-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MNemjxic13cO6ZhtQDZvL4zW19IHCUHSLaQ/uioZtHIQ/Prij9SPZShSiZ5+sXdB VLcDOgVijQJnW5ZN0OvdWg== 0000006207-01-500016.txt : 20020412 0000006207-01-500016.hdr.sgml : 20020412 ACCESSION NUMBER: 0000006207-01-500016 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20011031 FILED AS OF DATE: 20011212 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMREP CORP CENTRAL INDEX KEY: 0000006207 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 590936128 STATE OF INCORPORATION: OK FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-04702 FILM NUMBER: 1811627 BUSINESS ADDRESS: STREET 1: 641 LEXINGTON AVENUE STREET 2: 6TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2127054700 MAIL ADDRESS: STREET 1: 641 LEXINGTON AVE STREET 2: 6TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN REALTY & PETROLEUM CORP DATE OF NAME CHANGE: 19671019 10-Q/A 1 q10q1001.txt SECOND QUARTER FILING SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 31, 2001 ---------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________________ to _____________________ Commission File Number 1-4702 ------ AMREP Corporation - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Oklahoma 59-0936128 - -------------------------------------------------------------------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 641 Lexington Avenue, Sixth Floor, New York, New York 10022 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 705-4700 -------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has subject to such filing requirements for the past 90 days. Yes X No ___________ Number of Shares of Common Stock, par value $.10 per share, outstanding at December 10, 2001 - 6,573,586. FORM 10-Q AMREP CORPORATION AND SUBSIDIARIES INDEX ----- PART I. FINANCIAL INFORMATION PAGE NO. - ------- Item 1. Consolidated Financial Statements: Balance Sheets October 31, 2001 (Unaudited) and April 30, 2001 (Audited) 1 Statements of Operations and Retained Earnings (Unaudited) 2 Three Months Ended October 31, 2001 and 2000 Statements of Operations and Retained Earnings (Unaudited) Six Months Ended October 31, 2001 and 2000 3 Statements of Cash Flows (Unaudited) Six Months Ended October 31, 2001 and 2000 4 Notes to Consolidated Financial Statements 5 - 6 Item 2. Management's Discussion and Analysis 7 - 9 Item 3. Quantitative and Qualitative Disclosures about Market Risk 9 PART II. OTHER INFORMATION - -------- Item 4. Submission of Matters to a Vote of Security Holders 10 Item 6. Exhibits and Reports on Form 8-K 10 SIGNATURES 11 EXHIBIT INDEX 12 PART 1. FINANCIAL INFORMATION Item 1. Financial Statements - ----------------------------- AMREP CORPORATION AND SUBSIDIARIES Concolidated Balance Sheets (Thousands, except parvalue and number of shares) October 31, 2001 April 30, 2001 ------------------ ------------------ (Unaudited) (Audited) ASSETS - ------ Cash and cash equivalents $ 15,467 $ 15,941 Receivables, net: Real estate operations 6,864 7,070 Magazine circulation operations 44,744 37,533 Real estate inventory 61,476 73,347 Property, plant and equipment, at cost, net of accumulated depreciation and amortization of $16,080 at October 31, 2001 and $15,286 at April 30, 2001 14,993 14,314 Other assets 10,150 11,448 Excess of cost of subsidiary over net assets acquired 5,191 5,191 ------------------ ------------------ $ 158,885 $ 164,844 ================== ================== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Accounts payable $ 27,049 $ 19,735 Deposits and accrued expenses 8,287 7,591 Notes payable: Amounts due within one year 21,902 9,490 Amounts subsequently due 6,238 34,770 ------------------ ------------------ 28,140 44,260 Taxes payable 2,572 1,785 Deferred income taxes 1,692 1,692 ------------------ ------------------ 67,740 75,063 ------------------ ------------------ Commitments and contingencies Shareholders' equity: Common stock, $.10 par value; shares authorized - 20,000,000; shares issued - 7,399,677 at October 31, 2001 and April 30, 2001 740 740 Capital contributed in excess of par value 44,935 44,935 Retained earnings 51,179 49,815 Treasury stock, at cost; 826,091 shares at October 31, 2001 and April 30, 2001 (5,709) (5,709) ------------------ ------------------ 91,145 89,781 ------------------ ------------------ $ 158,885 $ 164,844 ================== ================== See notes to consolidated financial statements. 1 AMREP CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations and Retained Earnings (Unaudited) Three Months Ended October 31, 2001 and 2000 (Thousands, except per share amounts) 2001 2000 ------------------ ------------------- REVENUES - -------- Real estate operations: Land sales $ 13,537 $ 3,112 Home and condominium sales 635 507 ------------------ ------------------- 14,172 3,619 Magazine circulation operations 13,112 12,740 Interest and other operations 934 1,032 ------------------ ------------------- 28,218 17,391 ------------------ ------------------- COSTS AND EXPENSES - ------------------ Real estate cost of sales: Land sales 10,940 1,165 Home and condominium sales 717 1,166 Operating expenses: Magazine circulation operations 9,712 9,917 Real estate commissions and selling 452 256 Other operations 621 577 General and administrative: Real estate operations and corporate 822 907 Magazine circulation operations 1,630 1,676 Interest, net 442 803 ------------------ ------------------- 25,336 16,467 ------------------ ------------------- Income before income taxes 2,882 924 PROVISION FOR INCOME TAXES 1,153 370 ------------------ ------------------- NET INCOME 1,729 554 RETAINED EARNINGS, beginning of period 49,450 47,045 ------------------ ------------------- RETAINED EARNINGS, end of period $ 51,179 $ 47,599 ================== =================== NET INCOME PER SHARE - BASIC AND DILUTED $ 0.26 $ 0.08 ================== =================== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 6,574 6,629 ================== =================== See notes to consolidated financial statements. 