1. Existence and Standing....................................32
5.2. Authorization and Validity................................32
5.3. No Conflict; Government Consent...........................32
5.4. Financial Statements......................................33
5.5. Material Adverse Change...................................33
5.6. Taxes.....................................................33
5.7. Litigation and Contingent Obligations.....................33
5.8. Subsidiaries..............................................34
5.9. ERISA.....................................................34
5.10. Accuracy of Information...................................34
5.11. Regulation U..............................................34
5.12. Material Agreements.......................................34
5.13. Compliance With Laws......................................35
5.14. Ownership of Properties...................................35
5.15. Plan Assets; Prohibited Transactions......................35
5.16. Environmental Matters.....................................35
5.17. Investment Company Act....................................35
5.18. Public Utility Holding Company Act........................36
5.19. Subordinated Indebtedness.................................36
5.20. Post-Retirement Benefits..................................36
5.21. Insurance.................................................36
5.22. Solvency..................................................36
ARTICLE VI COVENANTS.................................................37
6.1. Financial and Other Reporting.............................37
6.2. Use of Proceeds...........................................39
6.3. Notice of Default.........................................39
6.4. Conduct of Business.......................................40
6.5. Taxes.....................................................40
6.6. Insurance.................................................40
6.7. Compliance with Laws......................................40
6.8. Maintenance of Properties.................................40
6.9. Inspection................................................40
6.10. Dividends.................................................41
6.11. Indebtedness..............................................41
6.12. Merger....................................................41
6.13. Sale of Assets............................................42
6.14. Investments and Acquisitions..............................42
<PAGE>
6.15. Liens.....................................................43
6.16. Capital Expenditures......................................44
6.17. Affiliates................................................44
6.18. Subordinated Indebtedness.................................44
6.19. Other Agreements..........................................44
6.20. Disposition of Indebtedness of Subsidiary or Parent.......44
6.21. Business Activities.......................................44
6.22. Availability of Revolving Loan Advances to
Fulfillment, Export, Canada and International.............45
6.23. Loans or Advances to Parent and Subsidiary................45
6.24. Financial Covenants.......................................45
6.24.1. Consolidated Current Ratio.......................45
6.24.2. Consolidated Cash Flow Coverage..................45
6.24.3. Consolidated Tangible Net Worth..................46
6.24.4. Ratio of Collections.............................46
6.24.5. Ratio of Returns.................................46
6.25. Lock Box..................................................46
6.26. Year 2000.................................................47
ARTICLE VII DEFAULTS................................ ................47
ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES............50
8.1. Acceleration..............................................50
8.2. Amendments................................................50
8.3. Preservation of Rights....................................51
ARTICLE IX GENERAL PROVISIONS........................................51
9.1. Survival of Representations...............................51
9.2. Governmental Regulation...................................51
9.3. Headings..................................................52
9.4. Entire Agreement..........................................52
9.5. Several Obligations; Benefits of this Agreement...........52
9.6. Expenses; Indemnification.................................52
9.7. Numbers of Documents......................................53
9.8. Accounting................................................53
9.9. Severability of Provisions................................53
9.10. Nonliability of Lenders...................................53
9.11. Confidentiality...........................................53
9.12. Nonreliance...............................................54
<PAGE>
ARTICLE X THE AGENT.................................................54
10.1. Appointment; Nature of Relationship.......................54
10.2. Powers....................................................54
10.3. General Immunity..........................................55
10.4. No Responsibility for Loans, Recitals, etc................55
10.5. Action on Instructions of Lenders.........................55
10.6. Employment of Agents and Counsel..........................55
10.7. Reliance on Documents; Counsel............................56
10.8. Agent's Reimbursement and Indemnification.................56
10.9. Notice of Default.........................................56
10.10. Rights as a Lender........................................57
10.11. Lender Credit Decision....................................57
10.12. Successor Agent...........................................57
10.13. Agent's Fee...............................................58
10.14. Delegation to Affiliates..................................58
10.15. Execution of Collateral Documents.........................58
10.16. Collateral Releases.......................................58
ARTICLE XI SETOFF; RATABLE PAYMENTS..................................59
11.1. Setoff....................................................59
11.2. Ratable Payments..........................................59
ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS.........59
12.1. Successors and Assigns....................................59
12.2. Participations............................................60
12.2.1 Permitted Participants; Effect....................60
12.2.2. Voting Rights....................................60
12.2.3. Benefit of Setoff................................60
12.3. Assignments...............................................61
12.3.1. Permitted Assignments............................61
12.3.2. Effect; Effective Date...........................61
12.4. Dissemination of Information..............................62
12.5. Tax Treatment.............................................62
ARTICLE XIII NOTICES...................................................62
13.1. Notices...................................................62
13.2. Change of Address.........................................63
<PAGE>
ARTICLE XIV COUNTERPARTS..............................................63
ARTICLE XV CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF
JURY TRIAL................................................63
15.1. CHOICE OF LAW.............................................63
15.2. CONSENT TO JURISDICTION...................................63
15.3. WAIVER OF JURY TRIAL......................................64
EXHIBIT A FORM OF OPINION...........................................69
EXHIBIT B COMPLIANCE CERTIFICATE....................................70
EXHIBIT C ASSIGNMENT AGREEMENT......................................74
EXHIBIT D LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION............86
EXHIBIT E-1, E-2 & E-3 NOTES........................................87
EXHIBIT F CERTIFICATE OF BORROWER RE: ANNUAL FINANCIAL
STATEMENTS................................................88
EXHIBIT G MONTHLY COMPLIANCE CERTIFICATE............................89
EXHIBIT H MONTHLY COLLATERAL REPORT ACCOUNTS RECEIVABLE
COLLATERAL................................................90
EXHIBIT I ACTUAL COLLECTIONS AND ESTIMATED NET BILLING REPORT.......91
SCHEDULE 1 SUBSIDIARIES AND OTHER INVESTMENTS........................92
SCHEDULE 2 INDEBTEDNESS AND LIENS....................................93
SCHEDULE 3 PERMITTED AFFILIATES IN CONNECTION WITH ELIGIBLE
ACCOUNTS..................................................94
<PAGE>
LOAN AGREEMENT
This Agreement, dated as of September 15, 1998, is among KABLE
NEWS COMPANY, INC., an Illinois corporation, as Borrower, the Lenders
and AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, as Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement:
"Account" as defined in the U.C.C.
"Account Debtor" as defined in the U.C.C.
"Acquisition" means any transaction, or any series of related
transactions, consummated on or after the date of this Agreement, by
which the Borrower or any of its Subsidiaries (i) acquires any going
business or all or substantially all of the assets of any firm,
corporation or limited liability company, or division thereof,
whether through purchase of assets, merger or otherwise or (ii)
directly or indirectly acquires (in one transaction or as the most
recent transaction in a series of transactions) at least a majority
(in number of votes) of the securities of a corporation which have
ordinary voting power for the election of directors (other than
securities having such power only by reason of the happening of a
contingency) or a majority (by percentage or voting power) of the
outstanding ownership interests of a partnership or limited
liability company.
"Actual Collections and Estimated Net Billing Report" is defined
in Section 6.1 (xi).
"Advance" means a borrowing hereunder (or conversion or
continuation thereof) consisting of the aggregate amount of the
several Loans made on the same Borrowing Date (or date of conversion
or continuation) by the Lenders to the Borrower of the same Type and,
in the case of Eurodollar Advances, for the same Interest Period.
"Affiliate" of any Person means any other Person directly or
indirectly controlling, controlled by or under common control with
such Person. A Person shall be deemed to control another Person if
the controlling Person owns 10% or more of any class of voting
securities (or other ownership interests) of the controlled Person or
possesses, directly or indirectly, the power to direct or cause the
direction of the management or policies of the controlled Person,
whether through ownership of stock, by contract or otherwise.
"Agent" means American National Bank and Trust Company of
Chicago in its capacity as contractual representative of the Lenders
pursuant to Article X, and not in its individual capacity as a
Lender, and any successor Agent appointed pursuant to Article X.
<PAGE>
"Aggregate Commitment" means the aggregate of the Commitments of
all the Lenders, as reduced from time to time pursuant to the terms
hereof.
"Agreement" means this Loan Agreement, as it may be amended or
modified and in effect from time to time.
"Agreement Accounting Principles" means generally accepted
accounting principles as in effect from time to time, applied in a
manner consistent with that used in preparing the financial
statements referred to in Section 5.4.
"American" means American National Bank and Trust Company of
Chicago.
"Applicable Fee Rate" means, at any time, the percentage rate
per annum at which Commitment Fees are accruing on the unused portion
of the Revolving Loan Commitment at such time as set forth in Section
2.5.
"Applicable Margin" means, with respect to Advances relating to
the Revolving Loan of any Type at any time, the percentage rate per
annum which is applicable at such time with respect to Advances of
such Type as set forth in the Pricing Schedule.
"Article" means an article of this Agreement unless another
document is specifically referenced.
"Authorized Officer" means Daniel Friedman, Chairman of the
Board, President and Chief Executive Officer, Bruce Obendorf, Vice
President, Director of Finance or David E. Bakener, Treasurer and
Controller of the Borrower, acting singly.
"Borrower" means Kable News Company, Inc., an Illinois
corporation, and its successors and assigns.
"Borrower Entities" means collectively Borrower, Export
Fulfillment, Canada and International.
"Borrowing Date" means a date on which an Advance is made
hereunder.
"Borrowing Notice" is defined in Section 2.8.
"Business Day" means (i) with respect to any borrowing, payment
or rate selection of Eurodollar Advances, a day (other than a
Saturday or Sunday) on which banks generally are open in Chicago and
New York for the conduct of substantially all of their commercial
lending activities and on which dealings in United States dollars are
carried on in the London interbank market and (ii) for all other
purposes, a day (other than a Saturday or Sunday) on which banks
generally are open in Chicago for the conduct of substantially all of
their commercial lending activities.
"Canada" means Kable News Company of Canada LTD, an Ontario,
Canada corporation.
<PAGE>
"Canada Security Agreement" means that certain Security
Agreement dated September 15, 1998 executed by Canada in favor of
Agent for the ratable benefit of the Lenders, as it may be amended or
modified and in effect from time to time.
"Capital Expenditures" means, without duplication, any
expenditures for any purchase or other acquisition of any asset which
would be classified as a fixed or capital asset on a consolidated
balance sheet of the Borrower and its Subsidiaries prepared in
accordance with Agreement Accounting Principles excluding (i)
expenditures of insurance proceeds to rebuild or replace any asset
after a casualty loss and (ii) leasehold improvement expenditures for
which the Borrower or a Subsidiary is reimbursed promptly by the
lessor.
"Capitalized Lease" of a Person means any lease of Property by
such Person as lessee which would be capitalized on a balance sheet
of such Person prepared in accordance with Agreement Accounting
Principles.
"Capitalized Lease Obligations" of a Person means the amount of
the obligations of such Person under Capitalized Leases which would
be shown as a liability on a balance sheet of such Person prepared in
accordance with Agreement Accounting Principles.
"Cash Collateral Account" is defined in Section 6.25.
"Cash Equivalent Investments" means (i) short-term obligations
of, or fully guaranteed by, the United States of America, (ii)
commercial paper rated A-1 or better by S&P or P-1 or better by
Moody's, (iii) demand deposit accounts maintained in the ordinary
course of business, and (iv) certificates of deposit issued by and
time deposits with commercial banks (whether domestic or foreign)
having capital and surplus in excess of $100,000,000; provided in
each case that the same provides for payment of both principal and
interest (and not principal alone or interest alone) and is not
subject to any contingency regarding the payment of principal or
interest.
"Change in Control" means (i) Parent shall cease to own, free
and clear of all Liens or other encumbrances, at least one hundred
percent (100%) of the outstanding shares of voting stock of the
Borrower on a fully diluted basis and (ii) Borrower shall cease to
own, free and clear of all Liens or other encumbrances, at least one
hundred percent (100%) of the outstanding shares of voting stock of
Export, Canada, International and Fulfillment.
"Code" means the Internal Revenue Code of 1986, as amended,
reformed or otherwise modified from time to time.
"Collateral Documents" means, collectively, the Kable Security
Agreement, Fulfillment Security Agreement, Export Security Agreement,
Canada Security Agreement, International Security Agreement, the
Trademark Security Agreement and the Stock Pledge Agreement.
"Commitment" means, for each Lender, the obligation of such
Lender to make Loans not exceeding the amount set forth opposite its
signature below or as set forth in any Notice of Assignment relating
<PAGE>
to any assignment that has become effective pursuant to Section
12.3.2, as such amount may be modified from time to time pursuant to
the terms hereof.
"Compliance Certificate" is defined in Section 6.1 (ix).
"Consolidated Capital Expenditures" means, with reference to any
period, the Capital Expenditures of the Borrower and its Subsidiaries
calculated on a consolidated basis for such period.
"Consolidated Current Assets" means all current assets of
Borrower and its Subsidiaries calculated on a consolidated basis in
accordance with Agreement Accounting Principles excluding, however,
all intangible assets (including, but not limited to, goodwill and
intellectual property rights such as copyright) and specifically
including cash items in any bank or trust company (on hand and in
transit); customers' Accounts, bills and notes receivable (less such
reserves as may be required by Agreement Accounting Principles);
merchandise inventories and inventories of raw materials and
supplies, of working materials in process and of finished products
(valued at not in excess of the cost or current market value thereof,
whichever is less); readily marketable securities (each maturing
within one year from the date of determination and taken at nor more
than cost or current market value, whichever is lower); and such
other tangible assets as, in accordance with Agreement Accounting
Principles, would be included in current assets, all after deduction
of appropriate reserves; provided, however that in computing Current
Assets there shall be excluded: 1) any notes receivable from the
Parent; and 2) any assets which are assigned, pledged or deposited as
security for or for the purpose of paying any Indebtedness which is
not included in current liabilities.
"Consolidated Cash Flow" means Consolidated Net Income after
taxes for any period plus the aggregate amount of the Borrower's and
its Subsidiary's depreciation, amortization (excluding capitalization
of internal expenses over twelve (12) months or less), taxes and
Consolidated Interest Expense for said period.
"Consolidated Cash Flow Coverage Ratio" means the ratio of
Consolidated Cash Flow to Consolidated Debt Service.
"Consolidated Current Liabilities" means all Indebtedness of
Borrower and its Subsidiaries calculated on a consolidated basis
payable on demand or maturing not more than one year from the date as
of which current liabilities are to be determined, final maturities
and prepayments of Indebtedness and sinking fund payments required to
be made in respect of any Indebtedness within one (1) year after said
date, and all other items (including taxes accrued as estimated)
which in accordance with Agreement Accounting Principles would be
included as current liabilities. The amount owing to the Lenders
under the Revolving Loan shall be deemed a "Current Liability".
"Consolidated Current Ratio" means the ratio of Consolidated
Current Assets to Consolidated Current Liabilities.
<PAGE>
"Consolidated Debt Service" means the Consolidated Interest
Expense for any period plus the aggregate principal amount of all
Indebtedness for borrowed money of Borrower and its Subsidiaries
payable or becoming due during said period.
"Consolidated Indebtedness" means at any time the Indebtedness
of the Borrower and its Subsidiaries calculated on a consolidated
basis as of such time.
"Consolidated Interest Expense" means, with reference to any
period, the interest expense of the Borrower and its Subsidiaries
calculated on a consolidated basis for such period.
"Consolidated Net Income" means, with reference to any period,
the net income (or loss) of the Borrower and its Subsidiaries
calculated on a consolidated basis for such period.
"Consolidated Tangible Net Worth" means at any date the
consolidated stockholders' equity of the Borrower and its
Subsidiaries determined in accordance with Agreement Accounting
Principles, less their consolidated Intangible Assets, all determined
as of such date. For purposes of this definition "Intangible Assets"
means the amount (to the extent reflected in determining such
consolidated stockholders' equity) of (i) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups
of assets of a going concern business made within twelve months after
the acquisition of such business) subsequent to April 30, 1998 in the
book value of any asset owned by Borrower or a Subsidiary, (ii) all
investments in unconsolidated Subsidiaries and all equity investments
in Persons which are not Subsidiaries, (iii) all unamortized debt
discount and expense, unamortized deferred charges, goodwill,
patents, trademarks, service marks, trade names, copyrights,
organization or developmental expenses and other intangible items,
(iv) amounts due from Parent, (v) amounts due from Affiliates, (vi)
all inter-company assets, (vii) amounts due from officers, directors
or employees, (viii) all unamortized acquisition costs and
unamortized signing bonuses, (ix) all prepaid expenses (other than
income taxes), and (x) any other intangible assets as defined in
accordance with the Agreement Accounting Principles.
"Consolidated Rentals" means, with reference to any period, the
Rentals of the Borrower and its Subsidiaries calculated on a
consolidated basis for such period.
"Contingent Obligation" of a Person means any agreement,
undertaking or arrangement by which such Person assumes, guarantees,
endorses, contingently agrees to purchase or provide funds for the
payment of, or otherwise becomes or is contingently liable upon, the
obligation or liability of any other Person, or agrees to maintain
the net worth or working capital or other financial condition of any
other Person, or otherwise assures any creditor of such other Person
against loss, including, without limitation, any comfort letter,
operating agreement or take-or-pay contract.
"Conversion/Continuation Notice" is defined in Section 2.9.
"Controlled Group" means all members of a controlled group of
corporations or other business entities and all trades or businesses
(whether or not incorporated) under common control which, together
<PAGE>
with the Borrower or any of its Subsidiaries, are treated as a single
employer under Section 414 of the Code.
"Corporate Base Rate" means a rate per annum equal to the
corporate base rate of interest announced by American from time to
time, changing when and as said corporate base rate changes.
"Default" means an event described in Article VII.
"Eligible Accounts" means an Account (including credits due from
publishers to any Borrowing Entity as set forth under Item 7 of
Exhibit H attached hereto) owing by a Person to each of the Borrower
Entities which meets the following requirements at the time it comes
into existence and continues to meet the same until it is collected
in full:
(a) it is genuine and in all respects what it purports to
be;
(b) it is created in the ordinary course of each Borrower
Entity's business and arises from: (a) the performance of
services by each Borrower Entity and such services have been
fully performed, acknowledged and accepted by the Account
Debtor; or (b) the sale or lease of goods by each Borrower
Entity, including C.O.D. sales, and such goods have been
completed in accordance with Account Debtor's specifications (if
any) and delivered to and accepted by the Account Debtor, and
each Borrower Entity has possession of, or has delivered to
Lender at Lender's request, shipping and delivery receipts
evidencing such shipment;
(c) in the case of all Fulfillment Services, it is
evidenced by an invoice rendered to the Account Debtor
thereunder and is due and payable no later than forty-five (45)
days after the date of the invoice and is not more than ninety
(90) days past due, and in the case of all Newsstand Services,
it is evidenced by an invoice to the Account Debtor (except for
estimated net billings added to the net account receivables
shown on the Monthly Collateral Report pursuant to Section
6.1(xi)) thereunder and is not unpaid for more than one hundred
twenty (120) days from the date of the invoice;
(d) it is owned by each Borrower Entity, said Borrower
Entity has the right to subject it to a security interest in
favor of Agent for the ratable benefit of all Lenders, and it is
subject to a first priority perfected security interest in favor
of Agent for the ratable benefit of all Lenders, and to no other
claims, Liens security interests or encumbrances whatsoever,
other than Permitted Liens;
(e) it is a valid, legally enforceable and unconditional
obligation of the Account Debtor thereunder, and is not subject
to setoff, counterclaim, credit, allowance or adjustment by the
Account Debtor thereunder (except as recognized under the last
sentence of this definition of Eligible Accounts), or to any
claim by such Account Debtor denying liability thereunder in
whole or in part, and such Account Debtor has not refused to
accept and/or has not returned or offered to return any of the
goods or services which are the subject of such Account;
(f) to the knowledge of any Borrowing Entity, there are no
proceedings or actions which are then threatened or pending
against the Account Debtor which might result in any material
adverse change in its financial condition or in its ability to
pay any Account in full;
<PAGE>
(g) it does not arise out of a contract or order which, by
its terms, forbids or makes void or unenforceable the assignment
by each Borrower Entity to Agent of the Account arising with
respect thereto;
(h) the Account Debtor is not a director, officer,
employee, agent, Subsidiary, Parent or Affiliate (except for
those Affiliates listed in Schedule 3 attached hereto) of
Parent, Borrower or any of Borrower's Subsidiaries;
(i) the Account Debtor is a resident or citizen of and is
located within the United States of America, except for Accounts
due and owing to Export or Canada which may be due and owing
from Account Debtors located in Canada;
(j) it is not an Account with respect to which the Account
Debtor is the United States of America or any department, agency
or instrumentality thereof, unless the Borrower assigns its
right to payment of such Account to Agent pursuant to, and in
full compliance with, the Assignment of Claims Act of 1940, as
amended;
(k) it is not an Account with respect to which the Account
Debtor is any state, municipality or any department, agency or
instrumentality thereof, unless the Borrower Entity assigns its
rights to payment of such Account to Agent pursuant to, and in
full compliance with all applicable laws, rules and regulations
relating thereto;
(l) it is not an Account with respect to which the Account
Debtor is located in a state which requires the Borrower Entity,
as a precondition to commencing or maintaining an action in the
courts of that state, either to (A) receive a certificate of
authority to do business and be in good standing in such state,
or (B) file a notice of business activities report or similar
report with such state's taxing authority, unless (x) the
Borrower Entity has taken one of the actions described in
clauses (A) or (B), (y) the failure to take one of the actions
described in either clause (A) or (B) may be cured retroactively
by the Borrower Entity at its election, or (z) the Borrower
Entity has proven, to Agent's satisfaction, that it is exempt
from any such requirements under any such state's laws; and
(m) it is not an Account which, when added to a particular
Account Debtor's other indebtedness to each Borrower Entity
results in all accounts in the aggregate from the particular
Account Debtor exceeding fifty (50%) percent of all Accounts due
to the applicable Borrower Entity.
An Account which is at any time an Eligible Account, but which
subsequently fails to meet any of the foregoing requirements,
shall forthwith cease to be an Eligible Account. Further, with
respect to any Account, if Agent at any time or times hereafter
determines, in its sole and absolute discretion, that the
prospect of payment or performance by the Account Debtor is or
will be impaired, notwithstanding anything to the contrary
contained above, such Account shall no longer be an Eligible
Account. In addition, if at any time more than ten percent
(10%) of the amount of all Accounts owing from any one Account
Debtor of any Borrowing Entity remain unpaid beyond ninety (90)
days from the due date of said invoices in connection with any
<PAGE>
Fulfillment Services or remain unpaid beyond one hundred twenty
(120) days from the date of said invoices in connection with any
Newsstand Services, then all Accounts relating to said Account
Debtor shall be considered to be Ineligible Accounts. In
addition, in connection with all Accounts relating to Newsstand
Services to reflect that the Account Debtor, in connection with
same, has the right to return and does return a large volume of
magazines for which each Borrowing Entity has rendered invoices
in connection therewith there shall be deducted from Eligible
Accounts an amount reasonably determined by Borrower to reflect
this future reduction in Eligible Accounts.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances,
rules, judgments, orders, decrees, plans, injunctions, permits,
concessions, grants, franchises, licenses, agreements and other
governmental restrictions relating to (i) the protection of the
environment, (ii) the effect of the environment on human health,
(iii) emissions, discharges or releases of pollutants, contaminants,
hazardous substances or wastes into surface water, ground water or
land, or (iv) the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants,
contaminants, hazardous substances or wastes or the clean-up or other
remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any rule or regulation issued
thereunder.
"Eurodollar Advance" means an Advance which bears interest at
the applicable Eurodollar Rate.
"Eurodollar Base Rate" means, with respect to a Eurodollar
Advance for the relevant Interest Period, the applicable London
interbank offered rate for deposits in U.S. dollars appearing on Dow
Jones Markets (Telerate) Page 3750 as of 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period, and
having a maturity approximately equal to such Interest Period. If no
London interbank offered rate of such maturity then appears on Dow
Jones Markets (Telerate) Page 3750, then the Eurodollar Base Rate
shall be equal to the London interbank offered rate for deposits in
U.S. dollars maturing immediately before or immediately after such
maturity, whichever is higher, as determined by the Agent from Dow
Jones Markets (Telerate) Page 3750. If Dow Jones Markets (Telerate)
Page 3750 is not available, the applicable Eurodollar Base Rate for
the relevant Interest Period shall be the rate determined by the
Agent to be the rate at which American offers to place deposits in
U.S. dollars with first-class banks in the London interbank market at
approximately 11:00 a.m. (London time) two Business Days prior to the
first day of such Interest Period, in the approximate amount of
American's relevant portion of the Eurodollar Advance and having a
maturity approximately equal to such Interest Period.
"Eurodollar Loan" means a Loan which bears interest at the
applicable Eurodollar Rate.
"Eurodollar Rate" means, with respect to a Eurodollar Advance
for the relevant Interest Period, the sum of (i) the quotient of (a)
the Eurodollar Base Rate applicable to such Interest Period, divided
by (b) one minus the Reserve Requirement (expressed as a decimal)
applicable to such Interest Period, plus the Applicable Margin. The
Eurodollar Rate shall be rounded to the next higher multiple of 1/16
of 1% if the rate is not such a multiple.
<PAGE>
"Excluded Taxes" means, in the case of each Lender or applicable
Lending Installation and the Agent, taxes imposed on its overall net
income, and franchise taxes imposed on it, by (i) the jurisdiction
under the laws of which such Lender or the Agent is incorporated or
organized or (ii) the jurisdiction in which the Agent's or such
Lender's principal executive office or such Lender's applicable
Lending Installation is located.
"Exhibit" refers to an exhibit to this Agreement, unless another
document is specifically referenced.
"Export" means Kable News Export, Ltd., a Delaware corporation.
"Export Security Agreement" means that certain Security
Agreement dated September 15, 1998 executed by Export in favor of
Agent, for the ratable benefit of the Lenders, as it may be amended
or modified and in effect from time to time.
"Facility Termination Date" means September 15, 2001 or any
earlier date on which the Aggregate Commitment is reduced to zero or
otherwise terminated pursuant to the terms hereof.
"Federal Funds Effective Rate" means, for any day, an interest
rate per annum equal to the weighted average of the rates on
overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as
published for such day (or, if such day is not a Business Day, for
the immediately preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations at approximately
10:00 a.m. (Chicago time) on such day on such transactions received
by the Agent from three Federal funds brokers of recognized standing
selected by the Agent in its sole discretion.
"Financial Contract" of a Person means (i) any exchange-traded
or over-the-counter futures, forward, swap or option contract or
other financial instrument with similar characteristics, (ii) any
agreements, devices or arrangements providing for payments related to
fluctuations of interest rates, exchange rates or forward rates,
including, but not limited to, interest rate exchange agreements,
forward currency exchange agreements, interest rate cap or collar
protection agreements, forward rate currency or interest rate options.
"Floating Rate" means, for any day, a rate per annum equal to
(i) the Corporate Base Rate for such day plus (ii) the Applicable
Margin, in each case changing when and as the Corporate Base Rate
changes.
"Floating Rate Advance" means an Advance which bears interest at
the Floating Rate.
"Floating Rate Loan" means a Loan which bears interest at the
Floating Rate.
"Fulfillment" means Kable Fulfillment Services of Ohio, Inc., a
Delaware corporation.
<PAGE>
"Fulfillment Security Agreement" means that certain Security
Agreement dated September 15, 1998 executed by Fulfillment in favor
of Agent, for the ratable benefit of the Lenders, as it may be
amended or modified and in effect from time to time.
"Fulfillment Services" means all services performed by any
Borrowing Entity for any of its customers relating to product, order
and subscription processing and fulfillment; customer service;
telemarketing and related services.
"Guarantors" means the Parent and Subsidiary Guarantors, and
their successors and assigns.
"Guaranty" means that certain Guaranty dated as of September 15,
1998 executed by the Parent in favor of the Agent, for the ratable
benefit of the Lenders, as it may be amended or modified and in
effect from time to time.
"Indebtedness" of a Person means such Person's (i) obligations
for borrowed money, (ii) obligations representing the deferred
purchase price of Property or services (other than accounts payable
arising in the ordinary course of such Person's business payable on
terms customary in the trade), (iii) obligations, whether or not
assumed, secured by Liens or payable out of the proceeds or
production from property now or hereafter owned or acquired by such
Person, (iv) obligations which are evidenced by notes, acceptances,
or other instruments, (v) obligations of such Person to purchase
securities or other property arising out of or in connection with the
sale of the same or substantially similar securities or property,
(vi) Capitalized Lease Obligations, (vii) obligations in connection
with the issuance of Letters of Credit, (viii) obligations of a
Person in connection with Financial Contracts; (ix) Rate Hedging
Obligations; and (x) any other obligation for borrowed money or other
financial accommodation which in accordance with Agreement Accounting
Principles would be shown as a liability on the consolidated balance
sheet of such Person.
"Interest Period" means, with respect to a Eurodollar Advance, a
period of one, two, three or six months commencing on a Business Day
selected by the Borrower pursuant to this Agreement. Such Interest
Period shall end on the day which corresponds numerically to such
date one, two, three or six months thereafter, provided, however,
that if there is no such numerically corresponding day in such next,
second, third or sixth succeeding month, such Interest Period shall
end on the last Business Day of such next, second, third or sixth
succeeding month. If an Interest Period would otherwise end on a day
which is not a Business Day, such Interest Period shall end on the
next succeeding Business Day, provided, however, that if said next
succeeding Business Day falls in a new calendar month, such Interest
Period shall end on the immediately preceding Business Day.
"Installment Loan" as defined in Section 2.18.
"International" means Kable News International, Inc., a Delaware
corporation.
"International Security Agreement" means that certain Security
Agreement dated September 15, 1998 executed by International in favor
of Agent for the ratable benefit of the Lenders, as it may be amended
and modified, and in effect from time to time.
<PAGE>
"Investment" of a Person means any loan, advance (other than
commission, travel and similar advances to officers and employees
made in the ordinary course of business), extension of credit (other
than accounts receivable arising in the ordinary course of business
on terms customary in the trade) or contribution of capital by such
Person; stocks, bonds, mutual funds, partnership interests, notes,
debentures or other securities owned by such Person; any deposit
accounts and certificate of deposit owned by such Person; and
structured notes, derivative financial instruments and other similar
instruments or contracts owned by such Person.
"Kable Security Agreement" means that certain Security Agreement
dated September 15, 1998 executed by Borrower in favor of Agent, for
the ratable benefit of the Lenders, as it may be amended and modified
and in effect from time to time.
"Lenders" means the lending institutions listed on the signature
pages of this Agreement and their respective successors and assigns.
"Lending Installation" means, with respect to a Lender or the
Agent, the office, branch, subsidiary or affiliate of such Lender or
the Agent listed on the signature pages hereof or on a Schedule or
otherwise selected by such Lender or the Agent pursuant to Section
3.6.
"Letter of Credit" of a Person means a letter of credit or
similar instrument which is issued upon the application of such
Person or upon which such Person is an account party or for which
such Person is in any way liable.
"Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or
preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without
limitation, the interest of a vendor or lessor under any conditional
sale, Capitalized Lease or other title retention agreement).
"Loan" means, with respect to a Lender, such Lender's loan made
pursuant to Article II (or any conversion or continuation thereof).
"Loan Documents" means this Agreement and any Notes issued
pursuant to Section 2.13, the Collateral Documents, the Stock Pledge
Agreement, the Subsidiary Guaranties and the Guaranty.
"Material Adverse Effect" means a material adverse effect on (i)
the business, Property, condition (financial or otherwise), results
of operations, or prospects of the Borrower and its Subsidiaries
taken as a whole, (ii) the ability of the Borrower, Parent, Canada,
International, Export and Fulfillment to perform their obligations
under the Loan Documents to which they are a party, or (iii) the
validity or enforceability of any of the Loan Documents or the rights
or remedies of the Agent or the Lenders thereunder.
"Material Indebtedness" is defined in Section 7.5.
<PAGE>
"Monthly Collateral Report" is defined in Section 6.1(x).
"Multiemployer Plan" means a Plan maintained pursuant to a
collective bargaining agreement or any other arrangement to which the
Borrower or any member of the Controlled Group is a party to which
more than one employer is obligated to make contributions other than
a Single Employer Plan.
"Net Mark-to-Market Exposure" of a Person means, as of any date
of determination, the excess (if any) of all unrealized losses over
all unrealized profits of such Person arising from Rate Hedging
Agreements. "Unrealized losses" means the fair market value of the
cost to such Person of replacing such Rate Hedging Agreement as of
the date of determination (assuming the Rate Hedging Agreement were
to be terminated as of that date), and "unrealized profits" means the
fair market value of the gain to such Person of replacing such Rate
Hedging Agreement as of the date of determination (assuming such Rate
Hedging Agreement were to be terminated as of that date).
"Newsstand Services" means all services performed by any
Borrowing Entity for any of its customers relating to the single copy
distribution of paperbacks, magazines and related products on behalf
of said customers.
"Non-U.S. Lender" is defined in Section 3.5(iv).
"Note" means any promissory note issued at the request of a
Lender pursuant to Section 2.13 in the form of Exhibit E-1, E-2 or
E-3.
"Notice of Assignment" is defined in Section 12.3.2.
"Obligations" means all unpaid principal of and accrued and
unpaid interest on the Loans, all accrued and unpaid fees and all
expenses, reimbursements, indemnities and other obligations of the
Borrower to the Lenders or to any Lender, the Agent or any
indemnified party arising under the Loan Documents.
"Other Taxes" is defined in Section 3.5(ii).
"Parent" means AMREP Corporation, an Oklahoma corporation.
"Participants" is defined in Section 12.2.1.
"Payment Date" means the fifteenth (15th) day of the first month
following the end of each calendar quarter.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Person" means any natural person, corporation, firm, joint
venture, partnership, limited liability company, association,
enterprise, trust or other entity or organization, or any government
or political subdivision or any agency, department or instrumentality
thereof.
<PAGE>
"Plan" means an employee pension benefit plan which is covered
by Title IV of ERISA or subject to the minimum funding standards
under Section 412 of the Code as to which the Borrower or any member
of the Controlled Group may have any liability.
"Pricing Schedule" means the Schedule attached hereto identified
as such.
"Property" of a Person means any and all property, whether real,
personal, tangible, intangible, or mixed, of such Person, or other
assets owned, leased or operated by such Person.
"Purchasers" is defined in Section 12.3.1.
"Rate Hedging Agreement" means an agreement, device or
arrangement providing for payments which are related to fluctuations
of interest rates, exchange rates or forward rates, including, but
not limited to, dollar-denominated or cross-currency interest rate
exchange agreements, forward currency exchange agreements, interest
rate cap or collar protection agreements, forward rate currency or
interest rate options, puts and warrants.
"Rate Hedging Obligations" of a Person means any and all
obligations of such Person, whether absolute or contingent and
howsoever and whensoever created, arising, evidenced or acquired
(including all renewals, extensions and modifications thereof and
substitutions therefor), under (i) any and all Rate Hedging
Agreements, and (ii) any and all cancellations, buy backs, reversals,
terminations or assignments of any Rate Hedging Agreement.
"Regulation D" means Regulation D of the Board of Governors of
the Federal Reserve System as from time to time in effect and any
successor thereto or other regulation or official interpretation of
said Board of Governors relating to reserve requirements applicable
to member banks of the Federal Reserve System.
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System as from time to time in effect and any
successor or other regulation or official interpretation of said
Board of Governors relating to the extension of credit by banks for
the purpose of purchasing or carrying margin stocks applicable to
member banks of the Federal Reserve System.
"Reportable Event" means a reportable event as defined in
Section 4043 of ERISA and the regulations issued under such section,
with respect to a Plan, excluding, however, such events as to which
the PBGC has by regulation waived the requirement of Section 4043(a)
of ERISA that it be notified within 30 days of the occurrence of such
event, provided, however, that a failure to meet the minimum funding
standard of Section 412 of the Code and of Section 302 of ERISA shall
be a Reportable Event regardless of the issuance of any such waiver
of the notice requirement in accordance with either Section 4043(a)
of ERISA or Section 412(d) of the Code.
"Reports" is defined in Section 9.6.
<PAGE>
"Required Lenders" means Lenders in the aggregate having at
least fifty-one percent (51%) of the Aggregate Commitment or, if the
Aggregate Commitment has been terminated, Lenders in the aggregate
holding at least fifty-one percent (51%) of the aggregate unpaid
principal amount of the outstanding Advances.
"Reserve Requirement" means, with respect to an Interest Period,
the maximum aggregate reserve requirement (including all basic,
supplemental, marginal and other reserves) which is imposed under
Regulation D on Eurocurrency liabilities.
"Revolving Loan" means that portion of the Loans made in
connection with Revolving Loan Commitment.
"Revolving Loan Commitment" means that portion of the Aggregate
Commitment equal to Forty Million Dollars ($40,000,000.00).
"Schedule" refers to a specific schedule to this Agreement,
unless another document is specifically referenced.
"Section" means a numbered section of this Agreement, unless
another document is specifically referenced.
