SUBSCRIPTION GUARANTY
THIS SUBSCRIPTION GUARANTY AGREEMENT (the "Agreement"),
is made and entered into as of this ______ day of January, 1995,
by and between American Real Estate Partners, L.P., a Delaware
limited partnership ("AREP"), and X Limited Partners, a Delaware
limited partnership ("X LP").
RECITALS:
WHEREAS, AREP is distributing rights (the "Rights") at no
cost to holders of record as of the close of business on _________,
1995 (the "Record Date"), one transferable subscription right (each
a "Right") for each seven depositary units representing limited
partner interests in AREP (the "Depositary Units") held. Each
Right entitles the holder thereof ("Rights Holders") to purchase a
combination of Depositary Units and 5% cumulative pay-in-kind
redeemable convertible preferred units (the "Preferred Units").
WHEREAS, the Rights also entitle each holder thereof who
has exercised any portion of his Basic Subscription Rights an
additional right (the "Over-Subscription Privilege") to subscribe
for and purchase additional Depositary Units and Preferred Units
that are not purchased through the exercise of all Basic
Subscription Rights (the Depositary Units and the Preferred Units
issued upon exercise of the Basic Subscription Rights and/or the
Over-Subscription Privilege, if any, are referred to herein as the
"Securities"). The Securities available pursuant to the Over-
Subscription Privilege will be allocated pro rata (according to the
aggregate amount of Depositary Units and Preferred Units purchased
through the exercise of Basic Subscription Rights) among those
Rights Holders who exercise the Over-Subscription Privilege. Other
terms and conditions of the issuance of Rights and the subscription
for Securities (the "Offering") are more particularly set forth in
the definitive prospectus dated as of _______ (the "Prospectus"),
delivered to the holders of Depositary Units simultaneously with
the distribution of Rights. The Offering shall raise $110 million
dollars for AREP consisting of proceeds thereof.
WHEREAS, the Rights, once issued, are freely transferable
until the close of business on the last business day prior to the
expiration date of the Rights (the "Expiration Date"). AREP will
seek to list the Rights on the New York Stock Exchange or any
successor thereof (the "Exchange").
WHEREAS, X LP, the general partner of which is American
Property Investors, Inc. ("API"), a Delaware corporation wholly
owned by Carl C. Icahn ("Icahn") and which is the general partner
of AREP (the "General Partner") together with its affiliates, owns
1,365,768 Depositary Units (9.89%) as of _____________, the Record
Date of the Offering.
WHEREAS, ACF Industries, Incorporated, a New Jersey
corporation [and/or its wholly-owned subsidiaries] (collectively
"ACF"), [are] is a limited partner of X LP.
WHEREAS, X LP desires and agrees herein to serve as a
stand by purchaser, guaranteeing to subscribe for all Depositary
Units and Preferred Units available through the Offering which have
not been subscribed for and purchased by Rights Holders through the
exercise of Basic Subscription Rights(the "Unsubscribed Units")
and, subject to proration as described in the Prospectus, to
purchase such Depositary Units and Preferred Units, thereby
assuring AREP of receiving gross proceeds from the Offering of an
amount equal to $110 million.
NOW THEREFORE, for and in consideration of the premises,
and other good and valuable consideration the receipt and
sufficiency is hereby acknowledged, the parties hereto agree as
follows:
1. REPRESENTATIONS AND WARRANTIES. (a) AREP represents
and warrants to, and agrees with, X LP as follows: (The definitions
of certain terms, used in this Section 1 are defined in paragraphs
(i) and (xix) of this Section 1(a).
(i) AREP meets the requirements for use of Form S-3
under the Securities Act of 1933 (the "1933 Act") and has filed
with the Securities and Exchange Commission (the "Commission"), a
registration statement (File number 33-54767) on such Form S-3,
including related amendments thereto (the "Registration
Statement"). As filed, the Registration Statement and amendments
thereto and the prospectus and any supplements thereto filed
therewith (the "Prospectus"), shall contain all information
required by, and comply in all material respects with the
requirements of, the 1933 Act with respect to the Rights, the
Securities, the Offering thereof and the purchase of the
Unsubscribed Units. The Prospectus and any related letters from
AREP to record or beneficial owners of Depositary Units or Rights,
related letters from AREP to securities dealers, commercial banks,
trust companies and other nominees and other offering materials, in
each case disseminated by AREP or by any of its agents with AREP's
prior consent, including, without limitation, the Form of
Subscription Certificates, the Form of Notice of Guaranteed
Delivery, Guarantee, and any other information in writing that AREP
may approve or authorize for use in connection with the Offering,
are collectively referred to hereinafter as the "Offering
Materials."