2 AMREP CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations and Retained Earnings (Unaudited) Six Months Ended October 31, 2001 and 2000 (Thousands, except per share amounts) 2001 2000 ------------------ ------------------- REVENUES - -------- Real estate operations: Land sales $ 20,803 $ 5,883 Home and condominium sales 635 2,720 ------------------ ------------------- 21,438 8,603 Magazine circulation operations 24,710 25,069 Interest and other operations 1,720 1,929 ------------------ ------------------- 47,868 35,601 ------------------ ------------------- COSTS AND EXPENSES - ------------------ Real estate cost of sales: Land sales 17,412 2,521 Home and condominium sales 740 3,373 Operating expenses: Magazine circulation operations 19,434 20,123 Real estate commissions and selling 602 583 Other operations 1,240 1,126 General and administrative: Real estate operations and corporate 1,808 2,157 Magazine circulation operations 3,400 3,529 Interest, net 958 1,621 ------------------ ------------------- 45,594 35,033 ------------------ ------------------- Income before income taxes 2,274 568 PROVISION FOR INCOME TAXES 910 227 ------------------ ------------------- NET INCOME 1,364 341 RETAINED EARNINGS, beginning of period 49,815 47,258 ------------------ ------------------- RETAINED EARNINGS, end of period $ 51,179 $ 47,599 ================== =================== NET INCOME PER SHARE - BASIC AND DILUTED $ .21 $ .05 ================== =================== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 6,574 6,775 ================== =================== See notes to consolidated financial statements. 3 AMREP CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited) Six Months Ended October 31, 2001 and 2000 (Thousands) 2001 2000 ----------------- ------------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 1,364 $ 341 ----------------- ------------------ Adjustments to reconcile net income to net cash provided (used) by operating activities - Depreciation and amortization 1,267 1,536 Non-cash credits and charges: (Gain) on disposition of fixed assets - (192) Inventory and joint venture valuation adjustments - 283 Pension benefit accrual (192) ( 369) Bad debt reserve 324 232 Changes in assets and liabilities - Receivables (7,329) 4,939 Real estate inventory 11,871 (5,176) Other assets 1,017 265 Accounts payable, deposits and accrued expenses 8,010 (2,313) Taxes payable 787 840 ----------------- ------------------ Total adjustments 15,755 45 ----------------- ------------------ Net cash provided by operating activities 17,119 386 ----------------- ------------------ CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (1,473) (1,251) Proceeds from assets sold - 990 ----------------- ------------------ Net cash used by investing activities (1,473) (261) ----------------- ------------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from debt financing 12,915 13,125 Principal debt payments (29,035) (9,873) Proceeds from exercise of stock option - 6 Purchase of treasury stock - (4,492) ----------------- ------------------ Net cash used by financing activities (16,120) (1,234) ----------------- ------------------ Decrease in cash and cash equivalents (474) (1,109) CASH AND CASH EQUIVALENTS, beginning of period 15,941 12,934 ----------------- ------------------ CASH AND CASH EQUIVALENTS, end of period $ 15,467 $ 11,825 ================= ================== SUPPLEMENTAL CASH FLOW INFORMATION: Interest paid - net of amounts capitalized $ 958 $ 1,621 ================= ================== Income taxes paid (refunded) $ 67 $ (771) ================= ================== See notes to consolidated financial statements. 4 AMREP CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) Six Months Ended October 31, 2001 and 2000 (1) BASIS OF PRESENTATION --------------------- The accompanying unaudited financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission for interim financial information. The April 30, 2001 balance sheet amounts have been derived from the April 30, 2001 audited financial statements of the Registrant. Since the accompanying consolidated financial statements do not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements, it is suggested that they be read in conjunction with the audited consolidated financial statements and notes thereto included in the Registrant's 2001 Annual Report on Form 10-K. In the opinion of management, the accompanying unaudited financial statements include all adjustments, which are of a normal recurring nature, necessary to reflect a fair presentation of the results for the interim periods presented. The results of operations for such interim periods are not necessarily indicative of the results to be expected for the full fiscal year. (2) INFORMATION ABOUT THE COMPANY'S OPERATIONS IN DIFFERENT ------------------------------------------------------- INDUSTRY SEGMENTS ----------------- The following schedules set forth summarized data relative to the industry segments in which the Company operates for the three and six month periods ended October 31, 2001 and 2000. Certain amounts included in "Interest and other operations" on the Consolidated Statements of Operations are classified below within the land operations and homebuilding segments, depending upon the nature of business activity.
