EXECUTION COPY
EXHIBIT 10.3
PREFERRED UNIT RECIPIENT AGREEMENT
This PREFERRED UNIT RECIPIENT AGREEMENT (this "AGREEMENT") is made by
and among American Real Estate Investment, L.P., a Delaware limited partnership
(the "PARTNERSHIP"), American Real Estate Investment Corporation, a Maryland
corporation, as the sole general partner of the Partnership (the "COMPANY" and,
together with the Partnership, the "ACQUIROR"), Hopewell Properties, Inc. a
South Carolina corporation (the "PREFERRED UNIT RECIPIENT"), who is (directly or
indirectly, as a partner in partnerships or a member of limited liability
companies) contributing all or a portion of certain properties (the "CONTRIBUTED
ASSETS") to the Partnership in exchange for the issuance by the Partnership of
Series B preferred units of limited partner interests with the rights,
preferences and designations set forth on Annex I attached hereto (the
"PREFERRED UNITS") in the Partnership, pursuant to an Agreement of Sale and
Purchase made and entered into as of the 7th day of August, 1998, as amended
from time to time (as amended, the "AGREEMENT OF SALE AND PURCHASE"), among the
Partnership and the parties reflected on the signature pages thereto. Except as
otherwise noted herein, all capitalized terms used in this Agreement and not
otherwise defined in this Agreement shall have the meaning ascribed to them in
the Agreement of Sale and Purchase.
In consideration of the Partnership's agreement to offer Preferred
Units to the undersigned (the "OFFERING") as contemplated by the Agreement of
Sale and Purchase, the undersigned agrees and represents to the Partnership as
follows:
Section 1. ACCEPTANCE OF PARTNERSHIP AGREEMENT.
(a) The undersigned hereby agrees to receive from the Partnership the
number of Preferred Units indicated on the counterpart signature page hereof. In
respect of this Agreement, the undersigned herewith delivers to the Partnership
(i) two executed original signature pages of this Agreement, (ii) two executed
original signature pages of the exhibit to the Partnership Agreement and (iii) a
fully completed Investor Information Sheet, Account Information Sheet, and
Accredited Investor Questionnaire, attached as Exhibits A, B and C,
respectively.
(b) The undersigned acknowledges that the Preferred Units will be
issued to the undersigned (although the Preferred Units will not be
certificated).
(c) The undersigned agrees that upon receipt of Preferred Units by the
undersigned and admission of the undersigned as a limited partner in the
Partnership, the undersigned will be bound by the terms and conditions of the
Partnership's Amended and Restated Agreement of Limited Partnership, as amended
from time to time (the "PARTNERSHIP AGREEMENT"), except that the provisions of
Article XV of the Partnership Agreement shall not apply to the undersigned, and
with reference to the undersigned, shall be deemed to be replaced in their
entirety by the provisions of SECTION 3 of this Agreement which sets forth the
entire agreement between the parties with respect to registration rights under
the Securities Act of 1933, as amended (the "SECURITIES ACT").
(d) The Partnership agrees that it will admit the undersigned as a
limited partner in the Partnership upon receipt of Preferred Units by the
undersigned pursuant to this Agreement.
Section 2. INVESTOR REPRESENTATIONS AND WARRANTIES. The undersigned
hereby acknowledges, represents and warrants to, and agrees with the Partnership
as follows, which acknowledgments will be true and correct as of the closing of
the transaction whereby the Partnership acquires the Contributed Assets (the
"CLOSING DATE"):
(a) AUTHORIZATION. This Agreement has been duly executed and delivered
by the undersigned and constitutes a legal, valid and binding agreement of the
undersigned, enforceable in accordance with its terms. The undersigned
represents that it has full power and authority to enter into this Agreement. If
the undersigned is a corporation, partnership, trust or other entity, it
represents that: (i) it is duly organized, validly existing and in good standing
in its jurisdiction of incorporation or organization and has all the requisite
power and authority to invest in the securities as provided herein; (ii) such
investment does not result in any violation of, or conflict with, any term or
provision of the charter, bylaws or other governing documents of the undersigned
or any other instrument or agreement to which it is subject; (iii) such
investment has been duly authorized by all necessary action on behalf of the
undersigned; and (iv) this Agreement has been duly executed and delivered on
behalf of the undersigned and constitutes a legal, valid and binding agreement
of the undersigned.
(b) NO ADVERTISEMENT OR SOLICITATION. The undersigned acknowledges
that the offer and sale of the Preferred Units to it has not been accomplished
by any form of general solicitation or general advertising, including, but not
limited to, (i) any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media, or broadcast over
television or radio and (ii) any seminar or meeting whose attendees have been
invited by any general solicitation or general advertising.
(c) INVESTOR INFORMATION. All information which the undersigned has
heretofore furnished and furnishes herewith to the Partnership, including,
without limitation, the Investor Questionnaire and the certification as to the
undersigned's status as an Accredited Investor, as such term is defined in
Regulation D promulgated under the Securities Act, and any other information
with respect to the undersigned and the undersigned's financial position and
business experience is true, correct and complete as of the date of this
Agreement, and shall be true, correct and complete as of the date of the
acceptance hereof by the Partnership and the acquisition of the Preferred Units
by the undersigned, and if there should be any material change in such
information prior to the acquisition of the Preferred Units by the undersigned,
the undersigned will immediately furnish such revised or corrected information
to the Partnership.
(d) ACCREDITED INVESTOR. The undersigned is an Accredited Investor, as
such term is defined in Regulation D promulgated under the Securities Act.
