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SUBSCRIPTION AGENT AGREEMENT
This Subscription Agent Agreement (the "Agreement") is made as
of August __, 1997 between American Real Estate Partners, L.P., a Delaware
limited partnership (the "Partnership"), and Registrar and Transfer Company, a
New York corporation (the "Agent"). All terms not defined herein shall have the
meaning given in the prospectus (the "Prospectus") included in the Registration
Statement on Form S-3 (Registration No. 333-______) filed by the Partnership
with the Securities and Exchange Commission on July __, 1997, as amended by any
amendment filed with respect thereto (the "Registration Statement").
WHEREAS, the Partnership proposes to make a subscription offer
by issuing certificates or other evidences of subscription rights, in the form
designated by the Partnership (the "Subscription Certificates") to unitholders
of record (the "Record Date Unitholders") of its depositary units representing
limited partner interests ("Depositary Units"), as of a record date specified by
the Partnership (the "Record Date"), pursuant to which each Unitholder will have
certain rights (the "Rights") to subscribe for Depositary Units and 5%
cumulative pay-in-kind redeemable preferred units representing limited partner
interests in the Partnership (the "Preferred Units"), as described in and upon
such terms as are set forth in the Prospectus, a final copy of which has been
or, upon availability will promptly be, delivered to the Agent; and
WHEREAS, the Partnership wishes the Agent to perform certain
acts on behalf of the Partnership, and the Agent is willing to so act, in
connection with the distribution of the Subscription Certificates and the
issuance and exercise of the Rights to subscribe therein set forth, all upon the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual agreements set forth herein, the parties agree as follows:
1. APPOINTMENT. The Partnership hereby appoints the Agent to act as subscription
agent in connection with the distribution of Subscription Certificates and the
issuance and exercise of the Rights in accordance with the terms set forth in
this Agreement and Exhibit A hereto, and the Agent hereby accepts such
appointment.
2. FORM AND EXECUTION OF SUBSCRIPTION CERTIFICATES.
(a) Each Subscription Certificate shall be irrevocable and fully
transferable. The Agent shall, in its capacity as Transfer Agent of the
Partnership, maintain a register of Subscription Certificates and the holders of
record thereof (each of whom shall be deemed a "Unitholder" hereunder for
purposes of determining the
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rights of holders of Subscription Certificates). Each Subscription Certificate
shall, subject to the provisions thereof, entitle the Unitholder in whose name
it is recorded to the following:
(1) The right to acquire during the Subscription Period, as
defined in the Prospectus, at the Subscription Price, four Depositary
Units and one Preferred Unit for each Right (the "Basic Subscription
Right"); and
(2) If all Basic Subscription Rights are not exercised, the
right to subscribe for additional Depositary Units and Preferred Units,
at the Subscription Price and as a unit consisting of four Depositary
Units and one Preferred Unit, subject to the availability of such
Depositary Units and Preferred Units and to the allotment of such units
as may be available among Unitholders who exercise their Over-
Subscription Privilege on the basis specified in the Prospectus (the
"Over-Subscription Privilege").
3. RIGHTS AND ISSUANCE OF SUBSCRIPTION CERTIFICATES.
(a) Each Subscription Certificate shall evidence the Rights of the
Unitholder therein named to purchase Depositary Units and Preferred Units upon
the terms and conditions therein set forth.
(b) Upon the written advice of the Partnership, signed by any of its
duly authorized officers, as to the Record Date, the Agent shall, from a list of
the Unitholders as of the Record Date to be prepared by the Agent in its
capacity as Transfer Agent of the Partnership, prepare and record Subscription
Certificates in the names of the Unitholders, setting forth the number of Rights
to subscribe for the Partnership's Depositary Units and Preferred Units
calculated on the basis of one Right for each five Depositary Units recorded on
the books in the name of each such Unitholder as of the Record Date. The number
of Rights that are issued to Record Date Holders of a number of Depositary Units
not evenly divisible by five will be determined by multiplying the number of
Depositary Units held by such Record Date Holder by .2 and then rounding up to
the nearest whole number if the fractional amount is greater than or equal to .5
and rounding down to the nearest whole number if the fractional amount is less
than .5. In the case of Depositary Units held of record by a Nominee Holder, the
number of Rights issued to such Nominee Holder will be adjusted, by the Agent,
to permit rounding up (to the nearest whole number of Rights evenly divisible by
five) of the Rights to be received by beneficial holders for whom the Nominee
Holder is the holder of record only if the Nominee Holder provides to the Agent
on or before the close of business on the fifth business day prior to
___________, 1997 (the "Expiration Date"), written representation of the number
of Rights required for such rounding. Each Subscription Certificate shall be
dated as of the Record Date and shall be executed by a duly authorized officer
of the Partnership. Upon the written advice, signed as aforesaid, as to the
effective date of the Registration Statement, the Agent shall deliver the
Subscription Certificates, together with a copy
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of the Prospectus, instruction letter and any other document as the Partnership
deems necessary or appropriate, to all Unitholders with record addresses in the
United States (including its territories and possessions and the District of
Columbia). Delivery shall be by first class mail (without registration or
insurance), except for those Unitholders having a registered address outside the
United States (who will only receive copies of the Prospectus, instruction
letter and other documents as the Partnership deems necessary or appropriate, if
any), delivery shall be by air mail (without registration or insurance) and by
first class mail (without registration or insurance) to those Unitholders having
Army Post Office or Foreign Post Office addresses. No Subscription Certificate
shall be valid for any purpose unless so executed. Should any officer of the
Partnership whose signature has been placed upon any Subscription Certificate
cease to hold such office at any time thereafter, such event shall have no
effect on the validity of such Subscription Certificate.
