UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
Commission file number: 1-13762
RECKSON ASSOCIATES REALTY CORP.
(Exact name of registrant as specified in its charter)
Maryland 11-3233650
(State other jurisdiction of incorporation (IRS. Employer
of organization) Identification Number)
225 Broadhollow Road, Melville, NY 11747
(Address of principal executive office) (zip code)
(516) 694-6900
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K, or any
amendment to this Form 10-K. ____
The aggregate market value of the shares of common stock held by
non-affiliates was approximately $826 million based on the closing price on the
New York Stock Exchange for such shares on March 15,1999.
The number of the Registrant's shares of common stock outstanding was
40,053,358 as of March 15,1999.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the Annual Shareholder's
Meeting to be held May 20, 1999 are incorporated by reference into Part III.
<PAGE>
TABLE OF CONTENTS
Item No.
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Part I
1. Business . . . . . . . . ... . . . . . . . . . . . . . . . . . I-1
2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . I-9
3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . I-21
4. Submission of Matters to a Vote of Security Holders. . . . . . I-21
Part II
5. Market for Registrant's Common Equity and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . II-1
6. Selected Financial Data. . . . . . . . . . . . . . . . . . . . II-2
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations. ... . . . . . . . . . . . . . . . . . . II-3
7(a)Quantitative and Qualitative Disclosures about Market Risk . . II-13
8. Financial Statements and Supplementary Data .. . . . . . . . . II-13
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure . . . . . . . . . . . . . . . . . . . II-13
Part III
10. Directors and Executive Officers of the Registrant . . . . . III-1
11. Executive Compensation . . . . . . . . . . . . . . . . . . . III-1
12. Security Ownership of Certain Beneficial Owners and Management III-1
13. Certain Relationships and Related Transactions . . . . . . . . III-1
Part IV
14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV-1
<PAGE>
Part I
Item 1. Business
General
Reckson Associates Realty Corp. was incorporated in September 1994 and
commenced operations effective with the completion of its initial public
offering (the "IPO") on June 2, 1995. Reckson Associates Realty Corp.,
together with Reckson Operating Partnership, L.P. (the "Operating
Partnership"), and their affiliates (collectively, the "Company") was formed
for the purpose of continuing the commercial real estate business of Reckson
Associates, its affiliated partnerships and other entities ("Reckson"). For
more than 40 years, Reckson has been engaged in the business of owning,
developing, acquiring, constructing, managing and leasing suburban office
and industrial properties in the New York metropolitan area. Based on
industry surveys, management believes that the Company is one of the largest
owners and operators of Class A suburban office properties and industrial
properties in the New York tri-state area (the "Tri-State Area"). The Company
operates as a fully-integrated, self-administered and self-managed Real Estate
Investment Trust ("REIT"). As of December 31, 1998, the Company owned 204
properties (the "Properties") (including two joint venture properties)
encompassing approximately 21.0 million rentable square feet, all of which
are managed by the Company. The Properties consist of 73 Class A suburban
office properties (the "Office Properties")encompassing approximately 10.1
million square feet, 129 industrial properties (the "Industrial Properties")
encompassing approximately 10.8 million square feet and two 10,000 square
foot retail properties. In addition, as of December 31, 1998 the Company
had $61.3 million invested in certain mortgage indebtedness encumbering four
Class A Office Properties encompassing approximately 577,000 square feet, a
825,000 square foot Industrial Property, a 400 acre parcel of land and
approximately $17 million invested in a note receivable secured by a
partnership interest in Omni Partner's, L. P., owner of the Omni, a 575,000
square foot Class A Office Property located in Uniondale, New York (the
"Mortgage Note Investments"). As of December 31, 1998, the Company also
owned or had contracted to acquire approximately 980 acres of land in 18
separate parcels that may present future development opportunities. During
1998, the Company made investments in joint ventures with Reckson Strategic
Venture Partners, LLC ("RSVP"), a venture capital fund created as a research
and development vehicle for the Company to invest in alternative real estate
sectors (see Corporate Strategies and Growth Opportunities). RSVP is
managed by an affiliate of Reckson Service Industries, Inc., ("RSI"). The
Company has committed up to $100 million for investments in the form of
either (i) joint ventures with RSVP or (ii) loans to RSI for RSI's
investment in RSVP. To date, the Company has invested $10.1 million in
RSVP joint venture investments. During 1998, the Company also spun off RSI,
its commercial service business, to its shareholders and has provided RSI
with a $100 million line of credit. As of December 31, 1998 $33.7 million
had been drawn and is outstanding on this line.
The Office Properties are Class A suburban office buildings and are
well-located, well-maintained and professionally managed. In addition, these
properties are modern with high finishes or have been modernized to
successfully compete with newer buildings and achieve among the highest rent,
occupancy and tenant retention rates within their markets. The majority of the
Office Properties are located in 12 planned office parks and are tenanted by
a diverse industry group of national firms which include, consumer products,
pharmaceutical, telecommunication, health care, insurance and professional
service firms such as accounting firms and securities brokerage houses.
The Industrial Properties are utilized for distribution, warehousing, research
and development and light manufacturing / assembly activities and are located
primarily in three planned industrial parks developed by Reckson and 23
buildings acquired in connection with the Morris Companies acquisition (see
External Growth below).
All of the Company's interests in the Properties, the Mortgage Note
Investments and land are held directly or indirectly by, and all of its
operations are conducted through, the Operating Partnership. Reckson
Associates Realty Corp. controls the Operating Partnership as the sole
general partner and as of December 31, 1998, owned approximately 84% of the
Operating Partnership's outstanding common units of limited partnership
("Units").
The Company seeks to maintain cash reserves for normal repairs,
replacements, improvements, working capital and other contingencies. The
Operating Partnership has established an unsecured credit facility with a
maximum borrowing amount of $500 million scheduled to mature on July 23,
2001 and, an unsecured term loan with a maximum borrowing capacity of $75
million scheduled to mature on December 3, 1999. The credit facility and
the term loan require the Company to comply with a number of financial and
other covenants on an ongoing basis.
In February 1998, the Company completed a public stock offering and sold
791,152 common shares at a price of $25.44 per share (the "February 1998
Offering"). On April 29, 1998, the Company completed a public stock offering
and sold 1,093,744 common shares at a price of $24.38 per share (the "April
1998 Offering"). Additionally, during April 1998 the Company completed a
preferred stock offering and sold 9,200,000 shares (including 1,200,000
shares related to the exercise of the underwriters over allotment option)
of 7.625% Series A Convertible Cumulative Preferred Stock at a price of $25.00
per share (the "April 1998 Preferred Offering"). Net proceeds of
approximately $19.1 million from the February 1998 Offering, $25.3 million from
the April 1998 Offering and $221 million from the April 1998 Preferred Offering
were used to make acquisitions of Properties and to repay borrowings.
In March 1997, the Company completed a public offering and sold 4,945,000
common shares (pre-split) at a price of $45.25 (pre-split) (including 645,000
common shares related to the exercise of the underwriter over allotment option)
(the "March 1997 Offering"). In December 1997, the Company completed a public
offering and sold 3,081,777 common shares at a price of $26.00 per share (the
"December 1997 Offering"). Net proceeds to the Company of approximately $212
million from the March 1997 Offering and $80 million from the December 1997
Offering were used to make acquisitions of Properties and to repay borrowings.
There are numerous commercial properties that compete with the Company in
attracting tenants and numerous companies that compete in selecting land for
development and properties for acquisition.
The Company's executive offices are located at 225 Broadhollow Road,
Melville, New York 11747 and its telephone number at that location is (516)
694-6900. At December 31, 1998, the Company had approximately 250 employees.
Recent Developments
Acquisition Activity.
Set forth below is a brief description of the Company's major acquisition
activity during 1998. All of these Properties are located in the Tri-State
Area.
During 1998, the Company acquired or contracted to acquire approximately
$434 million of Class A suburban Office and Industrial Properties encompassing
approximately 3.7 million square feet. In addition, the Company acquired
approximately 192.1 acres of land for an aggregate purchase price of
approximately $20.6 million.
In that regard, during 1998, the Company acquired three Class A suburban
Office Properties and two Industrial Properties encompassing approximately
674,000 and 200,000 square feet respectively, located on Long Island for an
aggregate purchase price of approximately $ 67.8 million. In addition, the
Company acquired approximately 79.9 acres of land for an aggregate purchase
price of approximately $15.0 million.
During 1998, the Company acquired six Office Properties encompassing
approximately 980,000 square feet in Westchester from Cappelli Enterprises
and affiliated entities (see below) for an aggregate purchase price of
approximately $173 million.
During 1998, the Company acquired two Office Properties encompassing
approximately 325,000 square feet in Connecticut for an aggregate purchase
price of approximately $61.3 million
During 1998, the Company acquired four Office Properties encompassing
approximately 522,000 square feet and six Industrial Properties encompassing
approximately 985,000 square feet in New Jersey for an aggregate purchase
price of approximately $132.5 million (excluding the Company's investment
Reckson Morris Operating Partnership, L.P.; see below). In addition, the
Company acquired approximately 112.2 acres of land for an aggregate purchase
price of approximately $5.6 million.
On January 6, 1998, the Company made an initial investment in the Morris
Companies, a New Jersey developer and owner of "Big Box" warehouse facilities.
In connection with the transaction the Morris Companies contributed 100% of
their interests in certain industrial properties to Reckson Morris Operating
Partnership, L.P. ("RMI") in exchange for operating partnership units in RMI.
The Company has agreed to invest up to $150 million in RMI. As of December
31, 1998, the Company has invested approximately $ 93.8 million for an
approximate 71.8% controlling interest in RMI.
During 1998, the Company acquired a portfolio of six office properties
encompassing approximately 980,000 square feet in Westchester County, New York
from Cappelli Enterprises and affiliated entities ("Cappelli") for a purchase
price of approximately $173 million. The Cappelli acquisition includes a five
building, 850,000 square foot Class A office park in Valhalla and Court House
Square, a 130,000 square foot Class A office building located in White Plains.
The Company also obtained from Cappelli the remaining 50% interest in 360
Hamilton Avenue, a 365,000 square foot vacant office tower in downtown White
Plains for $10 million plus the return of his capital contributions of
approximately $1.5 million. In addition, the Company received an option
from Cappelli to acquire the remaining development parcels within the Valhalla
office park on which up to 875,000 square feet of office space can be
developed. These acquisitions were financed in part through proceeds from a
draw under the credit facilities, the issuance of 42,518 (approximately $42.5
million) preferred operating partnership units (the "Cappelli Preferred
Units"), and the assumption of approximately $47.1 million of mortgage debt.
Additionally, during 1998, the Company issued and advanced to Cappelli $19
million under two liquidity loans (the "Cappelli Liquidity Loans"). The
Cappelli Liquidity Loans bear interest at rates ranging from 10% to 10.5% per
annum and are secured by Cappelli's right, title and interest in the Cappelli
Preferred Units. Such amounts have been included in investments in mortgage
notes and notes receivable on the Company's balance sheet. On February 3,
1999, the Company made an additional $5 million advance under the Cappelli
Liquidity Loans.
In addition, the Company has invested approximately $61.3 million in
certain mortgage indebtedness encumbering four Class A Office Properties
located on Long Island encompassing approximately 577,000 square feet, a
825,000 square foot Industrial Property located in New Jersey and a 400 acre
parcel of land located in New Jersey. In addition, the Company has loaned
approximately $17 million to its minority partner in Omni, its flagship Long
Island Office Property, and effectively increased its economic interest in
the property owning partnership.
Set forth below is a brief description of the Company's major acquisition
activity during 1997. All of these Properties are located in the Tri-State
Area.
During 1997, the Company acquired or contracted to acquire approximately
$431 million of Class A suburban Office and Industrial Properties encompassing
approximately 4.9 million square feet. In addition, the Company acquired
approximately 335 acres of land for an aggregate purchase price of
approximately $24.2 million.
In that regard, during 1997, the Company acquired five Class A suburban
Office Properties and 15 Industrial Properties encompassing approximately
881,000 and 968,000 square feet respectively, located on Long Island.
During 1997, the Company acquired eight Office Properties encompassing
approximately 830,000 square feet and three Industrial Properties encompassing
approximately 163,000 square feet in Westchester for an aggregate purchase price
of approximately $117 million. In addition, the Company acquired approximately
32 acres of land for a purchase price of approximately $8 million.
During 1997, the Company acquired one Industrial Property encompassing
approximately 452,000 square feet in Connecticut for a purchase price of
approximately $27 million.
During 1997, the Company acquired 13 Office Properties encompassing
approximately 1.5 million square feet and one Industrial Property encompassing
approximately 128,000 square feet in New Jersey for an aggregate purchase price
of approximately $156 million. In addition, the Company acquired approximately
303 acres of land for an aggregate purchase price of approximately $16.2
million.
In October 1997, the Company sold 671 Old Willets Path in Hauppauge, New
York for approximately $725,000 and recorded a gain on the sale of $672,000.
In addition, during 1997, the Company invested approximately $29 million
in certain mortgage indebtedness encumbering one Class A Office Property on Long
Island encompassing approximately 177,000 square feet, a 400 acre parcel of land
located in New Jersey and a 586,000 square foot Industrial Property located in
New Jersey. In addition, on March 13, 1997 the Company loaned approximately $17
million to its minority partner in Omni, its flagship Long Island Office
Property, and effectively increased its economic interest in the property owning
partnership.
Leasing Activity
During the year ended December 31, 1998, the Company leased 1,519,166
square feet at the Office Properties at an average effective rent (i.e.,base
rent adjusted on a straight-line basis for free rent periods, tenant improve-
ments and leasing commissions) of $22.01 per square foot and 944,212 square
feet at the Industrial Properties at an average effective rent of $7.25 per
square foot. Included in this leasing data is 822,405 square feet at the Long
Island Office Properties at an average effective rent of $22.89; 221,822 square
feet at the Westchester Office Properties at an average effective rent of
$19.29; 52,976 square feet at the Connecticut Office Properties at an average
effective rent of $24.17; and 421,963, square feet at the New Jersey Office
Properties at an average effective rent of $21.45. Also included in this
leasing data is 705,871 square feet at the Long Island Industrial Properties
at an average effective rent of $7.41 and 238,341 square feet at the New Jersey
Industrial Properties at an average effective rent of $6.78.
Financing Activities
On July 23, 1998, the Company obtained a three year $500 million unsecured
revolving credit facility (the "Credit Facility") from Chase Manhattan Bank,
Union Bank of Switzerland and PNC Bank as co-managers of the credit facility
bank group. Interest rates on borrowings under the Credit Facility are priced
off of LIBOR plus a sliding scale ranging from 112.5 basis points to 137.5
basis points based on the leverage ratio of the Company. Upon the Company
receiving an investment grade rating on its senior unsecured debt by two rating
agencies, the pricing is adjusted based off of LIBOR plus a scale ranging from
65 basis points to 90 basis points depending upon the rating. The Credit
Facility replaced and restructured the Company's existing $250 million
unsecured credit facility and $200 million unsecured bridge facility. As a
result, certain deferred loan costs incurred in connection with those
facilities were written off. Such amount has been reflected as an
extraordinary loss on the Company's statement of operations. The Company
utilizes the Credit Facility primarily to finance the acquisitions of
Properties and other real estate investments, fund its development activities
and for working capital purposes. At December 31, 1998, the Company had
availability under the Credit Facility to borrow an additional $8.1 million
(net of $26.1 million of outstanding undrawn letters of credit).
On December 4, 1998, the Company obtained a one year $50 million unsecured
term loan (the "Term Loan") from Chase Manhattan Bank. On January 13, 1999,
the Company and Chase Manhattan Bank increased the total availability under the
Term Loan to $75 million. Interest rates on borrowings under the Term Loan
are priced off LIBOR plus 150 basis points for the first nine months and 175
basis points for the remaining three months. At December 31, 1998, the
Company had availability under the Term Loan to borrow an additional $30
million which was increased to $55 million on January 13, 1999.
Other Financing Activities
On May 21, 1998, the Company satisfied the mortgage note encumbering one
Property in the amount of approximately $1.9 million. Additionally, on October
27, 1998, the Company refinanced a $10.0 million mortgage note encumbering one
Property with a new $21.4 million mortgage loan from a third party financial
institution. The new mortgage note bears a fixed rate of interest of 6.45% and
matures on October 26, 2005. Excess proceeds were used to repay borrowings
under the Credit Facility.
During August 1997, the Company refinanced approximately $43 million of
mortgage debt on its Omni Office Property with a $58 million fixed rate
mortgage loan. The loan which matures on September 1, 2007 has a fixed rate of
7.72%. Additionally, during August, 1997, the Company sold $150 million of
7.2% senior unsecured notes due in August 2007. The net proceeds of these
financings were used to repay borrowings and for acquisitions of properties.
Stock Split
On February 12, 1997, the Board of Directors of the Company declared a
two-for-one stock split, effected as a stock dividend distributable on April
15, 1997 to stockholders of record on April 4, 1997.
Stock Offerings
On February 18, 1998, the Company sold 791,152 shares of the Company's
common stock at $25.44 per share for an aggregate consideration of
approximately $20.1 million before deducting offering expenses.
During April 1998, the Company completed a preferred stock offering and
sold 9,200,000 shares (including 1,200,000 shares related to the exercise of
the underwriters over allotment option) of 7.625% Series A Convertible
Cumulative Preferred Stock at a price of $25.00 per share for an aggregate
consideration of $230 million before deducting offering expenses. The
preferred stock is convertible to the Company's common stock at a conversion
rate of .8769 shares of common stock for each share of preferred stock.
On April 29, 1998, the Company completed a common stock offering and sold
1,093,744 common shares at a price of $24.38 per share for an aggregate
consideration of approximately $26.7 million before deducting offering
expenses.
Corporate Strategies and Growth Opportunities
The Company's primary business objectives are to maximize current return
to stockholders through increases in distributable cash flow per share and to
increase stockholders' long-term total return through the appreciation in value
of its Common Stock. The Company plans to achieve these objectives by
continuing Reckson's corporate strategies and capitalizing on the internal and
external growth opportunities described below.
Corporate Strategies. Management believes that throughout its 40-year
operating history, Reckson has created value in its properties through a
variety of market cycles by implementing the operating strategies described
below. These operating strategies include the implementation of (i) a
multidisciplinary leasing approach that involves architectural design and
construction personnel as well as leasing professionals, (ii) innovative
property marketing programs such as the broker frequent leasing points program
which was established by the Company to enhance relationships with the
brokerage community. The program allows brokers to accumulate points for
leasing space in the Company's portfolio which can be redeemed for luxurious
prizes, (iii) a comprehensive tenant service program and property amenities
designed to maximize tenant satisfaction and retention, (iv) cost control
management and systems that take advantage of economies of scale that arise
from the Company's market position and efficiencies attributable to the
state-of-the-art energy control system at many of the Office Properties and
(v) an acquisition and development strategy that is continuously adjusted in
light of anticipated changes in market conditions and that seeks to capitalize
on management's multidisciplinary expertise and market knowledge to modify,
upgrade and reposition a property in its marketplace in order to maximize
value.
The Company also intends to adhere to a policy of maintaining a Debt Ratio
(defined as the total debt of the Company as a percentage of the market value
of outstanding shares of common stock, Units and, the stated values of the
Company's preferred equity) of less than 50%. As of December 31, 1998, the
Company's Debt Ratio was approximately 39.4%. This calculation is net of
minority partners' proportionate share of debt and including the Company's
share of unconsolidated joint venture debt. This Debt Ratio is intended to
provide the Company with financial flexibility to select the optimal source of
capital (whether debt or equity) with which to finance external growth.
Growth Opportunities. The Company intends to achieve its primary business
objectives by applying its corporate strategies to the internal and external
growth opportunities described below.
Internal Growth. To the extent Long Island, Westchester, New Jersey and
Southern Connecticut suburban office and industrial markets continue to
improve, management believes the Company is well positioned to benefit from
rental revenue growth through: (i) contractual annual compounding 4% Base Rent
increases (defined as fixed gross rental amounts that excludes payments on
account of real estate tax, operating expense escalations and base electrical
charges) on approximately 85% of existing leases at the Long Island Properties;
(ii) periodic contractual increases in Base Rent on existing leases at the
Westchester Properties, the New Jersey Properties and the Southern Connecticut
Properties; and (iii) the potential for increases to Base Rents as leases
expire as a result of continued tightening of the office and industrial
markets with limited new supply.
In connection with the Company's acquisition and merger transaction with
Tower Realty Trust, Inc. (see External Growth below) the company entered the
New York City office market. The Manhattan office market is currently
experiencing favorable supply and demand characteristics similar to those
currently in the Company's Tri-State Area suburban markets and also is
characterized by its similar lack of available land supply and other barriers
to entry that limit our competition. The Tower portfolio includes Manhattan
office buildings that offer similar potential for increase in Base Rents as
described in (iii) above.
External Growth. The Company seeks to acquire multi-tenant suburban Class
A office and industrial properties located in the Tri-State Area. Management
believes that the Tri-State Area presents opportunities to acquire or invest
in properties at attractive yields. The Company believes that its (i) capital
structure, in particular its Credit Facility providing for a maximum borrowing
amount of up to $500 million, (ii) ability to acquire a property for Units of
the Operating Partnership and thereby defer the seller's income tax on gain,
(iii) operating economies of scale, (iv) relationships with financial
institutions and private real estate owners, (v) fully integrated operations
in its four existing suburban divisions and (vi) its dominant position and
franchise in the submarkets in which it owns properties will enhance the
Company's ability to identify and capitalize on acquisition opportunities.
The Company also intends to selectively develop new Class A suburban office
and industrial properties and to continue to redevelop existing Office and
Industrial Properties as these opportunities arise. In the near future the
Company will concentrate its development activities on industrial and Class
A suburban office properties within its Tri-State Area markets. The
Company's expansion into the Manhattan office market and the opening of its
New York City division will provide it with additional opportunities to
acquire an interest in properties at attractive yields. The Company also
believes that the addition of its New York City division will provide
additional leasing and operational facilities and enhance its overall
franchise value by being the only real estate operating company in the Tri-
State Area with significant presence in both Manhattan and each of the
surrounding sub-markets.
On January 6, 1998, the Company made an initial investment in the Morris
Companies, a New Jersey developer and owner of "Big Box" warehouse facilities.
In connection with the transaction the Morris Companies contributed 100% of
their interests in certain industrial properties to RMI in exchange for
operating partnership units in RMI. As of December 31, 1998, the Company has
invested approximately $93.8 million for an approximate 71.8% controlling
interest in RMI.
During 1997, the Company formed RSI and RSVP. The Operating Partnership
owned a 95% non voting common stock interest in RSI through June 10, 1998. On
June 11, 1998, the Operating Partnership distributed its 95% common stock
interest in RSI of approximately $3 million to its owners, including the
Company which, in turn, distributed the common stock of RSI to its
stockholders. Additionally, during June 1998, the Operating Partnership
established a credit facility with RSI (the"RSI Facility") in the amount of
$100 million for RSI's service sector operations and other general corporate
purposes. As of December 31, 1998, the Company had advanced $33.7 million
under the RSI facility all of which is outstanding. In addition, the
Operating Partnership approved the funding of investments of up to $100
million with or in RSVP (the "RSVP Commitment"), through RSVP-controlled
joint venture REIT-qualified investments or advances made to RSI under terms
similar to the RSI Facility. As of December 31, 1998, approximately $17.3
million had been invested through the RSVP Commitment, of which $10.1 million
represents RSVP controlled joint venture investments and $7.2 million
represents advances to RSI under the RSVP Commitment. Such amounts have been
included in investment in real estate joint ventures and investments in and
advances to affiliates, respectively, on the Company's balance sheet. RSI
serves as the managing member of RSVP. RSI invests in operating companies that
generally provide commercial services to the RSI customer base which includes
the tenants of RSI's executive suite business and to properties owned by the
Company and its tenants and third parties. RSVP was formed to provide the
Company with a research and development vehicle to invest in alternative real
estate sectors. RSVP invests primarily in real estate and real estate related
operating companies generally outside of the Company's core office and
industrial focus. RSVP's strategy is to identify and acquire interests in
established entrepreneurial enterprises with experienced management teams in
market sectors which are in the early stages of their growth cycle or offer
unique circumstances for attractive investments as well as a platform for
future growth.
On August 27, 1998 the Company announced the formation of a joint venture
with RSVP and the Dominion Group, an Oklahoma-based, privately-owned group of
companies that focuses on the development, acquisition and ownership of
government occupied office buildings and correctional facilities. The new
venture, Dominion Properties LLC (the "Dominion Venture"), is owned by Dominion
Venture Group LLC, and by a subsidiary of the Company. The Dominion Venture
will engage primarily in acquiring, developing and/or owning
government-occupied office buildings and privately operated correctional
facilities. Under the Dominion Venture's operating agreement, RSVP is to
invest up to $100 million, some of which may be invested by the Company
(the "RSVP Capital"). The initial contribution of RSVP Capital was
approximately $39 million of which approximately $10.1 million was invested by
a subsidiary of the Company. The Company's subsidiary funded its capital
contribution through the RSVP Commitment. In addition, the Company advanced
approximately $2.9 million to RSI through the RSVP Commitment for an investment
in RSVP which was then invested on a joint venture basis with the Dominion
Group in certain service business activities related to the real estate
activities. As of December 31, 1998, the Dominion Venture had investments in
11 government office buildings and two correctional facilities.
In July 1998, the Company formed a joint venture, Metropolitan Partners
LLC, a Delaware limited liability company ("Metropolitan"), with Crescent Real
Estate Equities Company, a Texas real estate investment trust ("Crescent").
Pursuant to a merger agreement executed on July 9, 1998 and amended and
restated on August 11, 1998 (the "Initial Merger Agreement") between
Metropolitan, the Company, Crescent and Tower Realty Trust Inc., a Maryland
corporation ("Tower"), Metropolitan agreed, subject to the terms and conditions
of the Merger Agreement, to purchase the common stock of Tower.
Prior to the execution of the Initial Merger Agreement, Metropolitan
identified certain potential tax issues regarding Tower's operations.
Metropolitan entered into the Initial Merger Agreement only after Tower
made detailed representations and warranties purporting to address these
issues. In the course of due diligence, however, Metropolitan, the Company
and Crescent discovered that these representations and warranties may not be
correct and discussed these concerns with Tower, specifically advising Tower
that they were not terminating the Initial Merger Agreement at that time.
Metropolitan, the Company and Crescent invited Tower to respond to these
concerns. However, on November 2, 1998, Tower filed a complaint in the Supreme
Court of the State of New York alleging Metropolitan, the Company and Crescent
willfully breached the Initial Merger Agreement. Tower, in the complaint, was
seeking declaratory and other relief, including damages of not less than $75
million and specific performance by Metropolitan, the Company and Crescent of
their obligations under the Initial Merger Agreement.
On December 8, 1998,the Company, Metropolitan and Tower executed a
revised merger agreement (the "Revised Merger Agreement"), pursuant to which
Tower will be merged (the "Merger") into Metropolitan, with Metropolitan
surviving the Merger. Concurrently with the Merger, Tower Realty Operating
Partnership, L.P. ("Tower OP") will be merged with and into a subsidiary of
Metropolitan. The consideration to be issued in the mergers will be comprised
of (i) 25% cash and (ii) 75% of shares of Class B Exchangeable Common Stock,
par value $.01 per share, of the Company (the "Class B Common Stock"), or in
certain circumstances described below, shares of Class B Common Stock and
unsecured notes of the Operating Partnership. The Company controls
Metropolitan and owns 100% of the common equity; Crescent owns a preferred
equity investment in Metropolitan. The Revised Merger Agreement replaces the
Initial Merger Agreement (which at that time was a 50/50 joint venture between
the Company and Crescent) relating to the acquisition by Metropolitan of Tower
for $24 per share.
Pursuant to the terms of the Revised Merger Agreement, holders of shares
of outstanding common stock of Tower ("Tower Common Stock"), and outstanding
units of limited partnership interest of Tower OP will have the option to elect
to receive cash or shares of Class B Common Stock, subject to proration. Under
the terms of the transaction, Metropolitan will effectively pay for each share
of Tower Common Stock and each unit of limited partnership interest of Tower OP
the sum of (i) $5.75 in cash, and (ii) 0.6273 of a share of Class B Common
Stock. The shares of Class B Common Stock are entitled to receive an initial
annual dividend of $2.24 per share and is subject to adjustment annually. The
shares of Class B Common Stock are exchangeable at any time, at the option of
the holder, into an equal number of shares of common stock, par value $.01 per
share, of the Company subject to customary antidilution adjustments. The
Company, at its option, may redeem any or all of the Class B Common Stock in
exchange for an equal number of shares of the Company's common stock at any
time following the four year, six-month anniversary of the issuance of the
Class B Common Stock. The Company's Board of Directors have recommended to
the Company's stockholders the approval of a proposal to issue a number of
shares of Class B Common Stock equal to 75% of the sum of (i) the number of
outstanding shares of the Tower Common Stock and (ii) the number of Tower
OP limited partnership units, in each case, at the effective time of the
mergers. If the stockholders of the Company do not approve the issuance of
the Class B Common Stock as proposed, the Revised Merger Agreement provides
that approximately one-third of the consideration that was to be paid in the
form of Class B Common Stock will be replaced by senior unsecured notes of
the Operating Partnership, which notes will bear interest at the rate of 7%
per annum and have a term of ten years. In addition, if the stockholders of
the Company do not approve the issuance of Class B Common Stock as proposed and
the Board of Directors of the Company withdraws or amends or modifies in any
material respect its recommendation for, approval of such proposal, then the
total principal amount of notes to be issued and distributed in the Merger
will be increased by $15 million.
Simultaneously with the execution of the Revised Merger Agreement,
Metropolitan and Tower executed and consummated a stock purchase agreement
(the "Series A Stock Purchase Agreement") pursuant to which Metropolitan
purchased from Tower approximately 2.2 million shares of Series A Convertible
Preferred Stock, par value $.01 per share, of Tower (the "Tower Preferred
Stock"), for an aggregate purchase price of $40 million, $30 million of which
was funded through a capital contribution by the Company to Metropolitan and
which is included in prepaid expenses and other assets on the Company's
balance sheet. The Tower Preferred Stock has a stated value of $18.44 per
share and is convertible by Metropolitan into an equal number of shares of
Tower Common Stock at anytime after the termination, if any, of the Revised
Merger Agreement, subject to customary antidilution adjustments. The Tower
Preferred Stock is entitled to receive dividends equivalent to those paid on
the Tower Common Stock. If the Revised Merger Agreement is not consummated
and a court of competent jurisdiction issues a final, non-appealable judgment
determining that the Company and Metropolitan are obligated to consummate the
Merger but have failed to do so, or determining that the Company and
Metropolitan failed to use their reasonable best efforts to take all actions
necessary to cause certain closing conditions to be satisfied, Metropolitan
is obligated to return to Tower $30 million of the Series A Preferred Stock.
Immediately prior to the execution of the Revised Merger Agreement and
consummation of the Series A Stock Purchase Agreement, the Company and Crescent
executed the amended and restated operating agreement of Metropolitan (the
"Metropolitan Operating Agreement") pursuant to which Crescent agreed to
purchase a convertible preferred membership interest (the "Preferred
Interest") in Metropolitan for an aggregate purchase price of $85 million.
Ten million dollars of the purchase price was paid by Crescent to Metropolitan
upon execution of the Metropolitan Operating Agreement to acquire the Tower
Preferred Stock and the remaining portion is payable prior to the closing of
the Merger and is expected to be used to fund a portion of the cash merger
consideration. Upon closing of the Merger, Crescent's investment will accrue
distributions at a rate of 7.5% per annum for a two-year period and may be
redeemed by Metropolitan at any time during that period for $85 million, plus
an amount sufficient to provide a 9.5% internal rate of return. If
Metropolitan does not redeem the preferred interest, upon the expiration of
the two-year period, Crescent must convert its interest into either (i) a
common membership interest in Metropolitan or (ii) shares of the Company's
common stock at a conversion price of $24.61.
In connection with the revised transaction, Tower, the Company and
Crescent have exchanged mutual releases for any claims relating to the Initial
Merger Agreement.
The Company has engaged brokers to, and anticipates that it will,
dispose of the Tower properties located outside of the New York City
metropolitan area. In addition, the Company, Tower and a third party have
reached an agreement for the third party to purchase four of Tower's New York
City properties for approximately $85 million shortly prior to the completion
of the merger.
Environmental Matters
Under various Federal, state and local laws, ordinances and regulations,
an owner of real estate is liable for the costs of removal or remediation of
certain hazardous or toxic substances on or in such property. These laws often
impose such liability without regard to whether the owner knew of, or was
responsible for, the presence of such hazardous or toxic substances. The cost
of any required remediation and the owner's liability therefore as to any
property is generally not limited under such enactments and could exceed the
value of the property and/or the aggregate assets of the owner. The presence
of such substances, or the failure to properly remediate such substances, may
adversely affect the owner's ability to sell or rent such property or to
borrow using such property as collateral. Persons who arrange for the
disposal or treatment of hazardous or toxic substances may also be liable for
the costs of removal or remediation of such substances at a disposal or
treatment facility, whether or not such facility is owned or operated by such
person. Certain environmental laws govern the removal, encapsulation or
disturbance of asbestos-containing materials ("ACMs") when such materials are
in poor condition, or in the event of renovation or demolition. Such 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, the Company may be
considered an owner or operator of such properties or as having arranged for
the disposal or treatment of hazardous or toxic substances and, therefore,
potentially liable for removal or remediation costs, as well as certain other
related costs, including governmental fines and injuries to persons and
property.
All of the Office Properties and all of the Industrial Properties have
been subjected to a Phase I or similar environmental audit after April 1, 1994
(which involved general inspections without soil sampling, ground water
analysis or radon testing and, for the Properties constructed in 1978 or
earlier, survey inspections to ascertain the existence of ACMs were
conducted) completed by independent environmental consultant companies
(except for 35 Pinelawn Road which was originally developed by Reckson and
subjected to a Phase 1 in April 1992). These environmental audits have not
revealed any environmental liability that would have a material adverse effect
on the Company's business.
Item 2. Properties
General
As of December 31, 1998, the Company owned 204 Properties (including two
joint venture office properties but excluding the Dominion Venture properties)
encompassing approximately 21.0 million square feet. These properties consist
of 73 Class A suburban Office Properties encompassing approximately 10.1
million square feet, 129 Industrial Properties encompassing approximately
10.8 million rentable square feet and two free-standing 10,000 square foot
retail properties. The rentable square feet of each property has been
determined for these purposes based on the aggregate leased square footage
specified in currently effective leases and, with respect to vacant space,
management's estimate. In addition, as of December 31, 1998, the Company
owned or had contracted to acquire approximately 980 acres of land in 18
separate parcels that may present future development opportunities.
