AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 7, 1999
REGISTRATION STATEMENT NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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RECKSON SERVICE INDUSTRIES, INC.
(Exact name of each registrant as specified in its charter)
DELAWARE 11-3383642
(State or other jurisdiction (I.R.S. employer identification number)
of incorporation or organization)
10 EAST 50TH STREET
NEW YORK, NEW YORK 10022
(212) 931-8000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive office)
SCOTT H. RECHLER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
RECKSON SERVICE INDUSTRIES, INC.
10 EAST 50TH STREET
NEW YORK, NEW YORK 10022
(212) 931-8000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copy to:
EDWARD F. PETROSKY, ESQ.
J. GERARD CUMMINS, ESQ.
BROWN & WOOD LLP
ONE WORLD TRADE CENTER, 58TH FLOOR
NEW YORK, N.Y. 10048
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
From time to time after this Registration Statement becomes effective.
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If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.|_|
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, as amended (the "Securities Act"), other than
securities offered only in connection with dividend or interest reinvestment
plans, please check the following box. |X|
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering.|_|
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Proposed Maximum
Title of Class of Securities Amount to Aggregate Price per Proposed Maximum Amount of
to be Registered be Registered Share (1) Aggregate Offering Price(1) Registration Fee(2)
- ---------------------------- ---------------- --------------------- --------------------------- --------------------
<S> <C> <C> <C> <C>
Common Stock 2,044,175 $38.81 $79,334,432 $22,055
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee.
(2) Pursuant to Rule 457(c) of the rules and regulations under the
Securities Act of 1933, as amended, the registration fee is calculated
based on the average of the high and low sale prices of the Company's
common stock on the Nasdaq National Market for December 3, 1999.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON THE DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE WITH SECTION 8(A) OF THE SECURITIES
ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON THE
DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
<PAGE>
The information contained in this prospectus is not complete and may be
changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting
an offer to buy these securities in any state where the offer or sale is not
permitted.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED DECEMBER 7, 1999
PROSPECTUS
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2,044,175 SHARES
RECKSON SERVICE INDUSTRIES, INC.
COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
This prospectus relates to 2,044,175 shares of common stock, $.01 par
value per share, of Reckson Service Industries, Inc. ("RSI" or the "Company"),
which may be offered from time to time by the selling stockholders named herein
in transactions on the Nasdaq National Market, in negotiated transactions or
otherwise, at fixed prices prevailing at the time of sale, at negotiated
prices, or without consideration, or by any other legally available means. We
are registering the common stock as required under the terms of registration
rights agreements entered into at the time of the issuance of the shares to the
selling stockholders. The registration of the common stock does not necessarily
mean that any of the shares will be offered or sold by the selling
stockholders.
The selling stockholders will receive all of the net proceeds from the
sale of the common stock and will pay all underwriting discounts and selling
commissions, if any, applicable to any such sale. We will not receive any of
the proceeds from the sale of the shares by the selling stockholders. We are
paying the costs of preparing and filing the registration statement of which
this prospectus is a part.
Our common stock is listed on the Nasdaq National Market under the
trading symbol "RSII." On December 6, 1999 the last reported sale price of the
common stock was $40 1/8 per share.
The common stock may be sold by selling stockholders from time to time
directly to purchasers or through agents, underwriters and dealers. See "Plan
of Distribution" and "Selling Stockholders." The selling stockholders and any
dealers, agents or underwriters which participate in the distribution of the
common stock may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933 and any commission received by them and any profit on
the resale of the common stock purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act. See "Plan of
Distribution" for a description of indemnification arrangements.
SEE "RISK FACTORS" BEGINNING ON P. 3 OF THIS PROSPECTUS FOR A
DESCRIPTION OF RISKS THAT SHOULD BE CONSIDERED BY PURCHASERS OF THE COMMON
STOCK.
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Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any representation to
the contrary is a criminal offense.
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The date of this prospectus is ___________, 1999.
<PAGE>
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith file reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). These reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, as well as the regional offices of the
Commission at 7 World Trade Center (13th Floor), New York, New York 10048, and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such information can be obtained by mail from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Commission maintains a Web site at
http://www.sec.gov containing reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
We have filed with the Commission a Registration Statement on Form S-3
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), of which this prospectus constitutes a part. This prospectus
does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information, reference is made to
the Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents that we previously filed with the Commission
are hereby incorporated by reference into this prospectus:
SEC FILINGS (FILE NO. 1-14183) PERIOD
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Annual Report on Form 10-K Year ended December 31, 1998
Quarterly Reports on Form 10-Q Quarters ended September 30,
1999, June 30, 1999 and March 31,
1999
Current Reports on Form 8-K Filed January 19, 1999, January 25,
(including Form 8-K/A) 1999, March 24, 1999, April 16,
1999, July 16, 1999, August 13,
1999, September 1, 1999, September
20, 1999, October 12, 1999,
October 14, 1999, and
October 28, 1999
Registration Statement on Form 8-A Filed June 1, 1998
We also incorporate by reference each of the following documents that
are filed with the Commission after the date of this prospectus until the
particular offering is completed or after the date of the initial registration
statement and prior to effectiveness of the registration statement:
o Reports filed under Section 13(a) and (c) of the Exchange Act;
o Definitive proxy or information statements filed
under Section 14 of the Exchange Act in connection
with any subsequent stockholders' meeting; and
o Any reports filed under Section 15(d) of the Exchange Act.
Any statement contained herein or in a document all or any portion of
which is incorporated or deemed to be incorporated by reference herein will be
deemed to be modified or superseded for purposes of this prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such earlier statement. Any statement so modified or
superseded will not be deemed, except as so modified or superseded, to
constitute a part of this prospectus.
We will provide a copy of any or all of these documents (exclusive of
exhibits unless the exhibits are specifically incorporated by reference
therein), without charge, to each person to whom this prospectus is delivered,
upon written or oral request to Reckson Service Industries, Inc., 10 East 50th
Street, New York, New York 10022, Attn: Jason M. Barnett, Executive Vice
President and General Counsel, telephone number (212) 931-8000.
CAUTIONARY STATEMENTS CONCERNING
FORWARD-LOOKING INFORMATION
Certain information both included and incorporated by reference in
this prospectus may contain forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act, and as
such may involve known and unknown risks, uncertainties and other factors which
may cause the actual results, performance or achievements of our company to be
materially different from future results, performance or achievements expressed
or implied by such forward-looking statements. Forward-looking statements,
which are based on certain assumptions and describe our future plans,
strategies and expectations are generally identifiable by use of the words
"may," "will," "should," "expect," "anticipate," "estimate," "believe,"
"intend" or "project" or the negative thereof or other variations thereon or
comparable terminology. Factors which could have a material adverse effect on
the operations and future prospects of our company are described below under
"Risk Factors." These risks and uncertainties should be considered in
evaluating any forward-looking statements contained or incorporated by
reference herein. Our actual results may differ significantly from the results
discussed in the forward-looking statements.
RISK FACTORS
An investment in the securities involves various risks. Prospective
investors should carefully consider the following information in conjunction
with the other information contained in this prospectus before purchasing the
securities offered. This prospectus contains forward-looking statements which
involve risks and uncertainties. Factors that might cause a difference include,
but are not limited to, those discussed below. You should refer to the
explanation of the qualifications and limitations of such forward-looking
statements discussed above.
OUR LACK OF OPERATING HISTORY IMPAIRS OUR ABILITY TO PREDICT FUTURE EARNINGS
AND WE HAVE SUSTAINED OPERATING LOSSES SINCE OUR INCEPTION
We were formed in July 1997 and have operated as a public company
since June 1998. We have sustained operating losses since our inception and
expect to sustain operating losses in the near future. The financial
information relating to us and our subsidiaries and their respective assets
included or incorporated by reference in this prospectus are not necessarily
indicative of our or our subsidiaries' future consolidated financial condition
or results of operations.
CERTAIN MEMBERS OF OUR SENIOR MANAGEMENT LACK EXPERIENCE IN OUR INVESTMENT
SECTORS
Three of the nine members of our senior management, including our
chief executive officer, are executive officers of Reckson Associates Realty
Corp. ("Reckson Associates"), a New York Stock Exchange-listed real estate
investment trust ("REIT"), and have served as part of our senior management
since prior to the spin-off distribution of our shares from Reckson Associates.