(e) INVESTMENT EXPERIENCE. The undersigned represents that it has such
knowledge and experience in financial and business matters as to be capable of
evaluating alone, or together with its purchaser representative or personal
advisor, the merits and risks of an investment in the Preferred Units. The
undersigned acknowledges that the undersigned has the financial ability to bear
the economic risk of its investment in the Partnership (including its possible
loss), has adequate means for providing for its current needs and personal
contingencies and has no need for liquidity with respect to the investment in
the Partnership. If other than an individual, the undersigned also represents it
has not been organized solely for the purpose of acquiring the Preferred Units.
(f) PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with the
undersigned in reliance upon its representation to the Partnership, which by the
undersigned's execution of this Agreement it hereby confirms, that the Preferred
Units to be received by the undersigned will be acquired for investment for the
undersigned's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and that it has no present intention
of selling, granting any
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participation in, or otherwise distributing the same. By executing this
Agreement, the undersigned further represents that it does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to any of the Preferred Units.
(g) DISCLOSURE OF INFORMATION. The undersigned and/or the
undersigned's purchaser representative or personal advisor, as the case may be:
(i) has received a copy of the Agreement of Sale and Purchase, the
Partnership Agreement and the Charter and Bylaws of the Company, and has
read and is familiar with these documents and their terms;
(ii) has received and read the following documents filed by the
Company with the Securities and Exchange Commission (the "SEC") pursuant to
the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"): (a)
the Company's Annual Report on Form 10-KSB for its fiscal year ended
December 31, 1997; (b) the Company's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1998, June 30, 1998 and September 30, 1998; and (c)
the Company's Current Reports on Form 8-K and 8-K/A filed January 23, 1998,
February 24, 1998, April 10, 1998, May 15, 1998, June 10, 1998, July 7,
1998, July 14, 1998, August 13, 1998, September 3, 1998 and November 13,
1998;
(iii) has been provided an opportunity to obtain any additional
information requested concerning the Preferred Units, the Partnership and
the Company;
(iv) has been provided, by the Company and the Partnership, with
all documents that it has requested relating to an investment in the
Preferred Units, has been given the opportunity to ask questions of, and
receive answers from, the Company and the Partnership concerning the terms
and conditions of this Agreement, the Partnership Agreement and other
matters pertaining to this investment, and has been given the opportunity to
obtain such additional information necessary to verify the accuracy of the
information provided in order to allow it to evaluate the merits and risks
of an investment in the Partnership to the extent the Company or the
Partnership possesses such information or can acquire it without
unreasonable effort or expense, and has not been furnished with or relied
upon any representations or other information (whether oral or written)
other than as set forth in this Agreement, the Agreement of Sale and
Purchase, or as contained in any documents or answers to questions furnished
to the undersigned by the Company or the Partnership; and
(v) has evaluated the risks of an investment in the Preferred
Units and has determined that such investment is suitable for it and that at
this time it can bear the economic risk of the investment.
(h) RESTRICTIONS ON TRANSFER.
(i) The undersigned understands and acknowledges that the
Preferred Units have not been registered under the Securities Act, by reason
of a specific exemption from the registration provisions thereof which
exemption depends upon, among other things, the bona fide nature of the
investment intent of the undersigned as expressed herein and the other
representations of the undersigned set forth herein.
(ii) The undersigned understands and acknowledges that none of the
Preferred Units or the securities into which Preferred Units may be
exchanged have been registered under the Securities Act or registered or
qualified under the securities laws of any state and none may be sold,
transferred, assigned, pledged or hypothecated absent an effective
registration thereof under such Securities Act or an
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opinion of counsel, which opinion is satisfactory in form and substance to
the Partnership and its counsel, to the effect that such registration is not
required under said Securities Act or such states or that such transaction
complies with the rules promulgated by the SEC under said Securities Act or
such states. The undersigned understands and acknowledges that the
undersigned must bear the economic risks of this investment resulting from
such limitations.
(iii) The undersigned understands and acknowledges that the sale,
transfer or other disposition of the Preferred Units is further restricted
by the provisions of this Agreement and the Partnership Agreement.
(iv) The undersigned understands and acknowledges that subject to
certain conditions and in accordance with the Partnership Agreement, at any
time after the Closing Date, the Preferred Units shall be convertible at any
time or from time to time upon 10 days notice to the Company, for shares
("REGISTRABLE SECURITIES") of the common stock, par value $.001 per share,
of the Company ("COMMON STOCK") on a 1:1.5151515 basis (subject to the
anti-dilution provisions set forth in the Partnership Agreement), or for
cash as provided in and subject to the conditions and restrictions contained
in the Partnership Agreement. The Common Stock also will not have been
registered under the Securities Act. The Company will also rely upon the
representations of the undersigned as to investment intent and otherwise
with respect to the issuance of any Common Stock. The restrictions referred
to as being applicable to unregistered Preferred Units in clauses (i)
through (iii) of this paragraph (h) will also apply to any unregistered
Common Stock.
(v) The undersigned is aware of the provisions of Rule 144
promulgated under the Securities Act, pursuant to which the undersigned may
be able to sell Common Stock, subject to certain exceptions, one year after
it receives such Common Stock so long as certain current public information
is available about the issuer, the sale is through a broker in an
unsolicited "broker's transaction" and the undersigned does not sell, in any
three-month period, more than the greater of 1% of the outstanding Common
Stock or the average weekly trading volume of Common Stock for the four-week
period preceding the sale. The undersigned generally will be able to sell
the Common Stock without regard to any volume or other limitations discussed
above beginning two years after it receives the Common Stock, unless it is
an affiliate of the Company (I.E., a person controlling, controlled by or
under common control with the Company). Affiliates of the Company will
continue to be subject to the volume limitations on unregistered sales
following the expiration of the two-year period. Under strict interpretation
the one-year and two-year periods are measured from the date shares of
Common Stock are received, not from the date Preferred Units are received.
