PROSPECTUS SUPPLEMENT
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(To prospectus dated September 20, 2000)
331,400 Shares
FrontLine Capital Group
Common Stock
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We are offering 331,400 shares of our common stock, par value $.01 per
share, at a price of $15.0875 per share. We will receive all of the net
proceeds from the sale of such common stock.
Our common stock is listed on the Nasdaq National Market under the symbol
"FLCG." The last reported sale price of our common stock on September 19, 2000
was $14.875 per share.
Investing in our common stock involves risks. See "Risk Factors"
beginning on page 2 of the accompanying prospectus to read about risks you
should consider before buying our 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 supplement or the accompanying prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
We are offering the shares of common stock directly to the prospective
purchaser at a price per share of $15.0875 for aggregate proceeds of
$4,999,997.50 (before our expenses). These shares will be delivered in New
York, New York on September 20, 2000.
The date of this prospectus supplement is September 20, 2000.
<PAGE>
TABLE OF CONTENTS
Page
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Prospectus Supplement
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The Company............................................................... S-3
Use of Proceeds........................................................... S-3
Plan of Distribution...................................................... S-3
Forward-Looking Statements................................................ S-3
Prospectus
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Risk Factors.................................................................2
Available Information.......................................................11
Incorporation of Certain Documents by Reference.............................12
The Company.................................................................13
Use of Proceeds.............................................................13
Ratios of Earnings to Fixed Charges and Preferred Stock Dividends...........13
Description of Debt Securities..............................................14
Description of Common Stock.................................................26
Description of Preferred Stock..............................................27
Description of Depositary Shares............................................35
Restrictions on Ownership of Capital Stock..................................38
Description of Warrants.....................................................40
Plan of Distribution........................................................41
Legal Matters...............................................................42
Experts.....................................................................42
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You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. This
information is accurate only as of its date. Our business, prospects,
financial condition and results of operations may have changed since then. We
have not authorized any person to provide you with different or additional
information. If anyone provides you with different or additional information,
you should not rely on it. We are not making an offer to sell these securities
in any jurisdiction where the offer or sale is not permitted.
The information in this prospectus supplement may not contain all of the
information that may be important to you. You should read the entire
prospectus supplement and the accompanying prospectus, including "Risk
Factors" beginning on page 2 of the accompanying prospectus, as well as the
documents incorporated by reference in this prospectus supplement and the
accompanying prospectus, before making an investment decision to purchase
shares of our common stock. All references to "we," "us" or the "Company" in
this prospectus supplement and the accompanying prospectus mean FrontLine
Capital Group and all entities owned or controlled by FrontLine Capital Group,
except where it is made clear that the term means only the parent company.
<PAGE>
THE COMPANY
We are a publicly traded operating company that acquires interests in and
develops a network of business-to-business, or B2B, e-commerce and e-services
Internet companies focused on serving small and medium-sized enterprises, or
SMEs, including independent professionals, entrepreneurs and the mobile
workforces of larger companies.
We are a Delaware corporation. Our principal executive office is located
at 1350 Avenue of the Americas, New York, New York 10019 and our telephone
number is (212) 931-8000.
USE OF PROCEEDS
The net proceeds from the sale of the 331,400 shares of common stock
offered hereby will be approximately $4.99 million, before the deduction of
estimated offering expenses of $30,000 payable by us.
We intend to use the net proceeds from the offering for general corporate
purposes.
PLAN OF DISTRIBUTION
We are offering the shares of common stock directly to the prospective
purchaser at the price set forth on the cover page of this prospectus
supplement.
The prospective purchaser will agree not to offer or sell any of the
shares of common stock offered hereby for a period of six months from the date
of issuance of the common stock without our prior written consent, subject to
certain exceptions. Following such period, for an additional six month period,
the prospective purchaser will be limited on the amount of such shares it may
sell or transfer on any single trading day to no more than 20% of the average
of the daily trading volume of our common stock on the Nasdaq National Market
for the preceding 30 trading days.
FORWARD-LOOKING STATEMENTS
Information contained or incorporated by reference in this prospectus
supplement and the accompanying prospectus may constitute forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties and assumptions about us and our partner companies, including,
among other things:
o development of an e-commerce market;
o our ability to identify trends in our markets and the markets of our
partner companies and to offer new solutions that address the
changing needs of these markets;
o our ability to successfully execute our business model;
o our partner companies' ability to compete successfully against
direct and indirect competitors;
o our ability to successfully integrate our partner companies into a
collaborative network;
o our ability to acquire interests in additional companies; and
o our ability to finance our business opportunities.
We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. In light of these risks, uncertainties and assumptions,
the events referred to in the forward-looking statements might not occur.
PROSPECTUS
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$318,323,750
FRONTLINE CAPITAL GROUP
Common Stock, Common Stock Warrants,
Preferred Stock, Preferred Stock Warrants, Depositary Shares
and Debt Securities
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FrontLine Capital Group may offer up to $318,323,750 of shares of our
common stock, shares of our preferred stock, depositary shares representing
interests in our preferred stock, warrants to purchase shares of our common
stock (including rights to purchase our common stock) or preferred stock and
our debt securities in one or more series. Our common stock is listed on the
Nasdaq National Market under the symbol "FLCG"
We may offer the securities at prices and on terms to be set forth in one
or more supplements to this prospectus. The securities may be offered
directly, through agents on our behalf or through underwriters or dealers.
See "Risk Factors" beginning on page 2 of this prospectus for a
description of risks that should be considered by purchasers of the
securities.
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.
The date of this prospectus is September 20, 2000.
<PAGE>
RISK FACTORS
This prospectus contains forward-looking statements which involve risks
and uncertainties. Our actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
a difference include, but are not limited to, those discussed below. 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 and the related prospectus
supplement before purchasing the securities offered by the related prospectus
supplement.
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 is not necessarily indicative of
our or our subsidiaries' future consolidated financial condition or results of
operations.
Certain members of our executive management lack experience in our investment
sectors
Certain members of our executive management, including our president and
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 executive 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
executive and senior management who have relevant experience and we may retain
the management of businesses that we acquire, prior to our spin-off from
Reckson Associates the primary experience of these officers was 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, business to business ("B2B") e-commerce and e-services entities
(each, a "partner company"). In addition, Reckson Strategic Venture Partners,
LLC, our subsidiary ("Reckson Strategic Venture Partners"), may also expand
through the acquisition of real estate and real estate operating companies.
The success of our growth strategies will depend on our ability to identify
and acquire attractive business opportunities on favorable terms 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 also 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
Acquisitions are 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 that acquisitions will be efficiently and adequately
integrated. Significant competition may exist for targeted acquisitions. Some
of the entities 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 better capitalized and have greater access to capital.
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 entities may be significant and non-recoverable.
Furthermore, we cannot assure that acquisitions will not result in additional
losses.
The acquisition of interests in start-up or early stage entities,
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 entities in an early stage of development
or with little or no operating history, entities operating at a loss or with
substantial variations in operating results from period to period, and
entities with the need for substantial additional capital to support expansion
or to achieve or maintain a competitive position. Such entities may face
intense competition, including competition from entities 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 entities in rapidly
changing high-technology and Internet fields; such entities may face special
risks of product obsolescence and may encounter intense competition from other
entities financed by venture capitalists. In addition, start-up entities may
require significant additional capital contributions from us.
We may hold our interests in start-up or early stage entities for an
indefinite period of time; and it may take several years from the date of our
initial acquisition of any such interest, if ever, for the start-up entity 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 any 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 partner companies may seek to
complete initial public offerings of their common stock. No assurance can be
given that such partner companies will be successful. 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.
We are highly dependent upon Reckson Operating Partnership for financing
We rely significantly on Reckson Operating Partnership, L.P. ("Reckson
Operating Partnership") for the financing of our operations. As a result, if
Reckson Operating Partnership 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 condition, results of operations, business or prospects, it may
substantially and adversely affect our ability to pursue business
opportunities and our financial condition and performance. 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 has an employment agreement with the 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. Certain members of our executive management, including our president
and chief executive officer, 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 contracts with 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 interest with Reckson Associates
Conflicts as a result of overlapping management. Certain members of our
executive management, including our president and chief executive officer,
serve in similar capacities for Reckson Associates. In addition, three members
of our Board of Directors (including our President and Chief Executive
Officer) 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 June 30, 2000, Reckson
Associates' senior management and directors beneficially owned approximately
12.25% of the outstanding common stock of Reckson Associates and approximately
18.28% of our outstanding common stock. In calculating the ownership of common
stock of Reckson Associates, we have included Reckson Associates' Class A
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 Class A and Class B 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 common stock 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 equity 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. 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 which we present to
Reckson Operating Partnership and which it elects to pursue. As a result, our
and our affiliates' business and future opportunities are restricted.
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
and it is required to enter into a "master" lease arrangement. Pursuant to
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
"FrontLine 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 us under a credit
agreement with terms substantially identical to those under the FrontLine
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 FrontLine 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
FrontLine Facility has a term of five years and advances thereunder are
recourse obligations of the Company. Interest accrues on advances made under
the FrontLine 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 principal is prepayable without penalty only at our
option.
Subject to the amendments described below, as long as there are
outstanding advances under the FrontLine 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 FrontLine 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 FrontLine 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 June 30, 2000, borrowings under the FrontLine Facility aggregated
approximately $92.7 million and pursuant to the Reckson Strategic Venture
Partners Commitment, Reckson Operating Partnership had made approximately
$29.4 million in joint venture investments with Reckson Strategic Venture
Partners and had loaned approximately $38.5 million under the credit
agreement.
In November 1999, the credit facilities were amended to allow us to incur
up to $135 million in debt secured by our 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 us. As consideration for the amendments, which were
approved by our Board of Directors and that of Reckson Associates, we paid a
fee to Reckson Operating Partnership of approximately $3.6 million in the form
of approximately 176,000 shares of our common stock. In November and December
1999, we borrowed approximately $60 million on a secured basis in connection
with the increase in our holdings in the predecessor to HQ, which borrowing
was subsequently repaid in full. In addition, we obtained a $25 million line
of credit from a commercial lender in connection with certain obligations
relating to HQ. The line of credit is secured by shares that we hold in HQ
Global and was recently expanded to allow us to use proceeds for general
corporate purposes.