THREE MONTHS Land Home Corporate Operations Building Distribution Fulfillment and Other Consolidated October 2001 (Thousands): Revenues $ 13,852 $ 651 $ 4,191 $ 8,921 $ 603 $ 28,218 Expenses(excluding interest) 11,938 813 3,191 8,151 801 24,894 Interest expense, net 36 - 312 59 35 442 ----------- ----------- ------------ ---------- ------------ ------------ Pretax income (loss) contribution $ 1,878 $ (162) $ 688 $ 711 $ (233) $ 2,882 =========== =========== ============ ========== ============ ============ - ----------------------------------------------------------------------------------------------------------------- October 2000 (Thousands): Revenues $ 3,576 $ 529 $ 3,574 $ 9,166 $ 546 $ 17,391 Expenses(excluding interest) 1,954 1,309 3,488 8,105 808 15,664 Interest expense, net 81 5 524 151 42 803 ----------- ----------- ------------ ---------- ------------ ------------ Pretax income (loss) contribution $ 1,541 $ (785) $ (438) $ 910 $ (304) $ 924 =========== =========== ============ =========== ========= ============ - -----------------------------------------------------------------------------------------------------------------
5
SIX MONTHS Land Home Corporate Operations Building Distribution Fulfillment and Other Consolidated October 2001 (Thousands): Revenues $ 21,361 $ 667 $ 7,758 $ 16,952 $ 1,130 $ 47,868 Expenses(excluding interest) 19,260 924 6,474 16,360 1,618 44,636 Interest expense, net 81 - 663 142 72 958 ----------- ----------- ------------ ---------- ----------- ------------ Pretax income (loss) contribution $ 2,020 $ (257) $ 621 $ 450 $ (560) $ 2,274 =========== ========= ============ ========== ============ ============ Identifiable assets $ 70,951 $ 2,890 $ 47,215 $ 17,879 $ 19,950 $ 158,885 - ----------------------------------------------------------------------------------------------------------------- October 2000 (Thousands): Revenues $ 6,643 $ 2,769 $ 7,407 $ 17,662 $ 1,120 $ 35,601 Expenses(excluding interest) 4,078 3,757 7,198 16,454 1,925 33,412 Interest expense, net 195 34 1,015 290 87 1,621 ----------- ----------- ------------ ----------- ----------- ------------ Pretax income (loss) contribution $ 2,370 $(1,022) $ (806) $ 918 $ (892) $ 568 =========== =========== ============ =========== =========== ============ Identifiable assets $ 82,409 $ 6,010 $ 44,581 $ 16,473 $ 20,598 $ 170,071 - -----------------------------------------------------------------------------------------------------------------
6 AMREP CORPORATION AND SUBSIDIARIES Item 2. Management's Discussion and Analysis of Financial Condition and Results - -------------------------------------------------------------------------------- of Operations - ------------- Results of Operations for the Three and Six Months ended October 31, 2001 and - -------------------------------------------------------------------------------- 2000 - ---- Revenues from real estate operations were $14.2 million and $21.4 million for the fiscal year 2002 three and six month periods ended October 31, 2001, respectively, compared to $3.6 million and $8.6 million in the comparable periods of the prior fiscal year. Substantially all of these revenues in both years were derived from land sales, and increased in the current fiscal year periods primarily due to large land sales in California and Colorado in the first two quarters of the current year which were made as part of the Company's restructuring of its real estate operations, including a program to dispose of all real estate assets in markets outside of New Mexico. Although these land sales generated a substantial amount of cash, the gross profits realized were marginal and, as a result, the average gross profit percentage on all land sales was 19% in the second quarter and 16% in the first six months of the current year compared to 63% and 57% in the comparable periods of the prior year. In Rio Rancho, gross profits on land sales were 48% and 44% in the three and six month periods of fiscal 2002, respectively, compared to 67% and 60% in the same periods last year. This decrease reflected the fact that the current year's activity included proportionately more sales of developed lots from projects that contribute a lower average gross profit than realized in the prior year, which included a larger proportion of undeveloped lots that on average contribute a higher gross profit percentage. Land sale revenues and related gross profits can vary from period to period as a result of the nature and timing of specific transactions, and thus past results are not an indication of amounts that may be expected to occur in future periods. In addition, real estate results were also favorably impacted in the three and six month periods of the current year as the company sold the final homes under development, and costs and expenses from the wind-down of homebuilding activities were less than those incurred in the prior year. Revenues from magazine circulation operations increased to approximately $13.1 million in the second quarter ended October 31, 2001 from $12.7 million in the same period last year, and for the six months ended October 31, 2001 decreased from $25.1 million last year to $24.7 million this year. Revenues from Newsstand Distribution Services increased approximately $600,000 in this year's second quarter and $400,000 for the six month period compared to last year, partly due to improved magazine sales as well as an increase in the Company's average commission due to a changed mix of sales. Revenues from Fulfillment Services decreased by approximately $200,000 and $700,000 in the three and six month periods of fiscal 2002, respectively, compared to the same period last year due in large part to the loss of sweepstakes processing business for one customer. Magazine circulation operating expenses decreased by approximately $200,000 in the second quarter and $700,000 in the six month period, due in part to payroll-related and other cost reductions, principally in the Newsstand Distribution Services division. 