"Secured Obligations" means, collectively, (i) the Obligations
and (ii) all Rate Hedging Obligations owing to one or more Lenders.
"Single Employer Plan" means a Plan maintained by the Borrower
or any member of the Controlled Group for employees of the Borrower
or any member of the Controlled Group.
"Stock Pledge Agreement" means that certain Stock Pledge
Agreement dated September 15, 1998 executed by Parent in favor of
Agent, for the ratable benefit of the Lenders, as it may be amended
or modified and in effect from time to time.
"Subsidiary Guaranties" means that certain Guaranty dated as of
September 15, 1998 executed by Export, that certain Guaranty dated
September 15, 1998 executed by Fulfillment, that certain Guaranty
dated as of September 15, 1998 executed by Canada and that certain
Guaranty dated September 15, 1998 executed by International.
"Subsidiary Guarantors" means Export, Fulfillment, Canada and
International and their successors and assigns.
"Subordinated Indebtedness" of a Person means any Indebtedness
of such Person the payment of which is subordinated to payment of the
Obligations to the written satisfaction of the Required Lenders.
<PAGE>
"Subsidiary" of a Person means (i) any corporation more than 50%
of the outstanding securities having ordinary voting power of which
shall at the time be owned or controlled, directly or indirectly, by
such Person or by one or more of its Subsidiaries or by such Person
and one or more of its Subsidiaries, or (ii) any partnership, limited
liability company, association, joint venture or similar business
organization more than 50% of the ownership interests having ordinary
voting power of which shall at the time be so owned or controlled.
Unless otherwise expressly provided, all references herein to a
"Subsidiary" shall mean a Subsidiary of the Borrower.
"Substantial Portion" means, with respect to the Property of the
Borrower and its Subsidiaries, Property which (i) represents more
than 10% of the consolidated assets of the Borrower and its
Subsidiaries as would be shown in the consolidated financial
statements of the Borrower and its Subsidiaries as at the beginning
of the twelve-month period ending with the month in which such
determination is made, or (ii) is responsible for more than 10% of
the consolidated net sales or of the consolidated net income of the
Borrower and its Subsidiaries as reflected in the financial
statements referred to in clause (i) above.
"Taxes" means any and all present or future taxes, duties,
levies, imposts, deductions, charges or withholdings, and any and all
liabilities with respect to the foregoing, but excluding Excluded
Taxes.
"Term Loan" as defined in Section 2.19.
"Trademark Security Agreement" means that certain Trademark
Collateral Assignment and Security Agreement dated September 15, 1998
executed by Borrower in favor of Agent for the ratable benefit of the
Lenders, as it may be amended or modified in effect from time to time.
"Transferee" is defined in Section 12.4.
"Type" means, with respect to any Advance in connection with the
Revolving Loan, its nature as a Floating Rate Advance or a Eurodollar
Advance.
"U.C.C." means the Uniform Commercial Code or comparable statute
or successor statute or any successor statute thereto, as in effect
from time to time in the relevant jurisdiction.
"Unfunded Liabilities" means the amount (if any) by which the
present value of all vested and unvested accrued benefits under all
Single Employer Plans exceeds the fair market value of all such Plan
assets allocable to such benefits, all determined as of the then most
recent valuation date for such Plans using PBGC actuarial assumptions
for single employer plan terminations.
"Unmatured Default" means an event which but for the lapse of
time or the giving of notice, or both, would constitute a Default.
"Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary
all of the outstanding voting securities of which shall at the time
be owned or controlled, directly or indirectly, by such Person or one
<PAGE>
or more Wholly-Owned Subsidiaries of such Person, or by such Person
and one or more Wholly-Owned Subsidiaries of such Person, or (ii) any
partnership, limited liability company, association, joint venture or
similar business organization 100% of the ownership interests having
ordinary voting power of which shall at the time be so owned or
controlled.
"Year 2000 Issues" means anticipated costs, problems and
uncertainties associated with the inability of certain computer
applications to effectively handle data including dates on and after
January 1, 2000, as such inability affects the business, operations,
and financial condition of the Borrower and its Subsidiaries and of
the Borrower's and its Subsidiaries' material customers, suppliers
and vendors.
The foregoing definitions shall be equally applicable to both
the singular and plural forms of the defined terms.
ARTICLE II
THE CREDITS
2.1. Commitment. From and including the date of this Agreement
and prior to the Facility Termination Date, each Lender severally
agrees, on the terms and conditions set forth in this Agreement, to
make Loans to the Borrower from time to time in amounts not to exceed
in the aggregate at any one time outstanding the amount of its
Commitment. Subject to the terms of this Agreement, the Borrower may
borrow, repay and reborrow at any time prior to the Facility
Termination Date amounts in connection with the Revolving Loan, but
not the Installment Loan and Term Loan. The Commitments to lend
hereunder shall expire on the Facility Termination Date.
2.2. Required Payments; Termination. Any outstanding Advances
and all other unpaid Obligations shall be paid in full by the
Borrower on the Facility Termination Date.
2.3. Ratable Loans. Each Advance hereunder shall consist of
Loans made from the several Lenders ratably in proportion to the
ratio that their respective Commitments bear to the Aggregate
Commitment.
2.4. Types of Advances. The Advances in connection with the
Revolving Loan may be Floating Rate Advances or Eurodollar Advances,
or a combination thereof, selected by the Borrower in accordance with
Sections 2.8 and 2.9.
2.5. Commitment Fee; Reductions in Aggregate Revolving Loan
Commitment. The Borrower agrees to pay to the Agent for the account
of each Lender a commitment fee of one-quarter percent (1/4%) per
annum on the daily unused portion of such Lender's Revolving Loan
Commitment from the date hereof to and including the Facility
Termination Date, payable on each Payment Date hereafter and on the
Facility Termination Date. The Borrower may permanently reduce the
aggregate Revolving Loan Commitment in whole, or in part ratably
among the Lenders in integral multiples of $100,000.00, upon at least
five Business Days' written notice to the Agent, which notice shall
specify the amount of any such reduction, provided, however, that the
amount of the aggregate Revolving Loan Commitment may not be reduced
below the aggregate principal amount of the outstanding Advances in
<PAGE>
connection with the Revolving Loan. All accrued commitment fees
shall be payable on the effective date of any termination of the
obligations of the Lenders to make Loans hereunder.
2.6. Minimum Amount of Each Advance and Maximum Number of
Outstanding Eurodollar Advances. Each Eurodollar Advance shall be in
the minimum amount of $1,000,000.00 (and in multiples of $100,000.00
if in excess thereof), and each Floating Rate Advance shall be in the
minimum amount of $100,000.00 (and in multiples of $10,000.00 if in
excess thereof), provided, however, that any Floating Rate Advance
may be in the amount of the unused aggregate Revolving Loan
Commitment. In addition, at no time shall there be outstanding more
than four (4) individual Eurodollar Advances.
2.7. Optional Principal Payments. The Borrower may from time to
time pay, without penalty or premium, all outstanding Floating Rate
Advances, or, in a minimum aggregate amount of $100,000.00 or any
integral multiple of $10,000.00 in excess thereof, any portion of the
outstanding Floating Rate Advances upon two Business Days' prior
notice to the Agent. The Borrower may from time to time pay, subject
to the payment of any funding indemnification amounts required by
Section 3.4 but without penalty or premium, all outstanding
Eurodollar Advances, or, in a minimum aggregate amount of
$1,000,000.00 or any integral multiple of $100,000.00 in excess
thereof, any portion of the outstanding Eurodollar Advances upon
three Business Days' prior notice to the Agent.
2.8. Method of Selecting Types and Interest Periods for New
Advances. In connection with all Advances relating to the Revolving
Loan, the Borrower shall select the Type of Advance and, in the case
of each Eurodollar Advance, the Interest Period applicable thereto
from time to time. The Borrower shall give the Agent irrevocable
notice (a "Borrowing Notice") not later than 2:00 p.m. (Chicago time)
on any Borrowing Date of each Floating Rate Advance and two Business
Days before the Borrowing Date for each Eurodollar Advance,
specifying:
(i) the Borrowing Date, which shall be a Business Day, of such
Advance,
(ii) the aggregate amount of such Advance,
(iii) the Type of Advance selected, and
(iv) in the case of each Eurodollar Advance, the Interest Period
applicable thereto.
The Agent will make the funds received from the Lenders, or provided
by Agent pursuant to Section 2.21, hereof, available to the Borrower
at the Agent's aforesaid address not later than 5:00 p.m. (Chicago
time) on any Borrowing Date.
2.9. Conversion and Continuation of Outstanding Advances.
Floating Rate Advances shall continue as Floating Rate Advances
unless and until such Floating Rate Advances are converted into
<PAGE>
Eurodollar Advances pursuant to this Section 2.9 or are repaid in
accordance with Section 2.7. Each Eurodollar Advance shall continue
as a Eurodollar Advance until the end of the then applicable Interest
Period therefor, at which time such Eurodollar Advance shall be
automatically converted into a Floating Rate Advance unless (x) such
Eurodollar Advance is or was repaid in accordance with Section 2.7 or
(y) the Borrower shall have given the Agent a Conversion/Continuation
Notice (as defined below) requesting that, at the end of such
Interest Period, such Eurodollar Advance continue as a Eurodollar
Advance for the same or another Interest Period. Subject to the
terms of Section 2.6, the Borrower may elect from time to time to
convert all or any part of a Floating Rate Advance into a Eurodollar
Advance. The Borrower shall give the Agent irrevocable notice (a
"Conversion/Continuation Notice") of each conversion of a Floating
Rate Advance into a Eurodollar Advance or continuation of a
Eurodollar Advance not later than 10:00 a.m. (Chicago time) at least
three Business Days prior to the date of the requested conversion or
continuation, specifying:
(i) the requested date, which shall be a Business Day, of such
conversion or continuation,
(ii) the aggregate amount and Type of the Advance which is to be
converted or continued, and
(iii) the amount of such Advance which is to be converted into or
continued as a Eurodollar Advance and the duration of the
Interest Period applicable thereto.
2.10. Changes in Interest Rate, etc. Each Floating Rate Advance
shall bear interest on the outstanding principal amount thereof, for
each day from and including the date such Advance is made or is
automatically converted from a Eurodollar Advance into a Floating
Rate Advance pursuant to Section 2.9, to but excluding the date it is
paid or is converted into a Eurodollar Advance pursuant to Section
2.9 hereof, at a rate per annum equal to the Floating Rate for such
day. Changes in the rate of interest on that portion of any Advance
maintained as a Floating Rate Advance will take effect simultaneously
with each change in the Alternate Base Rate. Each Eurodollar Advance
shall bear interest on the outstanding principal amount thereof from
and including the first day of the Interest Period applicable thereto
to (but not including) the last day of such Interest Period at the
interest rate determined by the Agent as applicable to such
Eurodollar Advance based upon the Borrower's selections under Section
2.8 and 2.9 and otherwise in accordance with the terms hereof. No
Interest Period may end after the Facility Termination Date.
2.11. Rates Applicable After Default. Notwithstanding anything
to the contrary contained in Section 2.8 or 2.9, during the
continuance of a Default or Unmatured Default the Required Lenders
may, at their option, by notice to the Borrower (which notice may be
revoked at the option of the Required Lenders notwithstanding any
provision of Section 8.2 requiring unanimous consent of the Lenders
to changes in interest rates), declare that no Advance may be made
as, converted into or continued as a Eurodollar Advance. During the
continuance of a Default the Required Lenders may, at their option,
by notice to the Borrower (which notice may be revoked at the option
of the Required Lenders notwithstanding any provision of Section 8.2
requiring unanimous consent of the Lenders to changes in interest
rates), declare that (i) each Eurodollar Advance shall bear interest
for the remainder of the applicable Interest Period at the rate
otherwise applicable to such Interest Period plus 3% per annum, (ii)
each Floating Rate Advance shall bear interest at a rate per annum
equal to the Floating Rate in effect from time to time plus 3% per
annum and (iii) interest on the Term Loan and Installment Loan shall
bear interest at a rate per annum equal to the interest rate then in
<PAGE>
effect from time to time thereunder plus 3% per annum, provided that,
during the continuance of a Default under Section 7.6 or 7.7, the
interest rates set forth in clauses (i), (ii) and (iii) above shall
be applicable to all Advances without any election or action on the
part of the Agent or any Lender.
2.12. Method of Payment. All payments of the Obligations
hereunder shall be made, without setoff, deduction, or counterclaim,
in immediately available funds to the Agent at the Agent's address
specified pursuant to Article XIII, or at any other Lending
Installation of the Agent specified in writing by the Agent to the
Borrower, by noon (local time) on the date when due and shall be
applied ratably by the Agent among the Lenders. Each payment
delivered to the Agent for the account of any Lender shall be
delivered promptly by the Agent to such Lender in the same type of
funds that the Agent received at its address specified pursuant to
Article XIII or at any Lending Installation specified in a notice
received by the Agent from such Lender. The Agent is hereby
authorized to charge the account of the Borrower maintained with
American for each payment of principal, interest and fees as it
becomes due hereunder.
2.13. Noteless Agreement; Evidence of Indebtedness. (i) Each
Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Borrower to
such Lender resulting from each Loan made by such Lender from time to
time, including the amounts of principal and interest payable and
paid to such Lender from time to time hereunder.
(ii) The Agent shall also maintain accounts in which it will
record (a) the amount of each Loan made hereunder, the Type thereof
and the Interest Period with respect thereto, (b) the amount of any
principal or interest due and payable or to become due and payable
from the Borrower to each Lender hereunder and (c) the amount of any
sum received by the Agent hereunder from the Borrower and each
Lender's share thereof.
(iii) The entries maintained in the accounts maintained
pursuant to paragraphs (i) and (ii) above shall be prima facie
evidence of the existence and amounts of the Obligations therein
recorded; provided, however, that the failure of the Agent or any
Lender to maintain such accounts or any error therein shall not in
any manner affect the obligation of the Borrower to repay the
Obligations in accordance with their terms.
(iv) Any Lender may request that its Loans be evidenced by a
promissory note (a "Note"). In such event, the Borrower shall
prepare, execute and deliver to such Lender a Note payable to the
order of such Lender in a form supplied by the Agent. Thereafter,
the Loans evidenced by such Note and interest thereon shall at all
times (including after any assignment pursuant to Section 12.3) be
represented by one or more Notes payable to the order of the payee
named therein or any assignee pursuant to Section 12.3, except to the
extent that any such Lender or assignee subsequently returns any such
Note for cancellation and requests that such Loans once again be
evidenced as described in paragraphs (i) and (ii) above.
2.14. Telephonic Notices. The Borrower hereby authorizes the
Lenders and the Agent to extend, convert or continue Advances, effect
selections of Types of Advances and to transfer funds based on
telephonic notices made by any person or persons the Agent or any
<PAGE>
Lender in good faith believes to be acting on behalf of the
Borrower. The Borrower agrees to deliver promptly to the Agent a
written confirmation, if such confirmation is requested by the Agent
or any Lender, of each telephonic notice signed by an Authorized
Officer. If the written confirmation differs in any material respect
from the action taken by the Agent and the Lenders, the records of
the Agent and the Lenders shall govern absent manifest error.
2.15. Interest Payment Dates; Interest and Fee. Interest accrued
on each Floating Rate Advance shall be payable on each Payment Date,
commencing with the first such date to occur after the date hereof
and at maturity. Interest accrued on each Eurodollar Advance shall
be payable on the last day of its applicable Interest Period, on any
date on which the Eurodollar Advance is prepaid, whether by
acceleration or otherwise, and at maturity. Interest accrued on each
Eurodollar Advance having an Interest Period longer than three months
shall also be payable on the last day of each three-month interval
during such Interest Period. Interest and commitment fees shall be
calculated for actual days elapsed on the basis of a 360-day year.
Interest shall be payable for the day an Advance is made but not for
the day of any payment on the amount paid if payment is received
prior to noon (local time) at the place of payment. If any payment
of principal of or interest on an Advance shall become due on a day
which is not a Business Day, such payment shall be made on the next
succeeding Business Day and, in the case of a principal payment, such
extension of time shall be included in computing interest in
connection with such payment.
2.16. Notification of Advances, Interest Rates, Prepayments and
Commitment Reductions. Promptly after receipt thereof, the Agent
will notify each Lender of the contents of each Aggregate Commitment
reduction notice, Borrowing Notice, Conversion/Continuation Notice,
and repayment notice received by it hereunder. The Agent will notify
each Lender of the interest rate applicable to each Eurodollar
Advance promptly upon determination of such interest rate and will
give each Lender prompt notice of each change in the Corporate Base
Rate.
2.17. Limitation on Outstanding Amount of Revolving Loan. At no
time shall the outstanding amount of the Revolving Loan exceed eighty
percent (80%) of the Eligible Accounts. If, at any time, the
outstanding amount of the Revolving Loan exceeds eighty percent (80%)
of the Eligible Accounts for any reason, including a determination by
Agent that an account is no longer an Eligible Account, Borrower
shall immediately pay to Agent the amount of said excess to be
applied to reduce the then principal balance of the Revolving Loan.
2.18. Installment Loan. In addition to the Revolving Loan,
contemporaneously with the execution of this Agreement, Lenders shall
make an installment loan (the "Installment Loan") to Borrower in the
aggregate principal amount of One Million Two Hundred Thousand
Dollars ($1,200,000.00). The Installment Loan shall be secured by
the Collateral Documents, is specifically included with the
Obligations as defined herein, and shall bear interest at the rate of
the Corporate Base Rate as changing from time to time. Borrower
shall repay the Installment Loan through payments of interest only at
the Corporate Base Rate commencing on the first day of October and on
the first day of each month thereafter together with annual principal
payments of Four Hundred Thousand Dollars ($400,000.00) commencing on
December 31, 1998 and on the last day of each December thereafter
with a final payment of the then full principal balance of the
<PAGE>
Installment Loan together with all remaining accrued interest on
October 31, 2000. The Installment Loan may be prepaid at any time
without penalty or premium. Any prepayment shall be applied to the
payments due on the Installment Loan in the inverse order of their
maturity.
2.19. Term Loan. In addition to the Revolving Loan and
Installment Loan, contemporaneously with the execution of this
Agreement, Lenders shall make a term loan (the "Term Loan") to
Borrower in the aggregate principal amount of One Million Five
Hundred Thousand Dollars ($1,500,000.00). The Term Loan shall be
secured by the Collateral Documents, is specifically including within
the Obligations as defined herein, and shall bear interest at the
rate of the Corporate Base Rate as changing from time to time plus
fifty (50) basis points. Borrower shall repay the Term Loan through
payment of quarterly payments of accrued interest plus quarterly
principal payments of One Hundred Twenty Five Thousand Dollars
($125,000.00) commencing on November 30, 1998 and continuing on the
last day of each February, May, August and November thereafter with a
final payment of the then full principal balance of the Term Loan
together with all remaining accrued interest on August 31, 2001. The
Term Loan may be prepaid at any time without penalty or premium. Any
prepayment shall be applied to the payments due on the Term Loan in
the inverse order of their maturity.
2.20. Lending Installations. Each Lender may book its Loans at
any Lending Installation selected by such Lender and may change its
Lending Installation from time to time. All terms of this Agreement
shall apply to any such Lending Installation and the Loans and any
Notes issued hereunder shall be deemed held by each Lender for the
benefit of such Lending Installation. Each Lender may, by written
notice to the Agent and the Borrower in accordance with Article XIII,
designate replacement or additional Lending Installations through
which Loans will be made by it and for whose account Loan payments
are to be made.
2.21. Periodic Funding by Lenders.
(i) Because the Borrower anticipates requesting Advances in
connection with the Revolving Loan on a daily basis and
repaying the Revolving Loan on a daily basis through
collections resulting in the amount of the outstanding
Revolving Loan fluctuating from day to day, and in order to
administer the Revolving Loan in an efficient manner and to
minimize the transfer of funds between the Agent and the
Lenders, the Lenders hereby instruct the Agent, and the
Agent may (but is not obligated to) (A) make available, on
behalf of the Lenders, the full amount of all Advances in
connection with the Revolving Loan requested by the
Borrower (not to exceed $40,000,000.00 in the aggregate at
any one time outstanding) without giving each Lender prior
notice of the proposed Advance relating to the Revolving
Loan, of such Lender's ratable portion thereof and the
other matters covered by the Borrowing Notice and (B) if
the Agent has made any such amounts available as provided
in clause (A), upon repayment of the Revolving Loan by the
Borrower, apply such amounts repaid directly to the amounts
made available by the Agent in accordance with clause (A)
and not yet settled as described below; provided that the
Agent shall not advance funds as described in clause (A)
above if the Agent has actually received prior to such
Advance related to the Revolving Loan a certificate from
the Borrower pursuant to and in accordance with Section 6.2
<PAGE>
that an Unmatured Default or Default then exists.
(ii) If the Agent advances the Revolving Loan on behalf of the
Lenders, as provided in paragraph (i), above, the amount of
the outstanding Revolving Loan and each Lender's ratable
portion thereof shall be computed twice a week rather than
daily and shall be adjusted upward or downward on the basis
of the amount of the outstanding Revolving Loan as of 5:00
p.m. (Chicago time) on the Business Day immediately
preceding the date of each computation; provided, however,
that the Agent retains the absolute right at any time or
from time to time to make the above-described adjustments
at intervals more frequent than twice a week.
(iii)The Agent shall deliver to each of the Lenders after the
end of each computation period, or such lesser period or
periods as the Agent shall determine, a summary statement
of the amount of the outstanding Revolving Loan for such
period (such period or periods being hereafter referred to
as a "Settlement Period"). If the summary statement is
sent by the Agent and received by the Lenders prior to
12:30 p.m. (Chicago time) on any Business Day each Lender
shall make the transfers described in the next succeeding
sentence no later than 3:00 p.m. (Chicago time) on the day
such summary statement was sent; and if such summary
statement is sent by the Agent and received by the Lenders
after 12:30 p.m. (Chicago time) on any Business Day, each
Lender shall make such transfers no later than 3:00 p.m.
(Chicago time) on the next succeeding Business Day.
(iv) If in any Settlement Period, the amount of a Lender's
ratable portion of the Revolving Loan is in excess of the
amount of the Revolving Loan actually funded by such
Lender, such Lender shall forthwith (but in no event later
than the time set forth in paragraph (iii), above) transfer
to the Agent by wire transfer in immediately available
funds the amount of such excess; and, on the other hand, if
the amount of a Lender's ratable portion of the Revolving
Loan in any Settlement Period is less than the amount of
the Revolving Loan actually funded by such Lender, the
Agent shall forthwith transfer to such Lender by wire
transfer in immediately available funds the amount of such
difference. The obligation of each of the Lenders to
transfer such funds shall be irrevocable and unconditional
and without recourse to or warranty by the Agent. The
Agent and the Lenders agree to make their respective books
and records at the end of each Settlement Period to reflect
at all times the dollar amount of their respective ratable
portions of the outstanding Revolving Loan.
(v) Because the Agent on behalf of the Lenders may be advancing
and/or may be repaid the Revolving Loan prior to the time
when the Lenders will actually advance and/or be repaid the
Revolving Loan, interest with respect to the Revolving Loan
shall be allocated by the Agent to each Lender (including
the Agent) in accordance with the amount of the Revolving
Loan actually advanced by and repaid to each Lender
(including the Agent) during each Settlement Period and
shall accrue from and including the date such portion of
the Revolving Loan is advanced by the Agent but excluding
the date such portion of the Revolving Loan was repaid by
the Borrower in accordance with this Agreement or actually
<PAGE>
settled by the applicable Lender as described in this
Section 2.21.
2.22. Non-Receipt of Funds by the Agent. Unless the Borrower or
a Lender, as the case may be, notifies the Agent prior to the date on
which it is scheduled to make payment to the Agent of (i) in the case
of a Lender, the proceeds of a Loan or (ii) in the case of the
Borrower, a payment of principal, interest or fees to the Agent for
the account of the Lenders, that it does not intend to make such
payment, the Agent may assume that such payment has been made. The
Agent may, but shall not be obligated to, make the amount of such
payment available to the intended recipient in reliance upon such
assumption. If such Lender or the Borrower, as the case may be, has
not in fact made such payment to the Agent, the recipient of such
payment shall, on demand by the Agent, repay to the Agent the amount
so made available together with interest thereon in respect of each
day during the period commencing on the date such amount was so made
available by the Agent until the date the Agent recovers such amount
at a rate per annum equal to (x) in the case of payment by a Lender,
the Federal Funds Effective Rate for such day or (y) in the case of
payment by the Borrower, the interest rate applicable to the relevant
Loan.
ARTICLE III
YIELD PROTECTION; TAXES
3.1. Yield Protection. If, on or after the date of this
Agreement, the adoption of any law or any governmental or
quasi-governmental rule, regulation, policy, guideline or directive
(whether or not having the force of law), or any change in the
interpretation or administration thereof by any governmental or
quasi-governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or
compliance by any Lender or applicable Lending Installation with any
request or directive (whether or not having the force of law) of any
such authority, central bank or comparable agency:
(i) subjects any Lender or any applicable Lending Installation
to any Taxes, or changes the basis of taxation of payments
(other than with respect to Excluded Taxes) to any Lender
in respect of its Eurodollar Loans, or
(ii) imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or similar
requirement against assets of, deposits with or for the
account of, or credit extended by, any Lender or any
applicable Lending Installation (other than reserves and
assessments taken into account in determining the interest
rate applicable to Eurodollar Advances), or
(iii) imposes any other condition the result of which is to
increase the cost to any Lender or any applicable Lending
Installation of making, funding or maintaining its
Eurodollar Loans or reduces any amount receivable by any
Lender or any applicable Lending Installation in connection
with its Eurodollar Loans, or requires any Lender or any
applicable Lending Installation to make any payment
<PAGE>
calculated by reference to the amount of Eurodollar Loans
held or interest received by it, by an amount deemed
material by such Lender,
and the result of any of the foregoing is to increase the cost to
such Lender or applicable Lending Installation of making or
maintaining its Eurodollar Loans or Commitment or to reduce the
return received by such Lender or applicable Lending Installation in
connection with such Eurodollar Loans or Commitment, in each case by
an amount deemed material by such Lender, then, within 15 days of
demand by such Lender, the Borrower shall pay such Lender such
additional amount or amounts as will compensate such Lender for such
increased cost or reduction in amount received.
3.2. Changes in Capital Adequacy Regulations. If a Lender
determines the amount of capital required or expected to be
maintained by such Lender, any Lending Installation of such Lender or
any corporation controlling such Lender is increased as a result of a
Change, then, within 15 days of demand by such Lender, the Borrower
shall pay such Lender the amount necessary to compensate for any
shortfall in the rate of return on the portion of such increased
capital which such Lender determines is attributable to this
Agreement, its Loans or its Commitment to make Loans hereunder (after
taking into account such Lender's policies as to capital adequacy).
"Change" means (i) any change after the date of this Agreement in the
Risk-Based Capital Guidelines or (ii) any adoption of or change in
any other law, governmental or quasi-governmental rule, regulation,
policy, guideline, interpretation, or directive (whether or not
having the force of law) after the date of this Agreement which
affects the amount of capital required or expected to be maintained
by any Lender or any Lending Installation or any corporation
controlling any Lender. "Risk-Based Capital Guidelines" means (i)
the risk-based capital guidelines in effect in the United States on
the date of this Agreement, including transition rules, and (ii) the
corresponding capital regulations promulgated by regulatory
authorities outside the United States implementing the July 1988
report of the Basle Committee on Banking Regulation and Supervisory
Practices Entitled "International Convergence of Capital Measurements
and Capital Standards," including transition rules, and any
amendments to such regulations adopted prior to the date of this
Agreement.
3.3. Availability of Types of Advances. If any Lender
determines that maintenance of its Eurodollar Loans at a suitable
Lending Installation would violate any applicable law, rule,
regulation, or directive, whether or not having the force of law, or
if the Required Lenders determine that (i) deposits of a type and
maturity appropriate to match fund Eurodollar Advances are not
available or (ii) the interest rate applicable to a Type of Advance
does not accurately reflect the cost of making or maintaining such
Advance, then the Agent shall suspend the availability of the
affected Type of Advance and require any affected Eurodollar Advances
to be repaid or converted to Floating Rate Advances, subject to the
payment of any funding indemnification amounts required by Section
3.4.
3.4. Funding Indemnification. If any payment of a Eurodollar
Advance occurs on a date which is not the last day of the applicable
Interest Period, whether because of acceleration, prepayment or
otherwise, or a Eurodollar Advance is not made on the date specified
by the Borrower for any reason other than default by the Lenders, the
Borrower will indemnify each Lender for any loss or cost incurred by
it resulting therefrom, including, without limitation, any loss or
cost in liquidating or employing deposits acquired to fund or
maintain such Eurodollar Advance.
<PAGE>
3.5. Taxes. (i) All payments by the Borrower to or for the
account of any Lender or the Agent hereunder or under any Note shall
be made free and clear of and without deduction for any and all
Taxes. If the Borrower shall be required by law to deduct any Taxes
from or in respect of any sum payable hereunder to any Lender or the
Agent, (a) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable
to additional sums payable under this Section 3.5) such Lender or the
Agent (as the case may be) receives an amount equal to the sum it
would have received had no such deductions been made, (b) the
Borrower shall make such deductions, (c) the Borrower shall pay the
full amount deducted to the relevant authority in accordance with
applicable law and (d) the Borrower shall furnish to the Agent the
original copy of a receipt evidencing payment thereof within 30 days
after such payment is made.
(ii) In addition, the Borrower hereby agrees to pay any present
or future stamp or documentary taxes and any other excise or property
taxes, charges or similar levies which arise from any payment made
hereunder or under any Note or from the execution or delivery of, or
otherwise with respect to, this Agreement or any Note ("Other Taxes").
(iii) The Borrower hereby agrees to indemnify the Agent and
each Lender for the full amount of Taxes of the type contemplated by
clause (i) or Other Taxes (including, without limitation, any Taxes
or Other Taxes imposed on amounts payable under this Section 3.5)
paid by the Agent or such Lender and any liability (including
penalties, interest and expenses) arising therefrom or with respect
thereto. Payments due under this indemnification shall be made
within 30 days of the date the Agent or such Lender makes demand
therefor pursuant to Section 3.6.
(iv) Each Lender that is not incorporated under the laws of the
United States of America or a state thereof (each a "Non-U.S.
Lender") agrees that it will, not less than ten Business Days after
the date of this Agreement, (i) deliver to each of the Borrower and
the Agent two duly completed copies of United States Internal Revenue
Service Form 1001 or 4224, certifying in either case that such Lender
is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes,
and (ii) deliver to each of the Borrower and the Agent a United
States Internal Revenue Form W-8 or W-9, as the case may be, and
certify that it is entitled to an exemption from United States backup
withholding tax. Each Non-U.S. Lender further undertakes to deliver
to each of the Borrower and the Agent (x) renewals or additional
copies of such form (or any successor form) on or before the date
that such form expires or becomes obsolete, and (y) after the
occurrence of any event requiring a change in the most recent forms
so delivered by it, such additional forms or amendments thereto as
may be reasonably requested by the Borrower or the Agent. All forms
or amendments described in the preceding sentence shall certify that
such Lender is entitled to receive payments under this Agreement
without deduction or withholding of any United States federal income
taxes, unless an event (including without limitation any change in
treaty, law or regulation) has occurred prior to the date on which
any such delivery would otherwise be required which renders all such
forms inapplicable or which would prevent such Lender from duly
completing and delivering any such form or amendment with respect to
it and such Lender advises the Borrower and the Agent that it is not
capable of receiving payments without any deduction or withholding of
United States federal income tax.
<PAGE>
(v) For any period during which a Non-U.S. Lender has failed to
provide the Borrower with an appropriate form pursuant to clause
(iv), above (unless such failure is due to a change in treaty, law or
regulation, or any change in the interpretation or administration
thereof by any governmental authority, occurring subsequent to the
date on which a form originally was required to be provided), such
Non-U.S. Lender shall not be entitled to indemnification under this
Section 3.5 with respect to Taxes imposed by the United States;
provided that, should a Non-U.S. Lender which is otherwise exempt
from or subject to a reduced rate of withholding tax become subject
to Taxes because of its failure to deliver a form required under
clause (iv), above, the Borrower shall take such steps as such
Non-U.S. Lender shall reasonably request to assist such Non-U.S.
Lender to recover such Taxes.
(vi) Any Lender that is entitled to an exemption from or
reduction of withholding tax with respect to payments under this
Agreement or any Note pursuant to the law of any relevant
jurisdiction or any treaty shall deliver to the Borrower (with a copy
to the Agent), at the time or times prescribed by applicable law,
such properly completed and executed documentation prescribed by
applicable law as will permit such payments to be made without
withholding or at a reduced rate.
3.6. Lender Statements; Survival of Indemnity. To the extent
reasonably possible, each Lender shall designate an alternate Lending
Installation, other than the ones shown on the signature pages
hereof, with respect to its Eurodollar Loans to reduce any liability
of the Borrower to such Lender under Sections 3.1, 3.2 and 3.5 or to
avoid the unavailability of Eurodollar Advances under Section 3.3, so
long as such designation is not, in the judgment of such Lender,
disadvantageous to such Lender. Each Lender shall deliver a written
statement of such Lender to the Borrower (with a copy to the Agent)
as to the amount due, if any, under Section 3.1, 3.2, 3.4 or 3.5.
Such written statement shall set forth in reasonable detail the
calculations upon which such Lender determined such amount and shall
be final, conclusive and binding on the Borrower in the absence of
manifest error. In determining such amount, each Lender may use any
reasonable averaging and attribution methods. Determination of
amounts payable under such Sections in connection with a Eurodollar
Loan shall be calculated as though each Lender funded its Eurodollar
Loan through the purchase of a deposit of the type and maturity
corresponding to the deposit used as a reference in determining the
Eurodollar Rate applicable to such Loan, whether in fact that is the
case or not. Unless otherwise provided herein, the amount specified
in the written statement of any Lender shall be payable on demand
after receipt by the Borrower of such written statement. The
obligations of the Borrower under Sections 3.1, 3.2, 3.4 and 3.5
shall survive payment of the Obligations and termination of this
Agreement.
ARTICLE IV
CONDITIONS PRECEDENT
4.1. Initial Advance. The Lenders shall not be required to make
the initial Advance hereunder unless the Borrower has furnished to
the Agent with sufficient copies for the Lenders:
(i) Copies of the articles or certificate of incorporation of
the Borrower, each Subsidiary of the Borrower and the
Parent together with all amendments, and a certificate of
<PAGE>
good standing, each certified by the appropriate
governmental officer in its jurisdiction of incorporation.
(ii) Copies, certified by the Secretary or Assistant Secretary
of the Borrower, each Subsidiary of Borrower and the
Parent, of its by-laws and of its Board of Directors'
resolutions and of resolutions or actions of any other body
authorizing the execution of the Loan Documents to which
the Borrower, each Subsidiary of the Borrower and the
Parent is a party.
(iii) An incumbency certificate, executed by the Secretary or
Assistant Secretary of the Borrower, each Subsidiary of
Borrower and the Parent, which shall identify by name and
title and bear the signatures of the Authorized Officers
and any other officers of the Borrower, each Subsidiary of
Borrower and the Parent authorized to sign the Loan
Documents to which the Borrower, each Subsidiary of
Borrower and the Parent is a party, upon which certificate
the Agent and the Lenders shall be entitled to rely until
informed of any change in writing by the Borrower.
(iv) Certificates of good standing and/or qualification to do
business for the Borrower, each Subsidiary of Borrower and
Parent issued for all jurisdictions wherein said
qualification is necessary as a result of said parties
owning assets or doing business therein.
(v) A certificate, signed by the chief financial officer of the
Borrower, stating that on the initial Borrowing Date no
Default or Unmatured Default has occurred and is continuing.
(vi) A written opinion of the Borrower's counsel, addressed to
the Lenders in substantially the form of Exhibit A.
(vii) Any Notes requested by a Lender pursuant to Section 2.13
payable to the order of each such requesting Lender.
(viii) Written money transfer instructions, in substantially the
form of Exhibit D, addressed to the Agent and signed by an
Authorized Officer, together with such other related money
transfer authorizations as the Agent may have reasonably
requested.
(ix) The executed Kable Security Agreement.
(x) The executed Fulfillment Security Agreement.
(xi) The executed Export Security Agreement.
(xii) The executed Canada Security Agreement.
(xiii) The Executed International Security Agreement.
<PAGE>
(xiv) The executed Guaranty.
(xv) The executed Subsidiary Guaranties.
(xvi) The executed Stock Pledge Agreement.
(xvii) The executed Trademark Security Agreement.
(xviii) Delivery of all stock certificates and executed assignments
as required under the Stock Pledge Agreement and the Kable
Security Agreement.
(xix) Executed UCC-1 and UCC-2 financing statements in favor of
Agent for the ratable benefit of all Lenders executed by
Borrower, Fulfillment, Export, Canada and International for
filing and/or recording in all applicable jurisdictions.