Although subsequent to the spin-off we have retained members of senior
management who have relevant experience and we may retain the management of the
businesses that we acquire, the primary experience of those three officers is
in the business of acquiring, developing, and re-developing suburban office and
industrial properties in the New York "Tri-State" area and not in pursuing our
investment objectives.
WE CANNOT ASSURE OUR ABILITY TO MANAGE GROWTH
We intend to expand our operations through the acquisition of, or
investment in, B2B e-commerce and e-services companies (each a "partner
company"). In addition, Reckson Strategic Venture Partners, LLC, our subsidiary
("Reckson Strategic Venture Partners"), may also expand rapidly through the
acquisition of real estate and real estate operating companies. The success of
our growth strategies will depend on our ability to identify attractive
business opportunities and effectively operate and integrate any newly acquired
businesses. Our growth plans will require the participation of, and place
demands upon, our management and operating personnel. Our ability to manage
future growth effectively requires the development of operational, financial
and management information systems. We cannot assure that we will effectively
manage our growth. If we are unable to manage our growth effectively, it may
adversely affect our business, results of operations and financial condition.
OUR STRATEGY OF GROWTH THROUGH ACQUISITIONS INVOLVES RISKS AND MAY RESULT
IN LOSSES
Acquisition is a significant source of our growth. We cannot assure
that suitable acquisition opportunities will be available to us or our
affiliates. We also cannot assure that we or our affiliates will not overpay
for acquisitions or the efficient and adequate integration of these
acquisitions. Significant competition may exist for targeted acquisitions. Some
of the companies in which we acquire an interest may have (i) little or no
operating histories, (ii) historical operating losses, and (iii) competitors
that are larger and more well capitalized. Some of our or our affiliates'
acquisitions may be involved in sectors that are subject to increasing
competition. As a result, the costs incurred to acquire or reposition companies
may be significant and non-recoverable. Furthermore, we can not assure that
acquisitions will not result in additional losses.
The acquisition of interests in start-up or early stage companies,
particularly in the Internet area, involves a high degree of business and
financial risk that can result in substantial losses. Among these are the risks
associated with investment in companies in an early stage of development or
with little or no operating history, companies operating at a loss or with
substantial variations in operating results from period to period, and
companies with the need for substantial additional capital to support expansion
or to achieve or maintain a competitive position. Such companies may face
intense competition, including competition from companies with greater
financial resources, more extensive development, manufacturing, marketing and
service capabilities, and a larger number of qualified managerial and technical
personnel. We may take significant positions in companies in rapidly changing
high-technology and internet fields; such companies may face special risks of
product obsolescence and may encounter intense competition from other companies
financed by venture capitalists. In addition, start-up companies may require
significant additional capital contributions from us.
We may hold our interests in start-up or early stage companies for an
indefinite period of time; and it may take several years from the date of our
initial acquisition of such interest for the start-up company to reach such a
state of maturity that disposition could be considered.
It is anticipated that a substantial portion of our holdings may
consist of securities that are subject to restrictions on sale because they
were acquired from the issuer in "private placement" transactions or because we
might be deemed to be an affiliate of the issuer. Generally, we would not be
able to sell these securities publicly without the expense and time required to
register the securities under the Securities Act or to sell the securities
under Rule 144 or other rules under the Securities Act which permit only
limited sales under specified conditions. When restricted securities are sold
to the public, we could be deemed an "underwriter", or possibly a controlling
person, with respect thereto for the purpose of the Securities Act and be
subject to liability as such under that Act.
In addition, practical limitations may inhibit our ability to sell our
holdings because the issuers thereof are privately held, we own a relatively
large percentage of the issuer's outstanding securities, or the customers,
joint venture associates, other investors, financial institutions or management
are relying on our continued investment. Sales may also be limited by
securities market conditions, which may be unfavorable for sales of securities
of particular issuers or issuers in particular industries. The above
limitations on liquidity of our holdings could prevent a successful sale
thereof, result in delay of any sale or reduce the amount of proceeds that
might otherwise be realized.
DEPENDENCE ON FUTURE MARKET CONDITIONS
Our strategy involves creating value for our shareholders by helping our
partner companies develop and effectively execute their business plans.
Depending upon our partner companies' success in executing their business
plans and future market conditions, some of such partner companies may seek to
complete initial public offerings of their shares. We expect to retain a
significant ownership portion after a partner company goes public. If the
public market in general, or the market for Internet-related companies in
particular, were to weaken for a prolonged period of time, the ability of our
partner companies to complete public offerings would be materially adversely
affected. In addition, future weakness in the public markets, particularly the
market for Internet-related companies, may adversely affect the value of our
common stock, as well as the value of the stock of our partner companies.
OUR BUSINESS AND FUTURE OPPORTUNITIES ARE RESTRICTED
We are prohibited under the intercompany agreement between us and
Reckson Operating Partnership, L.P. ("Reckson Operating Partnership") from
making REIT-Qualified investments unless Reckson Operating Partnership is given
the right of first opportunity in respect of those investments and chooses not
to pursue the investments. In addition, if an investment becomes available to
one of our affiliates, the affiliate is required to allow Reckson Operating
Partnership to participate in the investment to the extent of our interest in
the investment. Our charter provides that one of our corporate purposes is to
perform our obligations under the intercompany agreement. We are also required
to assist Reckson Operating Partnership in structuring and consummating any
REIT-Qualified investment presented to Reckson Operating Partnership which it
elects to pursue. As a result, our and our affiliates' business and future
opportunities are restricted.
WE ARE HIGHLY DEPENDENT UPON RECKSON OPERATING PARTNERSHIP FOR FINANCING
We rely significantly on Reckson Operating Partnership for the financing
of our operations. As a result, if Reckson Associates is unable to access the
financial markets, our ability to finance operations may be severely
restricted. In addition, if Reckson Associates should fail to qualify as a
REIT or have a decline in its financial or other condition or earnings,
affairs or prospects, it may substantially and adversely affect our ability to
pursue business opportunities and our financial condition. Investors should
review the section captioned "--We may have conflicts of interest with Reckson
Associates -- Conflicts in our loans with Reckson Operating Partnership;
limitation on our ability to pay dividends and incur additional debt."
WE RELY HEAVILY ON KEY PERSONNEL
Our success and the success of our partner companies depends
significantly upon the contribution of our executive officers, senior
management, and other key personnel that we retain. None of our executive
officers have an employment agreement with our company. The two managing
directors of Reckson Strategic Venture Partners (the "Reckson Strategic Venture
Partners Managing Directors") have entered into employment contracts with RSVP
Holdings, LLC, the managing member of Reckson Strategic Venture Partners.
Conversely, two of our executive officers have employment agreements with
Reckson Associates pursuant to which they have agreed to spend as much time as
may be necessary in carrying out their duties to Reckson Associates. These
executive officers do not have similar obligations to the Company. Furthermore,
we cannot assure that we or our partner companies will retain key managerial
and other personnel or attract suitable replacements or additional personnel if
required. We have not obtained key-man insurance for any of our executive
officers or other key personnel.
WE MAY HAVE CONFLICTS OF INTERESTS WITH RECKSON ASSOCIATES
CONFLICTS AS A RESULT OF OVERLAPPING MANAGEMENT. Our President and
Chief Executive Officer, Chairman of the Board, Chief Financial Officer, and
General Counsel each serve in similar capacities for Reckson Associates. In
addition, four members of our Board of Directors also serve as directors of
Reckson Associates. Although each of the individuals referred to above is
committed to our success, they are also committed to the success of Reckson
Associates. As of September 30, 1999, Reckson Associates' senior management and
directors beneficially owned approximately 10% of the outstanding common stock
of Reckson Associates and approximately 35% of our outstanding common stock. In
calculating the ownership of common stock of Reckson Associates, we have
included Reckson Associates common stock and its Class B exchangeable common
stock; and we have assumed the exchange of all limited partnership units in
Reckson Operating Partnership for shares of common stock and the exercise of
all vested stock options. There is a risk that the common membership of
management, members of the Boards of Directors and ownership of Reckson
Associates and the Company will lead to conflicts of interest in the fiduciary
duties owed to stockholders by common directors and officers in connection with
transactions between the two companies, as well as a conflict in allocating
management time.