(ii) On the Effective Date (as hereinafter defined), the
Registration Statement did or will, and when the Prospectus is
first filed (if required) in accordance with Rule 424(b) and on the
Closing Date (as hereinafter defined), the Prospectus will, comply
in all material respects with the applicable requirements of the
1933 Act and the respective rules thereunder; on the Effective
Date, the Registration Statement did not or will not contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make
the statements therein not misleading; and on the Effective Date,
the Prospectus, if not required to be filed pursuant to Rule
424(b), and the Offering Materials did not or will not, and on the
date of any filing pursuant to Rule 424(b) and on the Closing Date,
the Prospectus and the Offering Materials will not, include any
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untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading; PROVIDED, HOWEVER, that AREP makes no representations
or warranties as to the information contained in or omitted from
the Registration Statement or the Prospectus in reliance upon and
in conformity with information furnished in writing to AREP by or
on behalf of X LP specifically for inclusion in the Registration
Statement or the Prospectus.
(iii) AREP and its subsidiary, American Real Estate
Holding Limited Partnership (the "Subsidiary"), are limited
partnerships duly formed, validly existing and in good standing
under the laws of the State of Delaware with full power, authority
and legal right to own, lease and operate their properties and
conduct their business as now conducted and currently proposed to
be conducted by it in the Registration Statement and the
Prospectus; and AREP and its Subsidiary are each duly qualified to
transact business as a foreign limited partnership and are in good
standing in each other jurisdiction in which they own or lease
property of a nature, or transact business of a type, that would
make such qualification necessary, except to the extent that the
failure to so qualify or be in good standing would not have a
material adverse effect on AREP and its Subsidiary, considered as
one enterprise.
(iv) AREP and its Subsidiary have all requisite power
and authority to execute, deliver and perform their obligations
under this Agreement; and this Agreement has been duly authorized,
executed and delivered by AREP and, assuming due execution and
delivery of this Agreement by X LP, constitutes a legal, valid and
binding obligation of AREP, enforceable against AREP in accordance
with its terms except (A) as enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization or other similar
laws affecting creditors' rights generally and except as
enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in
equity or at law), and (B) as rights to indemnity and contribution
hereunder may be limited by Federal or state securities laws and/or
public policy.
(v) The consolidated financial statements and the
related notes of AREP incorporated by reference in the Registration
Statement and the Prospectus present fairly in accordance with
generally accepted accounting principles ("GAAP") the consolidated
financial position of AREP as of the dates indicated and the
consolidated results of operations and cash flows of AREP for the
periods specified. Such financial statements have been prepared in
conformity with GAAP applied on a consistent basis throughout the
periods involved, except as otherwise noted therein and subject, in
the case of interim statements, to normal year-end audit
adjustments. The financial statements schedules incorporated by
reference in the Registration Statement and the Prospectus present
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fairly in accordance with GAAP the information required to be
stated therein.
(vi) All of the Unsubscribed Units will have been duly
authorized, validly issued and duly recorded in the books and on
the records of AREP at the time of issuance; no holder of the
Unsubscribed Units will be subject to personal liability by reason
of being such a holder; and none of the Unsubscribed Units will be
issued in violation of the preemptive rights of any Depositary Unit
or Preferred Unit holder.
(vii) The Preferred Units, issued and delivered upon a
distribution, if any, equal to 5% of the liquidation preference on
any of the Unsubscribed Units, will be duly authorized and validly
issued and duly recorded in the books and records of AREP; no
holder of any of the Unsubscribed Units as of the date of issuance
will be subject to personal liability by reason of being such a
holder; and none of such Unsubscribed Units outstanding as of the
date thereof, will be issued in violation of the preemptive rights
of any holder of Preferred Units.
(viii) The Depositary Units, when issued and delivered
upon conversion, if any, of any of the Unsubscribed Units, will be
duly authorized and validly issued and duly recorded in the books
and records of AREP; no holder of any of the Depositary Units
resulting from the conversion of any of the Unsubscribed Units as
of the date of issuance will be subject to personal liability by
reason of being such a holder; and none of such Depositary Units
outstanding as of the date thereof, will be issued in violation of
the preemptive rights of any holder of Depositary Units.
(ix) AREP has taken or will take all valid and
necessary actions to register and insure the qualification of the
Unsubscribed Units under state securities laws.
(x) AREP has taken all valid action to duly reserve for
listing on the Exchange such number of its authorized and unissued
Unsubscribed Units, if accepted for listing, as are deliverable by
AREP pursuant to this Agreement, against receipt of and payment
therefor in accordance with the provisions set forth herein.
(xi) All those securities registered by the Registration
pursuant to the Offering and all other Offering Materials conform
in all material respects to the descriptions thereof contained or
incorporated by reference in the Registration Statement and the
Prospectus.