(c) The Agent will mail a copy of the Prospectus, instruction letter, a
special notice and other documents as the Partnership deems necessary or
appropriate, if any, but not Subscription Certificates to Record Date Holders
whose record addresses are outside the United States (including its territories
and possessions and the District of Columbia) ("Foreign Record Date
Unitholders"). The Rights to which such Subscription Certificates relate will be
held by the Agent for such Foreign Record Date Unitholders' accounts until
instructions are received to exercise, sell or transfer the Rights. If no
instructions have been received by 12:00 Noon, New York City time, three
Business Days prior to the Expiration Date, the Agent will use its best efforts
to sell the Rights of those registered Foreign Record Date Unitholders. The
proceeds net of commissions, if any, to the Agent from the sale of those Rights
by the Agent will be remitted to those Foreign Record Date Unitholders on a pro
rata basis.
4. EXERCISE.
(a) Exercising Rights Holders may acquire Depositary Units and
Preferred Units pursuant to Basic Subscription Rights and the Over-Subscription
Privilege by delivery to the Agent as specified in the Prospectus of (i) the
Subscription Certificate with respect thereto, duly executed by such Unitholder
in accordance with and as provided by the terms and conditions of the
Subscription Certificate, together with (ii) the purchase price of $ __________
for each four Depositary Units and one Preferred Unit subscribed for by exercise
of Basic Subscription Rights and the Over-Subscription Privilege, in U.S.
dollars by money order or check drawn on a bank in the United States, in each
case payable to the order of the Agent for the account of the Partnership.
(b) Rights may be exercised at any time after the date of issuance of
the Subscription Certificates with respect thereto but no later than 5:00 P.M.
New York time on the Expiration Date. For the purpose of determining the time of
the exercise of any Rights,
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delivery of any material to the Agent shall be deemed to occur when such
materials are received at the address of the Agent as specified in the
Prospectus.
(c) Notwithstanding the provisions of Section 4(a) and 4(b) regarding
delivery of an executed Subscription Certificate to the Agent prior to 5:00 p.m.
New York time on the Expiration Date, if prior to such time the Agent receives a
Notice of Guaranteed Delivery from a bank, a trust company or a New York Stock
Exchange member guaranteeing delivery of (i) payment of the full Subscription
Price for the Depositary Units and Preferred Units subscribed for pursuant to
the exercise of Basic Subscription Rights and any additional Preferred Units and
Depositary Units subscribed for pursuant to the Over-Subscription Privilege and
(ii) a properly completed and executed Subscription Certificate, then such
exercise of Basic Subscription Rights and the Over-Subscription Privilege shall
be regarded as timely, subject, however, to receipt of the duly executed
Subscription Certificate and full payment for the Depositary Units and Preferred
Units by the Agent within five business days after the Expiration Date (the
"Protect Period").
(d) Within seven business days following the end of the Protect Period,
the Agent shall send to each Exercising Rights Holder (or, if Depositary Units
on the Record Date are held by Cede & Co. or any other depository or nominee, to
Cede & Co. or such other depository or nominee) the certificates representing
the Depositary Units and Preferred Units acquired pursuant to the Basic
Subscription Rights, and, if applicable, the Over-Subscription Privilege. Any
excess payment to be refunded by the Partnership to an Exercising Rights Holder
who is not allocated the full amount of Depositary Units and Preferred Units
subscribed for pursuant to the Over-Subscription Privilege, shall be mailed by
the Agent to him or her within seven business days following the Protect Period.
5. TRANSFER OF RIGHTS.
(a) Rights Holders who do not wish to exercise any or all of their
Rights may sell any unexercised Rights. The Agent will use its best efforts to
sell all Rights which remain unclaimed as a result of Subscription Certificates
being returned by the postal authorities to the Agent as undeliverable as of the
fourth business day prior to the Expiration Date and Rights of non-U.S.
shareholders who do not respond to the Agent at least four days prior to the
Expiration Date. Such sales will be made, net of commissions, on behalf of the
nonclaiming Unitholders. The Agent will hold the proceeds from those sales for
the benefit of such nonclaiming Unitholders until such proceeds are either
claimed or escheat.