(xx) Executed UCC-1 and UCC-2 financing statements executed by
Fulfillment, Export, Canada and International in favor of
Borrower with assignment of same to Agent for the ratable
benefit of all Lenders in connection with the grant of a
security interest by Fulfillment, Export, Canada and
International to Borrower as described in Section 6.22
hereof.
(xxi) An executed Monthly Collateral Report.
(xxii) An executed Actual Collections and Estimated Net Billing
Report.
(xxiii) The insurance certificate described in Section 5.21.
(xxiv) Such other documents as any Lender or its counsel may have
reasonably requested.
4.2. Each. The Lenders shall not be required to make any
Advance (other than an Advance that, after giving effect thereto and
to the application of the proceeds thereof, does not increase the
aggregate amount of outstanding Advances), unless on the applicable
Borrowing Date:
(i) There exists no Default or Unmatured Default.
(ii) The representations and warranties contained in Article V
are true and correct as of such Borrowing Date except to
the extent any such representation or warranty is stated to
relate solely to an earlier date, in which case such
representation or warranty shall have been true and correct
on and as of such earlier date.
(iii) All legal matters incident to the making of such Advance
shall be satisfactory to the Lenders and their counsel.
<PAGE>
Each Borrowing Notice with respect to each such Advance shall
constitute a representation and warranty by the Borrower that the
conditions contained in Sections 4.2(i) and (ii) have been
satisfied. Any Lender may require a duly completed compliance
certificate in substantially the form of Exhibit B as a condition to
making an Advance.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lenders that:
5.1. Existence and Standing. Each of the Borrower and its
Subsidiaries is a corporation, partnership (in the case of
Subsidiaries only) or limited liability company duly and properly
incorporated or organized, as the case may be, validly existing and
(to the extent such concept applies to such entity) in good standing
under the laws of its jurisdiction of incorporation or organization
and has all requisite authority to conduct its business in each
jurisdiction in which its business is conducted, except in such
jurisdictions where failure to obtain said authority would not have a
Material Adverse Effect.
5.2. Authorization and Validity. The Borrower, each Subsidiary
and Parent have the power and authority and legal right to execute
and deliver the Loan Documents to which they are a party and to
perform their obligations thereunder. The execution and delivery by
the Borrower, each Subsidiary and Parent of the Loan Documents to
which they are a party and the performance of its obligations
thereunder have been duly authorized by proper corporate proceedings,
and the Loan Documents to which the Borrower, each Subsidiary and the
Parent is a party constitute legal, valid and binding obligations of
the Borrower, each Subsidiary and Parent enforceable against the
Borrower, each Subsidiary and the Parent in accordance with their
terms, except as enforceability may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors'
rights generally and subject also to the availability of equitable
remedies if equitable remedies are sought.
5.3. No Conflict; Government Consent. Neither the execution and
delivery by the Borrower, each Subsidiary or Parent of the Loan
Documents to which it is a party, nor the consummation of the
transactions therein contemplated, nor compliance with the provisions
thereof will violate (i) any law, rule, regulation, order, writ,
judgment, injunction, decree or award binding on the Borrower or any
of its Subsidiaries or Parent, or (ii) the Borrower's, Parent's or
any Subsidiary's articles or certificate of incorporation,
partnership agreement, certificate of partnership, articles or
certificate of organization, by-laws, or operating or other
management agreement, as the case may be, or (iii) the provisions of
any indenture, instrument or agreement to which the Borrower or any
of its Subsidiaries or Parent is a party or is subject, or by which
it, or its Property, is bound, or conflict with or constitute a
default thereunder, or result in, or require, the creation or
imposition of any Lien in, of or on the Property of the Borrower or a
Subsidiary or Parent pursuant to the terms of any such indenture,
instrument or agreement. No order, consent, adjudication, approval,
license, authorization, or validation of, or filing, recording or
registration with, or exemption by, or other action in respect of any
governmental or public body or authority, or any subdivision thereof,
which has not been obtained by the Borrower or any of its
Subsidiaries or Parent, is required to be obtained by the Borrower or
<PAGE>
any of its Subsidiaries or Parent in connection with the execution
and delivery of the Loan Documents, the borrowings under this
Agreement, the payment and performance by the Borrower of the
Obligations or the legality, validity, binding effect or
enforceability of any of the Loan Documents.
5.4. Financial Statements. The April 30, 1998 consolidated
financial statements of the Borrower and its Subsidiaries heretofore
delivered to the Lenders were prepared in accordance with generally
accepted accounting principles in effect on the date such statements
were prepared and fairly present the consolidated financial condition
and operations of the Borrower and its Subsidiaries at such date and
the consolidated results of their operations for the period then
ended.
5.5. Material Adverse Change. Since May 1, 1998 there has been
no change in the business, Property, prospects, condition (financial
or otherwise) or results of operations of the Borrower and its
Subsidiaries which could reasonably be expected to have a Material
Adverse Effect. Parent has disclosed to Agent and Lenders that it
anticipates the possibility of divesting itself of one of its
wholly-owned subsidiaries to-wit AMREP Southwest Inc. ("Southwest").
Agent and Lenders acknowledge that (i) the execution of the present
Agreement creates no security interest in their favor in any stock or
assets of Southwest, (ii) that they have no objection to and consent
to said divestiture by Parent, and (iii) that said divestiture shall
not be deemed to be an event which would have a Material Adverse
Effect under this Agreement on Borrower or Parent.
5.6. Taxes. The Parent, Borrower and its Subsidiaries have
filed all United States federal tax returns and all other tax returns
which are required to be filed and have paid all taxes due pursuant
to said returns or pursuant to any assessment received by the Parent,
Borrower or any of its Subsidiaries, except such taxes, if any, as
are being contested in good faith and as to which adequate reserves
have been provided in accordance with Agreement Accounting Principles
and as to which no Lien exists. The consolidated United States
income tax returns of the group including Parent, Borrower and its
United States Subsidiaries have been audited by the Internal Revenue
Service through the fiscal year ended December 31, 1989. No tax
liens have been filed and no claims (except as disclosed in the most
recent 10-K of the Parent) are being asserted with respect to any
such taxes. The charges, accruals and reserves on the books of the
Borrower and its Subsidiaries in respect of any taxes or other
governmental charges are adequate.
5.7. Litigation and Contingent Obligations. There is no
litigation, arbitration, governmental investigation, proceeding or
inquiry pending or, to the knowledge of any of their officers,
threatened against or affecting the Borrower or any of its
Subsidiaries or Parent which could reasonably be expected to have a
Material Adverse Effect or which seeks to prevent, enjoin or delay
the making of any Loans. Other than any liability incident to any
litigation, arbitration or proceeding which could not reasonably be
expected to have a Material Adverse Effect, the Borrower has no
material contingent obligations not provided for or disclosed in the
financial statements referred to in Section 5.4.
5.8. Subsidiaries. Schedule 1 contains an accurate list of all
Subsidiaries of the Borrower as of the date of this Agreement,
setting forth their respective jurisdictions of organization and the
percentage of their respective capital stock or other ownership
interests owned by the Borrower or other Subsidiaries. All of the
issued and outstanding shares of capital stock or other ownership
<PAGE>
interests of such Subsidiaries have been (to the extent such concepts
are relevant with respect to such ownership interests) duly
authorized and issued and are fully paid and non-assessable.
5.9. ERISA. The Unfunded Liabilities of all Single Employer
Plans do not in the aggregate exceed $100,000.00. Neither the
Borrower nor any other member of the Controlled Group is a member of
any Multiemployer Plans. Each Plan complies in all material respects
with all applicable requirements of law and regulations, no
Reportable Event has occurred with respect to any Plan, neither the
Borrower nor any other member of the Controlled Group has withdrawn
from any Plan or initiated steps to do so, and no steps have been
taken to reorganize or terminate any Plan.
5.10. Accuracy of Information. No information, exhibit or report
furnished by the Borrower or any of its Subsidiaries or Parent to the
Agent or to any Lender in connection with the negotiation of, or
compliance with, the Loan Documents contained any material
misstatement of fact or omitted to state a material fact or any fact
necessary to make the statements contained therein not misleading.
5.11. Regulation U. Margin stock (as defined in Regulation U)
constitutes less than 25% of the value of those assets of the
Borrower and its Subsidiaries which are subject to any limitation on
sale, pledge, or other restriction hereunder.
5.12. Material Agreements. Neither the Borrower nor any
Subsidiary nor Parent is a party to any agreement or instrument or
subject to any charter or other corporate restriction which could
reasonably be expected to have a Material Adverse Effect. Neither
the Borrower nor any Subsidiary nor Parent is in default in the
performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in (i) any agreement to which it is
a party, which default could reasonably be expected to have a
Material Adverse Effect or (ii) any agreement or instrument
evidencing or governing Indebtedness.
5.13. Compliance With Laws. The Borrower and its Subsidiaries
have complied with all applicable statutes, rules, regulations,
orders and restrictions of any domestic or foreign government or any
instrumentality or agency thereof having jurisdiction over the
conduct of their respective businesses or the ownership of their
respective Property except for any failure to comply with any of the
foregoing which could not reasonably be expected to have a Material
Adverse Effect.
5.14. Ownership of Properties. Except as set forth on Schedule
2, on the date of this Agreement, the Borrower and its Subsidiaries
will have good title, free of all Liens other than those permitted by
Section 6.15, to all of the Property and assets reflected in the
Borrower's most recent consolidated financial statements provided to
the Agent as owned by the Borrower and its Subsidiaries.
5.15. Plan Assets; Prohibited Transactions. The Borrower is not
an entity deemed to hold "plan assets" within the meaning of 29
C.F.R. Subsection 2510.3-101 of an employee benefit plan (as defined in
Section 3(3) of ERISA) which is subject to Title I of ERISA or any
plan (within the meaning of Section 4975 of the Code), and neither
the execution of this Agreement nor the making of Loans hereunder
gives rise to a prohibited transaction within the meaning of Section
406 of ERISA or Section 4975 of the Code.
<PAGE>
5.16. Environmental Matters. In the ordinary course of its
business, the officers of the Borrower consider the effect of
Environmental Laws on the business of the Borrower and its
Subsidiaries, in the course of which they identify and evaluate
potential risks and liabilities accruing to the Borrower due to
Environmental Laws. On the basis of this consideration, the Borrower
has concluded that Environmental Laws cannot reasonably be expected
to have a Material Adverse Effect. Neither the Borrower nor any
Subsidiary has received any notice to the effect that its operations
are not in material compliance with any of the requirements of
applicable Environmental Laws or are the subject of any federal or
state investigation evaluating whether any remedial action is needed
to respond to a release of any toxic or hazardous waste or substance
into the environment, which non-compliance or remedial action could
reasonably be expected to have a Material Adverse Effect.
5.17. Investment Company Act. Neither the Borrower nor any
Subsidiary is an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company
Act of 1940, as amended.
5.18. Public Utility Holding Company Act. Neither the Borrower
nor any Subsidiary is a "holding company" or a "subsidiary company"
of a "holding company", or an "affiliate" of a "holding company" or
of a "subsidiary company" of a "holding company", within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
5.19. Subordinated Indebtedness. The Obligations constitute
senior indebtedness which is entitled to the benefits of the
subordination provisions of all outstanding Subordinated Indebtedness.
5.20. Post-Retirement Benefits. The present value of the
expected cost of post-retirement medical and insurance benefits
payable by the Borrower and its Subsidiaries to its employees and
former employees, as estimated by the Borrower in accordance with
procedures and assumptions deemed reasonable by the Required Lenders,
does not exceed $100,000.00.
5.21. Insurance. The certificate signed by the President or
Chief Financial Officer of the Borrower, that attests to the
existence and adequacy of, and summarizes, the property and casualty
insurance program carried by the Borrower with respect to itself and
its Subsidiaries and that has been furnished by the Borrower to the
Agent and the Lenders, is complete and accurate. This summary
includes the insurer's or insurers' name(s), policy number(s),
expiration date(s), amount(s) of coverage, type(s) of coverage,
exclusion(s), and deductibles. This summary also includes similar
information, and describes any reserves, relating to any
self-insurance program that is in effect.
5.22. Solvency. (i) Immediately after the consummation of the
transactions to occur on the date hereof and immediately following
the making of each Loan, if any, made on the date hereof and after
giving effect to the application of the proceeds of such Loans, (a)
the fair value of the assets of the Borrower and its Subsidiaries on
a consolidated basis, at a fair valuation, will exceed the debts and
liabilities, subordinated, contingent or otherwise, of the Borrower
and its Subsidiaries on a consolidated basis; (b) the present fair
saleable value of the property of the Borrower and its Subsidiaries
on a consolidated basis will be greater than the amount that will be
required to pay the probable liability of the Borrower and its
<PAGE>
Subsidiaries on a consolidated basis on their debts and other
liabilities, subordinated, contingent or otherwise, as such debts and
other liabilities become absolute and matured; (c) the Borrower and
its Subsidiaries on a consolidated basis will be able to pay their
debts and liabilities, subordinated, contingent or otherwise, as such
debts and liabilities become absolute and matured; and (d) the
Borrower and its Subsidiaries on a consolidated basis will not have
unreasonably small capital with which to conduct the businesses in
which they are engaged as such businesses are now conducted and are
proposed to be conducted after the date hereof.
(ii) The Borrower does not intend to, or to permit any of its
Subsidiaries to, and does not believe that it or any of its
Subsidiaries will, incur debts beyond its ability to pay such debts
as they mature, taking into account the timing of and amounts of cash
to be received by it or any such Subsidiary and the timing of the
amounts of cash to be payable on or in respect of its Indebtedness or
the Indebtedness of any such Subsidiary.
ARTICLE VI
COVENANTS
During the term of this Agreement, unless the Required Lenders
shall otherwise consent in writing:
6.1. Financial and Other Reporting. The Borrower will maintain,
for itself and each Subsidiary, a system of accounting established
and administered in accordance with generally accepted accounting
principles, and furnish to the Lenders:
(i) Within ten (10) days after the Parent files its Form 10-K
with the Securities and Exchange Commission but in no event
later than one hundred fifteen (115) days after the end of
each fiscal year, unaudited financial statements of the
Borrower and its Subsidiaries, accompanied by: (a) an audit
opinion from Borrower's independent Certified Public
Accountant ("Accountant") on the Accounts of the Borrower
and its Subsidiaries; (b) a consolidating report that shows
the financial statements of the Borrower and its
Subsidiaries and the financial statements of the Parent and
its Subsidiaries (other than the Borrower and its
Subsidiaries); and (c) a letter addressed to the Lender
from the Accountants stating that they have no knowledge
that anything has occurred which constitutes, or which with
the passage of time or service of notice or both would
constitute, a Default under this Agreement or any other
agreement between the Borrower. its Subsidiaries, Parent
and the Lender or stating that such an event has occurred
and specifying each such event, all as of the close of the
fiscal year with respect to which the financial statement
has been prepared.
(ii) Within twenty (25) days after the end of each month of each
fiscal year of Borrower, the Borrower will supply the Agent
with interim financial statements signed by a financial
officer of the Borrower reflecting the financial condition
<PAGE>
of the Borrower and its Subsidiaries as of the end of such
month and the results of the operations of the Borrower and
its Subsidiaries since the beginning of the fiscal year.
(iii) The annual financial statements provided for in this
Article shall be accompanied by a certificate signed by the
Chairman of the Board, the President or an Executive Vice
President of the Borrower stating that a review of the
activities of the Borrower and its Subsidiaries and the
Parent during such period has been made under the
supervision of such individual with a view to determining
that the Borrower, its Subsidiaries and Parent have
observed, performed and fulfilled all of its obligations
under this Agreement and the other Loan Documents, and that
to the best of such individual's knowledge, no event has
occurred which constitutes, or which with the passage of
time or service of notice or both would constitute a
Default, or stating that such an event has occurred and
specifying each such event. The annual financial
statements of the Borrower shall also be accompanied by a
certificate in the form attached hereto as Exhibit F signed
by the Chairman of the Board, the President, an Executive
Vice President or the Treasurer of the Borrower.
(iv) Within three (3) Business Days after the Parent files its
Form 10-K with the Securities and Exchange Commission but
in no event later than one hundred five (105) days after
the close of each fiscal year, a copy of such Form 10-K.
In addition, upon their becoming available, copies of all
regular and periodic reports, if any, which the Borrower or
any of its Subsidiaries or the Parent files with the
Securities and Exchange Commission or any governmental
agency or agencies substituted therefor, or any similar or
corresponding governmental department, commission, board,
bureau or agency, domestic or foreign, or with any
securities exchange; and with copies of all reports, proxy
statements and financial statements delivered or sent by
the Borrower or any of its Subsidiaries or the Parent to
its stockholders.
(v) Together with the financial statements required under
Sections 6.1(i) and (ii), a compliance certificate in
substantially the form of Exhibit B signed by its chief
financial officer showing the calculations necessary to
determine compliance with this Agreement and stating that
no Default or Unmatured Default exists, or if any Default
or Unmatured Default exists, stating the nature and status
thereof.
(vi) Within 270 days after the close of each fiscal year, a
statement of the Unfunded Liabilities of each Single
Employer Plan, certified as correct by an actuary enrolled
under ERISA.
(vii) As soon as possible and in any event within 10 days after
the Borrower knows that any Reportable Event has occurred
with respect to any Plan, a statement, signed by the chief
financial officer of the Borrower, describing said
Reportable Event and the action which the Borrower proposes
to take with respect thereto.
<PAGE>
(viii) As soon as possible and in any event within 10 days after
receipt by the Borrower, a copy of (a) any notice or claim
to the effect that the Borrower or any of its Subsidiaries
is or may be liable to any Person as a result of the
release by the Borrower, any of its Subsidiaries, or any
other Person of any toxic or hazardous waste or substance
into the environment, and (b) any notice alleging any
violation of any federal, state or local environmental,
health or safety law or regulation by the Borrower or any
of its Subsidiaries.
(ix) Within twenty-five (25) days after the end of each month
during the term of this Agreement, the Borrower shall
complete and deliver to the Agent a monthly Compliance
Certificate ("Compliance Certificate") in the form attached
hereto as Exhibit G.
(x) Within twenty-five (25) days after the end of each month
during the term of this Agreement, the Borrower shall
complete and deliver to the Agent a Monthly Collateral
Report ("Monthly Collateral Report") in the form attached
hereto as Exhibit H.
(xi) On or before the third (3rd) Business Day of each month
during the term of this Agreement, the Borrower shall
complete and deliver to the Agent an Actual Collections and
Estimated Net Billing Report ("Actual Collections and
Estimated Net Billing Report") in the form attached hereto
as Exhibit I. Among other things, the Actual Collections
and Estimated Net Billing Report will indicate the
estimated net billings of the Borrower for the current
month on the basis of the "on sale date" of each
publication and such net billings will then be added to
"net account receivables" for the immediately preceding
month.
(xii) In no event later than one hundred fifteen (115) days after
the end of each fiscal year, financial projections for
Borrower and its Subsidiaries for the subsequent fiscal
year in a form and content reasonably acceptable to Agent.
(xiii) Such other information (including non-financial
information) as the Agent or any Lender may from time to
time reasonably request.
6.2. Use of Proceeds. The Borrower will, and will cause each
Subsidiary to, use the proceeds of the Advances for working capital
purposes only, and to repay outstanding Advances. The Borrower will
not, nor will it permit any Subsidiary to, use any of the proceeds of
the Advances to purchase or carry any "margin stock" (as defined in
Regulation U). Borrower shall also be entitled to disburse portions
of any Advance to its Subsidiaries as described in Section 6.22
hereof.
6.3. Notice of Default. The Borrower will, and will cause each
Subsidiary to, give prompt notice in writing to the Lenders of the
occurrence of any Default or Unmatured Default and of any other
development, financial or otherwise, which could reasonably be
expected to have a Material Adverse Effect.
<PAGE>
6.4. Conduct of Business. The Borrower will, and will cause
each Subsidiary to, carry on and conduct its business in
substantially the same manner and in substantially the same fields of
enterprise as it is presently conducted and do all things necessary
to remain duly incorporated or organized, validly existing and (to
the extent such concept applies to such entity) in good standing as a
domestic corporation, partnership or limited liability company in its
jurisdiction of incorporation or organization, as the case may be,
and maintain all requisite authority to conduct its business in each
jurisdiction in which its business is conducted.
6.5. Taxes. The Borrower and each United States Subsidiary will
be included in a timely filed complete and correct United States
consolidated federal income tax return filed by the Parent of
Borrower and Borrower will, and will cause each Subsidiary to, timely
file complete and correct applicable foreign, state and local tax
returns required by law and pay when due all taxes, assessments and
governmental charges and levies upon it or its income, profits or
Property, except those which are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves
have been set aside in accordance with Agreement Accounting
Principles.
6.6. Insurance. The Borrower will, and will cause each
Subsidiary to, maintain with financially sound and reputable
insurance companies insurance on all their Property in such amounts
and covering such risks as is consistent with sound business
practice, and the Borrower will furnish to any Lender upon request
full information as to the insurance carried.
6.7. Compliance with Laws. The Borrower will, and will cause
each Subsidiary to, comply with all laws, rules, regulations, orders,
writs, judgments, injunctions, decrees or awards to which it may be
subject including, without limitation, all Environmental Laws.
6.8. Maintenance of Properties. The Borrower will, and will
cause each Subsidiary to, do all things necessary to maintain,
preserve, protect and keep its Property in good repair, working order
and condition, and make all necessary and proper repairs, renewals
and replacements so that its business carried on in connection
therewith may be properly conducted at all times.
6.9. Inspection. The Borrower will, and will cause each
Subsidiary to, permit the Agent and the Lenders, by their respective
representatives and agents, to inspect any of the Property, books and
financial records of the Borrower and each Subsidiary, to examine and
make copies of the books of accounts and other financial records of
the Borrower and each Subsidiary, and to discuss the affairs,
finances and accounts of the Borrower and each Subsidiary with, and
to be advised as to the same by, their respective officers at such
reasonable times and intervals as the Agent or any Lender may
designate.
6.10.Dividends. The Borrower will not, nor will it permit any
Subsidiary to, declare or pay any dividends or make any distributions
on its capital stock (other than dividends payable in its own capital
stock) or redeem, repurchase or otherwise acquire or retire any of
its capital stock at any time outstanding, except that any Subsidiary
may declare and pay dividends or make distributions to the Borrower
or to a Wholly-Owned Subsidiary; provided, however, that the Borrower
(a) may pay to the Parent on a quarterly basis an amount not to
exceed fifty percent (50%) of the Borrower's Consolidated Net Income
after provision for income taxes for the preceding fiscal quarter, as
shown on the Borrower's financial statements, provided, however, that
at the end of any fiscal year the aggregate of such quarterly
payments shall not exceed fifty percent (50%) of the Borrower's
<PAGE>
Consolidated Net Income after provision for income taxes for such
fiscal year and (b) may pay to Parent on an estimated quarterly basis
an amount not to exceed (x) Borrower's Consolidated Net Income before
provision for income taxes for such period times (y) the then
applicable federal statutory corporate income tax rate. Irrespective
of the foregoing, no dividends shall be paid to the Parent under this
Section 6.10 unless the Borrower is in compliance with all of the
covenants contained in this Agreement, nor may any dividends be paid
if there is existing a Default or an Unmatured Default, or if said
payment of dividends would cause a Default.
6.11. Indebtedness. The Borrower will not, nor will it permit
any Subsidiary to, create, incur or suffer to exist any Indebtedness,
except:
(i) The Loans, and
(ii) Indebtedness not to exceed an outstanding amount in excess
of the amount as set forth in Schedule 2, and
(iii) In addition to the Indebtedness described in 6.11(ii),
secured and unsecured Indebtedness of all Borrowing Entities in an
amount not to exceed outstanding at any time during the term of this
Agreement Six Million and No/100 Dollars ($6,000,000.00) in the
aggregate for all Borrowing Entities owing to any Party other than
Lenders and inter-company Indebtedness.
6.12. Merger. The Borrower will not, nor will it permit any
Subsidiary to, merge or consolidate with or into any other Person,
except that a Subsidiary may merge into the Borrower or a
Wholly-Owned Subsidiary.
6.13. Sale of Assets. The Borrower will not, nor will it permit
any Subsidiary to, lease, sell or otherwise dispose of its Property
to any other Person, except:
(i) Sales of inventory in the ordinary course of business.
(ii) Leases, sales or other dispositions of its Property that,
together with all other Property of the Borrower and its
Subsidiaries previously leased, sold or disposed of (other
than inventory in the ordinary course of business) as
permitted by this Section during the twelve-month period
ending with the month in which any such lease, sale or
other disposition occurs, do not constitute a Substantial
Portion of the Property of the Borrower and its
Subsidiaries.
6.14. Investments and Acquisitions. The Borrower will not, nor
will it permit any Subsidiary to, make or suffer to exist any
Investments (including without limitation, loans and advances to, and
other Investments in, Subsidiaries), or commitments therefor, or to
<PAGE>
create any Subsidiary or to become or remain a partner in any
partnership or joint venture, or to make any Acquisition of any
Person, except:
(i) Cash Equivalent Investments;
(ii) Existing Investments in Subsidiaries and other Investments
in existence on the date hereof and described in Schedule 1;
(iii) Loans or advances to employees not exceeding $100,000 in
the aggregate outstanding;
(iv) Loans from Borrower to its Subsidiaries pursuant to Section
6.22 hereof;
(v) Acquisitions which in the aggregate do not exceed the
expenditure of an amount in excess of $3,000,000.00 on an
annual basis, provided following said Acquisitions Borrower
and its Subsidiaries are still in compliance with all the
Financial Covenants described in Section 6.24 hereof;
(vi) Advances to publishers in the ordinary course of the
Borrower's business;
(vii) Loans to publishers evidenced by promissory notes which
shall bear interest on the unpaid principal balance but
which shall not exceed One Million Five Hundred Thousand
Dollars ($1,500,000.00) in the aggregate; and
(viii) Loans or advances to the Parent not exceeding $5,400,000.00
in the aggregate at any time.
6.15. Liens. The Borrower will not, nor will it permit any
Subsidiary to, create, incur, or suffer to exist any Lien in, of or
on the Property of the Borrower or any of its Subsidiaries, except:
(i) Liens for taxes, assessments or governmental charges or
levies on its Property if the same shall not at the time be
delinquent or thereafter can be paid without penalty, or
are being contested in good faith and by appropriate
proceedings and for which adequate reserves in accordance
with Agreement Accounting Principles shall have been set
aside on its books.
(ii) Liens imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar liens arising in the
ordinary course of business which secure payment of
obligations not more than 60 days past due or which are
being contested in good faith by appropriate proceedings
and for which adequate reserves shall have been set aside
on its books.
(iii) Liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age
pensions, or other social security or retirement benefits,
or similar legislation.
<PAGE>
(iv) Utility easements, building restrictions and such other
encumbrances or charges against real property as are of a
nature generally existing with respect to properties of a
similar character and which do not in any material way
affect the marketability of the same or interfere with the
use thereof in the business of the Borrower or its
Subsidiaries.
(v) (a) Liens existing on the date hereof and described in
Schedule 2 together with any future Liens on the same
property described in Schedule 2 and also (b) Purchase
Money Liens ("Purchase Money Liens") placed on additional
property purchased after the date hereof provided that (x)
in connection with Purchase Money Liens (i) no such Lien
shall extend to any property other than the property at the
time being purchased and (ii) the Indebtedness incurred in
connection with said Lien does not exceed ninety percent
(90%) of the Purchase Price of the property being acquired
unless Agent consents, in writing, to a higher percentage
and (y) the total Indebtedness secured by the Liens
described in (a) and (b) hereof does not exceed the sum of
the aggregate total amount of Indebtedness shown on
Schedule 2 plus Six Million and No/100 Dollars
($6,000,000.00).
(vi) Liens in favor of the Agent, for the benefit of the
Lenders, granted pursuant to any Collateral Document.
(vii) Security interests in favor of American securing
Indebtedness incurred prior to the execution of this
Agreement and which are to be released upon the funding of
the first Advance hereunder.
6.16. Capital Expenditures. The Borrower will not, nor will it
permit any Subsidiary to, expend, or be committed to expend, in
excess of $4,000,000.00 for Capital Expenditures during any one
fiscal year on a non-cumulative basis in the aggregate for the
Borrower and its Subsidiaries.
6.17. Affiliates. The Borrower will not, and will not permit any
Subsidiary to, enter into any transaction (including, without
limitation, the purchase or sale of any Property or service) with, or
make any payment or transfer to, any Affiliate except in the ordinary
course of business and pursuant to the reasonable requirements of the
Borrower's or such Subsidiary's business and upon fair and reasonable
terms no less favorable to the Borrower or such Subsidiary than the
Borrower or such Subsidiary would obtain in a comparable arms-length
transaction.
6.18. Subordinated Indebtedness. The Borrower will not, and will
not permit any Subsidiary to, make any amendment or modification to
the indenture, note or other agreement evidencing or governing any
Subordinated Indebtedness, or directly or indirectly voluntarily
prepay, defease or in substance defease, purchase, redeem, retire or
otherwise acquire, any Subordinated Indebtedness.
6.19. Other Agreements. The Borrower will not, and will not
permit its Subsidiaries to, enter into or acquiesce in any agreement
which limits or restricts the right of the Borrower or any Subsidiary
to comply with the provisions of this Agreement or which limits or
<PAGE>
restricts the rights of the Borrower or any Subsidiary and/or the
Agent, as assignee for the ratable benefit of the Lender, under any
promissory note from the Parent under Section 6.14 or which limits or
restricts the rights of the Parent to comply with any guarantee
delivered or given pursuant hereto.
6.20. Disposition of Indebtedness of Subsidiary or Parent. The
Borrower will not sell, assign, pledge, transfer or otherwise dispose
of or encumber, except as permitted by this Agreement, any
indebtedness owing to it from any of its Subsidiaries or from the
Parent.
6.21. Business Activities. The Borrower will not engage in any
type of business except the businesses in which it was engaged on
April 30, 1998, including, without limitation, the distribution of
paperbacks, magazines and related products; product, order and
subscription processing and fulfillment; customer service;
telemarketing and related services. However, Borrower may become
engaged in the publishing business if such business does not at any time
account for greater than ten percent (10%) of Borrower's revenues on
an annual basis.
6.22. Availability of Revolving Loan Advances to Fulfillment,
Export, Canada and International. Borrower agrees that as additional
consideration for Fulfillment, Export, Canada and International
executing and delivering the Fulfillment Security Agreement, Export
Security Agreement, Canada Security Agreement and International
Security Agreement and the Subsidiary Guaranties that Borrower shall,
when requested by Fulfillment, Export, Canada or International, make
available and loan to Export, Fulfillment, Canada and International
portions of the Advances relating to the Revolving Loan to be used by
Export, Fulfillment, Canada and International for working capital
purposes. Borrower shall keep accurate books and records relating to
all of said loans to Export, Fulfillment, Canada and International
and shall, if requested by Agent, supply to Agent all information
relating to same. Borrower hereby accepts the grant of a security
interest in all the assets of Fulfillment, Export, Canada and
International as set forth in the acknowledgement signed by Export,
Fulfillment, Canada and International attached hereto and by
Borrower's execution hereof assigns same together with all loans made
in connection therewith to Agent for the ratable benefit of all
Lenders to further secure the repayment of the Obligations.
6.23. Loans or Advances to Parent and Subsidiary. The Borrower
will cooperate with the Lenders in enforcing any and all obligations
of the Parent and any Subsidiary to the Borrower pursuant to loans or
advances made to the Parent or any Subsidiary in accordance with
Section 6.14 and in ensuring that the Parent and each Subsidiary
comply with any and all covenants and warranties entered into in
connection with such loans or advances.
6.24. Financial Covenants.
6.24.1. Consolidated Current Ratio. The Borrower will, at
all times, maintain a Consolidated Current Ratio of not less
than 1.00 to 1.00.
6.24.2. Consolidated Cash Flow Coverage. The Borrower
will from the fiscal quarter beginning May, 1998 and at all
times thereafter maintain a Consolidated Cash Flow Coverage
<PAGE>
Ratio, measured at the end of each fiscal quarter calculated by
taking the sum of the numerators of the Consolidated Cash Flow
Coverage Ratio for the fiscal quarter then ending and the
immediately three preceding fiscal quarters and dividing such
amount by the sum of the denominators of the Consolidated Cash
Flow Coverage Ratio for the fiscal quarter then ending and the
immediately three preceding fiscal quarters with the resultant
ratio being not less than 1.00 to 1.00.
6.24.3. Consolidated Tangible Net Worth. The Borrower
will, from the date of this Agreement through April 30, 1999
maintain a Consolidated Tangible Net Worth of no less than
$2,800,000.00. Thereafter, as of the end of each subsequent
fiscal year of Borrower said Consolidated Tangible Net Worth
must increase by and be maintained thereafter at an amount equal
to the prior year's Consolidated Tangible Net Worth plus the
greater of (x) $500,000.00 or (y) fifty percent (50%) of the
Consolidated Net Income of Borrower for the applicable fiscal
year.
6.24.4. Ratio of Collections. The Borrower and its
Subsidiaries shall never allow the ratio of (x) the consolidated
collections of amounts relating to all Accounts of Borrower and
its Subsidiaries to (y) all outstanding and due and owing
Accounts of Borrower and its Subsidiaries to be less than
thirteen percent (13%).
6.24.5. Ratio of Returns. The Borrower and its
Subsidiaries will never allow the ratio of (x) consolidated
actual returns, allowances and discounts to (y) consolidated
reserves for returns to average less than sixty-five percent
(65%) for any three (3) month period during the term of this
Agreement.
6.25. Lock Box. The Borrower shall establish a lock box account
with the Agent (herein called the "Cash Collateral Account") in the
Borrower's name and each Borrowing Entity shall direct all Account
Debtors to directly remit all payments on Accounts to same and into
which Cash Collateral Account the Borrower and each Subsidiary will
immediately deposit all payments constituting proceeds of Accounts,
whether in the form of cash or check or some other form of payment.
All payments made to the Cash Collateral Account shall be the
exclusive property of the Agent for the ratable benefit of all the
Lenders and no person other than the Agent shall have a right of
setoff against such Cash Collateral Account. All such payments
received in the Cash Collateral Account shall be applied against the
principal balance of the Revolving Loan (a) on the date that any
check, draft or similar item of payment has been honored and final
settlement thereof has been reflected as available to the Agent, and
(b) in connection with wire transfers on the date received provided
said wire transfer is received by Agent by 12:00 p.m. (Chicago time),
and if received after 12:00 p.m. (Chicago time) on the next Business
Day after receipt.
The Borrower, each of its Subsidiaries and any of their
Affiliates, employees, agents or other persons acting for on in
concert with the Borrower shall (acting as trustee for the Agent)
receive as the sole and exclusive property of the Agent for the
ratable benefit of all Lenders any monies, checks, notes, drafts or
any other payments relating to and/or proceeds of Accounts which come
into the possession or under the control of the Borrower or such
persons. Immediately upon receipt of such funds, the Borrower or
<PAGE>
such persons shall cause the same to be deposited in the Cash
Collateral Account or shall deliver the same to the Agent in the
identical form in which such item of payment was received, provided,
however, that the Borrower may deposit proceeds in The Bank of
Montreal in Toronto, Canada and Amcore Bank of Ogle County in Mt.
Morris, Illinois for clearance purposes only, provided that such
proceeds are transmitted to the Borrower's Cash Collateral Account
from time to time, but not less frequently than within one (1) week
of deposit at Amcore Bank of Ogle County and in connection with The
Bank of Montreal, said transmittals shall be not less frequently than
when said deposits held by said bank reach an amount of $100,000.00
or more. The Borrower will indemnify and save harmless the Agent and
all Lenders from and against all liabilities and expenses, including
reasonable attorneys' fees on account of any adverse claim asserted
against the Agent and all Lenders relating to any proceeds received
by the Agent from any obligor on any Account owing to the Borrower or
its Subsidiaries, and such obligation of the Borrower shall continue
in effect after and notwithstanding the termination of this
Agreement, the discharge of the Obligations and the release hereof.
6.26. Year 2000. The Borrower will take all actions reasonably
necessary to assure that the Year 2000 Issues will not have a
Material Adverse Effect on the business, operations or financial
condition of the Borrower or any of its Subsidiaries. Upon the
Agent's request, the Borrower will provide the Agent with a
description of its plan to address Year 2000 issues, including
updates and progress reports. The Borrower will advise the Agent of
any reasonably anticipated Material Adverse Effect on the business,
operations or financial condition of the Borrower or its Subsidiaries
as a result of Year 2000 issues.
ARTICLE VII
DEFAULTS
The occurrence of any one or more of the following events shall
constitute a Default:
7.1. Any representation or warranty made or deemed made by or on
behalf of the Borrower or any of its Subsidiaries to the Lenders or
the Agent under or in connection with this Agreement, any Loan, or
any certificate or information delivered in connection with this
Agreement or any other Loan Document shall be materially false on the
date as of which made.
7.2. Nonpayment of principal of any Loan when due, or nonpayment
of interest upon any Loan or of any commitment fee or other
obligations under any of the Loan Documents within ten days after the
same becomes due.
7.3. The breach by the Borrower of any of the terms or
provisions of Article VI.