(xii) Prior to or at the Effective Date, AREP and the
Registrar and Transfer Company, the subscription agent
("Subscription Agent") will have entered into a subscription agency
agreement (the "Subscription Agency Agreement"). When executed by
AREP, the Subscription Agency Agreement will have been duly
authorized, executed and delivered by AREP and, assuming due
authorization, execution and delivery by the Subscription Agent,
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will constitute a valid and binding obligation of AREP and
enforceable against AREP in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting creditors' rights
generally and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
(xiii) Since the respective dates as of which
information is given in the Registration Statement and the
Prospectus, except as otherwise stated or described therein, there
has not been (a) any material adverse change in the condition
(financial or otherwise), results of operations, earnings, business
affairs of AREP, whether or not arising in the ordinary course of
business, or (b) any distribution of any kind declared, paid or
made by AREP on its Depositary Units, other than regular periodic
distributions, if any, and other than the Rights.
(xiv) Neither AREP nor its Subsidiary is in violation of
its certificate of limited partnership or in default under any
contract, indenture, mortgage, loan agreement or other agreement or
instrument to which it is a party or any of its properties may be
subject or by which it may be bound, except for such defaults that
in the aggregate would not have a material adverse effect on the
condition (financial or otherwise) of AREP or its Subsidiary. The
execution and delivery of, and performance under, this Agreement,
the exercise of and payment of the subscription price in connection
with such exercise of, the Rights and the participation in the
Offering do not and will not result in any violation of the
certificate of limited partnership of AREP or its Subsidiary or the
agreement of limited partnership of AREP and its Subsidiary, and do
not and will not conflict with, or result in a breach of any of the
terms or provisions of, or constitute a default under, or result in
the creation or imposition of any lien, charge or encumbrance upon
any property or assets of AREP or its Subsidiary under (a) any
indenture, mortgage, loan agreement, note, lease or other agreement
or instrument to which AREP or its Subsidiary is a party or any of
its respective properties may be subject or by which it is or may
be bound, or (b) any existing applicable law, rule, regulation,
judgment, order or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction
over AREP or its Subsidiary or any of its respective properties
(except, in the case of (a) and (b) above, where such conflicts,
breaches or defaults or liens, charges or encumbrances in the
aggregate would not have a material adverse effect on the condition
(financial or otherwise) of AREP or its Subsidiary).
(xv) No authorization, approval, consent or license of
any government, governmental instrumentality or court, domestic or
foreign (other than under the 1933 Act, the Securities Exchange Act
of 1934, as amended (the "1934 Act") and the securities or blue sky
laws of the various states), is required for the offer and sale by
AREP of the Securities or the Unsubscribed Units or the
consummation of the Offering as set forth in the Registration
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Statement and the Prospectus or the consummation by AREP of the
transactions contemplated in this Agreement.
(xvi) Except as disclosed in the Prospectus, there is no
action, suit or proceeding before or by any government,
governmental instrumentality or court, domestic or foreign, now
pending against or affecting AREP or its Subsidiary that is
required to be disclosed in the Registration Statement and the
Prospectus.
(xvii) AREP has not taken and will not take, directly
or indirectly, any action designed to, or that might be reasonably
expected to, cause or result in stabilization or manipulation of
the price of the Rights or the Depositary Units; PROVIDED, HOWEVER,
that AREP makes no representation as to any action taken by X LP or
its affiliates, except in such affiliates' capacities as officers
or agents of AREP, acting in those capacities.
(xviii) The proceeds of the Offering will be applied as
set forth in the Prospectus.
(xix) The terms which follow, when used in this
Agreement, shall have the meanings indicated. The term "the
Effective Date" shall mean each date that the Registration
Statement and any post-effective amendment or amendments thereto
became or become effective. "Execution Time" shall mean the date
and time that this Agreement is executed and delivered by the
parties hereto. "Registration Statement" shall mean the
registration statement referred to in paragraph (i) above,
including exhibits and financial statements, as amended at the
Execution Time (or, if not effective at the Execution Time, in the
form in which it shall become effective) and, in the event any
post-effective amendment thereto becomes effective prior to the
Closing Date, shall also mean such registration statement as so
amended. Such term shall include any Rule 430A Information deemed
to be included therein at the Effective Date as provided by Rule
430A. "Rule 424" and "Rule 430A" refer to such rules under the
1933 Act. "Rule 430A Information" means information with respect
to the Securities, the Unsubscribed Units and the Offering
permitted to be omitted from the Registration Statement when it
becomes effective pursuant to Rule 430A. Any reference herein to
the Registration Statement or the Prospectus shall be deemed to
refer to and include the documents incorporated by reference
therein pursuant to Item 12 of Form S-3 which were filed under the
1934 Act on or before the Effective Date of the Registration
Statement or the issue date of any such Prospectus, as the case may
be; and any reference herein to the terms "amend", "amendment" or
"supplement" with respect to the Registration Statement, any such
Prospectus shall be deemed to refer to and include the filing of
any document under the 1934 Act after the issue date of any such
Prospectus, as the case may be, deemed to be incorporated therein
by reference.