The preceding description is a general summary of the restrictions of Rule
144, and the undersigned should consult with its own legal advisor to ensure
compliance with all of the requirements of applicable federal and state
securities laws and regulations. In this connection, the undersigned
understands Rule 144 may or may not be available for the resale of the
Preferred Units and the undersigned should consult an attorney with regard
to the availability of Rule 144. The Common Stock is subject to the
reporting requirements under the Exchange Act, and upon notice of issuance
will be listed for trading on the American Stock Exchange or such other
exchange or quotation system on which the Common Stock is listed at such
time. The undersigned further understands and acknowledges that, with
respect to the Common Stock, while the Company believes that it satisfies
the conditions of Rule 144 on the date it accepts this subscription, and
will continue to use its commercially reasonable efforts to satisfy such
conditions, there can be no assurance that it will meet such conditions one
year following the issuance of Common Stock (the first date when sales under
this rule would be permitted). In the event not all of the requirements of
Rule 144 are met, registration under the Securities Act or some other
registration exemption will be required for any disposition of Common Stock.
The undersigned understands that although Rule 144 is not exclusive, the SEC
has expressed its opinion that persons proposing to sell restricted
securities received in an offering other than a registered offering or
pursuant to Rule 144 will have a substantial burden of proof in establishing
that an exemption from registration is
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available for such offers or sales that such persons and the brokers who
participate in the transactions do so at their own risk.
(i) GUARANTEED PAYMENT DATE. The undersigned understands that with
respect to the first Guaranteed Payment Date (as defined below) on or after the
Closing, for distributions by Acquiror as contemplated by the Partnership
Agreement, distributions payable with respect to the Preferred Units issued
pursuant to this Agreement shall be made to the Preferred Unit Recipient on a
PRO RATA basis based upon the number of days during the calendar quarter
preceding such Guaranteed Payment Date that the Preferred Unit Recipient held
such Preferred Units. "GUARANTEED PAYMENT DATE" shall mean the last calendar day
of March, June, September and December in each year.
(j) INDEMNIFICATION. The undersigned understands and acknowledges that
the Partnership and the Company are relying on representations, warranties and
agreements made by the undersigned to the Partnership and the Company herein and
in the Investor Questionnaire, and thus, hereby agrees to indemnify the
Partnership and the Company and their respective partners, directors, officers,
affiliates, agents and employees, and hold each of them harmless against any and
all loss, damage, liability or expense, including reasonable attorneys' fees,
which they or any of them may suffer, sustain or incur by reason of or in
connection with any misrepresentation or breach of warranty or agreement made by
the undersigned under this Agreement, the Investor Questionnaire or in
connection with the sale or distribution by the undersigned of the Preferred
Units subscribed for by the undersigned pursuant hereto, or the Common Stock
into which the Preferred Units may be exchanged, in violation of the Securities
Act or any other applicable law.
(k) INVESTOR AWARENESS. The undersigned acknowledges, agrees and is
aware that:
(i) no federal or state agency has passed upon the Preferred Units
or the Common Stock or made any finding or determination as to the fairness
of this investment nor any recommendation or endorsement of the investment;
(ii) there are substantial risks of loss of investment incidental
to the purchase of the Preferred Units;
(iii) except as provided in the Partnership Agreement, the
investment in the Partnership or the Common Stock is an illiquid investment
and the undersigned must bear the economic risk of investment in the
Preferred Units or the Common Stock for an indefinite period of time;
(iv) this Agreement and the Partnership Agreement contain
substantial restrictions on transferability of the Preferred Units and
Common Stock;
(v) neither the Company, the Partnership, nor any of their
affiliates or representatives has provided the undersigned with any
investment, tax, legal, regulatory or accounting advice with respect to the
investment in or ownership of Preferred Units or Common Stock;
(vi) the representations, warranties, agreements, undertakings and
acknowledgments made by the undersigned in this Agreement (including,
without limitation, the exhibits thereto) are made with the intent that they
be relied upon by the Partnership and the Company in determining the
undersigned's suitability as a purchaser of the Preferred Units, and shall
survive its admission as a limited partner in the Partnership; and
(vii) this Agreement may not be cancelled, revoked or withdrawn by
the undersigned, and that this Agreement and the documents submitted
herewith shall survive (A) changes in the
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transaction, documents and instruments described in the Agreement of Sale
and Purchase that are not material; and (B) death, disability or dissolution
of the undersigned.
(l) LEGENDS. To the extent applicable, any certificate issued in
respect of any Preferred Units or Common Stock issued in exchange for Preferred
Units, shall be endorsed with the legends substantially in the form set forth
below, and the undersigned covenants that, except to the extent such
restrictions are waived by the Partnership, the undersigned shall not transfer
any Preferred Units or Common Stock received in exchange therefor without
complying with the restrictions on transfer described in such legends; PROVIDED,
HOWEVER, that the legend described in Section 2(l)(ii) shall only apply to the
Preferred Units and not the Common Stock issued in exchange for Preferred Units,
and shall be endorsed only on the certificates, if any, issued in respect of the
Preferred Units:
(i) "THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR THE
SECURITIES LAWS OF ANY STATE, HAVE BEEN ISSUED PURSUANT TO A CLAIM OF
EXEMPTION FROM THE REGISTRATION PROVISIONS OF THE SECURITIES ACT AND ANY
STATE SECURITIES LAW WHICH MAY BE APPLICABLE, AND MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED WITHOUT COMPLIANCE WITH THE REGISTRATION PROVISIONS
OF THE SECURITIES ACT AND ANY OTHER APPLICABLE FEDERAL OR STATE SECURITIES
LAWS OR COMPLIANCE WITH APPLICABLE EXEMPTIONS THEREFROM."