(b) Rights Holders may transfer a portion of the Rights evidenced by a
single Subscription Certificate by delivering to the Agent at least one business
day prior to the Expiration Date a Subscription Certificate properly endorsed
for transfer, with
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instructions to register such portion of the Rights evidenced thereby in the
name of the transferee and to issue a new Subscription Certificate to the
transferee evidencing such transferred Rights. In such event, the Agent shall
issue a new Subscription Certificate evidencing the balance of the Rights to the
transferring Rights Holder or, if the transferring Rights Holder so instructs,
to an additional transferee.
6. VALIDITY OF SUBSCRIPTIONS. Irregular subscriptions not otherwise covered by
specific instructions herein shall be submitted to an appropriate officer of the
Partnership and handled in accordance with his or her instructions. Such
instructions will be documented by the Agent indicating the instructing officer
and the date thereof.
7. OVER-SUBSCRIPTION. If all Basic Subscription Rights are not exercised, the
remaining Depositary Units and Preferred Units (the "Remaining Units") shall be
allocated to persons exercising the Over-Subscription Privilege in the amounts
of such over-subscriptions. If the number of Depositary Units and Preferred
Units for which the Over-Subscription Privilege has been exercised is greater
than the Remaining Units, the Agent shall allocate the Remaining Units to the
persons exercising the Over-Subscription Privilege pro rata according to the
aggregate number of Basic Subscription Rights exercised so that the aggregate
amount of Depositary Units and Preferred Units issued to Unitholders who
subscribe pursuant to the Over-Subscription Privilege will generally be in
proportion to the aggregate amount of Depositary Units and Preferred Units
purchased through the exercise of Basic Subscription Rights. The Agent shall
advise the Partnership immediately upon the completion of the allocation set
forth above as to the total number of Depositary Units and Preferred Units
subscribed and distributable.
8. DELIVERY OF CERTIFICATES. Within seven business days following the end of the
Protect Period, the Agent will deliver (i) certificates representing those
Depositary Units and Preferred Units purchased pursuant to exercise of Basic
Subscription Rights and (ii) certificates representing those Depositary Units
and Preferred Units purchased pursuant to the exercise of the Over- Subscription
Privilege.
9. HOLDING PROCEEDS OF RIGHTS OFFERING IN ESCROW.
(a) All proceeds received by the Agent from Unitholders in respect of
the exercise of Rights shall be held by the Agent, on behalf of the Partnership,
in a segregated, interest-bearing escrow account (the "Escrow Account"). Pending
disbursement in the manner described in Section 4(d) above, funds held in the
Escrow Account shall be invested by the Agent at the direction of the
Partnership.
(b) The Agent shall deliver all proceeds received in respect of the
exercise of Rights (including interest earned thereon) to the Partnership as
promptly as practicable, but in no event later
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than seven business days after the end of the Protect Period. Proceeds held in
respect of excess payments (including interest earned thereon) shall be refunded
to Unitholders entitled to such a refund within seven business days after the
end of the Protect Period.
10. REPORTS. Daily, during the period commencing on the Record Date, until
termination of the Subscription Period, the Agent will report by telephone or
telecopier (by 12:00 Noon, New York time), confirmed by letter, to a designated
officer of the Partnership, daily data regarding Rights exercised, the selling
price of Rights, the total number of Depositary Units and Preferred Units
subscribed for, payments received therefor, the number of Rights sold and the
net proceeds thereof, bringing forward the figures from the previous day's
report in each case so as to also show the cumulative totals and any such other
information as may be mutually determined by the Partnership and the Agent.
11. LOSS OR MUTILATION. If any Subscription Certificate is lost, stolen,
mutilated or destroyed, the Agent may, on such terms which will indemnify and
protect the Partnership and the Agent as the Agent may in its discretion impose
(which shall, in the case of a mutilated Subscription Certificate include the
surrender and cancellation thereof), issue a new Subscription Certificate of
like denomination in substitution for the Subscription Certificate so lost,
stolen, mutilated or destroyed.
12. COMPENSATION FOR SERVICES. The Partnership agrees to pay to the Agent
compensation for its services as such in accordance with its Fee Schedule set
forth hereto as Exhibit A. The Agent agrees that such compensation shall include
all services as Transfer Agent and Registrar provided in connection with the
offering of the Rights. The Partnership further agrees that it will reimburse
the Agent for its reasonable out-of-pocket expenses incurred in the performance
of its duties as such.