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(b) X LP represents and warrants to, and agrees with,
AREP as follows:
(i) X LP is a limited partnership duly formed, validly
existing and in good standing under the laws of the State of
Delaware with full power, authority and legal right to own, lease
and operate its properties and conduct its business as now
conducted; X LP is duly qualified to transact business as a foreign
limited partnership and is in good standing in each other
jurisdiction in which it owns or leases property of a nature, or
transact business of a type, that would make such qualification
necessary, except to the extent that the failure to so qualify or
be in good standing would not have a material adverse effect on X
LP.
(ii) X LP has all requisite power and authority to
execute, deliver and perform its obligations under this Agreement;
and this Agreement has been duly authorized, executed and delivered
by X LP, and, assuming due execution and delivery of this Agreement
by AREP, constitutes a legal, valid and binding obligation of X LP,
enforceable against X LP in accordance with its terms except (A) as
enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws affecting
creditors' rights generally and except as enforcement thereof is
subject to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law), and
(B) as rights to indemnity and contribution hereunder may be
limited by Federal or state securities laws and/or public policy.
(iii) X LP is not in violation of its certificate of
limited partnership or in default under any contract, indenture,
mortgage, loan agreement or other agreement or instrument to which
it is a party or any of its properties may be subject or by which
it may be bound, except for such defaults that in the aggregate
would not have a material adverse effect on the condition
(financial or otherwise) of X LP. The execution and delivery of,
and performance under, this Agreement, the exercise of and payment
of the subscription price in connection with such exercise of, the
Rights and the participation in the Offering do not and will not
result in any violation of the certificate of limited partnership
of X LP or the agreement of limited partnership of X LP, and do not
and will not conflict with, or result in a breach of any of the
terms or provisions of, or constitute a default under, or result in
the creation or imposition of any lien, charge or encumbrance upon
any property or assets of X LP under (a) any indenture, mortgage,
loan agreement, note, lease or other agreement or instrument to
which X LP is a party or any of its respective properties may be
subject or by which it is or may be bound, or (b) any existing
applicable law, rule, regulation, judgment, order or decree of any
government, government instrumentality or court, domestic or
foreign, having jurisdiction over X LP or any of its respective
properties (except, in the case of (a) and (b) above, where such
conflicts, breaches or defaults or liens, charges or encumbrances
7
in the aggregate would not have a material adverse effect on the
condition (financial or otherwise) of X LP).
(iv) The partnership interests of X LP are owned
beneficially, of record, free and clear of any security interests,
liens, encumbrances, equities, claims or other defects by (a) the
General Partner which, in turn, is wholly owned by Icahn and (b)
ACF.
(v) Immediately prior to the Expiration Date, X LP will
a) own beneficially, of record, free and clear of any security
interests, liens, encumbrances, equities, claims or other defects,
all Depositary Units currently owned by API and ACF and its
affiliates; and b) receive a cash contribution from ACF of the
lesser of (a) $110 million and (b) such smaller dollar amount as is
necessary for X LP to comply with its obligations to AREP pursuant
this Agreement.
(vi) To the extent that the Registration Statement or
Prospectus contains any information regarding X LP, on the
Effective Date, those portions of the Registration Statement or the
Prospectus, furnished in writing to AREP by or on behalf of X LP
specifically for inclusion therein, did not or will not contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make
the statements therein not misleading.
(vii) The execution, delivery and consummation of
this Agreement, and the participation by X LP in the Offering as
described in the Registration Statement and the Prospectus do not
and will not result in any violation of X LP's agreement of limited
partnership and do not and will not conflict with, or result in a
breach of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of X LP or its
affiliates under (A) any indenture, mortgage, lien agreement, or
other agreement or instrument to which X LP or its affiliates is a
party or any of their respective properties may be subject, or by
which each of them or any of them may be bound or (B) any existing
applicable law, rule, regulation, judgment, order or decree of any
government, governmental instrumentality or court, domestic or
foreign, having jurisdiction over X LP or its affiliates or any of
its respective properties (except, in the case of (A) and (B)
above, where such conflicts, breaches or defaults or liens, charges
or encumbrances in the aggregate would not have a material adverse
effect on the condition (financial or otherwise) of X LP).
(viii) No authorization, approval, consent or license
of any government, governmental instrumentality or court, domestic
or foreign (other than under the 1933 Act and the securities or
blue sky laws of the various states), is required for the receipt
or sale of Unsubscribed Units by X LP or its affiliates, in
connection with the execution, delivery and consummation of this
8
Agreement, and the participation by X LP in the Offering as
described in the Registration Statement and the Prospectus.