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
not our affiliates. These policies do not prohibit sales of assets to or from
affiliates, but would require the sales to be approved by our independent
directors. 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
entities 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 entities. 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 entities 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 interests in joint
ventures and 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 we nor
our partner or co-venturer 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, as amended (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, financial condition and results of operations.
Our holdings in OnSite Access, Inc., a company with a limited operating
history, expose us to regulatory risks; the risk of technological obsolescence
and other risks
Our holdings include an interest in OnSite Access, Inc. ("OnSite"), 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 cannot assure that governmental regulations that adversely
affect our investment will not be passed. Additionally, the industry is
constantly undergoing rapid change and technological innovation. OnSite is
therefore subject to the risk that its services could become obsolete.
On December 15, 1999, OnSite filed a registration statement on Form S-1
with the Commission covering the initial public offering of its common stock.
There can be no assurance that the OnSite initial public offering will be
consummated or, if consummated, the timing or terms of such offering.
Our holdings in HQ Global Workplaces, Inc. expose us to real estate,
operational and financial risks
Our largest holding is common stock of HQ Global Holdings, Inc. ("HQ
Global"), the parent company of HQ Global Workplaces, Inc. ("HQ"). HQ is the
largest provider of flexible officing solutions in the world, with more than
2,500 employees, 65,000 clients and over 470 business centers in 17 countries.
HQ is a newly-formed company resulting from the merger of our partner company,
VANTAS Incorporated ("VANTAS"), and HQ Global Workplaces, Inc. ("Old HQ"). HQ
provides tenants with furnished office suites and immediate support services,
including but not limited to, secretarial services, telecommunication services
and conference facilities. The executive office suites industry is subject to
risks comparable to those of 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 holdings in HQ. Our holdings in HQ are also subject to
the additional risks that the combined company may not perform as we
anticipate and VANTAS' and Old HQ's operations may not be effectively
integrated.
HQ Global has issued an aggregate of $220 million of convertible
preferred stock which it is required to redeem in November 2007. As of June
30, 2000, HQ has borrowed $240 million in senior debt which has a final
maturity date in November 2005. HQ also has $125 million of mezzanine debt
outstanding that is due in May 2007.
In addition, we obtained a $25 million line of credit from a commercial
lender in connection with certain obligations relating to HQ. The line of
credit is secured by shares that we hold in HQ Global and was recently
expanded to allow us to use proceeds for general corporate purposes.
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. Furthermore, payment of dividends
on our common stock is prohibited under our credit facilities until all
amounts outstanding under the credit facilities are paid in full. In addition,
the payment of dividends on our common stock is prohibited unless full
distributions have been paid on our Series A convertible cumulative preferred
stock, liquidation preference $1,000 per share (the "Series A Preferred
Stock").
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 HQ and 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 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 the 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. As of September 19, 2000, there were 26,000 shares
of our Series A Preferred Stock outstanding. 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.
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
under the Securities Act with respect to the securities. This prospectus does
not contain all of the information set forth in the registration statement,
certain parts of which have been omitted in accordance with the rules and
regulations of the Commission. For further information regarding us and the
securities, reference is made to the registration statement, including the
exhibits filed as a part thereof, and the documents incorporated by reference
in this prospectus. Statements made in this prospectus as to the contents of
any contract, agreement or other document referred to are not necessarily
complete; with respect to each contract, agreement or other document filed as
an exhibit to the registration statement or to an Exchange Act report,
reference is made to the exhibit for a more complete description of the matter
involved, and each statement shall be deemed qualified in its entirety by
reference. Copies of the registration statement and the exhibits may be
inspected, without charge, at the offices of the Commission, or obtained at
prescribed rates from the Public Reference Section of the Commission at the
address set forth above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents that we have previously filed with the Commission
are hereby incorporated by reference into this prospectus:
SEC Filings (File No. 0-30162) Period
------------------------------ ------
Annual Report on Form 10-K Year ended December 31, 1999
Quarterly Reports on Form 10-Q Quarters ended March 31, 2000 and
June 30, 2000
Current Reports on Form 8-K Filed January 25, 2000, February 15,
(including Form 8-K/A) 2000, March 2, 2000, March 2, 2000,
March 28, 2000, May 12, 2000, June 16,
2000 and August 15, 2000
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 FrontLine Capital Group, 1350 Avenue of the
Americas, New York, New York 10019, Attn: James Burnham, Senior Vice
President, telephone number (212) 931-8000.
THE COMPANY
We were formed in July 1997 as a subsidiary of Reckson Associates and our
shares of common stock were spun off to shareholders of Reckson Associates in
June 1998. In March 2000, we changed our name from Reckson Service Industries,
Inc. to FrontLine Capital Group.
We are a Delaware corporation. Our principal executive office is located
at 1350 Avenue of the Americas, New York, New York 10019, and our telephone
number is (212) 931-8000.
USE OF PROCEEDS
Unless otherwise specified in the applicable prospectus supplement, the
net proceeds from the sale of the securities offered by the applicable
prospectus supplement will be used for general corporate purposes, including
the repayment of existing indebtedness, in each case, as described in detail
in the prospectus supplement depending on the circumstances at the time of the
related offering.
RATIOS OF EARNINGS TO FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
The following table sets forth the deficiencies in (i) the coverage of
fixed charges by earnings before fixed charges and (ii) fixed charges and
preferred stock dividends by earnings before fixed charges and preferred stock
dividends for the periods shown (in thousands):
<TABLE>
<CAPTION>
Six Months Ended Year Ended December 31,
----------------------- -----------------------------------------------------------
June 30, 2000 1999 1998 1997
------------- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Deficiency in the coverage of
fixed charges by earnings before
fixed charges(1).................. $(104,194) $(61,478) $(8,147) $(258)
Deficiency in the coverage of fixed
charges and preferred stock dividends
by earnings before fixed charges and
preferred stock dividends(2)...... $(105,117) -- -- --
__________________________
(1) These deficiencies represent our pre-tax loss after adjustment for our equity in the loss of Partner Companies
and other ownership interest.
(2) These deficiencies represent our pre-tax loss after adjustment for our equity in the loss of Partner Companies
and other ownership interest and preferred stock dividends. Prior to January 2000, we did not pay any preferred
stock dividends.
</TABLE>
DESCRIPTION OF DEBT SECURITIES
The debt securities covered by this prospectus (the "Debt Securities")
will be issued under an Indenture (the "Indenture") among the Company and the
trustee named therein (the "Trustee"). The form of Indenture has been filed as
an exhibit to the Registration Statement of which this prospectus is a part
and is available for inspection at the corporate trust office of the trustee.
The Indenture is subject to, and governed by, the Trust Indenture Act of 1939,
as amended (the "TIA"). The statements made hereunder relating to the
Indenture and the Debt Securities to be issued thereunder are summaries of the
material provisions thereof and do not purport to be complete and are subject
to, and are qualified in their entirety by reference to, all provisions of the
Indenture and the Debt Securities. All section references appearing herein are
to sections of the Indenture, and capitalized terms used but not defined
herein shall have the respective meanings set forth in the Indenture.
General
The Debt Securities will be direct, unsecured obligations of the Company
and will rank equally with all other unsecured and unsubordinated indebtedness
of the Company. The Debt Securities may be issued without limit as to
aggregate principal amount, in one or more series, in each case as established
from time to time in or pursuant to authority granted by a resolution of the
Board of Directors of the Company, or as established in one or more indentures
supplemental to the Indenture. All Debt Securities of one series need not be
issued at the same time and, unless otherwise provided, a series may be
reopened, without the consent of the holders of the Debt Securities of the
series, for issuances of additional Debt Securities of the same series.
The Indenture provides that there may be more than one Trustee
thereunder, each with respect to one or more series of Debt Securities. Any
Trustee under the Indenture may resign or be removed with respect to one or
more series of Debt Securities, and a successor Trustee may be appointed to
act with respect to the series. In the event that two or more persons are
acting as Trustee with respect to different series of Debt Securities, each
Trustee shall be a trustee of a trust under the Indenture separate and apart
from the trust administered by any other Trustee, and, except as otherwise
indicated herein, any action described herein to be taken by a Trustee may be
taken by each Trustee with respect to, and only with respect to, the one or
more series of Debt Securities for which it is Trustee under the Indenture.
Reference is made to the prospectus supplement relating to the series of
Debt Securities being offered for the specific terms thereof, including:
(1) the title of the Debt Securities;
(2) the aggregate principal amount of the Debt Securities and any limit
on the aggregate principal amount;
(3) the percentage of the principal amount at which the Debt Securities
will be issued and, if other than the principal amount thereof, the
portion of the principal amount thereof payable upon declaration of
acceleration of the maturity thereof;
(4) the date or dates, or the method for determining the date or dates,
on which the principal of such Debt Securities will be payable;
(5) the rate or rates (which may be fixed or variable), or the method by
which the rate or rates shall be determined, at which the Debt
Securities will bear interest, if any;
(6) the date or dates, or the method for determining the date or dates,
from which any interest will accrue, the dates on which any interest
will be payable, the record dates for such interest payment dates,
or the method by which any date shall be determined, the person to
whom the interest shall be payable, and the basis upon which
interest shall be calculated if other than that of a 360-day year of
twelve 30-day months;
(7) the place or places where the principal of (and premium, if any) and
interest, if any, on the Debt Securities will be payable, the Debt
Securities may be surrendered for registration of transfer or
exchange and notices or demands to or upon the Company in respect of
the Debt Securities and the Indenture may be served;
(8) the date or dates on which or the period or periods within which,
the price or prices at which and the terms and conditions upon which
the Debt Securities may be redeemed, as a whole or in part, at the
option of the Company, if it is to have an option;
(9) the obligation, if any, of the Company to redeem, repay or purchase
the Debt Securities pursuant to any sinking fund or analogous
provision or at the option of a holder thereof, and the date or
dates on which or the period or periods within which, the price or
prices at which and the terms and conditions upon which the Debt
Securities will be redeemed, repaid or purchased, as a whole or in
part, pursuant to its obligation;
(10) if other than U.S. dollars, the currency or currencies in which the
Debt Securities are denominated and payable, which may be a foreign
currency or units of two or more foreign currencies or a composite
currency or currencies, and the terms and conditions relating
thereto;
(11) whether the amount of payments of principal of (and premium, if any)
or interest, if any, on the Debt Securities may be determined with
reference to an index, formula or other method (which index, formula
or method may, but need not be, based on a currency, currencies,
currency unit or units or composite currency or currencies) and the
manner in which the amounts shall be determined;
(12) any additional events of default or covenants of the Debt
Securities;
(13) whether the Debt Securities will be issued in certificated and/or
book-entry form;
(14) whether the Debt Securities will be in registered or bearer form
and, if in registered form, the denominations thereof if other than
$1,000 and any integral multiple thereof and, if in bearer form, the
denominations thereof if other than $5,000 and terms and conditions
relating thereto;
(15) if the defeasance and covenant defeasance provisions described
herein are to be inapplicable or any modification of these
provisions;
(16) if the Debt Securities are to be issued upon the exercise of debt
warrants, the time, manner and place for the Debt Securities to be
authenticated and delivered;
(17) whether and under what circumstances the Company will pay additional
amounts on the Debt Securities in respect of any tax, assessment or
governmental charge and, if so, whether the Company will have the
option to redeem such Debt Securities in lieu of making a payment;
(18) if other than the Trustee, the identity of each security registrar
and/or paying agent; and
(19) any other material terms of the Debt Securities.