7.4. The breach by the Borrower (other than a breach which
constitutes a Default under another Section of this Article VII) of
any of the terms or provisions of this Agreement which is not
remedied within five days after written notice from the Agent or any
Lender.
<PAGE>
7.5. Failure of the Borrower or any of its Subsidiaries or any
Guarantor to pay when due any Indebtedness aggregating in excess of
$100,000.00 ("Material Indebtedness"); or the default by the Borrower
or any of its Subsidiaries or any Guarantor in the performance
(beyond the applicable grace period with respect thereto, if any) of
any term, provision or condition contained in any agreement under
which any such Material Indebtedness was created or is governed, or
any other event shall occur or condition exist, the effect of which
default or event is to cause, or to permit the holder or holders of
such Material Indebtedness to cause, such Material Indebtedness to
become due prior to its stated maturity; or any Material Indebtedness
of the Borrower or any of its Subsidiaries or any Guarantor shall be
declared to be due and payable or required to be prepaid or
repurchased (other than by a regularly scheduled payment) prior to
the stated maturity thereof; or the Borrower or any of its
Subsidiaries or any Guarantor shall not pay, or admit in writing its
inability to pay, its debts generally as they become due.
7.6. The Borrower or any of its Subsidiaries or any Guarantor
shall (i) have an order for relief entered with respect to it under
the Federal bankruptcy laws as now or hereafter in effect, (ii) make
an assignment for the benefit of creditors, (iii) apply for, seek,
consent to, or acquiesce in, the appointment of a receiver,
custodian, trustee, examiner, liquidator or similar official for it
or any Substantial Portion of its Property, (iv) institute any
proceeding seeking an order for relief under the Federal bankruptcy
laws as now or hereafter in effect or seeking to adjudicate it a
bankrupt or insolvent, or seeking dissolution, winding up,
liquidation, reorganization, arrangement, adjustment or composition
of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors or fail to file an answer or
other pleading denying the material allegations of any such
proceeding filed against it, (v) take any corporate or partnership
action to authorize or effect any of the foregoing actions set forth
in this Section 7.6 or (vi) fail to contest in good faith any
appointment or proceeding described in Section 7.7.
7.7. Without the application, approval or consent of the
Borrower or any of its Subsidiaries, or any Guarantor a receiver,
trustee, examiner, liquidator or similar official shall be appointed
for the Borrower or any of its Subsidiaries or any Guarantor or any
Substantial Portion of its Property, or a proceeding described in
Section 7.6(iv) shall be instituted against the Borrower or any of
its Subsidiaries or any Guarantor and such appointment continues
undischarged or such proceeding continues undismissed or unstayed for
a period of 30 consecutive days.
7.8. Any court, government or governmental agency shall condemn,
seize or otherwise appropriate, or take custody or control of, all or
any portion of the Property of the Borrower and its Subsidiaries or
any Guarantor which, when taken together with all other Property of
the Borrower and its Subsidiaries or any Guarantor so condemned,
seized, appropriated, or taken custody or control of, during the
twelve-month period ending with the month in which any such action
occurs, constitutes a Substantial Portion.
7.9. The Borrower or any of its Subsidiaries shall fail within
30 days to pay, bond or otherwise discharge any judgment or order for
the payment of money in excess of $100,000.00, which is not stayed on
appeal or otherwise being appropriately contested in good faith.
<PAGE>
7.10. The Unfunded Liabilities of all Single Employer Plans shall
exceed in the aggregate $100,000.00 or any Reportable Event shall
occur in connection with any Plan.
7.11. The Borrower or any of its Subsidiaries shall (i) be the
subject of any proceeding or investigation pertaining to the release
by the Borrower, any of its Subsidiaries or any other Person of any
toxic or hazardous waste or substance into the environment, or (ii)
violate any Environmental Law, which, in the case of an event
described in clause (i) or clause (ii), could reasonably be expected
to have a Material Adverse Effect.
7.12. Any Change in Control shall occur.
7.13. The occurrence of any "default", as defined in any Loan
Document (other than this Agreement) or the breach of any of the
terms or provisions of any Loan Document (other than this Agreement),
which default or breach continues beyond any period of grace therein
provided.
7.14. Nonpayment by the Borrower of any Rate Hedging Obligation
when due or the breach by the Borrower of any term, provision or
condition contained in any Rate Hedging Agreement.
7.15. Any Guaranty or Subsidiary Guaranty shall fail to remain in
full force or effect or any action shall be taken to discontinue or
to assert the invalidity or unenforceability of any Guaranty or
Subsidiary Guaranty, or any Guarantor shall fail to comply with any
of the terms or provisions of any Guaranty or Subsidiary Guaranty to
which it is a party, or any Guarantor shall deny that it has any
further liability under any Guaranty or Subsidiary Guaranty to which
it is a party, or shall give notice to such effect.
7.16. Any Collateral Document shall for any reason fail to create
a valid and perfected first priority security interest in any
collateral purported to be covered thereby, except as permitted by
the terms of any Collateral Document, or any Collateral Document
shall fail to remain in full force or effect or any action shall be
taken to discontinue or to assert the invalidity or unenforceability
of any Collateral Document, or the Borrower, Subsidiary of Borrower
or Parent shall fail to comply with any of the terms or provisions of
any Collateral Document.
7.17. The representations and warranties set forth in Section
5.15 (Plan Assets; Prohibited Transactions") shall at any time not be
true and correct.
ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
8.1. Acceleration. If any Default described in Section 7.6 or
7.7 occurs with respect to the Borrower, the obligations of the
Lenders to make Loans hereunder shall automatically terminate and the
Obligations shall immediately become due and payable without any
election or action on the part of the Agent or any Lender. If any
other Default occurs, the Required Lenders (or the Agent with the
consent of the Required Lenders) may terminate or suspend the
obligations of the Lenders to make Loans hereunder, or declare the
<PAGE>
Obligations to be due and payable, or both, whereupon the Obligations
shall become immediately due and payable, without presentment,
demand, protest or notice of any kind, all of which the Borrower
hereby expressly waives.
If, within 30 days after acceleration of the maturity of the
Obligations or termination of the obligations of the Lenders to make
Loans hereunder as a result of any Default (other than any Default as
described in Section 7.6 or 7.7 with respect to the Borrower) and
before any judgment or decree for the payment of the Obligations due
shall have been obtained or entered, the Required Lenders (in their
sole discretion) shall so direct, the Agent shall, by notice to the
Borrower, rescind and annul such acceleration and/or termination.
8.2. Amendments. Subject to the provisions of this Article
VIII, the Required Lenders (or the Agent with the consent in writing
of the Required Lenders) and the Borrower may enter into agreements
supplemental hereto for the purpose of adding or modifying any
provisions to the Loan Documents or changing in any manner the rights
of the Lenders or the Borrower hereunder or waiving any Default
hereunder; provided, however, that no such supplemental agreement
shall, without the consent of all of the Lenders:
(i) Extend the final maturity of any Loan or postpone any
regularly scheduled payment of principal of any Loan or
forgive all or any portion of the principal amount thereof,
or reduce the rate or extend the time of payment of
interest or fees thereon.
(ii) Reduce the percentage specified in the definition of
Required Lenders.
(iii) Extend the Facility Termination Date, or reduce the amount
or extend the payment date for, the mandatory payments
required under Section 2.2, or increase the amount of the
Commitment of any Lender hereunder, or permit the Borrower
to assign its rights under this Agreement.
(iv) Amend this Section 8.2.
(v) Release any guarantor of any Advance or, except as provided
in the Collateral Documents, release all or substantially
all of the Collateral.
(vi) Change the percentage set forth in Section 2.17.
No amendment of any provision of this Agreement relating to the Agent
shall be effective without the written consent of the Agent. The
Agent may waive payment of the fee required under Section 12.3.2
without obtaining the consent of any other party to this Agreement.
8.3. Preservation of Rights. No delay or omission of the
Lenders or the Agent to exercise any right under the Loan Documents
shall impair such right or be construed to be a waiver of any Default
or an acquiescence therein, and the making of a Loan notwithstanding
the existence of a Default or the inability of the Borrower to
satisfy the conditions precedent to such Loan shall not constitute
<PAGE>
any waiver or acquiescence. Any single or partial exercise of any
such right shall not preclude other or further exercise thereof or
the exercise of any other right, and no waiver, amendment or other
variation of the terms, conditions or provisions of the Loan
Documents whatsoever shall be valid unless in writing signed by the
Lenders required pursuant to Section 8.2, and then only to the extent
in such writing specifically set forth. All remedies contained in
the Loan Documents or by law afforded shall be cumulative and all
shall be available to the Agent and the Lenders until the Obligations
have been paid in full.
ARTICLE IX
GENERAL PROVISIONS
9.1. Survival of Representations. All representations and
warranties of the Borrower contained in this Agreement shall survive
the making of the Loans herein contemplated.
9.2. Governmental Regulation. Anything contained in this
Agreement to the contrary notwithstanding, no Lender shall be
obligated to extend credit to the Borrower in violation of any
limitation or prohibition provided by any applicable statute or
regulation.
9.3. Section headings in the Loan Documents are for
convenience of reference only, and shall not govern the
interpretation of any of the provisions of the Loan Documents.
9.4. Entire Agreement. The Loan Documents embody the entire
agreement and understanding among the Borrower, the Agent and the
Lenders and supersede all prior agreements and understandings among
the Borrower, the Agent and the Lenders relating to the subject
matter thereof.
9.5. Several Obligations; Benefits of this Agreement. The
respective obligations of the Lenders hereunder are several and not
joint and no Lender shall be the partner or agent of any other
(except to the extent to which the Agent is authorized to act as
such). The failure of any Lender to perform any of its obligations
hereunder shall not relieve any other Lender from any of its
obligations hereunder. This Agreement shall not be construed so as
to confer any right or benefit upon any Person other than the parties
to this Agreement and their respective successors and assigns.
9.6. Expenses; Indemnification. (i) The Borrower shall
reimburse the Agent for any costs, internal charges and out-of-pocket
expenses (including attorneys' fees and time charges of attorneys for
the Agent, which attorneys may be employees of the Agent) paid or
incurred by the Agent in connection with the preparation,
negotiation, execution, delivery, syndication, review, amendment,
modification, and administration of the Loan Documents. The Borrower
also agrees to reimburse the Agent and the Lenders for any costs,
internal charges and out-of-pocket expenses (including attorneys'
fees and time charges of attorneys for the Agent and the Lenders,
which attorneys may be employees of the Agent or the Lenders) paid or
incurred by the Agent or any Lender in connection with the collection
and enforcement of the Loan Documents. Expenses being reimbursed by
the Borrower under this Section include, without limitation, costs
and expenses incurred in connection with the Reports described in the
following sentence. The Borrower acknowledges that from time to time
<PAGE>
American may prepare and may distribute to the Lenders (but shall
have no obligation or duty to prepare or to distribute to the
Lenders) certain audit reports (the "Reports") pertaining to the
Borrower's assets for internal use by American from information
furnished to it by or on behalf of the Borrower, after American has
exercised its rights of inspection pursuant to this Agreement.
(ii) The Borrower hereby further agrees to indemnify the Agent
and each Lender, its directors, officers and employees against all
losses, claims, damages, penalties, judgments, liabilities and
expenses (including, without limitation, all expenses of litigation
or preparation therefor whether or not the Agent or any Lender is a
party thereto) which any of them may pay or incur arising out of or
relating to this Agreement, the other Loan Documents, the
transactions contemplated hereby or the direct or indirect
application or proposed application of the proceeds of any Loan
hereunder except to the extent that they are determined in a final
non-appealable judgment by a court of competent jurisdiction to have
resulted from the gross negligence or willful misconduct of the party
seeking indemnification. The obligations of the Borrower under this
Section 9.6 shall survive the termination of this Agreement.
9.7. Numbers of Documents. All statements, notices, closing
documents, and requests hereunder shall be furnished to the Agent
with sufficient counterparts so that the Agent may furnish one to
each of the Lenders.
9.8. Accounting. Except as provided to the contrary herein, all
accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with Agreement
Accounting Principles.
9.9. Severability of Provisions. Any provision in any Loan
Document that is held to be inoperative, unenforceable, or invalid in
any jurisdiction shall, as to that jurisdiction, be inoperative,
unenforceable, or invalid without affecting the remaining provisions
in that jurisdiction or the operation, enforceability, or validity of
that provision in any other jurisdiction, and to this end the
provisions of all Loan Documents are declared to be severable.
9.10. Nonliability of Lenders. The relationship between the
Borrower on the one hand and the Lenders and the Agent on the other
hand shall be solely that of borrower and lender. Neither the Agent
nor any Lender shall have any fiduciary responsibilities to the
Borrower. Neither the Agent nor any Lender undertakes any
responsibility to the Borrower to review or inform the Borrower of
any matter in connection with any phase of the Borrower's business or
operations. The Borrower agrees that neither the Agent nor any
Lender shall have liability to the Borrower (whether sounding in
tort, contract or otherwise) for losses suffered by the Borrower in
connection with, arising out of, or in any way related to, the
transactions contemplated and the relationship established by the
Loan Documents, or any act, omission or event occurring in connection
therewith, unless it is determined in a final non-appealable judgment
by a court of competent jurisdiction that such losses resulted from
the gross negligence or willful misconduct of the party from which
recovery is sought. Neither the Agent nor any Lender shall have any
liability with respect to, and the Borrower hereby waives, releases
and agrees not to sue for, any special, indirect or consequential
damages suffered by the Borrower in connection with, arising out of,
or in any way related to the Loan Documents or the transactions
contemplated thereby.
<PAGE>
9.11. Confidentiality. Each Lender agrees to hold any
confidential information which it may receive from the Borrower
pursuant to this Agreement in confidence, except for disclosure (i)
to its Affiliates and to other Lenders and their respective
Affiliates, (ii) to legal counsel, accountants, and other
professional advisors to that Lender or to a Transferee, (iii) to
regulatory officials, (iv) to any Person as requested pursuant to or
as required by law, regulation, or legal process, (v) to any Person
in connection with any legal proceeding to which that Lender is a
party, and (vi) permitted by Section 12.4.
9.12. Nonreliance. Each Lender hereby represents that it is not
relying on or looking to any margin stock (as defined in Regulation U
of the Board of Governors of the Federal Reserve System) for the
repayment of the Loans provided for herein.
ARTICLE X
THE AGENT
10.1. Appointment; Nature of Relationship. The American National
Bank and Trust Company of Chicago is hereby appointed by each of the
Lenders as its contractual representative (herein referred to as the
"Agent") hereunder and under each other Loan Document, and each of
the Lenders irrevocably authorizes the Agent to act as the
contractual representative of such Lender with the rights and duties
expressly set forth herein and in the other Loan Documents. The
Agent agrees to act as such contractual representative upon the
express conditions contained in this Article X. Notwithstanding the
use of the defined term "Agent," it is expressly understood and
agreed that the Agent shall not have any fiduciary responsibilities
to any Lender by reason of this Agreement or any other Loan Document
and that the Agent is merely acting as the contractual representative
of the Lenders with only those duties as are expressly set forth in
this Agreement and the other Loan Documents. In its capacity as the
Lenders' contractual representative, the Agent (i) does not hereby
assume any fiduciary duties to any of the Lenders, (ii) is a
"representative" of the Lenders within the meaning of Section 9-105
of the Uniform Commercial Code and (iii) is acting as an independent
contractor, the rights and duties of which are limited to those
expressly set forth in this Agreement and the other Loan Documents.
Each of the Lenders hereby agrees to assert no claim against the
Agent on any agency theory or any other theory of liability for
breach of fiduciary duty, all of which claims each Lender hereby
waives.
10.2. Powers. The Agent shall have and may exercise such powers
under the Loan Documents as are specifically delegated to the Agent
by the terms of each thereof, together with such powers as are
reasonably incidental thereto. The Agent shall have no implied
duties to the Lenders, or any obligation to the Lenders to take any
action thereunder except any action specifically provided by the Loan
Documents to be taken by the Agent.
10.3. General Immunity. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable to the
Borrower, the Lenders or any Lender for any action taken or omitted
to be taken by it or them hereunder or under any other Loan Document
or in connection herewith or therewith except to the extent such
action or inaction is determined in a final non-appealable judgment
<PAGE>
by a court of competent jurisdiction to have arisen from the gross
negligence or willful misconduct of such Person.
10.4. No Responsibility for Loans, Recitals, etc. Neither the
Agent nor any of its directors, officers, agents or employees shall
be responsible for or have any duty to ascertain, inquire into, or
verify (a) any statement, warranty or representation made in
connection with any Loan Document or any borrowing hereunder; (b) the
performance or observance of any of the covenants or agreements of
any obligor under any Loan Document, including, without limitation,
any agreement by an obligor to furnish information directly to each
Lender; (c) the satisfaction of any condition specified in Article
IV, except receipt of items required to be delivered solely to the
Agent; (d) the existence or possible existence of any Default or
Unmatured Default; (e) the validity, enforceability, effectiveness,
sufficiency or genuineness of any Loan Document or any other
instrument or writing furnished in connection therewith; (f) the
value, sufficiency, creation, perfection or priority of any Lien in
any collateral security; or (g) the financial condition of the
Borrower or any guarantor of any of the Obligations or of any of the
Borrower's or any such guarantor's respective Subsidiaries. The
Agent shall have no duty to disclose to the Lenders information that
is not required to be furnished by the Borrower to the Agent at such
time, but is voluntarily furnished by the Borrower to the Agent
(either in its capacity as Agent or in its individual capacity).
10.5. Action on Instructions of Lenders. The Agent shall in all
cases be fully protected in acting, or in refraining from acting,
hereunder and under any other Loan Document in accordance with
written instructions signed by the Required Lenders (except for acts
of gross negligence or willful misconduct of Agent in carrying out
said written instructions), and such instructions and any action
taken or failure to act pursuant thereto shall be binding on all of
the Lenders. The Lenders hereby acknowledge that the Agent shall be
under no duty to take any discretionary action permitted to be taken
by it pursuant to the provisions of this Agreement or any other Loan
Document unless it shall be requested in writing to do so by the
Required Lenders. The Agent shall be fully justified in failing or
refusing to take any action hereunder and under any other Loan
Document unless it shall first be indemnified to its satisfaction by
the Lenders pro rata against any and all liability, cost and expense
that it may incur by reason of taking or continuing to take any such
action.
10.6. Employment of Agents and Counsel. The Agent may execute
any of its duties as Agent hereunder and under any other Loan
Document by or through employees, agents, and attorneys-in-fact and
shall not be answerable to the Lenders, except as to money or
securities received by it or its authorized agents, for the default
or misconduct of any such agents or attorneys-in-fact selected by it
with reasonable care. The Agent shall be entitled to advice of
counsel concerning the contractual arrangement between the Agent and
the Lenders and all matters pertaining to the Agent's duties
hereunder and under any other Loan Document.
10.7. Reliance on Documents; Counsel. The Agent shall be
entitled to rely upon any Note, notice, consent, certificate,
affidavit, letter, telegram, statement, paper or document believed by
it to be genuine and correct and to have been signed or sent by the
proper person or persons, and, in respect to legal matters, upon the
opinion of counsel selected by the Agent, which counsel may be
employees of the Agent.
<PAGE>
10.8. Agent's Reimbursement and Indemnification. The Lenders
agree to reimburse and indemnify the Agent ratably in proportion to
their respective Commitments (or, if the Commitments have been
terminated, in proportion to their Commitments immediately prior to
such termination) (i) for any amounts not reimbursed by the Borrower
for which the Agent is entitled to reimbursement by the Borrower
under the Loan Documents, (ii) for any other expenses incurred by the
Agent on behalf of the Lenders, in connection with the preparation,
execution, delivery, administration and enforcement of the Loan
Documents (including, without limitation, for any expenses incurred
by the Agent in connection with any dispute between the Agent and any
Lender or between two or more of the Lenders) and (iii) for any
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind and
nature whatsoever which may be imposed on, incurred by or asserted
against the Agent in any way relating to or arising out of the Loan
Documents or any other document delivered in connection therewith or
the transactions contemplated thereby (including, without limitation,
for any such amounts incurred by or asserted against the Agent in
connection with any dispute between the Agent and any Lender or
between two or more of the Lenders), or the enforcement of any of the
terms of the Loan Documents or of any such other documents, provided
that no Lender shall be liable for any of the foregoing to the extent
any of the foregoing is found in a final non-appealable judgment by a
court of competent jurisdiction to have resulted from the gross
negligence or willful misconduct of the Agent or the gross negligence
or willful misconduct on any agent or attorney-in-fact selected by
Agent pursuant to Section 10.6. The obligations of the Lenders under
this Section 10.8 shall survive payment of the Obligations and
termination of this Agreement.
10.9. Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Unmatured
Default hereunder unless the Agent has received written notice from a
Lender or the Borrower referring to this Agreement describing such
Default or Unmatured Default and stating that such notice is a
"notice of default". In the event that the Agent receives such a
notice, the Agent shall give prompt notice thereof to the Lenders.
10.10. Rights as a Lender. In the event the Agent is a
Lender, the Agent shall have the same rights and powers hereunder and
under any other Loan Document with respect to its Commitment and its
Loans as any Lender and may exercise the same as though it were not
the Agent, and the term "Lender" or "Lenders" shall, at any time when
the Agent is a Lender, unless the context otherwise indicates,
include the Agent in its individual capacity. The Agent and its
Affiliates may accept deposits from, lend money to, and generally
engage in any kind of trust, debt, equity or other transaction, in
addition to those contemplated by this Agreement or any other Loan
Document, with the Borrower or any of its Subsidiaries in which the
Borrower or such Subsidiary is not restricted hereby from engaging
with any other Person. The Agent, in its individual capacity, is not
obligated to remain a Lender.
10.11. Lender Credit Decision. Each Lender acknowledges that
it has, independently and without reliance upon the Agent or any
other Lender and based on the financial statements prepared by the
Borrower and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into
this Agreement and the other Loan Documents. Each Lender also
acknowledges that it will, independently and without reliance upon
the Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to
<PAGE>
make its own credit decisions in taking or not taking action under
this Agreement and the other Loan Documents.
10.12. Successor Agent. The Agent may resign at any time by
giving written notice thereof to the Lenders and the Borrower, such
resignation to be effective upon the appointment of a successor Agent
or, if no successor Agent has been appointed, forty-five days after
the retiring Agent gives notice of its intention to resign. The
Agent may be removed at any time with or without cause by written
notice received by the Agent from the Required Lenders, such removal
to be effective on the date specified by the Required Lenders. Upon
any such resignation or removal, the Required Lenders shall have the
right to appoint, on behalf of the Borrower and the Lenders, a
successor Agent. If no successor Agent shall have been so appointed
by the Required Lenders within thirty days after the resigning
Agent's giving notice of its intention to resign, then the resigning
Agent may appoint, on behalf of the Borrower and the Lenders, a
successor Agent. Notwithstanding the previous sentence, the Agent
may at any time without the consent of the Borrower or any Lender,
appoint any of its Affiliates which is a commercial bank as a
successor Agent hereunder. If the Agent has resigned or been removed
and no successor Agent has been appointed, the Lenders may perform
all the duties of the Agent hereunder and the Borrower shall make all
payments in respect of the Obligations to the applicable Lender and
for all other purposes shall deal directly with the Lenders. No
successor Agent shall be deemed to be appointed hereunder until such
successor Agent has accepted the appointment. Any such successor
Agent shall be a commercial bank having capital and retained earnings
of at least $100,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the resigning or removed Agent. Upon the
effectiveness of the resignation or removal of the Agent, the
resigning or removed Agent shall be discharged from its duties and
obligations hereunder and under the Loan Documents. After the
effectiveness of the resignation or removal of an Agent, the
provisions of this Article X shall continue in effect for the benefit
of such Agent in respect of any actions taken or omitted to be taken
by it while it was acting as the Agent hereunder and under the other
Loan Documents. In the event that there is a successor to the Agent
by merger, or the Agent assigns its duties and obligations to an
Affiliate pursuant to this Section 10.12, then the term "Corporate
Base Rate" as used in this Agreement shall mean the prime rate, base
rate or other analogous rate of the new Agent.
10.13. Agent's Fee. The Borrower agrees to pay to Agent, for
its own Account, an annual Agent Fee in advance of $25,000.00. Said
Agent's Fee shall be paid to Agent contemporaneously with the
execution of this Agreement on each annual anniversary date
thereafter.
10.14. Delegation to Affiliates. The Borrower and the
Lenders agree that the Agent may delegate any of its duties under
this Agreement to any of its Affiliates. Any such Affiliate (and
such Affiliate's directors, officers, agents and employees) which
performs duties in connection with this Agreement shall be entitled
to the same benefits of the indemnification, waiver and other
protective provisions to which the Agent is entitled under Articles
IX and X.
10.15. Execution of Collateral Documents. The Lenders hereby
empower and authorize the Agent to execute and deliver to the
Borrower on their behalf any security agreement(s) and all related
<PAGE>
financing statements and any financing statements, agreements,
documents or instruments as shall be necessary or appropriate to
effect the purposes of any security agreement(s).
10.16. Collateral Releases. The Lenders hereby empower and
authorize the Agent to execute and deliver to the Borrower on their
behalf any agreements, documents or instruments as shall be necessary
or appropriate to effect any releases of Collateral which shall be
permitted by the terms hereof or of any other Loan Document or which
shall otherwise have been approved by the Required Lenders (or, if
required by the terms of Section 8.2, all of the Lenders) in writing.
ARTICLE XI
SETOFF; RATABLE PAYMENTS
11.1. Setoff. In addition to, and without limitation of, any
rights of the Lenders under applicable law, if the Borrower becomes
insolvent, however evidenced, or any Default occurs, any and all
deposits (including all account balances, whether provisional or
final and whether or not collected or available) and any other
Indebtedness at any time held or owing by any Lender or any Affiliate
of any Lender to or for the credit or account of the Borrower may be
offset and applied toward the payment of the Obligations owing to
such Lender, whether or not the Obligations, or any part hereof,
shall then be due.
11.2. Ratable Payments. If any Lender, whether by setoff or
otherwise, has payment made to it upon its Loans (other than payments
received pursuant to Section 3.1, 3.2, 3.4 or 3.5) in a greater
proportion than that received by any other Lender, such Lender
agrees, promptly upon demand, to purchase a portion of the Loans held
by the other Lenders so that after such purchase each Lender will
hold its ratable proportion of Loans. If any Lender, whether in
connection with setoff or amounts which might be subject to setoff or
otherwise, receives collateral or other protection for its
Obligations or such amounts which may be subject to setoff, such
Lender agrees, promptly upon demand, to take such action necessary
such that all Lenders share in the benefits of such collateral
ratably in proportion to their Loans. In case any such payment is
disturbed by legal process, or otherwise, appropriate further
adjustments shall be made.
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
12.1.Successors and Assigns. The terms and provisions of the
Loan Documents shall be binding upon and inure to the benefit of the
Borrower and the Lenders and their respective successors and assigns,
except that (i) the Borrower shall not have the right to assign its
rights or obligations under the Loan Documents and (ii) any
assignment by any Lender must be made in compliance with Section
12.3. Notwithstanding clause (ii) of this Section, any Lender may at
any time, without the consent of the Borrower or the Agent, assign
all or any portion of its rights under this Agreement and any Note to
a Federal Reserve Bank; provided, however, that no such assignment to
a Federal Reserve Bank shall release the transferor Lender from its
obligations hereunder. The Agent may treat the Person which made any
<PAGE>
Loan or which holds any Note as the owner thereof for all purposes
hereof unless and until such Person complies with Section 12.3 in the
case of an assignment thereof or, in the case of any other transfer,
a written notice of the transfer is filed with the Agent. Any
assignee or transferee of the rights to any Loan or any Note agrees
by acceptance of such transfer or assignment to be bound by all the
terms and provisions of the Loan Documents. Any request, authority
or consent of any Person, who at the time of making such request or
giving such authority or consent is the owner of the rights to any
Loan (whether or not a Note has been issued in evidence thereof),
shall be conclusive and binding on any subsequent holder, transferee
or assignee of the rights to such Loan.
12.2. Participations.
12.2.1 Permitted Participants; Effect. Any Lender may, in
the ordinary course of its business and in accordance with
applicable law, at any time sell to one or more banks or other
entities ("Participants") participating interests in any Loan
owing to such Lender, any Note held by such Lender, any
Commitment of such Lender or any other interest of such Lender
under the Loan Documents. In the event of any such sale by a
Lender of participating interests to a Participant, such
Lender's obligations under the Loan Documents shall remain
unchanged, such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations,
such Lender shall remain the owner of its Loans and the holder
of any Note issued to it in evidence thereof for all purposes
under the Loan Documents, all amounts payable by the Borrower
under this Agreement shall be determined as if such Lender had
not sold such participating interests, and the Borrower and the
Agent shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations
under the Loan Documents.
12.2.2. Voting Rights. Each Lender shall retain the sole
right to approve, without the consent of any Participant, any
amendment, modification or waiver of any provision of the Loan
Documents other than any amendment, modification or waiver with
respect to any Loan or Commitment in which such Participant has
an interest which forgives principal, interest or fees or
reduces the interest rate or fees payable with respect to any
such Loan or Commitment, extends the Facility Termination Date,
postpones any date fixed for any regularly-scheduled payment of
principal of, or interest or fees on, any such Loan or
Commitment, releases any guarantor of any such Loan or releases
all or substantially all of the collateral, if any, securing any
such Loan.
12.2.3. Benefit of Setoff. The Borrower agrees that each
Participant shall be deemed to have the right of setoff provided
in Section 11.1 in respect of its participating interest in
amounts owing under the Loan Documents to the same extent as if
the amount of its participating interest were owing directly to
it as a Lender under the Loan Documents, provided that each
Lender shall retain the right of setoff provided in Section 11.1
with respect to the amount of participating interests sold to
each Participant. The Lenders agree to share with each
Participant, and each Participant, by exercising the right of
setoff provided in Section 11.1, agrees to share with each
Lender, any amount received pursuant to the exercise of its
<PAGE>
right of setoff, such amounts to be shared in accordance with
Section 11.2 as if each Participant were a Lender.
12.3. Assignments.
12.3.1. Permitted Assignments. Any Lender may, in the
ordinary course of its business and in accordance with
applicable law, at any time assign to one or more banks or other
entities ("Purchasers") all or any part of its rights and
obligations under the Loan Documents. Such assignment shall be
substantially in the form of Exhibit C or in such other form as
may be agreed to by the parties thereto. The consent of the
Borrower and the Agent shall be required prior to an assignment
becoming effective with respect to a Purchaser which is not a
Lender or an Affiliate thereof; provided, however, that if a
Default has occurred and is continuing, the consent of the
Borrower shall not be required. Such consent shall not be
unreasonably withheld or delayed. Each such assignment shall
(unless each of the Borrower and the Agent otherwise consents)
be in an amount not less than the lesser of (i) $5,000,000.00 or
(ii) the remaining amount of the assigning Lender's Commitment
(calculated as at the date of such assignment).
12.3.2. Effect; Effective Date. Upon (i) delivery to the
Agent of a notice of assignment, substantially in the form
attached as Exhibit I to Exhibit C (a "Notice of Assignment"),
together with any consents required by Section 12.3.1, and (ii)
payment of a $3,000 fee to the Agent for processing such
assignment, such assignment shall become effective on the
effective date specified in such Notice of Assignment. The
Notice of Assignment shall contain a representation by the
Purchaser to the effect that none of the consideration used to
make the purchase of the Commitment and Loans under the
applicable assignment agreement are "plan assets" as defined
under ERISA and that the rights and interests of the Purchaser
in and under the Loan Documents will not be "plan assets" under
ERISA. On and after the effective date of such assignment, such
Purchaser shall for all purposes be a Lender party to this
Agreement and any other Loan Document executed by or on behalf
of the Lenders and shall have all the rights and obligations of
a Lender under the Loan Documents, to the same extent as if it
were an original party hereto, and no further consent or action
by the Borrower, the Lenders or the Agent shall be required to
release the transferor Lender with respect to the percentage of
the Aggregate Commitment and Loans assigned to such Purchaser.
Upon the consummation of any assignment to a Purchaser pursuant
to this Section 12.3.2, the transferor Lender, the Agent and the
Borrower shall, if the transferor Lender or the Purchaser
desires that its Loans be evidenced by Notes, make appropriate
arrangements so that new Notes or, as appropriate, replacement
Notes are issued to such transferor Lender and new Notes or, as
appropriate, replacement Notes, are issued to such Purchaser, in
each case in principal amounts reflecting their respective
Commitments, as adjusted pursuant to such assignment.
12.4. Dissemination of Information. The Borrower authorizes each
Lender to disclose to any Participant or Purchaser or any other
Person acquiring an interest in the Loan Documents by operation of
law (each a "Transferee") and any prospective Transferee any and all
information in such Lender's possession concerning the
creditworthiness of the Borrower and its Subsidiaries, including
<PAGE>
without limitation any information contained in any Reports; provided
that each Transferee and prospective Transferee agrees to be bound by
Section 9.11 of this Agreement.
12.5. Tax Treatment. If any interest in any Loan Document is
transferred to any Transferee which is organized under the laws of
any jurisdiction other than the United States or any State thereof,
the transferor Lender shall cause such Transferee, concurrently with
the effectiveness of such transfer, to comply with the provisions of
Section 3.5(iv).
ARTICLE XIII
NOTICES
13.1. Notices. Except as otherwise permitted by Section 2.14
with respect to borrowing notices, all notices, requests and other
communications to any party hereunder shall be in writing (including
electronic transmission, facsimile transmission or similar writing)
and shall be given to such party: (x) in the case of the Borrower or
the Agent, at its address or facsimile number set forth on the
signature pages hereof, (y) in the case of any Lender, at its address
or facsimile number set forth below its signature hereto or (z) in
the case of any party, at such other address or facsimile number as
such party may hereafter specify for the purpose by notice to the
Agent and the Borrower in accordance with the provisions of this
Section 13.1. Each such notice, request or other communication shall
be effective (i) if given by facsimile transmission, when transmitted
to the facsimile number specified in this Section and confirmation of
receipt is received, (ii) if given by mail, 72 hours after such
communication is deposited in the mails with first class postage
prepaid, addressed as aforesaid, or (iii) if given by any other
means, when delivered (or, in the case of electronic transmission,
received) at the address specified in this Section; provided that
notices to the Agent under Article II shall not be effective until
received.
13.2. Change of Address. The Borrower, the Agent and any Lender
may each change the address for service of notice upon it by a notice
in writing to the other parties hereto.
ARTICLE XIV
COUNTERPARTS
This Agreement may be executed in any number of counterparts,
all of which taken together shall constitute one agreement, and any
of the parties hereto may execute this Agreement by signing any such
counterpart. This Agreement shall be effective when it has been
executed by the Borrower, the Agent and the Lenders and each party
has notified the Agent by facsimile transmission or telephone that it
has taken such action.
<PAGE>
ARTICLE XV
CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL
15.1. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE
CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF
CONFLICTS) OF THE STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL
LAWS APPLICABLE TO NATIONAL BANKS.
15.2. CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES
FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO, ILLINOIS IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS
AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT
OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER
HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING
HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY LENDER TO BRING
PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER
JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER AGAINST THE
AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT
OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT
ONLY IN A COURT IN CHICAGO, ILLINOIS.
15.3. WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT AND EACH
LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN
TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO,
OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED
THEREUNDER.
<PAGE>
IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have
duly executed this Agreement as of the date first above written.
KABLE NEWS COMPANY, INC.,
an Illinois corporation
By:___________________________
Title:________________________
16 South Wesley Avenue
Mt. Morris, Illinois
Attention: President
Telephone: (815)734-4151
FAX: (815)734-5233
Commitments
$21,350,000.00 (50%) AMERICAN NATIONAL BANK AND
-------------- TRUST COMPANY OF CHICAGO,
Individually and as Agent
By:__________________________
Title:_______________________
Chicago, Illinois
Attention: James R. Popp
Telephone: (312)661-6532
FAX: (312)661-3566
<PAGE>
$9,607,500.00 (22.5%) HELLER FINANCIAL, INC.
-------------
By:__________________________
Title:_______________________
500 West Monroe
Chicago, Illinois 60661
Attention: Venkat Venkatesan
Telephone: (312) 441-6859
FAX: (312) 441-6199
$5,871,250.00 (13.75%) MERRILL LYNCH BUSINESS
------------- FINANCIAL SERVICES INC.
By:__________________________
Title:_______________________
33 West Monroe Street, 22nd Floor
Chicago, Illinois 60603
Attention: Gary Stewart
Telephone: (312) 269-4423
FAX: (312) 845-9093
$5,871,250.00 (13.75%) FIRST BANK
-------------
By:__________________________
Title:_______________________
4565 West Harrison Street
Hillside, Illinois 60162
Attention: Bill Lavery
Telephone: (708) 236-1680
FAX: (708) 236-1661
$42,700,000.00
===============
<PAGE>
CERTIFICATE OF ACKNOWLEDGEMENT AND PLEDGE
The undersigned, wholly-owned subsidiaries of Kable News Company,
Inc., an Illinois corporation ("Borrower") hereby execute the present
certificate and agree to be bound by and honor all covenants,
conditions and terms of the attached Loan Agreement ("Loan
Agreement") applicable to each of the undersigned. In addition, each
of the undersigned, by their execution hereof, hereby grants a
security interest in favor of Borrower in and to all presently
existing and hereafter arising accounts, inventory, equipment,
general intangibles, instruments and chattel paper and the proceeds
of all of the foregoing of each of said companies to secure all
amounts advanced and/or lent to each of said companies pursuant to
Section 6.22 of the Loan Agreement.