(ix) There is no action, suit or proceeding before or by
any government, governmental instrumentality or court, domestic or
foreign, now pending against or affecting X LP.
(x) X LP has not taken and will not take, directly or
indirectly, any action designed to, or that might be reasonably
expected to, cause or result in stabilization or manipulation of
the price of the Rights or the Depositary Units; PROVIDED, HOWEVER,
that X LP makes no representation as to any action taken by AREP or
its Subsidiary.
2. AGREEMENT OF PARTIES CONCERNING PURCHASE, SALE,
DELIVERY AND COMPENSATION.
On the basis of, and in reliance upon, the
representations and warranties contained herein and subject to the
terms and conditions set forth herein, the parties agree as
follows:
(a) AREP agrees to issue and sell to X LP and X LP
agrees to (i) subscribe for and purchase 1,147,248 Depositary Units
and 191,208 Preferred Units through the exercise of its Basic
Subscription Rights and (ii) to subscribe for all other Depositary
Units and Preferred Units pursuant to the Over-Subscription
Privilege which are not otherwise acquired by Rights Holders
pursuant hereto and, subject to proration as described in the
Prospectus, to purchase such additional Depositary Units and
Preferred Units, thereby assuring AREP will receive gross
proceeds from the Offering of an amount equal to $110 million.
(b) Delivery of and payment for the Securities
purchased by X LP mentioned in Section 2(a)(i) above shall be made
in accordance with the terms set forth in the Registration
Statement. Delivery of and payment for the Unsubscribed Units
purchased by X LP mentioned in Section 2(a)(ii) above shall be on
the fifth (5th) business day after written notice is given by AREP
or the Subscription Agent to X LP of the number and aggregate
purchase price of the Unsubscribed Units X LP is obligated
hereunder to purchase (the "Closing Date"). Payment shall be made
to AREP by certified or official bank check or checks drawn on
_______ or similar next day funds payable to the order of [AREP],
against delivery to X LP of those certificates for those
Unsubscribed Units X LP is obligated hereunder to purchase. The
certificates for such Unsubscribed Units shall be in such
denominations as may be requested by X LP and registered in the
name of X LP, unless otherwise designated by X LP in writing two
days before the date of the Closing Date.
(c) AREP will enter into and perform under an agreement
between X LP and AREP whereby AREP shall register Securities and
the Unsubscribed Units held by X LP (the "Registration Rights
Agreement"), a copy of which is attached hereto as Exhibit [ ].
9
(d) AREP will pay all expenses incident to the
performance of its obligations under this Agreement, including (i)
the printing and filing, and delivery to X LP of copies, of the
Registration Statement as originally filed and of each amendment
thereto, and of the Prospectus; (ii) the printing (or otherwise
reproducing) of this Agreement; (iii) the preparation, issuance and
delivery of the Subscription Certificates to the unit holders of
AREP; (iv) the preparation, issuance and delivery of the
certificates for the Securities and Unsubscribed Units to X LP; (v)
the reasonable fees and disbursements of AREP's counsel and
accountants; (vi) the qualification of the Rights, Securities and
the Unsubscribed Units under state securities laws in accordance
with the provisions of Section 1(a)(ix) hereof, including filing
fees and the fees and disbursements of counsel in connection
therewith and in connection with the preparation of a survey of the
state securities laws (the "Blue Sky Survey"); (vii) the printing
(or otherwise reproducing) and delivery to X LP of copies of the
Blue Sky Survey; and (viii) the fees and expenses incurred in
connection with the listing of the Rights, Securities and
Unsubscribed Units issued in connection with the Offering, on the
Exchange.
(e) If this Agreement is terminated by X LP in
accordance with the provisions of Section 4 or Section 6 hereof,
AREP shall reimburse X LP for all of reasonable out-of-pocket
expenses, including the reasonable fees and disbursements of X LP's
counsel up to a maximum of $_________________.
3. COVENANTS.
(a) AREP covenants that
(i) AREP will use its best efforts to cause the
Registration Statement, if not effective at the Execution Time, and
any amendment thereof, including any post-effective amendment, to
become effective as soon as practicable. Prior to the termination
of the Offering, AREP will not file any amendment of the
Registration Statement or supplement to the Prospectus without X
LP's prior consent, which consent shall not be unreasonably
withheld or delayed. Subject to the foregoing sentence, if the
Registration Statement has become or becomes effective pursuant to
Rule 430A, or filing of the Prospectus is otherwise required under
Rule 424(b), AREP will cause the Prospectus, properly completed, to
be filed with the Commission pursuant to the applicable paragraph
of Rule 424(b) within the time period prescribed and will provide
evidence satisfactory to X LP of such timely filing. AREP will
promptly advise X LP (A) when the Registration Statement, if not
effective at the Execution Time, and any amendment thereto, shall
have become effective, (B) when the Prospectus, shall have been
filed (if required) with the Commission pursuant to Rule 424(b),
(C) when, prior to termination of the Offering, any amendment to
the Registration Statement shall have been filed or become
effective, (D) of any request by the Commission for any amendment
of the Registration Statement or supplement to the Prospectus or
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for any additional information, (E) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or the institution or threatening of any
proceeding for that purpose and (F) of the receipt by AREP of any
notification with respect to the suspension of the qualification of
the Securities or the Unsubscribed Units for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose. AREP will use its best efforts to prevent the
issuance of any such stop order or suspension and, if issued, to
obtain as soon as possible the withdrawal thereof.