(ii) "THIS CERTIFICATE IS NOT NEGOTIABLE. THE SALE, TRANSFER OR
ASSIGNMENT OF THE SECURITIES REPRESENTED HEREBY IS SUBJECT TO RESTRICTIONS
CONTAINED IN THAT CERTAIN PREFERRED UNIT RECIPIENT AGREEMENT ENTERED INTO
BETWEEN THE HOLDER HEREOF AND THE PARTNERSHIP AND THE PARTNERSHIP'S AMENDED
AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP (THE "PARTNERSHIP AGREEMENT"),
AND SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED UNLESS AND TO
THE EXTENT PERMITTED BY, AND IN ACCORDANCE WITH, THE PROVISIONS OF SUCH
PREFERRED UNIT RECIPIENT AGREEMENT AND THE PARTNERSHIP AGREEMENT."
(m) AUTHORITY.
(i) The undersigned has not made a general assignment for the
benefit of creditors, filed any voluntary petition in bankruptcy or suffered
the filing of any involuntary petition by its creditors, suffered the
appointment of a receiver to take possession of all, or substantially all,
of its assets, suffered the attachment or other judicial seizure of all, or
substantially all, of its assets, admitted in writing its inability to pay
its debts as they come due or made an offer of settlement, extension or
composition to its creditors generally.
(ii) Neither the execution and delivery of this Agreement by the
undersigned nor the performance by the undersigned of the transactions
contemplated hereby will: (a) violate or conflict with any of the provisions
of the partnership agreement or certificate of limited partnership (or
similar organizational and governing documents), if any, of the undersigned;
(b) violate, result in a breach of, conflict with, result in the
acceleration of, or entitle any party to accelerate the maturity or the
cancellation of the performance of any obligation arising out of any
agreement binding on the undersigned, or result in the creation or
imposition of any lien, encumbrance, pledge, claim, security interest,
demand, easement, covenant, condition, restriction and encroachment of any
kind or nature (collectively, "LIENS") in or upon any of the undersigned's
Preferred Units or constitute a default (or an event which might, with the
passage of time or the giving of notice, or both, constitute a default)
under any mortgage, indenture, deed of trust, lease, contract (including any
Service Agreement), loan or credit
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agreement, license or other instrument to which the undersigned is a party
or by which it or any of its assets may be bound or affected; or (c) violate
or conflict with any provision of any statute, law, rule, regulation, code
or ordinance or any judgment, decree, order, writ, permit or license
applicable to the undersigned or the undersigned's Contributed Assets. Other
than those which have been obtained or made prior to the date hereof, no
consent or approval or action of, filing with or notice to any governmental
or regulatory authority, any creditor, investor, member, partner,
shareholder, or tenant-in-common of the undersigned is necessary or required
for the execution, delivery and performance by the undersigned of this
Agreement or the consummation of the transactions contemplated hereby.
Section 3. REGISTRATION RIGHTS. All capitalized terms used in this
Section 3 and not otherwise defined in this Agreement shall have the meanings
ascribed to them in the Partnership Agreement.
(a) SHELF REGISTRATION UNDER THE SECURITIES ACT.
(i) FILING OF SHELF REGISTRATION STATEMENT. Within 90 days
following the Closing Date, the Company shall cause to be filed with the SEC
a shelf registration statement and related prospectus, including any
preliminary prospectus and documents incorporated by reference (the "SHELF
REGISTRATION STATEMENT") that complies as to form in all material respects
with applicable SEC rules providing for the sale by the Preferred Unit
Recipient of its Registrable Securities, and agrees to use its commercially
reasonable efforts to cause such Shelf Registration Statement to be declared
effective by the SEC as soon as reasonably practicable thereafter. The
Preferred Unit Recipient agrees to provide in a timely manner information
regarding its proposed distribution of the Registrable Securities and such
other information reasonably requested by the Company in connection with the
preparation of and for inclusion in the Shelf Registration Statement. The
Company agrees to use its commercially reasonable efforts to keep the Shelf
Registration Statement continuously effective under the Securities Act until
the earlier of (i) the first date on which the Preferred Unit Recipient has
consummated the sale of all of its Registrable Securities registered under
the Shelf Registration Statement, (ii) the date on which all of the
Registrable Securities are eligible for sale pursuant to Rule 144(k) (or any
successor provision) or in a single transaction pursuant to Rule 144(e) (or
any successor provision) under the Securities Act or (iii) the second
anniversary of the date of this Agreement and, further agrees to supplement
or amend the Shelf Registration Statement, if and as required by the rules,
regulations or instructions applicable to the registration form used by the
Company for such Shelf Registration Statement or by the Securities Act or by
any other rules and regulations thereunder for Shelf Registration. By
selling Common Stock as part of the Shelf Registration, the Preferred Unit
Recipient shall be deemed to have agreed to all of the terms and conditions
of this SECTION 3 and to have agreed to perform any and all obligations
relating to it hereunder.