KABLE NEWS EXPORT, LTD.
By:_________________________________
Title:_______________________________
KABLE NEWS COMPANY OF CANADA, LTD.
By:_________________________________
Title:_______________________________
KABLE NEWS INTERNATIONAL, INC.
By:_________________________________
Title:_______________________________
KABLE FULFILLMENT SERVICES
OF OHIO, INC.
By:_________________________________
Title:_______________________________
<PAGE>
PRICING SCHEDULE
========================================
Applicable Margin
========================================
Eurodollar Rate 275 Basis Points
========================================
Floating Rate 50 Basis Points
========================================
<PAGE>
EXHIBIT A
FORM OF OPINION
<PAGE>
EXHIBIT B
COMPLIANCE CERTIFICATE
To: The Lenders parties to the
Credit Agreement Described Below
This Compliance Certificate is furnished pursuant to that
certain Credit Agreement dated as of ______________ , ____________ (as
amended, modified, renewed or extended from time to time, the
"Agreement") among the ___________________________ (the "Borrower"),
the Lenders party thereto and American National Bank and Trust
Company of Chicago, as Agent for the Lenders. Unless otherwise
defined herein, capitalized terms used in this Compliance Certificate
have the meanings ascribed thereto in the Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected________________________of the Borrower;
2. I have reviewed the terms of the Agreement and I have made,
or have caused to be made under my supervision, a detailed review of
the transactions and conditions of the Borrower and its Subsidiaries
during the accounting period covered by the attached financial
statements;
3. The examinations described in paragraph 2 did not disclose,
and I have no knowledge of, the existence of any condition or event
which constitutes a Default or Unmatured Default during or at the end
of the accounting period covered by the attached financial statements
or as of the date of this Certificate, except as set forth below;
4. Schedule I attached hereto sets forth financial data and
computations evidencing the Borrower's compliance with certain
covenants of the Agreement, all of which data and computations are
true, complete and correct; and
5. Schedule II attached hereto sets forth the various reports
and deliveries which are required at this time under the Credit
Agreement, the Security Agreement and the other Loan Documents and
the status of compliance.
<PAGE>
Described below are the exceptions, if any, to paragraph 3 by
listing, in detail, the nature of the condition or event, the period
during which it has existed and the action which the Borrower has
taken, is taking, or proposes to take with respect to each such
condition or event:
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
The foregoing certifications, together with the computations set
forth in Schedule I hereto and the financial statements delivered
with this Certificate in support hereof, are made and delivered this
_______ day of _________________ , _____________.
_______________________________
<PAGE>
SCHEDULE I TO COMPLIANCE CERTIFICATE
Compliance as of _________, ______ with
Provisions of _______ and _________ of
the Agreement
<PAGE>
SCHEDULE II TO COMPLIANCE CERTIFICATE
Reports and Deliveries Currently Due
<PAGE>
EXHIBIT C
ASSIGNMENT AGREEMENT
This Assignment Agreement (this "Assignment Agreement") between
________________________ (the "Assignor") __________________ and
(the "Assignee") is dated as of ________________, 19_____. The parties
hereto agree as follows:
1. PRELIMINARY STATEMENT. The Assignor is a party to a Credit
Agreement (which, as it may be amended, modified, renewed or extended
from time to time is herein called the "Credit Agreement") described
in Item 1 of Schedule 1 attached hereto ("Schedule 1"). Capitalized
terms used herein and not otherwise defined herein shall have the
meanings attributed to them in the Credit Agreement.
2. ASSIGNMENT AND ASSUMPTION. The Assignor hereby sells and
assigns to the Assignee, and the Assignee hereby purchases and
assumes from the Assignor, an interest in and to the Assignor's
rights and obligations under the Credit Agreement such that after
giving effect to such assignment the Assignee shall have purchased
pursuant to this Assignment Agreement the percentage interest
specified in Item 3 of Schedule 1 of all outstanding rights and
obligations under the Credit Agreement relating to the facilities
listed in Item 3 of Schedule 1 and the other Loan Documents. The
aggregate Commitment (or Loans, if the applicable Commitment has been
terminated) purchased by the Assignee hereunder is set forth in Item
4 of Schedule 1.
3. EFFECTIVE DATE. The effective date of this Assignment
Agreement (the "Effective Date") shall be the later of the date
specified in Item 5 of Schedule 1 or two Business Days (or such
shorter period agreed to by the Agent) after a Notice of Assignment
substantially in the form of Exhibit "I" attached hereto has been
delivered to the Agent. Such Notice of Assignment must include any
consents required to be delivered to the Agent by Section 12.3.1 of
the Credit Agreement. In no event will the Effective Date occur if
the payments required to be made by the Assignee to the Assignor on
the Effective Date under Sections 4 and 5 hereof are not made on the
proposed Effective Date. The Assignor will notify the Assignee of
the proposed Effective Date no later than the Business Day prior to
the proposed Effective Date. As of the Effective Date, (i) the
Assignee shall have the rights and obligations of a Lender under the
Loan Documents with respect to the rights and obligations assigned to
the Assignee hereunder and (ii) the Assignor shall relinquish its
rights and be released from its corresponding obligations under the
Loan Documents with respect to the rights and obligations assigned to
the Assignee hereunder.
4. PAYMENT OBLIGATIONS. On and after the Effective Date, the
Assignee shall be entitled to receive from the Agent all payments of
principal, interest and fees with respect to the interest assigned
hereby. The Assignee shall advance funds directly to the Agent with
respect to all Loans and reimbursement payments made on or after the
Effective Date with respect to the interest assigned hereby. **[In
consideration for the sale and assignment of Loans hereunder, (i) the
Assignee shall pay the Assignor, on the Effective Date, an amount
equal to the principal amount of the portion of all Floating Rate
Loans assigned to the Assignee hereunder and (ii) with respect to
<PAGE>
each Fixed Rate Loan made by the Assignor and assigned to the
Assignee hereunder which is outstanding on the Effective Date, (a) on
the last day of the Interest Period therefor or (b) on such earlier
date agreed to by the Assignor and the Assignee or (c) on the date on
which any such Fixed Rate Loan becomes due (by acceleration or
otherwise)(the date as described in the foregoing clauses (a), (b) or
(c) being hereinafter referred to as the "Payment Date"), the
Assignee shall pay the Assignor an amount equal to the principal
amount of the portion of such Fixed Rate Loan assigned to the
Assignee which is outstanding on the Payment Date. If the Assignor
and the Assignee agree that the Payment Date for such Fixed Rate Loan
shall be the Effective Date, they shall agree to the interest rate
applicable to the portion of such Loan assigned hereunder for the
period from the Effective Date to the end of the existing Interest
Period applicable to such Fixed Rate Loan (the "Agreed Interest
Rate") and any interest received by the Assignee in excess of the
Agreed Interest Rate shall be remitted to the Assignor. In the event
interest for the period from the Effective Date to but not including
the Payment Date is not paid by the Borrower with respect to any
Fixed Rate Loan sold by the Assignor to the Assignee hereunder, the
Assignee shall pay to the Assignor interest for such period on the
portion of such Fixed Rate Loan sold by the Assignor to the Assignee
hereunder at the applicable rate provided by the Credit Agreement.
In the event a prepayment of any Fixed Rate Loan which is existing on
the Payment Date and assigned by the Assignor to the Assignee
hereunder occurs after the Payment Date but before the end of the
Interest Period applicable to such Fixed Rate Loan, the Assignee
shall remit to the Assignor the excess of the prepayment penalty paid
with respect to the portion of such Fixed Rate Loan assigned to the
Assignee hereunder over the amount which would have been paid if such
prepayment penalty was calculated based on the Agreed Interest Rate.
The Assignee will also promptly remit to the Assignor (i) any
principal payments received from the Agent with respect to Fixed Rate
Loans prior to the Payment Date and (ii) any amounts of interest on
Loans and fees received from the Agent which relate to the portion of
the Loans assigned to the Assignee hereunder for periods prior to the
Effective Date, in the case of Floating Rate Loans or fees, or the
Payment Date, in the case of Fixed Rate Loans, and not previously
paid by the Assignee to the Assignor.]** In the event that either
party hereto receives any payment to which the other party hereto is
entitled under this Assignment Agreement, then the party receiving
such amount shall promptly remit it to the other party hereto.
**Each Assignor may insert its standard payment provisions in lieu of
the payment terms included in this Exhibit.
5. FEES PAYABLE BY THE ASSIGNEE. The Assignee shall pay to the
Assignor a fee on each day on which a payment of interest or
commitment fees is made under the Credit Agreement with respect to
the amounts assigned to the Assignee hereunder (other than a payment
of interest or commitment fees for the period prior to the Effective
Date or, in the case of Fixed Rate Loans, the Payment Date, which the
Assignee is obligated to deliver to the Assignor pursuant to Section
4 hereof). The amount of such fee shall be the difference between
(i) the interest or fee, as applicable, paid with respect to the
amounts assigned to the Assignee hereunder and (ii) the interest or
fee, as applicable, which would have been paid with respect to the
amounts assigned to the Assignee hereunder if each interest rate was
_____ of 1% less than the interest rate paid by the Borrower or if the
commitment fee was _____ of 1% less than the commitment fee paid by
the Borrower, as applicable. In addition, the Assignee agrees to
pay _____% of the recordation fee required to be paid to the
Agent in connection with this Assignment Agreement.
<PAGE>
6. REPRESENTATIONS OF THE ASSIGNOR; LIMITATIONS ON THE
ASSIGNOR'S LIABILITY. The Assignor represents and warrants that it
is the legal and beneficial owner of the interest being assigned by
it hereunder and that such interest is free and clear of any adverse
claim created by the Assignor. It is understood and agreed that the
assignment and assumption hereunder are made without recourse to the
Assignor and that the Assignor makes no other representation or
warranty of any kind to the Assignee. Neither the Assignor nor any
of its officers, directors, employees, agents or attorneys shall be
responsible for (i) the due execution, legality, validity,
enforceability, genuineness, sufficiency or collectability of any
Loan Document, including without limitation, documents granting the
Assignor and the other Lenders a security interest in assets of the
Borrower or any guarantor, (ii) any representation, warranty or
statement made in or in connection with any of the Loan Documents,
(iii) the financial condition or creditworthiness of the Borrower or
any guarantor, (iv) the performance of or compliance with any of the
terms or provisions of any of the Loan Documents, (v) inspecting any
of the Property, books or records of the Borrower, (vi) the validity,
enforceability, perfection, priority, condition, value or sufficiency
of any collateral securing or purporting to secure the Loans or (vii)
any mistake, error of judgment, or action taken or omitted to be
taken in connection with the Loans or the Loan Documents.
7. REPRESENTATIONS OF THE ASSIGNEE. The Assignee (i) confirms
that it has received a copy of the Credit Agreement, together with
copies of the financial statements requested by the Assignee and such
other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Assignment
Agreement, (ii) agrees that it will, independently and without
reliance upon the Agent, the Assignor or any other Lender and based
on such documents and information at it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not
taking action under the Loan Documents, (iii) appoints and authorizes
the Agent to take such action as agent on its behalf and to exercise
such powers under the Loan Documents as are delegated to the Agent by
the terms thereof, together with such powers as are reasonably
incidental thereto, (iv) agrees that it will perform in accordance
with their terms all of the obligations which by the terms of the
Loan Documents are required to be performed by it as a Lender, (v)
agrees that its payment instructions and notice instructions are as
set forth in the attachment to Schedule 1, (vi) confirms that none of
the funds, monies, assets or other consideration being used to make
the purchase and assumption hereunder are "plan assets" as defined
under ERISA and that its rights, benefits and interests in and under
the Loan Documents will not be "plan assets" under ERISA, **[(vii)
confirms that it is an Eligible Assignee,]** **[and (viii) attaches
the forms prescribed by the Internal Revenue Service of the United
States certifying that the Assignee is entitled to receive payments
under the Loan Documents without deduction or withholding of any
United States federal income taxes]**.**
*to be inserted if required by the Credit Agreement.
**to be inserted if the Assignee is not incorporated under the laws
of the United States, or a state thereof.
8. INDEMNITY. The Assignee agrees to indemnify and hold the
Assignor harmless against any and all losses, costs and expenses
(including, without limitation, reasonable attorneys' fees) and
<PAGE>
liabilities incurred by the Assignor in connection with or arising in
any manner from the Assignee's non-performance of the obligations
assumed under this Assignment Agreement.
9. SUBSEQUENT ASSIGNMENTS. After the Effective Date, the
Assignee shall have the right pursuant to Section 12.3.1 of the
Credit Agreement to assign the rights which are assigned to the
Assignee hereunder to any entity or person, provided that (i) any
such subsequent assignment does not violate any of the terms and
conditions of the Loan Documents or any law, rule, regulation, order,
writ, judgment, injunction or decree and that any consent required
under the terms of the Loan Documents has been obtained and (ii)
unless the prior written consent of the Assignor is obtained, the
Assignee is not thereby released from its obligations to the Assignor
hereunder, if any remain unsatisfied, including, without limitation,
its obligations under Sections 4, 5 and 8 hereof.
10. REDUCTIONS OF AGGREGATE COMMITMENT. If any reduction in
the Aggregate Commitment occurs between the date of this Assignment
Agreement and the Effective Date, the percentage interest specified
in Item 3 of Schedule 1 shall remain the same, but the dollar amount
purchased shall be recalculated based on the reduced Aggregate
Commitment.
11. ENTIRE AGREEMENT. This Assignment Agreement and the
attached Notice of Assignment embody the entire agreement and
understanding between the parties hereto and supersede all prior
agreements and understandings between the parties hereto relating to
the subject matter hereof.
12. GOVERNING LAW. This Assignment Agreement shall be governed
by the internal law, and not the law of conflicts, of the State of
Illinois.
13. NOTICES. Notices shall be given under this Assignment
Agreement in the manner set forth in the Credit Agreement. For the
purpose hereof, the addresses of the parties hereto (until notice of
a change is delivered) shall be the address set forth in the
attachment to Schedule 1.
IN WITNESS WHEREOF, the parties hereto have executed this
Assignment Agreement by their duly authorized officers as of the date
first above written.
**[NAME OF ASSIGNOR]**
By:___________________________________
Title:________________________________
________________________________
________________________________
**[NAME OF ASSIGNEE]**
By:___________________________________
Title:________________________________
________________________________
________________________________
<PAGE>
SCHEDULE 1
to Assignment Agreement
1. Description and Date of Credit Agreement:
2. Date of Assignment Agreement: , 19
3. Amounts (As of Date of Item 2 above):
Facility Facility Facility Facility
1* 2* 3* 4*
-------- -------- -------- --------
a. Total of Commitments
(Loans)** under
Credit Agreement $ $ $ $
-------- -------- -------- --------
b. Assignee's Percentage
of each Facility purchased
under the Assignment
Agreement*** % % % %
-------- -------- -------- --------
c. Amount of Assigned Share in
each Facility purchased under
the Assignment
Agreement $ $ $ $
-------- -------- -------- --------
4. Assignee's Aggregate (Loan
Amount)** Commitment Amount
Purchased Hereunder: $
-------------
5. Proposed Effective Date: -------------
Accepted and Agreed:
**[NAME OF ASSIGNOR]** **[NAME OF ASSIGNEE]**
By:__________________________ By:_________________________
Title:_______________________ Title:______________________
* Insert specific facility names per Credit Agreement
** If a Commitment has been terminated, insert outstanding Loans in
place of Commitment
*** Percentage taken to 2 decimal places
<PAGE>
Attachment to SCHEDULE 1 to ASSIGNMENT AGREEMENT
ADMINISTRATIVE INFORMATION SHEET
--------------------------------
Attach Assignor's Administrative Information Sheet, which must
include notice addresses for the Assignor and the Assignee
(Sample form shown below)
ASSIGNOR INFORMATION
--------------------
Contact:
Name:______________________________ Telephone No.:___________________________
Fax No.:___________________________ Telex No.:_______________________________
Answerback:______________________________
Payment Information:
Name & ABA # of Destination Bank:_____________________________________________
_____________________________________________
Account Name & Number for Wire Transfer:______________________________________
______________________________________
Other Instructions:___________________________________________________________
______________________________________________________________________________
Address for Notices for Assignor:
ASSIGNEE INFORMATION
--------------------
Credit Contact:
Name:______________________________ Telephone No.:___________________________
Fax No.:___________________________ Telex No.:_______________________________
Answerback:______________________________
Key Operations Contacts:
Booking Installation:______________ Booking Installation:____________________
Name:______________________________ Name:____________________________________
Telephone No.:_____________________ Telephone No.:___________________________
Fax No.:___________________________ Fax No.:_________________________________
Telex No.:_________________________ Telex No.:_______________________________
Answerback:________________________ Answerback:______________________________
<PAGE>
Payment Information:
Name & ABA # of Destination Bank:_____________________________________________
_____________________________________________
Account Name & Number for Wire Transfer:______________________________________
______________________________________
Other Instructions:___________________________________________________________
______________________________________________________________________________
Address for Notices for Assignee:_____________________________________________
_____________________________________________
_____________________________________________
<PAGE>
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO ("ANB") INFORMATION
Assignee will be called promptly upon receipt of the signed agreement.
Initial Funding Contact: Subsequent Operations Contact:
- ----------------------- -----------------------------
Name:______________________________ Name:______________________________
Telephone No.:_____________________ Telephone No.:_____________________
Fax No.:___________________________ Fax No.:___________________________
ANB Telex No.:________________________
Initial Funding Standards:
- -------------------------
Libor - Fund 2 days after rates are set.
ANB Wire Instructions:
- ---------------------
Address for Notices for ANB:
- ---------------------------
<PAGE>
EXHIBIT "I"
to Assignment Agreement
NOTICE
OF ASSIGNMENT
-------------
_____________, 19_____
To: **[NAME OF BORROWER]**
_______________________
_______________________
**[NAME OF AGENT]**
_______________________
_______________________
From: **[NAME OF ASSIGNOR]** (the "Assignor")
**[NAME OF ASSIGNEE]** (the "Assignee")
1. We refer to that Credit Agreement (the "Credit Agreement")
described in Item 1 of Schedule 1 attached hereto ("Schedule 1").
Capitalized terms used herein and not otherwise defined herein shall have
the meanings attributed to them in the Credit Agreement.
2. This Notice of Assignment (this "Notice") is given and delivered
to the Borrower and the Agent pursuant to Section 12.3.2 of the Credit
Agreement.
3. The Assignor and the Assignee have entered into an Assignment
Agreement, dated as of ___________, 19___ (the "Assignment"), pursuant to
which, among other things, the Assignor has sold, assigned, delegated and
transferred to the Assignee, and the Assignee has purchased, accepted and
assumed from the Assignor the percentage interest specified in Item 3 of
Schedule 1 of all outstandings, rights and obligations under the Credit
Agreement relating to the facilities listed in Item 3 of Schedule 1. The
Effective Date of the Assignment shall be the later of the date specified
in Item 5 of Schedule 1 or two Business Days (or such shorter period as
agreed to by the Agent) after this Notice of Assignment and any consents
and fees required by Sections **[12.3.1 and 12.3.2]** of the Credit
Agreement have been delivered to the Agent, provided that the Effective
Date shall not occur if any condition precedent agreed to by the Assignor
and the Assignee has not been satisfied.
*To be included only if consent must be obtained from the Borrower
pursuant to Section 12.3.1 of the Credit Agreement.
<PAGE>
4. The Assignor and the Assignee hereby give to the Borrower and the
Agent notice of the assignment and delegation referred to herein. The
Assignor will confer with the Agent before the date specified in Item 5 of
Schedule 1 to determine if the Assignment Agreement will become effective
on such date pursuant to Section 3 hereof, and will confer with the Agent
to determine the Effective Date pursuant to Section 3 hereof if it occurs
thereafter. The Assignor shall notify the Agent if the Assignment
Agreement does not become effective on any proposed Effective Date as a
result of the failure to satisfy the conditions precedent agreed to by the
Assignor and the Assignee. At the request of the Agent, the Assignor
will give the Agent written confirmation of the satisfaction of the
conditions precedent.
5. The Assignor or the Assignee shall pay to the Agent on or before
the Effective Date the processing fee of $3,000 required by Section 12.3.2
of the Credit Agreement.
6. If Notes are outstanding on the Effective Date, the Assignor and
the Assignee request and direct that the Agent prepare and cause the
Borrower to execute and deliver new Notes or, as appropriate, replacement
notes, to the Assignor and the Assignee. The Assignor and, if applicable,
the Assignee each agree to deliver to the Agent the original Note received
by it from the Borrower upon its receipt of a new Note in the appropriate
amount.
7. The Assignee advises the Agent that notice and payment
instructions are set forth in the attachment to Schedule 1.
8. The Assignee hereby represents and warrants that none of the
funds, monies, assets or other consideration being used to make the
purchase pursuant to the Assignment are "plan assets" as defined under
ERISA and that its rights, benefits, and interests in and under the Loan
Documents will not be "plan assets" under ERISA.
9. The Assignee authorizes the Agent to act as its agent under the
Loan Documents in accordance with the terms thereof. The Assignee
acknowledges that the Agent has no duty to supply information with respect
to the Borrower or the Loan Documents to the Assignee until the Assignee
becomes a party to the Credit Agreement.*
*May be eliminated if Assignee is a party to the Credit Agreement prior to
the Effective Date.
NAME OF ASSIGNOR NAME OF ASSIGNEE
By:___________________________ By:______________________________
Title:________________________ Title:___________________________
ACKNOWLEDGED **[AND CONSENTED TO]** ACKNOWLEDGED**[AND CONSENTED TO]**
BY **[NAME OF AGENT]** BY **[NAME OF BORROWER]**
By:___________________________ By:______________________________
Title:________________________ Title:___________________________
**[Attach photocopy of Schedule 1 to Assignment]**
<PAGE>
EXHIBIT D
LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION
To: American National Bank and Trust Company of Chicago,
as Agent (the "Agent") under the Loan Agreement
Described Below.
Re: Loan Agreement, dated __________________, _______ (as the
same may be amended or modified, the "Loan Agreement"), among
_______________ (the "Borrower"), the Lenders named therein
and the Agent. Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned thereto in the
Loan Agreement.
The Agent is specifically authorized and directed to act upon
the following standing money transfer instructions with respect to
the proceeds of Advances or other extensions of credit from time to
time until receipt by the Agent of a specific written revocation of
such instructions by the Borrower, provided, however, that the Agent
may otherwise transfer funds as hereafter directed in writing by the
Borrower in accordance with Section 13.1 of the Loan Agreement or
based on any telephonic notice made in accordance with Section 2.14
of the Loan Agreement.
Facility Identification Number(s)______________________________________________
Customer/Account Name__________________________________________________________
Transfer Funds To______________________________________________________________
______________________________________________________________
______________________________________________________________
For Account No.________________________________________________________________
Reference/Attention To_________________________________________________________
Authorized Officer (Customer Representative) Date_______________________
___________________________ ___________________________
(Please Print) Signature
Bank Officer Name Date______________________
___________________________ ___________________________
(Please Print) Signature
(Deliver Completed Form to Credit Support Staff For Immediate Processing)
<PAGE>
EXHIBIT E-1, E-2 & E-3
NOTES
<PAGE>
EXHIBIT F
CERTIFICATE OF BORROWER
RE: ANNUAL FINANCIAL STATEMENTS
<PAGE>
EXHIBIT G
MONTHLY COMPLIANCE CERTIFICATE
<PAGE>
EXHIBIT H
MONTHLY COLLATERAL REPORT ACCOUNTS RECEIVABLE COLLATERAL
<PAGE>
EXHIBIT I
ACTUAL COLLECTIONS AND ESTIMATED NET BILLING REPORT
<PAGE>
SCHEDULE 1
SUBSIDIARIES AND OTHER INVESTMENTS
(See Sections 5.8 and 6.14)
Investment Jurisdiction of Owned Amount of Percent
In Organization By Investment Ownership
- ---------- --------------- ------ ---------- ---------
<PAGE>
SCHEDULE 2
INDEBTEDNESS AND LIENS
(See Sections 5.14, 6.11 and 6.15)
Maturity
Indebtedness Indebtedness Property and Amount
Incurred By Owed To Encumbered (If Any) of Indebtedness
- ------------ ------------ ------------------- ---------------
<PAGE>
SCHEDULE 3
PERMITTED AFFILIATES IN CONNECTION WITH ELIGIBLE ACCOUNTS
Any corporations majority owned or controlled by Nicholas G. Karabots.
EXHIBIT 4(b)
COMMITMENT AGREEMENT
Dated as of February 20, 1998
Between
AMREP SOUTHWEST, INC.,
a New Mexico corporation
"Company"
and
RESIDENTIAL FUNDING CORPORATION,
a Delaware corporation
"Lender"
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS..............................................2
Section 1.1. Certain Defined Terms....................................2
Section 1.2. Other Definitional Provisions...........................16
ARTICLE II SUBMISSION AND APPROVAL OF PROJECTS 17
Section 2.1. Conditions Precedent to Making Project Loans............17
Section 2.2. Approval of Projects....................................17
Section 2.3. Project Loans and Security..............................18
Section 2.4. Extension of Project Loan Availability
Termination Date.......................................21
Section 2.5. Revolving Nature........................................21
ARTICLE III FEES AND PAYMENTS.......................................22
Section 3.1. Project Loan Commitment Fees and Letter
of Credit Fees.........................................22
Section 3.2. No Reduction in Commitment Fees.........................23
Section 3.3. Payments................................................23
Section 3.4. Applications of Payments; Late Charges..................23
Section 3.5. Adjustments To Project Loan Amounts.....................24
ARTICLE IV REPRESENTATIONS AND WARRANTIES..........................25
Section 4.1. Consideration...........................................25
Section 4.2. Organization............................................25
Section 4.3. Authorization...........................................25
Section 4.4. Governmental Consents...................................25
Section 4.5. Validity................................................25
Section 4.6. Financial Position......................................26
Section 4.7. Governmental Regulations................................26
Section 4.8. Employee Benefit Plans..................................26
Section 4.9. Securities Activities...................................26
Section 4.10. No Material Adverse Change..............................26
Section 4.11. Payment of Taxes........................................26
Section 4.12. Litigation..............................................26
Section 4.13. Environmental Matters...................................26
Section 4.14. No Burdensome Restrictions..............................27
Section 4.15. Full Disclosure.........................................27
ARTICLE V COVENANTS OF COMPANY....................................28
Section 5.1. Consideration...........................................28
Section 5.2. Affirmative Covenants...................................28
Section 5.3. Negative Covenants......................................32
Section 5.4. Financial Covenants.....................................33
Section 5.5. Insurance...............................................34
<PAGE>
ARTICLE VI EVENTS OF DEFAULT AND REMEDIES..........................36
Section 6.1. Events of Default.......................................36
Section 6.2. Remedies................................................38
Section 6.3. Authorization to Apply Assets...........................38
ARTICLE VII MISCELLANEOUS...........................................40
Section 7.1. Successors and Assigns..................................40
Section 7.2. Notices.................................................40
Section 7.3. Changes, Waivers, Discharge and Modifications
in Writing.............................................41
Section 7.4. No Waiver; Remedies Cumulative..........................41
Section 7.5. Costs, Expenses and Taxes...............................42
Section 7.6. Disclaimer by Lender; No Joint Venture..................42
Section 7.7. Indemnification.........................................43
Section 7.8. Consultants.............................................43
Section 7.9. Governing Law...........................................44
Section 7.10. Titles and Headings.....................................44
Section 7.11. Counterparts............................................44
Section 7.12. Participations..........................................44
Section 7.13. Confidentiality.........................................44
Section 7.14. Time is of the Essence..................................45
Section 7.15. No Third Parties Benefitted.............................45
Section 7.16. Severability............................................45
Section 7.17. Jurisdiction............................................45
Section 7.18. Waiver of Jury Trial....................................45
Section 7.19. Interpretation..........................................46
Section 7.20. Entire Agreement........................................46
Section 7.21. Inconsistencies.........................................46
Section 7.22. Termination Date........................................46
<PAGE>
EXHIBIT A
CONDITIONS TO OBLIGATION OF
LENDER TO MAKE COMMITMENT..............................................A-1
EXHIBIT B
PROJECT UNDERWRITING DOCUMENTS.........................................B-1
EXHIBIT C
PROJECT REQUIREMENTS...................................................C-1
EXHIBIT D
FORM OF PROJECT COMMITMENT.............................................D-1
EXHIBIT E
FORM OF EXTENSION REQUEST..............................................E-1
<PAGE>
COMMITMENT AGREEMENT
THIS COMMITMENT AGREEMENT (this "Commitment
Agreement") is made as of February 20, 1998, by and
between AMREP SOUTHWEST, INC., a New Mexico corporation
(the "Company") and RESIDENTIAL FUNDING CORPORATION, a
Delaware corporation (the "Lender").
R E C I T A L S:
- - - - - - - -
A. The Company has applied to Lender for a
commitment to make project loans to the Company and its
affiliates, the proceeds of which will be used to
acquire, refinance and/or develop real property.
B. Concurrent with the execution and delivery of
this Commitment Agreement, the Lender will make three (3)
separate borrowing base loans to the Company and its
affiliates, the proceeds of which will be used to
construct homes on the developed real property referenced
in Recital A.
C. Lender is willing to commit to make the
requested project loans upon and subject to the terms and
conditions set forth in this Commitment Agreement.
A G R E E M E N T:
- - - - - - - - -
NOW, THEREFORE, in consideration of the covenants and
conditions herein contained, the parties agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
Section 1.1. Certain Defined Terms.
---------------------
As used herein (including any Exhibits attached hereto),
the following terms shall have the meanings set forth below (unless
expressly stated to the contrary):
"AMREP Corporation" shall mean AMREP Corporation, an
Oklahoma corporation.
"AMREPCO" shall mean AMREPCO, Inc., a Colorado
corporation.
"Acquisition Amount" shall mean, with respect to a
Project, the portion of the Project Loan Amount which is
available to be disbursed for Qualified Project
Expenditures which relate to the acquisition, financing
or refinancing of the Land, as such amount may be
adjusted from time to time by mutual consent of the
Lender and the Project Borrower evidenced by a written
statement or agreement executed and delivered by the
Lender and the Project Borrower.
"Advance Rate" shall mean, with respect to a Project
and disbursements of the Project Loan for the Project,
the percentages set forth in the Project Requirements
under the caption "ADVANCE RATES".
"Affiliate" shall mean a Person that, directly or
indirectly, controls, is controlled by, or is under
common control with, a referenced Person.
"Appraisal Report" shall mean, with respect to a
Project, a real estate appraisal report which (i) has
been prepared by an Appraiser, (ii) at the time it is
submitted to the Lender is not more than three (3) months
old, or was updated by letter not more than three (3)
months prior to the date of submission to the Lender,
(iii) states that it is prepared in accordance with the
applicable standards of the American Institute of Real
Estate Appraisers for such reports, (iv) provides an
appraisal of the Value of the Project or portion thereof
required to be appraised thereunder, and (v) employs a
customary methodology and provides limiting conditions
reasonably satisfactory to the Lender.
"Appraiser" shall mean, with respect to a Project, a
Person who is qualified to appraise property similar in
size and scope to the Project, which such Person is
acceptable to the Lender in its sole and absolute
discretion.
"Assignment" shall mean, with respect to a Project
Loan, that certain assignment of construction agreements
and development items to be executed by the Project
Borrower in favor of Lender, as the same may be amended
or otherwise modified from time to time.
"Available Amount" shall mean the amount which, until
the Project Loan Availability Termination Date, is
available with respect to any project which is proposed
<PAGE>
to be included as a Project, which amount shall equal the
Commitment Amount less the total of all Project Loan
Amounts.
"Borrowing Base Loan" shall mean, collectively, the
California Borrower Base Loan, the Colorado Borrowing
Base Loan and the New Mexico Borrowing Base Loan, in the
aggregate principal amount of Twelve Million Dollars
($12,000,000).
"Borrowing Base Loan Documents" shall mean,
collectively, the California Borrowing Base Loan
Documents, the Colorado Borrowing Base Loan Documents and
the New Mexico Borrowing Base Loan Documents.
"Borrowing Base Loan Security Instruments" shall
mean, collectively, the California Borrowing Base Loan
Security Instruments, the Colorado Borrowing Base Loan
Security Instruments and the New Mexico Borrowing Base
Loan Security Instruments.
"Budget" shall mean, with respect to a Project, the
itemized budget for the Project submitted to and approved
by the Lender, as such budget may be amended in
accordance with the provisions of the Construction Loan
Agreement.
"Business Day" shall mean a day other than Saturday,
Sunday or a day on which national banks are legally
closed for business in the States of Colorado, Illinois,
Minnesota, New Mexico or New York.
"California Borrowing Base Loan" shall mean that
certain loan in the original principal amount of Three
Million Dollars ($3,000,000) made by the Lender to Shasta
Real Estate, pursuant to the terms of the California
Borrowing Base Loan Agreement.
"California Borrowing Base Loan Agreement" shall mean
that certain loan agreement to be entered into by and
between the Lender and Shasta Real Estate, pursuant to
the terms of which loan agreement the Lender intends to
make the California Borrowing Base Loan, as the same may
be amended or otherwise modified from time to time.
"California Borrowing Base Loan Documents" shall have
the meaning given the term "Loan Documents" in the
California Borrowing Base Loan Agreement.
"California Borrowing Base Loan Security Instruments"
shall have the meaning given the term "Loan Security
Instruments" in the California Borrowing Base Loan
Agreement.
"Colorado Borrowing Base Loan" shall mean that
certain loan in the original principal amount of Four
Million Dollars ($4,000,000) made by the Lender to
AMREPCO, pursuant to the terms of the Colorado Borrowing
Base Loan Agreement.
<PAGE>
"Colorado Borrowing Base Loan Agreement" shall mean
that certain loan agreement to be entered into by and
between the Lender and AMREPCO, pursuant to the terms of
which loan agreement the Lender intends to make the
Colorado Borrowing Base Loan, as the same may be amended
or otherwise modified from time to time.
"Colorado Borrowing Base Loan Documents" shall have
the meaning given the term "Loan Documents" in the
Colorado Borrowing Base Loan Agreement.
"Colorado Borrowing Base Loan Security Instruments"
shall have the meaning given the term "Loan Security
Instruments" in the Colorado Borrowing Base Loan
Agreement.
"Commitment Agreement" shall mean this Commitment
Agreement, as this Commitment Agreement may be amended or
otherwise modified from time to time in accordance with
the terms hereof.
"Commitment Amount" shall mean Twenty Million
Dollars ($20,000,000).
"Company" shall mean AMPREP Southwest, Inc., a New
Mexico corporation.
"Construction Agreements" shall mean, with respect to
a Project, all agreements (including, without limitation,
construction contracts) entered into between the Project
Borrower and any contractor, architect, engineer,
supplier or other Person with respect to the development
or construction of the Project, as such agreements may be
amended or otherwise modified from time to time in
accordance with the provisions of the Construction Loan
Agreement.
"Construction Loan Agreement" shall mean, with
respect to a Project, the construction loan agreement to
be executed by the Project Borrower and the Lender, as
the same may be amended or otherwise modified from time
to time.
"Construction Progress Schedule" shall mean, with
respect to a Project, the schedule for the Development
Work and the Homes submitted to Lender, as such schedule
may be adjusted in accordance with the provisions of the
Construction Loan Agreement.
"Debt" shall mean, for any Person, without
duplication, the sum of all (i) indebtedness for borrowed
money, (ii) obligations evidenced by bonds, debentures,
notes or other similar instruments, (iii) obligations to
pay the deferred purchase price of property or services,
(iv) obligations as lessee under leases which shall have
been or should be, in accordance with GAAP, recorded as
capital leases, (v) obligations of such Person to
purchase securities (or other property) which arise out
of or in connection with the sale of the same or
substantially similar securities or property, (vi)
obligations of such Person to reimburse any bank or other
Person in respect of amounts actually paid under a letter
of credit or similar instrument, (vii) indebtedness or
obligations of others secured by a lien on any asset of
such Person, whether or not such indebtedness or
obligations are assumed by such Person (to the extent of
<PAGE>
the value of the asset), (viii) obligations incurred by
such Person pursuant to direct or indirect guaranties in
respect of, and obligations (contingent or otherwise) to
purchase or otherwise acquire, or otherwise to assure a
creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in
clauses (i) through (vii) above, and (ix) liabilities in
respect of unfunded vested benefits under plans covered
by Title IV of ERISA.