13. INSTRUCTIONS AND INDEMNIFICATION. The Agent undertakes the duties and
obligations imposed by this Agreement upon the following terms and conditions:
(a) The Agent shall be entitled to rely upon any instructions or
directions furnished to it by an appropriate officer of the Partnership, whether
in conformity with the provisions of this Agreement or constituting a
modification hereof or a supplement hereto. Without limiting the generality of
the foregoing or any other provision of this Agreement, the Agent, in connection
with its duties hereunder, shall not be under any duty or obligation to inquire
into the validity or invalidity or authority or lack thereof of any instruction
or direction from an officer of the Partnership which conforms to the applicable
requirements of this Agreement and which the Agent reasonably believes to be
genuine and shall not be liable for any delays, errors or loss of data occurring
by reason of circumstances beyond the Agent's control, including, without
limitation, acts of civil or military authority,
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national emergencies, labor difficulties, fire, flood, catastrophe, acts of God,
insurrection, war, riots or failure of the mails, transportation, communication
or power supply.
(b) The Partnership will indemnify the Agent and its nominees against,
and hold it harmless from, all liability and expense which may arise out of or
in connection with the services described in this Agreement or the instructions
or directions furnished to the Agent relating to this Agreement by an
appropriate officer of the Partnership, except for any liability or expense
which shall arise out of the negligence, bad faith or willful misconduct of the
Agent or such nominees.
14. CHANGES IN SUBSCRIPTION CERTIFICATE. The Agent may, without the consent or
concurrence of the Unitholders in whose names Subscription Certificates are
registered, by supplemental agreement or otherwise, concur with the Partnership
in making any changes or corrections in a Subscription Certificate that it shall
have been advised by counsel (who may be counsel for the Partnership) is
appropriate to cure any ambiguity or to correct any defective or inconsistent
provision or clerical omission or mistake or manifest error therein or herein
contained, and which shall not be inconsistent with the provision of the
Subscription Certificate except insofar as any such change may confer additional
rights upon the Unitholders.
15. ASSIGNMENT; DELEGATION.
(a) Neither this Agreement nor any rights or obligations hereunder may
be assigned or delegated by either party without the written consent of the
other party.
(b) This Agreement shall inure to the benefit of and be binding upon
the parties and their respective permitted successors and assigns. Nothing in
this Agreement is intended or shall be construed to confer upon any other person
any right, remedy or claim or to impose upon any other person any duty,
liability or obligation.
16. GOVERNING LAW. The validity, interpretation and performance of this
Agreement shall be governed by the laws of the State of New York.
17. SEVERABILITY. The parties hereto agree that if any of the provisions
contained in this Agreement shall be determined invalid, unlawful or
unenforceable to any extent, such provisions shall be deemed modified to the
extent necessary to render such provisions enforceable. The parties hereto
further agree that this Agreement shall be deemed severable, and the invalidity,
unlawfulness or unenforceability of any term or provision thereof shall not
affect the validity, legality or enforceability of this Agreement or of any term
or provision hereof.
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18. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original and all of which together shall be
considered one and the same agreement.
19. CAPTIONS. The captions and descriptive headings herein are for the
convenience of the parties only. They do not in any way modify, amplify, alter
or give full notice of the provisions hereof.
20. FURTHER ACTIONS. Each party agrees to perform such further acts and execute
such further documents as are necessary to effect the purposes of this
Agreement.
21. ADDITIONAL PROVISIONS. Except as specifically modified by this Agreement,
the Agent's rights and responsibilities set forth in the Agreement for Stock
Transfer Services between the Partnership and the Agent are hereby ratified and
confirmed and continue in effect.
AMERICAN REAL ESTATE PARTNERS, L.P.
By: American Property Investors, Inc.,
General Partner
By:
REGISTRAR AND TRANSFER COMPANY
By:
Name:
Title:
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EXHIBIT A
Transfer Service Agreement between American Real Estate Partners, L.P. (the
"Company") and Registrar and Transfer Company ("Agent").
FEES AND SERVICES
Agent will receive will receive $____ for each Subscription Certificate
that is exercised in the Rights Offering, provided however, the minimum fee
payable to Agent for its role in the Rights Offering will be $_______ and the
maximum fee for such role will be $_______. The fee for the Rights Offering
includes the following services:
* Acceptance and initial review of
certificates;
* Programming expenses for the
proration of rights or over
subscription requests;
* Responding to routine investor
correspondence;
* Calculation, imprinting and
enclosing Subscription Certificates
and related materials, up to four
enclosures;
* Curing defective Subscription
Certificates;
* Proration calculation and issuance of
Depositary Units, Preferred Units and
refund checks;
* Maintenance of an interest bearing
escrow account;
* Nominee fulfillment.
Out-of-pocket expenses including stationery, telephone, postage delivery
and other expenses are not included and will be itemized and billed as incurred.
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