(ii) EXPENSES. The Company shall pay all expenses incident to the
performance by it of its registration obligations under this Section 3,
including (i) all stock exchange, SEC and state securities registration,
listing and filing fees, (ii) all expenses incurred in connection with the
preparation, printing and distributing of the Shelf Registration Statement
and prospectus (including all expenses incurred in connection with the
delivery to the Preferred Unit Recipient of such number of copies of any
prospectus as it may reasonably request), and (iii) fees and disbursements
of counsel for the Company and of the independent public accountants of the
Company ("Registration Expenses"). The Preferred Unit Recipient shall pay
all underwriting discounts and commissions, brokerage or dealer fees, the
fees and disbursements of its counsel, accountants or other representatives
and transfer taxes, if any, relating to the sale or disposition of its
Registrable Securities pursuant to the Shelf Registration Statement or Rule
144 under the Securities Act.
(iii) INCLUSION IN SHELF REGISTRATION STATEMENT. The Company shall
include Registrable Securities held by the Preferred Unit Recipient at the
Closing in the Shelf Registration
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Statement. The provisions of this SECTION 3, and the obligations of the
Company hereunder, apply only to the Preferred Unit Recipient, and its
permitted transferees and assignees.
(b) REGISTRATION PROCEDURES. In connection with the obligations of the
Company with respect to the Shelf Registration Statement pursuant to SECTION
3(A) hereof, the Company shall:
(i) prepare and file with the Commission, within the time period
set forth in SECTION 3(a)(i) hereof, a Shelf Registration Statement, which
Shelf Registration Statement (A) shall be available for the sale of the
Registrable Securities in accordance with the intended method or methods of
distribution by the Preferred Unit Recipient and (B) shall comply as to form
in all material respects with the requirements of the applicable form and
include all financial statements required by the SEC to be filed therewith;
(ii) subject to the last three sentences of this SECTION 3(b)(ii)
and to SECTION 3(b)(ix) hereof, (A) prepare and file with the SEC such
amendments and post-effective amendments to the Shelf Registration Statement
as may be necessary to keep the Shelf Registration Statement effective for
the applicable period; (B) cause each Prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be filed pursuant
to Rule 424 or any similar rule that may be adopted under the Securities
Act; (C) respond promptly to any comments received from the SEC with respect
to the Shelf Registration Statement, or any amendment, post-effective
amendment or supplement relating thereto; and (D) comply with the provisions
of the Securities Act with respect to the disposition of all securities
covered by the Shelf Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the
Preferred Unit Recipient. Notwithstanding anything to the contrary contained
herein, the Company shall not be required to take any of the actions
described in clauses (A), (B) or (C) above with respect to the Preferred
Unit Recipient unless and until the Company has received either a written
notice (a "REGISTRATION NOTICE") from the Preferred Unit Recipient that it
intends to make offers or sales under the Shelf Registration Statement as
specified in such Registration Notice or a written response from it of the
type contemplated by SECTION 3(a)(iii); provided, however, that the Company
shall have ten business days to prepare and file any such amendment or
supplement after receipt of a Registration Notice. The Preferred Unit
Recipient also shall notify the Company in writing upon completion of such
offer or sale or at such time as the Preferred Unit Recipient no longer
intends to make offers or sales under the Shelf Registration Statement;
(iii) furnish to the Preferred Unit Recipient when it has
delivered a Registration Notice to the Company and is holding Registered
Securities, without charge, as many copies of each applicable Prospectus,
including each preliminary Prospectus and any amendment or supplement
thereto, and such other documents as the Preferred Unit Recipient may
reasonably request, in order to facilitate the public sale or other
disposition of the Registrable Securities; the Company consents to the use
of such Prospectus, including each preliminary Prospectus, by the Preferred
Unit Recipient in connection with the offering and sale of the Registrable
Securities covered by such Prospectus or the preliminary Prospectus;
(iv) use its reasonable best efforts to register or qualify the
Registrable Securities by the time the Shelf Registration Statement is
declared effective by the SEC under all applicable state securities or "blue
sky" laws of such jurisdictions as the Preferred Unit Recipient shall
reasonably request in writing, keep each such registration or qualification
effective during the period the Shelf Registration Statement is required to
be kept effective or during the period offers or sales are being made by the
Preferred Unit Recipient (if it has delivered a Registration Notice to the
Company), whichever is shorter, and do any and all other acts and things
which may be reasonably necessary or advisable to enable the Preferred Unit
Recipient to consummate the disposition in each such jurisdiction of
Registrable Securities owned by the Preferred Unit Recipient; provided,
however, that the Company shall not be required (A) to qualify generally to
do business in any jurisdiction or to register as a broker or dealer in such
jurisdiction
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where it would not be required so to qualify or register but for this
SECTION 3(b)(iv), (B) to subject itself to taxation in any such jurisdiction
or (C) to submit to the general service of process in any such jurisdiction;
(v) notify the Preferred Unit Recipient when the Shelf
Registration Statement has become effective and notify the Preferred Unit
Recipient if it is holding Registrable Securities and has delivered a
Registration Notice to the Company promptly and, if requested by the
Preferred Unit Recipient, confirm such advice in writing (A) when any
post-effective amendments and supplements to the Shelf Registration
Statement become effective, (B) of the issuance by the SEC or any state
securities authority of any stop order suspending the effectiveness of the
Shelf Registration Statement or the initiation of any proceedings for that
purpose, (C) if the Company receives any notification with respect to the
suspension of the qualification of the Registrable Securities for sale in
any jurisdiction or the initiation of any proceeding for such purpose and
(D) of the happening of any event during the period the Shelf Registration
Statement is effective as a result of which the Shelf Registration Statement