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities"). If material or applicable, special
U.S. federal income tax, accounting and other considerations applicable to
Original Issue Discount Securities will be described in the applicable
prospectus supplement.
Except with respect to a covenant limiting the incurrence of
indebtedness, a covenant requiring a certain percentage of unencumbered assets
and a covenant requiring any successor in a business combination with the
Company to assume all of the obligations of the Company under the Indenture,
the Indenture does not contain any other provisions that would limit the
ability of the Company to incur indebtedness or that would afford Holders of
the Debt Securities protection in the case of any of the following events:
o a highly leveraged or similar transaction involving the Company, the
management of the Company, or any affiliate of any these parties;
o a change of control; or
o a reorganization, restructuring, merger or similar transaction
involving the Company that may adversely affect the Holders of the
Debt Securities.
In addition, subject to the covenants referred to above, the Company may,
in the future, enter into certain transactions, such as the sale of all or
substantially all of its assets or the merger or consolidation of the Company,
that would increase the amount of the Company's indebtedness or substantially
reduce or eliminate the Company's assets, which may have an adverse effect on
the Company's ability to service its indebtedness, including the Debt
Securities. In addition, restrictions on ownership and transfers of the
Company's common stock and preferred stock may act to prevent or hinder a
change of control. See "Description of Common Stock--Restrictions on
Ownership" and "Description of Preferred Stock--Restrictions on Ownership."
Denominations, Interest, Registration and Transfer
Unless otherwise described in the applicable prospectus supplement, the
Debt Securities of any series which are registered securities, other than
registered securities issued in global form (which may be of any
denomination), shall be issuable in denominations of $1,000 and any integral
multiple thereof and the Debt Securities which are bearer securities, other
than bearer securities issued in global form (which may be of any
denomination), shall be issuable in denominations of $5,000.
Unless otherwise specified in the applicable prospectus supplement, the
principal of (and premium, if any) and interest on any series of Debt
Securities will be payable at the corporate trust office of the Trustee
provided that, at the option of the Company, payment of interest may be made
by check mailed to the address of the Person entitled thereto as it appears in
the applicable Security Register or by wire transfer of funds to the Person at
an account maintained within the United States.
Any interest not punctually paid or duly provided for on any Interest
Payment Date with respect to a Debt Security ("Defaulted Interest") will
forthwith cease to be payable to the Holder on the applicable Regular Record
Date and may either be paid to the Person in whose name the Debt Security is
registered at the close of business on a special record date (the "Special
Record Date") for the payment of the Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to the Holder of the Debt Security not
less than 10 days prior to the Special Record Date, or may be paid at any time
in any other lawful manner, all as more completely described in the Indenture.
Subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for
other Debt Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations upon surrender of the
Debt Securities at the corporate trust office of the Trustee referred to
above. In addition, subject to certain limitations imposed upon Debt
Securities issued in book-entry form, the Debt Securities of any series may be
surrendered for registration of transfer thereof at the corporate trust office
of the Trustee referred to above. Every Debt Security surrendered for
registration of transfer or exchange shall be duly endorsed or accompanied by
a written instrument of transfer. No service charge will be made for any
registration of transfer or exchange of any Debt Securities, but the Trustee
or the Company may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith. If the applicable
prospectus supplement refers to any transfer agent (in addition to the
Trustee) initially designated by the Company with respect to any series of
Debt Securities, the Company may at any time rescind the designation of any
transfer agent or approve a change in the location through which any transfer
agent acts, except that the Company will be required to maintain a transfer
agent in each place of payment for the series. The Company may at any time
designate additional transfer agents with respect to any series of Debt
Securities.
Neither the Company nor the Trustee shall be required to:
o issue, register the transfer of or exchange any Debt Security if the
Debt Security may be among those selected for redemption during a
period beginning at the opening of business 15 days before selection
of the Debt Securities to be redeemed and ending at the close of
business on the day of selection;
o register the transfer of or exchange any Registered Security so
selected for redemption in whole or in part, except, in the case of
any Registered Security to be redeemed in part, the portion thereof
not to be redeemed;
o exchange any Bearer Security so selected for redemption except that
the Bearer Security may be exchanged for a Registered Security of
that series and like tenor, provided that the Registered Security
shall be simultaneously surrendered for redemption; or
o issue, register the transfer of or exchange any Security which has
been surrendered for repayment at the option of the Holder, except
the portion, if any, of the Debt Security not to be so repaid.
Merger, Consolidation or Sale
The Company may consolidate with, or sell, lease or convey all or
substantially all of its assets to, or merge with or into, any other entity,
provided that the following conditions are met:
o the Company shall be the continuing entity, or the successor entity
(if other than the Company) formed by or resulting from any
consolidation or merger or which shall have received the transfer of
assets shall expressly assume payment of the principal of (and
premium, if any) and interest on all the Debt Securities and the due
and punctual performance and observance of all of the covenants and
conditions contained in the Indenture;
o immediately after giving effect to the transaction, no Event of
Default under the Indenture, and no event which, after notice or the
lapse of time, or both, would become an Event of Default, shall have
occurred and be continuing; and
o an officer's certificate and legal opinion covering these conditions
shall be delivered to the Trustee.
Events of Default, Notice and Waiver
The Indenture provides that the following events are "Events of Default"
with respect to any series of Debt Securities issued thereunder:
(a) default for 30 days in the payment of any installment of interest on
any Debt Security of the series;
(b) default in the payment of the principal of (or premium, if any, on)
any Debt Security of the series at its maturity;
(c) default in making any sinking fund payment as required for any Debt
Security of the series;
(d) default in the performance of any other covenant of the Company
contained in the Indenture (other than a covenant added to the
Indenture solely for the benefit of a series of Debt Securities
issued thereunder other than the series), the default having
continued for 60 days after written notice as provided in the
Indenture;
(e) the Company, any subsidiary in which the Company has invested, or is
committed or otherwise obligated to invest, at least $20,000,000 in
capital or any entity in which the Company is the general partner
shall fail to pay any principal of, premium or interest on or any
other amount payable in respect of, any recourse Indebtedness that
is outstanding in a principal or notional amount of at least
$20,000,000 (or the equivalent thereof in one or more other
currencies), either individually or in the aggregate (but excluding
Indebtedness outstanding hereunder), of the Company and its
consolidated Subsidiaries, taken as a whole, when the same becomes
due and payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), and the failure shall continue
after the applicable grace period, if any, specified in any
agreement or instrument relating to the Indebtedness, or any other
event shall occur or condition shall exist under any agreement or
instrument evidencing, securing or otherwise relating to any the
Indebtedness and shall continue after the applicable grace period,
if any, specified in the agreement or instrument, if the effect of
the event or condition is to accelerate, or to permit the
acceleration of, the maturity of the Indebtedness or otherwise to
cause, or to permit the holder or holders thereof (or a trustee or
agent on behalf of the holders) to cause the Indebtedness to mature
prior to its stated maturity;
(f) certain events of bankruptcy, insolvency or reorganization, or court
appointment of a receiver, liquidator or trustee of the Company or
any Significant Subsidiary or any of their respective property;
(g) any other Event of Default provided with respect to a particular
series of Debt Securities.
If an Event of Default under the Indenture with respect to Debt
Securities of any series at the time Outstanding occurs and is continuing,
then in every case the Trustee or the Holders of not less than 25% in
principal amount of the Outstanding Debt Securities of that series may declare
the principal amount (or, if the Debt Securities of that series are Original
Issue Discount Securities or Indexed Securities, the portion of the principal
amount as may be specified in the terms thereof) of all of the Debt Securities
of that series to be due and payable immediately by written notice thereof to
the Company (and to the Trustee if given by the Holders). However, at any time
after the declaration of acceleration with respect to Debt Securities of the
series (or of all Debt Securities then Outstanding under the Indenture, as the
case may be) has been made, but before a judgment or decree for payment of the
money due has been obtained by the Trustee, the Holders of not less than a
majority in principal amount of Outstanding Debt Securities of the series (or
of all Debt Securities then Outstanding under the Indenture, as the case may
be) may rescind and annul the declaration and its consequences if:
1. the Company shall have deposited with the Trustee all required
payments of the principal of (and premium, if any) and interest on
the Debt Securities of the series (or of all Debt Securities then
outstanding under the Indenture, as the case may be), plus certain
fees, expenses, disbursements and advances of the Trustee; and
2. all Events of Default, other than the non-payment of accelerated
principal of (or specified portion thereof), or premium (if any) or
interest on the Debt Securities of the series (or of all Debt
Securities then Outstanding under the Indenture, as the case may be)
have been cured or waived as provided in the Indenture.
The Indenture also provides that the Holders of not less than a majority
in principal amount of the Outstanding Debt Securities of any series (or of
all Debt Securities then Outstanding under the Indenture, as the case may be)
may waive any past default with respect to the series and its consequences,
except a default
o in the payment of the principal of (or premium, if any) or interest
on any Debt Security of the series or
o in respect of a covenant or provision contained in the Indenture
that cannot be modified or amended without the consent of the Holder
of each Outstanding Debt Security affected thereby.