(ii) If, at any time when the Prospectus relating to the
Securities and Unsubscribed Units is required to be delivered under
the 1933 Act, any event occurs as a result of which the Prospectus
as then supplemented would include any untrue statement of a
material fact or omit to state any material fact necessary to make
the statements therein in the light of the circumstances under
which they were made not misleading, or if it shall be necessary to
amend the Registration Statement or supplement the Prospectus to
comply with the 1933 Act or the rules thereunder (including to
comply with Item 512(c) of the Regulation S-K under the 1933 Act),
AREP promptly will prepare and file with the Commission, subject to
the second sentence of paragraph (a)(i) of this Section 3, an
amendment or supplement which will correct such statement or
omission or effect such compliance.
(iii) As soon as practicable, AREP will make generally
available to its unit holders, including X LP, an earning statement
or statements of AREP which will satisfy the provisions of Section
11(a) of the 1933 Act and Rule 158 promulgated thereunder.
(iv) AREP will furnish to X LP and counsel therefor,
without charge, signed copies of the Registration Statement
(including amendments and exhibits thereto). AREP will pay the
expenses of printing or other production of all documents relating
to the Offering and any meetings with prospective investors in the
Securities.
(v) AREP will promptly advise X LP if any of the
representations and warranties contained in Section 1(a) hereof
becomes inaccurate in any material respect subsequent to the date
hereof.
(vi) AREP will commence mailing, or cause the
Subscription Agent to mail, the Subscription Certificates to
holders of the Depositary Units as of the Record Date not later
than the day following the Record Date, which shall be not later
than ____________, and shall complete such mailing expeditiously,
and will offer the Securities for subscription in accordance with
the terms and under the conditions set forth in the Prospectus.
The Expiration Date shall be not later than 5:00 PM, New York City
time, on ___________________. AREP will advise X LP daily, during
the period when the Rights are exercisable, of the number and class
of Securities subscribed for, and prior to 12:00 Noon, New York
11
City time, on the business day following the Expiration Date, will
advise X LP of the number of Securities for which Rights Holders
subscribed.
(vii) AREP will enter into the Registration Rights
Agreement with X LP.
(b) X LP covenants that
(i) X LP will promptly advise AREP if any of the
representations and warranties contained in Section 1(b) hereof
becomes inaccurate in any material respect subsequent to the date
hereof.
(ii) X LP will deliver to AREP consolidated financial
statements and the related notes of ACF, which present fairly in
accordance with generally accepted accounting principles ("GAAP")
the consolidated financial position of ACF for the last two years.
4. CONDITIONS TO OBLIGATIONS OF X LP.
The obligation of X LP to comply with the provisions of
this Agreement shall be subject to the accuracy of the
representations and warranties on the part of AREP contained herein
as of the Execution Time and the Closing Date, to the accuracy of
the statements made by AREP in any certificates pursuant to the
provisions hereof, to the performance by AREP of its obligations
hereunder and the following additional conditions:
(a) If the Registration Statement has not become
effective prior to the Execution time, unless X LP agrees in
writing to a later time, the Registration Statement will become
effective not later than 12:00 Noon, New York City time on
_____________, or such later time as trading in the Depositary
Units begins on the Exchange; if filing of the Prospectus is
required pursuant to Rule 424(b), the Prospectus, will be filed in
the manner and within the time period required by Rule 424(b); and
no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that
purpose shall have been instituted or threatened.
(b) AREP shall furnish Gordon Altman Butowsky Weitzen
Shalov & Wein, counsel to X LP, such documents as are required to
enable Gordon Altman Butowsky Weitzen Shalov & Wein to render a
legal opinion on matters including, without limitation, the
issuance and sale of the Rights and the Securities, the
Unsubscribed Units, the Registration Statement, Prospectus and
other related matters as X LP may reasonably request.