Reckson has historically emphasized the development and acquisition of
properties that are part of large scale office and industrial parks and
approximately 70% of the Office Properties and approximately 49% of the
Industrial Properties (excluding the RMI properties) are located in such
parks (measured by rentable square footage). The Company believes that owning
properties in planned office and industrial parks provides certain strategic
advantages, including the following: (i) certain tenants prefer being located
in a park with other high quality companies to enhance their corporate image,
(ii) parks afford tenants certain aesthetic amenities such as a common
landscaping plan, standardization of signage and common dining and
recreational facilities, (iii) tenants may expand (or contract) their business
within a park, enabling them to centralize business functions and (iv) a park
provides tenants with access to other tenants and may facilitate business
relationships between tenants.
Also, as of December 31, 1998, the Company had invested approximately
$61.3 million in certain mortgage indebtedness encumbering four Class A Office
Properties on Long Island, a 825,000 square foot Industrial Property located
in New Jersey and a 400 acre parcel of land located in New Jersey. In
addition, the Company has loaned approximately $17 million to its minority
partner in Omni, its flagship Long Island Office Property, and effectively
increased its economic interest in the property owning partnership.
Set forth below is a summary of certain information relating to the
Properties, categorized by office and industrial parks, as of December 31,
1998.
Office Properties
General. As of December 31, 1998, the Company owned or had an interest in 73
Class A suburban Office Properties that encompass approximately 10.1 million
rentable square feet. As of December 31, 1998, these Office Properties were
approximately 93.8% leased to 858 tenants.
The Office Properties are Class A suburban office buildings and are
well-located, well-maintained and professionally managed. In addition, these
properties are modern with high finishes and achieve among the highest rent,
occupancy and tenant retention rates within their sub-markets. Forty nine of
the 73 Office Properties are located in the following 12 planned office parks:
the 23 acre North Shore Atrium, the 32 acre Huntington Melville Corporate
Center, the 50 acre Nassau West Corporate Center, the 29 acre Tarrytown
Corporate Center, the 7 acre Landmark Square Office Complex, the 32 acre
Executive Hill Office Park, the 76 acre Reckson Executive Park, the 11 acre
University Square Office Complex, the 58 acre Summit at Valhalla, the 5 acre
Mt. Pleasant Corporate Center, the 3.7 acre Stamford Towers Office Center,
and the 26 acre Short Hills Office Complex. The buildings in these office
parks offer a full array of amenities including health clubs, racquetball
courts, sun decks, restaurants, computer controlled HVAC access systems and
conference centers. Management believes that the location, quality of
construction and amenities as well as the Company's reputation for providing
a high level of tenant service have enabled the Company to attract and retain
a national tenant base. The office tenants include national service companies,
such as telecommunications firms, "Big Five" accounting firms, securities
brokerage houses, insurance companies and health care providers.
The Long Island Office Properties are leased to national tenants, as
well as to local tenants. Leases on the Office Properties are typically
written for terms ranging from five to ten years and require (i) payment of a
fixed gross rental amount that excludes payments on account of real estate
tax, operating expense escalations and base electrical charges ("Base Rent"),
(ii) payment of a base electrical charge, (iii) payment of real estate tax
escalations over a base year, (iv) payment of compounded annual increases to
Base Rent in lieu of operating expense escalations (which the Company
believes have historically exceeded the annual increase in actual operating
expenses), (v) payment of overtime HVAC and electric and (vi) payment of
electric escalations over a base year. In virtually all leases, the landlord
is responsible for structural repairs. Renewal provisions typically provide
for renewal rates at market rates or a percentage thereof, provided that such
rates are not less than the most recent renewal rates.
The Westchester Properties, the Southern Connecticut Properties and the
New Jersey Properties are also leased to national tenants, as well as to local
tenants. Leases are typically for terms ranging from five to ten years and
require (i) payment of Base Rent, (ii) payment of a base electrical charge,
(iii) payment of real estate tax escalations over a base year, (iv) payment of
periodic fixed increases in Base Rent, (v) payment of operating expense
escalations over a base year, and (vi) payment of electric escalations over a
base year. In virtually all leases, the landlord is responsible for
structural repairs. Renewal provisions typically provide for renewal rates
at market rate or a percentage thereof, provided that such rates are not less
than the most recent renewal rates.
The following table sets forth certain information as of December 31,
1998 for each of the Office Properties.
<TABLE>
<CAPTION>
Ownership
Interest
(Ground
Company's Lease Land Number
Percentage Expiration Year Area of
Property Ownership Date) <F1> Constructed (Acres) Floors
----------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C>
Office Properties:
Huntington Melville Corporate Center,
Melville, NY
395 North Service Rd 100% Leasehold 1988 7.5 4
(2081)
200 Broadhollow Rd. 100% Fee 1981 4.6 4
48 South Service Rd. 100% Fee 1986 7.3 4
35 Pinelawn Rd 100% Fee 1980 6.0 2
275 Broadhollow Rd 100% Fee 1970 5.8 4
1305 Old Walt Whitman Rd <F3> 100% Fee 1998<F5> 18.1 3
---------
Total-Huntington Melville
Corporate Center <F4> 49.3
---------
North Shore Atrium,
Syosset, NY
6800 Jericho Turnpike
(North Shore Atrium I) 100% Fee 1977 13.0 2
6900 Jericho Turnpike
(North Shore Atrium II) 100% Fee 1982 5.0 4
---------
Total-North Shore Atrium 18.0
---------
Nassau West Corporate Center,
Mitchel Field, NY
50 Charles Lindbergh Blvd. Leasehold
(Nassau West Corporate Center II) 100% (2082) 1984 9.1 6
60 Charles Lindbergh Blvd. Leasehold
(Nassau West Corporate Center I) 100% (2082) 1989 7.8 2
51 Charles Lindbergh Blvd.. Leasehold
100% (2084) 1989 6.6 1
55 Charles Lindbergh Blvd. Leasehold
100% (2082) 1982 10.0 2
333 Earl Ovington Blvd. (The Omni) Leasehold
60% (2088) 1991 30.6 10
90 Merrick Ave Leasehold
100% (2084) 1985 13.2 9
---------
Total-Nassau West Corporate Center 77.3
---------
Tarrytown Corp. Center
Tarrytown, NY
505 White Plains Road 100% Fee 1974 1.4 2
520 White Plains Road 60% Fee<F6> 1981 6.8 6
555 White Plains Road 100% Fee 1972 4.2 5
560 White Plains Road 100% Fee 1980 4.0 6
580 White Plains Road 100% Fee 1977 6.1 6
660 White Plains Road 100% Fee 1983 10.9 6
---------
Total-Tarrytown Corporate Center 33.4
---------
Royal Executive Park,
Rye Brook, NY
1 International Dr. 100% Fee 1983 N/A 3
2 International Dr. 100% Fee 1983 N/A 3
3 International Dr. 100% Fee 1983 N/A 3
4 International Dr. 100% Fee 1986 N/A 3
5 International Dr. 100% Fee 1986 N/A 3
6 International Dr. 100% Fee 1986 N/A 3
---------
Total-Reckson Executive Park 44.4
---------
Summit at Valhalla
Valhalla, NY
100 Summit Dr. 100% Fee 1988 11.3 4
200 Summit Dr. 100% Fee 1990 18.0 4
500 Summit Dr. 100% Fee 1986 29.1 4
---------
Total - Summit at Valhalla 58.4
---------
Mt. Pleasant Corporate Center
115/117 Stevens Ave. 100% Fee 1984 5.0 3
---------
Total - Mt Pleasant Corporate Center 5.0
---------
Landmark Square,
Stamford, CT
One Landmark Square 100% Fee 1973 N/A 22
Two Landmark Square 100% Fee 1976 N/A 3
Three Landmark Square 100% Fee 1978 N/A 6
Four Landmark Square 100% Fee 1977 N/A 5
Five Landmark Square 100% Fee 1976 N/A 3
Six Landmark Square 100% Fee 1984 N/A 10
---------
Total - Landmark Square 7.2
---------
Stamford Towers
Stamford, CT
680 Washington Blvd. 100% Fee 1989 1.3 11
750 Washington Blvd. 100% Fee 1989 2.4 11
---------
Total-Stamford Towers 3.7
---------
Stand-alone Long Island
Office Properties
400 Garden City Plaza
Garden City, NY 100% Fee 1989 5.7 5
88 Duryea Rd.
Melville, NY 100% Fee 1986 1.5 2
310 East Shore Rd.
Great Neck, NY 100% Fee 1981 1.5 4
333 East Shore Rd. Leasehold
Great Neck, NY 100% (2030) 1976 1.5 2
520 Broadhollow Rd.
Melville, NY 100% Fee 1978 7.0 1
1660 Walt Whitman Rd.
Melville, NY 100% Fee 1980 6.5 1
125 Baylis Rd.
Melville, NY 100% Fee 1980 8.2 2
150 Motor Parkway,
Hauppauge, NY 100% Fee 1984 11.3 4
1979 Marcus Ave.
Lake Success, NY 100% Fee 1987 8.6 4
---------
Total-Stand-alone Long Island
Office Properties 51.8
---------
Stand-alone Westchester Properties
155 White Plains Road,
Tarrytown, NY 100% Fee 1963 13.2 2
235 Main Street,
White Plains, NY 100% Fee 1974 <F5> 0.4 6
245 Main Street,
White Plains, NY 100% Fee 1983 0.4 6
2 Church Street,
Ossining, NY 100% Fee 1979 1.1 2
120 White Plains Rd.,
Tarrytown, NY 100% Fee 1984 9.7 6
80 Grasslands
Elmsford, NY 100% Fee 1989 4.9 3
360 Hamilton Avenue,
White Plains, NY <F3> 100% Fee 1977 1.5 12
140 Grand Street
White Plains, NY 100% Fee 1991 2.2 9
---------
Total Stand-alone Westchester
Office Properties<F4> 33.4
---------
Executive Hill Office Park
West Orange, NJ
100 Executive Dr 100% Fee 1978 10.1 3
200 Executive Dr 100% Fee 1980 8.2 4
300 Executive Dr 100% Fee 1984 8.7 4
10 Rooney Circle 100% Fee 1971 5.2 3
---------
Total-Executive Hill Office Park 32.2
---------
University Square,
Princeton, NJ
100 Campus Dr. 100% Fee 1987 N/A 1
104 Campus Dr. 100% Fee 1987 N/A 1
115 Campus Dr. 100% Fee 1987 N/A 1
---------
Total University Square 11.0
---------
Short Hills Office Complex
Short Hills, NJ
101 West John F. Kennedy Parkway 100% Fee 1981 9.0 6
101 East John F. Kennedy Parkway 100% Fee 1981 6.0 4
51 John F Kennedy Parkway 100% Fee 1988 11.0 5
---------
Total - Short Hills Office Complex 26.0
---------
Stand-alone New Jersey Properties
1 Paragon Drive
Montvale, NJ 100% Fee 1980 11.0 2
99 Cherry Hill Road
Parsippany, NJ 100% Fee 1982 8.8 3
119 Cherry Hill Road
Parsippany, NJ 100% Fee 1982 9.3 3
One Eagle Rock
Hanover, NJ 100% Fee 1986 10.4 3
155 Passaic Ave.
Fairfield, NJ 100% Fee 1984 3.6 4
3 University Plaza
Hackensack, NJ 100% Fee 1985 10.6 6
1255 Broad Street
Clifton, NJ <F3> 100% Fee 1968 11.1 2
---------
Total Stand-alone New Jersey
Properties <F4> 64.8
---------
Total-Office Properties <F4> 515.9
=========
<FN>
<F1>
Ground lease expirations assume exercise of renewal options by the lessee.
<F2>
Represents Base Rent of signed leases at December 31, 1998 adjusted for
scheduled contractual increases during the 12 months ending December 31, 1999.
Total Base Rent for these purposes reflects the effect of any lease expirations
that occur during the 12-month period ending December 31, 1999. Amounts
included in rental revenue for financial reporting purposes have been
determined on a straight-line basis rather than on the basis of contractual
rent as set forth in the foregoing table.
<F3>
Property is currently under redevelopment.
<F4>
Percent leases excludes properties under development.
<F5>
Year renovated.
<F6>
The actual fee interest in 520 White Plains Road is held by the County of
Westchester Industrial Development Agency. The fee interest in 520 White
Plains Road may be acquired if the outstanding principal under certain loan
agreements and annual basic installments are prepaid in full.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Annual Number
Rentable Annual Base Rent of
Square Percent Base Rent Per Leased Tenant
Property Feet Leased <F2> Sq. Ft. Leases
-------------- ---------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Office Properties:
Huntington Melville Corporate Center,
Melville, NY
395 North Service Rd 187,393 100.0% $4,473,934 $23.87 6
200 Broadhollow Rd. 67,432 80.9% $1,171,091 $21.48 10
48 South Service Rd. 125,372 95.1% $2,774,294 $23.26 7
35 Pinelawn Rd 105,241 96.4% $2,087,240 $20.58 25
275 Broadhollow Rd 124,441 97.9% $2,527,812 $20.74 20
1305 Old Walt Whitman Rd <F3> 167,400 54.0% $1,057,370 $11.69 2
-------------- ------------- ----------
Total-Huntington Melville
Corporate Center <F4> 777,279 95.8% $14,091,741 $20.88 70
-------------- ------------- ----------
North Shore Atrium,
Syosset, NY
6800 Jericho Turnpike
(North Shore Atrium I) 209,028 78.1% $2,931,343 $17.96 37
6900 Jericho Turnpike
(North Shore Atrium II) 101,036 81.5% $1,518,383 $18.44 12
-------------- ------------- ----------
Total-North Shore Atrium 310,064 79.2% $4,449,726 $18.12 49
-------------- ------------- ----------
Nassau West Corporate Center,
Mitchel Field, NY
50 Charles Lindbergh Blvd.
(Nassau West Corporate Center II) 211,845 100.0% $4,939,446 $23.15 22
60 Charles Lindbergh Blvd.
(Nassau West Corporate Center I) 186,889 100.0% $3,892,949 $20.79 7
51 Charles Lindbergh Blvd.. 108,000 100.0% $2,064,081 $19.11 1
55 Charles Lindbergh Blvd. 214,581 100.0% $2,483,483 $11.57 2
333 Earl Ovington Blvd. (The Omni) 575,000 96.8% $15,623,699 $28.07 27
90 Merrick Ave. 221,839 100.0% $5,083,788 $22.54 22
-------------- ------------- ----------
Total-Nassau West Corporate Center 1,518,154 99.2% $34,087,446 $22.64 81
-------------- ------------- ----------
Tarrytown Corp. Center
Tarrytown, NY
505 White Plains Road 26,468 96.3% $434,549 $17.05 20
520 White Plains Road 171,761 100.0% $3,192,362 $18.59 1
555 White Plains Road 121,585 56.7% $1,035,561 $15.01 6
560 White Plains Road 126,741 99.0% $2,304,411 $18.40 15
580 White Plains Road 170,726 78.6% $2,533,944 $18.89 19
660 White Plains Road 258,715 92.9% $4,878,054 $20.30 46
-------------- ------------- ----------
Total-Tarrytown Corporate Center 875,726 87.5% $14,378,881 $18.77 107
-------------- ------------- ----------
Royal Executive Park,
Rye Brook, NY
1 International Dr. 90,000 100.0% $1,170,000 $13.00 1
2 International Dr. 90,000 100.0% $1,170,000 $13.00 1
3 International Dr. 91,174 100.0% $1,822,063 $19.98 5
4 International Dr. 86,694 100.0% $1,578,818 $18.20 10
5 International Dr. 90,000 100.0% $2,416,482 $26.85 1
6 International Dr. 94,016 100.0% $1,567,129 $16.67 8
-------------- ------------- ----------
Total-Reckson Executive Park 541,884 100.0% $9,724,492 $17.94 26
-------------- ------------- ----------
Summit at Valhalla
Valhalla, NY
100 Summit Dr. 249,551 99.0% $5,975,322 $24.19 7
200 Summit Dr. 240,834 85.9% $4,975,008 $24.05 12
500 Summit Dr. 208,660 100.0% $5,633,820 $27.00 1
-------------- ------------- ----------
Total - Summit at Valhalla 699,045 94.8% $16,584,150 $25.03 20
-------------- ------------- ----------
Mt. Pleasant Corporate Center
115/117 Stevens Ave. 162,004 96.5% $3,028,227 $19.36 17
-------------- ------------- ----------
Total - Mt Pleasant Corporate Center 162,004 96.5% $3,028,227 $19.36 17
-------------- ------------- ----------
Landmark Square,
Stamford, CT
One Landmark Square 296,716 86.6% $5,720,613 $22.26 59
Two Landmark Square 39,701 81.8% $692,342 $21.31 9
Three Landmark Square 128,286 89.5% $2,630,895 $22.91 21
Four Landmark Square 104,446 89.9% $2,141,460 $22.81 16
Five Landmark Square 57,273 87.7% $175,000 $3.48 1
Six Landmark Square 171,899 96.5% $3,819,304 $23.03 7
-------------- ------------- ----------
Total - Landmark Square 798,321 89.5% $15,179,614 $21.25 113
-------------- ------------- ----------
Stamford Towers
Stamford, CT
680 Washington Blvd. 132,759 85.7% $2,477,251 $21.78 5
750 Washington Blvd. 192,108 95.8% $4,363,747 $23.70 10
-------------- ------------- ----------
Total-Stamford Towers 324,867 91.7% $6,840,998 $22.97 15
-------------- ------------- ----------
Stand-alone Long Island
Office Properties
400 Garden City Plaza
Garden City, NY 176,073 87.4% $3,557,257 $23.10 23
88 Duryea Rd.
Melville, NY 25,061 79.6% $354,022 $17.75 3
310 East Shore Rd.
Great Neck, NY 50,000 100.0% $1,207,228 $24.09 21
333 East Shore Rd.
Great Neck, NY 17,715 99.6% $483,726 $27.41 9
520 Broadhollow Rd.
Melville, NY 83,176 100.0% $1,520,471 $18.28 5
1660 Walt Whitman Rd.
Melville, NY 73,115 91.2% $1,234,445 $18.52 4
125 Baylis Rd.
Melville, NY 98,329 64.4% $1,106,006 $17.48 12
150 Motor Parkway,
Hauppauge, NY 191,447 94.2% $3,730,513 $20.69 24
1979 Marcus Ave.
Lake Success, NY 351,000 78.8% $5,330,079 $19.26 25
-------------- ------------- ----------
Total-Stand-alone Long Island
Office Properties 1,065,916 85.5% $18,523,747 $20.32 126
-------------- ------------- ----------
Stand-alone Westchester Properties
155 White Plains Road,
Tarrytown, NY 60,909 95.6% $1,114,080 $19.13 6
235 Main Street,
White Plains, NY 83,237 94.4% $1,404,396 $17.87 29
245 Main Street,
White Plains, NY 73,543 92.0% $1,340,432 $19.81 17
2 Church Street,
Ossining, NY 24,250 60.6% $218,745 $14.89 4
120 White Plains Rd.,
Tarrytown, NY 203,000 100.0% $4,445,022 $21.86 12
80 Grasslands
Elmsford, NY 85,104 99.3% $1,609,730 $19.04 6
360 Hamilton Avenue,
White Plains, NY <F3> 365,000 0.0% $0 $0.00 0
140 Grand Street
White Plains, NY 130,136 93.0% $2,673,200 $22.10 17
-------------- ------------- ----------
Total Stand-alone Westchester
Office Properties<F4> 1,025,179 95.9% $12,805,605 $20.39 91
-------------- ------------- ----------
Executive Hill Office Park
West Orange, NJ
100 Executive Dr 92,872 100.0% $1,778,542 $19.15 12
200 Executive Dr 102,630 96.5% $2,029,480 $20.50 18
300 Executive Dr 126,196 100.0% $2,568,559 $20.32 11
10 Rooney Circle 69,684 100.0% $1,406,904 $20.19 2
-------------- ------------- ----------
Total-Executive Hill Office Park 391,382 99.1% $7,783,485 $20.06 43
-------------- ------------- ----------
University Square,
Princeton, NJ
100 Campus Dr. 27,350 99.7% $428,715 $15.73 2
104 Campus Dr. 70,155 100.0% $1,140,019 $16.25 1
115 Campus Dr. 33,600 100.0% $602,144 $17.92 2
-------------- ------------- ----------
Total University Square 131,105 99.9% $2,170,878 $16.57 5
-------------- ------------- ----------
Short Hills Office Complex
Short Hills, NJ
101 West John F. Kennedy Parkway 185,233 100.0% $2,963,728 $16.00 1
101 East John F. Kennedy Parkway 122,841 100.0% $1,965,456 $16.00 1
51 John F Kennedy Parkway 248,962 97.1% $7,911,179 $32.72 15
-------------- ------------- ----------
Total - Short Hills Office Complex 557,036 98.7% $12,840,363 $23.35 17
-------------- ------------- ----------
Stand-alone New Jersey Properties
1 Paragon Drive
Montvale, NJ 104,599 88.3% $1,963,502 $21.25 14
99 Cherry Hill Road
Parsippany, NJ 93,250 97.5% $1,202,632 $13.23 16
119 Cherry Hill Road
Parsippany, NJ 95,724 97.1% $1,393,181 $14.99 16
One Eagle Rock
Hanover, NJ 140,000 98.1% $1,879,371 $13.68 6
155 Passaic Ave.
Fairfield, NJ 84,500 99.0% $872,602 $10.43 3
3 University Plaza
Hackensack, NJ 216,403 98.3% $3,889,398 $18.28 22
1255 Broad Street
Clifton, NJ <F3> 180,000 34.5% $951,096 $15.33 1
-------------- ------------- ----------
Total Stand-alone New Jersey
Properties <F4> 914,476 96.7% $12,151,782 $15.74 78
-------------- ------------- ----------
Total-Office Properties <F4> 10,092,438 93.8% $184,641,135 $20.64 858
============== ============= ==========
<FN>
<F1>
Ground lease expirations assume exercise of renewal options by the lessee.
<F2>
Represents Base Rent of signed leases at December 31, 1998 adjusted for
scheduled contractual increases during the 12 months ending December 31, 1999.
Total Base Rent for these purposes reflects the effect of any lease expirations
that occur during the 12-month period ending December 31, 1999. Amounts
included in rental revenue for financial reporting purposes have been
determined on a straight-line basis rather than on the basis of contractual
rent as set forth in the foregoing table.
<F3>
Property is currently under redevelopment.
<F4>
Percent leases excludes properties under development.
<F5>
Year renovated.
<F6>
The actual fee interest in 520 White Plains Road is held by the County of
Westchester Industrial Development Agency. The fee interest in 520 White
Plains Road may be acquired if the outstanding principal under certain loan
agreements and annual basic installments are prepaid in full.
</FN>
</TABLE>
Industrial Properties
General. As of December 31, 1998, the Company owned or had an interest
in 129 Industrial Properties that encompass approximately 10.8 million rentable
square feet. As of December 31, 1998, the Industrial Properties were
approximately 96.9% leased to 281 tenants. Many of the Industrial Properties
have been constructed with high ceiling heights (i.e., above 18 feet), upscale
office building facades, parking in excess of zoning requirements, drive-in
and/or loading dock facilities and other features which permit them to be
leased for industrial and/or office purposes.
The Industrial Properties are leased to national tenants as well as to
local companies. These tenants utilize the Industrial Properties for
distribution, warehousing, research and development and light
manufacturing/assembly activities. Leases on the Industrial Properties are
typically written for terms ranging from three to seven years and require (i)
payment of a Base Rent, (ii) payments of real estate tax escalations over a
base year, (iii) payments of compounded annual increases to Base Rent and (iv)
reimbursement of all operating expenses. Electric costs are borne and paid
directly by the tenant. Certain leases are "triple net" (i.e., the tenant is
required to pay in addition to annual Base Rent, all operating expenses and
real estate taxes). In virtually all leases, the landlord is responsible for
structural repairs. Renewal provisions typically provide for renewal rents at
market rates, provided that such rates are not less than the most recent
rental rates.
Approximately 49% of the Industrial Properties (excluding the Morris
Companies) measured by square footage, are located in three large scale planned
industrial parks that were developed by Reckson. They are (i) Vanderbilt
Industrial Park, a 400-acre industrial park containing 50 buildings with
approximately 3.6 million square feet.(ii) Airport International Plaza a
200-acre industrial park containing 32 buildings with approximately 1.4 million
square feet, and (iii) County Line Industrial Center, a 28-acre industrial park
containing six buildings and approximately one million square feet.
In addition to its industrial parks, as of December 31, 1998, the Company
owned 36 standalone Industrial Properties. As of December 31, 1998, these
Properties were approximately 98% leased (excluding properties under
development) to 68 tenants. Included in the 36 standalone Industrial
Properties are 24 Properties located on Long Island encompassing approximately
2.0 million square feet, of which 35% are located in Farmingdale, 13% are
located in Melville, 11% are located in Islip/Islandia and 10% are located in
Hauppauge.
The following table sets forth certain information as of December 31, 1998
for each of the Industrial Properties.
<TABLE>
<CAPTION>
Ownership Percentage
Interest Office/
(Ground Research
Company's Lease Land Clearance and
Percentage Expiration Year Area Height Development
Property Ownership Date) Constructed (Acres) (Feet)<F1> Finish
----------- --------------- ------------ ------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Industrial Properties:
Vanderbilt Industrial Park,
Hauppauge, NY
360 Vanderbilt Motor Parkway 100% Fee 1967 4.2 16 62%
410 Vanderbilt Motor Parkway 100% Fee 1965 3.0 15 7%
595 Old Willets Path 100% Fee 1968 3.5 14 14%
611 Old Willets Path 100% Fee 1963 3.0 14 11%
631/641 Old Willets Path 100% Fee 1965 1.9 14 31%
651/661 Old Willets Path 100% Fee 1966 2.0 14 45%
681 Old Willets Path 100% Fee 1961 1.3 14 10%
740 Old Willets Path 100% Fee 1965 3.5 14 5%
325 Rabro Dr. 100% Fee 1967 2.7 14 10%
250 Kennedy Dr. 100% Fee 1979 7.0 16 9%
90 Plant Ave. 100% Fee 1972 4.3 16 13%
110 Plant Ave. 100% Fee 1974 6.8 18 8%
55 Engineers Rd. 100% Fee 1968 3.0 18 8%
65 Engineers Rd. 100% Fee 1969 1.8 22 10%
85 Engineers Rd. 100% Fee 1968 2.3 18 5%
100 Engineers Rd. 100% Fee 1968 5.0 14 11%
150 Engineers Rd. 100% Fee 1969 6.8 22 11%
20 Oser Ave. 100% Fee 1979 5.0 16 18%
30 Oser Ave. 100% Fee 1978 4.4 16 21%
40 Oser Ave. 100% Fee 1974 3.1 16 33%
50 Oser Ave. 100% Fee 1975 4.1 21 15%
60 Oser Ave. 100% Fee 1975 3.3 21 19%
63 Oser Ave. 100% Fee 1974 1.2 20 9%
65 Oser Ave. 100% Fee 1975 1.2 18 10%
73 Oser Ave. 100% Fee 1974 1.2 20 15%
80 Oser Ave. 100% Fee 1974 1.1 18 25%
85 Nicon Ct. 100% Fee 1978 6.1 30 10%
90 Oser Ave. 100% Fee 1973 1.1 16 26%
104 Parkway Dr. 100% Fee 1985 1.8 15 50%
110 Ricefield Ln. 100% Fee 1980 2.0 15 25%
120 Ricefield Ln. 100% Fee 1983 2.0 15 24%
125 Ricefield Ln. 100% Fee 1973 2.0 14 20%
135 Ricefield Ln. 100% Fee 1981 2.1 15 10%
85 Adams Dr. 100% Fee 1980 1.8 15 90%
395 Oser Ave 100% Fee 1980 6.1 14 100%
185 Oser Ave 100% Fee 1974 2.0 18 40%
25 Davids Dr. 100% Fee 1975 3.2 20 90%
45 Adams Ave 100% Fee 1979 2.1 18 90%
225 Oser Ave 100% Fee 1977 1.2 14 80%
180 Oser Ave 100% Fee 1978 3.4 16 35%
360 Oser Ave 100% Fee 1981 1.3 18 35%
400 Oser Ave 100% Fee 1982 9.5 16 30%
375 Oser Ave 100% Fee 1981 1.2 18 40%
425 Rabro Drive 100% Fee 1980 4.0 16 25%
390 Motor Parkway 100% Fee 1980 10.0 14 4%
600 Old Willets Path 100% Fee 1965 4.5 14 25%
400 Moreland Road <F3> 100% Fee 1967 6.3 17 10%
-------
Total Vanderbilt
Industrial Park <F4> 160.4
-------
Airport International Plaza,
Islip, NY
20 Orville Dr. 100% Fee 1978 1.0 16 50%
25 Orville Dr. 100% Fee 1970 2.2 16 100%
50 Orville Dr. 100% Fee 1976 1.6 15 20%
65 Orville Dr. 100% Fee 1971 2.2 14 13%
70 Orville Dr. 100% Fee 1975 2.3 22 7%
80 Orville Dr. 100% Fee 1988 6.5 16 21%
85 Orville Dr. 100% Fee 1974 1.9 14 20%
95 Orville Dr. 100% Fee 1974 1.8 14 10%
110 Orville Dr. 100% Fee 1979 6.4 24 15%
180 Orville Dr. 100% Fee 1982 2.3 16 18%
1101 Lakeland Ave. 100% Fee 1983 4.9 20 8%
1385 Lakeland Ave. 100% Fee 1973 2.4 16 18%
125 Wilbur Place 100% Fee 1977 4.0 16 31%
140 Wilbur Place 100% Fee 1973 3.1 20 37%
160 Wilbur Place 100% Fee 1978 3.9 16 30%
170 Wilbur Place 100% Fee 1979 4.9 16 28%
4040 Veterans Highway 100% Fee 1972 1.0 14 100%
120 Wilbur Place 100% Fee 1972 2.8 16 15%
2004 Orville Dr 100% Fee 1998 7.4 24 20%
-------
Total Airport International Plaza 62.6
-------
County Line Industrial Center,
Melville, NY
5 Hub Dr. 100% Fee 1979 6.9 20 20%
10 Hub Dr. 100% Fee 1975 6.6 20 15%
30 Hub Drive 100% Fee 1976 5.1 20 18%
265 Spagnoli Rd. 100% Fee 1978 6.0 20 28%
-------
Total County Line Industrial Center 24.6
-------
Standalone Long Island
Industrial Properties
32 Windsor Pl.,
Islip, NY 100% Fee 1971 2.5 18 10%
42 Windsor Pl.,
Islip, NY 100% Fee 1972 2.4 18 8%
208 Blydenburgh Rd.,
Islandia, NY 100% Fee 1969 2.4 14 17%
210 Blydenburgh Rd.,
Islandia, NY 100% Fee 1969 1.2 14 16%
71 Hoffman Ln.,
Islandia, NY 100% Fee 1970 5.8 16 10%
135 Fell Ct.,
Islip, NY 100% Fee 1965 3.2 16 20%
-------
Subtotal Islip/Islandia 17.5
-------
70 Schmitt Boulevard,
Farmingdale, NY 100% Fee 1975 4.4 18 10%
105 Price Parkway,
Farmingdale, NY 100% Fee 1969 12.0 26 8.5%
110 BI County Blvd.,
Farmingdale, NY 100% Fee 1984 9.5 19 45%
-------
Subtotal Farmingdale 25.9
-------
70 Maxess Rd,
Melville, NY 100% Fee 1969 9.3 15 38%
20 Melville Park Rd,
Melville, NY 100% Fee 1965 4.0 23 66%
45 Melville Park Drive,
Melville, NY 100% Fee 1998 4.2 24 22%
65 Marcus Drive
Melville, NY 100% Fee 1968 5.0 16 50%
333 Smith St <F3>
Melville, NY 100% Fee 1967 7.1 22 95%
-------
Subtotal Melville <F4> 29.6
-------
300 Motor Parkway,
Hauppauge, NY 100% Fee 1979 4.2 14 100%
1516 Motor Parkway,
Hauppauge, NY 100% Fee 1981 7.9 24 5%
-------
Subtotal Hauppauge 12.1
-------
933 Motor Parkway,
Smithtown, NY 100% Fee 1973 5.6 20 26%
65 S. Service Rd. ,
Plainview, NY<F5> 100% Fee 1961 1.6 14 10%
85 S. Service Rd.,
Plainview, NY 100% Fee 1961 1.6 14 60%
19 Nicholas Drive,
Yaphank, NY <F6> 100% Fee 1989 29.6 24 5%
48 Harbor Park Dr.,
Port Washington, NY 100% Fee 1976 2.7 16 100%
110 Marcus Drive,
Huntington, NY 100% Fee 1980 6.1 20 39%
35 Engle St., <F3>
Hicksville, NY 100% Leasehold<F7> 1966 4.0 24 8%
100 Andrews,
Hicksville, NY 100% Fee 1954 11.7 25 12%
-------
Total Standalone Long Island
Industrial Properties <F4> 62.9
-------
Standalone Westchester Industrial
Properties
100 Grasslands Rd., <F3> 100% Fee 1964 3.6 16 100%
Elmsford, NY
2 Macy Rd., 100% Fee 1962 5.7 16 100%
Harrison, NY
500 Saw Mill Rd., 100% Fee 1968 7.3 22 17%
Elmsford, NY
-------
Total Standalone Westchester
Industrial Properties 16.6
-------
Standalone New Jersey Industrial
Properties
40 Cragwood Rd,
South Plainfield, NJ 100% Fee 1965 13.5 16 49%
400 Cabot Dr.,
Hamilton Township, NJ 100% Fee 1989 44.8 30 10%
100 Forge Way,
Rockaway, NJ 100% Fee 1986 3.5 24 12%
200 Forge Way,
Rockaway, NJ 100% Fee 1989 12.7 28 23%
300 Forge Way,
Rockaway, NJ 100% Fee 1989 4.2 24 37%
400 Forge Way,
Rockaway, NJ 100% Fee 1989 12.8 28 20%
5 Henderson Dr.,
West Caldwell, NJ 100% Fee 1967 15.2 14 10%
492 River Rd, <F3>
Nutley, NJ 100% Fee 1952 17.3 13 100%
-------
Total New Jersey Standalone
Industrial Properties <F4> 124.0
-------
Standalone Connecticut Industrial
Property
710 Bridgeport,
Shelton, CT 100% Fee 1971-1979 36.1 22 30%
-------
Total Connecticut Standalone
Industrial Property 36.1
-------
Reckson Morris Industrial Trust
200 Carter Dr.,
Edison, NJ 71.8% Fee 1988 7.7 24 11%
118 Moonachie Ave,
Carlstadt, NJ 71.8% Fee 1989 11.0 24 8%
24 Abeel Rd,
Cranbury, NJ 71.8% Fee 1979 3.2 24 8%
275 / 285 Pierce St,
Franklin, NJ 71.8% Fee 1988 6.9 24 7%
301 / 321 Herrod Blvd. So.
