UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FOR M 8-K
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934


Date of Report (Date of earliest event reported):             November 19, 2012              
 

AMREP CORPORATION
(Exact name of Registrant as specified in its charter)

Oklahoma
1-4702
59-0936128
(State or other jurisdiction of
(Commission File
(IRS Employer
incorporation)
Number)
Identification No.)

300 Alexander Park, Suite 204, Princeton, New Jersey
08540
(Address of principal executive offices)
(Zip Code)
 
Registrant's telephone number, including area code:   (609) 716-8200

Not Applicable
(Former name or former address, if changed since last report)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions (see General Instruction A.2. below):

[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 
 
 
 
Item 1.01.  Entry into a Material Definitive Agreement.
 
Item 2.03.  Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
 
Reference is made to (i) the Current Report on Form 8-K filed by the Company on August 15, 2012, reporting that the loan in the outstanding principal amount of $16,214,000 (the “Loan”) from Compass Bank to the Company’s AMREP Southwest Inc. (“ASW”) subsidiary had been purchased by Kappa Lending Group, LLC (“Kappa Lending”), a company organized and wholly-owned by Nicholas G. Karabots, the Vice Chairman of the Company and beneficial owner of more than 40 % of its outstanding Common Stock, and (ii) the Current Report on Form 8-K filed by the Company on August 28, 2012 reporting the execution of documents formally extending the maturity date of the Loan to December 1, 2012.
 
Kappa Lending and ASW have executed the Third Amendment dated as of November 19, 2012 to the Loan Agreement dated December 17, 2009 and Third Modification dated November 19, 2012 to the Promissory Note dated December 17, 2009 (together, the “Third Loan Amendments”), further amending the terms of the Loan.
 
The Third Loan Amendments effect a number of changes to the terms of the Loan, which will become effective December 1, 2012, the most significant of which are:
 
·  
The Loan’s maturity date has been extended for five years to December 1, 2017 and the Loan will bear interest at 8-1/2% per annum payable monthly.
 
·  
No payments of principal are required until maturity, except that on a quarterly basis ASW is required to make principal payments in an amount equal to 25% of the net cash from sales of land (as defined) it received in the prior quarter.
 
·  
As additional security for the Loan, Kappa Lending has received a pledge of the stock of ASW’s wholly-owned subsidiary, Outer Rim Investments, Inc., and by December 15, 2012 is to receive a first mortgage on land ASW owns in Rio Rancho, New Mexico that is not presently mortgaged to secure the Loan, which consists of approximately 4,100 acres comprised of approximately 6,200 scattered lots.  Outer Rim Investments, Inc. owns approximately 12,500 acres in Sandoval County, New Mexico, largely comprised of scattered lots, which at present is not being actively offered for sale.
 
·  
A sale transaction by ASW of the newly mortgaged land for more than $50,000 or any land other than land zoned and designated as a residential classification for more than $100,000 requires Kappa Lending’s approval.  Otherwise, Kappa Lending is required to release the lien of its mortgage on any land being sold by ASW in the ordinary course to an unrelated party on terms ASW believed to be commercially reasonable and at a price ASW believed to be not less than the land’s fair market value or, in the case of the newly mortgaged land, its wholesale value, upon receipt of ASW’s certification to such effect.
 

 
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·  
The Loan may be prepaid at any time without penalty except that if the prepayment is in connection with the disposition of ASW or substantially all of its assets there is a prepayment penalty, initially 5% of the amount prepaid with the percentage declining by 1% each year.
 
·  
The covenant requiring ASW to maintain collateral for the Loan with an appraised value that is at least 2-1/2 times the outstanding Loan amount has been eliminated.
 
Copies of the Third Loan Amendments are included as Exhibits 10.1 and 10.2 to this Current Report.  Such Exhibits are incorporated into these Items 1.01 and 2.03 by reference and their description in these Items is qualified by such reference.
 
Item 9.01.  Financial Statements and Exhibits.
 
Exhibit No.
Description
 
10.1
Third Amendment dated as of November 19, 2012 to Loan Agreement dated  December 17, 2009 between AMREP Southwest Inc. and Kappa Lending Group, LLC.
 
10.2
Third Modification dated November 19, 2012 to the Promissory Note dated December 17, 2009 of AMREP Southwest Inc. payable to Kappa Lending Group, LLC.