The Trustee will be required to give notice to the Holders of Debt
Securities within 90 days of a default under the Indenture unless the default
has been cured or waived; provided, however, that the Trustee may withhold
notice to the Holders of any series of Debt Securities of any default with
respect to the series (except a default in the payment of the principal of (or
premium, if any) or interest on any Debt Security of the series or in the
payment of any sinking fund installment in respect of any Debt Security of the
series) if specified Responsible Officers of the Trustee consider the
withholding to be in the interest of the Holders.
The Indenture provides that no Holders of Debt Securities of any series
may institute any proceedings, judicial or otherwise, with respect to the
Indenture or for any remedy thereunder, except in the case of failure of the
Trustee, for 60 days, to act after it has received a written request to
institute proceedings in respect of an Event of Default from the Holders of
not less than 25% in principal amount of the Outstanding Debt Securities of
the series, as well as an offer of reasonable indemnity. This provision will
not prevent, however, any holder of Debt Securities from instituting suit for
the enforcement of payment of the principal of (and premium, if any) and
interest on the Debt Securities at the respective due dates thereof.
Subject to provisions in the Indenture relating to its duties in case of
default, the Trustee is under no obligation to exercise any of its rights or
powers under the Indenture at the request or direction of any Holders of any
series of Debt Securities then Outstanding under the Indenture, unless the
Holders shall have offered to the Trustee thereunder reasonable security or
indemnity. The Holders of not less than a majority in principal amount of the
Outstanding Debt Securities of any series (or of all Debt Securities then
Outstanding under the Indenture, as the case may be) shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or of exercising any trust or power conferred upon
the Trustee. However, the Trustee may refuse to follow any direction which is
in conflict with any law or the Indenture, or which may be unduly prejudicial
to the Holders of Debt Securities of the series not joining therein.
Within 120 days after the close of each fiscal year, the Company must
deliver a certificate of an officer certifying to the Trustee whether or not
the officer has knowledge of any default under the Indenture and, if so,
specifying each default and the nature and status thereof.
Modification of the Indenture
Modifications and amendments of the Indenture will be permitted to be
made only with the consent of the Holders of not less than a majority in
principal amount of all Outstanding Debt Securities or series of Outstanding
Debt Securities which are affected by the modification or amendment; provided,
however, that no modification or amendment may, without the consent of the
Holder of each Debt Security affected thereby:
o change the Stated Maturity of the principal of, or premium (if any)
or any installment of interest on, any Debt Security, reduce the
principal amount of, or the rate or amount of interest on, or any
premium payable on redemption of, any Debt Security, or reduce the
amount of principal of an Original Issue Discount Security that
would be due and payable upon declaration of acceleration of the
maturity thereof or would be provable in bankruptcy, or adversely
affect any right of repayment of the holder of any Debt Security,
change the place of payment, or the coin or currency, for payment of
principal of, premium, if any, or interest on any Debt Security or
impair the right to institute suit for the enforcement of any
payment on or with respect to any Debt Security;
o reduce the above-stated percentage of outstanding Debt Securities of
any series necessary to modify or amend the Indenture, to waive
compliance with certain provisions thereof or certain defaults and
consequences thereunder or to reduce the quorum or voting
requirements set forth in the Indenture;
o modify any of the foregoing provisions or any of the provisions
relating to the waiver of certain past defaults or certain
covenants, except to increase the required percentage to effect the
action or to provide that certain other provisions may not be
modified or waived without the consent of the Holder of the Debt
Security.
In addition to the Company's obligation to pay the principal of, and
premium (if any) and interest on, the Debt Securities, the Debt Securities of
a series may be entitled to the benefits of additional covenants. Neither the
Company nor the Trustee may waive compliance with such additional covenants
unless the Holders of not less than a majority in principal amount of a series
of Outstanding Debt Securities consent to the waiver.
Modifications and amendments of the Indenture will be permitted to be
made by the Company and the Trustee without the consent of any Holder of Debt
Securities for any of the following purposes:
1. to evidence the succession of another Person to the Company as
obligor under the Indenture;
2. to add to the covenants of the Company for the benefit of the
Holders of all or any series of Debt Securities or to surrender any
right or power conferred upon the Company in the Indenture;
3. to add Events of Default for the benefit of the Holders of all or
any series of Debt Securities;
4. to add or change any provisions of the Indenture to facilitate the
issuance of, or to liberalize certain terms of, Debt Securities in
bearer form, or to permit or facilitate the issuance of Debt
Securities in uncertificated form, provided that this action shall
not adversely affect the interests of the Holders of the Debt
Securities of any series in any material respect;
5. to amend or supplement any provisions of the Indenture, provided
that no amendment or supplement shall materially adversely affect
the interests of the Holders of any Debt Securities then
Outstanding;
6. to secure the Debt Securities;
7. to establish the form or terms of Debt Securities of any series;
8. to provide for the acceptance of appointment by a successor Trustee
or facilitate the administration of the trusts under the Indenture
by more than one Trustee;
9. to cure any ambiguity, defect or inconsistency in the Indenture,
provided that this action shall not adversely affect the interests
of Holders of Debt Securities of any series in any material respect;
or
10. to supplement any of the provisions of the Indenture to the extent
necessary to permit or facilitate defeasance and discharge of any
series of the Debt Securities, provided that the action shall not
adversely affect the interests of the Holders of the Debt Securities
of any series in any material respect.
In determining whether the Holders of the requisite principal amount of
Outstanding Debt Securities of a series have given any request, demand,
authorization, direction, notice, consent or waiver thereunder or whether a
quorum is present at a meeting of Holders of Debt Securities, the Indenture
provides that:
1. the principal amount of an Original Issue Discount Security that
shall be deemed to be Outstanding shall be the amount of the
principal thereof that would be due and payable as of the date of
the determination upon declaration of acceleration of the maturity
thereof;
2. the principal amount of a Debt Security denominated in a foreign
currency that shall be deemed Outstanding shall be the U.S. dollar
equivalent, determined on the issue date for the Debt Security, of
the principal amount (or, in the case of an Original Issue Discount
Security, the U.S. dollar equivalent on the issue date of the Debt
Security of the amount determined as provided in (1) above);
3. the principal amount of an Indexed Security that shall be deemed
Outstanding shall be the principal face amount of the Indexed
Security at original issuance, unless otherwise provided with
respect to the Indexed Security pursuant to the Indenture; and
4. Debt Securities owned by the Company or any other obligor upon the
Debt Securities or any affiliate of the Company or of the other
obligor shall be disregarded.
The Indenture contains provisions for convening meetings of the Holders
of Debt Securities of a series. A meeting will be permitted to be called at
any time by the Trustee, and also, upon request, by the Company or the Holders
of at least 10% in principal amount of the Outstanding Debt Securities of the
series, in any case upon notice given as provided in the Indenture. Except for
any consent that must be given by the Holder of each Debt Security affected by
certain modifications and amendments of the Indenture, any resolution
presented at a meeting or adjourned meeting duly reconvened at which a quorum
is present will be permitted to be adopted by the affirmative vote of the
Holders of a majority in principal amount of the Outstanding Debt Securities
of that series; provided, however, that, except as referred to above, any
resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that may be made, given or taken by
the Holders of a specified percentage, which is less than a majority, in
principal amount of the Outstanding Debt Securities of a series may be adopted
at a meeting or adjourned meeting duly reconvened at which a quorum is present
by the affirmative vote of the Holders of the specified percentage in
principal amount of the Outstanding Debt Securities of that series. Any
resolution passed or decision taken at any meeting of Holders of Debt
Securities of any series duly held in accordance with the Indenture will be
binding on all Holders of Debt Securities of that series. The quorum at any
meeting called to adopt a resolution, and at any reconvened meeting, will be
Persons holding or representing a majority in principal amount of the
Outstanding Debt Securities of a series; provided, however, that if any action
is to be taken at the meeting with respect to a consent or waiver which may be
given by the Holders of not less than a specified percentage in principal
amount of the Outstanding Debt Securities of a series, the Persons holding or
representing the specified percentage in principal amount of the Outstanding
Debt Securities of the series will constitute a quorum.
Notwithstanding the foregoing provisions, any action to be taken at a
meeting of Holders of Debt Securities of any series with respect to any action
that the Indenture expressly provides may be taken by the Holders of a
specified percentage which is less than a majority in principal amount of the
Outstanding Debt Securities of a series may be taken at a meeting at which a
quorum is present by the affirmative vote of Holders of the specified
percentage in principal amount of the Outstanding Debt Securities of the
series.
Discharge, Defeasance and Covenant Defeasance
The Company may discharge certain obligations to Holders of any series of
Debt Securities that have not already been delivered to the Trustee for
cancellation and that either have become due and payable or will become due
and payable within one year (or scheduled for redemption within one year) by
irrevocably depositing with the Trustee, in trust, funds in the currency or
currencies, currency unit or units or composite currency or currencies in
which the Debt Securities are payable in an amount sufficient to pay the
entire indebtedness on the Debt Securities in respect of principal (and
premium, if any) and interest to the date of the deposit (if the Debt
Securities have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be.
The Indenture provides that, unless these provisions are made
inapplicable to the Debt Securities of or within any series pursuant to the
Indenture, the Company may elect either (a) to defease and discharge itself
from any and all obligations with respect to the Debt Securities (except for
the obligation to pay additional amounts, if any, upon the occurrence of
certain events of tax, assessment or governmental charge with respect to
payments on the Debt Securities and the obligations to register the transfer
or exchange of Debt Securities, to replace temporary or mutilated, destroyed,
lost or stolen Debt Securities, to maintain an office or agency in respect of
the Debt Securities and to hold moneys for payment in trust) ("defeasance") or
(b) to release itself from their obligations with respect to the Debt
Securities under certain sections of the Indenture and, if provided pursuant
to the Indenture, their obligations with respect to any other covenant, and
any omission to comply with the obligations shall not constitute a default or
an Event of Default with respect to the Debt Securities ("covenant
defeasance"), in either case upon the irrevocable deposit by the Company with
the Trustee, in trust, of an amount, in the currency or currencies, currency
unit or units or composite currency or currencies in which the Debt Securities
are payable at Stated Maturity, or Government Obligations (as defined below),
or both, applicable to the Debt Securities which through the scheduled payment
of principal and interest in accordance with their terms will provide money in
an amount sufficient to pay the principal of (and premium, if any) and
interest on the Debt Securities, and any mandatory sinking fund or analogous
payments thereon, on the scheduled due dates therefor.