Brunswick, NJ 71.8% Fee 1991 39.5 26 1%
1 Nixon Ln,
Edison, NJ 71.8% Fee 1988 10.8 24 9%
18 Madison Rd.
Fairfield, NJ 71.8% Fee 1979 1.2 22 28%
200 / 250 Kennedy Dr.,
Sayerville, NJ 71.8% Fee 1988 7.9 24 9%
24 Madison Rd. Fairfield,
Fairfield, NJ 71.8% Fee 1980 2.5 24 18%
243 St. Nicholas Ave, So.
Plainfield, NJ 71.8% Fee 1974 1.0 20 8%
26 Madison Rd.,
Fairfield, NJ 71.8% Fee 1980 2.1 24 11%
300 / 350 Kennedy Dr.,
Sayerville, NJ 71.8% Fee 1988 9.7 24 3%
309 Kennedy Dr.,
Sayerville, NJ 71.8% Fee 1996 11.6 30 20%
34 Englehard Dr.,
Cranbury, NJ 71.8% Fee 1982 12.0 24 6%
409 Kennedy Dr.,
Sayerville, NJ 71.8% Fee 1996 14.9 30 20%
535 Secaucus Rd.,
Secaucus, NJ 71.8% Fee 1979 4.4 24 27%
55 Carter Dr.,
Edison, NJ 71.8% Fee 1987 5.0 24 20%
22 Madison Rd.,
Fairfield, NJ 71.8% Fee 1980 3.5 24 23%
135 Fieldcrest Dr.,
Edison, NJ 71.8% Fee 1980 3.7 24 5%
Mount Ebo Corporate Park
Brewster, NY 71.8% Fee 1978 11.4 18 10%
30 Stultz Rd., <F3>
Brunswick, NJ 71.8% Fee 1978 12.6 18 10%
Industrial Ave.,
Teterboro, NJ 71.8% Fee 1998 15.3 32 10%
6 Johanna Ct., <F3>
East Brunswick, NJ 71.8% Fee 1978 18.4 18 10%
-------
Total Reckson Morris
Industrial Trust <F4> 216.3
-------
Total Industrial Properties <F4> 788.6
=======
<FN>
<F1>
Calculated as the difference from the lowest beam to floor.
<F2>
Represents Base Rent of signed leases at December 31, 1998 adjusted for
scheduled contractual increases during the 12 months ending December 31, 1999.
Total Base Rent for these purposes reflects the effect of any lease expirations
that occur during the 12 month period ending December 31, 1999. Amounts
included in rental revenue for financial reporting purposes have been
determined on a straight-line basis rather than on the basis of contractual
rent as set forth in the foregoing table.
<F3>
Property under redevelopment.
<F4>
Percent leased excludes properties under redevelopment.
<F5>
A tenant has been granted an option exercisable after April 30, 1997 and prior
to October 31, 2002 to purchase this property for $600,000.
<F6>
The actual fee interest in 19 Nicholas Drive is currently held by the Town of
Brookhaven Industrial Development Agency. The Company may acquire such fee
interest by making a nominal payment to the Town of Brookhaven Industrial
Development Agency.
<F7>
The Company has entered into a 20 year lease agreement in which it has the
right to sublease the premises.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Annual Number
Rentable Annual Base Rent of
Square Percent Base Per Leased Tenant
Property Feet Leased Rent <F2> Sq. Ft. Leases
------------ ---------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Industrial Properties:
Vanderbilt Industrial Park,
Hauppauge, NY
360 Vanderbilt Motor Parkway 54,000 100.0% $232,200 $4.30 1
410 Vanderbilt Motor Parkway 41,784 100.0% $203,113 $4.86 4
595 Old Willets Path 31,670 84.5% $121,355 $4.53 3
611 Old Willets Path 20,000 100.0% $142,809 $7.14 2
631/641 Old Willets Path 25,000 100.0% $157,143 $6.29 4
651/661 Old Willets Path 25,000 100.0% $165,278 $6.61 7
681 Old Willets Path 15,000 100.0% $94,688 $6.31 1
740 Old Willets Path 30,000 100.0% $29,670 $.99 1
325 Rabro Dr. 35,000 100.0% $206,909 $5.83 2
250 Kennedy Dr. 127,980 100.0% $455,298 $3.56 1
90 Plant Ave. 75,000 100.0% $384,836 $5.14 3
110 Plant Ave. 125,000 100.0% $540,000 $4.32 1
55 Engineers Rd. 36,000 100.0% $193,945 $5.39 1
65 Engineers Rd. 23,000 100.0% $131,474 $5.72 1
85 Engineers Rd. 40,800 100.0% $91,176 $2.23 2
100 Engineers Rd. 88,000 100.0% $366,279 $4.16 1
150 Engineers Rd. 135,000 100.0% $398,580 $2.95 1
20 Oser Ave. 42,000 98.7% $334,151 $8.06 2
30 Oser Ave. 42,000 100.0% $249,676 $5.94 5
40 Oser Ave. 59,800 100.0% $357,683 $5.96 13
50 Oser Ave. 60,000 100.0% $240,000 $4.00 1
60 Oser Ave. 48,000 100.0% $192,000 $4.00 1
63 Oser Ave. 22,000 100.0% $108,506 $4.93 1
65 Oser Ave. 20,000 100.0% $97,284 $4.86 1
73 Oser Ave. 20,000 100.0% $122,720 $6.14 1
80 Oser Ave. 19,500 100.0% $64,356 $3.30 1
85 Nicon Ct. 104,000 100.0% $485,621 $4.67 1
90 Oser Ave. 37,500 100.0% $123,756 $3.30 1
104 Parkway Dr. 27,600 100.0% $191,434 $6.94 1
110 Ricefield Ln. 32,264 100.0% $155,168 $4.81 1
120 Ricefield Ln. 33,060 100.0% $168,000 $5.08 1
125 Ricefield Ln. 30,495 100.0% $193,539 $6.35 1
135 Ricefield Ln. 32,340 100.0% $198,507 $6.14 1
85 Adams Dr. 20,000 100.0% $260,000 $13.00 1
395 Oser Ave 50,000 100.0% $417,285 $8.43 1
185 Oser Ave 30,000 100.0% $208,430 $6.95 1
25 Davids Dr. 40,000 100.0% $313,978 $7.85 1
45 Adams Ave 28,000 100.0% $136,461 $4.87 1
225 Oser Ave 10,000 100.0% $33,125 $3.31 2
180 Oser Ave 61,868 88.0% $341,070 $6.26 8
360 Oser Ave 23,000 100.0% $128,800 $5.60 1
400 Oser Ave 164,936 76.4% $746,201 $5.92 22
375 Oser Ave 20,000 100.0% $142,740 $7.14 1
425 Rabro Drive 65,641 100.0% $586,080 $9.00 1
390 Motor Parkway 181,155 45.5% $300,947 $3.65 2
600 Old Willets Path 69,627 100.0% $255,398 $3.67 1
400 Moreland Road <F3> 56,875 0.00% $0 $0 0
------------ ----------- ---------
Total Vanderbilt
Industrial Park <F4> 2,379,895 93.5% $11,067,669 $5.10 112
------------ ----------- ---------
Airport International Plaza,
Islip, NY
20 Orville Dr. 12,852 100.0% $20,785 $1.62 1
25 Orville Dr. 32,300 100.0% $460,067 $13.67 2
50 Orville Dr. 28,000 73.5% $192,290 $9.35 2
65 Orville Dr. 32,000 100.0% $165,894 $5.18 2
70 Orville Dr. 41,508 100.0% $315,242 $7.59 2
80 Orville Dr. 92,544 100.0% $611,454 $6.61 9
85 Orville Dr. 25,000 100.0% $0 $0 0
95 Orville Dr. 25,000 100.0% $131,750 $5.27 1
110 Orville Dr. 110,000 100.0% $649,733 $5.91 1
180 Orville Dr. 37,612 100.0% $222,733 $5.92 2
1101 Lakeland Ave. 90,411 100.0% $534,205 $5.91 1
1385 Lakeland Ave. 35,000 100.0% $153,484 $4.39 3
125 Wilbur Place 62,686 87.1% $285,546 $5.23 12
140 Wilbur Place 48,500 100.0% $231,821 $4.78 2
160 Wilbur Place 62,710 100.0% $397,941 $6.35 6
170 Wilbur Place 72,062 93.1% $306,255 $4.57 7
4040 Veterans Highway 2,800 100.0% $54,061 $19.31 1
120 Wilbur Place 35,000 78.6% $212,999 $7.75 3
2004 Orville Dr 106,515 100.0% $676,814 $6.35 1
------------ ----------- ---------
Total Airport International
Plaza 952,500 93.2% $5,623,074 $6.24 58
------------ ----------- ---------
County Line Industrial Center,
Melville, NY
5 Hub Dr. 88,001 100.0% $495,704 $5.63 2
10 Hub Dr. 95,546 68.8% $348,394 $5.30 3
30 Hub Drive 73,127 100.0% $388,913 $5.32 2
265 Spagnoli Rd. 85,500 100.0% $608,774 $7.12 3
------------ ----------- ---------
Total County Line Industrial
Center 342,174 100.0% $1,841,785 $5.89 10
------------ ----------- ---------
Standalone Long Island
Industrial Properties
32 Windsor Pl.,
Islip, NY 43,000 100.0% $133,253 $3.10 1
42 Windsor Pl.,
Islip, NY 65,000 100.0% $226,057 $3.48 1
208 Blydenburgh Rd.,
Islandia, NY 24,000 100.0% $117,970 $4.92 4
210 Blydenburgh Rd.,
Islandia, NY 20,000 100.0% $106,480 $5.32 2
71 Hoffman Ln.,
Islandia, NY 30,400 100.0% $173,134 $5.70 1
135 Fell Ct.,
Islip, NY 30,000 100.0% $222,750 $7.43 1
------------ ----------- ---------
Subtotal Islip/Islandia 212,400 100.0% $979,644 $4.61 10
------------ ----------- ---------
70 Schmitt Boulevard,
Farmingdale, NY 76,312 100.0% $188,113 $2.47 1
105 Price Parkway,
Farmingdale, NY 297,000 100.0% $1,348,072 $4.54 1
110 BI County Blvd.,
Farmingdale, NY 147,303 100.0% $1,314,179 $8.93 12
------------ ----------- ---------
Subtotal Farmingdale 520,615 100.0% $2,850,364 $5.48 14
------------ ----------- ---------
70 Maxess Rd,
Melville, NY 78,000 100.0% $640,590 $8.15 1
20 Melville Park Rd,
Melville, NY 67,922 100.0% $378,063 $5.57 1
45 Melville Park Drive,
Melville, NY 40,247 100.0% $519,656 $12.91 1
65 Marcus Drive
Melville, NY 60,000 100.0% $570,648 $9.51 1
333 Smith St <F3>
Melville, NY 165,000 0.0% $0 $0 0
------------ ----------- ---------
Subtotal Melville <F4> 411,169 100.0% $2,108,957 $8.55 4
------------ ----------- ---------
300 Motor Parkway,
Hauppauge, NY 55,942 97.0% $870,808 $16.05 10
1516 Motor Parkway,
Hauppauge, NY 140,000 100.0% $861,583 $6.15 1
------------ ----------- ---------
Subtotal Hauppauge 195,942 95.0% $1,732,391 $8.92 11
------------ ----------- ---------
933 Motor Parkway,
Smithtown, NY 48,000 100.0% $334,760 $6.97 1
65 S. Service Rd. ,
Plainview, NY<F5> 10,000 100.0% $67,875 $6.79 1
85 S. Service Rd.,
Plainview, NY 20,000 100.0% $132,547 $6.63 2
19 Nicholas Drive,
Yaphank, NY <F6> 145,000 100.0% $302,575 $2.09 1
48 Harbor Park Dr.,
Port Washington, NY 35,000 100.0% $680,146 $19.43 1
110 Marcus Drive,
Huntington, NY 78,240 100.0% $480,062 $6.14 1
35 Engle St., <F3> <F7>
Hicksville, NY 120,000 0.0% $0 $0 0
100 Andrews,
Hicksville, NY 167,500 66.1% $1,066,412 $6.36 2
------------ ----------- ---------
Total Standalone Long Island
Industrial Properties <F4> 623,740 100.0% $3,064,377 $6.08 9
------------ ----------- ---------
Standalone Westchester Industrial
Properties
100 Grasslands Rd., <F3> 45,000 0.0% $0 $0 0
Elmsford, NY
2 Macy Rd., 26,000 100.0% $422,500 $16.25 1
Harrison, NY
500 Saw Mill Rd., 92,000 100.0% $828,000 $9.00 1
Elmsford, NY
------------ ----------- ---------
Total Standalone Westchester
Industrial Properties 163,000 100.0% $1,250,500 $10.60 2
------------ ----------- ---------
Standalone New Jersey Industrial
Properties
40 Cragwood Rd,
South Plainfield, NJ 135,000 57.5% $944,590 $12.16 3
400 Cabot Dr.,
Hamilton Township, NJ 585,510 100.0% $2,739,377 $4.68 1
100 Forge Way,
Rockaway, NJ 20,136 100.0% $149,907 $7.44 6
200 Forge Way,
Rockaway, NJ 72,118 100.0% $450,738 $6.25 2
300 Forge Way,
Rockaway, NJ 24,000 100.0% $149,367 $6.17 2
400 Forge Way,
Rockaway, NJ 73,000 100.0% $407,666 $5.58 2
5 Henderson Dr.,
West Caldwell, NJ 210,000 100.0% $453,750 $2.16 1
492 River Rd, <F3>
Nutley, NJ 128,000 0.00% $0 $0 0
------------ ----------- ---------
Total New Jersey Standalone
Industrial Properties <F4> 1,247,764 94.9% $5,295,395 $4.98 17
------------ ----------- ---------
Standalone Connecticut Industrial
Property
710 Bridgeport,
Shelton, CT 452,414 100.0% $2,900,684 $6.41 2
------------ ----------- ---------
Total Connecticut Standalone
Industrial Property 452,414 100.0% $2,900,684 $6.41 2
------------ ----------- ---------
Reckson Morris Industrial Trust
200 Carter Dr.,
Edison, NJ 105,790 100.0% $407,261 $3.85 2
118 Moonachie Ave,
Carlstadt, NJ 243,751 100.0% $1,828,133 $7.50 1
24 Abeel Rd,
Cranbury, NJ 40,022 100.0% $185,000 $4.62 1
275 / 285 Pierce St,
Franklin, NJ 103,075 99.7% $258,492 $2.52 3
301 / 321 Herrod Blvd. So.
Brunswick, NJ 610,949 100.0% $2,291,059 $3.75 1
1 Nixon Ln,
Edison, NJ 192,829 100.0% $376,820 $1.95 1
18 Madison Rd.
Fairfield, NJ 14,000 100.0% $95,492 $6.82 1
200 / 250 Kennedy Dr.,
Sayerville, NJ 161,751 98.4% $534,565 $3.36 2
24 Madison Rd. Fairfield,
Fairfield, NJ 35,505 100.0% $226,323 $6.38 2
243 St. Nicholas Ave, So.
Plainfield, NJ 15,000 100.0% $78,750 $5.25 1
26 Madison Rd.,
Fairfield, NJ 30,300 100.0% $169,842 $5.60 2
300 / 350 Kennedy Dr.,
Sayerville, NJ 164,267 98.4% $467,337 $2.89 3
309 Kennedy Dr.,
Sayerville, NJ 202,000 100.0% $909,000 $4.50 1
34 Englehard Dr.,
Cranbury, NJ 203,404 100.0% $894,978 $4.40 1
409 Kennedy Dr.,
Sayerville, NJ 225,831 100.0% $930,612 $4.12 1
535 Secaucus Rd.,
Secaucus, NJ 62,093 91.7% $313,164 $5.50 1
55 Carter Dr.,
Edison, NJ 114,512 88.3% $388,692 $3.84 3
22 Madison Rd.,
Fairfield, NJ 39,875 100.0% $215,724 $5.41 1
135 Fieldcrest Dr.,
Edison, NJ 78,000 98.7% $331,075 $4.30 2
Mount Ebo Corporate Park
Brewster, NY 93,948 100.0% $879,519 $9.36 1
30 Stultz Rd., <F3>
Brunswick, NJ 60,617 0% $0 $0 0
Industrial Ave.,
Teterboro, NJ 332,352 100.0% $2,193,523 $6.60 1
6 Johanna Ct., <F3>
East Brunswick, NJ 214,000 0% 0 0 0
------------ ----------- ---------
Total Reckson Morris
Industrial Trust <F4> 3,343,871 99.2% $13,975,361 $4.59 32
------------ ----------- ---------
Total Industrial
Properties <F4> 10,845,484 96.9% $52,690,201 $5.41 281
============ =========== =========
<FN>
<F1>
Calculated as the difference from the lowest beam to floor.
<F2>
Represents Base Rent of signed leases at December 31, 1998 adjusted for
scheduled contractual increases during the 12 months ending December 31, 1999.
Total Base Rent for these purposes reflects the effect of any lease expirations
that occur during the 12 month period ending December 31, 1999. Amounts
included in rental revenue for financial reporting purposes have been
determined on a straight-line basis rather than on the basis of contractual
rent as set forth in the foregoing table.
<F3>
Property under redevelopment.
<F4>
Percent leased excludes properties under redevelopment.
<F5>
A tenant has been granted an option exercisable after April 30, 1997 and prior
to October 31, 2002 to purchase this property for $600,000.
<F6>
The actual fee interest in 19 Nicholas Drive is currently held by the Town of
Brookhaven Industrial Development Agency. The Company may acquire such fee
interest by making a nominal payment to the Town of Brookhaven Industrial
Development Agency.
<F7>
The Company has entered into a 20 year lease agreement in which it has the
right to sublease the premises.
</FN>
</TABLE>
Retail Properties
As of December 31, 1998, the Company owned two free-standing 10,000 square
foot retail properties. The retail properties which are located in Great
Neck, New York and Huntington, New York were 100% leased as of December 31,
1998.
Developments in Progress
As of December 31, 1998, the Company owned or had under contract
approximately 980 acres of land in 18 separate parcels, ten of which are
located in Long Island, two of which are located in Westchester and six of
which are located in New Jersey. The parcels have been zoned for potential
industrial and retail development. The Company plans to seek development
opportunities as market conditions permit. The Company had invested
approximately $48 million in land costs and approximately $14 million in
additional development costs at December 31, 1998. In addition, the Company
estimates that if these projects were to be completed, total additional
development cost would be approximately $505 million. Additionally at December
31, 1998, the Company had invested approximately $36 million in seven
properties that the Company plans to either redevelop or reposition.
The Company estimates that if it completes the redevelopment and
repositioning it will spend an additional $24 million.
Historical Non-Incremental Revenue-Generating Capital Expenditures, Tenant
Improvement Costs and Leasing Commissions
The following table sets forth annual and per square foot recurring,
non-incremental revenue-generating capital expenditures and non-incremental
revenue-generating tenant improvement costs and leasing commissions incurred by
the Company to retain revenues attributable to existing leased space for the
period 1994 through 1998 for the Office Properties and the Industrial
Properties. As noted, incremental revenue-generating tenant improvement costs
and leasing commissions are excluded from the table set forth immediately
below. The historical capital expenditures, tenant improvement costs and
leasing commissions set forth below are not necessarily indicative of future
recurring, non-incremental revenue-generating capital expenditures or
non-incremental revenue-generating tenant improvement costs and leasing
commissions.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Capital Expenditures
Office Properties
Total $158,340 $364,545 $379,026 $1,108,675 $2,004,976
Per square foot $ 0.10 $ 0.19 $ 0.13 $ 0.22 $ 0.23
Industrial Properties
Total $524,369 $290,457 $670,751 $733,233 $1,205,266
Per square foot $ 0.18 $ 0.08 $ 0.18 $ 0.15 $ 0.12
Non-Incremental Revenue-Generating
Tenant Improvement Costs and Leasing
Commissions
Long Island Office Properties
Annual Tenant Improvement Costs $902,312 $452,057 $523,574 $784,044 $1,140,251
Per square foot improved 5.13 4.44 4.28 7.00 3.98
Annual Leasing Commissions 341,253 144,925 119,047 415,822 418,191
Per square foot leased 1.94 1.42 0.97 4.83 1.46
Total per square foot $7.07 $5.86 $5.25 $11.83 $5.44
Westchester Office Properties
Annual Tenant Improvement Costs N/A N/A $834,764 $1,211,665 $711,160
Per square foot improved N/A N/A 6.33 8.90 4.45
Annual Leasing Commissions N/A N/A 264,388 366,257 286,150
Per square foot leased N/A N/A 2.00 2.69 1.79
Total per square foot N/A N/A $8.33 $11.59 $6.24
Connecticut Office Properties
Annual Tenant Improvement Costs N/A N/A $58,000 $1,022,421 $202,880
Per square foot improved N/A N/A 12.45 13.39 5.92
Annual Leasing Commissions N/A N/A 0 256,615 151,063
Per square foot leased N/A N/A 0.00 3.36 4.41
Total per square foot N/A N/A $12.45 $16.75 $10.33
New Jersey Office Properties
Annual Tenant Improvement Costs N/A N/A N/A N/A $654,877
Per square foot improved N/A N/A N/A N/A 3.78
Annual Leasing Commissions N/A N/A N/A N/A 396,127
Per square foot leased N/A N/A N/A N/A 2.08
Total per square foot N/A N/A N/A N/A $5.86
Industrial Properties
Annual Tenant Improvement Costs $585,891 $210,496 $380,334 $230,466 $283,842
Per square foot improved 0.88 0.90 0.72 0.55 0.65
Annual Leasing Commissions 176,040 107,351 436,213 81,013 218,749
Per square foot leased 0.27 0.46 0.82 0.19 0.50
Total per square foot $1.15 $1.36 $1.54 $.74 $1.15
</TABLE>
The Option Properties
Six properties owned by Reckson (the "Reckson Option Properties") and four
properties in which Reckson owns a non-controlling minority interest (the
"Other Option Properties") and, together with the Reckson Option Properties,
the ("Option Properties") were not contributed to the Operating Partnership
upon completion of the IPO. However, the Operating Partnership was granted 10
year options to acquire interests in the Option Properties under the terms and
conditions described below. As of the date hereof, the Company had acquired or
contracted to acquire all but two of the Reckson Option Properties.
The two remaining Reckson Option Properties are comprised of 225
Broadhollow Road, Melville, New York, a 185,889 square foot suburban Class A
office property located in the Huntington Melville Corporate Center and 593
Acorn Street, Babylon, New York, a 39,551 square foot stand alone industrial
property both of which are managed by an affiliate of the Company.
The Operating Partnership has been granted options, exercisable over a
10 year period that commenced upon closing of the IPO, to acquire each of the
Reckson Option Properties and Reckson's ownership interest in the Other Option
Properties at a purchase price equal to the lesser of (i) a fixed price (the
"Fixed Price") and (ii) the Net Operating Income attributable to such Option
Property during the 12 month period preceding exercise of the option by the
Operating Partnership (multiplied by Reckson's percentage ownership interest
in the case of the Other Option Properties) divided by a capitalization rate
of 11.5%; provided that, in no event shall the purchase price be less than the
outstanding balance of the mortgage debt encumbering the Option Property
(multiplied by Reckson's percentage ownership interest in the case of the
Other Option Properties) on the acquisition date. Net Operating Income is
defined generally for these purposes as gross income minus annual operating
costs. The portion of the purchase price not required to repay mortgage debt
and other transaction costs incurred in connection with the sale of such
Option Property shall be payable in Units. The fixed prices for 225
Broadhollow Road and 593 Acorn Street are $21,242,000 and $878,100,
respectively.
The Reckson partnerships that currently own the Reckson Option Properties
may sell any of these properties to a party other than the Operating
Partnership, provided that the selling entity provides the Company with 30-days
advance notice of such sale. Upon receiving such notice, the Company may then
elect to exercise the option to acquire the Reckson Option Property and, if it
so chooses, sell the property to such party.
In addition to the foregoing, in the event a sale of any Option Property
to a third party is consummated, the Operating Partnership will receive
"Reckson's Net After Tax Profit" from such sale. Reckson's Net After Tax
Profit is defined generally for such purposes as the product of (i) Reckson's
percentage ownership interest in the Option Property (100% in the case of
Reckson Option Properties) multiplied by (ii) the excess of the gross sales
price over the total of any outstanding mortgage or other encumbrance, the
federal income tax payable by the partners as a result of the sale, as well
as other transaction costs incurred in connection with the sale of such Option
Property, including transfer taxes, closing adjustments, brokerage commissions,
legal fees and accounting fees.
The terms of the options granted to the Operating Partnership with respect
to the Option Properties have not been based on appraisals and are not the
product of an arm's-length negotiation since members of the Rechler family
maintain an ownership interest in such Option Properties. However, management
believes that such terms are fair to the Company and a determination by the
Operating Partnership to exercise an option to acquire an interest in any
Option Property shall be subject to the approval of the Independent Directors
and, with respect to interests in the Other Option Properties, the approval of
Reckson's partners.
Mortgage Indebtedness
The following table sets forth certain information regarding the mortgage
debt of the Company, as of December 31, 1998.
<TABLE>
<CAPTION>
Principal
Amount
Outstanding Interest Maturity Amortization
Property (in thousands) Rate Date Schedule
- --------------------------------------------- --------- --------- -----------
<S> <C> <C> <C> <C>
6800 Jericho Turnpike
(NORTH SHORE ATRIUM I) $15,001 7.25% 6/10/2000 ---
6900 Jericho Turnpike
(North Shore Atrium II) 5,279 7.25% 6/10/2000 ---
200 Broadhollow Rd. 6,621 7.75% 6/02/2002 30 year
395 North Service Road 21,375 6.45% 10/26/2005 <F5>
50 Charles Lindbergh Blvd. 15,479 7.25% 7/10/2001 ---
333 Earl Ovington Blvd.
(The Omni) <F1> 57,162 7.72 % 08/14/2007 25 year
310 East Shore Rd. 2,322 8.00% 7/01/2002 ---
80 Orville Dr. 2,616 7.50% <F2> 2/01/2004 ---
70 Schmitt Boulevard 150 9.25% 8/01/99 <F3>
580 White Plains Road 8,503 7.375% 9/01/2000 25 year
Landmark Square 48,579 8.02% 10/07/2006 25 year
110 Bi-County Blvd. 4,383 9.125% 11/13/2012 20 year
100 Summit Lake Drive 23,600 8.50% 04/01/2007 14 year
200 Summit Lake Drive 20,764 9.25% 01/01/2006 25 year
6 Johana Court <F4> 6,850 7.00% 11/01/99 ---
309/409 Kennedy Drive <F4> 14,779 7.50% 03/15/2002 ---
----------
Total $253,463
==========
<FN>
<F1>
The Company has a 60% general partnership interest in the Omni Partnership. The
Company's proportionate share of the aggregate principal amount of the mortgage
debt on the Omni is $34.3 million.
<F2>
Interest rate increases to 10.1% after the first five years of the loan.
<F3>
Principal payments of $18,750 per month for the period September 1998 to
August 1999.
<F4>
The Company has an approximate 71.8% general partnership interest in RMI.
The Company's proportionate share of the aggregate principal amount of the
mortgage debt of RMI is approximately $15.5 million.
<F5>
Principal payments of $34,000 per month for the period November 1998 to
October 2005.
</FN>
</TABLE>
Item 3. Legal Proceedings
The Company is not presently subject to any material litigation nor, to
the Company's knowledge, is any litigation threatened against the Company,
other than routine actions for negligence or other claims and administrative
proceedings arising in the ordinary course of business, some of which are
expected to be covered by liability insurance and all of which collectively
are not expected to have a material adverse effect on the liquidity, results
of operations or business or financial condition of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of stockholders during the fourth
quarter of the year ended December 31, 1998.
Part II
Item 5. Market For Registrant's Common Equity and Related Stockholder
matters
The Company's common stock began trading on the New York Stock Exchange
("NYSE") on May 25, 1995, under the symbol "RA". The following table sets
forth the quarterly high and low closing sales prices per share of the common
stock reported on the NYSE and the distributions paid by the Company for each
respective quarter ended.
<TABLE>
<CAPTION>
High <F3> Low <F3> Distribution <F3>
--------------- --------------- ---------------
<S> <C> <C> <C>
March 31, 1997 $23.563 $20.438 $0.3000
June 30, 1997 $23.000 $20.875 $0.3125 <F1>
September 30, 1997 $27.000 $22.375 $0.3125
December 31, 1997 $28.750 $24.063 $0.3125
March 31, 1998 $26.438 $24.125 $0.3125
June 30, 1998 $26.375 $22.688 $0.4199 <F2>
September 30, 1998 $26.000 $19.000 $0.3375
December 31, 1998 $24.563 $20.188 $0.3375
<FN>
<F1>
Commencing with the distribution for the quarter ended June 30, 1997, the Board
of Directors of the Company increased the quarterly distribution to $.3125 per
share, which is equivalent to an annual distribution of $1.25 per share.
<F2>
Commencing with the distribution for the quarter ended June 30, 1998, the
Board of Directors of the Company increased the quarterly distribution to
$.3375 per share, which is equivalent to an annual distribution of $1.35 per
share. In addition, on June 11, 1998, the Company paid a stock dividend
equivalent to $.0824 per share relating to the Operating Partnership's
distribution of its common stock interest in RSI to the Company.
<F3>
Historical amounts adjusted to reflect a two-for-one stock split effective
April 15, 1997.
</FN>
</TABLE>
Item 6. Selected Financial Data (in thousands except share and
properties data)
<TABLE>
<CAPTION>
Reckson Associates Realty Corp.
--------------------------------------------------------------
for the
For the Year Ended Period
--------------------------------------------- June 3, 1995 to
December, December, December, December 31,
31, 1998 31, 1997 31, 1996 1995 <F1>
-------------- -------------- -------------- -----------------
<S> <C> <C> <C> <C>
Operating Data:
Revenues $ 266,373 $ 153,395 $ 96,141 $ 38,455
Total expenses 201,892 107,905 70,951 27,901
Income (before preferred dividends and
distributions, minority interests and
extraordinary items) 64,481 45,490 25,190 10,554
Preferred dividends and distributions 14,244 --- --- ---
Minority interests' 10,672 8,624 6,768 3,067
Extraordinary items-gain (loss) (net of
minority interests' share) (1,670) (2,230) (895) (4,234)
Net income 37,895 34,636 17,527 3,253
Per Share Data:
Basic: <F2>
Income before extraordinary items $ 1.00 $ 1.13 $ 0.92 $ 0.51
Extraordinary items -(loss) (0.04) (0.07) (0.04) (0.29)
Net income 0.96 1.06 0.88 0.22
Diluted: <F2a>
Income before extraordinary items $ 0.99 $ 1.11 $ 0.91 $ 0.51
Extraordinary items-(loss) (.04) (.07) (.04) (.29)
Diluted net income .95 1.04 0.87 0.22
Balance Sheet Data: (period end):
Commercial real estate properties,
before accumulated depreciation $ 1,743,223 $ 1,015,282 $ 519,504 $ 290,712
Total assets 1,854,816 1,113,257 543,758 242,728
Mortgage notes payable 253,463 180,023 161,513 98,126
Unsecured credit facility 465,850 210,250 108,500 40,000
Unsecured term loan 20,000 --- --- ---
Senior unsecured notes 150,000 150,000 --- ---
Market value of equity <F3> 1,332,882 1,141,592 653,606 303,943
Total market capitalization including
debt <F3> <F4> 2,199,936 1,668,800 921,423 426,798
Other Data:
Funds from operations (basic) <F5> $ 97,697 $ 69,548 $ 41,133 $ 17,246
Funds from operations (diluted) <F5> $ 99,449 $ 69,548 $ 41,133 $ 17,246
Total square feet (at end of period) 21,000 13,645 8,800 5,430
Number of properties (at end of period) 204 155 110 81
<FN>
<F1>
Represents certain financial information on a consolidated historical basis for
Reckson Associates Realty Corp. and on a combined historical basis for the
Reckson Group.
<F2>
Based on 39,473,000, 32,727,000, 19,928,000 and 14,678,000 weighted average
shares of common stock outstanding for the years ended December 31, 1998,
1997, 1996 and for the period June 3, 1995 to December 31, 1995,
respectively.
<F2a>
Based on 40,010,000, 33,260,000, 20,190,000 and 14,725,000 weighted average
shares of common stock outstanding for the years ended December 31, 1998,
1997, 1996 and for the period June 3, 1995 to December 31, 1995, respectively.
<F3>
Based on the sum of (i) the market value of the Company's common stock and
operating partnership units (assuming conversion) of 47,800,049, 44,988,846,
31,119,364 and 20,690,448 at December 31, 1998, 1997, 1996 and 1995 (based on
a share/unit price of $22.19, $25.38, $21.13 and $14.69 at December 31, 1998,
1997, 1996 and 1995 respectively), (ii) the stated value of 9,192,000 shares
of the Company's preferred stock at December 31, 1998 (based on a stated price
of $25.00 per share) and (iii) the stated value of 42,518 of the Operating
Partnership's preferred units at December 31, 1998 (based on a stated price
of $1,000 per unit).
<F4>
Debt amount is net of minority partners' proportionate share plus the Company's
share of unconsolidated joint venture debt.
<F5>
See "Management's Discussion and Analysis" for a discussion of funds from
operations.