or a related Prospectus contains any untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary
to make the statements therein (in the case of the Prospectus, in light of
the circumstances under which they were made) not misleading;
(vi) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of the Shelf Registration Statement at
the earliest possible moment; (vii) furnish to the Preferred Unit Recipient
holding Registrable Securities that has delivered a Registration Notice to
the Company, without charge, at least one conformed copy of the Shelf
Registration Statement and any post-effective amendment thereto (without
documents incorporated therein by reference or exhibits thereto, unless
requested);
(viii) cooperate with the Preferred Unit Recipient when it is
holding Registrable Securities to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold and
not bearing any Securities Act legend; and enable certificates for such
Registrable Securities to be issued for such numbers of shares and
registered in such names as the Preferred Unit Recipient may reasonably
request at least two business days prior to any sale of Registrable
Securities;
(ix) subject to the last three sentences of SECTION 3(b)(ii)
hereof, upon the occurrence of any event contemplated by SECTION 3(b)(v)(d)
hereof, use its reasonable best efforts promptly to prepare and file a
supplement or prepare, file and obtain effectiveness of a post-effective
amendment to the Shelf Registration Statement or a related Prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of the
Registrable Securities, such Prospectus will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading;
(x) a reasonable time prior to the filing of any Prospectus, any
amendment to the Shelf Registration Statement or amendment or supplement to
a Prospectus, provide copies of such document (not including any documents
incorporated by reference therein unless requested) to the Preferred Unit
Recipient holding Registrable Securities if it has provided a Registration
Notice to the Company;
(xi) use its reasonable best efforts to cause all Registrable
Securities to be listed on any securities exchange on which similar
securities issued by the Company are then listed;
9
(xii) otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the SEC and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering at least 12 months which shall satisfy the provisions of Section
11(a) of the Securities Act and Rule 158 thereunder; and
(xiii) use its reasonable best efforts to cause the Registrable
Securities covered by the Shelf Registration Statement to be registered with
or approved by such other governmental agencies or authorities as may be
necessary by virtue of the business and operations of the Company to enable
the Preferred Unit Recipient, having delivered a Registration Notice to the
Company, to consummate the disposition of such Registrable Securities.
The Company may require the Preferred Unit Recipient, if it is holding
Registrable Securities, to furnish to the Company in writing such information
regarding the proposed distribution by the Preferred Unit Recipient as the
Company may from time to time reasonably request in writing.
In connection with and as a condition to the Company's obligations with
respect to the Shelf Registration Statement pursuant to SECTION 3(a) hereof and
this SECTION 3(b), the Preferred Unit Recipient agrees that (A) it will not
offer or sell its Registrable Securities under the Shelf Registration Statement
until (1) it has either (I) provided a Registration Notice pursuant to SECTION
3(b)(ii) hereof or (II) had Registrable Securities included in the Shelf
Registration Statement at the time it became effective pursuant to SECTION
3(a)(iii) hereof and (2) it has received copies of the supplemented or amended
Prospectus contemplated by SECTION 3(b)(ii) hereof and receives notice that any
post-effective amendment has become effective; (B) upon receipt of any notice
from the Company of the happening of any event of the kind described in SECTION
3(b)(ii)(D) hereof, the Preferred Unit Recipient will forthwith discontinue
disposition of Registrable Securities pursuant to the Shelf Registration
Statement until the Preferred Unit Recipient receives copies of the supplemented
or amended Prospectus contemplated by SECTION 3(b)(ix) hereof and receives
notice that any post-effective amendment has become effective, and, if so
directed by the Company, the Preferred Unit Recipient will deliver to the
Company (at the expense of the Company) all copies in its possession, other than
permanent file copies then in the Preferred Unit Recipient's possession, of the
Prospectus covering such Registrable Securities current at the time of receipt
of such notice; and (C) all offers and sales under the Shelf Registration
Statement shall be completed within forty-five (45) days after the first date on
which offers or sales can be made pursuant to clause (A) above (a "Sale
Period"), and upon expiration of such forty-five (45) day period the Preferred
Unit Recipient will not offer or sell its Registrable Securities under the Shelf
Registration Statement until it has again complied with the provisions of clause
(A)(2) above, except that if the applicable Registration Notice was delivered to
the Company at a time which was not part of a Sale Period, such forty-five (45)
day period shall be the next succeeding Sale Period.
(c) RESTRICTIONS ON PUBLIC SALE BY HOLDERS OF REGISTRABLE SECURITIES.
The Preferred Unit Recipient agrees with the Company that:
(i) If the Board of Directors of the Company determines in its
good faith judgment that the filing of the Shelf Registration Statement
under SECTION 3(a) hereof or the use of any Prospectus would materially
impede, delay or interfere with any pending material financing, acquisition
or corporate reorganization or other material corporate development
involving the Company or any of its subsidiaries, or require the disclosure
of important information which the Company has a bona fide business purpose
for preserving as confidential or the disclosure of which would impede the
Company's ability to consummate a significant transaction, upon written
notice of such determination by the Company, the right of the Preferred Unit
Recipient to offer, sell or distribute any Registrable Securities pursuant
to the Shelf Registration Statement or to require the Company to take action
with respect to the registration or sale of any Registrable Securities
pursuant to the Shelf Registration Statement (including any action
contemplated by SECTION 3(b) hereof) will be suspended until the date upon
which the Company notifies
10
the Preferred Unit Recipient in writing that suspension of such rights for
the grounds set forth in this SECTION 3(c)(i) is no longer necessary, but in
any event, no such period shall extend for longer than 45 days; PROVIDED the
Company may deliver only two such notices in any twelve month period.