CONFLICTS UNDER THE INTERCOMPANY AGREEMENT. In connection with the
spin-off distribution of our common stock, we entered into an intercompany
agreement with Reckson Operating Partnership to formalize our relationship at
the outset and to limit conflicts of interest. The intercompany agreement was
not negotiated at arms' length since 95% of our capital stock was owned by
Reckson Operating Partnership at the time it was executed. Under the
intercompany agreement, we granted Reckson Operating Partnership a right of
first opportunity to make any REIT-qualified investment that becomes available
to us. In addition, if a REIT-qualified investment opportunity becomes
available to an affiliate of ours, including Reckson Strategic Venture
Partners, 100% of the common ownership interest of which is indirectly owned by
us, the intercompany agreement requires our affiliate to allow Reckson
Operating Partnership to participate in the opportunity to the extent of our
interest in the affiliate.
Under the intercompany agreement, Reckson Operating Partnership
granted us a right of first opportunity to provide to Reckson Operating
Partnership and its tenants any type of non-customary commercial services for
occupants of office, industrial and other property types, which Reckson
Associates may not be permitted to provide because they may generate REIT
non-qualifying income under Federal tax laws. We will provide services to
Reckson Operating Partnership at rates and on terms as attractive as either the
best available for comparable services in the market or those offered by us to
third parties. In addition, Reckson Operating Partnership will give us access
to its tenants with respect to commercial services that may be provided to
tenants.
Under the intercompany agreement, subject to certain conditions,
Reckson Operating Partnership granted us a right of first refusal to become the
lessee of any real property acquired by Reckson Operating Partnership if it
determines that the operation of the property may involve the performance of
non-customary services that would jeopardize Reckson Associates' REIT status,
it is required to enter into a "master" lease arrangement. Pursuant to a this
"master" lease arrangement, Reckson Operating Partnership would own the
property, but lease it entirely to a single lessee that would operate the
property.
With respect to services that we will provide to Reckson Operating
Partnership, management will have a conflict of interest relating to the market
rates being charged to Reckson Operating Partnership for these services. In
addition, management will have a conflict of interest in determining whether we
or Reckson Operating Partnership should pursue a REIT-qualified investment
opportunity outside of Reckson Associates' core business strategy of investing
in office and industrial properties in the New York Tri-State area.
Furthermore, we and Reckson Operating Partnership may structure investments so
that Reckson Operating Partnership - Reckson Strategic Venture Partners joint
ventures may pursue the portion of investments generating REIT-qualified income
and Reckson Strategic Venture Partners will pursue directly the other portion
of these investments. Accordingly, Reckson Strategic Venture Partners and
Reckson Operating Partnership - Reckson Strategic Venture Partners joint
ventures may have conflicts of interest in the structuring, valuation,
management and disposition of these investments.
CONFLICTS IN OUR LOANS WITH RECKSON OPERATING PARTNERSHIP; LIMITATION
ON OUR ABILITY TO PAY DIVIDENDS AND INCUR ADDITIONAL DEBT. In June 1998, we
established a credit facility with Reckson Operating Partnership (the "Reckson
Service Industries Facility") in the amount of $100 million for our service
sector operations and other general corporate purposes. In addition, in June
1998, Reckson Operating Partnership authorized the investment of $100 million
with respect to the funding of the investment of Reckson Strategic Venture
Partners (the "Reckson Strategic Venture Partners Commitment"). Amounts
available under the Reckson Strategic Venture Partners Commitment are funded
through investments by Reckson Operating Partnership into joint ventures with
Reckson Strategic Venture Partners or through loans directly to the Company
under a credit agreement with terms substantially identical to those under the
Reckson Service Industries Facility. Although the credit agreement provides for
the borrowing of up to $100 million from Reckson Operating Partnership, the
amount available is reduced by the amount of any joint venture investments
between Reckson Operating Partnership and Reckson Strategic Venture Partners.
Loans under the Reckson Strategic Venture Partners Commitment in excess of $25
million in any single investment are subject to approval by the Board of
Directors of Reckson Associates, while advances under the Reckson Service
Industries Facility in excess of $10 million in respect of any single
investment are subject to approval by the Board of Directors of Reckson
Associates, or a committee thereof. The Reckson Service Industries Facility has
a term of five years and advances thereunder are recourse obligations of our
company. Interest accrues on advances made under the Reckson Service Industries
Facility at a rate equal to the greater of (1) the prime rate plus 2% and (2)
12% per annum, with the rate on amounts that are outstanding for more than one
year increasing annually at a rate of 4% of the prior year's rate. Prior to
maturity, interest is payable quarterly but only to the extent of net cash flow
and on an interest-only basis and is prepayable without penalty at our option.
As long as there are outstanding advances under the Reckson Service
Industries Facility or borrowings by us under the credit agreement with respect
to the Reckson Strategic Venture Partners Commitment, we are prohibited from
paying dividends on any shares of our capital stock or incurring additional
debt. The Reckson Service Industries Facility and the credit agreement with
respect to the Reckson Strategic Venture Partners Commitment are subject to
certain other covenants and prohibit advances thereunder to the extent the
advances could, in Reckson Associates' determination, endanger the status of
Reckson Associates as a REIT. The terms of the Reckson Service Industries
Facility and the credit agreement with respect to the Reckson Strategic Venture
Partners Commitment were not negotiated at arms' length and thus may not
reflect terms that could have been obtained from independent third parties.
Additional indebtedness may be incurred by our subsidiaries. As of September
30, 1999, borrowings under the Reckson Service Industries Facility aggregated
approximately $83.6 million and pursuant to the Reckson Strategic Venture
Partners Commitment, Reckson Operating Partnership had made approximately $21.7
million in joint venture investments with Reckson Strategic Venture Partners
and had loaned approximately $32.9 million under the credit agreement. In
November 1999, the credit facilities were amended to allow the Company to incur
up to $135 million in debt secured by Company assets and to pay interest
thereon, and to allow the payment of dividends on up to $200 million of
preferred stock which may be issued by the Company. As consideration for the
amendments, which were approved by the Board of Directors of both the Company
and Reckson Associates, we paid a fee to Reckson Operating Partnership in the
form of approximately 176,000 shares of our common stock.
POLICIES WITH RESPECT TO CONFLICTS OF INTEREST MAY NOT BE SUCCESSFUL.
We have adopted policies designed to eliminate or minimize conflicts of
interest. These policies include the approval of all transactions in which our
directors or officers have a conflicting interest by a majority of the
directors who are neither officers nor affiliated with us. These policies do
not prohibit sales of assets to or from affiliates, but would require the sales
to be approved by the independent directors of the Company. However, there is
no assurance that these policies will be successful and, if they are not
successful, decisions could be made that might fail to reflect fully the
interests of all of our stockholders.
WE HAVE NO PRIOR SPONSORSHIP OF A VENTURE CAPITAL VEHICLE AND MAY INVEST IN
COMPANIES IN AN EARLY STAGE OF DEVELOPMENT OR WITH HISTORICAL OPERATING LOSSES
Reckson Strategic Venture Partners is a real estate venture capital
entity formed to acquire interests in real estate and real estate-related
operating companies. We have committed up to $100 million in Reckson Strategic
Venture Partners although such commitment is reduced by the amount of any
investments made by Reckson Operating Partnership into joint ventures with
Reckson Strategic Venture Partners. A subsidiary of ours serves as the managing
member of Reckson Strategic Venture Partners. Neither we nor Reckson Associates
have previously sponsored a real estate venture capital entity. Reckson
Strategic Venture Partners' holdings may include, among other things, holdings
in companies in an early stage of development that have historical operating
losses. In addition, decreases in values in the property markets, volatility in
the securities markets, interest rate increases and unfavorable conditions in
the economy generally, and in the real estate industry in particular, may have
a negative impact on the performance of Reckson Strategic Venture Partners.
Reckson Strategic Venture Partners has obtained a $200 million
preferred equity facility from PaineWebber Real Estate Securities ("PWRES"),
which is partially funded by an investment fund that is jointly sponsored by
financier George Soros and PWRES. Under the terms of the PaineWebber equity
facility, Reckson Strategic Venture Partners is subject to various covenants
and events of default and related remedies. Such remedies include increased
control rights of PWRES over the operation of Reckson Strategic Venture
Partners under certain circumstances. In addition, PWRES and such investment
fund, if applicable, receive a priority or preferred distribution from the
operations of Reckson Strategic Venture Partners prior to the distribution of
cash to our subsidiary serving as the managing member of Reckson Strategic
Venture Partners. The Reckson Strategic Venture Partners Managing Directors are
entitled to a portion of the profits of the managing member of Reckson
Strategic Venture Partners after we obtain a return of our capital plus a
minimum return. As a result, we cannot assure that the Reckson Strategic
Venture Partners Managing Directors will not pursue investments involving
greater risk in seeking higher profits. Any investments identified by the
Reckson Strategic Venture Partners Managing Directors are subject to our
approval.