<F6>
The earnings per share amounts prior to 1997 have been restated as required to
comply with Statement of Financial Accounting Standards No. 128, Earnings Per
Share. For further discussion of earnings per share and the impact of State-
ment No. 128, see the notes to the consolidated financial statements.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Reckson Group
----------------------------------
for the
Period For the
January 1, Year Ended
1995 to June December
2, 1995 <F1>, 31, 1994
----------------- ----------------
<S> <C> <C>
Operating Data:
Revenues $ 20,889 $ 56,931
Total expenses 20,695 55,685
Income (before preferred dividends and
distributions, minority interests and
extraordinary items) 194 1,246
Preferred dividends and distributions --- ---
Minority interests' --- ---
Extraordinary items-gain (loss) (net of
minority interests' share) --- 4,434
Net income 194 5,680
Per Share Data:
Basic: <F2>
Income before extraordinary items --- ---
Extraordinary items -(loss) --- ---
Net income --- ---
Diluted: <F2a>
Income before extraordinary items --- ---
Extraordinary items-(loss) --- ---
Diluted net income --- ---
Balance Sheet Data: (period end):
Commercial real estate properties,
before accumulated depreciation --- $ 162,192
Total assets --- 132,035
Mortgage notes payable --- 180,286
Unsecured credit facility --- ---
Unsecured term loan --- ---
Senior unsecured notes --- ---
Market value of equity <F3> --- ---
Total market capitalization including
debt <F3> <F4> --- ---
Other Data:
Funds from operations (basic) <F5> --- ---
Funds from operations (diluted) <F5> --- ---
Total square feet (at end of period) 4,529 4,529
Number of properties (at end of period) 72 72
<FN>
<F1>
Represents certain financial information on a consolidated historical basis for
Reckson Associates Realty Corp. and on a combined historical basis for the
Reckson Group.
<F2>
Based on 39,473,000, 32,727,000, 19,928,000 and 14,678,000 weighted average
shares of common stock outstanding for the years ended December 31, 1998,
1997, 1996 and for the period June 3, 1995 to December 31, 1995,
respectively.
<F2a>
Based on 40,010,000, 33,260,000, 20,190,000 and 14,725,000 weighted average
shares of common stock outstanding for the years ended December 31, 1998,
1997, 1996 and for the period June 3, 1995 to December 31, 1995, respectively.
<F3>
Based on the sum of (i) the market value of the Company's common stock and
operating partnership units (assuming conversion) of 47,800,049, 44,988,846,
31,119,364 and 20,690,448 at December 31, 1998, 1997, 1996 and 1995 (based on
a share/unit price of $22.19, $25.38, $21.13 and $14.69 at December 31, 1998,
1997, 1996 and 1995 respectively), (ii) the stated value of 9,192,000 shares
of the Company's preferred stock at December 31, 1998 (based on a stated price
of $25.00 per share) and (iii) the stated value of 42,518 of the Operating
Partnership's preferred units at December 31, 1998 (based on a stated price
of $1,000 per unit).
<F4>
Debt amount is net of minority partners' proportionate share plus the Company's
share of unconsolidated joint venture debt.
<F5>
See "Management's Discussion and Analysis" for a discussion of funds from
operations.
<F6>
The earnings per share amounts prior to 1997 have been restated as required to
comply with Statement of Financial Accounting Standards No. 128, Earnings Per
Share. For further discussion of earnings per share and the impact of State-
ment No. 128, see the notes to the consolidated financial statements.
</FN>
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion should be read in conjunction with the historical
financial statements of Reckson Associates Realty Corp. (the "Company") and
related notes.
The Company considers certain statements set forth herein to be
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended, with respect to the Company's expectations for future
periods. Certain forward-looking statements, including, without limitation,
statements relating to the timing and success of acquisitions, the financing
of the Company's operations, the ability to lease vacant space and the ability
to renew of relet space under expiring leases, involve certain risks and
uncertainties. Although the Company believes that the expectations reflected
in such forward-looking statements are based on reasonable assumptions, the
actual results may differ materially from those set forth in the
forward-looking statements and the Company can give no assurance that its
expectation will be achieved. Certain factors that might cause the results
of the Company to differ materially from those indicated by such
forward-looking statements include, among other factors, general economic
conditions, general real estate industry risks, tenant default and
bankruptcies, loss of major tenants, the impact of competition and acquisition,
redevelopment and development risks, the ability to finance business
opportunities and local real estate risks such as an oversupply of space or a
reduction in demand for real estate in the Company's real estate markets.
Consequently, such forward-looking statements should be regarded solely as
reflections of the Company's current operating and development plans and
estimates. These plans and estimates are subject to revisions from time to
time as additional information becomes available, and actual results may
differ from those indicated in the referenced statements.
Overview and Background
The Reckson Group, the predecessor to the Company was engaged in the
ownership, management, operation, leasing and development of commercial real
estate properties, principally office and industrial buildings, and also owned
certain undeveloped land located primarily on Long Island, New York. On June 2,
1995, following completion of the Initial Public Offering (the "IPO") and the
related formation transactions, the Company owned or had an interest in 72
properties (including one joint venture property) and succeeded to the Reckson
Group's real estate business.
The Company is a self-administered and self managed real estate
investment trust ("REIT") specializing in the acquisition, leasing, financing,
management and development of office and industrial properties.
The Company owns all of the interests in its real estate properties
through Reckson Operating Partnership, L.P. (the "Operating Partnership") or
Reckson FS Limited Partnership. At December 31, 1998, the Company owned 204
properties (the "Properties"), (including two joint venture properties)
encompassing approximately 21.0 million square feet. The Properties include
73 suburban office properties (the "Office Properties") containing
approximately 10.1 million square feet, 129 industrial properties ( the
"Industrial Properties") containing approximately 10.8 million square feet
and two retail properties containing 20,000 square feet.
Since the IPO, the Company has acquired or contracted to acquire
approximately $1.14 billion of Class A suburban office and industrial
properties encompassing approximately 12.8 million square feet located in
the New York Tri-State Area of Long Island, Westchester, Southern Connecticut
and New Jersey. In that regard, the Company has acquired 13 Office Properties
and 33 Industrial Properties encompassing approximately 2.1 and 2.6 million
square feet, respectively, located on Long Island for an aggregate purchase
price of approximately $302 million. Since its initial investment in
Westchester the Company has acquired 17 Office Properties encompassing
approximately 2.4 million square feet and three Industrial Properties
encompassing approximately 163,000 square feet for an aggregate purchase
price of approximately $304 million. Since its initial investment in Southern
Connecticut the Company has acquired two Office Properties encompassing
approximately 325,000 square feet for an aggregate purchase price of
approximately $61.3 million. In May 1997, the Company acquired five Office
Properties encompassing approximately 496,000 square feet located in New
Jersey for an aggregate purchase price of approximately $56.9 million and,
in connection with this acquisition, established its New Jersey Division.
Since its initial investment in New Jersey the Company has acquired 12
Office Properties encompassing approximately 1.5 million square feet and
seven Industrial Properties encompassing approximately 1.1 million square
feet for an aggregate purchase price of approximately $231.6 million.
Additionally, the Company has invested approximately $52.1 million for
approximately 154 acres of land located in Long Island, 32 acres of land
located in Westchester and 380 acres of land located in New Jersey which
allows for approximately 4.3 million square feet of future development
opportunities. In addition, the Company has invested approximately $61.3
million in certain mortgage indebtedness encumbering four Class A Office
Properties on Long Island encompassing approximately 577,000 square feet,
a 825,000 square foot Industrial Property located in New Jersey and a 400
acre parcel of land located in New Jersey. On January 6, 1998, the Company
made its initial investment in the Morris Companies, a New Jersey developer
and owner of "Big Box" warehouse facilities. In connection with the
transaction the Morris Companies contributed 100% of their interests in
certain industrial properties to Reckson Morris Operating Partnership,
L.P., ("RMI") in exchange for operating partnership units in RMI. The
Company has agreed to invest up to $150 million in RMI. As of December 31,
1998, the Company has invested approximately $93.8 million for an
approximate 71.8% controlling interest. In addition, at December 31, 1998,
the Company had advanced approximately $31 million to the Morris Companies
primarily to fund certain construction costs related to development
properties to be contributed to RMI.
During 1997, the Company formed Reckson Service Industries, Inc. ("RSI")
and Reckson Strategic Venture Partners, LLC ("RSVP"). The Operating
Partnership owned a 95% non voting common stock interest in RSI through June
10, 1998. On June 11, 1998, the Operating Partnership distributed its 95%
common stock interest in RSI of approximately $3 million to its owners,
including the Company which, in turn, distributed the common stock of RSI to
its stockholders. Additionally, during June 1998, the Operating Partnership
established a credit facility with RSI (the"RSI Facility") in the amount of
$100 million for RSI's service sector operations and other general corporate
purposes. As of December 31, 1998, the Company had advanced $33.7 million
under the RSI facility all of which is outstanding. In addition, the
Operating Partnership approved the funding of investments of up to $100
million with or in RSVP (the "RSVP Commitment"), through RSVP-controlled
joint venture REIT-qualified investments or advances made to RSI under terms
similar to the RSI Facility. As of December 31, 1998, approximately $17.3
million had been invested through the RSVP Commitment, of which $10.1
million represents RSVP controlled joint venture investments and $7.2
million represents advances to RSI under the RSVP Commitment. Such amounts
have been included in investment in real estate joint ventures and
investments in and advances to affiliates, respectively, on the Company's
balance sheet. RSI serves as the managing member of RSVP. RSI invests in
operating companies that generally provide commercial services to the RSI
customer base which includes the tenants of RSI's executive suite business
and to properties owned by the Company and its tenants and third parties.
RSVP was formed to provide the Company with a research and development
vehicle to invest in alternative real estate sectors. RSVP invests primarily
in real estate and real estate related operating companies generally outside
of the Company's core office and industrial focus. RSVP's strategy is to
identify and acquire interests in established entrepreneurial enterprises
with experienced management teams in market sectors which are in the early
stages of their growth cycle or offer unique circumstances for attractive
investments as well as a platform for future growth.
The Operating Partnership and RSI have entered into an intercompany
agreement (the "Reckson Intercompany Agreement") to formalize their
relationship and to limit conflicts of interest. Under the Reckson
Intercompany Agreement, RSI granted the Operating Partnership a right of first
opportunity to make any REIT -qualified investment that becomes available to
RSI. In addition, if a REIT-qualified investment opportunity becomes
available to an affiliate of RSI, including RSVP, the Reckson Intercompany
Agreement requires such affiliate to allow the Operating Partnership to
participate in such opportunity to the extent of RSI's interest.
Under the Reckson Intercompany Agreement, the Operating Partnership
granted RSI a right of first opportunity to provide commercial services to the
Operating Partnership and its tenants. RSI will provide services to the
Operating Partnership at rates and on terms as attractive as either the best
available for comparable services in the market or those offered by RSI to
third parties. In addition, the Operating Partnership will give RSI access
to its tenants with respect to commercial services that may be provided to
such tenants and,under the Reckson Intercompany Agreement, subject to certain
conditions, the Operating Partnership granted RSI a right of first refusal to
become the lessee of any real property acquired by the Operating Partnership
if the Operating Partnership determines that, consistent with the Company's
status as a REIT, it is required to enter into a "master" lease agreement.
On August 27, 1998 the Company announced the formation of a joint venture
with RSVP and the Dominion Group, an Oklahoma-based, privately-owned group of
companies that focuses on the development, acquisition and ownership of
government occupied office buildings and correctional facilities. The new
venture, Dominion Properties LLC (the "Dominion Venture"), is owned by
Dominion Venture Group LLC, and by a subsidiary of the Company. The
Dominion Venture will engage primarily in acquiring, developing and/or
owning government-occupied office buildings and privately operated
correctional facilities. Under the Dominion Venture's operating agreement,
RSVP is to invest up to $100 million, some of which may be invested by the
Company ( the "RSVP Capital"). The initial contribution of RSVP Capital
was approximately $39 million of which approximately $10.1 million was invested
by a subsidiary of the Company. The Company's subsidiary funded its capital
cntribution through the RSVP Commitment. In addition, the Company advanced
approximately $2.9 million to RSI through he RSVP Commitment for an investment
in RSVP which was then invested on a joint venture basis with the Dominion
Group in certain service business activities related to the real estate
activities. As of December 31, 1998, the Dominion Venture had investments in
11 government office buildings and two correctional facilities.
In July 1998, the Company formed a joint venture, Metropolitan Partners
LLC, a Delaware limited liability company ("Metropolitan"), with Crescent Real
Estate Equities Company, a Texas real estate investment trust ("Crescent").
Pursuant to a merger agreement executed on July 9, 1998 and amended and
restated on August 11, 1998 (the "Initial Merger Agreement") between
Metropolitan, the Company, Crescent and Tower Realty Trust Inc., a Maryland
corporation ("Tower"), Metropolitan agreed, subject to the terms and
conditions of the Merger Agreement, to purchase the common stock of Tower.
Prior to the execution of the Initial Merger Agreement, Metropolitan
identified certain potential tax issues regarding Tower's operations.
Metropolitan entered into the Initial Merger Agreement only after Tower made
detailed representations and warranties purporting to address these issues.
In the course of due diligence, however, Metropolitan, the Company and
Crescent discovered that these representations and warranties may not be
correct and discussed these concerns with Tower, specifically advising Tower
that they were not terminating the Initial Merger Agreement at that time.
Metropolitan, the Company and Crescent invited Tower to respond to these
concerns. However, on November 2, 1998, Tower filed a complaint in the
Supreme Court of the State of New York alleging Metropolitan, the Company
and Crescent willfully breached the Initial Merger Agreement. Tower, in
the complaint, was seeking declaratory and other relief, including damages
of not less than $75 million and specific performance by Metropolitan, the
Company and Crescent of their obligations under the Initial Merger Agreement.
On December 8, 1998,the Company, Metropolitan and Tower executed a
revised merger agreement (the "Revised Merger Agreement"), pursuant to which
Tower will be merged (the "Merger") into Metropolitan, with Metropolitan
surviving the Merger. Concurrently with the Merger, Tower Realty Operating
Partnership, L.P. ("Tower OP") will be merged with and into a subsidiary of
Metropolitan. The consideration to be issued in the mergers will be comprised
of (i) 25% cash and (ii) 75% of shares of Class B Exchangeable Common Stock,
par value $.01 per share, of the Company (the "Class B Common Stock"), or
in certain circumstances described below, shares of Class B Common Stock and
unsecured notes of the Operating Partnership. The Company controls
Metropolitan and owns 100% of the common equity; Crescent owns a preferred
equity investment in Metropolitan. The Revised Merger Agreement replaces the
Initial Merger Agreement (which at that time was a 50/50 joint venture between
the Company and Crescent) relating to the acquisition by Metropolitan of Tower
for $24 per share.
Pursuant to the terms of the Revised Merger Agreement, holders of shares
of outstanding common stock of Tower ("Tower Common Stock"), and outstanding
units of limited partnership interest of Tower OP will have the option to elect
to receive cash or shares of Class B Common Stock, subject to proration. Under
the terms of the transaction, Metropolitan will effectively pay for each share
of Tower Common Stock and each unit of limited partnership interest of Tower OP
the sum of (i) $5.75 in cash, and (ii) 0.6273 of a share of Class B Common
Stock. The shares of Class B Common Stock are entitled to receive an initial
annual dividend of $2.24 per share and is subject to adjustment annually. The
shares of Class B Common Stock are exchangeable at any time, at the option of
the holder, into an equal number of shares of common stock, par value $.01 per
share, of the Company subject to customary antidilution adjustments. The
Company, at its option, may redeem any or all of the Class B Common Stock in
exchange for an equal number of shares of the Company's common stock at any
time following the four year, six-month anniversary of the issuance of the
Class B Common Stock. The Company's Board of Directors have recommended to
the Company's stockholders the approval of a proposal to issue a number of
shares of Class B Common Stock equal to 75% of the sum of (i) the number of
outstanding shares of the Tower Common Stock and (ii) the number of Tower OP
limited partnership units, in each case, at the effective time of the mergers.
If the stockholders of the Company do not approve the issuance of the Class B
Common Stock as proposed, the Revised Merger Agreement provides that
approximately one-third of the consideration that was to be paid in the form
of Class B Common Stock will be replaced by senior unsecured notes of the
Operating Partnership, which notes will bear interest at the rate of 7% per
annum and have a term of ten years. In addition, if the stockholders of the
Company do not approve the issuance of Class B Common Stock as proposed and
the Board of Directors of the Company withdraws or amends or modifies in
any material respect its recommendation for, approval of such proposal, then
the total principal amount of notes to be issued and distributed in the Merger
will be increased by $15 million.
Simultaneously with the execution of the Revised Merger Agreement,
Metropolitan and Tower executed and consummated a stock purchase agreement (the
"Series A Stock Purchase Agreement") pursuant to which Metropolitan purchased
from Tower approximately 2.2 million shares of Series A Convertible Preferred
Stock, par value $.01 per share, of Tower (the "Tower Preferred Stock"), for
an aggregate purchase price of $40 million, $30 million of which was funded
through a capital contribution by the Company to Metropolitan and which is
included in prepaid expenses and other assets on the Company's balance sheet.
The Tower Preferred Stock has a stated value of $18.44 per share and is
convertible by Metropolitan into an equal number of shares of Tower Common
Stock at anytime after the termination, if any, of the Revised Merger
Agreement, subject to customary antidilution adjustments. The Tower
Preferred Stock is entitled to receive dividends equivalent to those paid
on the Tower Common Stock. If the Revised Merger Agreement is not
consummated and a court of competent jurisdiction issues a final,
non-appealable judgment determining that the Company and Metropolitan are
obligated to consummate the Merger but have failed to do so, or determining
that the Company and Metropolitan failed to use their reasonable best efforts
to take all actions necessary to cause certain closing conditions to be
satisfied, Metropolitan is obligated to return to Tower $30 million of the
Series A Preferred Stock.
Immediately prior to the execution of the Revised Merger Agreement and
consummation of the Series A Stock Purchase Agreement, the Company and Crescent
executed the amended and restated operating agreement of Metropolitan (the
"Metropolitan Operating Agreement") pursuant to which Crescent agreed to
purchase a convertible preferred membership interest (the "Preferred
Interest") in Metropolitan for an aggregate purchase price of $85 million.
Ten million dollars of the purchase price was paid by Crescent to Metropolitan
upon execution of the Metropolitan Operating Agreement to acquire the Tower
Preferred Stock and the remaining portion is payable prior to the closing of
the Merger and is expected to be used to fund a portion of the cash merger
consideration. Upon closing of the Merger, Crescent's investment will accrue
distributions at a rate of 7.5% per annum for a two-year period and may be
redeemed by Metropolitan at any time during that period for $85 million, plus
an amount sufficient to provide a 9.5% internal rate of return. If
Metropolitan does not redeem the preferred interest, upon the expiration of
the two-year period, Crescent must convert its interest into either (i) a
common membership interest in Metropolitan or (ii) shares of the Company's
common stock at a conversion price of $24.61.
In connection with the revised transaction, Tower, the Company and
Crescent have exchanged mutual releases for any claims relating to the Initial
Merger Agreement.
The Company anticipates that it will dispose of the assets in the Tower
portfolio located outside of New York. In addition, the Company is also
considering the disposition of certain of the Tower properties located in
New York.
The market capitalization of the Company at December 31, 1998 was
approximately $2.2 billion. The Company's market capitalization is based on
the market value of the Company's common stock and the Operating Partnership's
units (assuming conversion) of $22.19 per share/unit (based on the closing
price of the Company's common stock on December 31,1998), the Company's
preferred stock of $25 per share, the Operating Partnership's preferred
units of $1,000 per unit and the $867 million (including its share of
unconsolidated joint venture debt and net of minority partners' interests) of
debt outstanding at December 31, 1998. As a result, the Company's total debt
to total market capitalization ratio at December 31, 1998 equaled
approximately 39.4%.
Results of Operations
The Company's total revenues increased by $113 million or 73.7% from 1997
to 1998 and $57.3 million or 60% from 1996 to 1997. The growth in total
revenues is substantially attributable to the Company's acquisition of 47
properties and the development of two properties which aggregate approximately
7.4 million square feet in 1998, the acquisition of 45 properties comprising
approximately 4.8 million square feet in 1997 and the acquisition of 29
properties comprising approximately 3.3 million square feet in 1996.
Total revenues were also positively effected by increases in occupancies
in our properties and to increases in rental rates throughout our markets.
Property operating revenues, which include base rents and tenant escalations
and reimbursements ("Property Operating Revenues") increased by $108.7 million
or 75.6% from 1997 to 1998 and $51 million or 55% from 1996 to 1997. The 1998
increase in Property Operating Revenues is comprised of $2.1 million
attributable to increases in rental rates and changes in occupancies and
$106.6 million attributable to acquisitions of properties. The remaining
balance of the increase in total revenues in 1998 is primarily attributable
to increases in interest income on the Company's investments in mortgage notes
and notes receivable and income related to the Company's interest in its service
companies primarily attributable to the executive center business. The 1997
increase in Property Operating Revenues is comprised of $2.1 million
attributable to increases in rental rates and changes in occupancies and $48.9
million attributable to acquisitions of properties. The remaining balance of
the increase in total revenues in 1997 is substantially attributable to
interest income on the Company's investments in mortgage notes and notes
receivables. The increase from 1996 to 1997 was offset by a decrease in the
equity in earnings of service companies as a result of the management and
construction companies focusing most of their resources on the Company's core
portfolio and redevelopment opportunities rather than third party services.
The Company's base rent was increased by the impact of the straight-line rent
adjustment by $7.7 million in 1998, $4.5 million in 1997 and $3.8 million in
1996.
Property operating expenses, real estate taxes and ground rents
("Property Expenses") increased by $34.4 million from 1997 to 1998 and by $16.8
million from 1996 to 1997. These increases are primarily due to the
acquisition of properties. Gross operating margins (defined as Property
Operating Revenues less Property Expenses, taken as a percentage of Property
Operating Revenues) for 1998, 1997and 1996 were 66.2%, 64.7% and 63.4%,
respectively. The year to year increases in gross operating margins results
from increases realized in rental rates, the Company's ability to realize
certain operating efficiencies as a result of operating a larger portfolio of
properties with concentrations of properties in office and industrial parks
or in its established sub-markets, a stable operating cost environment and the
increased ownership of net leased properties.
Marketing, general and administrative expenses were $15.9 million in
1998, $8.3 million in 1997 and $5.9 million in 1996. The increase in
marketing, general and administrative expenses is due to the increased costs
of managing the acquisition Properties, the cost of opening and maintaining the
Company's Westchester, Southern Connecticut and New Jersey divisions and the
increase in corporate management and administrative costs associated with the
growth of the Company. The Company's business strategy has been to expand
into the other Tri-State Area suburban markets by applying its standards for
high quality office and industrial space and premier tenant service to its New
Jersey, Westchester and Southern Connecticut divisions. In doing this, the
Company seeks to create a superior franchise value that it enjoys in its home
base of Long Island. Over the past three years the Company has supported this
effort by increasing the marketing programs in the other divisions and
strengthening the resources and operating systems in these divisions.
The cost of these efforts are reflected in both marketing, general and
administrative expense as well as the revenue growth of the Company.
Marketing, general and administrative expense as a percentage of total
revenues were 5.98% in 1998, 5.41% in 1997 and 6.18% in 1996.
Interest expense was $47.8 million in 1998, $21.6 million in 1997 and
$13.3 million in 1996. The increase of $26.2 million from 1997 to 1998 is
attributable to (i) an increase in mortgage debt including approximately
$14.8 million resulting from the Morris acquisition in January 1998,
approximately $45.1 million resulting from the Cappelli acquisition in
April 1998 and the refinancing of 395 North Service Road in the amount
$21.4 million in October 1998; (ii) a full year of interest on the Company's
senior unsecured notes (the "Senior Unsecured Notes") and (iii) an increased
average balance on the Company's credit facilities. The increase of $8.3
million from 1996 to 1997 is attributable to an increase in mortgage debt
including a $50 million mortgage note incurred in connection with the
acquisition of Landmark Square in October 1996, the refinancing of Omni in the
amount of $58 million in August 1997, increased interest cost attributable to
an increased average balance on the Company's credit facilities and interest
on the Company's Senior Unsecured Notes. The weighted average balance
outstanding on the Company's credit facilities was $377.9 million for 1998,
$103.2 million for 1997and $71.2 million for 1996.
Included in amortization expense is amortized finance costs of $1.6
million in 1998, $.80 million in 1997 and $.53 million in 1996. The increase
of $.80 million from 1997 to 1998 is primarily attributable to loan costs
incurred in connection with the Company's $500 million credit facility and
$50 million term loan. The increase of $.27 million from 1996 to 1997 was the
result of the amortization of financing costs associated with the credit
facilities, the Landmark Square mortgage, the Omni refinanced mortgage and
the Senior Unsecured Notes.
Extraordinary items, net of minority interest resulted in a $1.7 million
loss in 1998, a $2.2 million loss in 1997and a $.9 million loss in 1996. The
extraordinary items were all attributed to the write-offs of certain deferred
loan costs incurred in connection with the Company's restructuring of its
credit facilities.
Liquidity and Capital Resources
Summary of Cash Flows
Net cash provided by operating activities totaled $118.2 million in 1998,
$75.8 million in 1997 and $41.9 million in 1996. Increases for each year
were primarily attributable to the growth in cash flow provided by the
acquisition of properties and to a lesser extent from interest income from
mortgage notes and notes receivable.
Net cash used by investing activities totaled $613.3 million in 1998,
$549.3 million in 1997and $274.6 million in 1996. Cash used in investing
activities related primarily to investments in real estate properties
including development costs and investments in mortgage notes and notes
receivable. In addition, in December 1998, the Company purchased $40 million
of preferred stock of Tower Realty Trust, Inc. in connection with the Merger
transaction.
Net cash provided by financing activities totaled $475.6 million in 1998,
$482.7 million in 1997 and $238.4 million in 1996. Cash provided by financing
activities during 1998, 1997 and 1996 was primarily attributable to proceeds
from public stock offerings and draws on the Company's credit facilities and
additionally, in 1998 the issuance of preferred securities and in 1997 proceeds
from the issuance of Senior Unsecured Notes.
Investing Activities
During 1998, the Company acquired (i) on Long Island, three Office
Properties encompassing an aggregate of approximately 674,000 square feet for
approximately $63.4 million and two Industrial Properties encompassing
approximately 200,000 square feet for approximately $4.4 million; (ii) in
Westchester, six Office Properties encompassing approximately 980,000 square
feet for approximately $173 million; (iii) in Connecticut, two Office
Properties encompassing an aggregate of approximately 325,000 square feet for
approximately $61.3 million and (iv) in New Jersey, four Class A Office
Properties encompassing approximately 522,000 square feet for approximately
$90.9 million and six Industrial Properties encompassing approximately 985,000
square feet for approximately $41.6 million. In addition, on January 6, 1998,
the Company invested approximately $72 million and acquired a controlling
interest in the Morris Companies, an owner and operator of "Big Box"
industrial properties located in Secaucus, New Jersey.
In June 1998, the Company established the RSI credit facility in the
amount of $100 million for RSI's service sector operations and for other
general corporate purposes. As of December 31, 1998, approximately $33.7
million had been advanced to RSI under this facility. In addition, the Company
approved the commitment to fund investments of up to $100 million with or in
RSVP. As of December 31, 1998, the Company has invested approximately $17.3
million under this commitment.
Financing Activities
In connection with the $173 million acquisition of the Cappelli portfolio
and the $10 million purchase of the Cappelli interest in 360 Hamilton Avenue,
the Company issued series B, C and D preferred operating units in the amount
of approximately $42.5 million. The series B, C and D preferred units have
a current distribution rate of 6.25% and are convertible to common units at
conversion prices of approximately $32.51, $29.39 and $29.12, respectively
for each preferred unit.
During 1998, the Company paid cash dividends of $.99 per share
(representing dividends for three quarters). In addition, on June 11, 1998,
the Company paid a stock dividend equivalent to $0.0824 per share relating to
the Operating Partnership's distribution of its common stock interest in RSI to
the Company.
On February 18, 1998, the Company completed a public stock offering and
sold 791,152 common shares at a price of $25.44 per share. Net proceeds from
the offering were approximately $19.1 million and were used to fund
acquisitions of properties and repay borrowings.
During April 1998, the Company completed a preferred stock offering and
sold 9,200,000 shares (including 1,200,000 shares related to the exercise of
the underwriters over allotment option) of 7.625% Series A Convertible
Cumulative Preferred Stock at a price of $25.00 per share. Net proceeds
from the offering were approximately $220.8 million. The preferred stock is
convertible to the Company's common stock at a conversion rate of .8769
shares of common stock for each share of preferred stock.
On April 29, 1998, the Company completed a common stock offering and sold
1,093,744 common shares at a price of $24.38 per share. Net proceeds from the
offering were approximately $25.3 million and were used to fund acquisitions
of properties and repay borrowings.
On July 23, 1998, the Company obtained a three year $500 million
unsecured revolving credit facility (the "Credit Facility") from Chase
Manhattan Bank, Union Bank of Switzerland and PNC Bank as co-managers of
the credit facility bank group. Interest rates on borrowings under the
Credit Facility are priced off of LIBOR plus a sliding scale ranging from
112.5 basis points to 137.5 basis points based on the leverage ratio of the
Company. Upon the Company receiving an investment grade rating on its senior
unsecured debt by two rating agencies, the pricing is adjusted based off of
LIBOR plus a scale ranging from 65 basis points to 90 basis points depending
upon the rating. The Credit Facility replaced and restructured the Company's
existing $250 million unsecured credit facility and $200 million unsecured
bridge facility. As a result, certain deferred loan costs incurred in
connection with those facilities were written off. Such amount has been
reflected as an extraordinary loss on the Company's statement of operations.
The Company utilizes the Credit Facility primarily to finance the acquisitions
of properties and other real estate investments, fund its development
activities and for working capital purposes. At December 31, 1998, the Company
had availability under the Credit Facility to borrow an additional $8.1 million
(net of $26.1million of outstanding undrawn letters of credit).
On December 4, 1998, the Company obtained a one year $50 million unsecured
term loan (the "Term Loan") from Chase Manhattan Bank. On January 13, 1999,
the Company and Chase Manhattan Bank increased the total availability under
the Term Loan to $75 million. Interest rates on borrowings under the Term
Loan are priced off LIBOR plus 150 basis points for the first nine months and
175 basis points for the remaining three months. At December 31, 1998, the
Company had availability under the Term Loan to borrow an additional $30
million which was increased to $55 million on January 13, 1999.
Capitalization
The Company's indebtedness at December 31, 1998 totaled $867 million (net
of the minority partners' proportionate share of debt and including the
Company's share of unconsolidated joint venture debt of approximately $22.3
million) and was comprised of $464 million outstanding under the Credit
Facility, $20 million outstanding under the Term Loan, $150 million of Senior
Unsecured Notes and $233 million of mortgage indebtedness with an average
interest rate of approximately 7.9% and an average maturity of approximately
5.7 years. Based on the Company's total market capitalization of approximately
$2.2 billion at December 31, 1998, (calculated as the sum of (i) a $22.19 stock
price at December 31, 1998 and assuming the conversion of 7,764,630 Operating
Partnership units (ii) a $1,000 stated value at December 31, 1998 of the
Operating Partnership's preferred units (iii) a $25.00 stated value at December
31, 1998 of the Company's preferred stock and (iv)$867 million of debt)the
Company's debt represented 39.4% of its total market capitalization.
Historically, rental revenue has been the principal source of funds to
pay operating expenses, debt service and capital expenditures, excluding
non-recurring capital expenditures of the Company. The Company's investments
in mortgage notes,RSVP and advances under the RSI facility are expected to
produce cash flows. The Company expects to meet its short term liquidity
requirements generally through its net cash provided by operating activities
along with the Credit Facility and Term Loan previously discussed. The Company
expects to meet certain of its financing requirements through long-term
secured and unsecured borrowings and the issuance of debt securities and
additional equity securities of the Company. The Company also expects certain
strategic dispositions of assets or interests in assets to generate cash
flows. The Company will refinance existing mortgage indebtedness or
indebtedness under the Credit Facility at maturity or retire such debt
through the issuance of additional debt securities or additional equity
securities. The Company anticipates that the current balance of cash and cash
equivalents and cash flows from operating activities, together with cash
available from borrowings and debt and equity offerings, will be adequate to
meet the capital and liquidity requirements of the Company in both the short
and long-term.
In order to qualify as a REIT for federal income tax purposes, the Company
is required to make distributions to its stockholders of at least 95% of REIT
taxable income. The Company expects to use its cash flow from operating
activities for distributions to stockholders and for payment of expenditures.
The Company intends to invest amounts accumulated for distribution in
short-term investments.
Inflation
Certain office leases provide for fixed base rent increases or indexed
escalations. In addition, certain office leases provide for separate
escalations of real estate taxes and electric costs over a base amount.
The industrial leases also generally provide for fixed base rent increases,
direct pass through of certain operating expenses and separate real estate tax
escalation over a base amount. The Company believes that inflationary increases
in expenses will generally be offset by contractual rent increases and expense
escalations described above.
The Credit Facility and the Term Loan bear interest at a variable rate,
which will be influenced by changes in short-term interest rates, and are
sensitive to inflation.
Impact of Year 2000
Some of the Company's older computer programs were written using two
digits rather than four to define the applicable year. As a result, those
computer programs have time-sensitive software that recognizes a date using
"00" as the year 1900 rather than the year 2000. This could cause a system
failure or miscalculation causing disruptions of operations, including, among
other things, a temporary inability to process transactions, or engage in
similar normal business activities.
The Company has completed an assessment to modify or replace portions of
its software so that its computer systems will function properly with respect
to dates in the year 2000 and thereafter. Currently, the entire property
management system is year 2000 compliant and has been thoroughly tested.
Since the Company's accounting software is maintained and supported by an
unaffiliated third party, the total year 2000 project cost as it relates to
the accounting software is estimated to be minimal.
The year 2000 project is estimated to be completed not later than July 31,
1999, which is prior to any anticipated impact on its operating systems.
Additionally, the Company has received assurances from its contractors that
all of the Company's building management and mechanical systems are currently
year 2000 compliant or will be made compliant prior to any impact on those
systems. However, the Company cannot guarantee that all contractors will
comply with their assurances and therefore, the Company may not be able to
determine year 2000 compliance of those contractors. At that time, the
Company will determine the extent to which the Company will be able to replace
non compliant contractors. The Company believes that with modifications to
existing software and conversions to new software, the year 2000 issue will
not pose significant operational problems for its computer systems. However,
if such modifications and conversions are not made, or are not completed
timely, the year 2000 issue could have a material impact on the operations
of the Company.
To date, the Company has expended approximately $375,000 and expects to
expend an additional one million dollars in connection with upgrading building
management, mechanical and computer systems. The costs of the project and the
date on which the Company believes it will complete the year 2000 modifications
are based on management's best estimates, which were derived utilizing numerous
assumptions of future events, including the continued availability of certain
resources and other factors. However, there can be no guarantee that these
estimates will be achieved and actual results could differ materially from
those anticipated. Specific factors that might cause such material
differences include, but are not limited to, the availability and costs of
personnel trained in this area, the ability to locate and correct all
relevant computer codes, and similar uncertainties.