 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
AMREP CORPORATION
 
       (Registrant)

 
By:   /s/  Peter M Pizza             
 
       Peter M. Pizza,
       Vice President and
 
       Chief Financial Officer
 
Date:  November 21, 2012

 
-3-
 
 
EXHIBIT INDEX

Exhibit No.
Description
 
10.1
Third Amendment dated as of November 19, 2012 to Loan Agreement dated December 17, 2009 between AMREP Southwest Inc. and Kappa Lending Group, LLC.
 
10.2
Third Modification dated November 19, 2012 to the Promissory Note dated December 17, 2009 of AMREP Southwest Inc. payable to Kappa Lending Group, LLC.


-4-

 

EXHIBIT 10.1

THIRD AMENDMENT TO LOAN AGREEMENT


THIS THIRD AMENDMENT TO LOAN AGREEMENT (this “ Amendment ”) is executed as of the 19th day of  November, 2012 and effective as of December 1, 2012 (the " Effective Date "), by and between AMREP SOUTHWEST INC., a New Mexico corporation (the “ Borrower ”), and KAPPA LENDING GROUP, LLC, a Pennsylvania limited liability company (the “ Lender ”).

WHEREAS, Compass Bank (“ Compass ”) extended a loan (the “ Loan ”) to Borrower in the original principal amount of $22,500,000 as evidenced by that certain Promissory Note (the “ Original Note ”) dated December 17, 2009;

WHEREAS, in connection with the Loan, Compass and Borrower entered into a Loan Agreement (the “ Original Loan Agreement ”) dated as of December 17, 2009;

WHEREAS, Compass and Borrower modified certain terms of the Loan pursuant to that certain First Amendment to Loan Agreement (the “ First Amendment ”) dated April 29, 2011;

WHEREAS, Compass and Borrower modified certain terms of the Original Note pursuant to that certain First Modification (the “ First Modification ”) dated April 29, 2011;

WHEREAS, Compass sold all of its right, title and interest in the Loan to Lender as of August 13, 2012 (the “ Sale Date ”) and Lender has succeeded to all rights, title and interest in and to the Loan as of the Sale Date;

WHEREAS, Lender and Borrower modified certain terms of the Loan pursuant to that certain Second Amendment to Loan Agreement (the “ Second Amendment ”) dated August 24, 2012 (the Original Loan Agreement as modified by the First Amendment and the Second Amendment, hereinafter the “ Loan Agreement ”);

WHEREAS, Lender and Borrower modified certain terms of the Original Note pursuant to that certain Second Modification (the “ Second Modification ”) dated August 24, 2012 (the Original Note as modified by the First Modification and the Second Modification, hereinafter the “ Note ”);

WHEREAS, the Lender and Borrower desire to further amend the terms of the Loan Agreement pursuant to the terms and conditions contained herein; 

NOW, THEREFORE, in consideration of the mutual covenants and conditions contained herein and in the Loan Agreement, the parties agree as follows: 

1.           All the terms and conditions of the Loan Agreement are incorporated herein and by this reference made a part hereof, and shall remain the same except to the extent modified by
 
 
1
 
 
this Amendment.  The defined term “Lender” shall be deemed to mean and replace the defined term “Bank” in all of the Loan Documents.  The Capitalized terms used herein, but not otherwise defined shall have the meaning ascribed to such term in the Loan Agreement. 

2.           Lender and Borrower hereby agree as follows:

                       a. The maturity date of the Note is extended to December 1, 2017 (the “ New Maturity Date ”). The period from the Effective Date to the New Maturity Date shall be referred to as the “ Extension Term ” and the entire remaining Note balance shall be due and payable in full on the New Maturity Date.

                       b. Borrower shall continue to make payments of interest to the Lender in accordance with the terms of the Note as modified by that certain Third Amendment to Note of even date herewith until the outstanding principal balance is paid in full.

                       c. For the period from and after the Effective Date until the New Maturity Date, Borrower shall not be required to pay to Lender any principal payments except as follows.  No later than twenty (20) days following the end of the calendar quarter, Borrower shall make a principal payment (each a “ Required Principal Payment ”) to Lender equal to 25% of the net cash from sales of land received by Borrower in such calendar quarter.   If no net cash from sales of land is received during any calendar quarter, then no Required Principal Payment shall be due for such calendar quarter. The term “net cash from sales of land” shall have the meaning ascribed to such term in the First Amendment, as amended to include the Scattered Lots (as hereafter defined). For purposes of this paragraph, the term “calendar quarter” shall be deemed to mean the periods of January 1 st through March 31 st , April 1 st through June 30 th , July 1 st through September 30 th , and October 1 st through December 31 st . No separate release price shall be paid by Borrower in connection with any release of Collateral.