OWNERSHIP OF ASSETS THROUGH PARTNER COMPANIES AND JOINT VENTURES COULD LIMIT
OUR CONTROL OF THOSE INVESTMENTS
We and Reckson Strategic Venture Partners anticipate holding a
significant portion of our assets through ownership of an interest in joint
ventures and in partner companies in which we own a significant interest and
participate in management and other parties also own an interest. These
investments may involve risks not otherwise present for investments made solely
by us, including the possibility that our co-venturer or other owners of
partner companies might become bankrupt, that our co-venturer or other owners
of partner companies might at any time have different interests or goals than
we do, and that our co-venturer or other owners of partner companies may take
action contrary to our instructions, requests, policies or objectives. Other
risks of joint venture investments and holdings in partner companies include
impasse on decisions, such as a sale, because neither our partner or
co-venturer nor us would have full control over the joint venture or partner
company. There is no limitation under our organizational documents as to the
amount of funds that may be invested in joint ventures or partner companies.
In addition, if we do not control sufficiently one or more of our
partner companies, our investment in those companies may be considered
"investment securities" under the Investment Company Act of 1940 (the "1940
Act"). Generally, any company that owns investment securities with a value
exceeding 40% of its total assets (excluding cash items and government
securities) is an "investment company" subject to registration under, and
compliance with, the 1940 Act, unless a particular exemption or safe harbor
applies. Compliance with the 1940 Act might be very costly and difficult. In
addition, there could be negative consequences if we are found to be operating
as an unregistered investment company. At the same time, if we are required to
take actions, such as the acquisition or disposition of investments, to avoid
being considered an investment company it also may have negative consequences.
Accordingly, matters related to the 1940 Act may at any time harm our business
and results of operations.
OUR HOLDINGS IN ONSITE ACCESS, INC., A COMPANY WITH A LIMITED OPERATING
HISTORY, EXPOSE US TO REGULATORY RISKS AS WELL AS THE RISK OF TECHNOLOGICAL
OBSOLESCENCE
Our holdings include an approximately 36% fully-diluted interest in
Onsite Access, Inc. ("Onsite"). Onsite is a privately-held company that
provides advanced telecommunication systems and services within commercial
buildings. Onsite has been in existence since 1999, has a relatively small
capitalization, and has historical operating losses. We anticipate that Onsite
will continue to grow rapidly, but we cannot assure when, if ever, Onsite will
become profitable. Onsite's success is contingent upon its ability to continue
to obtain contracts to wire buildings for the delivery of internet access, data
and voice transport services. In addition, certain executive officers at Onsite
have only recently been hired and OnSite's future success will be dependent, in
part, on such executives' ability to perform effectively.
Our holdings in Onsite are exposed to risks specific to the
telecommunications industry. The industry is regulated on both the federal and
state level and we can not assure that governmental regulations that adversely
affect our investment will not be passed. Additionally, the technology sector
is constantly undergoing rapid change and innovation. Onsite is therefore
subject to the risk that its technological services could become obsolete.
OUR HOLDINGS IN VANTAS INCORPORATED EXPOSE US TO REAL ESTATE AND OPERATIONAL
RISKS
Our holdings include an approximately 45% fully diluted interest in
VANTAS Incorporated ("VANTAS"). VANTAS is a company that provides tenants with
furnished office suites and immediate support services, included but not
limited to, secretarial services, telecommunication services and conference
facilities. The executive office suites industry is subject to risks comparable
to the real estate industry. Supply and demand and the location of office
buildings are all factors that directly affect the office suites industry. A
significant downturn in the real estate market could adversely affect our
investment in VANTAS.
VANTAS is the successor to three separate executive office suites
companies. The management team at VANTAS has not worked together as a unit for
a long period and we cannot assure that the integration of the three office
suites companies will be successful.
THE STUDENT HOUSING SECTOR EXPOSES US TO PARTICULAR RISKS
Through Reckson Strategic Venture Partners, we hold a 77.77% in
American Campus Communities, a manager of student housing facilities, and a
23.33% interest in the Dobie Center, a student housing facility located near
the campus of the University of Texas. The student housing business is a
fragmented sector undergoing rapid development and change. In addition to
traditional real estate risks, student housing risks include economic, social,
governmental and demographic factors as they relate to the number of students
attending colleges and universities in need of student housing. Student housing
facilities are to a large extent reliant upon the well-being of the colleges or
universities to which such facilities relate. Student housing facilities are
possibly subject to competition from colleges and universities as well as other
providers of student housing. In addition, the maintenance and insurance costs
of student housing may exceed the costs typical of multifamily housing.
Furthermore, due to the nature of student housing, turnover of tenants is
significant and student housing is less utilized during summer months.
WE DO NOT ANTICIPATE PAYING DIVIDENDS IN THE FORESEEABLE FUTURE
We intend to use our available funds to pursue investment and business
opportunities. Therefore, we do not anticipate the payment of any dividends on
our common stock in the foreseeable future. Payment of dividends on our common
stock is prohibited under the credit facilities until all amounts outstanding
under the credit facilities are paid in full. The payment of dividends will
also be subject to any limitations imposed by other credit facilities and debt
securities that we may obtain or issue in the future.
REAL ESTATE RISKS MAY AFFECT OUR EARNINGS
Our holdings include real estate and real estate-related assets,
particularly through our holdings in Reckson Strategic Venture Partners.
Investments in real estate are subject to the risks incident to the ownership
and operation of real estate. Our real estate holdings may be adversely
affected by a number of factors, including:
o real estate holdings are generally illiquid
o the national, state and local economic climate and real
estate conditions, such as oversupply of or reduced demand
for space and changes in market rental rates
o the need to periodically renovate, repair and relet our space
o increasing operating costs, including real estate taxes and
utilities, which may not be passed through to tenants
o defaults by our tenants or their failure to pay rent on a
timely basis
o uninsured losses
Through Reckson Strategic Venture Partners, we have real estate and
real estate-related holdings in the areas of student housing, assisted living
and government occupied buildings. Reckson Strategic Ventures Partners is
likely to make additional acquisitions in commercial real estate, and may,
particularly through joint ventures, be involved in the development of real
estate. Development and construction activities in connection with these types
of investments include risks of cost overruns, completion and lease-up delays,
unavailability of financing and changes in market conditions.
Our development activities are also subject to risks relating to the
inability to obtain, or delays in obtaining, all necessary zoning, land-use,
building, occupancy and other required governmental permits and authorizations.
If any of the above events occur, the revenues received from Reckson Strategic
Venture Partners' real estate investments and the values of these investments
could be adversely affected. In addition, new development activities,
regardless of whether or not they are ultimately successful, typically require
a substantial portion of management's time and attention.
ENVIRONMENTAL PROBLEMS ARE POSSIBLE AND MAY BE COSTLY
Federal, state and local laws and regulations relating to the
protection of the environment may require a current or previous owner or
operator of real estate to investigate and clean up hazardous or toxic
substances or petroleum product releases at a property. An owner of real estate
is liable for the costs of removal or remediation of certain hazardous or toxic
substances on or in the property. These laws often impose such liability
without regard to whether the owner knew of, or caused, the presence of the
contaminants. Clean-up costs and the owner's liability generally are not
limited under the enactments and could exceed the value of the property and/or
the aggregate assets of the owner. The presence of or the failure to properly
remediate the substances may adversely affect the owner's ability to sell or
rent the property or to borrow using the property as collateral. Persons who
arrange for the disposal or treatment of hazardous or toxic substances may also
be liable for the clean-up costs of the substances at a disposal or treatment
facility, whether or not such facility is owned or operated by the person. Even
if more than one person was responsible for the contamination, each person
covered by the environmental laws may be held responsible for the clean-up
costs incurred. In addition, third parties may sue the owner or operator of a
site for damages and costs resulting from environmental contamination emanating
from that site.