In a "worst case scenario", the Company believes that failure of the
building management and mechanical systems to operate properly would result in
inconveniences to the building tenants which might include no elevator service,
lighting or entry and egress. In this case, the management of the Company
would manually override such systems in order for normal operations to resume.
Additionally, in a "worst case scenario" of the failure of the third party to
deliver, on a timely basis, the necessary upgrades to the accounting software,
the Company would be required to process transactions, such as the issuance
of disbursements, manually until an alternative system was implemented.
If the Company is not successful in implementing their year 2000
compliance plan, the Company may suffer a material adverse impact on their
consolidated results of operations and financial condition. Because of the
importance of addressing the year 2000 issue, the Company expects to develop
contingency plans if they determine that the compliance plans will not be
implemented by July 31, 1999.
Funds From Operations
Management believes that funds from operations ("FFO") is an appropriate
measure of performance of an equity REIT. FFO is defined by the National
Association of Real Estate Investment Trusts (NAREIT) as net income or loss,
excluding gains or losses from debt restructurings and sales of properties,
plus depreciation and amortization, and after adjustments for unconsolidated
partnerships and joint ventures. FFO does not represent cash generated from
operating activities in accordance with generally accepted accounting
principles and is not indicative of cash available to fund cash needs. FFO
should not be considered as an alternative to net income as an indicator of
the Company's operating performance or as an alternative to cash
flow as a measure of liquidity. (See Selected Financial Data). In March 1995,
NAREIT issued a "White Paper" analysis to address certain interpretive issues
under its definition of FFO. The White Paper provides that amortization of
deferred financing costs and depreciation of non-rental real estate assets are
no longer to be added back to net income to arrive at FFO.
Since all companies and analysts do not calculate FFO in a similar
fashion, the Company's calculation of FFO presented herein may not be
comparable to similarly titled measures as reported by other companies.
The following table presents the Company's FFO calculation for the years
ended December 31,
(in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
----------- ------------ -----------
<S> <C> <C> <C>
Income before preferred dividends
and distributions, limited partners'
interest in the operating partnership
and extraordinary items $ 61,718 $ 44,683 $ 24,382
Less:
Preferred dividends and distributions 14,244 --- ---
Extraordinary loss, net of limited
partners' interest in theoperating
partnership of $323, $578 and $364,
respectively 1,670 2,230 895
Limited Partners' minority interest
in the operating partnership 7,909 7,817 5,960
----------- ------------ -----------
Net Income available to common
shareholders 37,895 34,636 17,527
Adjustments for Funds From Operations
Add:
Limited Partners' minority interest
in the operating partnership 7,909 7,817 5,960
Depreciation and amortization 51,424 26,834 17,429
Minority interests' in consolidated
partnerships 2,763 807 808
Extraordinary loss, net of limited
partners' interest in the operating
partnership of $323, $578 and $364,
respectively 1,670 2,230 895
Less:
Gain on sale of property --- 672 ---
Amount distributed to minority
partners in consolidated
partnerships 3,964 2,104 1,486
----------- ------------ -----------
Basic Funds From Operations 97,697 69,548 41,133
Add:
Dilutive preferred distributions 1,752 --- ---
----------- ------------ -----------
Diluted Fund From Operations $ 99,449 $ 69,548 $ 41,133
=========== ============ ===========
Weighted Average Shares/Units
outstanding <F1> 47,201 39,743 26,431
=========== ============ ===========
Diluted Weighted Average
Shares/Units outstanding <F1> 48,651 40,276 26,693
=========== ============ ===========
<FN>
<F1>
Assumes conversion of limited partnership units of the Operating Partnership.
</FN>
</TABLE>
Item 7(a). Quantitative and Qualitative Disclosures about market risk.
The primary market risk facing the Company is interest rate risk on its
long term debt, mortgage notes and notes receivable. The Company does not
hedge interest rate risk using financial instrument nor is the Company subject
to foreign currency risk.
The following table sets forth the Company's long term debt obligations,
principal cash flows by scheduled maturity, weighted average interest rates
and estimated fair market value ("FMV") at December 31, 1998 (dollars in
thousands):
<TABLE>
<CAPTION>
For the Year Ended December 31,
------------------------------------------------
1999 2000 2001 2002 2003 Thereafter Total F.M.V
-------- -------- --------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long term debt:
Fixed rate $10,752 $32,131 $ 19,440 $ 12,937 $ 19,295 $308,908 $403,463 $ 403,463
Average interest
rate 8.72% 7.38% 7.42% 7.91% 7.65% 7.58% 7.60% ---
Variable rate $20,000 $ --- $465,850 $ --- $ --- $ --- $485,850 $ 485,850
Average interest
rate 7.06% --- 6.99% --- --- --- 6.99% ---
</TABLE>
In addition, the Company has assessed the market risk for its variable
rate debt and believes that a one percent increase in interest rates would have
an approximate $4.9 million increase in interest expense based on approximately
$485.9 million outstanding at December 31, 1998.
The following table sets forth the Company's mortgage notes and note
receivables by scheduled maturity date, weighted average interest rates and
estimated FMV at December 31, 1998 (dollars in thousands):
<TABLE>
<CAPTION>
For the Year Ended December 31,
------------------------------------------------
1999 2000 2001 2002 2003 Thereafter Total F.M.V
--------- -------- --------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage notes and
notes receivable:
Fixed rate $ 74,817 $ --- $ --- $ 5,600 $ --- $ 16,990 $ 97,407 $ 97,407
Average interest
rate 9.55% --- --- 11.00% --- 11.45% 9.96% ---
</TABLE>
The fair value of the Company's long term debt, mortgage notes and notes
receivable is estimated based on discounting future cash flows at interest
rates that management believes reflects the risks associated with long term
debt, mortgage notes and notes receivable of similar risk and duration.
Item 8. Financial Statements and Supplementary Data
The response to this item is included in a separate section of this Form
10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
Part III
Item 10. Directors and Executive Officers of the Registrant
The information contained in the section captioned "Proposal I: Election
of Directors" of the Company's definitive proxy statement for the 1999 annual
meeting of stockholders is incorporated herein by reference.
Item 11. Executive Compensation
The information contained in the section captioned "Executive
Compensation" of the Company's definitive proxy statement for the 1999 annual
meeting of stockholders is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information contained in the section captioned "Principal and
Management Stockholders" of the Company's definitive proxy statement for the
1999 annual meeting of stockholders is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The information contained in the section captioned "Certain Relationships
and Related Transactions" of the Company's definitive proxy statement for the
1999 annual meeting of the stockholders is incorporated herein by reference.
Part IV
Item 14. Financial Statements and Schedules, Exhibits and Reports on Form 8-K
(a)(1 and 2) Financial Statements and Schedules
The following consolidated financial information is included as a separate
section of this annual report on Form 10-K:
Page
------
Reckson Associates Realty Corp.
Report of Independent Auditors IV-5
Consolidated Balance Sheets as of December 31, 1998 and
December 31, 1997 IV-6
Consolidated Statements of Income for the years ended
December 31, 1998, 1997 and 1996 IV-7
Consolidated Statement of Stockholders' Equity for the years
ended December 31, 1998, 1997 and 1996. IV-8
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996 . IV-9
Notes to Financial Statements IV-10
Schedule III - Real Estate and Accumulated Depreciation IV-30
All other schedules are omitted since the required information is not
present in amounts sufficient to require submission of the schedule or because
the information required is included in the financial statements and notes
thereto.
(3) Exhibits
Exhibit Filing
Number Reference Description
3.1 a Amended and Restated Articles of Incorporation
3.2 a By-Laws of Registrant
3.3 h Articles Supplementary of the Registrant filed with the
Maryland State Department of Assessments and Taxation
on April 9, 1998
4.1 b Specimen Share Certificate of Common Stock
4.2 h Specimen Share Certificate of Preferred Stock
10.1 a Amended and Restated Agreement of Limited Partnership
of Reckson Operating Partnership, L. P.
10.2 h Supplement to the Amended and Restated Agreement of
Limited Partnership of Reckson Operating Partnership,
L.P. Establishing Series A Preferred Units of Limited
Partnerships Interest.
10.3 h Supplement to the Amended and Restated Agreement
of Limited Partnership of Reckson Operating
Partnership, L. P. Establishing Series B Preferred Units
of Limited Partnership Interest.
10.4 h Supplement to the Amended and Restated Agreement
of Limited Partnership of Reckson Operating
Partnership, L. P. Establishing Series C Preferred
Units of Limited Partnership Interest.
10.5 h Supplement to the Amended and Restated Agreement
of Limited Partnership of Reckson Operating
Partnership, L. P. Establishing Series D Preferred
Units of Limited Partnership Interest.
10.6 f Third Amended and Restated Agreement of Limited
Partnership of Omni Partners, L. P.
10.7 Amendment and Restatement of Employment and
Non-Competition Agreement between Registrant and
Donald Rechler.
10.8 Amendment and Restatement of Employment and
Non-Competition Agreement between Registrant and
Scott Rechler.
10.9 Amendment and Restatement of Employment and
Non-Competition Agreement between Registrant and
Mitchell Rechler.
10.10 Amendment and Restatement of Employment and
Non-Competition Agreement between Registrant and
Gregg Rechler.
10.11 Amendment and Restatement of Employment and
Non-Competition Agreement between Registrant and
Roger Rechler.
10.12 Amendment and Restatement of Employment and
Non-Competition Agreement between Registrant and J.
Michael Maturo.
10.13 a Purchase Option Agreements relating to the Reckson
Option Properties
10.14 a Purchase Option Agreements relating to the Other
Option Properties
10.15 c Amended 1995 Stock Option Plan
10.16 c 1996 Employee Stock Option Plan
10.17 b Ground Leases for certain of the properties
10.18 Third Amended and Restated Agreement of Limited
Partnership of Reckson FS Limited Partnership
10.19 a Indemnity Agreement relating to 100 Oser Avenue
10.20 f Amended and Restated 1997 Stock Option Plan
10.21 f 1998 Stock Option Plan
10.22 f Amended and Restated Agreement of Limited
Partnership of Reckson Morris Operating Partnership,
L. P.
10.23 f Note Purchase Agreement for the Senior Unsecured Notes
10.24 Amended and Restated Severance Agreement between
Registrant and Donald Rechler
10.25 Amended and Restated Severance Agreement between
Registrant and Scott Rechler
10.26 Amended and Restated Severance Agreement between
Registrant and Mitchell Rechler
10.27 Amended and Restated Severance Agreement between
Registrant and Gregg Rechler
10.28 Amended and Restated Severance Agreement between
Registrant and Roger Rechler
10.29 Amended and Restated Severance Agreement between
Registrant and J. Michael Maturo
10.30 d $500 million Credit Agreement dated July 23, 1998
among Reckson Operating Partnership, L. P. and
Reckson Morris Operating Partnership, L. P. and the
Chase Manhattan Bank, UBS AG and PNC Bank and
other lenders party thereto
10.31 e $75 million Amended and Restated Credit Agreement
dated January 12, 1999 among Reckson Operating
Partnership, L. P. and Reckson Morris Operating
Partnership, L. P. and ING (U.S.) Capital LLC and the
Chase Manhattan Bank and other lenders party thereto
10.32 g Agreement and Plan of Merger by and among Tower
Realty Trust, Inc., Reckson Associates Realty Corp.,
Reckson Operating Partnership, L. P. and Metropolitan
Partners LLC, dated December 8, 1998
10.33 g Stock Purchase Agreement by and between Tower
Realty Trust Inc. and Metropolitan Partners LLC, dated
December 8, 1998
10.34 g Amended and Restated Operating Agreement of
Metropolitan Partners LLC, dated December 8, 1998
10.35 Intercompany Agreement by and between Reckson
Operating Partnership, L. P. and Reckson Service
Industries, Inc., dated May 13, 1998
10.36 Credit Agreement dated as of June 15, 1998 between
Reckson Service Industries, Inc., as borrower and
Reckson Operating Partnership, L. P., as Lender
relating to Reckson Strategic Venture Partners, LLC
10.37 Credit Agreement dated as of June 15, 1998 between
Reckson Service Industries, Inc., as borrower and
Reckson Operating Partnership, L. P., as Lender
relating to the operations of Reckson Service
Industries, Inc.
12.1 Statement of Ratios of Earnings to Fixed Charges
21.1 Statement of Subsidiaries
23.0 Consent of Independent Auditors
24.1 Power of Attorney (included in Part IV of the Form 10-K)
27.0 Financial Data Schedule
- ---
a Previously filed as an exhibit to Registration
Statement on Form S-11 (No.333-1280) and
incorporated herein by reference.
b Previously filed as an exhibit to Registration
Statement on Form S-11 (No.33-84324) and
incorporated herein by reference.
c Previously filed as an exhibit to the Company's Form
8-K report filed with the SEC on November 25, 1996
and incorporated herein by reference.
d Previously filed as an exhibit to the Company's Form
8-K report filed with the SEC on August 14, 1998 and
incorporated herein by reference.
e Previously filed as an exhibit to the Company's Form
8-K report filed with the SEC on February 5, 1999 and
incorporated herein by reference.
f Previously filed as an exhibit to the Company's Form
10-K filed with the SEC on March 26, 1998 and
incorporated herein by reference.
g Previously filed as an exhibit to the Company's Form
8-K report filed with the SEC on December 22, 1998
and incorporated herein by reference.
h Previously filed as an exhibit to the Company's Form
8-K report filed with the SEC on March 1, 1999 and
incorporated herein by reference.
(b) Reports on Form 8-K
On November 2, 1998, the Company filed a report on Form 8-K related to
press releases announcing the litigation involving the Company and Tower Realty
Trust, Inc.
On December 8, 1998, the Company filed a report on Form 8-K announcing the
execution of a revised merger agreement with Tower Realty Trust, Inc.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on March 15, 1999.
Reckson Associates Realty Corp.
By: /s/ Donald J. Rechler
-----------------------
(Donald J. Rechler)
Chairman of the Board, and
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and
directors of Reckson Associates Realty Corp., hereby severally constitute Scott
H. Rechler, Mitchell D. Rechler and Michael Maturo, and each of them singly,
our true and lawful attorneys with full power to them, and each of them singly,
to sign for us and in our names in the capacities indicated below, the Form
10-K filed herewith and any and all amendments to said Form 10-K, and generally
to do all such things in our names and in our capacities as officers and
directors to enable Reckson Associates Realty Corp. to comply with the
provisions of the Securities Exchange Act of 1934, and all requirements of
the Securities and Exchange Commission, hereby ratifying and confirming our
signatures as they may be signed by our said attorneys, or any of them, to said
Form 10-K and any and all amendments thereto.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
<S> <C> <C>
/s/ Donald J. Rechler Chairman of the Board, Chief March 15, 1999
- ---------------------- Executive Officer and Director
(Donald J. Rechler) (principal executive officer)
/s/ Scott Rechler President, Chief Operating Officer March 15, 1999
- ---------------------- and Director
(Scott Rechler)
/s/ Roger M. Rechler Vice Chairman of the Board and March 15, 1999
- ---------------------- Director
(Roger M. Rechler)
/s/ Michael Maturo Executive Vice President, March 15, 1999
- ---------------------- Treasurer and Chief Financial
(Michael Maturo) Officer (principal financial officer
and principal accounting officer)
/s/ Mitchell D. Rechler Executive Vice President and March 15, 1999
- ---------------------- Director
(Mitchell D. Rechler)
/s/ Harvey R. Blau Director March 15, 1999
- ----------------------
(Harvey R. Blau)
/s/ Leonard Feinstein Director March 15, 1999
- ----------------------
(Leonard Feinstein)
/s/ John V.N. Klein Director March 15, 1999
- ----------------------
(John V.N. Klein)
/s/ Conrad Stephenson Director March 15, 1999
- ----------------------
(Conrad Stephenson)
/s/ Herve A. Kevenides Director March 15, 1999
- ----------------------
(Herve A. Kevenides)
/s/ Lewis S. Ranieri Director March 15, 1999
- ----------------------
(Lewis S. Ranieri)
</TABLE>
Report of Independent Auditors
Board of Directors and Stockholders
Reckson Associates Realty Corp.
We have audited the accompanying consolidated balance sheets of Reckson
Associates Realty Corp. as of December 31, 1998 and 1997, and the related
consolidated statements of income, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1998. We have also
audited the financial statement schedule listed in the index at item 14(a).
These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and financial statement schedule
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Reckson
Associates Realty Corp. at December 31, 1998 and 1997, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1998 in conformity with generally accepted accounting
principles. Also, in our opinion, the financial statement schedule referred to
above, when considered in relation to the basic financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
ERNST & YOUNG LLP
New York, New York
February 11, 1999
<PAGE>
<PAGE>
RECKSON ASSOCIATES REALTY CORP.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
December 31,
-------------------------
1998 1997
---------- ----------
ASSETS
Commercial real estate properties, at cost
(Notes 2, 3, 5, 7 and 8)
Land ............................................ $ 212,540 $ 138,526
Buildings and improvements ...................... 1,372,549 818,229
Developments in progress:
Land ............................................ 69,143 36,857
Development costs ............................... 82,901 17,616
Furniture, fixtures and equipment .................. 6,090 4,054
----------- ----------
1,743,223 1,015,282
Less accumulated depreciation ........... (159,049) (111,068)
----------- ----------
1,584,174 904,214
Investments in real estate joint ventures .......... 15,104 7,223
Investment in mortgage notes and notes
receivable (Note 8) .............................. 99,268 104,509
Cash and cash equivalents (Note 12) ................ 2,349 21,828
Tenant receivables ................................. 5,159 4,975
Investments in and advances to affiliates (Note 7) . 53,329 26,547
Deferred rent receivable ........................... 22,526 14,973
Prepaid expenses and other assets (Notes 7 and 8) .. 46,372 5,248
Contract and land deposits and pre-acquisition costs 2,253 7,559
Deferred lease and loan costs, less
accumulated amortization of $18,170 (1998)
and $14,844 (1997) .............................. 24,282 16,181
----------- ----------
Total Assets .................................... $ 1,854,816 $1,113,257
=========== ==========
LIABILITIES
Mortgage notes payable (Note 2) .................... $ 253,463 $ 180,023
Unsecured credit facility (Note 3) ................. 465,850 210,250
Unsecured term loan (Note 3) ....................... 20,000 --
Senior unsecured notes (Note 4) .................... 150,000 150,000
Accrued expenses and other liabilities (Note 5) .... 48,565 30,987
Dividends and distributions payable ................ 19,663 120
Affiliate payables (Note 7) ........................ 2,395 807
----------- ----------
Total Liabilities ............................... 959,936 572,187
----------- ----------
Minority interests' in consolidated partnerships ... 52,173 6,655
Preferred unit interest in the operating partnership 42,518 --
Limited Partners' minority interest in
the operating partnership ....................... 94,125 85,750
----------- ----------
188,816 92,405
----------- ----------
Commitments and other comments
(Notes 9, 10, 13 and 16) ........................ -- --
STOCKHOLDERS' EQUITY (Note 6)
Preferred Stock, $.01 par value, 25,000,000
shares authorized, 9,192,000 and 0
issued and outstanding .......................... 92 --
Common Stock, $.01 par value, 100,000,000 shares
authorized, 40,035,419 and 37,770,158 shares
issued and outstanding, respectively............. 400 378
Additional paid in capital.......................... 705,572 448,287
----------- ----------
Total Stockholders' Equity....................... 706,064 448,665
----------- ----------
Total Liabilities and Stockholders' Equity....... $ 1,854,816 $1,113,257
=========== ==========
(see accompanying notes to financial statements)
<PAGE>
<TABLE>
<CAPTION>
RECKSON ASSOCIATES REALTY CORP.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
For the Year Ended December 31,
-----------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES (Note 10):
Base rents ..................................... $ 224,703 $ 128,778 $ 82,150
Tenant escalations and reimbursements .......... 27,744 14,981 10,628
Equity in earnings of service companies ........ 1,233 55 1,031
Equity in earnings of real estate joint ventures 603 459 266
Interest income on mortgage notes and notes
receivable ................................... 7,739 5,437 --
Investment and other income (Note 8) ........... 4,351 3,685 2,066
----------- ----------- -----------
Total Revenues ................................... 266,373 153,395 96,141
----------- ----------- -----------
EXPENSES:
Property operating expenses ................... 47,919 28,943 18,959
Real estate taxes ............................. 35,541 20,579 13,935
Ground rents .................................. 1,761 1,269 1,107
Marketing, general and administrative ......... 15,919 8,292 5,949
Interest ...................................... 47,795 21,585 13,331
Depreciation and amortization ................. 52,957 27,237 17,670
----------- ----------- -----------
Total Expenses ................................... 201,892 107,905 70,951
----------- ----------- -----------
Income before preferred dividends and
distributions, minority interests'
and extraordinary items ....................... 64,481 45,490 25,190
Minority partners' interests in consolidated
partnerships .................................. (2,763) (807) (808)
Distributions to preferred unit holders .......... (1,753) -- --
Limited partners' minority interest
in the operating partnership .................. (7,909) (7,817) (5,960)
----------- ----------- -----------
Income before extraordinary items and
dividends to preferred shareholders ............ 52,056 36,866 18,422
Extraordinary items - (loss) on
extinguishment of debts, net of
limited partners' minority interest
share of $323, $578 and $364,
respectively (Note 3).. ........................ (1,670) (2,230) (895)
Dividends to preferred shareholders............... (12,491) -- --
----------- ----------- -----------
Net income available to common
shareholders ................................... $ 37,895 $ 34,636 $ 17,527
----------- ----------- -----------
Basic net income per common share:
Income before extraordinary items................. $ 1.00 $ 1.13 $ .92
Extraordinary items - (loss) on
extinguishment of debts (.04) (.07) (.04)
----------- ----------- -----------
Net income per common share..................... $ .96 $ 1.06 $ .88
=========== =========== ===========
Weighted average common shares
outstanding .................................. 39,473,000 32,727,000 19,928,000
----------- ----------- -----------
Diluted net income per common share
(Notes 1 and 6) ......................... $ .95 $ 1.04 $ .87
=========== =========== ===========
Diluted weighted average common
shares outstanding (Notes
1 and 6)................................. 40,010,000 33,260,000 20,190,000
=========== =========== ===========
</TABLE>
(see accompanying notes to financial statements)
<PAGE>
RECKSON ASSOCIATES REALTY CORP.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
Limited
Additional Total Partners'
Common Preferred Paid Retained Stockholders' Minority
Stock Stock in Capital Earnings Equity Interest
--------- --------- --------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Stockholders' equity, December 31, 1995 ................ $ 75 $ -- $ 61,684 $ -- $ 61,759 $ 26,148
Proceeds from public offerings ......................... 47 -- 120,498 -- 120,545 24,671
Issuance of operating partnership units
(Note 12) ............................................ -- -- 10,909 -- 10,909 3,135
Proceeds from exercise of employee options ............. -- -- 263 -- 263 75
Two for one stock split (Note 6) ....................... 122 -- (122) -- -- --
Net Income ............................................. -- -- -- 17,527 17,527 5,596
Dividends and distributions paid and
payable ............................................... -- -- (6,609) (17,527) (24,136) (7,746)
--------- --------- --------- --------- --------- ---------
Stockholders' equity, December 31, 1996 ................ 244 -- 186,623 -- 186,867 51,879
Two for one stock split (Note 6) ....................... 50 -- (50) -- -- --
Proceeds from public offerings ......................... 80 -- 256,564 -- 256,644 33,925
Issuance of operating partnership units
(Note 12) ........................................... -- -- 9,473 -- 9,473 1,236
Proceeds from exercise of employee options ............. 4 -- 1,706 -- 1,710 178
Net Income ............................................. -- -- -- 34,636 34,636 7,239
Dividends and distributions paid and
payable .............................................. -- -- (6,029) (34,636) (40,665) (8,707)
--------- --------- --------- --------- --------- ---------
Stockholders' equity, December 31, 1997 ................ 378 -- 448,287 -- 448,665 85,750
Proceeds from preferred offering ....................... -- 92 220,708 -- 220,800 --
Conversions of preferred stock ......................... -- -- (31) -- (31) 31
Proceeds from public offerings ......................... 21 -- 41,340 -- 41,361 8,785
Issuance of operating partnership units
(Note 12) ........................................... -- -- 11,576 -- 11,576 2,458
Proceeds from exercise of employee options ............. 1 -- 990 -- 991 210
Net income ............................................. -- -- -- 37,895 37,895 7,586
Dividends and distributions paid
and payable ......................................... -- -- (17,298) (37,895) (55,193) (10,695)
--------- --------- --------- --------- --------- ---------
Stockholders' equity, December 31, 1998 ................ $ 400 $ 92 $ 705,572 $ -- $ 706,064 $ 94,125
========= ========= ========= ========= ========= =========
</TABLE>
(see accompanying notes to financial statements)
<PAGE>
<TABLE>
<CAPTION>
RECKSON ASSOCIATES REALTY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
For the Year Ended December 31,
-----------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS ................................. $ 37,895 $ 34,636 $ 17,527
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization ............................................ 52,957 27,237 17,670
Loss on extinguishment of debts, net of minority interest ................ 1,670 2,230 895
Minority partners' interest in consolidated partnerships ................. 2,763 807 808
Limited partners' minority interest in the operating partnership.......... 7,909 7,817 5,960
Gain on sale of interest in Reckson Executive Centers, LLC ............... (9) -- --
Gain on sales of property and securities ................................. (43) (672) --
Distribution from investments in real estate joint ventures .............. 470 408 191
Equity in earnings of service companies ................................. (1,233) (55) (931)
Equity in earnings of real estate joint ventures ......................... (603) (459) (266)
Changes in operating assets and liabilities:
Deferred rents receivable ................................................ (7,553) (4,500) (3,837)
Prepaid expenses and other assets ........................................ (6,499) (1,931) (608)
Tenant and affiliate receivables ......................................... (184) (1,183) (256)
Accrued expenses and other liabilities ................................... 30,667 11,427 4,700
--------- --------- ---------
Net cash provided by operating activities ................................ 118,207 75,762 41,853
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of commercial real estate properties ........................... (449,241) (429,379) (181,130)
Investment in mortgage notes and notes receivable ........................ 4,072 (50,282) (50,892)
Interest receivables ..................................................... 2,602 (2,392) (870)
(Increase) decrease in contract deposits and preacquisition costs ........ 8,839 (1,303) (6,668)
Additions to developments in progress .................................... (97,570) (40,367) (8,427)
Additions to commercial real estate properties ........................... (21,181) (12,038) (12,441)
Payment of leasing costs ................................................. (8,802) (5,417) (5,028)
Investments in securities ................................................ (42,299) (1,756) --
Additions to furniture, fixtures and equipment ........................... (2,071) (1,159) (115)
Investments in and advances to real estate joint ventures ................ (7,773) (1,734) (5,832)
Investment in service companies .......................................... -- (4,241) (3,170)
Distribution from a service company ...................................... 15 -- --
Additions to capital escrow reserves ..................................... (700) -- --
Proceeds from sales of property and securities ........................... 809 725 --
--------- --------- ---------
Net cash (used in)investing activities ................................... (613,300) (549,343) (274,573)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings ................................................. -- -- 54,402
Principal payments on borrowings ......................................... (4,735) (1,624) (380)
Proceeds from issuance of senior unsecured notes ......................... -- 150,000 --
Proceeds from issuance of preferred stock, net of issuance costs.......... 220,800 -- --
Proceeds from mortgage refinancing's, net of refinancing costs ........... 11,458 20,134 --
Payment of loan costs and prepayment penalties ........................... (4,738) (4,983) (2,525)
Investments in and advances to affiliates ................................ (23,452) (20,513) (2,952)
Proceeds from credit facilities .......................................... 393,100 421,000 144,500
Principal payments on credit facilities .................................. (137,500) (319,250) (76,000)
Proceeds from term loan .................................................. 20,000 -- --
Proceeds from issuance of common stock, and
exercise of options net of issuance costs .............................. 51,934 299,991 145,317
Contribution by a minority partner in a consolidated partnership ......... 10,000 -- --
Distribution to minority partners in consolidated partnerships ........... (3,570) (5,355) (1,392)
Distributions to limited partners in the operating partnership ........... (7,576) (8,707) (5,719)
Distributions to preferred unitholders ................................... (1,312) -- --
Dividends to common shareholders ......................................... (39,157) (47,972) (16,827)
Dividends to preferred shareholders ...................................... (9,638) -- --
--------- --------- ---------
Net cash provided by financing activities ................................... 475,614 482,721 238,424
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents ........................ (19,479) 9,140 5,704
Cash and cash equivalents at beginning of period ............................ 21,828 12,688 6,984
--------- --------- ---------
Cash and cash equivalents at end of period .................................. $ 2,349 $ 21,828 $ 12,688
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest ................................. $ 41,822 $20,246 $ 13,261
========= ======= =========
</TABLE>
(see accompanying notes to financial statements)
<PAGE>
RECKSON ASSOCIATES REALTY CORP.
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Reckson Associates Realty Corp. (the "Company") is a self
administered and self managed real estate investment trust ("REIT")engaged in
the ownership, management, operation, leasing and development of commercial
real estate properties, principally office and industrial buildings and owns
land for future development (collectively, the "Properties") located in the
New York tri-state area (the "Tri State Area").
ORGANIZATION AND FORMATION OF THE COMPANY
The Company was incorporated in Maryland in September 1994 and on June
2, 1995 completed an initial public offering of 6,120,000 shares (pre split) of
$.01 par value common stock ("the Offering"). The Offering price was $24.25 per
share (pre split) resulting in gross proceeds of $148,410,000. The Company also
issued 400,000 shares (pre split) in a concurrent offering to the Rechler family
resulting in $9,700,000 of additional proceeds. On June 28, 1995, the
underwriters exercised their over allotment option and, accordingly, the Company
issued an additional 918,000 shares (pre split) of common stock and received
gross proceeds of $22,261,500. The aggregate proceeds to the Company, net of
underwriters' discount, advisory fee and offering costs were approximately
$162,000,000.
The Company became the sole general partner of Reckson Operating
Partnership L.P. (the "Operating Partnership") by contributing substantially all
of the net proceeds of the Offering, in exchange for an approximate 73% interest
in the Operating Partnership. All Properties acquired by the Company are held by
or through the Operating Partnership.
The Operating Partnership executed various option and purchase
agreements whereby it issued 2,758,960 units (pre split) in the Operating
Partnership ("Units") to the continuing investors and assumed approximately
$163,438,000 (net of the Omni mortgages) of indebtedness in exchange for
interests in certain property partnerships, fee simple and leasehold interests
in properties and development land, certain business assets of the executive
center entities and 100% of the non-voting preferred stock of the management and
construction companies.
During 1997, the Company formed Reckson Service Industries, Inc.
("RSI") and Reckson Strategic Venture Partners, LLC ("RSVP"). The Operating
Partnership owned a 95% non voting common stock interest in RSI through June 10,
1998. On June 11, 1998, the Operating Partnership distributed its 95% common
stock interest in RSI of approximately $3 million to its owners, including the
Company which, in turn, distributed the common stock of RSI to its stockholders.
Additionally, during June 1998, the Operating Partnership established a credit
facility with RSI (the "RSI Facility") in the amount of $100 million for RSI's
service sector operations and other general corporate purposes. As of December
31, 1998, the Company had advanced $ 33.7 million under the RSI facility all of
which is outstanding. In addition, the Operating Partnership approved the
funding of investments of up to $100 million with or in RSVP (the "RSVP
Commitment"), through RSVP-controlled joint venture REIT-qualified investments
or advances made to RSI under terms similar to the RSI Facility. As of December
31, 1998, approximately $17.3 million had been invested through the RSVP
Commitment, of which $10.1 million represents RSVP controlled joint venture
investments and $7.2 million represents advances to RSI under the RSVP
Commitment. Such amounts have been included in investment in real estate joint
ventures and investments in and advances to affiliates, respectively, on the
accompanying balance sheet. RSI serves as the managing member of RSVP. RSI
invests in operating companies that generally provide commercial services to
the RSI customer base which includes the tenants of RSI's executive suite
business and to properties owned by the Company and its tenants and third
parties. RSVP was formed to provide the Company with a research and development
vehicle to invest in alternative real estate sectors. RSVP invests primarily
in real estate and real estate related operating companies generally outside of
the Company's core office and industrial focus. RSVP's strategy is to
identify and acquire interests in established entrepreneurial enterprises with
experienced management teams in market sectors which are in the early stages
of their growth cycle or offer unique circumstances for attractive investments
as well as a platform for future growth.
<PAGE>
On January 6, 1998, the Company made an initial investment in the
Morris Companies, a New Jersey developer and owner of "Big Box" warehouse
facilities. In connection with the transaction the Morris Companies
contributed 100% of their interests in certain industrial properties to Reckson
Morris Operating Partnership, L.P. ("RMI") in exchange for operating
partnership units in RMI. The Company has agreed to invest up to $150 million
in RMI. As of December 31, 1998, the Company has invested approximately
$93.8 million for an approximate 71.8% controlling interest in RMI.
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements include the
consolidated financial position of the Company and the Operating Partnership as
at December 31, 1998 and 1997 and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1998. The
Operating Partnership's investments in Metropolitan Partners, LLC
("Metropolitan"), RMI and Omni Partners, L. P. ("Omni") are reflected in the
accompanying financial statements on a consolidated basis with a reduction for
minority partners' interest. The operating results of the service businesses
currently conducted by Reckson Management Group, Inc., ("RMG"), and Reckson
Construction Group, Inc., are reflected in the accompanying financial statements
on the equity method of accounting. The operating results of Reckson Executive
Centers, L.L.C., ("REC"), a service business of the Operating Partnership were
reflected in the accompanying financial statements on the equity method of
accounting through March 31, 1998. On April 1, 1998, the Operating Partnership
sold its 9.9% interest in REC to RSI. Additionally, the operating results of RSI
were reflected in the accompanying financial statements on the equity method of
accounting through June 10, 1998. On June 11, 1998 the Operating Partnership
distributed its 95% common stock interest in RSI to its owners, including the
Company which, in turn, distributed the common stock of RSI to its stockholders.
The Operating Partnership also invests in real estate joint ventures where it
may own less than a controlling interest, such investments are also reflected in
the accompanying financial statements on the equity method of accounting. All
significant intercompany balances and transactions have been eliminated in the
consolidated financial statements.