A trust will only be permitted to be established if, among other things,
the Company has delivered to the Trustee an Opinion of Counsel (as specified
in the Indenture) to the effect that the Holders of the Debt Securities will
not recognize income, gain or loss for U.S. federal income tax purposes as a
result of the defeasance or covenant defeasance and will be subject to U.S.
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if the defeasance or covenant defeasance had
not occurred, and the Opinion of Counsel, in the case of defeasance, must
refer to and be based upon a ruling of the Internal Revenue Service or a
change in applicable United States federal income tax law.
"Government Obligations" means securities which are (1) direct
obligations of the United States of America or the government which issued the
foreign currency in which the Debt Securities of a particular series are
payable, for the payment of which its full faith and credit is pledged or (2)
obligations of a person controlled or supervised by and acting as an agency or
instrumentality of the United States of America or the government which issued
the foreign currency in which the Debt Securities of the series are payable,
the payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America or other government, which, in
either case, are not callable or redeemable at the option of the issuer
thereof, and shall also include a depository receipt issued by a bank or trust
company as custodian with respect to any Government Obligation or a specific
payment of interest on or principal of any Government Obligation held by the
custodian for the account of the holder of a depository receipt, provided that
(except as required by law) the custodian is not authorized to make any
deduction from the amount payable to the holder of the depository receipt from
any amount received by the custodian in respect of the Government Obligation
or the specific payment of interest on or principal of the Government
Obligation evidenced by the depository receipt.
Unless otherwise provided in the applicable prospectus supplement, if
after the Company has deposited funds and/or Government Obligations to effect
defeasance or covenant defeasance with respect to Debt Securities of any
series:
(a) the Holder of a Debt Security of the series is entitled to, and does,
elect pursuant to the Indenture or the terms of the Debt Security to receive
payment in a currency, currency unit or composite currency other than that in
which the deposit has been made in respect of the Debt Security, or
(b) a Conversion Event (as defined below) occurs in respect of the
currency, currency unit or composite currency in which the deposit has been
made, the indebtedness represented by the Debt Security shall be deemed to
have been, and will be, fully discharged and satisfied through the payment of
the principal of (and premium, if any) and interest on the Debt Security as
they become due out of the proceeds yielded by converting the amount so
deposited in respect of the Debt Security into the currency, currency unit or
composite currency in which the Debt Security becomes payable as a result of
the election or the Conversion Event based on the applicable market exchange
rate.
"Conversion Event" means the cessation of use of:
o a currency, currency unit or composite currency both by the
government of the country which issued the currency and for the
settlement of transactions by a central bank or other public
institutions of or within the international banking community or
o the euro both within the European Monetary System and for the
settlement of transactions by public institutions of or within the
European Community.
Unless otherwise provided in the applicable prospectus supplement, all
payments of principal of (and premium, if any) and interest on any Debt
Security that is payable in a foreign currency that ceases to be used by its
government of issuance shall be made in U.S. dollars.
In the event the Company effects covenant defeasance with respect to any
Debt Securities and the Debt Securities are declared due and payable because
of the occurrence of any Event of Default other than the Event of Default
described in clause (d) under "Event of Default, Notice and Waiver" with
respect to sections no longer applicable to the Debt Securities or described
in clause (g) under "Events of Default, Notice and Waiver" with respect to any
other covenant as to which there has been covenant defeasance, the amount in
the currency, currency unit or composite currency in which the Debt Securities
are payable, and Government Obligations on deposit with the Trustee, will be
sufficient to pay amounts due on the Debt Securities at the time of their
Stated Maturity but may not be sufficient to pay amounts due on the Debt
Securities at the time of the acceleration resulting from the Event of
Default. However, the Company would remain liable to make payment of the
amounts due at the time of acceleration.
Governing Law
The Indenture and the Notes shall be governed by the laws of the State of
New York.
Conversion Rights
The terms and conditions, if any, upon which any Debt Securities are
convertible into debt securities or equity securities of the Company will be
set forth in the applicable prospectus supplement. The terms will include the
number or principal amount of securities into which the debt securities are
convertible, the conversion price (or manner of calculation thereof), the
conversion period, provisions as to whether conversion will be at the option
of the holders of the debt securities, or the Company, the events requiring an
adjustment of the conversion price (or the manner of calculation thereof) and
any provisions affecting conversion in the event of the redemption of the debt
securities.
Global Securities
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities (the "Global Securities") that will be
deposited with, or on behalf of, a depositary (the "Depositary") identified in
the applicable prospectus supplement relating to the series. Global Securities
may be issued in either registered or bearer form and in either temporary or
permanent form. The specific terms of the depositary arrangement with respect
to a series of Debt Securities will be described in the applicable prospectus
supplement relating to the series.
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 September 19, 2000,
there were 36,142,051 shares of common stock outstanding. In addition, the
Series A Preferred Stock is currently convertible into approximately 368,898
shares of common stock (subject to adjustment), and we have warrants
outstanding which are exercisable for 1,828,750 shares of common stock. Our
Series A Preferred Stock accumulates dividends at a rate of 8-7/8% per annum
payable in cash or in shares of our common stock.
All shares of common stock offered hereby have been duly authorized and
will be fully paid and nonassessable. Subject to the preferential rights of
any other shares or series of stock, including the Series A Preferred 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 our Board of Directors out of assets
legally available therefor and to share ratably in our assets legally
available for distribution to our common stockholders in the event of the
Company's liquidation, dissolution or winding up after payment of or adequate
provision for all of our known debts and liabilities. Under the terms of our
credit agreements, we are prohibited from paying any dividends on shares of
our common stock as long as there are amounts outstanding under such
agreements. In addition, we are prohibited from paying any dividends on shares
of our capital stock ranking on a parity or junior to our outstanding Series A
Preferred Stock unless full distributions have been paid thereon.
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 our existing common
stock may elect all of the directors then standing for election and the
holders of the remaining shares will not be able to elect any directors. In
addition, whenever distributions on any shares of our Series A Preferred Stock
are in arrears for more than two payments, holders of Series A Preferred
Stock, voting as a separate class, are entitled to vote for the election of
two additional 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 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 Internal
Revenue Code (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. At the time that we
were spun-off from Reckson Associates, there was a substantial identity of
ownership between stockholders of Reckson Associates and our stockholders. It
is not known to what degree such identity of ownership may still exist or may
continue. Therefore, in order to protect Reckson Associates from the risk that
rental income it earns from us or our affiliates, or from tenants that we or
our affiliates provide 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 our common stock is
limited to 9.9% of the aggregate number or value of shares of our common stock
outstanding and the ownership by any person of our capital stock is limited to
9.9% of the aggregate value of all classes of capital stock outstanding.
Restrictions on Ability to Pay Dividends
Subject to certain exceptions, as long as there are outstanding advances
under our credit agreements, we are prohibited from paying dividends on any
shares of our capital stock or incurring additional debt. In addition, we are
prohibited from paying any dividends on shares of our capital stock ranking on
a parity or junior to our Series A Preferred Stock unless full distributions
have been paid on such preferred stock. 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 our common stock is American Stock
Transfer & Trust Company.
DESCRIPTION OF PREFERRED STOCK
General
Our Charter provides that we may issue up to 25 million shares of
preferred stock, $.01 par value per share. As of September 19, 2000, there
were 26,000 shares of our Series A Preferred Stock outstanding.
The issuance of preferred stock could adversely affect the voting power,
dividend rights and other rights of holders of common stock. Although the
Board of Directors has no intention at the present time, it could establish a
series of preferred stock that could, depending on the terms of the series,
delay, defer or prevent a transaction or a change in control of the Company
that might involve a premium price for the common stock or otherwise be in the
best interest of the holders thereof. Management believes that the
availability of preferred stock will provide us with increased flexibility in
structuring possible future financing and acquisitions and in meeting other
needs that might arise.
Terms
Subject to the limitations prescribed by the Charter, the Board of
Directors is authorized to fix the number of shares constituting each series
of preferred stock and the designations and powers, preferences and relative,
participating, optional or other special rights and qualifications,
limitations or restrictions thereof, including the provisions as may be
desired concerning voting, redemption, dividends, dissolution or the
distribution of assets, conversion, and other subjects or matters as may be
fixed by resolution of the Board of Directors. The preferred stock will, when
issued, be fully paid and nonassessable and will have no preemptive rights.
Reference is made to the prospectus supplement relating to the series of
preferred stock offered thereby for the specific terms thereof, including:
o The title and stated value of the preferred stock;
o The number of shares of the preferred stock, the liquidation
preference per share of the preferred stock and the offering price
of the preferred stock;
o The dividend rate(s), period(s) and/or payment date(s) or method(s)
of calculation thereof applicable to the preferred stock;
o The date from which dividends on the preferred stock shall
accumulate, if applicable;
o The procedures for any auction and remarketing, if any, for the
preferred stock;
o The provision for a sinking fund, if any, for the preferred stock;
o The provisions for redemption, if applicable, of the preferred
stock;
o Any listing of the preferred stock on any securities exchange;
o The terms and conditions, if applicable, upon which the preferred
stock may or will be convertible into our common stock or debt
securities, including the conversion price or manner of calculation
thereof;
o The relative ranking and preferences of the preferred stock as to
dividend rights and rights upon liquidation, dissolution or winding
up of the affairs of the Company;
o Any limitations on direct or beneficial ownership and restrictions
on transfer, in each case as may be appropriate to preserve the
status of Reckson Associates as a REIT;
o A discussion of material federal income tax considerations
applicable to the preferred stock; and
o Any other specific terms, preferences, rights, limitations or
restrictions of the preferred stock.
Rank
Unless otherwise specified in the applicable prospectus supplement, the
preferred stock will, with respect to dividend rights and rights upon
liquidation, dissolution or winding up of the Company, rank:
i. senior to the common stock and to all classes or series of equity
securities issued by the Company, the terms of which provide that
the equity securities shall rank junior to the preferred stock;
ii. on a parity with all classes or series of equity securities issued
by the Company, other than those referred to in clauses (i) and
(iii); and
iii. junior to all classes or series of equity securities issued by the
Company which the terms of the preferred stock provide will rank
senior to it. The term "equity securities" does not include
convertible debt securities.