                       d. In consideration of Lender entering into this Amendment and extending the term of the Credit Facility, Borrower shall: (i) grant a first priority mortgage (the “ Additional Mortgage ”) on all real property owned by Borrower and located in or about Rio Rancho, New Mexico which is not presently included in the definition of Collateral under the Credit Facility (collectively, the “ Scattered Lots ”); and (ii) execute and deliver to Lender a Stock Pledge (the “ Stock Pledge ”) under which Borrower shall grant a security interest in all presently existing and hereafter arising issued and outstanding shares of capital stock of Outer Rim Investments, Inc., a New Mexico corporation, as additional security for the timely payment and performance of all of Borrower’s obligations under the Credit Facility.  The Additional Mortgage and the Stock Pledge shall be in form and substance acceptable to Lender’s attorney and each such document shall be included within the definition of Loan Documents. The Stock Pledge shall be duly executed and delivered to Lender concurrent with the execution and delivery of this Amendment.  The Additional Mortgage shall be duly executed and delivered to Lender as soon as practical after the legal descriptions for the Scattered Lots have been prepared, and in no event later than December 15, 2012.  If the Additional Mortgage is not executed and delivered to Lender on or before December 15, 2012, it shall constitute an Event of Default under the Loan Agreement without further notice to Borrower.  The Additional Mortgage shall be recorded by Lender in the Real Property Records of Sandoval County, New Mexico and Borrower shall pay
 
 
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all recording fees in connection therewith.  From and after the Effective Date, the term Collateral as defined in Section 1.5 of the Original Loan Agreement shall be deemed to include the Scattered Lots.

                       e. Notwithstanding any other provision of the Loan Documents, Lender shall grant a partial release of Lender’s mortgage on the Collateral under the Mortgage or the Additional Mortgage (as the case may be) in connection with sales of land by Borrower provided that Borrower certifies to Lender in writing that such sale is (i) to an unrelated third party; (ii) for a price that Borrower believes in good faith is not less than the fair market value of such Collateral or in the case of the Scattered Lots, the wholesale value of such Collateral; (iii) on terms that Borrower believes in good faith to be commercially reasonable; and (iv) in the ordinary course of Borrower’s business; provided , however , Lender’s prior written approval shall be required (x) with respect to the sale of the Scattered Lots, if the individual or collective sales price of the Scattered Lot(s) in any single transaction exceeds $50,000; or (y) with respect to the sale of any non-residential land (“ Commercial Land ”) if the individual or collective sales price of the Commercial Land in any single transaction exceeds $100,000.  For purposes of this paragraph, the term “Commercial Land” shall mean all land other than land zoned and designated as a residential classification, including without limitation, land zoned commercial, retail and/or industrial. Such partial releases shall be granted as soon as is reasonably practicable and in any event within ten (10) business days after Borrower’s written request is received by Lender (provided that Borrower is entitled to such partial release).

           f. Solely in the event of a sale or transfer of Borrower’s stock (or a merger, consolidation or other similar transaction) or a sale of all or substantially all of Borrower’s assets to an unrelated third party which results in a principal prepayment (each a “ Prepayment ”) prior to the New Maturity Date, Borrower shall pay to Lender a prepayment premium (the “ Prepayment Premium ”) in connection therewith in an amount as set forth as follows.   The Prepayment Premium shall be: (i) 5% of the amount of the Prepayment if the Prepayment occurs in the first year of the Extension Term; (ii) 4% of the amount of the Prepayment if the Prepayment occurs in the second year of the Extension Term; (iii) 3% of the amount of the Prepayment if the Prepayment occurs in the third year of the Extension Term; (iv) 2% of the amount of the Prepayment if the Prepayment occurs in the fourth year of the Extension Term; and (v) 1% of the amount of the Prepayment if the Prepayment occurs in the fifth year of the Extension Term.  The Prepayment Premium shall be due and payable to Lender at the time of the Prepayment. The Prepayment Premium shall not apply to any Required Principal Payment as set forth above.

                      g.  In the event that any payment of principal, Prepayment Premium or interest is ten (10) or more days late, Borrower shall pay a late fee equal to 5% of such past due amount.

                      h. Section 4.3(c) is hereby modified such that Borrower shall provide projections of consolidated financial statements for each fiscal year through the New Maturity Date within sixty (60) days after Lender’s written request, provided that Lender shall not make such request more than once in any twelve (12) month period.

