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"
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
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
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
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:
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
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.
"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
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
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.
"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,
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
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
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.
"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.
"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.
"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.
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;
(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.
"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".
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
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:
(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.
(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
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.
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.
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.
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.
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.
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.
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.
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
(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.
(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.
(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
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.
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
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.
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.
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
(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
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.
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
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,
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
(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
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
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
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.
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
-----------------------------------
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
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
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.
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.
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.
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- ------------------------------------------------------------
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.
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- ------------------------------------------------------------
GEOGRAPHIC REGION Limited to the States of
California, Colorado and New
Mexico.
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- ------------------------------------------------------------
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.
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- ------------------------------------------------------------
- ------------------------------------------------------------
SALES PRICES The base sales prices for the
Units shall not exceed $300,000.
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- ------------------------------------------------------------
START LIMITATIONS The phasing of the Development
Work will be based upon the
economics and physical
requirements of the Project.
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- ------------------------------------------------------------
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.
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- ------------------------------------------------------------
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.
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- ------------------------------------------------------------
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.
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- ------------------------------------------------------------
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
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
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.
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
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.
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
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.
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
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.
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
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.
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:___________________________
SCHEDULE 1 TO PROJECT COMMITMENT
BUDGET FOR ACQUISITION AND DEVELOPMENT
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:_______________________________
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:_______________________________