Environmental laws also govern the presence, maintenance and removal
of asbestos-containing materials ("ACMs"). These laws impose liability for
release of ACMs into the air and third parties may seek recovery from owners or
operators of real properties for personal injury associated with ACMs. In
connection with the ownership (direct or indirect), operation, management and
development of real properties, we may be considered an owner or operator of
properties containing ACMs. We may be potentially liable for removal,
remediation and other costs, including governmental fines and injuries to
persons and property.
CERTAIN ANTITAKEOVER PROVISIONS MAY DETER THIRD PARTY ACQUISITION PROPOSALS
Our charter and bylaws and applicable sections of the Delaware General
Corporation Law may make the acquisition of control of our company more
difficult without the approval of our Board of Directors. Certain provisions of
our charter and bylaws, among other things:
o classify our Board of Directors into three classes, each of which
serves for staggered three-year terms;
o provide that any of our directors may be removed by the affirmative
vote of stockholders having at least 80% of the total voting power
only for cause;
o provide that only the Chairman of the Board, President or a
majority of our Board of Directors may call special meetings
of the stockholders;
o provide that the stockholders may take action only at a meeting
of our stockholders, not by written consent;
o provide that stockholders must comply with certain advance
notice procedures in order to nominate candidates for
election to our Board of Directors or to place stockholders'
proposals on the agenda for consideration at meetings of the
stockholders;
o provide that, under certain circumstances, the affirmative
vote of the holders of two-thirds of our common stock is
required to approve any merger or similar business
combination involving our company;
o provide that the holder of "control shares" of our company
acquired in a control share acquisition have no voting rights
with respect to such control shares except to the extent
approved by the vote of the holders of two-thirds of our
common stock;
o subject to certain exceptions, limit the ownership by any
person of our common stock to 9.9% of the number of shares or
value of our common stock and limit the ownership by any
person of our capital stock to 9.9% of the aggregate value of
all classes of our capital stock; and
o provide that the stockholders may amend or repeal any of the
foregoing provisions of the charter or bylaws only by a vote
of at least 80% of the stock entitled to vote generally in
the election of directors.
With certain exceptions, Section 203 of the Delaware General
Corporation Law imposes certain restrictions on mergers and other business
combinations between our company and any holder of 15% or more of our common
stock. The charter provides that the foregoing provisions and Section 203 do
not apply to Reckson Associates and its affiliates. Accordingly, Reckson
Associates and its affiliates are in a position to effect a business
combination or other transaction with us in situations where others are
restricted from effecting a similar transaction. Our charter authorizes the
Board of Directors to issue up to 25 million shares of preferred stock, par
value $.01 per share, in series, and to establish the rights and preferences
(including the exchange of such shares of preferred stock into shares of our
common stock) of any series of preferred stock so issued. The issuance of
certain types of preferred stock could have the effect of delaying or
preventing a change in control of our company, even if such a change in control
were in the best interests of some, or a majority, of our stockholders.
RISK OF IMPACT OF YEAR 2000 ISSUE ON OUR OPERATIONS AND FINANCIAL RESULTS
Some of our older computer programs were written using two digits
rather than four to define the applicable year. As a result, those computer
programs have time-sensitive software that recognizes a date using "00" as the
year 1900 rather than the year 2000. This could cause a system failure or
miscalculation causing disruptions of operations, including, among other
things, a temporary inability to process transactions, or engage in similar
normal business activities.
We have completed an assessment to modify or replace portions of our
software so that our computer systems will function properly with respect to
dates in the year 2000 and thereafter. Since our accounting software is
maintained and supported by a third party, the total year 2000 project cost is
estimated to be minimal.
Our year 2000 project is complete to date. Additionally, we have
received assurances from our significant service providers that all of our
systems are currently year 2000 compliant or will be made compliant prior to
any impact on those systems. However, we cannot guarantee that all service
providers will comply with their assurances and therefore we may not be able to
determine year 2000 compliance of those contractors. At that time, we will
determine the extent to which we will be able to replace non-compliant service
providers. We believe that with modifications to existing software and
conversion to new software, the year 2000 issue will not pose significant
operational problems for our computer systems. However, if modifications and
conversions are not made, or are not completed timely, the year 2000 issue
could have a material impact on our operations.
To date, we have expended approximately $66,000 in connection with
year 2000 issues. However, there can be no guarantee that these estimates will
be achieved and actual results could differ materially from those anticipated.
Specific factors that might cause material differences include, but are not
limited to the availability and costs of personnel trained in this area, the
ability to locate and correct all relevant computer codes, and similar
uncertainties.
In a "worst case scenario" of the failure of the third party to timely
deliver the necessary upgrades to the accounting software, we would manually
process transactions, such as the issuance of disbursements, until an
alternative system is implemented.
If we are not successful in implementing our year 2000 compliance
plan, we may suffer a material adverse impact on our results of operations and
financial condition. Because of the importance of addressing the year 2000
issue, we expect to develop contingency plans if we determine that the
compliance plans will not be implemented.
THE COMPANY
We were formed on July 15, 1997. We are a publicly-traded operating
company that identifies, acquires interest in, and develops a network of
business-to-business ("B2B") e-commerce and e-services companies that service
small and medium sized enterprises, independent professionals and the mobile
workforce of larger companies. We were formed in 1997 as a subsidiary of
Reckson Associates. We were spun-off from Reckson Associates in June 1998.
We are a Delaware corporation. Our principal executive office is
located at 10 East 50th Street, New York, New York 10022, and our telephone
number is (212) 931-8000.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares of
common stock by the selling stockholders.
DESCRIPTION OF COMMON STOCK
GENERAL
Our charter (the "Charter") provides that we may issue up to 100
million shares of common stock, $.01 par value per share. As of November 30,
1999, there were 28,201,372 shares of common stock outstanding.
All shares of common stock offered hereby have been duly authorized and
are fully paid and nonassessable. Subject to the preferential rights of any
other shares or series of stock and to the provisions of the Charter regarding
Excess Stock (as defined under "Restrictions on Ownership of Capital Stock"),
holders of shares of common stock offered hereby will be entitled to receive
dividends on the stock if, as and when authorized and declared by the Board of
Directors of the Company out of assets legally available therefor and to share
ratably in the assets of the Company legally available for distribution to its
common stockholders in the event of its liquidation, dissolution or winding up
after payment of or adequate provision for all known debts and liabilities of
the Company. Under the terms of our credit agreements with Reckson Operating
Partnership, we are prohibited from paying any dividends on shares of our
capital stock as long as there are amounts outstanding under the agreements.
Subject to the provisions of the Charter regarding Excess Stock, each
outstanding share of common stock, entitles the holder to one vote on all
matters submitted to a vote of stockholders, including the election of
directors, and, except as provided with respect to any other class or series of
stock, the holders of these shares will possess the exclusive voting power.
There is no cumulative voting in the election of directors, which means that
the holders of a majority of the outstanding shares of the Company's existing
common stock can elect all of the directors then standing for election and the
holders of the remaining shares will not be able to elect any directors.
Holders of shares of common stock have no preference, conversion,
exchange, sinking fund, redemption or appraisal rights and have no preemptive
rights to subscribe for any other securities. Subject to the provisions of the
Charter regarding Excess Stock, shares of common stock will have equal
dividend, liquidation and other rights.
CERTAIN PROVISIONS OF THE CHARTER
The Board of Directors is divided into three classes of directors,
each class constituting approximately one-third of the total number of
directors, with the classes serving staggered terms. At each annual meeting of
stockholders, the class of directors to be elected at the meeting will be
elected for a three-year term and the directors in the other two classes will
continue in office. We believe that classified directors will help to assure
the continuity and stability of the Board of Directors and our business
strategies and policies as determined by the Board. The use of a staggered
board may delay or defer a change in control or removal of incumbent
management.
Our charter and bylaws contain additional provisions that may deter
third party acquisition proposals. Prospective investors should review the
section captioned "Risk Factors -- Certain Anti-takeover provisions may deter
third party acquisition proposals."
RESTRICTIONS ON OWNERSHIP
In order for Reckson Associates to qualify as a REIT under the Code,
it must satisfy a variety of requirements, including annual tests with respect
to the nature of its gross income. Substantially all of Reckson Associates'
gross income meets these requirements by qualifying as "rentals from real
property" under Section 856(d) of the Code. Under this provision, however, a
REIT's real property rentals can be disqualified if the rent is received by the
REIT from a related party or if noncustomary services are performed for the
tenant other than by an independent contractor. The characterization of a party
as a related-party tenant or as an independent contractor depends, in part,
upon the percentage of stock, assets or net profits of such party that may be
owned by the REIT or by stockholders of the REIT. Such ownership may be direct
or may be indirect under certain attribution rules prescribed by the Code.