 
 
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                       i. Section 4.10 of the Loan Agreement (Maximum Loan To Value Collateral Ratio) is hereby deleted in its entirety as of the Effective Date.

                       j. In conjunction with the execution of this Amendment and as consideration for the extension of the loan term to the New Maturity Date, Borrower shall pay Lender a loan extension fee equal to Twenty Five Thousand Dollars ($25,000.00).  Such fee shall be paid upon execution and delivery of this Amendment.

3.           Borrower and Lender shall execute a Third Modification to the Note consistent with the terms of this Amendment and in the form attached hereto and made a part hereof as Exhibit A .

4.           Section 7.2 (Notices) of the Original Loan Agreement is hereby modified such that the notice provision for Bank is deleted and replaced with the following:


LENDER:                    Kappa Lending Group, LLC
            P.O. Box 736
            40 E. Skippack Pike
Fort Washington, PA 19034
Attn: William J. Bonner, Jr., General Counsel
Fax: (215) 643-3818

5.           The representations and warranties of the Borrower in the Loan Agreement are hereby ratified and reaffirmed.

6.           The Borrower hereby represents and warrants to Lender as follows:

a.           The Borrower has the power and authority to enter into this Amendment and to do all acts and things as are required or contemplated hereunder to be done, observed and performed by it.

b.           This Amendment has been duly authorized, validly executed and delivered by one or more authorized officers of the Borrower and constitutes the legal, valid and binding obligation of the Borrower enforceable against it in accordance with its terms, provided that such enforceability is subject to general principles of equity.

c.           The execution and delivery of this Amendment and the performance by the Borrower hereunder does not and will not, as a condition to such execution, delivery and performance, require the consent or approval of any regulatory authority or governmental authority or agency having jurisdiction over the Borrower, nor be in contravention of or in conflict with the articles of incorporation, bylaws or other organizational documents of the Borrower, or the provision of any statute, or any judgment, order or indenture, instrument, agreement or undertaking, to which the Borrower is party or by which any of the assets or properties of the Borrower is bound.
 
 
 
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7.           The Borrower represents that it does not have any set-offs, defenses, recoupments, offsets, counterclaims or other causes of action against Lender relating to the Loan Documents and the indebtedness evidenced and secured thereby and agrees that, if any such set-off, defense, counterclaim, recoupment or offset otherwise exists on the date of this Amendment, each such defense, counterclaim, recoupment, offset or cause of action is hereby waived and released forever.

8.           For and in consideration of the obligations set forth herein and intending to be legally bound hereby, the Borrower does hereby remise, release and forever discharge Lender, and its respective successors and assigns, of and from and all manner of actions, causes of actions, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, claims, and demands of whatsoever nature, in law, in equity or in admiralty, direct or indirect, known or unknown, matured or not matured, including for contribution and/or indemnity, that the Borrower has ever had or now has, including, without limitation, those with respect to any and all matters alleged or which could have been alleged, with respect to the Loan Documents or the making or administration of the loans up to and including the date of this Amendment. The genera1 release hereby entered into and executed by Borrower is intended by Borrower to be final, complete and total as to all matters that have arisen or occurred up to and including the date of this Amendment.

9.           The Borrower agrees to promptly take such action, upon the request of Lender, as is necessary to carry out the intent of this Amendment.

10.           Except as modified herein, the Loan Agreement is hereby ratified and remains in full force and effect. In the case of any provision of any Loan Document that deletes provisions of an earlier document, this will not have the effect of restoring to the Loan Documents even earlier provisions that were deleted by the provisions now being deleted. This Amendment may be executed in any number of counterparts, each of which shall be an original, and such counterparts together shall constitute one and the same instrument. Executed copies via facsimile or electronic transmission shall be deemed to constitute originals for all purposes.

[REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY]

 
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IN WITNESS WHEREOF, the parties have executed and delivered this Third Amendment to Loan Agreement as of the date first above written.
 