7 Real estate commissions and selling expenses increased in both the three and six month periods ended October 31, 2001, but these expenses did not increase proportionately to sales because the sales in California and Colorado discussed above had minimal variable selling costs. Real estate and corporate general and administrative expenses decreased in both the second quarter and six months of this year compared to the same periods last year reflecting the implementation of a cost reduction program and other budgetary controls. General and administrative costs of magazine circulation operations decreased by 3% and 4% for the three and six month periods ended October 31, 2001, respectively, as a result of these measures. Interest expense decreased in both periods due to lowering average borrowings and reduced interest rates. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- During the past several years, the Company has financed its operations from internally generated funds from home and land sales and magazine circulation operations, and from borrowings under its various lines-of-credit and construction loan agreements. Most borrowings are made by subsidiaries and guaranteed by the Company. The Company's Kable News Company subsidiary has a line-of-credit with a group of banks under which, as a result of a modification of the agreement entered into in June 2001, the commitment amount was reduced to $25.6 million as of October 31, 2001, at which time $20.1 million was outstanding. This line bears interest at the prime rate plus 1% and matures on May 1, 2002. In accordance with the June 2001 modification, the commitment amount will be further reduced to $23.5 million at December 31, 2001. Kable's current lenders have advised Kable that they do not intend to renew their lending commitments beyond May 1, 2002, and the Company and Kable have therefore initiated discussions with other potential lenders. Expressions of interest have been received from several of these sources, but no agreements have been reached at this time and there are no assurances that Kable will be able to find replacement lenders or renegotiate or extend the terms of the current credit agreement beyond May 1, 2002, however, management believes that Kable will be able to replace this line of credit before May 1, 2002. The other line-of-credit borrowings are used principally to support real estate development in New Mexico. These loans are collateralized by certain real estate assets and are subject to available collateral and various financial performance and other covenants. At October 31, 2001, the maximum available under real estate lines-of-credit was $9.3 million, of which $4.8 million of borrowings were outstanding. During the past several years, the Company has restructured its real estate operations by winding-down homebuilding activities and selling a substantial portion of its landholdings in Colorado, and all of its landholdings in California and Oregon. At October 31, 2001, inventories had decreased to $61.5 million compared to $73.3 million at April 30, 2001 principally as a result of sales of property in California and Colorado. In addition, notes payable relating to real estate operations had decreased to $7.4 million October 31, 8 2001 from $13.2 million at April 30, 2001, principally from the use of proceeds of land sales, and notes payable of magazine circulation operations had decreased to $20.7 million at October 31, 2001 from $31.1 million at April 30, 2001. Statement of Forward-Looking Information - ---------------------------------------- Certain information included herein and in other Company statements, reports and filings with the Securities and Exchange Commission is forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Refer to Item 7 of the Annual Report on Form 10-K for a discussion of the assumptions and factors on which these statements are based. Any changes in the actual outcome of these assumptions and factors could produce significantly different results; accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty. Item 3. Quantitative and Qualitative Disclosures About Market Risk - ------------------------------------------------------------------- There have been no material changes to the Company's market risk for the six month period ended October 31, 2000. See Item 7(A) of the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 2001 for additional information regarding quantitative and qualitative disclosures about market risk. 9 PART II ------- Other Information ----------------- Item 4. Submission of Matters to a Vote of Security Holders. - ------------------------------------------------------------- The 2001 Annual Meeting of Shareholders of the Registrant was convened on September 20, 2001 and adjourned to October 4, 2001. At the adjourned meeting, Lonnie A. Coombs and Samuel N. Seidman were reelected directors of the Registrant by the following votes: For Withheld Lonnie A. Coombs 6,008,789 13,217 Samuel N. Seidman 6,008,269 13,737 Item 6. Exhibits and Reports on Form 8-K. - ------------------------------------------ (a) Exhibits: 4(a) Sixth Modification Agreement dated as of September 28, 2001, to the Loan Agreement dated as of September 15, 1998 between Kable News Company, Inc. and American National Bank and Trust Company of Chicago, as Agent and the Lenders, as defined therein. (b) Reports on Form 8-K No reports on Form 8-K were filed by Registrant during the quarter ended October 31, 2001. 