(c) AREP shall have furnished to X LP certificates of
AREP dated as of the Execution Time and the Closing Date and signed
by any two officers of the General Partner to the effect that:
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(i) the representations and warranties of AREP in
this Agreement are true and correct in all material respects
at and as of the Execution Time or on and as of the Closing
Date, as the case may be, with the same effect as if made at
the Execution Time or on the Closing Date, as the case may be,
and AREP shall have complied with all the covenants and
agreements and satisfied all conditions, as applicable;
(ii) there has been no issuance of a stop order
suspending the effectiveness of the Registration Statement and
no proceedings for that purpose have been instituted or, to
the best of AREP's knowledge, no such order is threatened;
(iii) since the date of the most recent financial
statements included in the Prospectus, there has been no
material adverse change in the condition (financial or other),
of AREP or its Subsidiary, whether or not arising from
transactions in the ordinary course of business, except as set
forth in or contemplated by AREP in the Prospectus.
5. INDEMNIFICATION AND CONTRIBUTION.
(a) AREP agrees to indemnify and hold harmless the
general partner, officers, other limited partners, employees and
agents of X LP and each person who controls X LP within the meaning
of either the 1933 Act or the 1934 Act against any and all losses,
claims, damages or liabilities, joint or several, to which they or
any of them may become subject under the 1933 Act, the 1934 Act or
other Federal or state statutory law or regulation, at common law
or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement for the
registration of the Securities and the Unsubscribed Units as originally
filed or in any amendment thereof, or in any of the Offering
Materials, or in any amendment thereof or supplement thereto, or
arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; PROVIDED,
HOWEVER, that AREP will not be liable in any such case to the
extent that any such loss, claim, damage or liability (A) arises
out of or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission made therein in reliance
upon and in conformity with written information furnished to AREP
by or on behalf of X LP specifically for inclusion therein or (B)
is found in a final judgment by a court of competent jurisdiction
to have resulted from the bad faith or negligence of such
indemnified party or any party related to an indemnified party or
to have resulted from a violation of Rule 10b-6, 10b-7 or 10b-8
under the 1934 Act. This indemnity agreement will be in addition
to any liability which AREP may otherwise have.
(b) X LP agrees to indemnify and hold harmless AREP,
each of its directors, each of its officers who signs the
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Registration Statement, and each person who controls AREP within
the meaning of the 1933 Act or the 1934 Act, to the same extent as
the foregoing indemnity from AREP to X LP, but only with reference
to (i) written information relating to X LP furnished to AREP by or
on behalf of X LP specifically for inclusion in the documents
referred to in the foregoing indemnity, or (ii) violations of
Sections Rule 10b-6, 10b-7 or 10b-8 under the 1934 Act or other
securities law violations. This indemnity agreement will be in
addition to any liability which X LP may otherwise have.
(c) Promptly after receipt by an indemnified party under
this Section 5 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party under this Section 5, notify the
indemnifying party in writing of the commencement thereof; but the
failure so to notify the indemnifying party (i) will not relieve it
from liability under paragraph (a) or (b) above, unless and to the
extent it did not otherwise learn of such action and such failure
results in the forfeiture by the indemnifying party of substantial
rights and defenses and (ii) will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party
other than the indemnification obligation provided in paragraph (a)
or (b) above. The indemnifying party shall be entitled to appoint
counsel of the indemnifying party's choice at the indemnifying
party's expense to represent the indemnified party in any action
for which indemnification is sought (in which case the indemnifying
party shall not thereafter be responsible for the fees and expenses
of any separate counsel retained by the indemnified party or
parties except as set forth below); PROVIDED, HOWEVER, that such
counsel shall be reasonably satisfactory to the indemnified party.
Notwithstanding the indemnifying party's election to appoint coun-
sel to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel
(including local counsel), and the indemnifying party shall bear
the reasonable fees, costs and expenses of such separate counsel if
(i) the use of counsel chosen by the indemnifying party to
represent the indemnified party would present such counsel with a
conflict of interest, (ii) the actual or potential defendants in,
or targets of, any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have
reasonably concluded that there may be legal defenses available to
it and/or other indemnified parties which are different from or
additional to those available to the indemnifying party (it being
understood, however, that in connection with such action the
indemnifying party shall not be liable for the expenses of more
than one separate counsel (in addition to local counsel) in any one
action or separate but substantially similar actions in the same
jurisdiction arising out of the same general allegations or circum-
stances, representing the indemnified parties who are parties to
such action), (iii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after
notice of the institution of such action or (iv) the indemnifying
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party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party. An indemnifying
party will not, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry
of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim
or action), unless such settlement, compromise or consent includes
an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in
paragraph (a) or (b) of this Section 5 is unavailable to or
insufficient to hold harmless an indemnified party for any reason,
AREP and X LP agree to contribute to the aggregate losses, claims,
damages and liabilities, including legal or other expenses
reasonably incurred in connection with investigating or defending
same (collectively "Losses") to which AREP, on the one hand, and X
LP, on the other hand, may be subject in such proportion as is
appropriate to reflect the relative benefits received by AREP, on
the one hand, and X LP, on the other hand, from the Offering;
PROVIDED, HOWEVER, that in no case shall X LP be responsible for
any amount in excess of the aggregate compensation paid hereunder.