"Deed of Trust" shall mean, with respect to a
Project Loan, the construction deed of trust, security
agreement and fixture filing with assignment of rents,
proceeds and agreements to be executed by the Project
Borrower, as trustor, for the benefit of the Lender, as
the same may be amended or otherwise modified from time
to time.
"Development Amount" shall mean, with respect to a
Project, the portion of the Project Loan Amount which is
available to be disbursed for Qualified Project
Expenditures which relate to, or will be required by the
Project Borrower in connection with, the Development
Work, as such amount may be adjusted from time to time by
mutual consent of the Lender and the Project Borrower
evidenced by a written statement or agreement executed
and delivered by the Lender and the Project Borrower.
"Development Work" shall mean, with respect to a
Project, the work of development to be performed on or
with respect to the Land (including, without limitation,
the installation of utilities, roads and all related
on-site and off-site improvements) in connection with the
development of the Land for the subsequent construction
thereon of Homes, all of which work and construction
shall be completed by or on behalf of the Project
Borrower in accordance with the Plans and Specifications,
but shall not include the Homes.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time, and
the regulations and rulings issued thereunder.
"Environmental Indemnity" shall mean, with respect to
a Project Loan, that certain hazardous substances
remediation and indemnification agreement to be executed
by the Project Borrower in favor of the Lender, as the
same may be amended or otherwise modified from time to
time.
"Event of Default" shall mean the occurrence, after
any applicable grace period, of any of the events listed
in Section~6.1.
"Facility Documents" shall mean all documents,
instruments, agreements, assignments and certificates
relating to the Project Loans and the Borrowing Base
Loan, including, without limitation, any and all loan or
credit agreements, promissory notes, deeds of trust,
mortgages, security agreements, assignments of rents,
assignments of leases, assignments of contracts,
environmental indemnities, guaranties, contractor's
consent agreements, lender's title insurance policies,
opinions of counsel, evidences of authorization or
incumbency, escrow instructions, architect's consent
<PAGE>
agreements, and UCC financing statements to be executed
(and acknowledged where applicable) by the Obligated
Parties and/or the Lender (as applicable) in connection
with Lender making the Project Loans and the Borrowing
Base Loan, as the same may be amended or otherwise
modified from time to time. The Facility Documents shall
include, but not be limited to, the following:
(a) this Commitment Agreement;
(b) as to each Project Loan, the Project Loan
Documents; and
(c) as to the Borrowing Base Loan, the Borrowing
Base Loan Documents.
"Facility Security Instruments" shall mean, with
respect to the Project Loans and the Borrowing Base Loan,
all pledge agreements, guaranties, deeds of trust,
mortgages, security agreements, assignments and other
agreements or instruments executed or delivered by the
Obligated Parties granting in favor of Lender a lien or
encumbrance on or a security interest in any property or
right or interest of such Obligated Parties as security
for the Project Loans or the Borrowing Base Loan, or
providing to the Lender other security for the Project
Loans or the Borrowing Base Loan, as the same may be
amended or otherwise modified from time to time,
including but not limited to the following:
(a) as to each Project Loan, the Project Loan
Security Instruments; and
(b) as to the Borrowing Base Loan, the Borrowing
Base Loan Security Instruments.
"GAAP" shall mean generally accepted accounting
principles set forth in the opinions and pronouncements
of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards
Board or in such other statements by such other entity as
may be approved by a significant segment of the
accounting profession prevalent in the United States of
America.
"Guarantor" shall mean, with respect to a Project
Loan, (i) AMREP Corporation and (ii) with respect to
those Projects as to which the Company is not the Project
Borrower, the Company.
"Guaranty" shall mean, with respect to a Project
Loan, the guaranty agreement to be executed by the
Guarantor in favor of the Lender, as the same may be
amended or otherwise modified from time to time.
<PAGE>
"Hazardous Materials" shall mean the following:
(a) any oil, flammable substances, explosives,
radioactive materials, hazardous wastes or
substances, toxic wastes or substances or any other
materials or pollutants, exposure to which is
prohibited, limited or regulated by any governmental
authority pursuant to any Hazardous Materials Law;
(b) asbestos in any form which is or could
become friable, urea formaldehyde foam insulation,
transformers or other equipment which contain
dielectric fluid containing levels of polychlorinated
biphenyls in excess of fifty (50) parts per million,
exposure to which is prohibited, limited or regulated
by any governmental authority pursuant to any
Hazardous Materials Law;
(c) any chemical, material or substance defined
as or included in the definition of "hazardous
substances", "hazardous wastes", "hazardous
materials", "extremely hazardous waste", "restricted
hazardous waste", or "toxic substances" or words of
similar import under any Hazardous Material Laws; and
(d) any other chemical, material or substance,
exposure to which is prohibited, limited or regulated
by any governmental authority pursuant to any
Hazardous Materials Law.
"Hazardous Materials Claims" shall mean any and all
enforcement, clean-up, removal or other governmental or
regulatory actions or orders threatened, instituted or
completed with respect to a Project pursuant to any
Hazardous Materials Laws, together with all claims made
or threatened by any third party relating to damage,
contribution, cost recovery compensation, loss or injury
with respect to a Project resulting from any Hazardous
Materials.
"Hazardous Materials Laws" shall mean any federal,
state or local laws, ordinances and the regulations,
policies or publications promulgated pursuant thereto
relating to (i) any Hazardous Materials (including,
without limitation, the use, handling, transportation,
production, disposal, discharge or storage thereof) or
(ii) environmental conditions on, under or about
property, including, without limitation, soil and
groundwater conditions; including, but not limited to,
the following, as now or hereafter amended: the Clean
Air Act, 42 U.S.C. Sec. 7401, et. seq.; the Clean Water
Act, 33 U.S.C. Sec. 7401, et. seq.; the Comprehensive
Environmental Response, Compensation and Liability Act of
1980, 42 U.S.C. Sec. 9601, et. seq., as amended by the
Superfund Amendments and Reauthorization Act of 1986, 42
U.S.C. Sec. 11001, et. seq.; the Endangered Species Act,
16 U.S.C. Sec. 1531, et. seq.; the Federal Insecticide,
Fungicide, and Rodenticide Act, 7 U.S.C. Sec. 136, et.
seq.; the Federal Water Pollution Control Act, 33 U.S.C.
Sec. 1251, et. seq.; the Hazardous Materials
Transportation Act, 49 U.S.C. Sec. 1801, et. seq.; the
National Environmental Policy Act, 42 U.S.C. Sec. 4321
et. seq.; the Occupational Safety and Health Act, 29
U.S.C. Sec. 651 et. seq.; the Resource Conservation and
Recovery Act, 42 U.S.C. Sec. 6901, et. seq.; the Safe
Drinking Water Act, 42 U.S.C. Secs. 300f to 300j; the
Solid Waste Disposal Act, 42 U.S.C. Sec. 3251, et. seq.;
and the Toxic Substances Control Act, 15 U.S.C. Sec.
2601, et. seq.; Sections 25115, 25117, 25122.7, 25140,
<PAGE>
25249.8, 25281, 25316, 25501, and 25316 of the California
Health and Safety Code; and Article 9 or Article 11 of
Title 22 of the California Administrative Code, Division
4, Chapter 20.
"Homes" shall mean, with respect to a Project, the
single family residences, condominium homes and/or
attached townhouses that will be constructed by the
Project Borrower in accordance with the Plans and
Specifications using certain of the proceeds of the
Borrowing Base Loan, which structures the Project
Borrower shall construct on the Lots and offer for sale
to individuals and families.
"Indemnified Party" shall mean the Lender and any
Participants and each of their officers, directors,
employees, agents, attorneys, consultants, advisors and
Affiliates.
"Inspector" shall mean, with respect to a Project,
the inspector(s) or engineer(s) engaged by Lender, at the
expense of the Project Borrower, to provide to Lender
consultation services in connection with the Project.
"Interest Due Date" shall mean, with respect to each
Project Loan and the Borrowing Base Loan, the fifteenth
(15th) calendar day of each month in which the Lender has
sent a statement of interest due pursuant to the terms of
the Facility Documents.
"Interest Reserve" shall mean, with respect to a
Project, the amount within the Budget which has been
designated as available to pay the interest on the
Project Loan; provided however, that in the event the
actual rate of absorption of Lots or Units within the
Project, at any time after six (6) months from the date
when sales of such Lots or Units commence, is thirty
percent (30%) or more below the projected absorption
rate, proceeds of the Project Loan may not be disbursed
to pay interest on the Project Loan Amount; provided
further however that in the event that, after the Project
Borrower is required to pay interest from its own funds
as provided in the preceding proviso, sales of the Lots
or Units, on a cummulative basis, are at a rate which is
greater than thirty percent (30%) below the projected
absorption rate, proceeds of the Project Loan may
thereafter be disbursed to pay interest on the Project
Loan Amount.
"Land" shall mean, with respect to a Project, that
certain real property which, upon completion of the
Development Work, will be suitable for and substantially
entitled for the construction of Homes thereon and
related on and off-site improvements and upon which the
Project Borrower will perform the Development Work and
construct the Homes, as such real property is legally
described in the Construction Loan Agreement.
"Land Banking" shall mean the practice of acquiring
unimproved real property and not commencing the initial
phase of development of such real property within four
(4) months after the date of acquisition; provided
however that the foregoing shall not apply to any real
property owned by the Company on the date of this
Commitment Agreement.
"Land Speculation" shall mean the practice of
acquiring either (i) unimproved real property and
reselling such real property without adding value by
development of such real property, or (ii) real property
<PAGE>
for which a preliminary plat has not been obtained or
which is not substantially entitled for the development
of a residential project; provided however that the
foregoing shall not apply to any real property owned by
the Company on the date of this Commitment Agreement.
"Laws and Regulations" shall mean, with respect to a
Project, (i) all laws, regulations, orders, codes,
ordinances, rules, statutes and policies of all local,
regional, county, state and federal governmental
authorities having jurisdiction over the Project and (ii)
all restrictive covenants and other title encumbrances,
permits and approvals, leases and other rental agreements
which in any case relate to the development, occupancy,
ownership, management, use, and/or operation of the
Project.
"Lender" shall mean Residential Funding Corporation,
a Delaware corporation.
"Lender's Release Price" shall mean, with respect to
a Project and any Lot or Unit within the Project which
the Project Borrower requests the Lender to release from
the lien of the Deed of Trust, the amount required to be
paid to the Lender prior to such release, which amount
shall equal, for each Lot or Unit located in the Project,
(i) an amount equal to the applicable principal payment
specified in Section 2.3(d) plus (ii) if proceeds of the
Borrowing Base Loan have been made available based upon a
value being assigned to such Lot or Unit pursuant to the
terms of the Borrowing Base Loan Documents, the
applicable principal payment of the Borrowing Base Loan
as specified in the applicable Borrowing Base Loan
Documents.
"Letter of Credit" shall mean, with respect to any
Project, any letter of credit issued by a bank or other
financial institution in favor of a governmental entity
to secure the Project Borrower's obligation to complete
the Development Work.
"Letter of Credit Amount" shall mean the face amount
of a Letter of Credit.
"Letter of Credit Fee" shall mean an annual amount
equal to one percent (1%) of the Letter of Credit Amount.
"Lots" shall mean, with respect to a Project, the
tracts of real property within the Land that have been or
will be developed for the subsequent construction thereon
of Homes.
"Material Adverse Change" shall mean any material and
adverse change in, or a change which has a material
adverse effect upon, any of:
(a) the business, properties, operations or
condition (financial or otherwise) of any of the
Obligated Parties since either or both of (i) April
30, 1997, or (ii) the date of the most recent
financial statements delivered to Lender in
connection with this Commitment Agreement; or
(b) the legal or financial ability of any of the
Obligated Parties to perform any of their obligations
<PAGE>
under the Facility Documents and to avoid any
Potential Default or Event of Default; or
(c) the legality, validity, binding effect or
enforceability against any of the Obligated Parties
of any Facility Document.
"Net Worth" shall mean, as to any Person, the net
worth of such Person accounted for in accordance with
GAAP.
"New Mexico Borrowing Base Loan" shall mean that
certain loan in the original principal amount of Five
Million Dollars ($5,000,000) made by the Lender to the
Company, pursuant to the terms of the New Mexico
Borrowing Base Loan Agreement.
"New Mexico Borrowing Base Loan Agreement" shall mean
that certain loan agreement dated of even date herewith
by and between the Lender and the Company, pursuant to
the terms of which loan agreement the Lender is making
the New Mexico Borrowing Base Loan, as the same may be
amended or otherwise modified from time to time.
"New Mexico Borrowing Base Loan Documents" shall have
the meaning given the term "Loan Documents" in the New
Mexico Borrowing Base Loan Agreement.
"New Mexico Borrowing Base Loan Security Instruments"
shall have the meaning given the term "Loan Security
Instruments" in the New Mexico Borrowing Base Loan
Agreement.
"Non-Lender Projects" shall mean all development or
construction projects then being developed or constructed
by the Company or any Affiliates, which such projects are
not being financed through proceeds of any Project Loan
or the Borrowing Base Loan.
"Note" shall mean, with respect to a Project Loan,
that certain promissory note to be executed by the
Project Borrower, as maker, and made payable to the order
of Lender, as holder, in the amount of the Project Loan
Amount and maturing on the Project Loan Maturity Date, to
evidence the Project Loan, as such promissory note may be
amended or otherwise modified from time to time.
"Obligated Parties" shall mean, collectively, the
Company, AMREPCO, Shasta Real Estate, any other Project
Borrower and the Guarantor, and shall include any other
Person owing obligations of any kind to the Lender
pursuant to the terms of any of the Facility Documents.
"Participant" shall mean any financial institution to
whom the Lender, in accordance with and subject to
Section 7.12, at any time sells, assigns, grants or
otherwise transfers a participation interest in all or
part of the obligations of the Obligated Parties under
the Facility Documents.
<PAGE>
"Permitted Exceptions" shall mean, with respect to a
Project, (i) real estate taxes and assessments not yet
due and payable and possible supplemental assessments for
improvements constructed on the Land, (ii) exceptions to
title which do not adversely affect the value of the
Land, the marketability of title to the Land or the use
to which the Land is intended to be put and which are
approved by Lender, (iii) easements for the installation
and maintenance of utilities servicing the Project which
do not adversely affect the value of the Land, the
marketability of title to the Land or the use to which
the Land is intended to be put and (iv) the exceptions
set forth in the Title Policy.
"Person" shall mean an individual, partnership,
corporation (including a business trust), limited
liability company, joint stock company, trust,
unincorporated association, joint venture or other
entity, or a government or any political subdivision or
agency thereof.
"Planning Costs" shall mean, with respect to a
Project, the fees and planning costs, such as engineering
and architectural fees, incurred in connection with the
planning for the Development Work and Homes, to the
extent reflected in the Budget.
"Plans and Specifications" shall mean, with respect
to a Project, the final set of architectural, structural,
mechanical, electrical, grading, sewer, water, street and
utility plans and specifications for the Development Work
and the Homes, including all supplements, amendments and
modifications thereto signed and affixed with the
architect's registration stamp or seal, all in form and
substance satisfactory to the Lender and the Inspector.
"Potential Default" shall mean the existence of any
event which with the giving of notice, the passage of
time, or both, would constitute an Event of Default or an
event of default (however described) under any other of
the Facility Documents.
"Prepayment Price" shall mean, with respect to a
Project Loan, an amount equal to (i) the principal amount
of the Project Loan to be prepaid, as requested by the
Project Borrower, with no premium thereon, plus (ii) all
accrued interest to the date of prepayment on the
principal amount prepaid, plus (iii) all unpaid fees,
charges and expenses due and owing to Lender.
"Prime Rate" shall mean the rate that is indicated in
the Telerate as the prime lending rate announced from
time to time by The First National Bank of Chicago, a
national banking association, as in effect from time to
time, it being understood that the Prime Rate is a
reference rate and does not necessarily represent the
lowest or best rate actually charged to any customer. In
the event that such rate is no longer shown in the
Telerate, the Company and Lender shall reasonably agree
on a substitute source for determining the prime lending
rate of The First National Bank of Chicago.
<PAGE>
"Project" shall mean the following:
(a) any acquisition, development and
construction project as to which the Lender has
issued a Project Commitment and made a Project Loan,
which such project shall include (i) the Land and
(ii) the Development Work and/or Homes to be
completed on the Land; it being understood that upon
completion of the Development Work on the Land,
proceeds of the Borrowing Base Loan may be made
available to finance the construction of the Homes on
the Land pursuant to and in accordance with the terms
of the Borrowing Base Loan Documents;
(b) any acquisition and development project as
to which the Lender has issued a Project Commitment
and made a Project Loan, which such project shall
include (i) the Land and (ii) the Development Work to
be completed on the Land;
(c) any other project as to which the Lender has
issued a Project Commitment and made a Project Loan,
including but not limited to Projects which include
the financing or refinancing of Land presently owned
by the Company, which such Project shall include the
Land and any Development Work or Homes to be
completed on the Land; and
(d) any other project financed with the proceeds
of the Borrowing Base Loan.
"Project Borrower" shall mean, with respect to a
Project, the entity which is specified as the borrower
for the Project Loan under the Project Loan Documents,
which entity shall also be the owner of the Project and
the identity of which such entity is subject to the
limitations of Section 2.1(d).
"Project Commitment" shall mean, with respect to a
Project, the commitment issued by the Lender to the
Project Borrower, wherein the Lender agrees, subject to
the terms and conditions of this Commitment Agreement and
such commitment, to make the Project Loan for the
Project. The Project Commitments shall be substantially
in the form of Exhibit D, with such additions, deletions
and/or amendments as are necessary with respect to the
Project, and shall set forth the terms pertaining to the
Project and the conditions to disbursement of proceeds of
the Project Loan to fund such Project.
"Project Loan" shall mean, with respect to a Project,
the loan made by the Lender to the Project Borrower
pursuant to and in accordance with the terms of the
Project Loan Documents, in the principal amount of the
Project Loan Amount.
"Project Loan Amount" shall mean, with respect to a
Project Loan, the amount designated as the Project Loan
Amount in the Project Loan Documents, as such amount may
be adjusted from time to time by mutual consent of the
Lender and the Project Borrower evidenced by a written
statement or agreement executed and delivered by the
Lender and the Project Borrower. The Project Loan Amount
shall be the total of the Acquisition Amount plus the
Development Amount.
<PAGE>
"Project Loan Anniversary Date" shall mean, with
respect to a Project Loan, the anniversary dates of the
Construction Loan Agreement.
"Project Loan Availability Termination Date" shall
mean February 20, 1999, which is the date twelve (12)
months after the date hereof, as such date may be
extended pursuant to the terms of Section 2.4.
"Project Loan Commitment Fee" shall mean, with
respect to each Project Loan, an annual amount, payable
in advance on the dates set forth in Section 3.1(a),
equal to one-half of one percent (0.50%) of the Project
Loan Amount, as the Project Loan Amount is determined on
the day such amount is due and payable.
"Project Loan Documents" shall mean, with respect to
a Project Loan, all documents, instruments, agreements,
assignments and certificates relating thereto, including,
without limitation, any and all loan or credit
agreements, promissory notes, deeds of trust, mortgages,
security agreements, assignments of rents, assignments of
leases, assignments of contracts, environmental
indemnities, guaranties, contractor's consent agreements,
lender's title insurance policies, opinions of counsel,
evidences of authorization or incumbency, escrow
instructions, architect's consent agreements, and UCC
financing statements to be executed (and acknowledged
where applicable) by any of the Obligated Parties (as
applicable) in connection with Lender making the Project
Loan to the Project Borrower, as the same may be amended
or otherwise modified from time to time. The Project
Loan Documents shall include, but not be limited to, the
following:
(a) the Project Commitment;
(b) the Construction Loan Agreement;
(c) the Note;
(d) the Deed of Trust;
(e) the Guaranty;
(f) the Environmental Indemnity;
(g) the Assignment;
(h) the UCC Financing Statement;
(i) the Construction Agreements;
(j) the Title Policy; and
(k) the Plans and Specifications.
<PAGE>
The Project Loan Documents shall include those forms of
documents, instruments, agreements, assignments and
certificates for the States of California, Colorado and
New Mexico which the Lender and the Company approve at
the time of their execution and delivery of this
Commitment Agreement, as evidenced by a written
certificate signed by the Lender and the Company. The
forms of the Project Loan Documents may be supplemented
or amended from time to time to add or amend form Project
Loan Documents approved by the Lender and the Company.
"Project Loan Maturity Date" shall mean, with respect
to a Project Loan, the date which is set forth in the
Project Loan Documents as the date on which the Project
Loan matures.
"Project Loan Security Instruments" shall mean, with
respect to a Project Loan, all pledge agreements,
guaranties, deeds of trust, mortgages, security
agreements, assignments and other agreements or
instruments executed or delivered by any of the Obligated
Parties (as applicable) granting in favor of Lender a
lien or encumbrance on or a security interest in any
property or right or interest of such Obligated Party as
security for the Project Loan, or providing to the Lender
other security for the Project Loan, as the same may be
amended or otherwise modified from time to time,
including but not limited to the following:
(a) the Deed of Trust;
(b) the Guaranty;
(c) the UCC Financing Statement; and
(d) the Assignment.
"Project Requirements" shall mean, for any project
proposed to be included as a Project pursuant to the
terms of this Commitment Agreement, the requirements and
limitations listed in Exhibit C.
"Project Underwriting Documents" shall mean, for any
project proposed to be included as a Project pursuant to
the terms of this Commitment Agreement, the documents
listed in Exhibit B and any other documents relating to
the proposed project which Lender reasonably requests,
all in form and substance reasonably satisfactory to the
Lender and, as to items A4, B1 and B3, in form and
substance reasonably satisfactory to the Inspector.
"Qualified Project Expenditures" shall mean, with
respect to a Project Loan, the expenditures for which
proceeds of the Project Loan may be disbursed, which such
expenditures shall be limited to the following:
(a) any advances for acquiring the Land,
financing the Land and/or refinancing the Land;
<PAGE>
(b) Planning Costs;
(c) the cost of materials and labor for
Development Work in place for the Project, but
excluding any costs for materials delivered to the
Land which have not yet been put in place;
(d) the Interest Reserve;
(e) Soft Costs; and
(f) any other costs or advances which may be
specified in the Project Commitment.
The particular amounts which may be disbursed for each of
the categories set forth in paragraphs (a) through (f)
above shall be set forth in the Budget for the Project.
Amounts in the Budget which are not listed in any of the
categories set forth in paragraphs (a) through (f) above
shall not be Qualified Project Expenditures and proceeds
of the Project Loan may not be disbursed for any such
amounts.
"Shasta Real Estate" shall mean Shasta Real Estate
Company, Inc., a California corporation.
"Soft Costs" shall mean, with respect to a Project,
the Project Borrower's overhead, general and
administrative expenses, the Project Borrower's general
contracting fees and other "soft costs" incurred in the
development, construction, marketing and sale of the
Project, to the extent reflected in the Budget.
"Termination Date" shall mean the date on which this
Commitment Agreement shall terminate and the date on
which all amounts owing with respect to the Project Loans
are required to be paid in full, which date shall be
February 20, 2002 which is the date forty eight (48)
months from the date of this Commitment Agreement, as
such date may be extended pursuant to the terms of
Section 2.4.
"Title Policy" shall mean, with respect to a Project,
that certain policy of title insurance accepted by the
Lender for the Project, which policy of title insurance
shall (i) be an ALTA loan form (1970 form, unrevised or
the equivalent thereof) title insurance policy, (ii) be
issued in such amount as the Lender and the Company agree
upon, (iii) be issued by a title insurer approved by the
Lender, (iv) insure the Lender that the Deed Of Trust is
an enforceable first lien against marketable fee simple
title to the Project, subject only to Permitted
Exceptions, (v) provide mechanics' lien coverage, (vi)
have all standard exceptions deleted therefrom, to the
extent permitted by applicable state law, and (vii) have
appended thereto such endorsements as Lender shall
reasonably require.
<PAGE>
"UCC Financing Statement" shall mean, with respect to
a Project Loan, the UCC financing statement to be
executed by the Project Borrower, as debtor, in favor of
Lender, as secured party, in connection with Lender
making the Project Loan to the Project Borrower, as such
UCC financing statements may be amended or otherwise
modified from time to time.
"Unit" shall mean, with respect to a Project, a Lot
and the Home constructed on such Lot.
"Value" shall mean, with respect to a Project or the
Land, Lot or Unit located in the Project, the value which
an Appraiser assigns as set forth in an Appraisal Report.
Section 1.2. Other Definitional Provisions.
-----------------------------
(a) Accounting terms not defined herein shall have
the respective meanings given to them under GAAP. To the
extent that the definitions of accounting terms herein
are inconsistent with the meanings of such terms under
GAAP, the definitions contained herein shall control.
(b) The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Commitment
Agreement shall refer to this Commitment Agreement as a
whole and not to any particular provision of this
Commitment Agreement.
(c) In this Commitment Agreement in the computation
of periods of time from a specified date to a later
specified date, the word "from" means "from and
including" and the words "to" and "until" each means "to
but excluding".
<PAGE>
ARTICLE II
SUBMISSION AND APPROVAL OF PROJECTS
Section 2.1. Conditions Precedent to Making Project Loans.
--------------------------------------------
(a) The obligation of the Lender to consider
proposed projects for inclusion as Projects and to
consider making Project Loans is subject to satisfaction
of the "Conditions to Obligation of Lender to Make
Commitment" set forth in Exhibit A.
(b) Subject to compliance with subparagraph (a)
above, from the date hereof until the Project Loan
Availability Termination Date, the Company may submit to
Lender projects proposed to be included as Projects, all
pursuant to and in accordance with the terms of this
Commitment Agreement.
(c) In order to include a proposed project as a
Project, the Company shall submit to Lender a complete
description of the proposed project, including the
Project Underwriting Documents, and evidence that the
proposed project complies with the Project Requirements.
The Company's request to the Lender with respect to a
Project may include a request that the Lender arrange for
the isssuance of a Letter of Credit with respect to the
Project, and a detailed description of the terms of such
requested Letter of Credit.
(d) The Project Borrowers may include (i) the
Company, (ii) AMREPCO or Shasta Real Estate, but only if,
in addition to AMREP Corporation, the Company shall act
as Guarantor with respect to the applicable Project Loan,
and (iii) such other entities controlled and managed by
the Company as the Lender shall approve, which approval
may be granted or withheld in the sole and absolute
discretion of the Lender, and which approval, if granted,
shall in all events require that, in addition to AMREP
Corporation, the Company act as Guarantor with respect to
the applicable Project Loan.
Section 2.2. Approval of Projects.
--------------------
(a) Upon its receipt of the Project Underwriting
Documents and evidence that the proposed project complies
with the Project Requirements, Lender shall have thirty
(30) days to review and, in its sole and absolute
discretion, approve or disapprove the proposed project
for inclusion as a Project.
(b) In the event the proposed project is approved as
a Project, Lender shall issue a Project Commitment with
respect thereto and such proposed project shall become a
Project for purposes of this Commitment Agreement;
provided however, that no Project Commitment shall be
issued with respect to any proposed project unless the
Available Amount is at least equal to the amount required
as the Project Loan Amount for such Project.
(c) Immediately upon issuance of the Project
Commitment, Lender and the Project Borrower shall proceed
to execute and deliver the Project Loan Documents, and
<PAGE>
upon such execution and delivery, the Project Loan shall
be made. Thereafter, upon compliance with the terms and
conditions of the Project Loan Documents, disbursements
with respect to the Qualified Project Expenditures for
the Project may be funded with proceeds of the Project
Loan.
Section 2.3. Project Loans and Security
--------------------------
(a) General. The Project Loans shall be made
pursuant to the Project Loan Documents, certain of the
terms of which are set forth below, but all of which
terms are subject to the additional provisions to be
included in the Project Loan Documents.
(b) Disbursements. Proceeds of the Project Loans
will be disbursed pursuant to the terms and conditions of
the Construction Loan Agreements, which such conditions
shall include the following:
(1) draws for all of the Projects, collectively,
will be available twice monthly; draws for the
Construction Amounts for all Projects, collectively,
will be available twice monthly;
(2) all draws shall be submitted at least five
(5) Business Days prior to the requested funding
date, and the Lender will employ its reasonable best
efforts to process the draw requests within five (5)
Business Days, but shall not be obligated to do so;
and
(3) draw funding will be conditioned upon, among
other things, supporting documentation, work in
place, title date downs and the presentation of
appropriate representations and warranties by the
Project Borrowers.
(c) Interest Rate. The Project Loan shall bear
interest at a rate equal to the Prime Rate plus one
percent (1%). All computations of interest with respect
to the Project Loans shall be made by Lender on the basis
of a year of 360 days, comprised of twelve (12) thirty
(30) day months, and shall be computed for the actual
number of days occurring in the period for which such
interest is payable. On or before the fifth (5th)
Business Day of each month, commencing with the first
month after the Lender has disbursed proceeds of the
Project Loan, the Lender shall send to the Project
Borrower a statement setting forth the amount of interest
due for the previous month. The Project Borrower shall
pay the interest due for the previous month on or before
the Interest Due Date, unless the Project Borrower has
elected, with respect to the Project, to include in the
Budget for such Project an Interest Reserve, in which
event the Lender shall make a drawing on the Project Loan
to pay the interest due on the Project Loan until such
time as the Interest Reserve is fully disbursed, after
which such date the Project Borrower will be required to
pay interest on the Project Loan from its own funds.
(d) Repayment of Principal. Principal of each
Project Loan shall be due and payable as follows:
<PAGE>
(1) upon the closing of a Lot or Unit in the
Project, the principal amount of the Project Loan to
be repaid by the Project Borrower shall be an amount
equal to one hundred twenty percent (120%) of the
total amount of the Project Loan budgeted for (i) the
acquisition of the Lot, (ii) the Development Work for
such Lot and (iii) all other costs related to such
Lot, until such time as the total amount of the
Project Loan budgeted for the Project has been paid
in full;
(2) if the full amount of the Project Loan has
not been repaid on or before the Project Loan
Maturity Date, the Project Borrower shall on such
Project Loan Maturity Date repay the entire remaining
principal amount of the Project Loan; and
(3) on any date that the Lender makes any
payment to with respect to a Letter of Credit, the
Project Borrower shall pay to the Lender an amount
equal to the amount so paid by the Lender with
respect to the Letter of Credit.
it being understood and agreed that, as to any
Project Loan, the foregoing principal repayment
provisions shall be modified to reflect the agreed
upon principal repayment provisions for such Project
Loan, including but not limited to modifications
which provide that with respect to those Projects
which include the financing of Land previously
purchased by the Project Borrower as to which no
Development Work or Construction Improvements are
contemplated during the term of the Project Loan, the
principal payments required by subsection (d)(1)
shall not include any amount advanced by the Lender
for the financing of such Land.
(e) Applications of Payments. Payments with respect
to the Project Loans received by Lender shall be applied
in the following manner:
(1) first, to the payment of all expenses,
charges, costs and fees incurred by or payable to
Lender and for which Project Borrower is obligated
pursuant to the terms of the Project Loan Documents;
(2) second, to the payment of all interest
accrued to the date of such payment; provided that
the payments made pursuant to Section 2.3(d)(1) and
(2) shall be applied to the payment of principal in
accordance with subparagraph (3) below and not to the
payment of interest; and
(3) third, to the payment of principal.
Notwithstanding anything to the contrary contained herein
or in the Project Loan Documents, after the occurrence
and during the continuation of an Event of Default, all
amounts received by Lender from any party shall be
applied in such order as Lender, in its sole discretion,
may elect.
<PAGE>
(f) Prepayment. The Project Borrowers shall have
the right to prepay the Notes at any time, in full or in
part at a price equal to the Prepayment Price. Any
partial prepayment of a Note shall be accompanied by a
statement wherein the Project Borrower specifies the
particular categories within the Budget or the particular
Lots and/or Units to which such prepayment relates.
(g) Releases from Lien of Deed of Trust. A Project
Borrower may from time to time request that Lender
release one or more Lots and/or Units from the lien of
the Deed of Trust and the other Facility Documents
encumbering such Lots and/or Units. Lender agrees that
it will execute a partial release that releases Lender's
lien on such Lot or Unit provided that the following
conditions precedent shall have been satisfied:
(1) Lender shall have received a written notice
requesting the partial release no fewer than five (5)
Business Days prior to the date on which the partial
release is to be effective, which notice shall
specify (i) the Project, (ii) the specific Lots
and/or Units to be released, (iii) if such release is
being requested in connection with a sale of the Lots
and/or Units, the Person to whom such Lots and/or
Units are being sold, which Person shall not be an
Affiliate of the Company, and (iv) the Lender's
Release Price(s) therefor;
(2) Lender shall have received evidence
satisfactory to Lender that (i) the closing of the
sale and/or release of such Lots and/or Units shall
be conducted through an escrow with a title company
specified by the Project Borrower and satisfactory to
Lender, and (ii) such title company shall have been
instructed, which instructions shall have been
acknowledged and agreed to by such title company and
which cannot be changed or supplemented without
Lender's written concurrence, not to record Lender's
partial release until such title company receives in
respect of such release an amount equal to Lender's
Release Price for such Lots and/or Units and is
irrevocably committed to disburse such amount to
Lender;
(3) Lender shall have received executed
originals of instruments, agreements and other
documents, in form and substance satisfactory to
Lender, which Lender determines are necessary or
appropriate, to evidence and/or effectuate the
partial release and to modify the Facility Documents
as a result thereof;
(4) Lender shall have received evidence
satisfactory to Lender that Project Borrower shall
receive appropriate endorsements to the Title Policy;
and
(5) Lender shall have received evidence
satisfactory to Lender that the Project Borrower has
satisfied all conditions precedent in the Facility
Documents relating to the release of the Lots and/or
Units.
(h) Security. Payment of the Project Loans and the
Borrowing Base Loan and performance of the obligations of
the Obligated Parties under the Facility Documents shall
be secured by the collateral described in the Facility
<PAGE>
Security Instruments, including first mortgage liens on
the real estate and all improvements located or
constructed on the real estate financed with the proceeds
of the Project Loans and the Borrowing Base Loan. All
Project Loans and the Borrowing Base Loan will be
cross-defaulted with this Commitment Agreement, all
Project Loans will be cross-defaulted with the Borrowing
Base Loan and all Project Loans will be cross-defaulted
with the other Project Loans. All security for the
Project Loans will collateralize this Commitment
Agreement, the Borrowing Base Loan and all other Project
Loans. In addition, with respect to those Project Loans
as to which the Company is not the Project Borrower, the
Company shall act as Guarantor.
Section 2.4. Extension of Project Loan Availability
---------------------------------------
Termination Date.
----------------
The Company may, not earlier than one hundred eighty
(180) days and not later than forty five (45) days prior to
the last day of the then effective Project Loan Availability
Termination Date (as it may be extended from time to time
pursuant to this Section 2.4), request that the Project
Loan Availability Termination Date and the Termination
Date be extended for a period equal to twelve (12) months
by giving written notice to Lender in the form of Exhibit E.
Lender may, in its sole and absolute discretion, consent
or not consent to such request by giving written notice
thereof to the Company on or before that date which is forty
five (45) days from the date the Lender received the Borrower's
request to extend the Project Loan Availability
Termination Date and the Termination Date. If Lender
fails to give such notice Lender shall be deemed not
to have consented to such extension. If the Lender
consents to such request, the Project Loan Availability
Termination Date and the Termination Date shall each be
extended for the specified period of time without the
requirement of any further action by the Company or Lender.
Section 2.5. Revolving Nature
----------------
(a) In entering into this Commitment Agreement, the
Lender and the Company intend that prior to the Project
Loan Availability Termination Date, any amounts of the
Project Loans which are repaid may, subject to the terms
of this Commitment Agreement limiting the Project Loan
Amounts and the terms restricting disbursements of
proceeds of the Project Loans, be added to the Available
Amount and shall be made available for another Project
and Project Loan.
(b) To the extent approved by the Lender and as set
forth in the applicable Project Commitment, the Project
Loan allocable to a Project may revolve, and principal
payments of the Project Loan may, subject to the terms of
this Commitment Agreement and the applicable Project Loan
Documents, be redrawn for the Project.
<PAGE>
ARTICLE III
FEES AND PAYMENTS
Section 3.1. Project Loan Commitment Fees and Letter
----------------------------------------
of Credit Fees.
--------------
(a) Each Project Borrower shall be required to pay
to Lender the Project Loan Commitment Fees on the dates
and for the periods set forth in this subparagraph (a).
The Project Loan Commitment Fees are payable in advance
for each of the periods indicated. The Project Loan
Commitment Fees shall be determined for each Project,
based upon the Project Loan Amount, and shall be paid as
follows:
(1) With respect to each Project, the initial
Project Loan Commitment Fee for the first annual
period of the Project Loan shall be payable
concurrent with the execution and delivery of the
Construction Loan Agreement.
(2) With respect to each Project, on each
Project Loan Anniversary Date, the Lender shall send
to the Project Borrower a statement setting forth the
amount of the Project Loan Commitment Fee due for the
next succeeding one-year period. The Project
Borrower shall pay the Project Loan Commitment Fee
for such succeeding one-year period on or before that
date which is fifteen (15) days after the date of the
Lender's notice to Project Borrower regarding the
Project Loan Commitment Fee.