10 FORM 10-Q AMREP CORPORATION AND SUBSIDIARIES SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMREP CORPORATION (Registrant) Dated: December 11, 2001 By: /s/ Peter M. Pizza ------------------ Peter M. Pizza Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 11 AMREP CORPORATION ANDSUBSIDIARIES EXHIBIT INDEX ------------- 4(a) Sixth Modification Agreement dated as of September 28, 2001, to the Loan Agreement dated as of September 15, 1998 between Kable News Company, Inc. and American National Bank and Trust Company of Chicago, as Agent and the Lenders, as defined therein. EX-4 3 exh4b.txt SIXTH MODIFICATION AGREEMENT Exhibit 4(a) SIXTH MODIFICATION AGREEMENT SIXTH MODIFICATION AGREEMENT ("AGREEMENT") ENTERED INTO AS OF THE 28th DAY OF SEPTEMBER, 2001 BY AND BETWEEN KABLE NEWS COMPANY, INC., AN ILLINOIS CORPORATION ("BORROWER"), AMREP CORPORATION, AN OKLAHOMA CORPORATION ("PARENT"), KABLE NEWS EXPORT, LTD., A DELAWARE CORPORATION, KABLE NEWS COMPANY OF CANADA LTD., AN ONTARIO, CANADA CORPORATION, KABLE NEWS INTERNATIONAL, INC., A DELAWARE CORPORATION, KABLE FULFILLMENT SERVICES OF OHIO, INC., A DELAWARE CORPORATION, DISTRIBUNET INC., A DELAWARE CORPORATION, MAGAZINE CONNECTION INC., A DELAWARE CORPORATION (COLLECTIVELY THE "ORIGINAL SUBSIDIARIES"), MAGAZINET, L.P., A DELAWARE LIMITED PARTNERSHIP ("MAGAZINET") AND MAGAZINET MANAGEMENT, L.L.C., A DELAWARE LIMITED LIABILITY COMPANY ("MANAGEMENT") (MAGAZINET AND MANAGEMENT COLLECTIVELY REFERRED TO AS THE "NEW SUBSIDIARIES" AND THE ORIGINAL SUBSIDIARIES AND NEW SUBSIDIARIES COLLECTIVELY REFERRED TO HEREIN AS "SUBSIDIARIES" AND BORROWER, PARENT AND SUBSIDIARIES COLLECTIVELY REFERRED TO HEREIN AS "BORROWING PARTIES"), AND AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO INDIVIDUALLY AND AS AGENT ("AGENT") FOR HELLER FINANCIAL, INC. ("HELLER"), FIFTH THIRD BANK, CHICAGO FORMERLY KNOWN AS OLD KENT BANK ("FIFTH THIRD"), NATIONAL CITY BANK OF MICHIGAN/ILLINOIS ("NATIONAL CITY") AND FIRST BANK ("FIRST BANK") (AGENT, HELLER, FIFTH THIRD, NATIONAL CITY AND FIRST BANK COLLECTIVELY REFERRED TO HEREIN AS "LENDERS") W I T N E S S E T H WHEREAS, Borrower has executed that certain Loan Agreement dated September 15, 1998 as modified by that certain Modification Agreement ("First Modification") dated July 7, 1999, that certain Second Modification Agreement ("Second Modification") dated June 29, 2000, that certain Third Modification Agreement ("Third Modification") dated December 15, 2000, that certain Fourth Modification Agreement ("Fourth Modification") dated March 16, 2001 and that certain Fifth Modification Agreement ("Fifth Modification") dated June 11, 2001 (the "Loan Agreement") relating to certain Loans ("Loans") made by Lenders to Borrower, to wit, a certain Forty Million and No/100 Dollar ($40,000,000.00) Secured Revolving Credit Facility, a certain One Million Two Hundred Thousand and No/100 Dollar ($1,200,000.00) Secured Term Loan and a certain One Million Five Hundred Thousand and No/100 Dollar ($1,500,000.00) Secured Term Loan; and WHEREAS, the Loans are evidenced by Notes (the "Notes") executed by Borrower and delivered to the Lenders; and WHEREAS, in connection with the Loans, Borrower and each Original Subsidiary have executed and delivered certain Security Agreements ("Security Agreements"); and WHEREAS, in connection with the Loans, Borrower has executed and delivered that certain Trademark Collateral Assignment and Security Agreement ("Trademark Assignment"); and WHEREAS, in connection with the Loans, Parent and each Original Subsidiary have executed and delivered those certain Guaranties ("Guaranties"); and WHEREAS, in connection with the Loans, Parent has executed and delivered that certain Stock Pledge Agreement ("Stock Pledge"); (the Loan Agreement, Notes, Security Agreements, Trademark Assignment, Guaranties, Stock Pledge Agreement together with the First Modification, Second Modification, Third Modification, Fourth Modification, Fifth Modification, this Agreement and the herein defined New Subsidiaries' Security Agreements and New Subsidiaries' Guaranties are collectively referred to herein as the "Loan Documents"); and WHEREAS, pursuant to the terms of the Second Modification Lenders consented to, among other matters, Distribunet Inc. investing in and becoming a limited partner in Senequier Holdings L.P., a Texas limited partnership ("Senequier"); and WHEREAS, Borrower, Distribunet Inc. and Magazine Connection Inc. are desirous of entering into that certain Termination Agreement dated September 28, 2001 (the "Termination Agreement") with both Senequier, Senequier Investment Management Inc., Mags2Go L.L.C. as well as Magazinet, Management and NewComm Corporation which among other matters will result in the redemption of all of the interest held by Distribunet (the "Distribunet Senequier Interest") as a limited partner in Senequier; and WHEREAS, the Borrowing Parties have requested Lenders to (i) consent to the execution of the Termination Agreement and the related documents described therein as well as (ii) release the lien held by Agent for the ratable benefit of the Lenders on the Distribunet Senequier Interest; and WHEREAS, Lenders have agreed to give said consent, release said lien and to modify the Loan Documents in accordance with the terms of this Agreement conditioned on the terms contained herein including but not limited to the 2 delivery to Lenders of Security Agreements executed by the New Subsidiaries (the "New Subsidiaries' Security Agreements") and Guaranties executed by the New Subsidiaries (the "New Subsidiaries' Guaranties"). NOW, THEREFORE, in consideration of the mutual premises of the parties hereto, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, IT IS AGREED: 1. Preambles. The preambles to this Agreement are fully incorporated herein by this reference thereto with the same force and effect as though restated herein. 