Currently, there is a substantial identity of ownership between stockholders of
Reckson Associates and stockholders of the Company. It cannot be predicted how
long or to what degree such identity of ownership may continue. Therefore, in
order to protect Reckson Associates from the risk that rental income it earns
from the Company or its affiliates, or from tenants that the Company or its
affiliates provides commercial services to, will not be disqualified as rent
from real property for REIT qualification purposes, subject to certain
exceptions, the ownership by any person or entity of the Company's common stock
is limited to 9.9% of the aggregate number or value of shares of the Company's
common stock outstanding and the ownership by any person of the Company's
capital stock is limited to 9.9% of the aggregate value of all classes of
capital stock outstanding.
RESTRICTIONS ON ABILITY TO PAY DIVIDENDS
As long as there are outstanding advances under the Reckson Service
Industries Facility or borrowings by us under the credit agreement with
respect to the Reckson Strategic Venture Partners Commitment, we are
prohibited from paying dividends on any shares of our capital stock or
incurring additional debt. See the section captioned "Risk Factors - We may
have conflicts of interest with Reckson Associates - Conflicts in our loans
with Reckson Operating Partnership; limitation on our ability to pay dividends
and incur additional debt" above.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is American
Stock Transfer & Trust Company.
SELLING STOCKHOLDERS
The common stock was originally issued by the Company in offerings
exempt from the registration requirements of the Securities Act. The purchasers
in those offerings or their pledgees, donees, transferees or other successors
in interest, who we collectively refer to in this prospectus as selling
stockholders, may from time to time offer and sell any and all of the shares of
common stock offered under this prospectus.
The following table sets forth certain information, as of December 6,
1999, with respect to shares of common stock covered by this prospectus and
other shares of common stock owned by the selling stockholders. Because the
selling stockholders may offer all, some or none of the shares of common stock
that are covered by this prospectus, no estimate can be made of the number of
shares of common stock that will be offered under this prospectus or the number
of shares of common stock that will be owned by any of the selling stockholders
upon completion of the offering to which this prospectus relates.
<TABLE>
<CAPTION>
Percentate of Class of
Shares of Common Stock Shares of Common Shares of Common Common Stock to be
Owned Before the Stock Covered by Stock to be Owned Owned After the
Name of Selling Stockholder Offering this Prospectus After the Offering(1) Offering(1)
- ------------------------------------ ------------------------ -------------------- ----------------------- ----------------------
<S> <C> <C> <C> <C>
JAH Realties, L.P. (2) 507,945 260,000 274,945 *
Veritech Ventures LLC (2) 1,731,597 1,731,597 0 *
Charles Orgel (3) 38,862 38,862 0 *
Robert Murphy (3) 13,716 13,716 0 *
</TABLE>
- ------------------
* Less than one percent (1%).
(l) Assumes the sale of all shares of common stock registered hereunder,
although the selling stockholders are under no obligation known to the Company
to sell any shares of common stock.
(2) JAH Realties, L.P. is the managing member of Veritech Ventures LLC. The
general partner of JAH Realties, L.P. is JLH Inc., of which Jon L. Halpern is
the sole stockholder. Mr. Halpern is a former executive officer and director of
Reckson Associates Realty Corp. In addition, JAH Realties, L.P., directly or
indirectly, has in the past been a co-venturer with the Company in various
holdings including OnSite Access, Inc., OnSite Commerce and Content LLC, VANTAS
Incorporated, American Campus Communities and Dobie Center LLC and continues to
own interests in OnSite Access, Inc., VANTAS Incorporated and Dobie Center LLC.
The shares of common stock to be offered by JAH Realties, L.P. and Veritech
Ventures LLC were acquired from the Company in exchange for interests in OnSite
Access, Inc. and OnSite Commerce and Content LLC.
(3) Shares of common stock were received from Realty Information Tracking
Services, Inc. ("RITS"). The Company issued such shares of common stock to RITS
in connection with the Company's acquisition of an interest in RITS.
PLAN OF DISTRIBUTION
We have been advised that the selling stockholders (a term that
includes pledgees, donees, transferees and other successors in interest, as
described above) may offer shares of common stock from time to time depending
on market conditions and other factors, in one or more transactions on the
Nasdaq National Market, or other national securities exchanges or
over-the-counter markets on which the shares are traded, or in negotiated
transactions, at market prices prevailing at the time of sale, at prices
related to those market prices, at negotiated prices or at fixed prices.
Sales of shares of common stock by the selling stockholders may
involve (i) block transactions in which the broker or dealer so engaged will
attempt to sell the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction, (ii) purchases by a
broker-dealer as principal and resale by such broker-dealer for its own account
pursuant to this prospectus, (iii) ordinary brokerage transactions and
transactions in which a broker solicits purchasers and (iv) privately
negotiated transactions. To the extent required, this prospectus may be amended
and supplemented from time to time to describe a specific plan of distribution.
In connection with the distribution of the shares of common stock or otherwise,
the selling stockholders may enter into hedging transactions with
broker-dealers. In connection with such transactions, broker-dealers may engage
in short sales of the common stock in the course of hedging the position they
assume with the selling stockholders. The selling stockholders may also sell
the common stock short and redeliver the shares to close out such short
positions.
The selling stockholders may also enter into option transactions
(including call or put option transactions) or other transactions with
broker-dealers which require delivery to such broker-dealer of shares offered
hereby, which shares such broker-dealer may resell pursuant to this prospectus
(as supplemented or amended to reflect such transaction, if necessary). The
selling stockholders may also pledge shares to a broker-dealer and, upon a
default, such broker-dealer may effect sales of the pledged shares pursuant to
this prospectus (as supplemented or amended to reflect such transaction, if
necessary). The selling stockholders may also sell the common stock through one
or more underwriters on a firm commitment or best-efforts basis (with a
supplement or amendment to this prospectus, if necessary). In addition, any
shares that qualify for sale pursuant to Rule 144 may be sold under Rule 144
rather than pursuant to this prospectus.
Brokers and dealers may receive compensation in the form of
concessions or commissions from the selling stockholders and/or purchasers of
shares for whom they may act as agent and/or to whom they may sell as principal
(which compensation may be in excess of customary commissions). The selling
stockholders and any broker or dealer that participates in the distribution of
shares may be deemed to be underwriters and any commissions received by them
and any profit on the resale of shares positioned by a broker or dealer may be
deemed to be underwriting discounts and commissions under the Securities Act.
We have agreed to indemnify the selling stockholders, each underwriter who
participates in an offering of the shares of common stock, each person, if any,
who controls any of such parties within the meaning of the Securities Act and
the Exchange Act, and each of their respective directors, officers, employees
and agents against certain liabilities, including liabilities arising under the
Securities Act. The selling stockholders may agree to indemnify any agent or
broker-dealer that participates in transactions involving sales of the shares
of common stock against certain liabilities, including liabilities arising
under the Securities Act.
We have advised the selling stockholders that Regulation M under the
Exchange Act may apply to sales of shares and to the activities of the selling
stockholders or broker-dealers in connection therewith. We will bear all costs,
expenses and fees in connection with the registration of the shares of common
stock covered by this prospectus. The selling stockholders will bear any
brokerage commissions and similar selling expenses, if any, attributable to the
sale of the shares.
RESTRICTIONS ON OWNERSHIP OF CAPITAL STOCK
EXCESS STOCK
The Charter provides that the Company may issue up to 25 million
shares of excess stock, par value $.01 per share ("Excess Stock"). For a
description of Excess Stock, see "--Restrictions on Ownership" below.