 

BORROWER:

                                                AMREP SOUTHWEST INC., a New Mexico
                                                corporation



                                                By:          /s/ James H. Wall, Jr.                     
                                                         James H. Wall, Jr., Sr. Vice President


                                                LENDER:

                                                KAPPA LENDING GROUP, LLC, a Pennsylvania
                                                limited liability company              



                                                By:          /s/ William J. Bonner, Jr.              
                                                        William J. Bonner, Jr., Vice President


6
EXHIBIT 10.2

 
Third Modification effective December 1, 2012
to the PROMISSORY NOTE dated December 17, 2009
 
 


 
This Third Modification (this “ Third Modification ”), dated this 19th day of November, 2012 and effective December 1, 2012 (the “ Effective Date ”) , is made to the PROMISSORY NOTE dated December 17, 2009 (the " Original   Note "), by AMREP SOUTHWEST INC., a New Mexico corporation (" Borrower "), payable to KAPPA LENDING GROUP, LLC, a Pennsylvania limited liability company (" Lender ," as successor in interest to Compass Bank) and subsequently modified by that certain First Modification (the “ First   Modification ”) dated April 29, 2011 and that certain Second Modification (the “ Second Modification ”) dated August 24, 2012 (the Original Note as modified by the First Modification and the Second Modification hereinafter the “ Note ”).
 

1.            This Third Modification is a written amendment to the Note, made pursuant to the provisions contained in the “AMENDMENTS” Section at page 2 of the Note.

 
2.            All capitalized terms have the meaning defined in the Note unless a specific definition for such term is contained in this Third Modification.

 
3.             By mutual agreement of the parties, the Note is modified to extend the maturity of the Note to December 1, 2017 (the “ New   Maturity   Date ”) and to incorporate the  other changes detailed below.

 
4.             Borrower hereby acknowledges and agrees that the outstanding principal balance of the Note is $16,214,000.00 . The Note continues to be non-revolving and no re-advance of principal shall be made.
 
5.             The section entitled “INTEREST RATE; MINIMUM RATE” in the Original Note is hereby deleted in its entirety and replaced with the following:
 
FIXED INTEREST   RATE .  Commencing the Effective Date, this Note shall accrue interest on the unpaid principal from time to time outstanding at the fixed rate of Eight and One-Half Percent (8.5%) per annum.  Commencing upon the occurrence of an Event of Default (including the failure to pay all outstanding principal and accrued interest upon maturity) and continuing for so long as such  Event of Default remains uncured, the interest rate on this Note shall be increased by 4.00 percentage points to Twelve and One-Half Percent (12.5%) per annum.
 
6.            The “Principal Payments” provisions set forth in Section 5 of the Second Modification are hereby deleted in their entirety and replaced with the following:
 
Principal Payments . The principal balance of the Note shall be repaid as follows:
 
 
A.  
Except as otherwise set forth in the Third Amendment to Loan Agreement dated as of even date herewith, for the period from the Effective Date until the New Maturity Date, there shall be no principal payments due from Borrower to Lender.
 
 
 
 
 
 
B.  
The entire remaining principal balance of the Note together with all accrued and unpaid interest shall be due and payable in full on the New Maturity Date.
 
 
7.            The section entitled “NO PREPAYMENT PENALTY” in the Original Note is hereby modified by the provisions contained in Section 2(f) of the Third Amendment to Loan Agreement (as hereinafter defined), which require a prepayment premium in the circumstances contained therein.
 
8.            The Loan Agreement dated December 17, 2009 (as modified by that certain First Amendment to Loan Agreement dated as of April 29, 2011 and that Second Amendment to Loan Agreement dated August 24, 2012) referenced in the Note has been amended in conjunction with this Third Modification by that certain Third Amendment to Loan Agreement dated as of even dated herewith (the “ Third Amendment to Loan Agreement ”).
 
9.            This Third Modification amends the Note and is not a replacement or a novation of the Note. The Note, as amended by this Third Modification, remains in full force and effect.  Borrower acknowledges there are no defenses, real or personal to payment of the Note.
 
 



BORROWER:

                                                AMREP SOUTHWEST INC., a New Mexico
                                                corporation



                                                By:          /s/ James H. Wall, Jr.                     
                                                         James H. Wall, Jr., Sr. Vice President


                                                LENDER:

                                                KAPPA LENDING GROUP, LLC



                                                By:          /s/ William J. Bonner, Jr.              
                                                        William J. Bonner, Jr., Vice President