2. Defined Terms. To the extent not otherwise defined herein to the contrary, all capitalized terms and/or phrases used in this Agreement shall have the respective meanings assigned to them in the Loan Documents. 3. Modification of Loan Agreement. Borrowing Parties and Lenders hereby agree that effective (the "Effective Time") immediately following the closing under the Termination Agreement the Loan Agreement be and hereby is modified as follows: (a) Magazinet, L.P., a Delaware limited partnership ("Magazinet"), and Magazinet Management, L.L.C., a Delaware limited liability company ("Management") are hereby added to the definition of "Borrower Entities"; (b) The Security Agreement of even date with this Agreement which shall be executed at the Effecive Time by Magazinet in favor of Agent for the ratable benefit of the Lenders as amended from time to time (the "Magazinet Security Agreement") and the Security Agreement of even date with this Agreement which shall be executed at the Effective Time by Management in favor of Agent for the ratable benefit of the Lenders as amended from time to time (the "Management Security Agreement") are hereby added to the definition of the "Collateral Documents"; (c) Magazinet and Management are hereby added to the definition of "Guarantors"; (d) The Guaranty of even date with this Agreement which shall be executed by Magazinet ("Magazinet Guaranty") and the Guaranty of even date with this Agreement which shall be executed by Management (the "Management Guaranty") at the Effective Time are hereby added to the definition of "Subsidiary Guaranties"; (e) Magazinet and Management are hereby added to the definition of "Subsidiary Guarantors"); (f) Section 6.21 of the Loan Agreement is hereby restated to read: "6.21 Business Activities. The Borrower and its Subsidiaries will not engage in any type of business except (a) the businesses in which they were engaged on April 30, 1998, including, without limitation, the distribution of paperbacks, magazines and related products; product, order and subscription processing and 3 fulfillment; customer service; telemarketing and related services; and (b) supplying magazines and other periodicals to retail sellers. However, Borrower may become engaged in the publishing business if such business does not at any time account for greater than ten percent (10%) of Borrower's revenues on an annual basis." Borrowing Parties further agree that the provisions of Section 6.22 of the Loan Agreement apply with equal force and effect to Magazinet and Management and that in further consideration of Lenders executing this Agreement Borrower shall also make available and loan to Magazinet and Management portions of any Advances relating to the Revolving Loan to be used by Magazinet and Management for working capital purposes. Magazinet and Management by their execution of this Agreement hereby join in the Certificate of Acknowledgment and Pledge attached to the Loan Agreement as if they were an original signatory thereto and hereby grants a security interest in favor of Borrower in and to all presently existing and hereafter arising accounts, inventory, equipment, general intangibles, instruments, investment securities and chattel paper of Magazinet and Management and the proceeds of all of the foregoing to secure all amounts advanced and/or lent to them by Borrower pursuant to said Section 6.22. Borrower by its execution of this Agreement hereby assigns all the foregoing together with all loans made in connection therewith to Magazinet and Management to Agent for the ratable benefit of the Lenders to further secure the repayment of the Obligations. (g) Section 6.28 is hereby restated to read: "6.28 Limitations on Investments in Senequier Holdings, L.P. (the "Partnership"). Notwithstanding anything to the contrary contained in this Agreement, after September 28, 2001, Borrower and Subsidiaries of Borrower shall not make any Investments, as said term is defined in Paragraph 4 of the Second Modification Agreement dated June 29, 2000, in the Partnership." (h) The following additional covenant is hereby added to Article VI of the Loan Agreement. "6.29 Limitation of Investments in Magazinet and Management. During the period from May 1, 2001 to April 30, 2002 the sum of all "Magazinet Investments" by Borrower or any of its Subsidiaries in Magazinet and Management shall not exceed Four Hundred Fifty Thousand and No/100 Dollars ($450,000.00). As used herein the term "Magazinet Investments" means the aggregate of all (a), capital contributions to Magazinet and Management in the form of cash or property for any purpose, (b) loans for any purpose to Magazinet and Management, (c) any guaranty of any debt of Magazinet and Management, (d) a pledge of any assets of Borrower or any of its Subsidiaries to secure any debt of Magazinet and Management, (e) cash paid or property transferred to acquire any ownership interest in or the right to acquire any 4 ownership interest in Magazinet and Management, and (f) cash advances to Magazinet and Management to fund operating losses of Magazinet and Management. The determination of the value of any property used in calculating the amount of the Magazinet Investments shall be done by Agent in its sole discretion. Borrower further agrees that in addition to all other matters to be shown on the Compliance Certificate that there also shall be shown thereon in a form and content acceptable to Agent the amount of the outstanding Magazinet Investments." 