(ii) In the case of the registration of any underwritten equity
offering proposed by the Company (other than any registration by the Company
on Form S-8, or a successor or substantially similar form, of (A) an
employee stock option, stock purchase or compensation plan or of securities
issued or issuable pursuant to any such plan or (B) a dividend reinvestment
plan), the Preferred Unit Recipient agrees, if requested in writing by the
managing underwriter or underwriters administering such offering, not to
effect any offer, sale or distribution of Registrable Securities (or any
option or right to acquire Registrable Securities) during the period
commencing on the seventh day prior to the expected effective date (which
date shall be stated in such notice) of the registration statement covering
such underwritten primary equity offering and ending on the date specified
by such managing underwriter in such written request to the Preferred Unit
Recipient, which date shall not be later than 45 days after such expected
dated of effectiveness or the commencement of the offering, as the case may
be.
(iii) In the event that the Preferred Unit Recipient uses a
Prospectus in connection with the offering and sale of Registrable
Securities covered by such Prospectus, the Preferred Unit Recipient will use
only the latest version of such Prospectus provided to it by the Company.
(d) INDEMNIFICATION; CONTRIBUTION.
(i) INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify and hold harmless the Preferred Unit Recipient and, if applicable,
its officers and directors and each person, if any, who controls any
Preferred Unit Recipient within the meaning of Section 15 of the Securities
Act as follows:
(A) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the Shelf
Registration Statement (or any amendment thereto) or any Prospectus,
including all documents incorporated therein by reference, or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading;
(B) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding by
any governmental agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, if such settlement is
effected with the written consent of the Company; and
(C) against any and all expense whatsoever, as incurred
(including reasonable fees and disbursements of counsel), reasonably
incurred in investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental agency
or body, commenced or threatened, in each case whether or not a party,
or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under clause (A) or (B) above;
PROVIDED, HOWEVER, that the indemnity provided pursuant to this
SECTION 3(d)(ii) does not apply to the Preferred Unit Recipient
with respect to any loss, liability, claim, damage or expense to
the extent arising out of any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in
conformity with written information
11
furnished to the Company by the Preferred Unit Recipient expressly
for use in the Shelf Registration Statement (or any amendment
thereto) or any Prospectus.
(ii) INDEMNIFICATION BY PREFERRED UNIT RECIPIENT. The Preferred
Unit Recipient agrees to indemnify and hold harmless the Company, and each
of its directors and officers (including each director and officer of the
Company who signed the Shelf Registration Statement), and each person, if
any, who controls the Company within the meaning of Section 15 of the
Securities Act, to the same extent as the indemnity contained in SECTION
3(d)(i) hereof (except that any settlement described in SECTION 3(d)(i)(B)
shall be effected with the written consent of the Preferred Unit Recipient),
but only insofar as such loss, liability, claim, damage or expense arises
out of or is based upon any untrue statement or omission, or alleged untrue
statement or omission, made in the Shelf Registration Statement (or any
amendment thereto) or any Prospectus in reliance upon and in conformity with
written information furnished to the Company by the Preferred Unit Recipient
expressly for use in the Shelf Registration Statement (or any amendment
thereto) or such Prospectus. In no event shall the liability of the
Preferred Unit Recipient under this SECTION 3(d)(ii) be greater in amount
than the dollar amount of the proceeds received by the Preferred Unit
Recipient upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
(iii) Each indemnified party shall give reasonably prompt notice
to each indemnifying party of any action or proceeding commenced against it
in respect of which indemnity may be sought hereunder, but failure so to
notify an indemnifying party (A) shall not relieve it from any liability
which it may have under the indemnity agreement provided in SECTION 3(d)(i)
OR (ii) unless and to the extent it did not otherwise learn of such action
and the lack of notice by the indemnified party significantly impairs the
indemnifying party's rights and defenses and (B) shall not, in any event,
relieve the indemnifying party from any obligations to any indemnified party
other than the indemnification obligation provided under SECTION 3(d)(i) OR
(ii). If the indemnifying party so elects within a reasonable time after
receipt of such notice, the indemnifying company may assume the defense of
such action or proceeding at such indemnifying party's own expense with
counsel chosen by the indemnifying party; PROVIDED, HOWEVER, that, if such
indemnified party or parties reasonably determine that a conflict of
interest exists where it is advisable for such indemnified party or parties
to be represented by separate counsel or that, upon advice of counsel, there
may be legal defenses available to them which are different from or in
addition to those available to the indemnifying party, then the indemnifying
party shall not be entitled to assume such defense and the indemnified party
or parties in the aggregate shall be entitled to one separate counsel at the
indemnifying party's expense. If an indemnifying party is not so entitled to
assume the defense of such action or does not assume such defense, after
having received the notice referred to in the first sentence of this SECTION
3(d)(iii), the indemnifying party or parties will pay the reasonable fees
and expenses of counsel for the indemnified party or parties. In such event
however, no indemnifying party will be liable for any settlement effected
without the written consent of such indemnifying party. If an indemnifying
party is entitled to assume, and assumes, the defense of such action or
proceeding in accordance with this paragraph, such indemnifying party shall
not be liable for any fees and expenses of counsel for the indemnified
parties incurred thereafter in connection with such action or proceeding.
(iv) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in this SECTION
3(d) is for any reason held to be unenforceable although applicable in
accordance with its terms, the Company and the Preferred Unit Recipient
shall contribute to the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity agreement incurred by
the Company and the Preferred Unit Recipient, in such proportion as is
appropriate to reflect the relative fault of and benefits to the Company on
the one hand and the Preferred Unit Recipient on the other, in connection
with the statements or omissions which resulted in such losses, liabilities,
claims, damages or expenses, as well as any other relevant equitable
considerations. The relative benefits to the indemnifying party and
indemnified parties shall be determined by reference to, among other things,
the total proceeds received by the indemnifying party and indemnified
parties in connection with the offering to which such losses, liabilities,
claims, damages, or expenses relate. The relative fault of the indemnifying
party and indemnified parties shall be
12
determined by reference to, among other things, whether the action in
question, including any untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact, has been made
by, or relates to information supplied by, such indemnifying party or the
indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action.