RESTRICTIONS ON OWNERSHIP
As described above, in order to protect Reckson Associates against the
risk of failing to satisfy certain tax laws applicable to REITs, our Charter
provides that no stockholder may own, or be deemed to own by virtue of the
attribution provisions of the Code, more than 9.9% of the aggregate number or
value of the Company's outstanding shares of common stock or more than 9.9% of
the aggregate value of the outstanding shares of all classes of the Company's
capital stock (the "Ownership Limit"), provided that in no event will a
stockholder be limited in the amount of the Company's common stock acquired in
connection with awards or exercises of employee stock options. In the event we
issue preferred stock, we may, in the designating amendment, set a limit on the
ownership of such preferred stock. Any direct or indirect ownership of shares
of stock in excess of the Ownership Limit or that would result in common
ownership among 10% holders of the Company's common stock and Reckson
Associates' common stock, will be null and void, and the intended transferee
will acquire no rights to the shares of capital stock. The foregoing
restrictions on transferability and ownership will not apply if Reckson
Associates determines that it is no longer in its best interests to attempt to
qualify, or to continue to qualify, as a REIT. Under the terms of the
intercompany agreement, the Company's Board of Directors will have the right to
waive the Ownership Limit only if permission to do so is granted by Reckson
Associates, in Reckson Associates' sole discretion, and the Company's Board of
Directors otherwise decides that such action is the best interest of the
Company.
Shares of capital stock owned, or deemed to be owned, or transferred
to a stockholder in excess of the Ownership Limit will automatically be
converted into shares of Excess Stock that will be transferred, by operation of
law, to the trustee of a trust for the exclusive benefit of one or more
charitable organizations described in Section 170(b) (1) (A) and 170(c) of the
Code (the "Charitable Beneficiary"). The trustee of the trust will be deemed to
own the Excess Stock for the benefit of the Charitable Beneficiary on the date
of the violative transfer to the original transferee-stockholder. Any dividend
or distribution paid to the original transferee-stockholder of Excess Stock
prior to the discovery by the Company that capital stock has been transferred
in violation of the provisions of the Company's Charter will be repaid to the
trustee upon demand. Any dividend or distribution authorized and declared but
unpaid shall be rescinded as void AB INITIO with respect to the original
transferee-stockholder and will instead be paid to the trustee of the trust for
the benefit of the Charitable Beneficiary. Any vote cast by an original
transferee-stockholder of shares of capital stock constituting Excess Stock
prior to the discovery by the Company that shares of capital stock have been
transferred in violation of the Company's Certificate of Incorporation shall be
rescinded as void AB INITIO. While the Excess Stock is held in trust, the
original transferee-stockholder will be deemed to have given an irrevocable
proxy to the trustee to vote the capital stock for the benefit of the
Charitable Beneficiary. The trustee of the trust may transfer the interest in
the trust representing the Excess Stock to any person whose ownership of the
shares of capital stock converted into such Excess Stock would be permitted
under the Ownership Limit and the Aggregate Ownership Limit. If such transfer
is made, the interest of the Charitable Beneficiary will terminate and the
proceeds of the sale will be payable to the original transferee-stockholder and
to the Charitable Beneficiary as described herein. The original
transferee-stockholder will receive the lesser of (i) the price paid by the
original transferee-stockholder for the shares of capital stock that were
converted into Excess Stock or, if the original transferee-stockholder did not
give value for such shares (e.g., the stock was received through a gift, devise
or other transaction), the average closing price for the class of shares from
which such shares of capital stock were converted for the ten trading days
immediately preceding such sale or gift, and (ii) the price received by the
trustee from the sale or other disposition of the Excess Stock held in trust.
The trustee may reduce the amount payable to the original
transferee-stockholder by the amount of dividends and distributions relating to
the shares of Excess Stock which have been paid to the original
transferee-stockholder and are owed by the original transferee-stockholder to
the trustee. Any proceeds in excess of the amount payable to the original
transferee-stockholder will be paid by the trustee to the Charitable
Beneficiary. Any liquidation distributions relating to Excess Stock will be
distributed in the same manner as proceeds of a sale of Excess Stock. If the
foregoing transfer restrictions are determined to be void or invalid by virtue
of any legal decision, statute, rule or regulations, then the original
transferee-stockholder of any shares of Excess Stock may be deemed, at the
option of the Company, to have acted as an agent on behalf of the Company in
acquiring the shares of Excess Stock and to hold the shares of Excess Stock on
behalf of the Company.
In addition, the Company will have the right, for a period of 90 days
during the time any shares of Excess Stock are held in trust, to purchase all
or any portion of the shares of Excess Stock at the lesser of (i) the price
initially paid for such shares by the original transferee-stockholder, or if
the original transferee-stockholder did not give value for such shares (e.g.,
the shares were received through a gift, devise or other transaction), the
average closing price for the class of stock from which such shares of Excess
Stock were converted for the ten trading days immediately preceding such sale
or gift, and (ii) the average closing price for the class of stock from which
such shares of Excess Stock were converted for the ten trading days immediately
preceding the date the Company elects to purchase such shares. The Company may
reduce the amount payable to the original transferee-stockholder by the amount
of dividends and distributions relating to the shares of Excess Stock which
have been paid to the original transferee-stockholder and are owned by the
original transferee-stockholder to the trustee. The Company may pay the amount
of such reductions to the trustee for the benefit of the Charitable
Beneficiary. The 90-day period begins on the later date of which notice is
received of the violative transfer if the original transferee-stockholder gives
notice to the Company of the transfer or, if no such notice is given, the date
the Company's Board of Directors determines that a violative transfer has been
made.
All certificates representing shares of capital stock will bear a
legend referring to the restrictions described above.
Each stockholder will be required, upon demand by the Company, to
disclose to the Company in writing any information with respect to the direct,
indirect and constructive ownership of capital stock of the Company as Reckson
Associates deems necessary for Reckson Associates to determine its compliance
with the provisions of the Code applicable to REITs.
The Company is required to maintain in its Charter the foregoing
Ownership Limit, Excess Stock and stock ownership disclosure requirements under
the terms of the Intercompany Agreement.
The Ownership Limit may have the effect of delaying, deferring or
preventing a change in control of the Company.
LEGAL MATTERS
The validity of the issuance of the shares offered hereby and certain
legal matters will be passed upon for us by Brown & Wood LLP, New York, New
York.
EXPERTS
The consolidated financial statements of Reckson Service Industries,
Inc. (the "Company") appearing in the Company's Annual Report (Form 10-K) for
the year ended December 31, 1998; and the consolidated financial statements of
Interoffice Superholdings Corporation and Subsidiaries for the period November
9, 1998 to December 31, 1998 appearing in the Company's Form 10-K for the year
ended December 31, 1998; and the consolidated financial statements of RSVP
Holdings, LLC for the period February 26, 1998 to December 31, 1998, appearing
in the Company's Form 10-K for the year ended December 31, 1998; and the
combined financial statements of Xebec Management Services, Inc. and affiliate
for the years ended December 31, 1997 and 1996, appearing in the Company's Form
8-K dated January 19, 1999; and the consolidated financial statements of
InterOffice (Holdings) Corporation and Subsidiaries for the years ended
December 31, 1997, 1996 and 1995 appearing in the Company's Form 8-K dated
January 19, 1999, have in each case been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon, incorporated
herein by reference. Such consolidated and combined financial statements are
incorporated herein by reference in reliance upon such reports given on the
authority of such firm as experts in accounting and auditing.
The financial statements incorporated in this prospectus by reference
to the audited historical consolidated financial statements of VANTAS
Incorporated and Subsidiaries (formerly ALLIANCE NATIONAL Incorporated and
Subsidiaries) as of June 30, 1998 and 1997 and December 31, 1998 and for the
years ended June 30, 1998, 1997 and 1996 and for the period July 1, 1998 to
December 31, 1998 appearing in Reckson Service Industries, Inc.'s Form 8-K/A
dated March 24, 1999, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in accounting and auditing.
<PAGE>
<TABLE>
<CAPTION>
========================================================= =================================================
<S> <C>
Neither we nor the selling stockholders have authorized any dealer,
salesperson or other person to give any information or other person to give any
information or represents anything not contained in this prospectus. You must
not rely on any unauthorized information. This prospectus does not offer to
sell or buy any shares in any jurisdiction where it is unlawful. The
information in this prospectus is current as of the date hereof.
RECKSON SERVICE
INDUSTRIES, INC.