Dividends
Unless otherwise specified in the applicable prospectus supplement, the
preferred stock will have the rights with respect to payment of dividends set
forth below.
Holders of the preferred stock of each series will be entitled to
receive, when, as and if declared by the Board of Directors of the Company,
out of assets of the Company legally available for payment, cash dividends in
the amounts and on the dates as will be set forth in, or pursuant to, the
applicable prospectus supplement. Each dividend shall be payable to holders of
record as they appear on the stock transfer books of the Company on the record
dates as shall be fixed by the Board of Directors of the Company.
Dividends on any series of preferred stock may be cumulative or
non-cumulative, as provided in the applicable prospectus supplement.
Dividends, if cumulative, will be cumulative from and after the date set forth
in the applicable prospectus supplement. If the Board of Directors of the
Company fails to declare a dividend payable on a dividend payment date on any
series of preferred stock for which dividends are non-cumulative, then the
holders of the series of preferred stock will have no right to receive a
dividend in respect of the related dividend period and the Company will have
no obligation to pay the dividend accrued for the period, whether or not
dividends on the series of preferred stock are declared payable on any future
dividend payment date.
If preferred stock of any series is outstanding, no full dividends will
be declared or paid or set apart for payment on any of the capital stock of
the Company of any other series ranking, as to dividends, on a parity with or
junior to the preferred stock of the series for any period unless:
o if the series of preferred stock has a cumulative dividend, full
cumulative dividends have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set
apart for the payment for all past dividend periods and the then
current dividend period or
o if the series of preferred stock does not have a cumulative
dividend, full dividends for the then current dividend period have
been or contemporaneously are declared and paid or declared and a
sum sufficient for the payment thereof set apart for the payment on
the preferred stock of the series.
When dividends are not paid in full (or a sum sufficient for the full
payment is not so set apart) upon preferred stock of any series and the shares
of any other series of preferred stock ranking on a parity as to dividends
with the preferred stock of the series, all dividends declared upon preferred
stock of the series and any other series of preferred stock ranking on a
parity as to dividends with the preferred stock shall be declared pro rata so
that the amount of dividends declared per share of preferred stock of the
series and the other series of preferred stock shall in all cases bear to each
other the same ratio that accrued dividends per share on the preferred stock
of the series and the other series of preferred stock (which shall not include
any accumulation in respect of unpaid dividends for prior dividend periods if
the preferred stock does not have a cumulative dividend) bear to each other.
No interest, or sum of money in lieu of interest, shall be payable in respect
of any dividend payment or payments on preferred stock of the series which may
be in arrears.
Except as provided in the immediately preceding paragraph, unless (1) if
the series of preferred stock has a cumulative dividend, full cumulative
dividends on the preferred stock of the series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for payment for all past dividend periods and the then current
dividend period, and (2) if the series of preferred stock does not have a
cumulative dividend, full dividends on the preferred stock of the series have
been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for the then current
dividend period, no dividends (other than in shares of common stock or other
capital stock ranking junior to the preferred stock of the series as to
dividends and upon liquidation) shall be declared or paid or set aside for
payment or other distribution shall be declared or made upon the common stock,
or any other of the capital stock of the Company ranking junior to or on a
parity with the preferred stock of the series as to dividends or upon
liquidation, nor shall any shares of common stock, or any other capital stock
of the Company ranking junior to or on a parity with the preferred stock of
the series as to dividends or upon liquidation, be redeemed, purchased or
otherwise acquired for any consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of any shares) by the Company
except:
(1) by conversion into or exchange for other capital stock of the Company
ranking junior to the preferred stock of the series as to dividends and upon
liquidation; or
(2) redemptions for the purpose of preserving the status of Reckson
Associates as a REIT.
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.
Redemption
If so provided in the applicable prospectus supplement, the preferred
stock will be subject to mandatory redemption or redemption at the option of
the Company, as a whole or in part, in each case upon the terms, at the times
and at the redemption prices set forth in the prospectus supplement.
The prospectus supplement relating to a series of preferred stock that is
subject to mandatory redemption will specify the number of shares of the
preferred stock that the Company will redeem in each year commencing after a
date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accumulated and unpaid dividends thereon
(which shall not, if the preferred stock does not have a cumulative dividend,
include any accumulation in respect of unpaid dividends for prior dividend
periods) to the date of redemption. The redemption price may be payable in
cash or other property, as specified in the applicable prospectus supplement.
If the redemption price for preferred stock of any series is payable only from
the net proceeds of the issuance of capital stock of the Company, the terms of
the preferred stock may provide that, if no capital stock shall have been
issued or to the extent the net proceeds from any issuance are insufficient to
pay in full the aggregate redemption price then due, the preferred stock shall
automatically and mandatorily be converted into the applicable capital stock
of the Company pursuant to conversion provisions specified in the applicable
prospectus supplement.
Notwithstanding the foregoing, unless (1) if the series of preferred
stock has a cumulative dividend, full cumulative dividends on all shares of
any series of preferred stock shall have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for payment for all past dividend periods and the then current dividend
period, and (2) if the series of preferred stock does not have a cumulative
dividend, full dividends on the preferred stock of any series have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for payment for the then current dividend
period, no shares of any series of preferred stock shall be redeemed unless
all outstanding preferred stock of the series is simultaneously redeemed;
provided, however, that the foregoing shall not prevent the purchase or
acquisition of preferred stock of the series to preserve the status of Reckson
Associates as a REIT or pursuant to a purchase or exchange offer made on the
same terms to holders of all outstanding preferred stock of the series. In
addition, unless (1) if the series of preferred stock has a cumulative
dividend, full cumulative dividends on all outstanding shares of any series of
preferred stock have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for payment
for all past dividend periods and the then current dividend period, and (2) if
the series of preferred stock does not have a cumulative dividend, full
dividends on the preferred stock of any series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for payment for the then current dividend period, the Company shall
not purchase or otherwise acquire, directly or indirectly, any shares of
preferred stock of the series (except by conversion into or exchange for
capital stock of the Company ranking junior to the preferred stock of the
series as to dividends and upon liquidation); provided, however, that the
foregoing shall not prevent the purchase or acquisition of preferred stock of
the series to preserve the status of Reckson Associates as a REIT or pursuant
to a purchase or exchange offer made on the same terms to holders of all
outstanding preferred stock of the series.
If fewer than all of the outstanding shares of preferred stock of any
series are to be redeemed, the number of shares to be redeemed will be
determined by the Company and the shares may be redeemed pro rata from the
holders of record of the shares in proportion to the number of the shares held
or for which redemption is requested by the holder (with adjustments to avoid
redemption of fractional shares) or by lot or in any other reasonable manner.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of preferred stock of
any series to be redeemed at the address shown on the stock transfer books.
Each notice shall state:
o the redemption date;
o the number of shares and series of the preferred stock to be
redeemed;
o the redemption price;
o the place or places where certificates for the preferred stock are
to be surrendered for payment of the redemption price;
o that dividends on the shares to be redeemed will cease to accumulate
on the redemption date; and
o the date upon which the holder's conversion rights, if any, as to
the shares shall terminate.
If fewer than all the shares of preferred stock of any series are to be
redeemed, the notice mailed to each holder thereof shall also specify the
number of shares of preferred stock to be redeemed from each holder. If notice
of redemption of any preferred stock has been given and if the funds necessary
for redemption have been set aside by the Company in trust for the benefit of
the holders of any preferred stock so called for redemption, then from and
after the redemption date dividends will cease to accumulate on the preferred
stock, and all rights of the holders of the preferred stock will terminate,
except the right to receive the redemption price.
Liquidation Preference
Upon any voluntary or involuntary liquidation, dissolution or winding up
of the affairs of the Company (referred to herein as a "liquidation"), then,
before any distribution or payment shall be made to the holders of any common
stock or any other class or series of capital stock of the Company ranking
junior to the preferred stock of the series in the distribution of assets upon
any liquidation, dissolution or winding up of the Company, the holders of the
preferred stock shall be entitled to receive out of assets of the Company
legally available for distribution to shareholders liquidating distributions
in the amount of the liquidation preference per share (set forth in the
applicable prospectus supplement), plus an amount equal to all dividends
accumulated and unpaid thereon (which shall not include any accumulation in
respect of unpaid dividends for prior dividend periods if the preferred stock
does not have a cumulative dividend). After payment of the full amount of the
liquidating distributions to which they are entitled, the holders of preferred
stock will have no rights or claim to any remaining assets. In the event that,
upon any voluntary or involuntary liquidation, dissolution or winding up, the
available assets of the Company are insufficient to pay the amount of the
liquidating distributions on all outstanding preferred stock of the series and
the corresponding amounts payable on all shares of other classes or series of
capital stock of the Company ranking on a parity with the preferred stock in
the distribution of assets, then the holders of the preferred stock and all
other classes or series of capital stock shall share ratably in any
distribution of assets in proportion to the full liquidating distributions to
which they would otherwise be respectively entitled.
The consolidation or merger of the Company with or into any other
entity, or the merger of another entity with or into the Company, or a
statutory share exchange by the Company, or the sale, lease or conveyance of
all or substantially all of the property or business of the Company, shall not
be deemed to constitute a liquidation, dissolution or winding up of the
Company.
Voting Rights
Holders of the preferred stock will not have any voting rights, except as
set forth below or as otherwise from time to time required by law or as
indicated in the applicable prospectus supplement.
Whenever dividends on any series of preferred stock shall be in arrears
for six or more quarterly periods, the holders of the preferred stock (voting
separately as a class with all other series of preferred stock upon which like
voting rights have been conferred and are exercisable) will be entitled to
vote for the election of two additional directors of the Company at a special
meeting called by the holders of record of at least ten percent (10%) of any
series of preferred stock so in arrears, unless the request is received less
than 90 days before the date fixed for the next annual or special meeting of
the stockholders, or at the next annual meeting of stockholders, and at each
subsequent annual meeting until (i) if the series of preferred stock has a
cumulative dividend, all dividends accumulated on the shares of preferred
stock for the past dividend periods and the then current dividend period shall
have been fully paid or declared and a sum sufficient for the payment thereof
set aside for payment or (ii) if the series of preferred stock does not have a
cumulative dividend, four quarterly dividends shall have been fully paid or
declared and a sum sufficient for the payment thereof set aside for payment.