4. Modification of Security Agreement Executed by Magazine Connection Inc. At the Effective Time, Item G of Schedule I to the Security Agreement executed by Magazine Connection Inc. is hereby restated to read: "Item G Pledged Shares Issuer Interest Magazinet Management, L.L.C., a Delaware limited liability company 1% membership interest Magazinet, L.P., a Delaware 1% partnership interest limited partnership 5. Modification of Security Agreement Executed by Distribunet Inc. At the Effective Time, Items G and H of Schedule I to the Security Agreement executed by Distribunet Inc. are hereby restated to read: "Item G Pledged Partnership Interest Issuer Percentage of Partnership Interest Magazinet, L.P., a Delaware Limited partnership 98% Item H Pledged Membership Interest Issuer Interest Magazinet Management, L.L.C., a Delaware limited liability company 99% membership interest" 6. Deliveries. Agent's execution of the present Agreement on behalf of all Lenders and their agreement to the terms and conditions hereof is expressly conditioned on the delivery to Agent of the documents referred to in clauses (a), (j), (n) and (o) of this Section 6 in a form and content acceptable to Agent and its counsel. The Borrowing Parties covenant and agree that the documents called for in the remaining clauses in this Section 6 in a form and content acceptable to Agent and its counsel will be delivered to the Agent at the Effective Time: (a) Duplicate counterparts of this Agreement executed by the Borrowing Parties (execution by Magazinet and Management to be at the Effective Time), 5 (b) Delivery of the executed New Subsidiaries' Security Agreements, (c) Delivery of the executed New Subsidiaries' Guaranties, (d) UCC-1 Financing Statements listing Magazinet as debtor in favor of Agent for filing in Delaware, (e) UCC-1 Financing Statement listing Magazinet as debtor in favor of Borrower and assigned to Agent for filing in Delaware, (f) UCC-1 Financing Statement listing Management as debtor in favor of Agent for filing in Delaware, (g) UCC-1 Financing Statement listing Management as debtor in favor of Borrower and assigned to Agent for filing in Delaware, (h) UCC-1 Financing Statement listing Magazine Connection Inc. as debtor in favor of Agent for filing in Delaware, (i) UCC-1 Financing Statement listing Magazine Connection Inc. as debtor in favor of Borrower and assigned to Agent for filing in Delaware, (j) Certificate of Good Standing for Magazinet issued by the Delaware Secretary of State, (k) Certificate of Good Standing for Management issued by the Delaware Secretary of State, (l) Partners Certificate for Magazinet certifying as to (i) attached Partnership Agreement, (ii) authorized partners' signatures, (m) Members Certificate for Management certifying as to (i) attached copy of Articles of Formation, (ii) Operating Agreement, (iii) authorized managers' signatures, (n) Copy of executed Termination Agreement and all other executed documents relating thereto, and (o) Payments of all Costs. 7. Release and Consent. Provided all the conditions precedent in the first sentence of Section 6 are fulfilled (i) Lenders hereby consent to the execution of the Termination Agreement and (ii) Agent shall deliver to Borrower at the closing under the Termination Agreement a release of the lien on the Distribunet Senequier Interest in such form as the Borrowing Parties may reasonably request and executed Uniform Commercial Code Amendments amending the existing UCC-1 Financing Statements to eliminate the Distribunet Senequier Interest from the described Collateral. 8. Costs. Concurrently with the execution of this Agreement, Borrower shall pay or cause to be paid to Agent in immediately available funds all fees and expenses of Lenders relating to this Agreement and the transactions contemplated 6 herein, including, without limitations, reasonable fees and expenses of Agent's counsel (the "Costs"). 9. Other Loan Documents Modifications. All Loan Documents are hereby deemed amended and modified to provide that any and all references to any Loan Documents therein are hereby deemed to be references to said Loan Documents as modified by this Agreement. 10. Other Documents. At Agent's request, the Borrowing Parties hereby agree to execute and deliver promptly to Agent such other documents as Agent, in its reasonable discretion, shall deem necessary or appropriate to evidence the transactions contemplated herein. 11. Reaffirmation. The Borrowing Parties do hereby reaffirm each and every covenant, condition, obligation and provision set forth in the Loan Documents, as modified hereby. The Borrowing Parties hereby restate and reaffirm all of the warranties and representations contained in the Loan Documents, as modified hereby, as being true and correct as of the date hereof. 12. References. All references herein to any of the Loan Documents shall be understood to be to the Loan Documents as modified hereby. All references in any of the Loan Documents to any other one or more of the Loan Documents shall hereafter be deemed to be to such document(s) as modified hereby. 