If the allocation provided by the immediately preceding sentence is
unavailable for any reason, AREP, on the one hand, and X LP, on the
other hand, shall contribute in such proportion as is appropriate
to reflect not only such relative benefits but also the relative
fault of AREP, on the one hand, and of X LP, on the other hand, in
connection with the statements or omissions which resulted in such
Losses as well as any other relevant equitable considerations.
Benefits received by AREP shall be deemed to be equal to the total
net proceeds from the Offering (before deducting expenses), as set
forth on the cover page of the Prospectus (assuming that all such
Rights are exercised), and benefits received by X LP shall be
deemed to be equal to the total compensation paid to X LP
hereunder. Relative fault shall be determined by reference to
whether any alleged untrue statement or omission relates to
information provided by AREP or X LP. AREP and X LP agree that it
would not be just and equitable if contribution were determined by
pro rata allocation or any other method of allocation which does
not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph (d), no person
guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 5, each person who controls X LP
within the meaning of either the 1933 Act or the 1934 Act and each
director, officer, partner, employee and agent of X LP shall have
the same rights to contribution as X LP, and each person who
controls AREP within the meaning of either the 1933 Act or the 1934
Act, each officer of AREP who shall have signed the Registration
Statement and each officer of AREP shall have the same rights to
contribution as AREP, subject in each case to the applicable terms
and conditions of this paragraph (d).
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6. TERMINATION. This Agreement shall be subject to
termination in the absolute discretion of X LP, by notice given to
AREP prior to delivery of and payment for the Securities and
Unsubscribed Units, if prior to such time (i) trading in AREP's
Depositary Units shall have been suspended by the Commission or the
Exchange or trading in securities generally on the Exchange shall
have been suspended or limited or minimum prices shall have been
established on the Exchange, (ii) AREP shall terminate the Offering
or the Offering shall not take place, (iii) a banking moratorium
shall have been declared either by Federal or New York State
authorities, (iv) there shall have occurred a decline in either the
Dow Jones Industrial Average or the Standard & Poor's Index of 400
Industrial Companies by an amount in excess of 20% measured from
the close of business on the last trading day preceding the date
hereof to the close of business on the Expiration Date, or (v)
there shall have occurred any outbreak or escalation of
hostilities, declaration by the United States of a national
emergency, or war or other calamity or crisis the effect of which
on the financial markets is such as to make it, in the sole
judgment of X LP, impracticable or inadvisable to proceed with the
Offering or delivery of the Securities and/or the Unsubscribed
Units or the fulfillment of X LP's obligations, as contemplated by
this Agreement.
7. REPRESENTATIONS AND INDEMNITIES TO SURVIVE. The
respective representations, warranties, agreements, covenants,
indemnities and other statements of AREP or its officers, and of X
LP or its affiliates as set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of any of the officers,
directors or controlling persons of X LP or AREP. The
representations, warranties, agreements, covenants, indemnities and
other statements will survive delivery of and payment for the
Securities and the Unsubscribed Units. The provisions of the
subsection (e) of Section 2 and Section 5 hereof shall survive the
termination or cancellation of this Agreement.
8. NOTICES. All communications hereunder will be in
writing and effective only on receipt, and, if sent to X LP will be
mailed, delivered or telegraphed and confirmed to it at [ ] South
Bedford, Mount Kisco, NY 10549; or, if sent to AREP, will be
mailed, delivered or telegraphed and confirmed to it at 90 South
Bedford, Mount Kisco, NY 10549, attn. John P. Saldarelli.
9. SUCCESSORS. This Agreement will inure to the
benefit of and be binding upon the parties hereto and their
respective successors and the officers and directors and
controlling persons of AREP and X LP, and no other person will have
any right or obligation hereunder.
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10. APPLICABLE LAW. This Agreement will be governed by
and construed in accordance with the laws of the State of New York.
11. BUSINESS DAY. For purposes of this Agreement,
"business day" means any day on which the Exchange is open for
trading.
12. COUNTERPARTS. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon
the same instrument.
13. AGREEMENT SUPERSEDES. This Agreement shall
supersede all provisions of any prior agreements, whether written
or oral, of the parties to this Agreement that relate to the
transactions contemplated by this Agreement.
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IN WITNESS WHEREOF, and intending to be legally bound
thereby, each of AREP and X LP has signed or caused to be signed
its name by its proper officers thereunto duly authorized, all as
of the day and year first above written.
AMERICAN REAL ESTATE PARTNERS, L.P.
By: American Property Investors, Inc.
By:_______________________________
Name:
Title:
X LIMITED PARTNERS
By: American Property Investors, Inc.
By:_______________________________
Name:
Title:
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