In these cases, the entire Board of Directors of the Company will be increased
by two directors.
Unless provided otherwise for any series of preferred stock, so long as
any shares of the preferred stock remain outstanding, the Company will not,
without the affirmative vote or consent of the holders of at least two-thirds
of the shares of the series of preferred stock outstanding at the time, given
in person or by proxy, either in writing or at a meeting (the series voting
separately as a class):
(1) authorize or create, or increase the authorized or issued amount of,
any class or series of capital stock ranking senior to the preferred stock
with respect to payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up of the Company, or reclassify any
authorized capital stock of the Company into preferred stock, or create,
authorize or issue any obligation or security convertible into or evidencing
the right to purchase any stock; or
(2) amend, alter or repeal the provisions of the Charter or the
Designating Amendment for the series of preferred stock, whether by merger,
consolidation or otherwise (an "Event"), so as to materially and adversely
affect any right, preference, privilege or voting power of the series of
preferred stock or the holders thereof;
provided, however, with respect to the occurrence of any of the Events
set forth in (2) above, so long as the series of preferred stock remains
outstanding with the terms thereof materially unchanged, taking into account
that upon the occurrence of an Event the Company may not be the surviving
entity, the occurrence of any Event shall not be deemed to materially and
adversely affect the rights, preferences, privileges or voting powers of
holders of the series of preferred stock; and provided, further, that (x) any
increase in the amount of the authorized preferred stock or the creation or
issuance of any other series of preferred stock, or (y) any increase in the
amount of authorized shares of the series of preferred stock or any other
series of preferred stock, in each case ranking on a parity with or junior to
the preferred stock of the series with respect to payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up of the
Company, shall not be deemed to materially and adversely affect the rights,
preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the
time when the act with respect to which the vote or consent would otherwise be
required shall be effected, all outstanding shares of the series of preferred
stock shall have been converted, redeemed or called for redemption and
sufficient funds shall have been deposited in trust to effect the redemption.
Conversion Rights
The terms and conditions, if any, upon which any series of preferred
stock is convertible into shares of common stock or debt securities of the
Company will be set forth in the applicable prospectus supplement. The terms
will include the number of shares of common stock or aggregate principal
amount of debt securities, as the case may be, into which the shares of
preferred stock are convertible, the conversion price (or manner of
calculation thereof), the conversion period, provisions as to whether
conversion will be at the option of the holders of the preferred stock of the
Company, the events requiring an adjustment of the conversion price and
provisions affecting conversion in the event of the redemption of the
preferred stock.
Shareholder Liability
Delaware law provides that no shareholder, including holders of preferred
stock, shall be personally liable for the acts and obligations of the Company
and that the funds and property of the Company shall be the only recourse for
these acts or obligations.
Restrictions on Ownership
As discussed below under "Restrictions on Ownership of Capital Stock," in
order to ensure Reckson Associates' status as a REIT under the Code, our
charter provides generally that no stockholder may own more than 9.9% of the
aggregate number or value of our outstanding shares of common stock, or more
than 9.9% of the aggregate value of the outstanding shares of all classes of
our capital stock. In connection with the issuance of a series of preferred
stock the Designating Amendment for such series may contain additional
provisions restricting the ownership and transfer of the preferred stock. The
applicable prospectus supplement will specify any additional ownership
limitation relating to a series of preferred stock.
Registrar and Transfer Agent
Unless otherwise specified in the applicable prospectus supplement, the
Registrar and Transfer Agent for the preferred stock will be American Stock
Transfer & Trust Company.
DESCRIPTION OF DEPOSITARY SHARES
General
The Company may issue receipts ("Depositary Receipts") for Depositary
Shares, each of which will represent a fractional interest or a share of a
particular series of a class of preferred stock, as specified in the
applicable prospectus supplement. Preferred stock of each series of each class
represented by Depositary Shares will be deposited under a separate Deposit
Agreement (each, a "Deposit Agreement") among the Company, the depositary
named therein (the depositary or its successor, the "Preferred Stock
Depositary") and the holders from time to time of the Depositary Receipts.
Subject to the terms of the Deposit Agreement, each owner of a Depositary
Receipt will be entitled, in proportion to the fractional interest of a share
of the particular series of a class of preferred stock represented by the
Depositary Shares evidenced by the Depositary Receipt, to all the rights and
preferences of the preferred stock represented by the Depositary Shares,
including dividend, voting, conversion, redemption and liquidation rights.
The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the applicable Deposit Agreement. Immediately following the
issuance and delivery of the preferred stock by the Company to the Preferred
Stock Depositary, the Company will cause the Preferred Stock Depositary to
issue, on our behalf, the Depositary Receipts. Copies of the applicable form
of Deposit Agreement and Depositary Receipt may be obtained from the Company
upon request.
Dividends and Other Distributions
The Preferred Stock Depositary will distribute all cash dividends or
other cash distributions received in respect of the preferred stock to the
record holders of the Depositary Receipts evidencing the related Depositary
Shares in proportion to the number of the Depositary Receipts owned by the
holder, subject to certain obligations of holders to file proofs, certificates
and other information and to pay certain charges and expenses to the Preferred
Stock Depositary.
In the event of a distribution other than in cash, the Preferred Stock
Depositary will distribute property received by it to the record holders of
Depositary Receipts entitled thereto, subject to certain obligations of
holders to file proofs, certificates and other information and to pay certain
charges and expenses to the Preferred Stock Depositary, unless the Preferred
Stock Depositary determines that it is not feasible to make the distribution,
in which case the Preferred Stock Depositary may, with the approval of the
Company, sell the property and distribute the net proceeds from the sale to
holders.
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.
Withdrawal of Shares
Upon surrender of the Depositary Receipts at the corporate trust office
of the Preferred Stock Depositary (unless the related Depositary Shares have
previously been called for redemption), the holders thereof will be entitled
to delivery at the office, to or upon the holder's order, of the number of
whole or fractional shares of preferred stock and any money or other property
represented by the Depositary Shares evidenced by the Depositary Receipts.
Holders of Depositary Receipts will be entitled to receive whole or fractional
shares of the related preferred stock on the basis of the proportion of
preferred stock represented by each Depositary Share as specified in the
applicable prospectus supplement, but holders of the preferred stock will not
thereafter be entitled to receive Depositary Shares therefor. If the
Depositary Receipts delivered by the holder evidence a number of Depositary
Shares in excess of the number of Depositary Shares representing the number of
shares of preferred stock to be withdrawn, the Preferred Stock Depositary will
deliver to the holder at the same time a new Depositary Receipt evidencing the
excess number of Depositary Shares.
Redemption of Depositary Shares
Whenever the Company redeems preferred stock held by the Preferred Stock
Depositary, the Preferred Stock Depositary will redeem as of the same
redemption date the number of Depositary Shares representing the preferred
stock so redeemed, provided the Company shall have paid in full to the
Preferred Stock Depositary the redemption price of the preferred stock to be
redeemed plus an amount equal to any accrued and unpaid dividends thereon to
the date fixed for redemption. The redemption price per Depositary Share will
be equal to the redemption price and any other amounts per share payable with
respect to the preferred stock. If less than all the Depositary Shares are to
be redeemed, the Depositary Shares to be redeemed will be selected by the
Preferred Stock Depositary by lot.
After the date fixed for redemption, the Depositary Shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of the Depositary Receipts evidencing the Depositary Shares so called
for redemption will cease, except the right to receive any moneys payable upon
redemption and any money or other property to which the holders of the
Depositary Receipts were entitled upon redemption upon surrender thereof to
the Preferred Stock Depositary.
Voting of the Underlying Preferred Shares
Upon receipt of notice of any meeting at which the holders of the
preferred stock are entitled to vote, the Preferred Stock Depositary will mail
the information contained in the notice of meeting to the record holders of
the Depositary Receipts evidencing the Depositary Shares which represent the
preferred stock. Each record holder of Depositary Receipts evidencing
Depositary Shares on the record date (which will be the same date as the
record date for the preferred stock) will be entitled to instruct the
Preferred Stock Depositary as to the exercise of the voting rights pertaining
to the amount of preferred stock represented by the holder's Depositary
Shares. The Preferred Stock Depositary will vote the amount of preferred stock
represented by the Depositary Shares in accordance with the instructions, and
we will agree to take all reasonable action which may be deemed necessary by
the Preferred Stock Depositary in order to enable the Preferred Stock
Depositary to do so. The Preferred Stock Depositary will abstain from voting
the amount of preferred stock represented by the Depositary Shares to the
extent it does not receive specific instructions from the holders of
Depositary Receipts evidencing the Depositary Shares.
Liquidation Preference
In the event of liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, each holder of a Depositary Receipt will be
entitled to the fraction of the liquidation preference accorded each share of
preferred stock represented by the Depositary Share evidenced by the
Depositary Receipt, as set forth in the applicable prospectus supplement.
Conversion of Preferred Shares
The Depositary Shares, as such, are not convertible into common stock or
any other securities or property of the Company. Nevertheless, if so specified
in the applicable prospectus supplement relating to an offering of Depositary
Shares, the Depositary Receipts may be surrendered by holders thereof to the
Preferred Stock Depositary with written instructions to the Preferred Stock
Depositary to instruct the Company to cause conversion of the preferred stock
represented by the Depositary Shares evidenced by Depositary Receipts into
whole shares of common stock, other preferred stock of the Company or other
shares of capital stock of the Company, and the Company has agreed that upon
receipt of instructions and any amounts payable in respect thereof, it will
cause the conversion thereof utilizing the same procedures as those provided
for delivery of preferred stock to effect the conversion. If the Depositary
Shares evidenced by a Depositary Receipt are to be converted in part only, one
or more new Depositary Receipts will be issued for any Depositary Shares not
to be converted. No fractional shares of common stock will be issued upon
conversion, and if the conversion will result in a fractional share being
issued, an amount will be paid in cash by the Company equal to the value of
the fractional interest based upon the closing price of the common stock on
the last business day prior to the conversion.
Amendment and Termination of the Deposit Agreement
The form of Depositary Receipt evidencing the Depositary Shares which
represent the preferred stock and any provision of the Deposit Agreement may
at any time be amended by agreement between the Company and the Preferred
Stock Depositary. However, any amendment that materially and adversely alters
the rights of the holders of Depositary Receipts will not be effective unless
the amendment has been approved by the existing holders of at least a majority
of the Depositary Shares evidenced by the Depositary Receipts then
outstanding.