The Company and the Preferred Unit Recipient agree that it would not be
just or equitable if contribution pursuant to this SECTION 3(d)(iv) were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this SECTION
3(d)(iv), the Preferred Unit Recipient shall not be required to contribute any
amount in excess of the amount by which the total price at which the Registrable
Securities of the Preferred Unit Recipient were sold to the public exceeds the
amount of any damages which the Preferred Unit Recipient is otherwise required
to pay by reason of such untrue statement or omission.
Notwithstanding the foregoing, no Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. For purposes of this SECTION 3(d)(iv), each
director of the Company, each officer of the Company who signed the Shelf
Registration Statement and each Person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act shall have the same rights to
contribution as the Company.
(e) RULE 144 SALES.
(i) The Company covenants that it will file the reports required
to be filed by the Company under the Securities Act and the Exchange Act, so
as to enable the Preferred Unit Recipient to sell Registrable Securities
pursuant to Rule 144 under the Securities Act.
(ii) In connection with any sale, transfer or other disposition by
the Preferred Unit Recipient of any Registrable Securities pursuant to Rule
144 under the Securities Act, the Company shall cooperate with the Preferred
Unit Recipient to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and not bearing
any Securities Act legend, and enable certificates for such Registrable
Securities to be for such number of shares and registered in such names as
the Preferred Unit Recipient may reasonably request at least two business
days prior to any sale of Registrable Securities.
Section 4. MISCELLANEOUS.
(a) MODIFICATION. Neither this Agreement nor any provisions hereof
shall be waived, modified, discharged or terminated except by an instrument in
writing signed by the party against whom any waiver, change, discharge or
termination is sought.
(b) NOTICES. All notices, payments, demands or other communications
given hereunder shall be deemed to have been duly given and received (i) upon
personal delivery or (ii) in the case of notices sent within, and for delivery
within, the United States, as of the date shown on the return receipt after
mailing by registered or certified mail, return receipt requested, postage
prepaid, or (iii) the second succeeding business day after deposit with Federal
Express or other equivalent air courier delivery service, unless the notice is
held or retained by the customs service, in which case the date shall be the
fifth succeeding business day after such deposit.
13
(c) BINDING EFFECT. Except as otherwise provided herein, this Agreement
shall be binding upon and inure to the benefit of the parties and their heirs,
executors, administrators, successors, legal representatives and permitted
assigns. If the undersigned is more than one person, the obligation of the
undersigned shall be joint and several and the agreements, representations,
warranties and acknowledgments herein contained shall be deemed to be made by
and be binding upon each such person and its heirs, executors, administrators
and successors.
(d) THIRD-PARTY BENEFICIARIES. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other person.
(e) ENTIRE AGREEMENT. This Agreement, the Agreement of Sale and
Purchase and the Partnership Agreement contain the entire agreement of the
parties with respect to this subscription, and there are no representations,
covenants or other agreements except as stated or referred to herein or therein.
(f) ASSIGNABILITY. This Agreement is not transferable or assignable by
the undersigned other than to Permitted Transferees pursuant to SECTION 2(h)(v)
hereof, or as otherwise permitted by the terms and conditions of this Agreement.
(g) APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without giving effect to
the conflict of law principles thereof.
(h) GENDER. All pronouns contained herein and any variations thereof
shall be deemed to refer to the masculine, feminine or neuter, singular or
plural, as the identity of the parties hereto may require.
(i) COUNTERPARTS. This Agreement may be executed through the use of
separate signature pages or in counterparts, and each of such counterparts
shall, for all purposes, constitute one agreement binding on the parties hereto,
notwithstanding that the parties hereto are not signatories to the same
counterpart.
(j) FURTHER ASSURANCES. The undersigned will, from time to time,
execute and deliver to the Company or the Partnership all such other and further
instruments and documents and take or cause to be taken all such other and
further action as the Company or the Partnership may reasonably request in order
to effect the transactions contemplated by this Agreement.
* * * * *
14
AMERICAN REAL ESTATE INVESTMENT, L.P.
PREFERRED UNIT RECIPIENT AGREEMENT
COUNTERPART SIGNATURE PAGE
The undersigned, desiring to enter into this Preferred Unit Recipient
Agreement for the subscription of the number of Preferred Units indicated below,
hereby agrees to all of the terms and provisions of this Preferred Unit
Recipient Agreement and agrees to be bound by all such terms and provisions.
The undersigned has executed this Preferred Unit Recipient Agreement as
of the 22nd day of December, 1998.
Number of Preferred Units: 300,000
HOPEWELL PROPERTIES, INC.
By:/S/ T. XXXXXX XXXXXXXX
----------------------
Name: T. Xxxxxx Xxxxxxxx
Title: President
Agreed and Accepted this 22 nd day of December, 1998.
AMERICAN REAL ESTATE INVESTMENT, L.P.,
a Delaware limited partnership
By: American Real Estate Investment Corporation,
a Maryland corporation
By: /S/ XXXXXXX X. BUTTE
---------------------
Name: Xxxxxxx X. Butte
Title: Vice-President
AMERICAN REAL ESTATE INVESTMENT CORPORATION,
a Maryland corporation
By: /S/XXXXXXX X. BUTTE
--------------------
Name: Xxxxxxx X. Butte
Title: Vice-President