The minority interests at December 31, 1998 represent an approximate
16.2% limited partnership interest in the Operating Partnership, an approximate
28.2% interest in RMI, a 25% interest in Metropolitan and a 40% interest in
Omni.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Real Estate
Depreciation is computed utilizing the straight-line method over the
estimated useful lives of ten to thirty years for buildings and improvements and
five to ten years for furniture, fixtures and equipment. Tenant improvements,
which are included in buildings and improvements, are amortized on a
straight-line basis over the term of the related leases.
Cash Equivalents
The Company considers highly liquid investments with a maturity of
three months or less when purchased, to be cash equivalents.
<PAGE>
Deferred Costs
Lease fees and loan costs are capitalized and amortized over the life
of the related lease or loan. The Company incurred costs related to offerings of
common and preferred stock which were charged to Stockholders' Equity.
Income Taxes
The Company generally will not be subject to federal income taxes as
long as it qualifies as a REIT. A REIT will generally not be subject to
federal income taxation on that portion of income that qualifies as REIT
taxable income and to the extent that it distributes such taxable income to its
stockholders and complies with certain requirements. As a REIT, the Company
is allowed to reduce taxable income by all or a portion of distributions to
stockholders and must distribute at least 95% of its taxable income to qualify
as a REIT. As distributions, for federal income tax purposes, have exceeded
taxable income, no federal income tax provision has been reflected in the
accompanying consolidated financial statements. State income taxes are not
significant.
During 1998, the Company paid cash dividends of $.99 per share
(representing dividends for three quarters) of which 100% was considered
ordinary income for federal income tax purposes. In addition, on June 11, 1998,
the Company paid a stock dividend equivalent to $.0824 per share relating to the
Operating Partnership's distribution of its common stock interest in RSI to the
Company. The stock dividend was also considered ordinary income for federal
income tax purposes. During 1997, the Company paid dividends of $1.54 per share
(representing dividends for five quarters) of which approximately 72% was
considered ordinary income and 28% was a return of capital for federal income
tax purposes.
<PAGE>
Revenue Recognition
Minimum rental income is recognized on a straight-line basis over the
term of the lease. The excess of rents recognized over amounts contractually due
are included in deferred rents receivable on the accompanying balance sheets.
Contractually due but unpaid rents are included in tenant receivables on the
accompanying balance sheets. Certain lease agreements provide for reimbursement
of real estate taxes, insurance, common area maintenance costs and indexed
rental increases, which are recorded on an accrual basis.
The Company records interest income on investments in mortgage notes
and notes receivable on an accrual basis of accounting. The Company does not
accrue interest on impaired loans where, in the judgment of management,
collection of interest according to the contractual terms is considered
doubtful. Among the factors the Company considers in making an evaluation of the
collectibility of interest are, the status of the loan, the value of the
underlying collateral, the financial condition of the borrower and anticipated
future events. Loan discounts are amortized over the life of the real estate
using the constant interest method.
Construction Operations
Construction operations are accounted for utilizing the completed
contract method. Under this method, costs and related billings are deferred
until the contract is substantially complete. Estimated losses on uncompleted
contracts are recorded in the period that management determines that a loss may
be incurred.
<PAGE>
Earnings Per Share
In 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 128, "Earnings per Share". Statement 128 replaced the calculation
of primary and fully diluted earnings per share with basic and diluted earnings
per share. Unlike primary earnings per share, basic earnings per share excludes
any dilutive effects of options, warrants and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts for all periods have been
presented, and where appropriate, restated to conform to the Statement 128
requirements. The conversion of Units into common stock would not have a
significant effect on per share amounts as the Units share proportionately with
the common stock in the results of the Operating Partnership's operations.
Stock Options
The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related
interpretations in accounting for its employee stock options because, the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation," (FAS No. 123) requires use of option
valuation models that were not developed for use in valuing employee stock
options. Under APB 25, no compensation expense was recognized because the
exercise price of the Company's employee stock options equals the market price
of the underlying stock on the date of grant (see Note 6).
Recent Pronouncements
In 1997, the FASB issued the following statements (i) Statement No.
130, "Reporting Comprehensive Income" ("SFAS 130") which is effective for fiscal
years beginning after December 15, 1997. SFAS 130 established standards for
reporting comprehensive income and its components in a full set of
general-purpose financial statements. SFAS 130 requires that all components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. The adoption of this standard
had no impact on the Company's financial position or results of operations. (ii)
Statement No. 131 "Disclosures about segments of an Enterprise and Related
Information" ("SFAS 131") which is effective for fiscal years beginning after
December 15, 1997. SFAS 131 establishes standards for reporting information
about operating segments in annual financial statements and in interim financial
reports. It also establishes standards for related disclosures about products
and services, geographic areas and major customers. The adoption of this
standard had no impact on the Company's financial position or results of
operations, but did affect the disclosure of segment information. See Note 11.
Reclassifications
Certain prior year amounts have been reclassified to conform to the
current year presentation.
<PAGE>
2. MORTGAGE NOTES PAYABLE
At December 31, 1998, there were 17 mortgage notes payable with an
aggregate outstanding principal amount of approximately $253 million. Properties
with an aggregate carrying value at December 31, 1998 of approximately $330
million are pledged as collateral against the mortgage notes payable. In
addition, $48.6 million of the $253 million are recourse to the Company. The
mortgage notes bear interest at rates ranging from 6.45% to 9.25%, and mature
between 1999 and 2012. The weighted average interest rate on the outstanding
mortgage notes payable at December 31, 1998 is 7.8%. Certain of the mortgage
notes payable are guaranteed by certain minority partners in the Operating
Partnership.
Scheduled principal repayments during the next five years and
thereafter are as follows (in thousands):
Year Ended December 31,
--------------------------
1999......................... $ 10,752
2000......................... 32,131
2001......................... 19,440
2002......................... 12,937
2003......................... 19,295
Thereafter................... 158,908
----------
$ 253,463
==========
3. CREDIT FACILITIES
On July 23, 1998, the Company obtained a three year $500 million
unsecured revolving credit facility (the "Credit Facility") from Chase Manhattan
Bank, Union Bank of Switzerland and PNC Bank as co-managers of the credit
facility bank group. Interest rates on borrowings under the Credit Facility are
priced off of LIBOR plus a sliding scale ranging from 112.5 basis points to
137.5 basis points based on the leverage ratio of the Company. Upon the Company
receiving an investment grade rating on its senior unsecured debt by two rating
agencies, the pricing is adjusted based off of LIBOR plus a scale ranging from
65 basis points to 90 basis points depending upon the rating. The Credit
Facility replaced and restructured the Company's existing $250 million unsecured
credit facility and $200 million unsecured bridge facility. As a result, certain
deferred loan costs incurred in connection with those facilities were written
off. Such amount has been reflected as an extraordinary loss on the
accompanying statement of operations. The Company utilizes the Credit Facility
primarily to finance the acquisitions of properties and other real estate
investments, fund its development activities and for working capital
purposes. At December 31, 1998, the Company had availability under the
Credit Facility to borrow an additional $8.1 million (net of $26.1 million of
outstanding undrawn letters of credit).
On December 4, 1998, the Company obtained a one year $50 million
unsecured term loan (the "Term Loan") from Chase Manhattan Bank. On January 13,
1999, the Company and Chase Manhattan Bank increased the total availability
under the Term Loan to $75 million. Interest rates on borrowings under the Term
Loan are priced off LIBOR plus 150 basis points for the first nine months and
175 basis points for the remaining three months. At December 31, 1998, the
Company had availability under the Term Loan to borrow an additional $30 million
which was increased to $55 million on January 13, 1999.
The Company capitalized interest incurred on borrowings to fund certain
development costs in the amount of $7,344,102, $2,351,201 and $800,434 for the
years ended December 31, 1998, 1997 and 1996 respectively.
<PAGE>
4. SENIOR UNSECURED NOTES
On August 28, 1997, the Company sold $150 million of 10-year senior
unsecured notes in a privately placed transaction. The senior unsecured notes
were priced at par with interest at 110 basis points over the 10- year treasury
note for an all in coupon of 7.2%. Interest is payable semiannually with
principal and unpaid interest due on August 28, 2007.
5. LAND LEASES
The Company leases, pursuant to noncancellable operating leases, the
land on which ten of its buildings were constructed. The leases, which contain
renewal options, expire between 2018 and 2080. The leases contain provisions for
scheduled increases in the minimum rent and one of the leases additionally
provides for adjustments to rent based upon the fair market value of the
underlying land at specified intervals. Minimum ground rent is recognized on a
straight-line basis over the terms of the leases. The excess of amounts
recognized over amounts contractually due is approximately $2,316,000 and
$1,948,000 at December 31, 1998 and 1997 respectively. These amounts are
included in accrued expenses and other liabilities on the accompanying balance
sheets. Future minimum lease commitments relating to the land leases as of
December 31, 1998 are as follows (in thousands):
1999.................................................... $1,781
2000.................................................... 1,783
2001.................................................... 1,800
2002.................................................... 1,819
2003.................................................... 1,818
Thereafter.............................................. 50,174
-------
$59,175
=======
6. STOCKHOLDERS' EQUITY
A Unit and a share of common stock have essentially the same economic
characteristics as they effectively share equally in the net income or loss and
distributions of the Operating Partnership. Beginning on the second anniversary
of the consummation of the Offering, Units may be redeemed for cash or, at the
election of the Company, for shares of common stock on a one-for-one basis.
On February 12, 1997, the Board of Directors of the Company declared a
two for one stock split to be effected as a stock dividend distributable on
April 15, 1997 to stockholders of record on April 4, 1997.
On February 18, 1998, the Company sold 791,152 shares of the Company's
common stock at $25.44 per share for an aggregate consideration of approximately
$20.1 million before deducting offering expenses.
During April 1998, the Company completed a preferred stock offering and
sold 9,200,000 shares (including 1,200,000 shares related to the exercise of the
underwriters over allotment option) of 7.625% Series A Convertible Cumulative
Preferred Stock at a price of $25.00 per share for an aggregate consideration of
$230 million before deducting offering expenses. The preferred stock is
convertible to the Company's common stock at a conversion rate of .8769 shares
of common stock for each share of preferred stock. As of December 31, 1998,
8,000 shares of the preferred stock were converted into the Company's common
stock.
On April 29, 1998, the Company completed a common stock offering and
sold 1,093,744 common shares at a price of $24.38 per share for an aggregate
consideration of approximately $26.7 million before deducting offering expenses.
<PAGE>
The Company has established the 1995, 1996, 1997 and 1998 Employee
Stock Option Plans (the "Plans") for the purpose of attracting and retaining
executive officers, directors and other key employees. As of December 31, 1998,
1,500,000, 400,000, 3,000,000 and 3,000,000 of the Company's authorized shares
have been reserved for issuance under the 1995, 1996, 1997 and 1998 plans,
respectively.
The following table sets forth the outstanding options and their
corresponding exercise price per share:
Exercise Price Range
Options --------------------
Granted(1) From (1) To(1)
--------- -------- ------
1995 Employee Stock Option Plan ..... 1,483,538 $12.04 $24.79
1996 Employee Stock Option Plan ..... 71,300 $19.67 $22.67
1997 Employee Stock Option Plan ..... 2,485,965 $22.67 $27.04
1998 Employee Stock Option Plan ..... 999,167 $21.88 $25.67
--------- ------ ------
Total ...................... 5,039,970
=========
---------
(1) Prices through December 31, 1996 are split adjusted.
Options granted to new employees vest in three equal installments on
the first, second and third anniversaries of the date of the grant. Options
granted to existing employees are generally exercisable on the date of the
grant.
In addition, the independent directors of the Company have been granted
options to purchase 117,000 shares pursuant to the 1995 Employee Stock Option
Plan at exercise prices ranging from $12.04 to $24.79 per share and options to
purchase 3,000 shares pursuant to the 1997 Employee Stock Option Plan at an
exercise price of $25.23 per share. The options granted to the independent
directors were exercisable on the date of the grant.
The Company has made loans to certain executive officers to purchase
310,834 shares of common stock at market prices ranging from $22.50 per share to
$27.13 per share. The loans bear interest at the mid-term Applicable Federal
Rate and are secured by the shares purchased. Such loans including accrued
interest will be forgiven each year on the annual anniversary of the grant date
based upon a ten year amortization period with a balloon payment due on the
fifth anniversary. As of December 31, 1998, the loan balances aggregated
approximately $7,075,000 and have been included as a reduction of additional
paid in capital on the accompanying consolidated balance sheets.
During 1998 and 1997, 74,837 and 126,429, respectively of employee
options were exercised resulting in proceeds to the Company of approximately
$1,107,000 and $1,888,000, respectively.
Pro forma information regarding net income and earnings per share is
required by FAS No. 123, and has been determined as if the Company had accounted
for its employee stock options under the fair value method of FAS No. 123. The
fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for 1998, 1997 and 1996; respectively: risk-free interest rate of
5%; dividend yields of 6.6%, 4.7% and 7.6%; volatility factors of the expected
market price of the Company's common stock of .167, and a weighted-average
expected life of the option of five years.
<PAGE>
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows for the years ended December 31:
1998 1997 1996
--------- ----------- ----------
Pro forma net income (in
thousands) ....................... $ 32,846 $ 34,287 $ 17,431
========== =========== ==========
Basic pro forma earnings per
share .......................... $ .83 $ 1.05 $ .88
========== =========== ==========
Diluted pro forma earnings per
share .......................... $ .82 $ 1.03 $ .86
========== =========== ==========
A summary of the Company's stock option activity, and related
information follows:
Weighted-Average
Options Exercise Price(1)
------- -----------------
Outstanding - December 31, 1995 ......... 864,060 $ 12.23
Granted ............................. 621,478 $ 16.94
Exercised ........................... (27,954) $ 12.39
Forfeited ........................... (36,370) $ 12.77
---------
Outstanding - December 31, 1996 ......... 1,421,214 $ 14.28
Granted ............................. 1,123,300 $ 26.67
Exercised ........................... (126,429) $ 14.94
Forfeited ........................... (10,319) $ 16.33
---------
Outstanding- December 31, 1997 .......... 2,407,766 $ 20.16
Granted ............................. 2,431,132 $ 24.03
Exercised ........................... (74,837) $ 14.76
Forfeited ........................... (30,417) $ 25.44
---------
Outstanding - December 31, 1998 ......... 4,733,644 $ 22.22
=========
- ----------
(1) Prices through December 31, 1996 are split adjusted
The weighted average fair value of options granted for the years ended
December 31, 1996, 1997 and 1998 was $.86, $1.47 and $2.06, respectively. In
addition, there were 403,564 options at a weighted average per share exercise
price of $13.95, 1,758,534 options at a weighted average per share exercise
price of $20.16 and 4,527,144 options at a weighted average per share exercise
price of $22.22 exercisable at December 31, 1996, 1997 and 1998, respectively.
<PAGE>
Exercise prices for options outstanding as of December 31, 1998 ranged
from $12.04 per share to $27.04 per share. The weighted-average remaining
contractual life of those options is approximately 8.56 years.
The Company made loans to certain senior officers to purchase units at
market prices ranging from $12.13 per unit to $21.94 per unit. The loans bear
interest at rates ranging between 8% to 8.5% and are secured by the units
purchased. Approximately $436,000 of such loans will be forgiven ratably at
each anniversary of employment over a three to four year period and
approximately $176,000 of such loans is due and payable with accrued interest on
January 9, 2002. The loan balances of approximately $248,000 and $362,000 at
December 31, 1998 and 1997, respectively have been included as a reduction of
additional paid in capital on the accompanying consolidated balance sheets.
The following table sets forth the Company's reconciliation of
numerators and denominators of the basic and diluted earnings per weighted
average common share and the computation of basic and diluted earnings per share
as required by FAS Statement 128 for the years ended December 31 (in thousands
except for earnings per share data):
<TABLE>
<CAPTION>
1998 1997 1996
------------ ---------- ----------
<S> <C> <C> <C>
Numerator:
Income before extraordinary items and
dividends to preferred shareholders ... $ 52,056 $ 36,866 $ 18,422
Preferred stock dividends .................. (12,491) -- --
---------- ---------- ----------
Numerator for basic an diluted earnings
per share ............................. $ 39,565 $ 36,866 $ 18,422
========== ========== ==========
Denominator:
Denominator for basic earnings per share -
weighted-average shares ................ 39,473 32,727 19,928
Effect of dilutive securities:
Employee stock options ................ 537 533 262
---------- ---------- ----------
Denominator for diluted earnings per share -
adjusted weighted-average shares and
assumed conversions ................... 40,010 33,260 20,190
========== ========== ==========
Basic earnings per common share:
Income before extraordinary items .......... $ 1.00 $ 1.13 $ .92
Extraordinary items ........................ (.04) (.07) (.04)
---------- ---------- ----------
Net income per common share ................ $ .96 $ 1.06 $ .88
========== ========== ==========
Diluted earnings per common share:
Income before extraordinary items .......... $ .99 $ 1.11 $ .91
Extraordinary items ........................ (.04) (.07) (.04)
---------- ---------- ----------
Diluted net income per common share ........ $ .95 $ 1.04 $ .87
========== ========== ==========
</TABLE>
<PAGE>
7. RELATED PARTY TRANSACTIONS
The Company, through its subsidiaries and affiliates, provides
management, leasing and other tenant related services to the Properties. Certain
executive officers of the Company have continuing ownership interests in the
unconsolidated service companies.
In connection with the IPO, the Company was granted options,
exercisable over a 10 year period to acquire six properties owned by the Reckson
Group, the predecessor to the Company, (the "Predecessor") (the "Reckson Option
Properties") and four properties in which the Predecessor owns a non-controlling
minority interest (the "Other Option Properties" and, together with the Reckson
Option Properties, the "Option Properties") at a purchase price equal to the
lesser of (i) a fixed purchase price and (ii) the Net Operating Income, as
defined, attributable to such Option Property during the 12 month period
preceding the exercise of the option divided by a capitalization rate of 11.5%,
but the purchase price shall in no case be less than the outstanding balance of
the mortgage debt encumbering the Option Property on the acquisition date.
As of December 31, 1998, the Company acquired four of the Reckson
Option Properties for an aggregate purchase price of approximately $35 million.
In connection with the purchase of such Option Properties the Company issued
475,032 Units at prices ranging from $16.38 per unit to $21.00 per unit (split
adjusted) as partial consideration in the transactions. Such Units were issued
to certain members of management and entities whose partners included members of
management. Additionally, during 1998, one of the Other Option Properties was
sold by the Predecessor to a third party.
The Company made construction loan advances to fund certain
redevelopment and leasing costs relating to one of the Other Option Properties.
At December 31, 1997 advances due to the Company were approximately $4,200,000.
Such amount beared interest at the rate of 11% per annum and was due on demand.
In January 1998, the outstanding advance including accrued and unpaid interest
was repaid in full.
The Operating Partnership and RSI have entered into an intercompany
agreement (the "Reckson Intercompany Agreement") to formalize their relationship
and to limit conflicts of interest. Under the Reckson Intercompany Agreement,
RSI granted the Operating Partnership a right of first opportunity to make any
REIT -qualified investment that becomes available to RSI. In addition, if a
REIT-qualified investment opportunity becomes available to an affiliate of RSI,
including RSVP, the Reckson Intercompany Agreement requires such affiliate to
allow the Operating Partnership to participate in such opportunity to the extent
of RSI's interest.
Under the Reckson Intercompany Agreement, the Operating Partnership
granted RSI a right of first opportunity to provide commercial services to the
Operating Partnership and its tenants. RSI will provide services to the
Operating Partnership at rates and on terms as attractive as either the best
available for comparable services in the market or those offered by RSI to third
parties. In addition, the Operating Partnership will give RSI access to its
tenants with respect to commercial services that may be provided to such tenants
and, under the Reckson Intercompany Agreement, subject to certain conditions,
the Operating Partnership granted RSI a right of first refusal to become the
lessee of any real property acquired by the Operating Partnership if the
Operating Partnership determines that, consistent with the Company's status
as a REIT, it is required to enter into a "master" lease agreement.
<PAGE>
On August 27, 1998 the Company announced the formation of a joint
venture with RSVP and the Dominion Group, an Oklahoma-based, privately-owned
group of companies that focuses on the development, acquisition and ownership of
government occupied office buildings and correctional facilities. The new
venture, Dominion Properties LLC (the "Dominion Venture"), is owned by Dominion
Venture Group LLC, and by a subsidiary of the Company. The Dominion Venture will
engage primarily in acquiring, developing and/or owning government-occupied
office buildings and privately operated correctional facilities. Under the
Dominion Venture's operating agreement, RSVP is to invest up to $100 million,
some of which may be invested by the Company ( the "RSVP Capital"). The initial
contribution of RSVP Capital was approximately $39 million of which
approximately $10.1 million was invested by a subsidiary of the Company. The
Company's subsidiary funded its capital contribution through the RSVP
Commitment. In addition, the Company advanced approximately $2.9 million to RSI
through the RSVP Commitment for an investment in RSVP which was then invested on
a joint venture basis with the Dominion Group in certain service business
activities related to the real estate activities. As of December 31, 1998, the
Dominion Venture had investments in 11 government office buildings and two
correctional facilities.
<PAGE>
During 1998, the Company made investments in and advances to RMG of
approximately $29.5 million. Such investments and advances were used by RMG in
connection with RMG's acquisition of an approximate 64% ownership interest in an
executive office suite business. Concurrently with RMG's investment, RSI
received an option to purchase RMG's interest at cost plus 8%. RMG is owned 97%
by the Company and 3% by an entity owned by certain officers of the Company. On
November 9, 1998, RSI exercised its option and, as a result RMG earned income
during the period of ownership of approximately $707,000. In addition, RSI
assumed the outstanding debt plus accrued interest owing to the Company.
8. COMMERCIAL REAL ESTATE INVESTMENTS
During 1997, the Company acquired five office properties encompassing
approximately 881,000 square feet and 15 industrial properties encompassing
approximately 968,000 square feet on Long Island for an aggregate purchase price
of approximately $131 million.
During 1997, the Company acquired eight office properties encompassing
approximately 830,000 square feet and three industrial properties encompassing
approximately 163,000 square feet in Westchester for an aggregate purchase price
of approximately $117 million. In addition, the Company acquired approximately
32 acres of land located in Westchester for a purchase price of approximately $8
million.
During 1997, the Company acquired one industrial property encompassing
approximately 452,000 square feet in Connecticut for a purchase price of
approximately $27 million.
During 1997, the Company acquired 13 office properties encompassing
approximately 1.5 million square feet and one industrial property encompassing
approximately 128,000 square feet in New Jersey for an aggregate purchase price
of approximately $156 million. In addition, the Company acquired approximately
303 acres of land located in New Jersey for an aggregate purchase price of
approximately $16.2 million.
In October 1997, the Company sold 671 Old Willets Path in Hauppauge,
New York for approximately $725,000 and recorded a gain on the sale of $672,000.
On January 6, 1998, the Company made an initial investment in the
Morris Companies, a New Jersey developer and owner of "Big Box" warehouse
facilities. In connection with the transaction the Morris Companies
contributed 100% of their interests in certain industrial properties to RMI in
exchange for operating partnership units in RMI. The Company has agreed to
invest up to $150 million in RMI. As of December 31, 1998, the Company has
invested approximately $93.8 million for an approximate 71.8% controlling
interest in RMI.
During 1998, the Company acquired three office properties
encompassing approximately 674,000 square feet, two industrial properties
encompassing approximately 200,000 square feet and approximately 79.9 acres of
vacant land which allows for approximately 816,000 square feet of future
development opportunities on Long Island for an aggregate purchase price of
approximately $82.8 million.
During 1998, the Company acquired four office properties encompassing
approximately 522,000 square feet, six industrial properties encompassing
approximately 985,000 square feet and approximately 112.2 acres of vacant land
which allows for approximately 815,000 square feet of future development
opportunities in New Jersey for an aggregate purchase price of approximately
$138.1 million.
During 1998, the Company acquired Stamford Towers located in Stamford,
Connecticut for approximately $61.3 million. Stamford Towers is a Class A office
complex consisting of two eleven story towers totaling approximately 325,000
square feet.
During 1998, the Company acquired a portfolio of six office properties
encompassing approximately 980,000 square feet in Westchester County, New York
from Cappelli Enterprises and affiliated entities ("Cappelli") for a purchase
price of approximately $173 million. The Cappelli acquisition includes a five
building, 850,000 square foot Class A office park in Valhalla and Court House
Square, a 130,000 square foot Class A office building located in White Plains.
The Company also obtained from Cappelli the remaining 50% interest in 360
Hamilton Avenue, a 365,000 square foot vacant office tower in downtown White
Plains for $10 million plus the return of his capital contributions of
approximately $1.5 million. In addition, the Company received an option from
Cappelli to acquire the remaining development parcels within the Valhalla office
park on which up to 875,000 square feet of office space can be developed. These
acquisitions were financed in part through proceeds from a draw under the credit
facilities, the issuance of 42,518 (approximately $42.5 million) preferred
operating partnership units (the "Cappelli Preferred Units"), and the assumption
of approximately $47.1 million of mortgage debt. Additionally, during 1998, the
Company issued and advanced to Cappelli $19 million under two liquidity loans
(the "Cappelli Liquidity Loans"). The Cappelli Liquidity Loans bear interest at
rates ranging from 10% to 10.5% per annum and are secured by Cappelli's right,
title and interest in the Cappelli Preferred Units. Such amounts have been
included in investments in mortgage notes and notes receivable on the
accompanying balance sheet. On February 3, 1999, the Company made an additional
$5 million advance under the Cappelli Liquidity Loans.
In July 1998, the Company formed a joint venture, Metropolitan Partners
LLC, a Delaware limited liability company ("Metropolitan"), with Crescent Real
Estate Equities Company, a Texas real estate investment trust ("Crescent").
Pursuant to a merger agreement executed on July 9, 1998 and amended and restated
on August 11, 1998 (the "Initial Merger Agreement") between Metropolitan, the
Company, Crescent and Tower Realty Trust Inc., a Maryland corporation ("Tower"),
Metropolitan agreed, subject to the terms and conditions of the Merger
Agreement, to purchase the common stock of Tower.
Prior to the execution of the Initial Merger Agreement, Metropolitan
identified certain potential tax issues regarding Tower's operations.
Metropolitan entered into the Initial Merger Agreement only after Tower made
detailed representations and warranties purporting to address these issues. In
the course of due diligence, however, Metropolitan, the Company and Crescent
discovered that these representations and warranties may not be correct and
discussed these concerns with Tower, specifically advising Tower that they were
not terminating the Initial Merger Agreement at that time. Metropolitan, the
Company and Crescent invited Tower to respond to these concerns. However, on
November 2, 1998, Tower filed a complaint in the Supreme Court of the State of
New York alleging Metropolitan, the Company and Crescent willfully breached the
Initial Merger Agreement. Tower, in the complaint, was seeking declaratory and
other relief, including damages of not less than $75 million and specific
performance by Metropolitan, the Company and Crescent of their obligations under
the Initial Merger Agreement.
<PAGE>
On December 8, 1998,the Company, Metropolitan and Tower executed a
revised merger agreement (the "Revised Merger Agreement"), pursuant to which
Tower will be merged (the "Merger") into Metropolitan, with Metropolitan
surviving the Merger. Concurrently with the Merger, Tower Realty Operating
Partnership, L.P. ("Tower OP") will be merged with and into a subsidiary of
Metropolitan. The consideration to be issued in the mergers will be comprised of
(i) 25% cash and (ii) 75% of shares of Class B Exchangeable Common Stock, par
value $.01 per share, of the Company (the "Class B Common Stock"), or in certain
circumstances described below, shares of Class B Common Stock and unsecured
notes of the Operating Partnership. The Company controls Metropolitan and owns
100% of the common equity; Crescent owns a preferred equity investment in
Metropolitan. The Revised Merger Agreement replaces the Initial Merger Agreement
(which at that time was a 50/50 joint venture between the Company and Crescent)
relating to the acquisition by Metropolitan of Tower for $24 per share.
Pursuant to the terms of the Revised Merger Agreement, holders of
shares of outstanding common stock of Tower ("Tower Common Stock"), and
outstanding units of limited partnership interest of Tower OP will have the
option to elect to receive cash or shares of Class B Common Stock, subject to
proration. Under the terms of the transaction, Metropolitan will effectively pay
for each share of Tower Common Stock and each unit of limited partnership
interest of Tower OP the sum of (i) $5.75 in cash, and (ii) 0.6273 of a share of
Class B Common Stock. The shares of Class B Common Stock are entitled to receive
an initial annual dividend of $2.24 per share and is subject to adjustment
annually. The shares of Class B Common Stock are exchangeable at any time, at
the option of the holder, into an equal number of shares of common stock, par
value $.01 per share, of the Company subject to customary antidilution
adjustments. The Company, at its option, may redeem any or all of the Class B
Common Stock in exchange for an equal number of shares of the Company's common
stock at any time following the four year, six-month anniversary of the issuance
of the Class B Common Stock. The Company's Board of Directors have recommended
to the Company's stockholders the approval of a proposal to issue a number of
shares of Class B Common Stock equal to 75% of the sum of (i) the number of
outstanding shares of the Tower Common Stock and (ii) the number of Tower OP
limited partnership units, in each case, at the effective time of the mergers.
If the stockholders of the Company do not approve the issuance of the Class B
Common Stock as proposed, the Revised Merger Agreement provides that
approximately one-third of the consideration that was to be paid in the form of
Class B Common Stock will be replaced by senior unsecured notes of the Operating
Partnership, which notes will bear interest at the rate of 7% per annum and have
a term of ten years. In addition, if the stockholders of the Company do not
approve the issuance of Class B Common Stock as proposed and the Board of
Directors of the Company withdraws or amends or modifies in any material respect
its recommendation for, approval of such proposal, then the total principal
amount of notes to be issued and distributed in the Merger will be increased by
$15 million.
Simultaneously with the execution of the Revised Merger Agreement,
Metropolitan and Tower executed and consummated a stock purchase agreement (the
"Series A Stock Purchase Agreement") pursuant to which Metropolitan purchased
from Tower approximately 2.2 million shares of Series A Convertible Preferred
Stock, par value $.01 per share, of Tower (the "Tower Preferred Stock"), for an
aggregate purchase price of $40 million, $30 million of which was funded through
a capital contribution by the Company to Metropolitan and which is included in
prepaid expenses and other assets on the accompanying balance sheet. The Tower
Preferred Stock has a stated value of $18.44 per share and is convertible by
Metropolitan into an equal number of shares of Tower Common Stock at anytime
after the termination, if any, of the Revised Merger Agreement, subject to
customary antidilution adjustments. The Tower Preferred Stock is entitled to
receive dividends equivalent to those paid on the Tower Common Stock. If the
Revised Merger Agreement is not consummated and a court of competent
jurisdiction issues a final, non-appealable judgment determining that the
Company and Metropolitan are obligated to consummate the Merger but have failed
to do so, or determining that the Company and Metropolitan failed to use their
reasonable best efforts to take all actions necessary to cause certain closing
conditions to be satisfied, Metropolitan is obligated to return to Tower $30
million of the Series A Preferred Stock.
<PAGE>
Immediately prior to the execution of the Revised Merger Agreement and
consummation of the Series A Stock Purchase Agreement, the Company and Crescent
executed the amended and restated operating agreement of Metropolitan (the
"Metropolitan Operating Agreement") pursuant to which Crescent agreed to
purchase a convertible preferred membership interest (the "Preferred Interest")
in Metropolitan for an aggregate purchase price of $85 million. Ten million
dollars of the purchase price was paid by Crescent to Metropolitan upon
execution of the Metropolitan Operating Agreement to acquire the Tower Preferred
Stock and the remaining portion is payable prior to the closing of the Merger
and is expected to be used to fund a portion of the cash merger consideration.
Upon closing of the Merger, Crescent's investment will accrue distributions at a
rate of 7.5% per annum for a two-year period and may be redeemed by Metropolitan
at any time during that period for $85 million, plus an amount sufficient to
provide a 9.5% internal rate of return. If Metropolitan does not redeem the
preferred interest, upon the expiration of the two-year period, Crescent must
convert its interest into either (i) a common membership interest in
Metropolitan or (ii) shares of the Company's common stock at a conversion price
of $24.61.
In connection with the revised transaction, Tower, the Company and
Crescent have exchanged mutual releases for any claims relating to the Initial
Merger Agreement.
The Company anticipates that it will dispose of the assets in the
Tower portfolio located outside of New York. In addition, the Company is also
considering the disposition of certain of the Tower properties located in New
York.
In addition, the Company has invested approximately $61.3 million in
certain mortgage indebtedness encumbering four Class A office buildings located
on Long Island encompassing approximately 577,000 square feet, a 825,000 square
foot industrial building located in New Jersey and a 400 acre parcel of land
located in New Jersey. In addition, the Company has loaned approximately $17
million to its minority partner in Omni, its flagship Long Island office
property, and effectively increased its economic interest in the property owning
partnership.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures of estimated fair value at December 31, 1998
were determined by management, using available market information and
appropriate valuation methodologies. Considerable judgment is necessary to
interpret market data and develop estimated fair value. The use of different
market assumptions and/or estimation methodologies may have a material effect on
the estimated fair value amounts.
Cash equivalents and variable rate debt are carried at amounts which
reasonably approximate their fair values.
Mortgage notes payable have an estimated aggregate fair value which
approximates its carrying value. Estimated fair value is based on interest rates
currently available to the Company for issuance of debt with similar terms and
remaining maturities.
<PAGE>
10. RENTAL INCOME
The Properties are being leased to tenants under operating leases. The
minimum rental amount due under certain leases are generally either subject to
scheduled fixed increases or indexed escalations. In addition, the leases
generally also require that the tenants reimburse the Company for increases in
certain operating costs and real estate taxes above base year costs.
Included in base rents and tenant escalations and reimbursements in the
accompanying statements of operations are amounts from Reckson Executive
Centers, LLC, a service business of the Company through March 31, 1998 and, a
related party as follows (in thousands):
TENANT
ESCALATIONS AND
FOR THE PERIODS BASE RENTS REIMBURSEMENTS
--------------- ---------- ---------------
January 1 through March 31, 1998............ $ 597 $ 149
Year ended December 31, 1997................ $ 2,154 $ 441
Year ended December 31, 1996................ $ 1,898 $ 417
Expected future minimum rents to be received over the next five years
and thereafter from leases in effect at December 31, 1998 are as follows (in
thousands):
1999.................................. $ 241,071
2000.................................. 222,112
2001.................................. 187,503
2002.................................. 165,730
2003.................................. 135,441
Thereafter............................ 386,953
-------------
$ 1,338,810
=============
<PAGE>
11. SEGMENT DISCLOSURE
The Company owns all of the interests in its real estate properties by or
through the Operating Partnership. The Company's portfolio consists of Class A
suburban office and industrial properties located in the Tri-State Area. In
addition, with the acquisition and merger transaction with Tower, the
Company has entered the Manhattan office market. Additionally, the Company's
portfolio includes 23 industrial properties owned by RMI. Each of the
divisions has a managing director who reports directly to the Chief Operating
Officer and Chief Financial Officer who have been identified as the Chief
Operating Decision Makers ("CODM")because of their final authority over
resource allocation, decisions and performance assessment.