13. No Defense, Counterclaims. Each Borrowing Party hereby represents and warrants to, and covenants with, Lenders that as of the date hereof, (a) each Borrowing Party has no defenses, offsets or counterclaims of any kind or nature whatsoever against any Lender with respect to the Loans or any of the Loan Documents, or any action previously taken or not taken by any Lender with respect thereto or with respect to any security interest, encumbrance, lien or collateral in connection therewith to secure the liabilities of each Borrowing Party, and (b) that the Lenders have fully performed all obligations to each Borrowing Party which it may have had or has on and of the date hereof. 14. Release. Without limiting the generality of the foregoing, each Borrowing Party, on its own behalf and on the behalf of its representatives, partners, shareholders, subsidiaries, affiliated and related entities, successors and assigns (hereinafter collectively referred to as the "Borrowing Group" and as to the Borrowing Group, each Borrowing Party represents and warrants that it has the right, power and authority to waive, release and forever discharge on behalf of the Borrowing Group, the "Bank Group" as hereinafter defined) waives, releases and forever discharges each Lender, and their respective officers, directors, subsidiaries, affiliated and related companies or entities, agents, servants, employees, shareholders, representatives, successors, assigns, attorneys, accountants, assets and properties, as the case may be (together hereinafter referred to as the "Bank Group") from and against all manner of actions, cause and causes of action, suits, debts, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, obligations, liabilities, costs, expenses, losses, damages, judgments, executions, claims and demands, of whatsoever kind or nature, in law or in equity, whether known or unknown, whether or not concealed or hidden, arising out of or relating to any matter, cause or thing whatsoever, that any of the Borrowing Group, jointly or severally, may have had, or now have or that may subsequently accrue against the 7 Bank Group by reason of any matter or thing whatsoever arising out of or in way connected to, directly, or indirectly, the Loans and/or any of the Loan Documents through the date hereof, Each Borrowing Party acknowledges and agrees that Lenders are specifically relying upon the representations, warranties, covenants and agreements contained herein and that such representations, warranties, covenants and agreements constitute a material inducement to enter into this Agreement. 15. No Custom. This Agreement shall not establish a custom or waive, limit or condition the rights and remedies of Lenders under the Loan Documents, all of which rights and remedies are expressly reserved. 16. Reaffirmation of Loan Documents, No Novation. Except as may be expressly set forth herein to the contrary, the Loan Documents remain unmodified, and all other terms and conditions thereof remain in full force and effect. Notwithstanding anything to the contrary contained herein, Borrowing Parties and Lenders expressly state, declare and acknowledge that this Agreement is intended only to modify each Borrowing Party's continuing obligations in the manner set forth herein, and is not intended as a novation of any and all amounts presently due and owing from any Borrowing Party to Lenders. 17. Captions; Counterparts. The captions used herein are for convenience of reference only and shall not be deemed to limit or affect the construction and interpretation of the terms of this Agreement. This Agreement may be signed in counterparts, each of which shall be deemed an original and all of which shall be deemed one Agreement. 18. Choice of Law and Severability. This Agreement shall be governed and construed under the laws of the State of Illinois. If any provision of this Agreement is held invalid or unenforceable, the remainder of this Agreement will not be affected thereby and the provisions of this Agreement shall be severable in any such instance. (THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK AND THE SIGNATURES BEGIN ON THE NEXT PAGE.) 8 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. BORROWER: KABLE NEWS COMPANY, INC., an Illinois corporation By: /s/ Michael P. Duloc Title: President PARENT: AMREP CORPORATION, an Oklahoma corporation KABLE NEWS INTERNATIONAL, INC., a Delaware corporation By: /s/Peter M. Pizza By: /s/ Michael P. Duloc Title: Vice President Title: President SUBSIDIARIES: KABLE NEWS EXPORT, LTD., a Delaware KABLE FULFILLMENT SERVICES OF corporation OHIO, INC., a Delaware corporation By: /s/ Michael P. Duloc By: /s/ Michael P. Duloc Title: President Title: Authorized Signatory 9 KABLE NEWS COMPANY OF CANADA LTD., an Ontario, Canada Corporation DISTRIBUNET INC., a Delaware corporation By: /s/ Michael P. Duloc Title: President By: /s/ Michael P. Duloc Title: President MAGAZINET, L.P., a Delaware limited partnership MAGAZINE CONNECTION INC., a By: Magazinet Management, L.L.C., a Delaware corporation Delaware limited liability company By: /s/ Michael P. Duloc By: /s/ Michael P. Duloc Title: President Name: Michael P. Duloc Title: Manager MAGAZINET MANAGEMENT, L.L.C., a Delaware limited liability company By: /s/ Michael P. Duloc Name: Michael P. Duloc Title: Manager 10 LENDERS: AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, as Agent for all Lenders and as a Lender By: /s/ Susan B. Kruesi Title: First Vice President 11 -----END PRIVACY-ENHANCED MESSAGE-----