(b) If a Project Borrower fails to pay any Project
Loan Commitment Fee as required under subsection (a) in a
timely manner, the Project Borrower shall authorize
Lender to disburse to itself proceeds of the Project Loan
to pay such Project Loan Commitment Fee, provided that
the foregoing shall not be construed as granting to the
Project Borrower the right to draw proceeds of the
Project Loan to pay the Project Loan Commitment Fee.
Lender in its sole discretion (but without any obligation
to do so) may make such disbursements notwithstanding the
existence of an Event of Default or Potential Default.
Such disbursements shall be added to the outstanding
principal balance of the Project Loan. The authorization
to be so granted is irrevocable, and no further direction
or authorization from Project Borrower is necessary for
Lender to make such disbursements. If Lender disburses
to itself proceeds of the Project Loan to pay itself a
Project Loan Commitment Fee without first having received
a request from the Project Borrower to make such a
disbursement, then Lender shall send to the Project
Borrower a statement that shows the amount of proceeds of
the Project Loan disbursed to pay such Project Loan
Commitment Fee and an explanation of Lender's calculation
of the amount thereof.
(c) In the event a Letter of Credit is issued with respect
to a Project, on the date of issuance of the Letter of
Credit and on each anniversary date of such issuance,
the Lender shall send to the Project Borrower a statement
setting forth the amount of the Letter of Credit Fee
due for the next succeeding one-year period. The Project
Borrower shall pay the Letter of Credit Fee for such succeeding
one-year period on or before that date which is fifteen
(15) days after the date of the Lender's notice to Project
Borrower regarding the Letter of Credit Fee.
<PAGE>
Section 3.2. No Reduction in Commitment.
--------------------------
The Company acknowledges and the Project Borrowers
shall acknowledge that the Project Loan Commitment Fees
required to be paid to the Lender pursuant to the
provisions of Section 3.1 shall be due and owing to the
Lender in advance for each annual period, regardless of
whether the Project Loan remains outstanding for the
entire annual period and regardless of whether the
Project Loan Amount decreases during such annual period.
In the event either the Project Borrower repays or is
required to repay the Project Loan prior to the end of
the applicable annual period or the Project Loan Amount
decreases prior to the end of the applicable annual
period, the Project Borrower shall not be entitled to any
refund of the Project Loan Commitment Fee previously
paid. Upon termination of the applicable Construction
Loan Agreement or upon the occurrence of an Event of
Default which results in the Lender exercising its remedy
to cease making disbursements of proceeds of the Project
Loan no additional Project Loan Commitment Fees shall
thereafter be due to the Lender.
Section 3.3. Payments.
--------
All payments made pursuant to the terms of the Facility
Documents shall be made to the Lender by federal funds wire
transfer in immediately available funds not later than 1:00 p.m.
(Minneapolis time) on the dates such payments are to be made.
Any payment received after 1:00 p.m. (Minneapolis time) shall be
deemed received by the Lender on the next Business Day.
All computations of interest and fees under the Facility
Documents shall be made by Lender on the basis of a
year of 360 days, comprised of twelve (12) thirty (30)
day months, for the actual number of days occurring in the
period for which such interest or fees are payable. If
any payment of fees, interest or principal to be made by
the Obligated Parties shall become due on a day other
than a Business Day, such payment shall be made on the
next succeeding Business Day.
Section 3.4. Applications of Payments; Late Charges.
--------------------------------------
(a) Payments received by Lender pursuant to the
terms of the Facility Documents shall be applied in the
following manner:
(1) first, to the payment of all expenses,
charges, costs and fees incurred by or payable to
Lender and for which the Obligated Parties are
obligated pursuant to the terms of the Facility
Documents;
(2) second, to the payment of all interest
accrued to the date of such payment, except that the
interim principal payments shall be applied to the
payment of principal in accordance with subparagraph
(3) below and not to the payment of interest; and
(3) third, to the payment of principal.
<PAGE>
Notwithstanding anything to the contrary contained
herein, after the occurrence and during the continuation
of an Event of Default, all amounts received by Lender
from any Obligated Party shall be applied in such order
as Lender, in its sole discretion, may elect.
(b) If any installment of principal, interest or
fees is not received by Lender within five (5) days after
the due date thereof, then in addition to the remedies
conferred upon Lender pursuant to Section 6.2 hereof and
the other Facility Documents, a late charge of four
percent (4%) of the amount of the payment due and unpaid
may, at the option of the Lender, be added to the
delinquent amount to compensate Lender for the expense of
handling the delinquency. The Company and Lender agree
that such late charge represents a good faith and fair
and reasonable estimate of the probable cost to Lender of
such delinquency. The Company acknowledges that during
the time that any such amount shall be in default, Lender
will incur losses which are impracticable, costly and
inconvenient to ascertain and that such late charge
represents a reasonable sum considering all of the
circumstances existing on the date of the execution of
this Commitment Agreement and represents a reasonable
estimate of the losses Lender will incur by reason of
late payment. The Company further agrees that proof of
actual losses would be costly, inconvenient,
impracticable and extremely difficult to fix. Acceptance
of such late charge shall not constitute a waiver of the
default with respect to the overdue payment, and shall
not prevent Lender from exercising any of the other
rights and remedies available hereunder.
Section 3.5. Adjustments To Project Loan Amount.
----------------------------------
With respect to each Project, the Project Borrower may, not
earlier than ninety (90) days and not later than thirty (30)
days prior to each Project Loan Anniversary Date, notify
the Lender that it has elected to reduce the Project Loan
Amount, effective on the immediately succeeding
Project Loan Anniversary Date, and the dollar amount to
which the Project Loan Amount is to be reduced; provided
however that the reduced Project Loan Amount shall never
be less than an amount equal to the total amount
necessary to complete the Development Work. In the event
the Project Borrower has elected to reduce the Project
Loan Amount as permitted by this Section 3.5, then (i)
on the immediately succeeding Project Loan Anniversary
Date, the Project Loan Amount shall be reduced without
the requirement of any further action by Project Borrower
or Lender and (ii) such reduction of the Project Loan Amount
shall be permanent, and the Project Borrower shall have no
ability to thereafter increase the Project Loan Amount.
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1. Consideration.
-------------
As an inducement to Lender to execute this Commitment
Agreement and agree to make the Project Loans subject to the
terms of this Commitment Agreement, Company represents and warrants
to Lender the truth and accuracy of the matters set forth in
this Article IV.
Section 4.2. Organization.
------------
The Company is duly organized and validly existing as a
corporation under the laws of New Mexico; AMREP Corporation
is duly organized and validly existing as a corporation under
the laws of the State of Oklahoma; AMREPCO is duly
organized and validly existing as a corporation under the
laws of the State of Colorado; and Shasta Real Estate is duly
organized and validly existing as a corporation under
the laws of the State of California. Each of the Obligated
Parties is duly qualified to do business and is in good
standing in every jurisdiction where its business or
properties require such qualification and has all
requisite power and authority to own and operate its
properties and to carry on its business as now
conducted or proposed to be conducted.
Section 4.3. Authorization.
-------------
The execution, delivery and performance by the Obligated
Parties of the Facility Documents to which each such entity
is a party have been duly authorized by all necessary
action and do not and will not (i) contravene the
organizational or charter documents of the applicable Obligated
Party; (ii) contravene any law, rule or regulation or any order,
writ, judgment, injunction or decree or any contractual restriction
binding on or affecting any Obligated Party; (iii) require
any approval or consent of any partner, shareholder or
any other Person other than approvals or consents which
have been previously obtained and disclosed in writing to
Lender; (iv) result in a breach of or constitute a default
under any indenture or loan or credit agreement or any other
agreement, lease or instrument to which any Obligated
Party is a party or by which any Obligated Party or any
of its properties may be bound or affected; or (v) result
in, or require the creation or imposition of, any lien of
any nature (other than the contemplated liens) upon or
with respect to any of the properties now owned or
hereafter acquired by any Obligated Party; and none of
the Obligated Parties is in default under any such law,
rule, regulation, order, writ, judgment, injunction,
decree or contractual restriction or any such indenture,
agreement, lease or instrument.
Section 4.4. Governmental Consents.
---------------------
No authorization or approval or other action by, and no
notice to or filing with, any governmental authority
or regulatory body is required for the due execution,
delivery and performance by the Obligated Parties of the
Facility Documents or any other document executed pursuant thereto
or in connection therewith.
Section 4.5. Validity.
--------
The Facility Documents have been or will be duly executed
and delivered by and constitute or will constitute the legal,
valid and binding obligations of the Obligated Parties enforceable
in accordance with their respective terms.
<PAGE>
Section 4.6. Financial Position.
------------------
As of the dates prepared, the financial statements
and all financial data heretofore delivered to Lender in
connection with the Facility Documents and/or relating to
the Obligated Parties are true, correct and complete in
all material respects and were prepared in accordance
with GAAP consistently applied. Such financial
statements fairly present the financial position of the
Persons who are the subject thereof as of the dates
thereof.
Section 4.7. Governmental Regulations.
------------------------
None of the Obligated Parties is subject to
regulation under the Investment Company Act of 1940, the
Federal Power Act, the Public Utility Holding Company Act
of 1935, the Interstate Commerce Act, as the same may be
amended from time to time, or any federal or state
statute or regulation limiting their ability to incur
Debt.
Section 4.8. Employee Benefit Plans.
----------------------
None of the Obligated Parties maintains any
pension, retirement, profit sharing or similar employee
benefit plan that is subject to ERISA which is not fully
funded as of the date of this Commitment Agreement.
Section 4.9. Securities Activities.
---------------------
None of the Obligated Parties is engaged
principally, or as one of its important activities, in
the business of extending credit for the purpose of
purchasing or carrying any margin stock (as defined in
Regulation U of the Board of Governors of the Federal
Reserve System in effect from time to time) and not more
than twenty-five percent (25%) of the value of the assets
of any Obligated Party consists of such margin stock.
Section 4.10. No Material Adverse Change.
-------------------------
No Material Adverse Change has occurred since
April 30, 1997.
Section 4.11. Payment of Taxes.
----------------
All tax returns and reports required to be filed
by each of the Obligated Parties have been timely filed,
or proper extensions for filing have been obtained, and
all taxes, assessments, fees and other governmental
charges upon the Obligated Parties and their properties,
assets, income and franchises which are due and payable
have been paid when due and payable, or proper extensions
for payment have been obtained, except to the extent that
such taxes, assessments, fees and other governmental
charges or the failure to pay the same would not result
in a Material Adverse Change. None of the Obligated
Parties has any knowledge of any proposed tax assessment
against any Obligated Party which has a substantial
likelihood of resulting in a Material Adverse Change.
Section 4.12. Litigation.
----------
Other than as previously disclosed in writing to
the Lender, there is no pending or, to the knowledge of
any Obligated Party, threatened action, suit, proceeding
or arbitration against or affecting any Obligated Party
before any court, governmental agency or arbitrator,
which has a substantial likelihood of resulting in a
Material Adverse Change.
<PAGE>
Section 4.13. Environmental Matters.
---------------------
The operations of the Obligated Parties comply in
all respects with all Hazardous Materials Laws except
such noncompliance which would not (if enforced in
accordance with applicable law) reasonably be expected to
result, individually or in the aggregate, in a Material
Adverse Change. As of the date of this Commitment
Agreement, (i) none of the Obligated Parties nor their
present properties or operations is subject to any
outstanding written order from or settlement or consent
agreement with any governmental authority or other
Person, nor is any of the foregoing subject to any
judicial or docketed administrative proceeding respecting
any Hazardous Materials Law, Hazardous Materials Claim or
Hazardous Material, and (ii) there are no other
conditions or circumstances known to any Obligated Party
which may give rise to any Hazardous Materials Claim
arising from the operations of any Obligated Party.
Section 4.14. No Burdensome Restrictions.
--------------------------
None of the Obligated Parties is a party to or
bound by any contract or agreement, or subject to any
charter or corporate restriction or any requirement of
law, which would reasonably be expected to result in a
Material Adverse Change.
Section 4.15. Full Disclosure.
---------------
None of the statements contained in any exhibit,
report, statement or certificate furnished by or on
behalf of any Obligated Party in connection with the
Facility Documents contains any untrue statement of a
material fact, or omits any material fact required to be
stated therein or necessary to make the statements made
therein, in light of the circumstances under which they
are made, not misleading; provided, however, that it is
recognized by Lender that projections and forecasts
provided and to be provided by the Obligated Parties,
while reflecting their good faith projections or
forecasts based upon methods and data the Obligated
Parties believe to be reasonable and accurate, are not to
be viewed as facts and that actual results during the
period or periods covered by any such projections and
forecasts may differ from the projected or forecasted
results.
Section 4.16. Adequate Consideration.
-----------------------
The Company represents and warrants to Lender that prior
to entering into this Commitment Agreement, it has reviewed
the benefits to be provided to it as a result of the Lender
entering into the Facility Documents and has concluded
that such benefits are reasonably equivalent in value to
the collateral to be pledged pursuant to the terms of the
Facility Documents and the obligations assumed and to be
assumed by the Company pursuant to the Facility Documents.
<PAGE>
ARTICLE V
COVENANTS OF COMPANY
Section 5.1. Consideration.
-------------
As an inducement to Lender to execute this
Commitment Agreement and agree to make the Project Loans
subject to the terms of this Commitment Agrement, Company
hereby covenants as set forth in this Article V.
Section 5.2. Affirmative Covenants.
---------------------
So long as any amount payable hereunder or under
any other Facility Document shall remain unpaid or Lender
shall have any commitment to disburse the proceeds of the
Project Loans or the Borrowing Base Loan, Company shall,
unless Lender shall otherwise consent in writing:
(a) Reporting Requirements. Furnish or cause to
be furnished to Lender the following notices and
reports:
(1) Monthly Status Reports Regarding
Projects. On or about the twentieth (20th) day
of each month, a status report for the previous
month (i) describing for all Projects the
progress of development and construction, (ii)
describing for all Projects sales activity and
other material developments and (iii) with
respect to the Projects only, describing
substantial deviations in the Development Work
or the Homes from the Plans and Specifications,
or the existence of defective workmanship or
materials incorporated into the Homes.
(2) Quarterly Reports. The following
quarterly reports, which shall be delivered at
the times required below:
(i) unaudited financial statements of
each Obligated Party, which financial
statements shall include (A) a balance sheet
as at the end of such fiscal quarter, (B)
statements of income and cash flow for such
fiscal quarter and the period from the
beginning of the then current fiscal year to
the end of such fiscal quarter and setting
forth in comparative form figures for the
corresponding period(s) of the preceding
fiscal year, all in reasonable detail and in
accordance with GAAP consistently applied
and certified by person serving as the chief
financial officer of the applicable
Obligated Party to fairly present the
financial condition of such Obligated Party
on a fully consolidated basis as at the end
of such fiscal quarter and the results of
the operations of the Obligated Party on a
fully consolidated basis for the period
ending on such date; all of which statements
shall be provided at the following times:
(aa) with respect to each Obligated
Party other than AMREP Corporation, as
soon as possible and in any event (i)
as to the first three (3) fiscal
quarters, within sixty (60) days after
the end of each such fiscal quarter and
<PAGE>
(ii) as to the last fiscal quarter,
within one hundred five (105) days
after the end of such fiscal quarter;
(bb) with respect to AMREP
Corporation, such quarterly reports
shall be required only with respect to
the first three (3) fiscal quarters and
shall be provided as soon as possible
and in any event within sixty (60) days
after the end of each such fiscal
quarter;
(ii) the quarterly reports required by
subsection (2)(i) above shall be accompanied
by a written statement certifying that such
Obligated Party is in compliance with the
terms of the Facility Documents, or if such
Obligated Party is not in compliance,
specifying the details of the non-compliance
and the action which the Obligated Party is
taking to correct such non-compliance; and
(iii) the quarterly reports required
by subsection (2)(i) above shall be
accompanied by a written report for each
Project which sets forth the actual costs of
the Project as compared with the Budget.
(3) Annual Reports. As soon as possible
and in any event (i) as to AMREP Corporation,
within one hundred five (105) days after the end
of each fiscal year, and (ii) as to AMREP
Southwest, within one hundred sixty five (165)
days after the end of each fiscal year, audited
financial statements of AMREP Corporation and
AMREP Southwest, as applicable, each on a fully
consolidated basis, which financial statements
shall include a balance sheet of the applicable
entity at the end of such fiscal year,
statements of income, shareholders' equity and
cash flow of such entity on a fully consolidated
basis for such fiscal year, and setting forth in
each case in comparative form figures for the
preceding fiscal year, all in reasonable detail
and in accordance with GAAP consistently applied
and accompanied by an unqualified opinion issued
by an independent certified public accountant
acceptable to Lender.
(4) Notice of Labor Controversy. As soon
as possible and in any event within ten (10)
Business Days after Company has knowledge of its
occurrence, written notice of any labor
controversy resulting in a material strike, work
stoppage, shutdown or other material labor
disruption against or involving any Obligated
Party or any Project.
(5) Notice of Material Adverse Change.
Promptly upon its occurrence, written notice and
a description of any matter which, to the best
of the Company's knowledge and belief, has
resulted, or is likely to result in, in a
Material Adverse Change.
<PAGE>
(6) Notice of Defaults or Potential
Defaults. As soon as possible and in any event
within ten (10) Business Days after Company has
knowledge of the occurrence of any Potential
Default (however described) or Event of Default
hereunder or an event of default (however
described) under any other of the Facility
Documents, written notice and a description of
such Potential Default, Event of Default or
event of default and the action which Company
proposes to take with respect thereto.
(7) Notices of Default Regarding Other
Development Projects. As soon as possible and
in any event within ten (10) Business Days after
Company has knowledge of the occurrence of any
event of default under any loan or other
financing facility, including seller financing,
made for a development project comparable to a
Project and involving Company or any Affiliate
which event of default might, in Company's good
faith judgment, result in a Material Adverse
Change.
(8) Notice of Litigation. As soon as
possible and in any event within ten (10)
Business Days after institution thereof, written
notice and a description of any adverse
litigation, action or proceeding commenced
against any Obligated Party or relating to any
Project which has a reasonable likelihood of
becoming litigation, an action or a proceeding
which is material to the operations of the
Obligated Party, and any adverse determination
in any such litigation, action or proceeding.
(9) Notices Regarding Hazardous
Materials. Promptly upon its occurrence,
written notice and a description of the release
of any Hazardous Material, or any liability with
respect thereto, on, under or in connection with
any Project and the action which Company
proposes to take with respect thereto.
(10) Notices Regarding Projects. As soon as
possible and in any event within ten (10)
Business Days after receipt by Company, copies
of all (i) notices of violation relating to and
materially adversely affecting any Project that
any Obligated Party receives from any
governmental agency or authority, (ii) notices
of default that any Obligated Party receives
under the Construction Agreements or any other
material agreement relating to and materially
adversely affecting any Project, and (iii)
notices of default that any Obligated Party
receives under any agreement relating to the
borrowing of money by any Obligated Party for
any Project from any Person.
(11) Notices Regarding Other Credit
Agreements. As soon as possible and in any event
within (10) Business Days, written notice that
any lender of any Obligated Party has declared a
material default pursuant to any credit
agreement, which notice shall specify the nature
of the default, the cure period, and a proposed
recommendation for curing such default.
<PAGE>
(12) Other Information. Such other
information respecting the business, properties,
assets, operations and condition, financial or
otherwise, of the Obligated Parties or the
Projects, including, without limitation, copies
of Project construction and sales reports, and
any other rights or interests subject to the
Facility Documents, as Lender may from time to
time reasonably request.
(b) Compliance with Laws and Regulations.
Comply in all material respects, with the Laws and
Regulations, the noncompliance with which might
result in a Material Adverse Change.
(c) Payment of Taxes and Claims. Subject to the
rights of the Obligated Parties granted pursuant to
the provisions of the Facility Documents, pay all
taxes, assessments and other governmental charges
imposed upon it or any of its properties or assets or
in respect of any of its franchises, business, income
or profits before any penalty accrues thereon, and
all claims (including, without limitation, claims for
labor, services, materials and supplies) for sums
which have become due and payable and which by law
have or may become a lien upon any of its properties
or assets.
(d) Maintenance of Properties; Books and
Records. Maintain or cause to be maintained:
(1) in good repair, working order and
condition all properties and assets material to
the continued conduct of the business of the
Obligated Parties, and from time to time make or
cause to be made all necessary repairs, renewals
and replacements thereof; and
(2) proper books, records and accounts in
which full, true and correct entries in
accordance with GAAP consistently applied are
made of all financial transactions and matters
involving its assets and business.
(e) Maintenance of Existence. Maintain and
preserve the existence of the Obligated Parties and
all rights, privileges, qualifications, permits,
licenses, franchises and other rights material to
their business.
(f) Further Assurances. Execute and deliver at
any time and from time to time any and all
instruments, agreements and documents, and shall take
such other action as Lender reasonably requires to
maintain, perfect or insure Lender's security
provided for under the Facility Documents, including,
without limitation, the execution of amendments to
the Facility Documents.
(g) Appraisals. At the request of the Lender,
which such request may be rendered at the sole
discretion of the Lender, provide to the Lender with
respect to any Project specified by the Lender, an
updated Appraisal Report; provided that with respect
to any Project, the Company shall be required to pay
<PAGE>
the costs of such Appraisal Reports no more often
than once per year.
(h) Development Work and Homes. With respect to
any Project financed using the proceeds of a Project
Loan, utilize the proceeds of the Borrowing Base Loan
to finance the Homes in the Project; provided that,
with respect to any Project as to which the Lender
has approved the sale of the finished lots to third
party builders, the proceeds of the Borrowing Base
Loan shall not be required to be used to finance the
Homes in that Project.
Section 5.3. Negative Covenants.
------------------
So long as any amount payable hereunder or any
other Facility Document still remains unpaid or Lender
shall have any commitment to disburse the proceeds of the
Project Loans or the Borrowing Base Loan, Company shall
not, unless Lender shall otherwise consent in writing:
(a) Liens. Subject to the rights of the
Obligated Parties granted pursuant to the provisions
of the Facility Documents, create, assume or suffer
to exist any lien, security interest or other charge
or encumbrance, or any other type of preferential
arrangement, upon the collateral for the Project
Loans or the Borrowing Base Loan assigned to Lender
by the Obligated Parties pursuant to the Facility
Security Instruments.
(b) Sales, Etc. of Assets; Ownership of
Collateral. Make no transfer, pledge or
hypothecation of any assets of any of the Obligated
Parties (in a single transaction or a series of
related transactions) other than to secure real
estate loans to other lenders in the normal course of
business, or any of the collateral for the Project
Loans or the Borrowing Base Loan assigned to Lender
pursuant to the Facility Security Instruments;
provided that the foregoing restriction shall not
apply to any transfer, pledge or hypothecation which
is made (i) in the ordinary course of the business of
the Obligated Parties or (ii) to an entity which is a
wholly owned subsidiary of the Company.
(c) Change in Nature of Business. Make any
change in the nature of the business of the Obligated
Parties as carried on at the date hereof.
(d) Land Banking or Land Speculation. Permit
the use of proceeds of the Project Loans or the
Borrowing Base Loan for Land Banking or Land
Speculation.
(e) Use of Proceeds. Use any part of the
proceeds of the Project Loans or the Borrowing Base
Loan to (i) purchase or carry any margin stock
(within the meaning of Regulation U issued by the
Board of Governors of the Federal Reserve System),
(ii) repay or otherwise refinance indebtedness of any
Obligated Party or others incurred to purchase or
carry any margin stock, (iii) extend credit for the
purpose of purchasing or carrying any margin stock,
or (iv) acquire any security in any transaction that
is subject to Section~13 or 14 of the Securities
Exchange Act of 1934, as amended, and regulations
promulgated thereunder.
<PAGE>
Section 5.4. Financial Covenants.
-------------------
Company shall comply with each of the following
financial covenants:
(a) Net Worth. The Company shall maintain a Net
Worth equal to or in excess of Forty Five Million
Dollars ($45,000,000).
(b) Ratio of Total Liabilities to Net Worth. At
all times, the ratio of the total liabilities of the
Company, determined in accordance with GAAP, to its
Net Worth shall not exceed 2.0 to 1.0.
(c) Pre-tax Net Income. The Company shall
ensure that the pre-tax net income for the Company
shall not be negative for any two consecutive
calendar quarters, nor negative for any four
consecutive calendar quarters on a cumulative basis.
(d) Limitation on Distributions. The Company
shall not distribute dividends, bonuses or profit
participations to officers or stockholders in the
event that any Event of Default or Potential Default
exists, nor in the event that such distribution would
result in the occurrence of an Event of Default or
Potential Default.
(e) Limitation on Amounts Paid to Guarantor.
Notwithstanding the provisions of Section 5.3(b), the
following provisions shall govern payments, pledges
and other transfers from the Company to AMREP
Corporation and Affiliates of AMREP Corporation:
(1) so long as the Guaranty from AMREP
Corporation is in effect, the Company may pay to
AMREP Corporation or an Affiliate of AMREP
Corporation management fees and other amounts to
reimburse AMREP Corporation or such Affiliate
for overhead expenses; provided that such
payments to AMREP Corporation and such
Affiliates shall never exceed Two Million Five
Hundred Thousand Dollars ($2,500,000) in any one
fiscal year; and p+ovided further that in the
event AMREP Corporation, pursuant to the terms
of the Guaranty, terminates its obligations
incurred under the terms of the Guaranty, the
Company may make no further payments, pledges or
other transfers to AMREP Corporation or any such
Affiliate; and
(2) the Company may make payments to AMREP
Corporation to repay that certain inter-company
debt owed to AMREP Corporation on the date of
this Commitment Agreement in the principal
amount of Fifteen Million Dollars ($15,000,000),
provided all of the following conditions are
met: (i) such payments are made in
contemplation and furtherance of the objective
to replace the owners of the Company with owners
<PAGE>
purchasing stock of the Company through the
public markets, (ii) the payments made to AMREP
Corporation consist soley of cash, and no other
assets of the Company are transferred to AMREP
Corporation, and (iii) the Net Worth of the
Company remains the same or increases, as a
result of such transfer and payment of the
inter-company debt.
Section 5.5. Insurance.
---------
The Company shall maintain the insurance required
by the terms of this Commitment Agreement and shall
deposit with Lender original, duplicate original or
certified copies of insurance certificates issued by
insurance companies with current Best's Key Ratings of
not less than A/IX and written in form and content
acceptable to Lender, providing the following minimum
insurance coverages:
(a) For each Project, all-risk course of
construction insurance (non-reporting form) in the
minimum amount of the proposed construction cost for
such Project on a replacement cost basis against loss
or damage by hazards customarily included within
"extended coverage" policies, and any other risks or
hazards which in Lender's reasonable judgment should
be insured against, with a Lender's Loss Payable
Endorsement naming Lender as an additional insured
together with a full replacement cost endorsement
(without provisions for co-insurance).
(b) "Commercial General Liability" insurance in
the minimum "general aggregate" amount of One Million
Dollars ($1,000,000), in the minimum "occurrence"
limit of One Million Dollars ($1,000,000) and in the
minimum "umbrella" amount of Ten Million Dollars
($10,000,000), all against claims for "personal
injury" liability, including bodily injury, death or
damage to the project liability, including completed
operations and contractual liability and also
including owners' and contractors' protective
coverage naming Lender as an additional insured.
(c) Workers' compensation insurance as
prescribed by the laws of each state in which the
Company is required to maintain such insurance, and
employers' liability with limits as prescribed by law.
(d) Unless otherwise agreed to by Lender, for
each Project, flood insurance in the maximum amount
of the Project Loan Amount or the maximum coverage
available, whichever is less, designating Lender as
payee, or evidence satisfactory to Lender that the
Project is not located within an area designated as
within the 100 year flood plain under the National
Flood Insurance Program.
(e) Insurance with respect to its properties,
assets and business against loss or damage of the
kinds customarily insured against by Persons of
established reputation engaged in the same or similar
business and similarly situated, of such types and in
such amounts as are customarily carried under similar
circumstances by such other Persons, all in
accordance with reasonably prudent industry standards.
<PAGE>
Each policy of insurance required under this Section
5.5 shall contain the "standard non-contributory
mortgagee clause" and the "standard lenders' loss payable
clause," or their equivalents, in favor of Lender, and
shall provide that it shall not be modified or canceled
without thirty (30) days' prior written notice to
Lender. Company shall also furnish Lender with receipts
for the payment of premiums on such policies or other
evidence of such payment reasonably satisfactory to
Lender, which such premiums may be paid in installments.
In the event Company does not deposit with Lender a new
policy of insurance with evidence of payment of premiums
thereon at least ten (10) days prior to the expiration of
any expiring policy, then Lender may, but shall not be
obligated to, procure such insurance, and Company shall
pay the premiums thereon to Lender promptly upon demand.
Lender shall not, by the fact of approving, disapproving,
accepting, preventing, obtaining or failing to obtain any
such insurance, incur any liability for the form or legal
sufficiency of insurance contracts, solvency of insurers
or payment of losses, and Company hereby expressly
assumes full responsibility therefor and all liability
related thereto, if any.
<PAGE>
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
Section 6.1. Events of Default.
-----------------
The occurrence of any of the following events
shall constitute an "Event of Default" hereunder:
(a) any Obligated Party shall fail to pay any
installment of principal on a Project Loan or the
Borrowing Base Loan when due, whether at stated
maturity, as a result of a mandatory prepayment
requirement, upon acceleration or otherwise, or pay
when due any interest, fees or other amounts payable
hereunder or under the other Facility Documents;
provided however, that in the event any Obligated
Party does not pay an installment of interest on or
before the Interest Due Date, but pays such
installment of interest within five (5) days
thereafter, then upon delivery of a written request
from such Obligated Party to the Lender with respect
to such late installment of interest, no Event of
Default shall occur with respect to such installment
of interest; provided further however that in any one
calendar year, the number of such notices which all
of the Obligated Parties, collectively, may deliver
to Lender shall be limited to two (2), and such two
(2) notices may not be with respect to consecutive
months of interest due; or
(b) any representation or warranty made by any
Obligated Party herein or in any other Facility
Document shall at any time be incorrect in any
material respect; or
(c) any Obligated Party shall fail to perform or
observe any term, covenant or agreement contained
herein or in any other Facility Document (other than
failures described elsewhere in this Section 6.1),
and such failure shall remain unremedied for thirty
(30) days after notice thereof from Lender to the
Obligated Party; provided that in the event the
Obligated Party commences and is diligently pursuing
to completion action to cure the failure, such thirty
(30) day period may be extended for such period of
time as is necessary to cure the failure, but in no
event longer then one hundred twenty (120) days from
the date of the Lender's notice; provided further
however, that in the event (i) Lender determines that
the failure to immediately declare an Event of
Default could materially and adversely harm the
rights of the Lender hereunder or under any Facility
Document, or the rights of the Lender with respect to
the collateral pledged to secure the Project Loans or
the Borrowing Base Loan, or (ii) Lender reasonably
determines that the failure to perform or observe the
terms of this Commitment Agreement or another
Facility Document cannot be remedied with the passage
of one hundred twenty (120) days, then Lender may
declare an immediate Event of Default in its notice
given pursuant to this Section 6.1(c); or
(d) any Obligated Party shall assert the
invalidity or unenforceability of this Commitment
Agreement or any other Facility Document or this
Commitment Agreement or any other Facility Document
shall be adjudicated to be invalid or unenforceable
in any material respect; or
<PAGE>
(e) any Obligated Party shall fail to pay any
Debt, or any interest or premium thereon, when due
(whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), and such failure
shall continue after the applicable grace period, if
any, specified in the agreement or instrument
relating to such Debt; or any other default under any
agreement or instrument relating to any such Debt, or
any other event, shall occur and shall continue after
the applicable grace period, if any, specified in
such agreement or instrument, if such failure to pay,
default or event could result in the acceleration, or
permits the acceleration of, the maturity of such
Debt; or any such Debt shall be declared to be due
and payable, or is required to be prepaid (other than
by a regularly scheduled required prepayment) prior
to the stated maturity thereof; provided however that
none of the foregoing events or inactions shall
constitute an Event of Default unless such event or
inaction could reasonably be expected to result in a
Material Adverse Change; or
(f) any Obligated Party shall generally not pay
its Debts as such Debts become due, or shall admit in
writing its inability to pay its Debts generally, or
shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by
or against any Obligated Party seeking to adjudicate
such party as bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of such
party's Debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the
appointment of a receiver, trustee or other similar
official for such party or for any substantial part
of such party's property and, in the case of any such
proceeding instituted against it (but not instituted
by it), either such proceeding shall remain
undismissed or unstayed for a period of thirty (30)
days (whether or not consecutive), or any of the
actions sought in such proceeding (including,
without, limitation, the entry of an order for relief
against, or the appointment of a receiver, trustee,
custodian or other similar official for, it or for
any substantial part of its property) shall occur; or
any Obligated Party shall take any action to
authorize any of the actions set forth above; or
(g) any event of default (however described)
under any other Facility Document shall occur and not
be cured within the applicable grace period; or
(h) any Facility Security Instrument, for any
reason, ceases to create a valid and perfected first
priority lien on or in the Land or other collateral
relating thereto as described in the Facility
Documents, or any Obligated Party shall so state in
writing; or
(i) the dissolution or winding up of any
Obligated Party; or
(j) any judgment or order for the payment of
money in excess of One Hundred Thousand Dollars
($100,000), singularly or in the aggregate, shall be
<PAGE>
rendered against any Obligated Party, and either (i)
enforcement proceedings shall have been commenced by
any creditor upon such judgment, and such proceedings
have not been stayed, or (ii) there shall be a period
of thirty five (35) days during which a stay of
enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect;
or
(k) a Material Adverse Change shall occur; or
(l) the Company shall fail to comply with any of
the financial covenants set forth in Section 5.4.
Section 6.2. Remedies.
--------
Upon the occurrence of any Event of Default, the
following provisions shall apply:
(a) if such event is an Event of Default
specified in Section 6.1(f), Lender's commitment to
fund the Project Loans and the Borrowing Base Loan
shall terminate and the indebtedness evidenced by the
Notes shall and any other amounts payable under this
Commitment Agreement and the Facility Documents shall
immediately and automatically become due and payable;
(b) if such event is any event other than an
Event of Default described in subparagraph (a) above,
Lender may, at its option:
(1) by notice to the Company terminate its
commitment to consider proposed projects for
approval as Projects; and/or
(2) by notice to the Company, terminate its
commitment to fund the Project Loans and the
Borrowing Base Loan and declare the Project
Loans and the Borrowing Base Loan, all interest
thereon, and all other amounts payable under
this Commitment Agreement and the other Facility
Documents to be due and payable, whereupon the
Project Loans and the Borrowing Base Loan, all
such interest and all such amounts shall become
and be forthwith due and payable, without
presentment, demand, protest or further notice
of any kind, all of which are hereby expressly
waived by the Company; and/or
(3) exercise any and all rights and
remedies which may be available to Lender under
the Facility Documents or at law or in equity,
including, without limitation, the right to
foreclose or otherwise realize upon all or any
part of the collateral securing the obligations
of the Obligated Parties and to proceed against
any of the Obligated Parties and/or any other
Person liable with respect to the obligations
under the Facility Documents.
Section 6.3. Authorization to Apply Assets.
--------------------------------
The Company hereby authorizes the Lender,
following the occurrence of an Event of Default, with
written notice to the Company, to apply any property,
balances, credits, accounts or moneys of any Obligated
Party then in the possession of Lender, or standing to
the credit of any Obligated Party to the payment of the
Project Loans and the Borrowing Base Loan.
<PAGE>
ARTICLE VII
MISCELLANEOUS
Section 7.1. Successors and Assigns.
----------------------
The provisions of this Commitment Agreement shall
be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns,
provided that none of the Obligated Parties may assign or
transfer any of its rights or obligations under this
Commitment Agreement or any other Facility Document
without the prior written consent of Lender.
Section 7.2. Notices.
-------
All notices, requests and demands to be made
hereunder to the parties hereto shall be in writing (at
the addresses set forth below) and shall be given by any
of the following means:
(a) personal delivery;
(b) reputable overnight courier service;
(c) electronic communication, whether by telex,
telegram or telecopying (if confirmed in writing sent
by registered or certified, first class mail, return
receipt requested); or
(d) registered or certified, first class mail,
return receipt requested.
Any notice, demand or request sent pursuant to the terms
of this Commitment Agreement shall be deemed received (i)
if sent pursuant subsection (a), upon such personal
delivery, (ii) if sent pursuant to subsection (b), on
the next Business Day following delivery to the courier
service, (iii) if sent pursuant to subsection (c), upon
dispatch if such dispatch occurs between the hours of
9:00 a.m. and 5:00 p.m. (recipient's time zone) on a
Business Day, and if such dispatch occurs other than
during such hours, on the next Business Day following
dispatch and (iv) if sent pursuant to subsection (d),
three (3) days following deposit in the mail.