The CODM evaluate the operating performance of these divisions based on
geographic area. In addition, as the Company expects to meet its short term
liquidity requirements in part through the Credit Facility and Term Loan,
interest incurred on borrowings under the Credit Facility and Term Loan is not
considered as part of property operating performance. The accounting policies of
the reportable segments are the same as those described in the summary of
significant accounting policies.
The following table sets forth the components of the Company's revenues
and expenses and other related disclosures as required by FAS Statement 131 for
the year ended December 31, 1998 (in thousands):
<TABLE>
<CAPTION>
Southern Consolidated
Long Island Westchester New Jersey Connecticut RMI Other Totals
--------------- -------------- ----------------- -------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Base rents...... $ 102,421 $ 51,983 $ 35,425 $ 22,134 $ 12,740 $ --- $ 224,703
Tenant escalations and
reimbursements...... 10,721 7,433 3,746 3,242 2,397 205 27,744
Equity in earnings of
service companies --- --- --- --- --- 1,233 1,233
Equity in earnings of
real estate joint
ventures............ --- --- --- --- --- 603 603
Interest income on
mortgage notes and
notes receivable.... --- --- --- --- --- 7,739 7,739
Investment and other
income.............. 407 15 29 9 --- 3,891 4,351
--------------- -------------- ----------------- -------------- ------------- ------------- -------
Total Revenues.......... 113,549 59,431 39,200 25,385 15,137 13,671 266,373
--------------- -------------- ----------------- -------------- ------------- ------------- -------
EXPENSES:
Property operating
expenses............ 20,774 13,476 5,245 5,932 392 2,100 47,919
Real estate taxes.... 20,400 7,379 4,442 1,125 2,195 --- 35,541
Ground rents......... 1,681 1 34 --- --- 45 1,761
Marketing, general and
administrative 6,835 1,530 1,820 1,514 456 3,764 15,919
Interest............. 9,281 3,421 15 3,934 1,101 30,043 47,795
Depreciation and
amortization........ 20,930 10,810 7,536 4,425 3,491 5,765 52,957
--------------- -------------- ----------------- -------------- ------------- ------------- -------
Total Expenses......... 79,901 36,617 19,092 16,930 7,635 41,717 201,892
--------------- -------------- ----------------- -------------- ------------- ------------- --------
Income before preferred
dividends and
distributions, minority
interests' and
extraordinary items.. $ 33,648 $ 22,814 $ 20,108 $ 8,455 $ 7,502 $ (28,046) $ 64,481
============== ========= =========== ============ ========= =========== ===========
Total Assets............ $ 518,648 $ 405,836 $ 170,623 $ 329,365 $ 156,430 $ 273,914 $ 1,854,816
=============== ========= =========== ============ ============= ============= ============
</TABLE>
<PAGE>
12. NON-CASH INVESTING AND FINANCING ACTIVITIES
Additional supplemental disclosures of non-cash investing and financing
activities are as follows (in thousands):
(1) In January 1997, the Company acquired one of the Reckson Option Properties
as follows:
Mortgage assumed................ $4,667
Issuance of 203,804 Units (split adjusted) 4,280
Cash paid....................... 61
------
Total purchase price............ $9,008
======
(2) In November 1997, the Company acquired a 181,000 square foot industrial
building located in Hauppauge, New York as follows:
Mortgage assumed and repaid..... $3,037
Issuance of 62,905 Units........ 1,578
Cash paid....................... 10
------
Total purchase price............ $4,625
======
(3) In December 1997, the Company purchased a 92,000 square foot industrial
building located in Elmsford, New York as follows:
Issuance of 183,469 Units....... $4,700
======
On January 2, 1998, the Company issued an additional 18,752 Units in
connection with the acquisition of a 92,000 square foot industrial building
located in Elmsford, New York for an additional non cash investment of
approximately $480,000.
On January 6, 1998, the Company acquired an office property located in
Uniondale, New York which included the issuance of 513,259 units for a total non
cash investment of $12 million.
On April 21, 1998, in connection with the acquisition of the Cappelli
portfolio, the Company assumed approximately $45.1 million of indebtedness,
issued 25,000 Series B preferred units and 11,518 Series C preferred units with
a combined stated value of approximately $36.5 million for a total non cash
investment of approximately $81.6 million. Additionally, during April 1998, in
connection with the acquisition of 155 Passaic Avenue in Fairfield, New Jersey,
the Company issued 1,979 Units for a total non cash investment of approximately
$50,000.
On June 11, 1998, the Operating Partnership distributed its 95% common
stock interest in RSI of approximately $3 million to its owners, including the
Company which, in turn, distributed the common stock of RSI to its shareholders.
On July 2, 1998, in connection with the acquisition of 360 Hamilton
Avenue located in White Plains, New York, the Operating Partnership assumed
approximately $2 million of indebtedness and issued 6,000 Series D preferred
units for a total non cash investment of approximately $8.0 million.
On August 13, 1998, in connection with the acquisition of two office
properties located in Parsippany, New Jersey, the Operating Partnership issued
50,072 Units for a total non cash investment of approximately $1.2 million
<PAGE>
During 1998, in connection with the Company's investment in the Morris
Companies, the Company assumed approximately $23 million of indebtedness ($16.9
million net of minority partners interest). In addition, the Morris Companies
contributed net assets of approximately $36 million to the Company in exchange
for an approximate 28.2% minority partners interest in RMI.
13. COMMITMENTS AND OTHER COMMENTS
The Company entered into employment agreements with its chairman and
five executive officers. The agreements are for five years and expire on May 31,
2003.
The Company sponsors a defined contribution savings plan pursuant to
section 401(k) of the Internal Revenue Code. Under such plan, there are no prior
service costs. All employees are eligible to participate in the plan after six
months of service. Employer contributions are based on a discretionary amount
determined by the Company's management. During 1998 and 1997, the Company made
no contributions.
The Company had outstanding undrawn letters of credit against its
credit facilities of approximately $26.1 million and $4 million at December 31,
1998 and 1997, respectively.
<PAGE>
14. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following summary represents the Company's results of operations
for each quarter during 1998 and 1997 (in thousands, except share amounts):
<TABLE>
<CAPTION>
1998
------------------------------------------------------------------------------
First Quarter Second Quarter Third Quarter Fourth Quarter
----------------- -------------- ------------- ------------------
<S> <C> <C> <C> <C>
Total revenues.............................. $ 55,063 $ 66,319 $ 71,600 $ 73,391
================= ============== ============= ==================
Income before preferred dividends and
distributions, minority interests' and
extraordinary items...................... $ 12,097 $ 17,524 $ 17,143 $ 17,717
Preferred dividends and distributions....... --- (4,168) (5,034) (5,042)
Minority interests'......................... (2,524) (3,445) (1,874) (2,829)
Extraordinary (loss)........................ --- --- (1,670) ---
------------------ --------------- -------------- -------------------
Net income available to common
shareholders............................. $ 9,573 $ 9,911 $ 8,565 $ 9,846
================= ============== ============= ==================
Basic net income per weighted
average common share:
Income before extraordinary items........... $ .25 $ .25 $ .25 $ .25
Extraordinary (loss)........................ --- --- (.04) ---
----------------- -------------- -------------- ------------------
Net income.................................. $ .25 $ .25 $ .21 $ .25
================== ============== ============== ==================
Weighted average common shares
outstanding.............................. 38,182,577 39,636,815 40,011,627 40,034,781
================== ============== ============== ==================
Diluted net income per common share
(Notes 1 and 6):
Income before extraordinary items........... $ .25 $ .25 $ .25 $ .24
Extraordinary items......................... --- --- (.04) ---
------------------ -------------- -------------- ------------------
Diluted net income per common share......... $ .25 $ .25 $ .21 $ .24
================== ============== ============== ==================
Diluted weighted average common
shares outstanding....................... 38,767,454 40,178,083 40,533,540 40,533,023
================== ============== ============== ==================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1997
------------------------------------------------------------------------------
First Quarter Second Quarter Third Quarter Fourth Quarter
---------------- ---------------- -------------- --------------------
<S> <C> <C> <C> <C>
Total revenues............................ $ 31,692 $ 36,194 $ 40,342 $ 45,167
================ ================ ============== ====================
Income before minority interests' and
extraordinary items.................... $ 8,805 $ 11,990 $ 11,470 $ 13,225
Minority interests'....................... (2,021) (2,194) (2,061) (2,348)
Extraordinary (loss)...................... --- (1,962) (268) ---
---------------- ---------------- -------------- --------------------
Net income................................ $ 6,784 $ 7,834 $ 9,141 $ 10,877
================ ================ ============== ====================
Basic net income per weighted
average common share:
Income before extraordinary item.......... $ .26 $ .29 $ .27 $ .31
Extraordinary loss........................ --- (.06) (.01) ---
---------------- ---------------- -------------- --------------------
Net income................................ $ .26 $ .23 $ .26 $ .31
================ ================ ============== ====================
Weighted average common shares
outstanding............................ 26,569,162 34,298,137 34,477,050 35,445,213
================ ================ ============== ====================
Diluted net income per common
share (Notes 1 and 6):
Income before extraordinary items........... $ .25 $ .28 $ .27 $ .30
Extraordinary items......................... --- (.06) (.01) ---
---------------- ---------------- -------------- --------------------
Diluted net income per common share......... $ .25 $ .22 $ .26 $ .30
================ ================ ============== ====================
Diluted weighted average common
shares outstanding..................... 27,056,018 34,801,582 35,030,464 36,032,319
================ ================ ============== ====================
</TABLE>
15. PRO FORMA RESULTS (UNAUDITED)
The following unaudited pro forma operating results of the Company for
the year ended December 31, 1998 have been prepared as if the property
acquisitions made during 1998 had occurred on January 1, 1998. Unaudited pro
forma financial information is presented for informational purposes only and may
not be indicative of what the actual results of operations of the Company would
have been had the events occurred as of January 1, 1998, nor does it purport to
represent the results of operations for future periods (in thousands):
Revenues......................................... $ 284,704
============
Income before extraordinary items and
dividends to preferred shareholders........... $ 61,290
============
Net Income....................................... $ 47,128
============
Net Income per common share...................... $ 1.19
============
<PAGE>
RECKSON ASSOCIATES REALTY CORP.
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D
-------- -------- -------- --------
COST CAPITALIZED
SUBSEQUENT TO
INITIAL COST ACQUISITION
------------ -----------
BUILDINGS AND BUILDINGS AND
DESCRIPTION ENCUMBRANCE LAND IMPROVEMENTS LAND IMPROVEMENTS
----------- ----------- ---- ------------ ---- ------------
<S> <C> <C> <C> <C> <C>
Vanderbilt Industrial
Park, Hauppauge,
New York 27 buildings in
an industrial park)...... B $1,940 $9,955 --_ $9,858
Airport International
Plaza, Islip, New York
(17 buildings in an
industrial park)......... 2,616(C) 1,263 13,608 --_ 10,133
County Line Industrial
Center, Huntington,
New York (3 buildings in
an industrial park)...... B 628 3,686 --_ 2,638
32 Windsor Place, Islip,
New York................. B 32 321 --_ 46
42 Windsor Place, Islip,
New York................. B 48 327 --_ 542
505 Walt Whitman Rd.,
Huntington, New York..... B 140 42 --_ 59
1170 Northern Blvd., N.
Great Neck, New York..... B 30 99 --_ 31
50 Charles Lindbergh
Blvd., Mitchel Field,
New York................. 15,479 A 12,089 --_ 4,179
200 Broadhollow Road,
Melville New York........ 6,621 338 3,354 --_ 2,994
48 South Service Road,
Melville, New York....... B 1,652 10,245 --_ 3,760
395 North Service Road,
Melville, New York....... 21,375 A 15,551 --_ 6,616
6800 Jericho Turnpike,
Syosset, New York........ 15,001 582 6,566 --_ 7,238
6900 Jericho Turnpike,
Syosset, New York........ 5,279 385 4,228 --_ 2,531
300 Motor Parkway,
Hauppauge, New c York.... B 276 1,136 --_ 1,489
88 Duryea Road, Melville,
New York................. B 200 1,565 --_ 669
210 Blydenburgh Road,
Islandia, New York....... B 11 158 --_ 155
208 Blydenburgh Road,
Islandia, New York....... B 12 192 --_ 145
71 Hoffman Lane, Islandia,
New York................. B 19 260 --_ 171
933 Motor Parkway,
Hauppauge, New York...... B 106 375 --_ 356
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COLUMN A COLUMN E COLUMN F COLUMN G COLUMN H COLUMN I
-------- -------- -------- -------- -------- --------
GROSS AMOUNT AT WHICH
CARRIED AT CLOSE OF PERIOD
LIFE ON WHICH
BUILDINGS AND ACCUMULATED DATE OF DATE DEPRECIATION
DESCRIPTION LAND IMPROVEMENTS TOTAL DEPRECIATION CONSTRUCTION ACQUIRED IS COMPUTED
----------- ---- ------------ ----- ------------ ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Vanderbilt Industrial
Park, Hauppauge,
New York (27 buildings 1961- 1961-
in an industrial park)... $1,940 $19,813 $21,753 $12,431 1979 1979 10-30 Years
Airport International
Plaza, Islip, New York
(17 buildings in an 1970- 1970-
industrial park)......... 1,263 23,741 25,004 13,555 1988 1988 10-30 Years
County Line Industrial
Center, Huntington,
New York (3 buildings in 1975- 1975-
an industrial park)...... 628 6,324 6,952 4,029 1979 1979 10-30 Years
32 Windsor Place, Islip,
New York................. 32 367 399 315 1971 1971 10-30 Years
42 Windsor Place, Islip,
New York................. 48 869 917 666 1972 1972 10-30 Years
505 Walt Whitman Rd.,
Huntington, New York..... 140 101 241 70 1950 1968 10-30 Years
1170 Northern Blvd., N.
Great Neck, New York..... 30 130 160 121 1947 1962 10-30 Years
50 Charles Lindbergh
Blvd., Mitchel Field,
New York................. 0 16,268 16,268 8,155 1984 1984 10-30 Years
200 Broadhollow Road,
Melville New York........ 338 6,348 6,686 3,454 1981 1981 10-30 Years
48 South Service Road,
Melville, New York....... 1,652 14,005 15,657 6,566 1986 1986 10-30 Years
395 North Service Road,
Melville, New York....... 0 22,167 22,167 10,014 1988 1988 10-30 Years
6800 Jericho Turnpike,
Syosset, New York........ 582 13,804 14,386 7,918 1977 1978 10-30 Years
6900 Jericho Turnpike,
Syosset, New York........ 385 6,759 7,144 3,261 1982 1982 10-30 Years
300 Motor Parkway,
Hauppauge, New c York.... 276 2,625 2,901 1,236 1979 1979 10-30 Years
88 Duryea Road, Melville,
New York................. 200 2,234 2,434 1,148 1980 1980 10-30 Years
210 Blydenburgh Road,
Islandia, New York....... 11 313 324 277 1969 1969 10-30 Years
208 Blydenburgh Road,
Islandia, New York....... 12 337 349 318 1969 1969 10-30 Years
71 Hoffman Lane, Islandia,
New York................. 19 431 450 379 1970 1970 10-30 Years
933 Motor Parkway,
Hauppauge, New York...... 106 731 837 540 1973 1973 10-30 Years
Continued-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D
-------- -------- -------- --------
COST CAPITALIZED
SUBSEQUENT TO
INITIAL COST ACQUISITION
------------ -----------
BUILDINGS AND BUILDINGS AND
DESCRIPTION ENCUMBRANCE LAND IMPROVEMENTS LAND IMPROVEMENTS
----------- ----------- ---- ------------ ---- ------------
<S> <C> <C> <C> <C> <C>
65 and 85 South Service
Road Plainview, New York. B 40 218 --- 10
333 Earl Ovington Blvd.,
Mitchel Field, New York
(Omni)................... 57,162 A 67,221 --_ 16,548
135 Fell Court, Islip,
New York................. B 462 1,265 --- 47
40 Cragwood Road, South
Plainfield, New Jersey... B 708 7,131 --- 4,772
110 Marcus Drive,
Huntington, New York..... B 390 1,499 --_ 97
333 East Shore Road, Great
Neck, New York........... B A 564 --_ 176
310 East Shore Road, Great
Neck, New York........... 2,322 485 2,009 --_ 304
70 Schmitt Blvd.,
Farmingdale New York..... 150 727 3,408 --_ 24
19 Nicholas Drive,
Yaphank, New York........ B 160 7,399 --_ 38
1516 Motor Parkway,
Hauppauge, New York...... B 603 6,722 --_ 13
125 Baylis Road, Melville,
New York................. B 1,601 8,626 --_ 814
35 Pinelawn Road,
Melville, New York....... B 999 7,073 --_ 1,937
520 Broadhollow Road,
Melville, New York....... B 457 5,572 --_ 1,424
1660 Walt Whitman Road,
Melville,New York........ B 370 5,072 --_ 429
70 Maxess Road, Melville,
New York................. B 367 1,859 95 2,753
85 Nicon Court, Hauppauge,
New York................. B 797 2,818 --_ 54
104 Parkway Drive So.,
Hauppauge, New York...... B 54 804 --- 130
20 Melville Park Rd.,
Melville, New York....... B 391 2,650 --- 96
105 Price Parkway,
Hauppauge, New York...... B 2,030 6,327 --- 453
48 Harbor Park Drive,
Hauppauge, New York...... B 1,304 2,247 --- 93
125 Ricefield Lane,
Hauppauge, New York...... B 13 852 --- 330
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COLUMN A COLUMN E COLUMN F COLUMN G COLUMN H COLUMN I
-------- -------- -------- -------- -------- --------
GROSS AMOUNT AT WHICH
CARRIED AT CLOSE OF PERIOD
--------------------------
LIFE ON WHICH
BUILDINGS AND ACCUMULATED DATE OF DATE DEPRECIATION
DESCRIPTION LAND IMPROVEMENTS TOTAL DEPRECIATION CONSTRUCTION ACQUIRED IS COMPUTED
----------- ---- ------------ ----- ------------ ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
65 and 85 South Service
Road Plainview, New York. 40 228 268 223 1961 1961 10-30 Years
333 Earl Ovington Blvd.,
Mitchel Field, New York
(Omni)................... 0 83,769 83,769 15,947 1990 1995 10-30 Years
135 Fell Court, Islip,
New York................. 462 1,312 1,774 284 1965 1992 10-30 Years
40 Cragwood Road, South
Plainfield, New Jersey... 708 11,903 12,611 6,331 1970 1983 10-30 Years
110 Marcus Drive,
Huntington, New York..... 390 1,596 1,986 1,149 1980 1980 10-30 Years
333 East Shore Road, Great
Neck, New York........... 0 740 740 473 1976 1976 10-30 Years
310 East Shore Road, Great
Neck, New York........... 485 2,313 2,798 1,349 1981 1981 10-30 Years
70 Schmitt Blvd.,
Farmingdale New York..... 727 3,432 4,159 382 1965 1995 10-30 Years
19 Nicholas Drive,
Yaphank, New York........ 160 7,437 7,597 845 1989 1995 10-30 Years
1516 Motor Parkway,
Hauppauge, New York...... 603 6,735 7,338 785 1981 1995 10-30 Years
125 Baylis Road, Melville,
New York................. 1,601 9,440 11,041 980 1980 1995 10-30 Years
35 Pinelawn Road,
Melville, New York....... 999 9,010 10,009 1,089 1980 1995 10-30 Years
520 Broadhollow Road,
Melville, New York....... 457 6,996 7,453 1,097 1978 1995 10-30 Years
1660 Walt Whitman Road,
Melville,New York........ 370 5,501 5,871 621 1980 1995 10-30 Years
70 Maxess Road, Melville,
New York................. 462 4,612 5,074 385 1967 1995 10-30 Years
85 Nicon Court, Hauppauge,
New York................. 797 2,872 3,669 286 1984 1995 10-30 Years
104 Parkway Drive So.,
Hauppauge, New York...... 54 934 988 89 1985 1996 10-30 Years
20 Melville Park Rd.,
Melville, New York....... 391 2,746 3,137 208 1965 1996 10-30 Years
105 Price Parkway,
Hauppauge, New York...... 2,030 6,780 8,810 603 1969 1996 10-30 Years
48 Harbor Park Drive,
Hauppauge, New York...... 1,304 2,340 3,644 208 1976 1996 10-30 Years
125 Ricefield Lane,
Hauppauge, New York...... 13 1,182 1,195 162 1973 1996 10-30 Years
Continued-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Column A Column B COLUMN C COLUMN D
-------- -------- -------- --------
COST CAPITALIZED
SUBSEQUENT TO
INITIAL COST ACQUISITION
------------ -----------
BUILDINGS AND BUILDINGS AND
Description ENCUMBRANCE LAND IMPROVEMENTS LAND IMPROVEMENTS
----------- ----------- ---- ------------ ---- ------------
<S> <C> <C> <C> <C> <C>
110 Ricefield Lane,
Hauppauge, New York...... B 33 1,043 --- 52
120 Ricefield Lane,
Hauppauge, New York...... B 16 1,051 --- 30
135 Ricefield Lane,
Hauppauge, New York...... B 24 906 --- 473
30 Hub Drive, Huntington,
New York................. B 469 1,571 --- 295
60 Charles Lindbergh,
Mitchel Field, New York.. B A 20,800 --- 1,594
155 White Plains Rod.,
Tarrytown, New York...... B 1,613 2,542 --- 876
2 Church Street,
Tarrytown, New York ..... B 232 1,307 --- 375
235 Main Street,
Tarrytown, New York...... B 955 5,375 --- 760
245 Main Street,
Tarrytown, New York...... B 1,294 7,284 --- 849
505 White Plains Road,
Tarrytown, New York...... B 236 1,332 --- 318
555 White Plains Road,
Tarrytown, New York...... B 712 4,133 51 2,668
560 White Plains Road,
Tarrytown, New York...... B 1,553 8,756 --- 1,795
580 White Plains Road,
Tarrytown, New York...... 8,503 2,591 14,595 --- 2,040
660 White Plains Road,
Tarrytown, New York...... B 3,929 22,640 45 2,505
Landmark Square, Stamford,
Connecticut.............. 48,579 11,603 64,466 --- 12,176
110 Bi-County Blvd.,
Farmingdale, New York.... 4,383 2,342 6,665 --- 123
RREEF Portfolio,
Hauppauge, New York (10
additional buildings in
Vanderbuilt Industrial
Park).................... B 930 20,619 --- 1,880
275 Broadhollow Road,
Melville, New York....... B 5,250 11,761 --- 514
One Eagle Rock, East
Hanover, New Jersey...... B 803 7,563 --- 1,580
710 Bridgeport Avenue,
Shelton, Connecticut..... B 5,405 21,620 7 533
101 JFK Expressway, Short
Hills, New Jersey........ B 7,745 43,889 --- 1,019
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COLUMN A COLUMN E COLUMN F COLUMN G COLUMN H COLUMN I
-------- -------- -------- -------- -------- --------
GROSS AMOUNT AT WHICH
CARRIED AT CLOSE OF PERIOD
LIFE ON WHICH
BUILDINGS AND ACCUMULATED DATE OF DATE DEPRECIATION
Description LAND IMPROVEMENTS TOTAL DEPRECIATION CONSTRUCTION ACQUIRED IS COMPUTED
---- ------------ ----- ------------ ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
110 Ricefield Lane,
Hauppauge, New York...... 33 1,095 1,128 109 1980 1996 10-30 Years
120 Ricefield Lane,
Hauppauge, New York...... 16 1,081 1,097 84 1983 1996 10-30 Years
135 Ricefield Lane,
Hauppauge, New York...... 24 1,379 1,403 200 1981 1996 10-30 Years
30 Hub Drive, Huntington,
New York................. 469 1,866 2,335 181 1976 1996 10-30 Years
60 Charles Lindbergh,
Mitchel Field, New York.. 0 22,394 22,394 2,143 1989 1996 10-30 Years
155 White Plains Rod.,
Tarrytown, New York...... 1,613 3,418 5,031 258 1963 1996 10-30 Years
2 Church Street,
Tarrytown, New York ..... 232 1,682 1,914 166 1979 1996 10-30 Years
235 Main Street,
Tarrytown, New York...... 955 6,135 7,090 612 1974 1996 10-30 Years
245 Main Street,
Tarrytown, New York...... 1,294 8,133 9,427 836 1983 1996 10-30 Years
505 White Plains Road,
Tarrytown, New York...... 236 1,650 1,886 183 1974 1996 10-30 Years
555 White Plains Road,
Tarrytown, New York...... 763 6,801 7,564 1,043 1972 1996 10-30 Years
560 White Plains Road,
Tarrytown, New York...... 1,553 10,551 12,104 1,494 1980 1996 10-30 Years
580 White Plains Road,
Tarrytown, New York...... 2,591 16,635 19,226 1,786 1997 1996 10-30 Years
660 White Plains Road,
Tarrytown, New York...... 3,974 25,145 29,119 2,767 1983 1996 10-30 Years
Landmark Square, Stamford,
Connecticut.............. 11,603 76,642 88,245 5,438 1973-1984 1996 10-30 Years
110 Bi-County Blvd.,
Farmingdale, New York.... 2,342 6,788 9,130 477 1984 1997 10-30 Years
RREEF Portfolio, 930 22,499 23,429 1,370 1974-1982 1997 10-30 Years
Hauppauge, New York (10
additional buildings in
Vanderbuilt Industrial Park)
275 Broadhollow Road,
Melville, New York....... 5,250 12,275 17,525 740 1970 1997 10-30 Years
One Eagle Rock, East
Hanover, New Jersey...... 803 9,143 9,946 566 1986 1997 10-30 Years
710 Bridgeport Avenue,
Shelton, Connecticut..... 5,412 22,153 27,565 1,295 1971-1979 1997 10-30 Years
101 JFK Expressway, Short
Hills, New Jersey........ 7,745 44,908 52,653 2,462 1981 1997 10-30 Years
Continued-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D
-------- -------- -------- --------
COST CAPITALIZED
SUBSEQUENT TO
INITIAL COST ACQUISITION
------------ -----------
<PAGE>
BUILDINGS AND BUILDINGS AND
DESCRIPTION ENCUMBRANCE LAND IMPROVEMENTS LAND IMPROVEMENTS
----------- ----------- ---- ------------ ---- ------------
<S> <C> <C> <C> <C> <C>
10 Rooney Circle, West
Orange, New Jersey....... B 1,302 4,615 1 418
Executive Hill Office
Park, West Orange,
New Jersey............... B 7,629 31,288 4 814
3 University Plaza,
Hackensack, New Jersey... B 7,894 11,846 --- 595
400 Garden City Plaza,
Garden City, New York.... B 13,986 10,127 --- 389
425 Rabro Drive,
Hauppauge, New York...... B 665 3,489 --- 67
One Paragon Drive,
Montvale, New Jersey..... B 2,773 9,901 --- 463
90 Merrick Avenue, East
Meadow, New York......... B A 19,193 --- 2,152
150 Motor Parkway,
Hauppauge, New York...... B 1,114 20,430 --- 2,365
390 Motor Parkway,
Hauppauge, New York...... B 240 4,459 --- 237
Royal Executive Park,
Ryebrook, New York....... B 18,343 55,028 -- 1,191
120 White Plains Road,
Tarrytown, New York...... B 3,355 24,605 --- 89
University Square,
Princeton, New Jersey.... B 3,288 8,888 --- 70
100 Andrews Road,
Hicksville, New York..... B 2,337 1,711 151 5,697
2 Macy Road, Harrison,
New York................. B 642 2,131 --- 47
80 Grasslands, Elmsford,
New York................. B 1,208 6,728 --- 175
65 Marcus Drive, Melville,
New York................. B 295 1,966 57 885
200 Carter Drive, Edison,
New Jersey............... B 240 2,745 --- ---
118 Moonachie Avenue,
Carlstadt, New Jersey.... B 6,270 12,727 --- ---
24 Abeel Road, Monroe,
New Jersey............... B 138 1,195 --- ---
275 / 285 Pierce Street,
Franklin New Jersey...... B 277 1,414 --- 16
301 / 321 Herrod Blvd.,
S Brunswick, New Jersey.. B 3,833 19,342 --- ---
1 Nixon Lane, Edison,
New Jersey............... B 1,113 4,918 --- ---
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COLUMN A COLUMN E COLUMN F COLUMN G COLUMN H COLUMN I
-------- -------- -------- -------- -------- --------
GROSS AMOUNT AT WHICH
CARRIED AT CLOSE OF PERIOD
--------------------------
<PAGE>
LIFE ON WHICH
BUILDINGS AND ACCUMULATED DATE OF DATE DEPRECIATION
DESCRIPTION LAND IMPROVEMENTS TOTAL DEPRECIATION CONSTRUCTION ACQUIRED IS COMPUTED
----------- ---- ------------ ----- ------------ ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 Rooney Circle, West
Orange, New Jersey....... 1,303 5,033 6,336 312 1971 1997 10-30 Years
Executive Hill Office
Park, West Orange,
New Jersey............... 7,633 32,102 39,735 1,619 1978-1984 1997 10-30 Years
3 University Plaza,
Hackensack, New Jersey... 7,894 12,441 20,335 638 1985 1997 10-30 Years
400 Garden City Plaza,
Garden City, New York.... 13,986 10,516 24,502 512 1989 1997 10-30 Years
425 Rabro Drive,
Hauppauge, New York...... 665 3,556 4,221 176 1980 1997 10-30 Years
One Paragon Drive,
Montvale, New Jersey..... 2,773 10,364 13,137 456 1980 1997 10-30 Years
90 Merrick Avenue, East
Meadow, New York......... 0 21,345 21,345 892 1985 1997 10-30 Years
150 Motor Parkway,
Hauppauge, New York...... 1,114 22,795 23,909 1,028 1984 1997 10-30 Years
390 Motor Parkway,
Hauppauge, New York...... 240 4,696 4,936 208 1980 1997 10-30 Years
Royal Executive Park,
Ryebrook, New York....... 18,343 56,219 74,562 2,133 1983-1986 1997 10-30 Years
120 White Plains Road,
Tarrytown, New York...... 3,355 24,694 28,049 890 1984 1997 10-30 Years
University Square,
Princeton, New Jersey.... 3,288 8,958 12,246 322 1987 1997 10-30 Years
100 Andrews Road,
Hicksville, New York..... 2,488 7,408 9,896 463 1954 1996 10-30 Years
2 Macy Road, Harrison,
New York................. 642 2,178 2,820 83 1962 1997 10-30 Years
80 Grasslands, Elmsford,
New York................. 1,208 6,903 8,111 268 1989/1964 1997 10-30 Years
65 Marcus Drive, Melville,
New York................. 352 2,851 3,203 167 1968 1996 10-30 Years
200 Carter Drive, Edison,
New Jersey............... 240 2,745 2,985 91 1985 1998 10-30 Years
118 Moonachie Avenue,
Carlstadt, New Jersey.... 6,270 12,727 18,997 423 1989 1998 10-30 Years
24 Abeel Road, Monroe,
New Jersey............... 138 1,195 1,333 40 1979 1998 10-30 Years
275 / 285 Pierce Street,
Franklin New Jersey...... 277 1,430 1,707 48 1988 1998 10-30 Years
301 / 321 Herrod Blvd.,
S Brunswick, New Jersey.. 3,833 19,342 23,175 643 1991 1998 10-30 Years
1 Nixon Lane, Edison,
New Jersey............... 1,113 4,918 6,031 164 1988 1998 10-30 Years
Continued-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D
-------- -------- -------- --------
COST CAPITALIZED
SUBSEQUENT TO
INITIAL COST ACQUISITION
------------ -----------
BUILDINGS AND BUILDINGS AND
DESCRIPTION ENCUMBRANCE LAND IMPROVEMENTS LAND IMPROVEMENTS
----------- ----------- ---- ------------ ---- ------------
<S> <C> <C> <C> <C> <C>
18 Madison Road,
Fairfield, New Jersey.... B 76 871 --- --
200 / 250 Kennedy Drive,
Sayreville, New Jersey... B 1,018 6,851 --- ---
24 Madison Road,
Fairfield, New Jersey.... B 131 2,176 --- ---
243 St Nicholas Avenue,
So. Plainfield,
New Jersey............... B 172 551 --- ---
26 Madison Road,
Fairfield, New Jersey.... B A 1,492 --- ---
300 / 350 Kennedy Drive,
Sayreville, New Jersey... B 1,003 7,303 --- ---
309 Kennedy Drive,
Sayreville, New Jersey... 10,345 297 9,102 --- ---
34 Englehard Drive,
Monroe, New Jersey....... B 1,073 6,656 --- ---
409 Kennedy Drive,
Sayreville, New Jersey... 4,434 126 9,650 --- ---
535 Secaucus Road,
Secaucus, New Jersey..... B 798 2,713 --- ---
55 Carter Drive, Edison,
New Jersey............... B 84 3,905 --- 30
Mount Ebo Corporate Park,
Brewster, New Jersey..... B 1,031 7,204 -- 16
Teterboro-Industrial
Avenue, Teterboro,
New jersey............... B 2,671 18,875 --- ---
22 Madison Road,
Fairfield, New Jersey.... B 655 1,445 --- 1
135 Fieldcrest Ave.,
Edison, New Jersey....... B 370 3,774 --- ---
400 Cabot Drive, Hamilton,
New Jersey............... B 2,068 18,614 --- 71
51 JFK Parkway, Short
Hills, New York.......... B 8,732 58,437 --- 323
Triad V - 1979 Marcus
Ave., Lake Success,
New York................. B 3,528 31,786 --- 2,966
100 Forge Way, Rockaway,
New Jersey............... B 315 902 --- 53
200 Forge Way, Rockaway,
New Jersey............... B 1,128 3,228 --- 168
300 Forge Way, Rockaway,
New Jersey............... B 376 1,075 --- 63
400 Forge Way, Rockaway,
New Jersey............... B 1,142 3,267 --- 168
51 -55 Charles Lindergh
Blvd., Uniondale,
New York................. B A 27,975 --- 4,119
155 Passaic Avenue,
Fairfield, New Jersey.... B 3 3,538 -- 174
100 Summit Drive,
Valhalla, New York....... 23,600 3,007 41,351 --- 1,148
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COLUMN A COLUMN E COLUMN F COLUMN G COLUMN H COLUMN I
-------- -------- -------- -------- -------- --------
GROSS AMOUNT AT WHICH
CARRIED AT CLOSE OF PERIOD
DESCRIPTION LAND BUILDINGS AND TOTAL ACCUMULATED DATE OF DATE LIFE ON WHICH
----------- ---- IMPROVEMENTS ----- DEPRECIATION CONSTRUCTION ACQUIRED DEPRECIATION
------------ ------------ ------------ -------- IS COMPUTED
-----------
<S> <C> <C> <C> <C> <C> <C> <C>
18 Madison Road, 76 871 947 29 1979 1998 10-30 Years
Fairfield, New Jersey....