- -------------------------------------------
TABLE OF CONTENTS
Available Information...............................2
Incorporation of Certain Documents
By Reference........................................2
Cautionary Statements Concerning
Forward-Looking Information.........................3
Risk Factors........................................3
The Company........................................13
Use of Proceeds....................................13
Description of Common Stock........................13
Selling Stockholders...............................15
Plan of Distribution...............................16
Restrictions On Ownership of Capital Stock.........17
Legal Matters......................................19
Experts............................................19
- -------------------------------------------
========================================================= =================================================
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following sets forth the estimated expenses in connection with the
issuance and distribution of the Registrant's securities being registered
hereby, other than underwriting discounts and commissions, all of which will be
borne by the Company:
Securities and Exchange Commission registration fee....... $22,055.00
Printing and engraving expenses........................... 5,000.00
Legal fees and expenses................................... 25,000.00
Accounting fees and expenses.............................. 12,000.00
Miscellaneous............................................. 5,0000.00
Trustee's fees............................................ 10,000.00
----------
Total..................................................... $79,055.00
==========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Delaware General Corporation Law (the "Delaware Law") provides
that a corporation may limit the liability of each director to the corporation
of its stockholders for monetary damages except for liability (i) for any
breach of the director's duty of loyalty to the corporation or its
stockholders; (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law; (iii) in respect of
certain unlawful dividend payments or stock redemptions or repurchases, and
(iv) for any transaction from which the director derives an improper personal
benefit. The Certificate of Incorporation and ByLaws provide for the
elimination and limitation of the personal liability of directors of the
Company for monetary damages to the fullest extent permitted by the Delaware
Law. In addition, the Certificate of Incorporation and Bylaws provide that if
the Delaware Law is amended to authorize the further elimination or limitation
of the liability of a director, then the liability of the directors shall be
eliminated or limited to the fullest extent permitted by the Delaware Law, as
so amended. The effect of this provision is to eliminate the rights of the
Company and its stockholders (through stockholders' derivative suits on behalf
of the Company) to recover monetary damages against a director for breach of
the fiduciary duty of care as a director (including breaches resulting from
negligent or grossly negligent behavior) except in the situations described in
clauses (i) through (iv) above. The provision does not limit or eliminate the
rights of the Company or any stockholder to seek non-monetary relief such as an
injunction or rescission in the event of a breach of a director's duty of care.
In addition, the Bylaws provide that the Company shall, to the full extent
permitted by the Delaware Law, as amended from time to time, indemnify and
advance expenses to each of its currently acting and former directors,
officers, members of the management advisory committee, employees and agents.
ITEM 16. EXHIBITS.
4.1 -- Articles of Incorporation.(1)
4.2 -- By-laws.(1)
4.3 -- Form of Common Share Certificate.(1)
5 -- Opinion of Brown & Wood LLP as to the legality of the
securities.
23.1 -- Consent of Brown & Wood LLP (included in Exhibits
5 and 8).
23.2 -- Consent of Ernst & Young LLP.
23.3 -- Consent of PricewaterhouseCoopers LLP.
24 -- Power of attorney (included on the signature
page of this Registration Statement).
- ---------------
(1) Previously filed as an exhibit to Registration Statement on Form S-1
(No. 333-44419) and incorporated herein by reference
ITEM 17. UNDERTAKINGS.
(a) The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to the Registration Statement;
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
provided, however, that paragraphs (1)(i) and
(1)(ii) do not apply if the information required to be
included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the Registrant
pursuant to Section 13 or 15(d) of the Exchange Act that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(3) (a) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, partners and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer, partner or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer, partner or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
(d) The Registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under Section 305 (b)(2) of
the Act.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Reckson
Service Industries, Inc. certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on December 7, 1999.
RECKSON SERVICE INDUSTRIES, INC.
By: /s/ Scott H. Rechler
-----------------------------
Scott H. Rechler
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Donald Rechler, Scott H. Rechler and
Michael Maturo, and each of them, his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capabilities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Chairman of the Board and Director
/s/ Donald J. Rechler December 7, 1999
---------------------
Donald J. Rechler
/s/ Scott H. Rechler President, Chief Executive Officer and December 7, 1999
------------------- Director (Principal Executive Officer)
Scott H. Rechler
Executive Vice President, Treasurer and
/s/ Michael Maturo Chief Financial Officer (Principal December 7, 1999
------------------ Financial Officer and Principal Accounting
Michael Maturo Officer)
/s/ Roger M. Rechler Director December 7, 1999
--------------------
Roger M. Rechler
/s/ Mitchell D. Rechler Secretary and Director December 7, 1999
-----------------------
Mitchell D. Rechler
/s/ Gregg M. Rechler Director December 7, 1999
--------------------
Gregg M. Rechler
/s/ Paul F. Amoruso Director December 7, 1999
-------------------
Paul F. Amoruso
------------------- Director
Ronald Cooper
</TABLE>
<PAGE>
EXHIBIT INDEX
EXHIBITS DESCRIPTION PAGE
5 -- Opinion of Brown & Wood LLP as to the legality of
the Securities.
23.1 -- Consent of Brown & Wood LLP (included in Exhibits 5
and 8).
23.2 -- Consent of Ernst & Young LLP.
23.3 -- Consent of PricewaterhouseCoopers LLP.
24 -- Power of attorney (included on the signature page of this
Registration Statement).
Exhibit 5
BROWN & WOOD LLP
One World Trade Center
New York, New York 10048
December 7, 1999
Reckson Service Industries, Inc.
10 East 50th Street
New York, New York 10022
Ladies and Gentlemen:
This opinion is furnished in connection with the registration
statement on Form S-3 (the "Registration Statement") filed with the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933,
as amended (the "Securities Act"), relating to the offering from time to time
by selling stockholders of up to 2,044,175 shares of common stock, par value
$0.01 per share (the "Common Shares"), of Reckson Service Industries, Inc.
(the "Company").
In connection with rendering this opinion, we have examined the
Company's Amended and Restated Certificate of Incorporation and Bylaws,
records of the Company's corporate proceedings, the Registration Statement and
such other certificates, records and documents as considered necessary for the
purposes of this opinion.
We are attorneys admitted to practice in the State of New York. We
express no opinion concerning the laws of any of the jurisdictions other than
the laws of the United States of America, the State of Delaware and the State
of New York.
Based upon the foregoing, we are of the opinion that the Common
Shares are validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and the reference to our firm under the caption "Legal
Matters" in the prospectus.
Very truly yours,
/s/ Brown & Wood LLP
Exhibit 23.2
Consent of Independent Accountants
We consent to the reference to our firm under the caption "Experts" in
the Registration Statement (Form S-3) and related Prospectus of Reckson
Service Industries, Inc. (the "Company") for the registration of 2,044,175
shares of its common stock and to the incorporation by reference therein of
our reports dated (i) March 12, 1999, with respect to the consolidated
financial statements of the Company included in its Annual Report (Form 10-K)
for the year ended December 31, 1998 filed with the Securities and Exchange
Commission on March 31, 1999, (ii) March 12, 1999, with respect to the
consolidated financial statements of Interoffice Superholdings Corporation and
Subsidiaries for the period November 9, 1998 to December 31, 1998 included in
the Company's Form 10-K filed with the Securities and Exchange Commission on
March 31, 1999, (iii) March 5, 1999, with respect to the consolidated
financial statements of RSVP Holdings, LLC for the period February 26, 1998 to
December 31, 1998, included in the Company's Form 10-K filed with the
Securities and Exchange Commission on March 31, 1999, (iv) January 4, 1999,
with respect to the combined financial statements of Xebec Management
Services, Inc. and affiliate for the years ended December 31, 1997 and 1996,
included in the Company's Form 8-K filed with the Securities and Exchange
Commission on January 19, 1999 and (v) September 18, 1998, with respect to the
consolidated financial statements of InterOffice (Holdings) Corporation and
Subsidiaries for the years ended December 31, 1997, 1996 and 1995 included in
the Company's Form 8-K filed with the Securities and Exchange Commission on
January 19, 1999.
/s/ Ernst & Young LLP
New York, New York
December 6, 1999
Exhibit 23.3
Consent of Independent Accountants
We hereby consent to the incorpoation by reference in this Registration
Statement of Reckson Service Industries, Inc. on Form S-3 of our report dated
February 26, 1999 relating to the consolidated financial statements of
VANTAS Incorporated and Subsidiaries (formerly ALLIANCE NATIONAL Incorporated
and Subsidiaries), which appears in Reckson Service Industries, Inc.'s Current
Report on Form 8-K/A dated March 24, 1999. We also consent to the references
to us under the heading "Experts" in such Registration Statement.
/s/PricewaterhouseCoopers LLP
New York, New York
December 7, 1999