The addresses for notices are as follows:
To Lender: Residential Funding Corporation
8400 Normandale Lake Boulevard
Suite 600
Minneapolis, Minnesota 55437
Attention: Managing Director
Construction Finance
Telephone No.: (612) 832-7435
Telecopier No.: (612) 832-7254
with a copy to: Residential Funding Corporation
8400 Normandale Lake Boulevard
Suite 600
<PAGE>
Minneapolis, Minnesota 55437
Attention: General Counsel
Telephone No.: (612) 832-7415
Telecopier No.: (612) 832-7190
To the Company: AMREP Southwest, Inc.
333 Rio Rancho Drive
Rio Rancho, New Mexico 87124
Attention: Mohan Vachani
Senior Vice President
Telephone No.: (505) 892-9200
Telecopier No.: (505) 896-9180
With copies to: AMREP Southwest, Inc.
641 Lexington Avenue
New York, New York 10022
Attention: Valerie Ascuitto
Telephone No.: (212) 705-4700
Telecopier No.: (212) 705-4740
Such addresses may be changed by notice to the other
parties given in the same manner as provided above.
Section 7.3. Changes, Waivers, Discharge and
--------------------------------------
Modifications in Writing.
------------------------
No provision of this Commitment Agreement may be
changed, waived, discharged or modified except by an
instrument in writing signed by the party against whom
enforcement of the change, waiver, discharge or
modification is sought and consented to by the Lender.
Section 7.4. No Waiver; Remedies Cumulative.
--------------------------------
No making of a Project Loan shall constitute a
waiver of any conditions to Lender's obligation to make
further Project Loans nor, in the event the Company is
unable to satisfy any such conditions, shall any such
waiver have the effect of precluding Lender from
thereafter declaring such inability to constitute an
Event of Default (however described) under this
Commitment Agreement. No failure or delay on the part of
Lender in the exercise of any power, right or privilege
hereunder or under this Commitment Agreement shall impair
such power, right or privilege or be construed to be a
waiver of any Event of Default (however described) or
acquiescence therein, nor shall any single or partial
exercise of any such power, right or privilege preclude
any other or further exercise thereof, or of any other
right, power or privilege. Except as specifically
provided herein, all rights and remedies existing under
this Commitment Agreement are cumulative to and not
exclusive of any rights or remedies otherwise available.
Section 7.5. Costs, Expenses and Taxes.
-------------------------
The Company agrees to pay the costs and all
expenses incurred by Lender in connection with the
preparation, execution, delivery, administration,
<PAGE>
modification and amendment of this Commitment Agreement,
the other Facility Documents and any other documents to
be delivered hereunder, including, without limitation,
the reasonable fees and out-of-pocket expenses of counsel
for Lender with respect thereto and with respect to
advising Lender as to its rights and responsibilities
under this Commitment Agreement and the other Facility
Documents.
The Company further agrees to pay all costs and
expenses of Lender (including, without limitation,
reasonable counsel fees and expenses, court costs and all
other litigation expenses, including, but not limited to,
reasonable expert witness fees, document copying
expenses, exhibit preparation, courier expenses, postage
expenses and communication expenses) in connection with
the enforcement of this Commitment Agreement, the other
Facility Documents and any other documents delivered
hereunder, including, without limitation, costs and
expenses incurred in connection with any bankruptcy,
insolvency, liquidation, reorganization, moratorium or
other similar proceeding, or any refinancing or
restructuring in the nature of a "workout" of the
Facility Documents and any other documents delivered by
the Company related thereto. In addition, the Company
shall pay any and all stamp and other taxes payable or
determined to be payable in connection with the execution
and delivery of this Commitment Agreement, the other
Facility Documents and the other documents to be
delivered hereunder, and agrees to hold Lender harmless
from and against any and all liabilities with respect to
or resulting from any delay in paying or omission to pay
such taxes.
Whenever the Company is obligated to pay or reimburse
Lender for any attorney's fees, those fees shall include
the costs for services of Lender's in-house counsel.
Payment from the Company of amounts due pursuant to
this Section 7.5 shall be due thirty (30) days after it
has received from the Lender written notice of the nature
of the item for which payment is required and the amount
due.
Section 7.6. Disclaimer by Lender; No Joint Venture.
--------------------------------------
The Company acknowledges, understands and agrees
as follows:
(a) the relationship between the Company and
Lender is, and shall at all times remain, solely that
of borrower and lender, and Lender neither undertakes
nor assumes any responsibility for or duty to the
Company to select, review, inspect, supervise, pass
judgment upon or inform the Company of the quality,
adequacy or suitability of any matter or thing
submitted to Lender for its approval;
(b) Lender owes no duty of care to protect the
Company or any other Person against negligent,
faulty, inadequate or defective building or
construction; and
<PAGE>
(c) the Company is not and shall not be an agent
of Lender for any purpose. Lender is not a joint
venture partner with the Company in any manner
whatsoever.
Approvals granted by Lender for any matters covered
under this Commitment Agreement shall be narrowly
construed to cover only the parties and facts identified
in any such approval.
Section 7.7. Indemnification.
---------------
Except as prohibited by applicable state law, the
Company agrees to protect, indemnify, defend and hold
harmless each Indemnified Party from and against any and
all claims (other than claims made by an Obligated Party
and other than Hazardous Materials Claims, the
indemnification for which is set forth in each
Environmental Indemnity), damages, losses, liabilities,
obligations, penalties, actions, judgments, suits, costs,
disbursements and expenses (including, without
limitation, reasonable fees and expenses of counsel and
consultants and allocated costs of internal counsel) that
may be incurred by or asserted against any Indemnified
Party, in each case arising out of or in connection with
or related to any of the following:
(a) any Project Loan, the Borrowing Base Loan,
this Commitment Agreement or any other Facility
Document;
(b) the use of funds advanced under the Facility
Documents; or
(c) the failure of any of the Obligated Parties
or any other party controlled by any of such parties
to comply fully with any and all laws applicable to
it (other than the Hazardous Materials Laws, the
indemnification for which is set forth in each
Environmental Indemnity),
whether or not an Indemnified Party is a party thereto
and whether or not the transactions contemplated hereby
are consummated, except to the extent such claims,
damages, losses, liabilities, obligations, penalties,
actions, judgments, suits, costs, obligations, penalties,
disbursements and expenses are found in a final
non-appealable judgment by a court of competent
jurisdiction to have resulted from the gross negligence
or willful misconduct of the Indemnified Party.
Without prejudice to the survival of any other
agreement of the Company hereunder, the agreements and
obligations of the Company contained in this Section 7.7
shall (i) survive the termination of this Commitment
Agreement and the other Facility Documents and the
payment in full of the Project Loans and the Borrowing
Base Loan and (ii) be in addition to the indemnification
obligations contained in the Environmental Indemnities.
Section 7.8. Consultants.
-----------
The Company shall pay any and all valid claims of
any consultants, advisors, brokers or agents whom it has
retained or with whom any of them have initiated contact
with respect to this Commitment Agreement who claims a
<PAGE>
right to any fees in connection with this Commitment
Agreement, and shall indemnify, defend and hold Lender
harmless from such claims, whether or not they are valid.
Section 7.9. Governing Law.
-------------
This Commitment Agreement shall be governed by and
construed in accordance with the laws of the State of New
Mexico, other than its principles of conflicts of law.
Section 7.10. Titles and Headings.
-------------------
The titles and headings of sections of this
Commitment Agreement are intended for convenience only
and shall not in any way affect the meaning or
construction of any provision of this Commitment
Agreement.
Section 7.11. Counterparts.
------------
This Commitment Agreement may be executed in any
number of counterparts, each of which shall be deemed an
original and all of which shall constitute one and the
same agreement with the same effect as if all parties had
signed the same signature page.
Section 7.12. Participants.
------------
Lender may at any time sell, assign or grant
participations in, or otherwise transfer to a
Participant, all or part of the obligations of the
Obligated Parties under the Facility Documents. Unless
the Lender is expressly prohibited from doing so, Lender
agrees to notify the Company in writing of any such sale,
assignment, grant or transfer and the identity of the
transferee within thirty (30) days after the occurrence
of such event. Without limitation of the exclusive right
of Lender to collect and enforce such obligations, the
Company agrees and each Obligated Party will agree that
each disposition will give rise to a debtor-creditor
relationship of the Obligated Party to the Participant,
and the Company authorizes and each Obligated Party will
authorize each Participant, upon the occurrence of an
Event of Default, to proceed directly by right of setoff,
banker's lien, or otherwise, against any assets of any of
the Company or Project Borrower which may be in the hands
of such Participant; provided however that the preceding
clauses of this sentence shall not be construed to give
to any Participant any rights which are in addition to
the rights such Participant would derive from the
participation arrangement between Lender and
Participant. The Company authorizes and each Obligated
Party will authorize Lender to disclose to any
prospective Participant and any Participant any and all
information in Lender's possession concerning the
Obligated Parties, this Commitment Agreement, the other
Facility Documents, the Projects and the collateral for
the obligations of the Obligated Parties under the
Facility Documents. The Lender shall obtain from every
Participant its covenant to comply with the terms of
Section 7.13 hereof.
Section 7.13. Confidentiality.
---------------
The Company and Lender shall mutually agree on the
contents of any press release, public announcement or
other public disclosure regarding this Commitment
Agreement and the transactions contemplated hereunder to
be made following the mutual execution and delivery of
this Commitment Agreement; provided that, subject to the
terms of Section 7.12, Lender may disclose the terms
hereof and give copies of the Facility Documents to
assignees and Participants and to prospective assignees
and Participants. If either party fails to respond to
the other party in writing with either an approval or a
<PAGE>
disapproval within five (5) Business Days of a party's
receipt of the other party's request for consent or
approval as expressly contemplated pursuant to this
Section~7.13, which request shall have been sent to the
other party's notice addressees in the manner set forth
in Section~7.2, then such consent or approval shall be
deemed to have been given, provided that such five (5)
Business Day period shall not commence to run unless and
until the other party shall have received all
information, materials, documents and other matters
required to be submitted to it hereunder with respect to
such consent or approval and all other information,
materials, documents and other matters reasonably
essential to its decision process.
Section 7.14. Time is of the Essence.
----------------------
Time is of the essence of this Commitment
Agreement.
Section 7.15. No Third Parties Benefitted.
---------------------------
This Commitment Agreement is made and entered into
for the sole protection and legal benefit of the Company,
Lender and the Participants and their permitted
successors and assigns, and no other Person shall be a
direct or indirect legal beneficiary of, or have any
direct or indirect cause of action or claim in connection
with, this Commitment Agreement or any of the other
Facility Documents. Lender shall not have any obligation
to any Person not a party to this Commitment Agreement or
the other Facility Documents.
Section 7.16. Severability.
------------
The illegality or unenforceability of any
provision of this Commitment Agreement or any instrument
or agreement required hereunder shall not in any way
affect or impair the legality or enforceability of the
remaining provisions of this Commitment Agreement or any
instrument or agreement required hereunder.
Section 7.17. Jurisdiction.
------------
Any legal action or proceeding with respect to
this Commitment Agreement may be brought in the courts of
the State of New Mexico or of the United States for the
District of New Mexico, and by execution and delivery of
this Commitment Agreement, the Company and Lender
consents, for itself and in respect of its property, to
the jurisdiction of those courts. The Company and Lender
irrevocably waive any objection, including any objection
to the laying of venue or based on the grounds of forum
non conveniens which it may now or hereafter have to the
bringing of any action or proceeding in such jurisdiction
in respect of this Commitment Agreement or any document
related hereto. The Company and Lender each waive any
personal service of any summons, complaint or other
process, which may be made by any other means permitted
by New Mexico law. Nothing in this Section 7.17 shall
affect the right of Lender to serve legal process in any
other manner permitted by law or limit the right of
Lender to bring any action or proceeding against the
Company or its property in the courts of any other
jurisdiction.
Section 7.18. Waiver of Jury Trial.
--------------------
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
THE COMPANY AND LENDER WAIVE THEIR RESPECTIVE RIGHTS TO A
TRIAL BY JURY ON ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS COMMITMENT
<PAGE>
AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY IN ANY ACTION, PROCEEDING
OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY PARTY
AGAINST ANY OTHER PARTY, WHETHER WITH RESPECT TO CONTRACT
CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY AND
LENDER AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL
BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT
LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT
THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY
OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM
OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO
CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS
COMMITMENT AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY
PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS COMMITMENT AGREEMENT AND THE OTHER
LOAN DOCUMENTS.
Section 7.19. Interpretation.
--------------
This Commitment Agreement and the other Facility
Documents shall not be construed against Lender merely
because of Lender's involvement in the preparation of
such documents and agreements.
Section 7.20. Entire Agreement.
----------------
This Commitment Agreement, together with the other
Facility Documents, embodies the entire present agreement
and understanding among the Obligated Parties and Lender
and supersedes all prior or contemporaneous agreements
and understandings of such persons, verbal or written,
relating to the subject matter hereof and thereof except
for any prior arrangements made with respect to the
payment by the Obligated Parties of (or any
indemnification for) any fees, costs or expenses payable
to or incurred (or to be incurred) by or on behalf of
Lender.
Section 7.21. Inconsistencies.
---------------
In the event of any inconsistencies between the
terms of this Commitment Agreement and the terms of any
of the other Facility Documents, the terms of the other
Facility Documents shall govern. In the event of any
ambiguity or inconsistency between the terms of any
Construction Loan Agreement, any other Project Loan
Document or this Commitment Agreement as compared with
the terms of the Project Commitment, the terms of the
Project Commitment shall in all events control.
Section 7.22. Termination Date.
----------------
The terms and provisions of this Commitment
Agreement shall continue in force and effect until the
Termination Date; provided however, that notwithstanding
any other provision herein or in any other Facility
Document to the contrary, so long any principal remains
outstanding with respect to any Project Loan or the
Borrowing Base Loan, or the Lender has any obligation to
any Obligated Party pursuant to the provisions of any
Facility Document, the obligations of the Obligated
Parties set forth herein shall remain in full force and
effect until the date on which the Lender has no further
obligations, even if such date is beyond the Termination
Date.
<PAGE>
IN WITNESS WHEREOF, Lender and the Company has caused
this Commitment Agreement to be duly executed and
delivered as of the date first above written.
AMREP SOUTHWEST, INC.,
a New Mexico corporation
By: /s/ James Wall
---------------------------------------
Printed Name: James Wall
-----------------------------
Title: President and Chairman of the Board
------------------------------------
RESIDENTIAL FUNDING CORPORATION,
a Delaware corporation
By: /s/ Donald V. Pierce
--------------------------------------
Printed Name: Donald V. Pierce
----------------------------
Title: Director of Structured Finance
-----------------------------------
<PAGE>
EXHIBIT A TO COMMITMENT AGREEMENT
CONDITIONS TO OBLIGATION OF LENDER TO MAKE COMMITMENT
The obligation of the Lender to make enter into this
Commitment Agreement is conditioned upon the Lender
having received, in form and substance satisfactory to
Lender, each of the following:
1. An executed original of this Commitment
Agreement.
2. A favorable opinion from counsel for the
Obligated Parties, which such opinion may be in the
form of one or more opinions, and may be from one or
more counsel, with respect to the following, or such
other matters as are covered in the opinion(s) of
counsel accepted by the Lender with respect to this
Commitment Agreement:
(a) The Company is duly organized and
validly existing as a corporation under the laws
of the State of New Mexico. AMREP Corporation
is duly organized and validly existing as a
corporation under the laws of the State of New
Mexico. AMREPCO is duly organized and validly
existing as a corporation under the laws of the
State of Colorado. Shasta Real Estate is duly
organized and validly existing as a corporation
under the laws of the State of California. Each
of such Obligated Parties is duly qualified to
do business and in good standing in every
jurisdiction where its business or properties
require such qualification and has all requisite
power and authority to own and operate its
properties and to carry on its business as now
conducted.
(b) Each of the Obligated Parties has the
power and authority to execute and deliver, and
perform its obligations under, those Facility
Documents to which each such Obligated Party is
a party.
(c) The execution, delivery and performance
by the Company of the Commitment Agreement have
been duly authorized by all necessary action and
do not and will not (i) contravene the charter
or organizational documents of the Company or
any partnership agreement or charter documents
of any other entity; (ii) contravene any law,
rule or regulation or, to such counsel's
knowledge (after due investigation), any order,
writ, judgment, injunction or decree or any
contractual restriction binding on or affecting
the Company; (iii)~require any approval or
consent of any shareholder or any other Person
other than approvals or consents which have been
previously obtained and disclosed in writing to
Lender; (iv)~to such counsel's knowledge (after
due investigation), result in a breach of or
constitute a default under any indenture or loan
or credit agreement or any other agreement,
lease or instrument to which the Company is a
<PAGE>
party or by which or any of its properties may
be bound or affected; or (v)~to such counsel's
knowledge after due investigation, result in, or
require the creation or imposition of, any lien
of any nature (other than the liens contemplated
by the Commitment Agreement) upon or with
respect to any of the properties now owned or
hereafter acquired by the Company and, to such
counsel's knowledge, the Company is not in
default under any such law, rule, regulation,
order, writ, judgment, injunction, decree or
contractual restriction or any such indenture,
agreement, lease or instrument.
(d) The Commitment Agreement has been duly
executed and delivered and constitutes the
legal, valid and binding obligation of the
Company enforceable in accordance with its
terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditor's
rights generally and by general principles of
equity. The remaining Facility Documents, when
executed and delivered by the applicable
Obligated Party, will constitute the legal,
valid and binding obligations of the applicable
Obligated Party, enforceable in accordance with
their respective terms, except as enforceability
may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws
affecting creditor's rights generally and by
general principles of equity.
(e) No authorization or approval or other
action by, and no notice to or filing with, any
governmental authority or regulatory body is
required for the due execution, delivery and
performance by any of the Obligated Parties of
the Facility Documents to which each such entity
is a party or any other document executed
pursuant thereto or in connection therewith.
(f) To such counsel's knowledge (after due
investigation), there is no pending or
threatened action, suit, proceeding or
arbitration against or affecting the Company or
any of its Affiliates before any court,
governmental agency or arbitrator which, has a
substantial likelihood of becoming litigation,
an action or a proceeding which is material to
the operations of the Company or such Affiliate.
(g) Such other opinions as Lender shall
reasonably request.
4. Copies of the Articles of Incorporation and
By-laws for the Company, AMREP Corporation, AMREPCO and
Shasta Real Estate together with a certificate of good
standing or similar document from the Secretary of State
of the state of each such entity's organization.
5. Copies of the resolutions adopted by the
Company, AMREP Corporation, AMREPCO and Shasta Real
Estate authorizing each such entity to obligate itself
<PAGE>
with respect to this Commitment Agreement and the other
Facility Documents and authorizing certain officers to
execute and deliver this Commitment Agreement and the
other Facility Documents.
6. Payment of all costs and expenses incurred by
Lender, including, without limitation, the fees and costs
of its legal counsel, in connection with the preparation,
execution and delivery of this Commitment Agreement.
<PAGE>
EXHIBIT B TO COMMITMENT AGREEMENT
PROJECT UNDERWRITING DOCUMENTS
A. GENERAL PROJECT INFORMATION:
1. Summary description of proposed project.
2. Purchase contract for Land or Lots.
3. Cash flow analysis, which shall include (i) the
proposed Budget (including a line item cost
breakdown and breakdown between costs of
acquisition of the Land or Lots, costs related
to Development Work and costs related to the
Homes), (ii) the proposed Construction Progress
Schedule, (iii) profitability summary and (iv)
source and use of funds statement.
4. An Appraisal Report(s) setting forth (i) a value
for the Land or each Lot with the proposed
project, (ii) a value for each floor plan of
Home to be included within the proposed project
and (iii) a market report supporting absorption
rates and information on the various model types
of Homes.
5. The plat relating to such project.
6. Evidence of site plan approval.
7. Evidence of proper zoning.
8. Title Commitment.
B. CONSTRUCTION INFORMATION AND DOCUMENTS:
1. Site plan.
2. Plans and Specifications and renderings/elevations of Plans and
Specifications.
3. ALTA survey.
4. Phase I environmental report.
5. Letters regarding utility availability and/or development agreement.
6. Building permits.
C. PROJECT LEGAL DOCUMENTS
1. Proposed or recorded covenants, conditions and restrictions.
2. If applicable, a copy of the homeowner's
association articles of incorporation, by-laws
and budget.
<PAGE>
EXHIBIT C TO COMMITMENT AGREEMENT
PROJECT REQUIREMENTS
- ------------------------------------------------------------
GENERAL A proposed Project may utilize
proceeds of a Project Loan for any
of the following: (i) acquisition
of the Land and construction of
the Development Work and Homes,
(ii) acquisition of the Land and
construction of the Development
Work, in order to allow the
finished lots to be sold to other
builders, or (iii) acquisition of
the Land and construction of the
Homes.
To the extent approved by the
Lender in its sole and absolute
discretion, a proposed Project may
also utilize proceeds of the
Project Loan to finance or
refinance Land presently held by
the Company, including but not
limited to Land as to which no
Development Work or Construction
Improvements are contemplated
during the term of the Facility
Documents.
A proposed project may be one of
several projects anticipated to be
developed by the Project Borrower
in a single contiguous development.
- ------------------------------------------------------------
- ------------------------------------------------------------
ENTITLEMENT RISK All proposed Projects must be
suitable for and substantially
entitled for the commencement of
the Development Work and/or the
Homes, as applicable, including
the relative on and off-site
improvements. The Land must be
fully entitled, and the Project
Borrower must be able to commence
development of the Project, as
contemplated by the Project
Underwriting Documents, upon
payment of fees to the governing
municipality.
- ------------------------------------------------------------
- ------------------------------------------------------------
GEOGRAPHIC REGION Limited to the States of
California, Colorado and New
Mexico.
- ------------------------------------------------------------
- ------------------------------------------------------------
PROJECT SIZE The size of each Project shall be
LIMITATIONS limited to the number of units
which can be absorbed prior to the
date on which the portion of the
Loan disbursed for such Project is
required to be repaid (see
"DEVELOPMENT LIFE CYCLE" below),
provided however that in no event
shall the size of any Project
exceed one hundred fifty (150)
units.
- ------------------------------------------------------------
- ------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------
SALES PRICES The base sales prices for the
Units shall not exceed $300,000.
- ------------------------------------------------------------
- ------------------------------------------------------------
START LIMITATIONS The phasing of the Development
Work will be based upon the
economics and physical
requirements of the Project.
- ------------------------------------------------------------
- ------------------------------------------------------------
COMMENCEMENT OF WORK The Development Work or the Homes,
as applicable, for a Project must
commence within three (3) months
of the date of the applicable
Construction Loan Agreement.
- ------------------------------------------------------------
- ------------------------------------------------------------
PROJECT LOAN MATURITY All outstanding borrowings of the
DATE Project Loan with respect to a
Project shall be due and owing on
or before the Project Loan
Maturity Date.
The Project Loan Maturity Dates
will be determined for each
Project, but will not exceed (i)
thirty six (36) months from the
date of the Construction Loan
Agreement, or (ii) the Termination
Date.
- ------------------------------------------------------------
- ------------------------------------------------------------
ADVANCE RATES The Advance Rates for the Projects
shall be as follows:
(1) to acquire the Land,
that amount which is equal to
the acquisition price of the
Land, less that amount which
is equal to 15% of the total
budgeted costs to acquire the
Land and complete the
Development Work; plus
(2) 100% of the costs of
the Development Work;
provided however that the Project
Loan Amount shall not exceed 70%
of the Value of the Project;
provided further however that in
the event the Project Borrower has
owned the Land for ten (10) or
more years, subpart (1) above
shall not be applicable.
In the event the Lender approves
the use of proceeds of the Project
Loan to finance or refinance Land
presently held by the Project
Borrower, the Advance Rate
relating to such refinancing shall
be set forth in the applicable
Project Commitment and shall be in
addition to and independent of the
Advance Rates set forth in the
preceding paragraphs.
- ------------------------------------------------------------
- ------------------------------------------------------------
<PAGE>
EXHIBIT D TO COMMITMENT AGREEMENT
FORM OF PROJECT COMMITMENT
[LETTERHEAD OF LENDER]
PROJECT COMMITMENT
Commit Date
Borrower/lc
c/o AMREP Southwest, Inc.
333 Rio Rancho Drive
Rio Rancho, New Mexico 87124
Attention: Mohan Vachani
Senior Vice President
Ladies and Gentlemen:
In accordance with and subject to the terms and
conditions of the Commitment Agreement dated as of
February 20, 1998 (the "Commitment Agreement") between
Residential Funding Corporation, a Delaware corporation
(the "Lender") and AMREP Southwest, Inc., a New Mexico
corporation (the "Company"), the Lender is pleased to
confirm that the Lender agrees to make a loan to the
Project Borrower specified below with respect to the
Project specified below, substantially upon the terms
outlined in this Project Commitment. Capitalized terms
used herein shall have the meanings assigned those terms
in the Commitment Agreement.
- ------------------------------------------------------------
GENERAL
- ------------------------------------------------------------
- ------------------------------------------------------------
PROJECT ProjectName
- ------------------------------------------------------------
- ------------------------------------------------------------
PROJECT BORROWER Borower/lc
- ------------------------------------------------------------
- ------------------------------------------------------------
GUARANTOR AMREP Corporation, an
Oklahoma corporation and
AMREP Southwest, Inc., a
New Mexico corporation
- ------------------------------------------------------------
- ------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------
PROJECT INFORMATION
- ------------------------------------------------------------
- ------------------------------------------------------------
DESCRIPTION OF PROJECT Select appropriate language
ACQUISITION OF LAND/LOTS:
Acquisition of land for a UnitNo
- unit residential subdivision
located in ProjectCounty County
in the State of ProjectState.
-----------------------------
-----------------------------
BULK LAND FINANCING: Insert
appropriate language.
-----------------------------
-----------------------------
DEVELOPMENT WORK: The work
of development to be
performed on or with
respect to the Land
(including, without
limitation, the
installation of utilities,
roads and all related
on-site and off-site
improvements) in connection
with the development of the
Land for the subsequent
construction thereon of
Homes, all of which work
and construction shall be
completed by or on behalf
of the Project Borrower in
accordance with the Plans
and Specifications, but
shall not include the Homes.
-----------------------------
-----------------------------
HOMES: The Project Borrower
shall use proceeds of the
Borrowing Base Loan to
construct the Homes on the
Land in accordance with the
Plans and Specifications,
which Homes shall include
UnitNo(wds/#) Select
apprproriate language
single-family detached
homes / condominium homes /
attached townhomes in a
subdivision commonly known
as ProjectName located in
ProjectCounty County, State
of ProjectState.
- ------------------------------------------------------------
- ------------------------------------------------------------
BUDGET The Budget for the
Acquisition Amount and the
Development Amount is
attached hereto as Schedule
1.
- ------------------------------------------------------------
- ------------------------------------------------------------
VALUE The Value for the Project
is equal to.
- ------------------------------------------------------------
- ------------------------------------------------------------
INSPECTOR Inspector, or such other
inspector(s) or
engineer(s) engaged by
Lender, at the expense of
the Project Borrower, to
provide to Lender
consultation services in
connection with the Project.
- ------------------------------------------------------------
- ------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------
CONSTRUCTION PROGRESS SCHEDULE Select appropriate language
Construction of the Project
will commence no later
than NUMBER OF DAYS
days from the date
of this Project Commitments
and will continue in
accordance with Section
6.11 of the Construction
Loan Agreement.
OR
Construction of the Project
has previously commenced
and will continue in
accordance with Section
6.11 of the Construction
Loan Agreement. The
foregoing statement shall
constitute, for purposes of
Section 6.3 of the
Construction Loan
Agreement, the Lender's
approval of the Project
Borrower's commencement of
construction prior to the
date of the Project Loan
Documents, provided the
Project Borrower delivers
to the Lender a Title
Policy meeting the
requirements of the
Construction Loan Agreement.
- ------------------------------------------------------------
- ------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------
CERTAIN TERMS OF THE PROJECT LOAN
- ------------------------------------------------------------
- ------------------------------------------------------------
PROJECT LOAN AMOUNT Amount($), of which amount (i)
is the Acquisition Amount and
(ii) is the Development
Amount. The Project Loan
Amount, the Acquisition
Amount and the Development
Amount may each be
adjusted from time to time
by mutual consent of the
Lender and the Project
Borrower evidenced by a
written statement or
agreement executed and
delivered by the Lender and
the Project Borrower.
-----------------------------
-----------------------------
Proceeds of the Project
Loan are not available to
be disbursed with respect
to the construction of the
Homes. Proceeds of the
Specify California, Colorad
or New Mexico Borrowing Base
Loan shall be used to finance
such construction.
- ------------------------------------------------------------
- ------------------------------------------------------------
LETTERS OF CREDIT Insert applicable information
- ------------------------------------------------------------
- ------------------------------------------------------------
PROJECT LOAN COMMITMENT FEE Simultaneous with the
closing of the Project
Loan, and on each
anniversary date
thereafter, the Project
Borrower shall pay to the
Lender the Project Loan
Commitment Fee, which is an
annual amount, payable in
advance, equal to one-half
of one percent (0.50%) of
the Project Loan Amount, as
the Project Loan Amount is
determined on the day such
amount is due and payable.
- ------------------------------------------------------------
- ------------------------------------------------------------
INTEREST RATE The Project Loan shall bear
interest at a rate equal to
the Prime Rate plus one
percent (1%).
- ------------------------------------------------------------
- ------------------------------------------------------------
ADVANCE RATE Proceeds of the Project
Loan may be advanced to
fund the following:
SELECT APPROPRIATE LANGUAGE
(1) to acquire the
Land, that amount which is
equal to the acquisition
price of the Land, less
that amount which is equal
to 15% of the total
budgeted costs to acquire
the Land and complete the
Development Work; plus
(1) [LANGUAGE RE BULK
LAND ADVANCE RATE]
(2) 100% of the costs
of the Development Work,
provided however that the
Project Loan Amount shall
not exceed 70% of the Value
of the Project.
- ------------------------------------------------------------
- ------------------------------------------------------------
ADDITIONAL LIMITATIONS ON Additional Limits on
DISBURSEMENTS Disbursement
- ------------------------------------------------------------
- ------------------------------------------------------------
REPAYMENT OF PRINCIPAL Principal of the Project
Loan shall be due and
payable as follows: Adjust
language as necessary to
reflect bulk land financed.
-----------------------------
-----------------------------
(1) upon the closing
of a Lot or Unit in the
Project, the principal
amount of the Project Loan
to be repaid by the Project
Borrower shall be an amount
equal to one hundred twenty
percent (120%) of the total
amount of the Project Loan
budgeted for (i) the
acquisition of the Lot,
(ii) the Development Work
for such Lot and (iii) all
other costs related to such
Lot, until such time as the
total amount of the Project
Loan budgeted for the
Project has been paid in
full; and
-----------------------------
-----------------------------
(2) if the full amount
of the Project Loan has not
been repaid on or before
the Project Loan Maturity
Date, the Project Borrower
shall on such Project Loan
Maturity Date repay the
entire remaining principal
amount of the Project Loan;
and
-----------------------------
-----------------------------
(3) on any date that
the Lender makes any
payment to with respect to
a Letter of Credit, the
Project Borrower shall pay
to the Lender an amount
equal to the amount so paid
by the Lender with respect
to the Letter of Credit.
- ------------------------------------------------------------
- ------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------
PROJECT LOAN MATURITY DATE The first to occur of (i),
MaturityDate, which is the date #
of monthsmonths from the date of
the Project Loan Documents (as
such date may be extended
in writing by the Lender
and the Project Borrower
from time to time), or (ii)
the date on which the
Project Loan is required to
be repaid pursuant to
Section 8.2 of the
Construction Loan Agreement.
- ------------------------------------------------------------
- ------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------
PROJECT LOAN DOCUMENTS
- ------------------------------------------------------------
- ------------------------------------------------------------
PROJECT UNDERWRITING Remaining Project Underwriting
DOCUMENTS REMAINING TO BE Documents
DELIVERED PRIOR TO CLOSING
OF PROJECT LOAN
- ------------------------------------------------------------
- ------------------------------------------------------------
PROJECT LOAN DOCUMENTS Construction Loan Agreement
Note
Deed of Trust
Guaranty from AMREP Corporation
Delete if NA Guaranty from
AMREP Southwest
Environmental Indemnity
Assignment
UCC-1 Financing Statement
Construction Agreements
Title Policy
Plans and Specifications
- ------------------------------------------------------------
- ------------------------------------------------------------
OTHER REQUIRED DOCUMENTS Prior to closing this
transaction, Project
Borrower shall deliver to
Lender the following:
Other Required Documents
- ------------------------------------------------------------
This Project Commitment is conditioned upon the
absence of (i) any material adverse change in the
financial condition, operations or prospects of the
Company since the date of the most recent financial
statements delivered to the Lender, and (ii) any material
action, suit or proceeding (including, without
limitation, any inquiry or investigation) pending or
threatened with respect to the Company that could result
in a Material Adverse Change.
The Project Loan Documents shall be prepared by
counsel to the Lender and shall be satisfactory to the
Lender. Project Borrower shall be obligated to pay all
costs and expenses incurred to satisfy all conditions
precedent, whether or not any funds of the Project Loan
are advanced with respect to the Project. The Lender
shall not be responsible or liable for consequential
damages which may be alleged as a result of the issuance
of this Project Commitment.
Project Borrower and the Company agree to indemnify
and hold harmless Lender from liabilities (including
costs of settlement) arising out of or resulting from the
transactions contemplated by this Project Commitment,
other than liabilities resulting from the gross
negligence or willful misconduct of the Lender, and to
reimburse the Lender for reasonable legal or other
expenses incurred in connection with the defense or
preparation of the defense of any such liability.
<PAGE>
The provisions of the immediately preceding two
paragraphs shall survive any termination of this Project
Commitment.
This Project Commitment shall terminate unless (a)
this Project Commitment is accepted by the Project
Borrower on or before and (b) definitive Project Loan
Documents, satisfactory in form and substance to the
Lender, have been entered into on or before or such
later date as is mutually agreeable to the Lender and the
Project Borrower.
Sincerely,
RESIDENTIAL FUNDING CORPORATION
By:______________________________
Printed Name:____________________
Title:___________________________
TERMS ACCEPTED:
AMREP SOUTHWEST, INC.,
a New Mexico corporation
By:______________________________
Printed Name:____________________
Title:___________________________
Delete unless different from AMREP
Southwest
BORROWER/UC,
BorrowerType
By:______________________________
Printed Name:____________________
Title:___________________________
<PAGE>
SCHEDULE 1 TO PROJECT COMMITMENT
BUDGET FOR ACQUISITION AND DEVELOPMENT
<PAGE>
EXHIBIT E TO COMMITMENT AGREEMENT
FORM OF EXTENSION REQUEST
Residential Funding Corporation
8400 Normandale Lake Boulevard
Suite 600
Minneapolis, Minnesota 55437
Attention: Managing Director, Construction Finance
Gentlemen/Ladies:
In accordance with Section 2.4 of that certain
Commitment Agreement dated as of February 20, 1998 (the
"Commitment Agreement"), between AMREP Southwest, Inc., a
New Mexico corporation, and you, the undersigned hereby
notifies you of its election to request an extension of
the Project Loan Availability Termination Date to
_________ __, 199_ and the Termination Date to _________
__, 199_.
Please indicate Lender's consent to such extension by
signing the attached copy of this letter in the space
provided below and returning the same to the undersigned.
Very truly yours,
AMREP SOUTHWEST, INC.,
a New Mexico corporation
By:__________________________________
Printed Name:________________________
Title:_______________________________
<PAGE>
CONSENT TO EXTENSION
RESIDENTIAL FUNDING CORPORATION, as Lender under the
Commitment Agreement dated as of February 20, 1998
between the Lender and AMREP SOUTHWEST, INC., a New
Mexico corporation, consents to the extensions of the
Project Loan Availability Termination Date and
Termination Date, as requested above.
RESIDENTIAL FUNDING CORPORATION,
a Delaware corporation
By:__________________________________
Name:________________________________
Title:_______________________________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
FDS - 2ND QUARTER
</LEGEND>
<CIK> 0000006207
<NAME> AMREP CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-START> MAY-01-1998
<PERIOD-END> OCT-31-1998
<EXCHANGE-RATE> 1
<CASH> 12,121
<SECURITIES> 0
<RECEIVABLES> 73,186
<ALLOWANCES> 0
<INVENTORY> 107,847
<CURRENT-ASSETS> 0
<PP&E> 32,100
<DEPRECIATION> 14,179
<TOTAL-ASSETS> 232,045
<CURRENT-LIABILITIES> 0
<BONDS> 52,643
0
0
<COMMON> 740
<OTHER-SE> 86,523
<TOTAL-LIABILITY-AND-EQUITY> 232,045
<SALES> 49,972
<TOTAL-REVENUES> 82,153
<CGS> 33,250
<TOTAL-COSTS> 63,271
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,389
<INCOME-PRETAX> 5,372
<INCOME-TAX> 2,149
<INCOME-CONTINUING> 3,223
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,223
<EPS-PRIMARY> 0.44
<EPS-DILUTED> 0
</TABLE>