The Deposit Agreement may be terminated by the Company upon not less than
30 days' prior written notice to the Preferred Stock Depositary if (1) the
termination is to preserve the status of Reckson Associates as a REIT or (2) a
majority of each class of preferred stock affected by the termination consents
to the termination, whereupon the Preferred Stock Depositary shall deliver or
make available to each holder of Depositary Receipts, upon surrender of the
Depositary Receipts held by the holder, the number of whole or fractional
shares of preferred stock as are represented by the Depositary Shares
evidenced by Depositary Receipts. In addition, the Deposit Agreement will
automatically terminate if (1) all outstanding Depositary Shares shall have
been redeemed, (2) there shall have been a final distribution in respect of
the related preferred stock in connection with any liquidation, dissolution or
winding up of the Company and the distribution shall have been distributed to
the holders of Depositary Receipts evidencing the Depositary Shares
representing the preferred stock or (iii) each related share of preferred
stock shall have been converted into capital stock of the Company not so
represented by Depositary Shares.
Charges of Preferred Shares Depositary
The Company will pay all transfer and other taxes and governmental
charges arising solely from the existence of the Deposit Agreement. In
addition, the Company will pay the fees and expenses of the Preferred Stock
Depositary in connection with the performance of its duties under the Deposit
Agreement. However, holders of Depositary Receipts will pay the fees and
expenses of the Preferred Stock Depositary for any duties requested by the
holders to be performed which are outside of those expressly provided for in
the Deposit Agreement.
Resignation and Removal of Depositary
The Preferred Stock Depositary may resign at any time by delivering to
the Company notice of its election to do so, and the Company may at any time
remove the Preferred Stock Depositary, any resignation or removal to take
effect upon the appointment of a successor Preferred Stock Depositary. A
successor Preferred Shares Depositary must be appointed within 60 days after
delivery of the notice of resignation or removal and must be a bank or trust
company having its principal office in the United States and having a combined
capital and surplus of at least $50,000,000.
Miscellaneous
The Preferred Stock Depositary will forward to holders of Depositary
Receipts any reports and communications from the Company which are received by
the Preferred Stock Depositary with respect to the related preferred stock.
Neither the Company nor the Preferred Stock Depositary will be liable if
the Preferred Stock Depositary is prevented from or delayed in, by law or any
circumstances beyond its control, performing its obligations under the Deposit
Agreement. The obligations of the Company and the Preferred Stock Depositary
under the Deposit Agreement will be limited to performing specified duties
thereunder in good faith and without negligence, gross negligence or willful
misconduct, and the Company and the Preferred Stock Depositary will not be
obligated to prosecute or defend any legal proceeding in respect of any
Depositary Receipts, Depositary Shares or preferred stock represented thereby
unless satisfactory indemnity is furnished. The Company and the Preferred
Stock Depositary may rely on written advice of counsel or accountants, or
information provided by persons presenting the preferred stock represented
thereby for deposit, holders of Depositary Receipts or other persons believed
to be competent to give information, and on documents believed to be genuine
and signed by a proper party.
If the Preferred Stock Depositary shall receive conflicting claims,
requests or instructions from any holders of Depositary Receipts, on the one
hand, and from the Company, on the other hand, the Preferred Stock Depositary
shall be entitled to act on claims, requests or instructions received from the
Company.
RESTRICTIONS ON OWNERSHIP OF CAPITAL STOCK
Excess Stock
Our Charter provides that we 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 certain
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 addition, in
the event we issue any additional series of 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 in 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. 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.
DESCRIPTION OF WARRANTS
The Company may issue Warrants for the purchase of common stock or
preferred stock. Warrants to purchase common stock may include rights to
purchase common stock that the Company issues to its common stock holders as a
dividend. Warrants may be issued independently or together with any securities
and may be attached to or separate from the securities. Each series of
Warrants will be issued under a separate warrant agreement (each, a "Warrant
Agreement") to be entered into between the Company and a warrant agent
specified therein ("Warrant Agent"). The Warrant Agent will act solely for the
Company in connection with the Warrants of the series and will not assume any
obligation or relationship of agency or trust for or with any holders or
beneficial owners of Warrants.
The applicable prospectus supplement will describe the following terms,
where applicable, of the Warrants in respect of which this prospectus is being
delivered:
o the title of the Warrants;
o the aggregate number of the Warrants;
o whether separate consideration will be issued for the Warrants and,
if so, the price or prices at which the Warrants will be issued;
o the currencies in which the price or prices of the Warrants may be
payable, if applicable;
o the designation, amount and terms of the Securities purchasable upon
exercise of the Warrants;
o the designation and terms of the other Securities, if any, with
which the Warrants are issued and the number of the Warrants issued
with each Security;
o if applicable, the date on and after which the Warrants and the
Securities purchasable upon exercise of the Warrants will be
separately transferable;
o the price or prices at which and currency or currencies in which the
Securities purchasable upon exercise of the Warrants may be
purchased;
o the date on which the right to exercise the Warrants shall commence
and the date on which the right shall expire;
o the minimum or maximum amount of the Warrants which may be exercised
at any one time;
o information with respect to book-entry procedures, if any;
o a discussion of material federal income tax considerations; and
o any other material terms of the Warrants, including terms,
procedures and limitations relating to the exchange and exercise of
the Warrants.
PLAN OF DISTRIBUTION
The Company may sell the securities to one or more underwriters for
public offering and sale by them or may sell the securities to investors
directly or through agents. Any underwriter or agent involved in the offer and
sale of the securities will be named in the applicable prospectus supplement.
Underwriters may offer and sell the securities at a fixed price or
prices, which may be changed, at prices related to the prevailing market
prices at the time of sale or at negotiated prices. The Company also may, from
time to time, authorize underwriters acting as their agents to offer and sell
the securities upon the terms and conditions as are set forth in the
applicable prospectus supplement. In connection with the sale of securities,
underwriters may be deemed to have received compensation from the Company in
the form of underwriting discounts or commissions and may also receive
commissions from purchasers of securities for whom they may act as agent.
Underwriters may sell securities to or through dealers, and dealers may
receive compensation in the form of discounts, concessions or commissions from
the underwriters and/or commissions from the purchasers for whom they may act
as agent.
Direct sales to investors may be accomplished through subscription
offerings or through subscription rights distributed to our stockholders. In
connection with subscription offerings or the distribution of subscription
rights to stockholders, if all of the underlying offered securities are not
subscribed for, we may sell such unsubscribed offered securities to third
parties directly or through agents and, in addition, whether or not all of the
underlying offered securities are subscribed for, we may concurrently offer
additional offered securities to third parties directly (including third
parties that are affiliated with us) or through agents, which agents may be
affiliated with us. Any underwriter or agent involved in the offer and sale of
the offered securities will be named in the applicable prospectus supplement.
Any underwriting compensation paid by the Company to underwriters or
agents in connection with the offering of securities, and any discounts,
concessions for commissions allowed by underwriters to participating dealers,
will be set forth in the applicable prospectus supplement. Underwriters,
dealers and agents participating in the distribution of the securities may be
deemed to be underwriters, and any discounts and commissions received by them
and any profit realized by them on resale of the securities may be deemed to
be underwriting discounts and commissions, under the Securities Act.
Underwriters, dealers and agents may be entitled, under agreements entered
into with the Company, to indemnification against and contribution toward
certain civil liabilities, including liabilities under the Securities Act.
Certain of the underwriters and their affiliates may be customers of,
engage in transactions with, and perform services for, the Company and its
subsidiaries in the ordinary course of business.
LEGAL MATTERS
The validity of the issuance of the securities offered hereby and certain
legal matters will be passed upon for the Company by Brown & Wood LLP, New
York, New York.
EXPERTS
The consolidated financial statements of the Company and Subsidiaries
appearing in the Company's Annual Report (Form 10-K) for the year ended
December 31, 1999; and the consolidated financial statements of VANTAS
Incorporated and Subsidiaries for the year ended December 31, 1999, appearing
in the Company's Form 8-K, filed March 2, 2000; have in each case been audited
by Ernst & Young LLP, independent auditors, as set forth in their reports
thereon included therein and incorporated herein by reference. Such
consolidated 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 as of December 31, 1998 and for each of the two
years in the period ended June 30, 1998 and for the period July 1, 1998 to
December 31, 1998 included in our Form 8-K, filed March 2, 2000, have been so
incorporated in reliance on the reports of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The financial statements incorporated in this prospectus by reference to
the audited historical consolidated financial statements of HQ Global
Workplaces, Inc. and Subsidiaries as of December 31, 1999 and 1998 and for the
years ended December 31, 1999 and 1998 and for the period from August 25, 1997
(inception) to December 31, 1997 and the audited historical consolidated
financial statements of OmniOffices (UK) Limited as of December 31, 1999 and
1998, and for the year ended December 31, 1999 and the nine-month period ended
December 31, 1998 appearing in our Form 8-K, filed March 2, 2000, have been so
incorporated in reliance on the reports of KPMG LLP, independent certified
public accountants, given on the authority of said firm as experts in
accounting and auditing.
The financial statements incorporated in this prospectus by reference to
the audited historical consolidated financial statements of OmniOffices Group,
Inc. for the period from January 1, 1997 to August 25, 1997 appearing in our
Form 8-K, filed March 2, 2000, have been so incorporated in reliance on the
report of BDO Seidman, LLP, independent auditors, given on the authority of
said firm as experts in accounting and auditing.
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TABLE OF CONTENTS
Prospectus
Risk Factors.................................. 2
Available Information......................... 11
Incorporation of Certain Documents by
Reference................................ 12
The Company................................... 13
Use of Proceeds............................... 13
Ratios of Earnings to Fixed Charges and
Preferred Stock Dividends................ 13 FrontLine Capital
Description of Debt Securities................ 14 Group
Description of Common Stock................... 26
Description of Preferred Stock................ 27
Description of Depositary Shares.............. 35
Restrictions on Ownership of Capital Stock.... 38
Description of Warrants....................... 40
Plan of Distribution.......................... 41
Legal Matters................................. 42
Experts....................................... 42
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