200 / 250 Kennedy Drive, 1,018 6,851 7,869 228 1988 1998 10-30 Years
Sayreville, New Jersey...
24 Madison Road, 131 2,176 2,307 72 1980 1998 10-30 Years
Fairfield, New Jersey....
243 St Nicholas Avenue, 172 551 723 18 1974 1998 10-30 Years
So. Plainfield,
New Jersey...............
26 Madison Road, 0 1,492 1,492 50 1980 1998 10-30 Years
Fairfield, New Jersey....
300 / 350 Kennedy Drive, 1,003 7,303 8,306 223 1988 1998 10-30 Years
Sayreville, New Jersey...
309 Kennedy Drive, 297 9,102 9,399 303 1996 1998 10-30 Years
Sayreville, New Jersey...
34 Englehard Drive, 1,073 6,656 7,729 221 1980 1998 10-30 Years
Monroe, New Jersey.......
409 Kennedy Drive, 126 9,650 9,776 321 1996 1998 10-30 Years
Sayreville, New Jersey...
535 Secaucus Road, 798 2,713 3,511 90 1979 1998 10-30 Years
Secaucus, New Jersey.....
55 Carter Drive, Edison, 84 3,935 4,019 131 1987 1998 10-30 Years
New Jersey...............
Mount Ebo Corporate Park, 1,031 7,220 8,251 120 1998 10-30 Years
Brewster, New Jersey.....
Teterboro-Industrial 2,671 18,875 21,546 224 1998 1998 10-30 Years
Avenue, Teterboro,
New jersey...............
22 Madison Road, 655 1,446 2,101 20 1980 1998 10-30 Years
Fairfield, New Jersey....
135 Fieldcrest Ave., 370 3,774 4,144 10 1980 1998 10-30 Years
Edison, New Jersey.......
400 Cabot Drive, Hamilton, 2,068 18,685 20,753 624 1989 1998 10-30 Years
New Jersey...............
51 JFK Parkway, Short 8,732 58,760 67,492 1,636 1988 1998 10-30 Years
Hills, New York..........
Triad V - 1979 Marcus 3,528 34,752 38,280 1,089 1987 1998 10-30 Years
Ave., Lake Success,
New York.................
100 Forge Way, Rockaway, 315 955 1,270 31 1986 1989 10-30 Years
New Jersey...............
200 Forge Way, Rockaway, 1,128 3,396 4,524 112 1989 1998 10-30 Years
New Jersey...............
300 Forge Way, Rockaway, 376 1,138 1,514 37 1989 1998 10-30 Years
New Jersey...............
400 Forge Way, Rockaway, 1,142 3,435 4,577 113 1989 1998 10-30 Years
New Jersey...............
51 -55 Charles Lindergh 0 32,094 32,094 1,469 1981 1998 10-30 Years
Blvd., Uniondale,
New York.................
155 Passaic Avenue, 3 3,712 3,715 83 1984 1998 10-30 Years
Fairfield, New Jersey....
100 Summit Drive, 3,007 42,499 45,506 986 1988 1998 10-30 Years
Valhalla, New York.......
Continued-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D
-------- -------- -------- --------
INITIAL COST COST CAPITALIZED
------------ SUBSEQUENT TO
ACQUISITION
-----------
DESCRIPTION ENCUMBRANCE LAND BUILDINGS AND LAND BUILDINGS AND
IMPROVEMENTS IMPROVEMENTS
------------ ----------- ---- ------------- ---- ------------
<S> <C> <C> <C> <C> <C>
115 / 117 Stevens Avenue, B 1,094 22,490 --- 407
Valhalla, New York.......
200 Summit Lake Drive, 20,764 4,343 37,305 --- 349
Valhalla, New York.......
140 Grand Street., B 1,931 18,743 --- 149
Valhalla, New York ......
500 Summit Lake Drive, B 7,052 37,309 --- 242
Valhalla, New York.......
5 Henderson Drive, West B 2,450 6,984 --- 30
Caldwell, New Jersey.....
Stamford Towers, Stamford, B 13,556 47,915 -- 930
Connecticut..............
99 Cherry Hill Road, B 2,359 7,508 -- 42
Parsippany, New Jersey...
119 Cherry Hill Road, B 2,512 7,622 --- 196
Parsipanny, New Jersey...
120 Wilbur Place, Bohemia, B 202 1,154 --- 44
New York ................
45 Melville Park Road, B 354 1,487 --- 1,581
Melville, New York ......
500 Saw Mill River Road, B 1,542 3,796 --- 169
Elmsford, New York.......
2004 Orville Drive, B 633 4,225 --- 1,208
No. Bohemia, New York....
Land held for development B 69,143 --- --- ---
Development in progress 6,850 --- 82,901 --- ---
Other property B --- --- --- 2,589
-------- -------- ---------- ---- --------
Total...................... $253,463 $281,272 $1,305,937 $411 $149,513
======== ========= ========== ==== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COLUMN A COLUMN E COLUMN F COLUMN G COLUMN H COLUMN I
-------- -------- -------- -------- -------- --------
GROSS AMOUNT AT WHICH
CARRIED AT CLOSE OF PERIOD
DESCRIPTION LAND BUILDINGS AND TOTAL ACCUMULATED DATE OF DATE LIFE ON WHICH
----------- ---- IMPROVEMENTS ----- DEPRECIATION CONSTRUCTION ACQUIRED DEPRECIATION
------------ ------------ ------------ -------- IS COMPUTED
-----------
<S> <C> <C> <C> <C> <C> <C>
115 / 117 Stevens Avenue, 1,094 22,897 23,991 514 1984 1998 10-30 Years
Valhalla, New York.......
200 Summit Lake Drive, 4,343 37,654 41,997 841 1990 1998 10-30 years
Valhalla, New York.......
140 Grand Street., 1,931 18,892 20,823 424 1991 1998 10-30 Years
Valhalla, New York ......
500 Summit Lake Drive, 7,052 37,551 44,603 632 1986 1998 10-30 Years
Valhalla, New York.......
5 Henderson Drive, 2,450 7,014 9,464 118 1967 1998 10-30 Years
West Caldwell, New Jersey
Stamford Towers, 13,556 48,845 62,401 855 1989 1998 10-30 Years
Stamford, Connecticut....
99 Cherry Hill Road, 2,359 7,550 9,909 106 1982 1998 10-30 Years
Parsippany, New Jersey...
119 Cherry Hill Road, 2,512 7,818 10,330 108 1982 1998 10-30 Years
Parsipanny, New Jersey...
120 Wilbur Place, 202 1,198 1,400 16 1972 1998 10-30 Years
Bohemia, New York .......
45 Melville Park Road, 354 3,068 3,422 57 1998 1998 10-30 Years
Melville, New York ......
500 Saw Mill River Road, 1,542 3,965 5,507 132 1968 1998 10-30 Years
Elmsford, New York.......
2004 Orville Drive, No. 633 5,433 6,066 128 1998 1998 10-30 Years
Bohemia, New York........
Land held for development 69,143 0 69,143 0 N/A Various N/A
Developments in progress --- 82,901 82,901 0
Other property --- 2,589 2,589 325
------- ---------- ---------- ---------
Total....................... $281,683 $1,455,450 $1,737,133 $156,231
======== ========== ========== ========
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
A These land parcels are leased (see Note 4). B There are no encumbrances on
these properties. C The Encumbrance of $2,616 is related to one property.
The aggregate cost for Federal Income Tax purposes was approximately $1,575
million at December 31, 1998.
<PAGE>
The changes in real estate for each of the periods in the three years
ended December 31, 1998 are as follows:
<TABLE>
<CAPTION>
JANUARY 1, 1998 JANUARY 1, 1997 JANUARY 1, 1996
TO TO TO
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Real estate balance at beginning of $1,011,228 $516,768 $288,056
period
Improvements 134,582 37,778 15,174
Disposal, including write-off of fully --- (154) (936)
depreciated building improvements
Acquisitions 591,323 456,836 214,474
----------- ---------- --------
Balance at end of period $1,737,133 $1,011,228 $516,768
=========== ========== ========
</TABLE>
The changes in accumulated depreciation, exclusive of amounts relating to
equipment, autos, furniture and fixtures, for each of the periods in the three
years ended December 31, 1998 are as follows:
<TABLE>
JANUARY 1, 1998 JANUARY 1, 1997 JANUARY 1, 1996
TO TO TO
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Balance at beginning of period $108,652 $86,344 $72,499
Depreciation for period 47,579 22,442 14,781
Disposal, including write-off of fully --- (134) (936)
depreciated building improvements
-------- --------- ---------
Balance at end of period $156,231 $108,652 $86,344
======== ========= =========
</TABLE>
Exhibit Index
Exhibit Filing
Number Reference Description
3.1 a Amended and Restated Articles of Incorporation
3.2 a By-Laws of Registrant
3.3 h Articles Supplementary of the Registrant filed with the
Maryland State Department of Assessments and Taxation
on April 9, 1998
4.1 b Specimen Share Certificate of Common Stock
4.2 h Specimen Share Certificate of Preferred Stock
10.1 a Amended and Restated Agreement of Limited Partnership
of Reckson Operating Partnership, L. P.
10.2 h Supplement to the Amended and Restated Agreement of
Limited Partnership of Reckson Operating Partnership,
L.P. Establishing Series A Preferred Units of Limited
Partnerships Interest.
10.3 h Supplement to the Amended and Restated Agreement
of Limited Partnership of Reckson Operating
Partnership, L. P. Establishing Series B Preferred Units
of Limited Partnership Interest.
10.4 h Supplement to the Amended and Restated Agreement
of Limited Partnership of Reckson Operating
Partnership, L. P. Establishing Series C Preferred
Units of Limited Partnership Interest.
10.5 h Supplement to the Amended and Restated Agreement
of Limited Partnership of Reckson Operating
Partnership, L. P. Establishing Series D Preferred
Units of Limited Partnership Interest.
10.6 f Third Amended and Restated Agreement of Limited
Partnership of Omni Partners, L. P.
10.7 Amendment and Restatement of Employment and
Non-Competition Agreement between Registrant and
Donald Rechler.
10.8 Amendment and Restatement of Employment and
Non-Competition Agreement between Registrant and
Scott Rechler.
10.9 Amendment and Restatement of Employment and
Non-Competition Agreement between Registrant and
Mitchell Rechler.
10.10 Amendment and Restatement of Employment and
Non-Competition Agreement between Registrant and
Gregg Rechler.
10.11 Amendment and Restatement of Employment and
Non-Competition Agreement between Registrant and
Roger Rechler.
10.12 Amendment and Restatement of Employment and
Non-Competition Agreement between Registrant and J.
Michael Maturo.
10.13 a Purchase Option Agreements relating to the Reckson
Option Properties
10.14 a Purchase Option Agreements relating to the Other
Option Properties
10.15 c Amended 1995 Stock Option Plan
10.16 c 1996 Employee Stock Option Plan
10.17 b Ground Leases for certain of the properties
10.18 Third Amended and Restated Agreement of Limited
Partnership of Reckson FS Limited Partnership
10.19 a Indemnity Agreement relating to 100 Oser Avenue
10.20 f Amended and Restated 1997 Stock Option Plan
10.21 f 1998 Stock Option Plan
10.22 f Amended and Restated Agreement of Limited
Partnership of Reckson Morris Operating Partnership,
L. P.
10.23 f Note Purchase Agreement for the Senior Unsecured Notes
10.24 Amended and Restated Severance Agreement between
Registrant and Donald Rechler
10.25 Amended and Restated Severance Agreement between
Registrant and Scott Rechler
10.26 Amended and Restated Severance Agreement between
Registrant and Mitchell Rechler
10.27 Amended and Restated Severance Agreement between
Registrant and Gregg Rechler
10.28 Amended and Restated Severance Agreement between
Registrant and Roger Rechler
10.29 Amended and Restated Severance Agreement between
Registrant and J. Michael Maturo
10.30 d $500 million Credit Agreement dated July 23, 1998
among Reckson Operating Partnership, L. P. and
Reckson Morris Operating Partnership, L. P. and the
Chase Manhattan Bank, UBS AG and PNC Bank and
other lenders party thereto
10.31 e $75 million Amended and Restated Credit Agreement
dated January 12, 1999 among Reckson Operating
Partnership, L. P. and Reckson Morris Operating
Partnership, L. P. and ING (U.S.) Capital LLC and the
Chase Manhattan Bank and other lenders party thereto
10.32 g Agreement and Plan of Merger by and among Tower
Realty Trust, Inc., Reckson Associates Realty Corp.,
Reckson Operating Partnership, L. P. and Metropolitan
Partners LLC, dated December 8, 1998
10.33 g Stock Purchase Agreement by and between Tower
Realty Trust Inc. and Metropolitan Partners LLC, dated
December 8, 1998
10.34 g Amended and Restated Operating Agreement of
Metropolitan Partners LLC, dated December 8, 1998
10.35 Intercompany Agreement by and between Reckson
Operating Partnership, L. P. and Reckson Service
Industries, Inc., dated May 13, 1998
10.36 Credit Agreement dated as of June 15, 1998 between
Reckson Service Industries, Inc., as borrower and
Reckson Operating Partnership, L. P., as Lender
relating to Reckson Strategic Venture Partners, LLC
10.37 Credit Agreement dated as of June 15, 1998 between
Reckson Service Industries, Inc., as borrower and
Reckson Operating Partnership, L. P., as Lender
relating to the operations of Reckson Service
Industries, Inc.
12.1 Statement of Ratios of Earnings to Fixed Charges
21.1 Statement of Subsidiaries
23.0 Consent of Independent Auditors
24.1 Power of Attorney (included in Part IV of the Form 10-K)
27.0 Financial Data Schedule
- ---
a Previously filed as an exhibit to Registration
Statement on Form S-11 (No.333-1280) and
incorporated herein by reference.
b Previously filed as an exhibit to Registration
Statement on Form S-11 (No.33-84324) and
incorporated herein by reference.
c Previously filed as an exhibit to the Company's Form
8-K report filed with the SEC on November 25, 1996
and incorporated herein by reference.
d Previously filed as an exhibit to the Company's Form
8-K report filed with the SEC on August 14, 1998 and
incorporated herein by reference.
e Previously filed as an exhibit to the Company's Form
8-K report filed with the SEC on February 5, 1999 and
incorporated herein by reference.
f Previously filed as an exhibit to the Company's Form
10-K filed with the SEC on March 26, 1998 and
incorporated herein by reference.
g Previously filed as an exhibit to the Company's Form
8-K report filed with the SEC on December 22, 1998
and incorporated herein by reference.
h Previously filed as an exhibit to the Company's Form
8-K report filed with the SEC on March 1, 1999 and
incorporated herein by reference.
<PAGE>
Exhibit 10.7
AMENDMENT AND RESTATEMENT OF
EMPLOYMENT AND NONCOMPETITION AGREEMENT
This AMENDMENT AND RESTATEMENT OF EMPLOYMENT AND NONCOMPETITION
AGREEMENT ("Agreement") is made as of the 1st day of June, 1998 by and among
Donald J. Rechler ("Executive") and Reckson Associates Realty Corp., a Maryland
corporation with a principal place of business at 225 Broadhollow Road,
Melville, New York 11747 (the "Employer") and amends, supersedes and completely
restates the Employment and Noncompetition Agreement made as of June 2, 1995 by
and among the Executive and the Employer.
1. Term. The term of this Agreement shall commence on the date first
above written and, unless earlier terminated as provided in Paragraph 7 below,
shall terminate on the fifth anniversary of such date (the "Original Term");
provided, however, that Sections 6 and 8 hereof shall survive the termination of
this Agreement as provided therein. The Original Term may be extended for such
period or periods, if any, as agreed to by Executive and the Employer (each a
"Renewal Term"). The period of Executive's employment hereunder consisting of
the Original Term and all Renewal Terms is herein referred to as the "Employment
Period".
2. Employment and Duties.
(a) During the Employment Period, Executive shall be employed in the
business of the Employer and its affiliates. Executive shall serve the Employer
as a senior corporate executive with the title Chief Executive Officer of the
Employer. Executive's duties and authority shall be as set forth in the By-laws
of the Employer and as otherwise established by the Board of Directors of the
Employer, shall be commensurate with his titles and positions with the Employer.
(b) Executive agrees to his employment as described in this
Paragraph 2 and agrees to devote substantially all of his business time and
efforts to the performance of his duties under this Agreement, except as
otherwise approved by the Board of Directors of the Employer; provided, however,
that nothing herein shall be interpreted to preclude Executive from (i)
participating as an officer or director of, or advisor to, any charitable or
other tax exempt organization or otherwise engaging in charitable, fraternal or
trade group activities, (ii) providing services to Reckson Service Industries,
Inc. ("RSI") and its affiliates, or (iii) investing his assets as a passive
investor in other entities or business ventures, provided that he performs no
management or similar role with respect to such entities or ventures and such
investment does not violate Section 8 hereof.
(c) In performing his duties hereunder, Executive shall be available
for reasonable travel as the needs of the Employer's business require. Executive
shall be based in the tri-state metropolitan area of New York, New Jersey and
Connecticut (the "Tri-State metropolitan area").
3. Compensation and Benefits. In consideration of Executive's services
hereunder, the Employer shall compensate Executive as provided in this Section
3.
(a) Base Salary. The Employer shall pay Executive an aggregate
annual salary at the rate of $500,000 per annum during the Employment Period
("Base Salary"), subject to withholding for applicable federal, state and local
taxes. Base Salary shall be payable in accordance with the Employer's normal
business practices, but in no event less frequently than monthly. Executive's
Base Salary shall be reviewed no less frequently than annually by the Employer
and may be increased, but not decreased, by the Employer during the Employment
Period.
(b) Incentive Compensation. In addition to the Base Salary payable
to Executive pursuant to Section 3(a), during the Employment Period Executive
shall be eligible to participate in any incentive compensation plans in effect
with respect to senior executive officers of the Employer, subject to
Executive's compliance with such criteria as the Employer's Board of Directors
may establish for Executive's participation in such plans from time to time. Any
awards to Executive under such plans will be established by the Employer's Board
of Directors, or a committee thereof, in its sole discretion.
(c) Stock Options. During the Employment Period, Executive shall be
eligible to participate in employee stock option plans established from time to
time for the benefit of senior executive officers and other employees of the
Employer in accordance with the terms and conditions of such plans. All
decisions regarding awards to Executive under the Employer's stock option plans
shall be made in the sole discretion of the Employer's Board of Directors, or a
committee thereof.
(d) Expenses. Executive shall be reimbursed for all reasonable
business related expenses incurred by Executive at the request of or on behalf
of the Employer, subject to such reasonable requirements with respect to
substantiation and documentation as may be specified by the Employer.
(e) Medical and Dental Insurance. During the Employment Period,
Executive and Executive's immediate family shall be entitled to participate in
such medical and dental benefit plans as the Employer shall maintain from time
to time for the benefit of senior executive officers of the Employer and their
families, on the terms and subject to the conditions set forth in such plans.
(f) Life Insurance and Disability Insurance. During the Employment
Period, the Employer shall provide Executive with life insurance and
comprehensive disability insurance.
(g) Vacations. Executive shall be entitled to reasonable paid
vacations in accordance with the then regular procedures of the Employer
governing senior executive officers, not to exceed four weeks per annum, in the
aggregate.
(h) Other Benefits. During the Employment Period, the Employer shall
provide to Executive such other benefits, including sick leave and the right to
participate in retirement or pension plans, as are made generally available to
senior executive officers and employees of the Employer from time to time.
4. Indemnification and Liability Insurance. The Employer agrees to
indemnify Executive with respect to any actions commenced against Executive in
his capacity as an officer or director, or former officer or director, of the
Employer or any affiliate thereof for which he may serve in such capacity. The
Employer also agrees to use its best efforts to secure and maintain officers and
directors liability insurance providing coverage for Executive.
5. Employer's Policies. Executive agrees to observe and comply with the
rules and regulations of the Employer as adopted by its Boards of Directors
regarding the performance of his duties and to carry out and perform orders,
directions and policies communicated to him from time to time by the Employer's
Boards of Directors.
6. Nondisclosure Covenant.
(a) General. All records, financial statements and similar documents
obtained, reviewed or compiled by Executive in the course of the performance by
him of services for the Employer, whether or not confidential information or
trade secrets, shall be the exclusive property of the Employer. Executive shall
have no rights in such documents upon any termination of this Agreement.
(b) Confidential Information. Executive will not disclose to any
person or entity (except as required by applicable law or in connection with the
performance of his duties and responsibilities hereunder), or use for his own
benefit or gain, any confidential information of the Employer obtained by him
incident to his employment with the Employer. The term "confidential
information" includes, without limitation, financial information, business
plans, prospects and opportunities which have been discussed or considered by
the management of the Employer but does not include any information which has
become part of the public domain by means other than Executive's non-observance
of his obligations hereunder. This paragraph shall survive the termination of
this Agreement.
7. Termination and Severance Payments.
(a) At-Will Employment. Executive's employment hereunder is "at
will" and may be terminated by the Employer at any time with or without Good
Reason (as defined in Section 7(e) below), by a majority vote of all of the
members of the Board of Directors of the Employer upon written notice to
Executive, subject only to the severance provisions specifically set forth in
this Section 7.
(b) Termination by Executive. The Employment Period and Executive's
employment hereunder may be terminated effective immediately by Executive by
written notice to the Board of Directors of the Employer within 30 days of the
occurrence of (i) a failure of the Board of Directors of the Employer to elect
Executive to offices with the same or substantially the same duties and
responsibilities as set forth in Section 2, (ii) a material failure by the
Employer to comply with the provisions of Section 3 or a material breach by the
Employer of any other provision of this Agreement, or (iii) a Force Out (as such
term is defined in Section 7(e) below).
(c) Certain Benefits upon Termination by Executive. Except as
specifically provided in this Section 7 or otherwise required by law, all
compensation and benefits to Executive under this Agreement shall terminate on
the date of termination of the Employment Period. Notwithstanding the foregoing,
if the Employment Period is terminated pursuant to Section 7(b) or if
Executive's employment is terminated by the Employer other than for Good Reason,
Executive shall be entitled to the following benefits:
(i) The Employer shall continue to pay Executive's Base Salary
for the remaining term of this Agreement after the date of
Executive's termination, at the rate in effect on the date of his
termination and on the same periodic payment dates as payment would
have been made to Executive had the Employment Period not been
terminated;
(ii) For the remaining term of this Agreement, Executive shall
continue to receive all benefits described in Section 3 existing on
the date of termination. For purposes of the application of such
benefits, Executive shall be treated as if he had remained in the
employ of the Employer with a Base Salary at the rate in effect on
the date of termination;
(iii) For purposes of any stock option plan of the Employer,
Executive shall be treated as if he had remained in the employ of
the Employer for the remaining term of this Agreement after the date
of Executive's termination so that (x) any stock options or other
awards (including restricted stock grants) of the Executive under
such plan shall continue to vest and become exercisable, and (y)
Executive shall be entitled to exercise any exercisable options or
other rights;
(iv) If, in spite of the provisions above, any benefits or
service credits under any benefit plan or program of the Employer
may not be paid or provided under such plan or program to Executive,
or to Executive's dependents, beneficiaries or estate, because
Executive is no longer considered to be an employee of the Employer,
the Employer shall pay or provide for payment of such benefits and
service credits to Executive, or to Executive's dependents,
beneficiaries or estate, for the remaining term of this Agreement;
and
(v) Nothing herein shall be deemed to obligate Executive to
seek other employment in the event of any such termination and any
amounts earned or benefits received from such other employment will
not serve to reduce in any way the amounts and benefits payable in
accordance herewith.
(d) Termination by the Employer for Good Reason. If (i) Executive is
terminated for Good Reason or (ii) Executive shall voluntarily terminate his
employment hereunder (other than pursuant to Section 7(b) hereof), then the
Employment Period shall terminate as of the effective date set forth in the
written notice of such termination (the "Termination Date") and Executive shall
be entitled to receive only his Base Salary at the rate then in effect until the
Termination Date and any outstanding stock options held by Executive shall
expire in accordance with the terms of the stock option plan or option agreement
under which the stock options were granted.
(e) Definitions. The following terms shall be defined as set forth
below.
(i) A "Change-in-Control" shall be deemed to have occurred
after the effective date of this Agreement if:
(A) any Person, together with all "affiliates" and
"associates" (as such terms are defined in Rule 12b-2 under
the Securities Exchange Act of 1934 (the "Exchange Act")) of
such Person, shall become the "beneficial owner" (as such term
is defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Employer representing 30% or
more of either (A) the combined voting power of the Employer's
then outstanding securities having the right to vote in an
election of the Employer's Board of Directors ("Voting
Securities") or (B) the then outstanding shares of all classes
of stock of the Employer (in either such case other than as a
result of the acquisition of securities directly from the
Employer); or
(B) individuals who, as of the effective date of this
Agreement, constitute the Employer's Board of Directors (the
"Incumbent Directors") cease for any reason, including,
without limitation, as a result of a tender offer, proxy
contest, merger or similar transaction, to constitute at least
a majority of the Employer's Board of Directors, provided that
any person becoming a director of the Employer subsequent to
the effective date of this Agreement whose election or
nomination for election was approved by a vote of at least a
majority of the Incumbent Directors shall, for purposes of
this Agreement, be considered an Incumbent Director; or
(C) the stockholders of the Employer shall approve (1)
any consolidation or merger of the Employer or any subsidiary
where the stockholders of the Employer, immediately prior to
the consolidation or merger, would not, immediately after the
consolidation or merger, beneficially own (as such term is
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, shares representing in the aggregate at least 60%
of the voting shares of the corporation issuing cash or
securities in the consolidation or merger (or of its ultimate
parent corporation, if any), (2) any sale, lease, exchange or
other transfer (in one transaction or a series of transactions
contemplated or arranged by any party as a single plan) of all
or substantially all of the assets of the Employer or (3) any
plan or proposal for the liquidation or dissolution of the
Employer;
Notwithstanding the foregoing, a "Change-in-Control" shall not be
deemed to have occurred for purposes of the foregoing clause (A) solely as the
result of an acquisition of securities by the Employer which, by reducing the
number of shares of stock or other Voting Securities outstanding, increases (x)
the proportionate number of shares of stock of the Employer beneficially owned
by any Person to 30% or more of the shares of stock then outstanding or (y) the
proportionate voting power represented by the Voting Securities beneficially
owned by any Person to 30% or more of the combined voting power of all then
outstanding Voting Securities; provided, however, that if any Person referred to
in clause (x) or (y) of this sentence shall thereafter become the beneficial
owner of any additional stock of the Employer or other Voting Securities (other
than pursuant to a share split, stock dividend, or similar transaction), then a
"Change-in-Control" shall be deemed to have occurred for purposes of the
foregoing clause (A).
(ii) A "Force Out" shall be deemed to have occurred in the
event of a Change-in-Control followed by:
(A) a change in duties, responsibilities, status or
positions with the Employer, which, in Executive's reasonable
judgment, does not represent a promotion from or maintaining
of Executive's duties, responsibilities, status or positions
as in effect immediately prior to the Change-in-Control, or
any removal of Executive from or any failure to reappoint or
reelect Executive to such positions, except in connection with
the termination of Executive's employment for Good Reason,
disability, retirement or death;
(B) a reduction by the Employer in Executive's Base
Salary as in effect immediately prior to the
Change-in-Control;
(C) the failure by the Employer to continue in effect
any of the benefit plans, programs or arrangements in which
Executive is participating at the time of the
Change-in-Control of the Employer (unless Executive is
permitted to participate in any substitute benefit plan,
program or arrangement with substantially the same terms and
to the same extent and with the same rights as Executive had
with respect to the benefit plan, program or arrangement that
is discontinued) other than as a result of the normal
expiration of any such benefit plan, program or arrangement in
accordance with its terms as in effect at the time of the
Change-in-Control, or the taking of any action, or the failure
to act, by the Employer which would adversely affect
Executive's continued participation in any of such benefit
plans, programs or arrangements on at least as favorable a
basis to Executive as is the case on the date of the
Change-in-Control or which would materially reduce Executive's
benefits in the future under any of such benefit plans,
programs or arrangements or deprive Executive of any material
benefits enjoyed by Executive at the time of the
Change-in-Control;
(D) the failure by the Employer to provide and credit
Executive with the number of paid vacation days to which
Executive is then entitled in accordance with the Employer's
normal vacation policies as in effect immediately prior to the
Change-in-Control;
(E) the Employer's requiring Executive to be based in an
office located beyond a reasonable commuting distance from
Executive's residence immediately prior to the
Change-in-Control, except for required travel relating to the
Employer's business to an extent substantially consistent with
the business travel obligations which Executive undertook on
behalf of the Employer prior to the Change-in-Control;
(F) the failure by the Employer to obtain from any
successor to the Employer an agreement to be bound by this
Agreement pursuant to Section 11 hereof; or
(G) any refusal by the Employer to continue to allow
Executive to attend to matters or engage in activities not
directly related to the business of the Employer which, prior
to the Change-in-Control, Executive was permitted by the
Employer's Boards of Directors to attend to or engage in.
(iii) "Good Reason" shall mean a finding by the Employer's
Board of Directors that Executive has (A) acted with gross
negligence or willful misconduct in connection with the performance
of his material duties hereunder; (B) defaulted in the performance
of his material duties hereunder and has not corrected such action
within 15 days of receipt of written notice thereof; (C) willfully
acted against the best interests of the Employer, which act has had
a material and adverse impact on the financial affairs of the
Employer; or (D) been convicted of a felony or committed a material
act of common law fraud against the Employer or its employees and
such act or conviction has had, or the Employer's Board of Directors
reasonably determines will have, a material adverse effect on the
interests of the Employer; provided, however, that a finding of Good
Reason shall not become effective unless and until the Board of
Directors provides the Executive notice that it is considering
making such finding and a reasonable opportunity to be heard by the
Board of Directors.
(iv) "Person" shall have the meaning used in Sections 13(d)
and 14(d) of the Exchange Act; provided however, that the term
"Person" shall not include (A) any current partner of Reckson
Operating Partnership, L.P., any stockholder or employee of the
Employer on the date hereof or any estate or member of the immediate
family of such a partner, stockholder or employee, or (B) the
Employer, any of its subsidiaries, or any trustee, fiduciary or
other person or entity holding securities under any employee benefit
plan of the Employer or any of its subsidiaries.
(f) Termination by Reason of Death. The Employment Period shall
terminate upon Executive's death and in such event, the Employer shall pay
Executive's Base Salary for a period of six (6) months from the date of his
death, or such longer period as the Employer's Boards of Directors may
determine, to Executive's estate or to a beneficiary designated by Executive in
writing prior to his death. Any unexercised or unvested stock options shall
remain exercisable or vest upon Executive's death only to the extent provided in
the applicable option plan and option agreements.
(g) Termination by Reason of Disability. In the event that Executive
shall become unable to efficiently perform his duties hereunder because of any
physical or mental disability or illness, Executive shall be entitled to be paid
his Base Salary until the later of such time when (i) the period of disability
or illness (whether or not the same disability or illness) shall exceed 180
consecutive days during the Employment Period and (ii) Executive becomes
eligible to receive benefits under a comprehensive disability insurance policy
obtained by the Employer (the "Disability Period"). Following the expiration of
the Disability Period, the Employer may terminate this Agreement upon written
notice of such termination. Any unexercised or unvested stock options shall
remain exercisable or vest upon such termination only to the extent provided in
the applicable option plan and option agreements .
(h) Arbitration in the Event of a Dispute Regarding the Nature of
Termination. In the event that the Employer terminates Executive's employment
for Good Reason and Executive contends that Good Reason did not exist, the
Employer's only obligation shall be to submit such claim to arbitration before
the American Arbitration Association ("AAA"). In such a proceeding, the only
issue before the arbitrator will be whether Executive was in fact terminated for
Good Reason. If the arbitrator determines that Executive was not terminated for
Good Reason, the only remedy that the arbitrator may award is entitlement to the
severance payments and benefits specified in Paragraph 7(c), the costs of
arbitration, and Executive's attorneys' fees. If the arbitrator finds that
Executive was terminated for Good Reason, the arbitrator will be without
authority to award Executive anything, the parties will each be responsible for
their own attorneys' fees, and the costs of arbitration will be paid 50% by
Executive and 50% by the Employer.
8. Noncompetition Covenant.
(a) Because Executive's services to the Employer are essential and
because Executive has access to the Employer's confidential information,
Executive covenants and agrees that (i) during the Employment Period and (ii) in
the event that this Agreement is terminated by the Employer for Good Reason or
by Executive other than pursuant to Section 7(b) hereof, during the
Noncompetition Period Executive will not, without the prior written consent of
the Board of Directors of the Employer which shall include the unanimous consent
of the Directors who are not officers of the Employer, directly or indirectly:
(A) engage, participate or assist, as an owner, partner,
employee, consultant, director, officer, trustee or agent, in
any business that engages or attempts to engage in, directly
or indirectly, the acquisition, development, construction,
operation, management or leasing of any commercial industrial
or office real estate property anywhere in the Tri-State
metropolitan area, or
(B) intentionally interfere with, disrupt or attempt to
disrupt the relationship, contractual or otherwise, between
the Employer or its affiliates and any tenant, supplier,
contractor, lender, employee or governmental agency or
authority.
(b) For purposes of this Section 8, the Noncompetition Period shall
mean the period commencing on the date of termination of Executive's employment
under this Agreement and ending on the latest of (i) the third anniversary of
the effective date of this Agreement, or (ii) the first anniversary of the date
of termination of Executive's employment under this Agreement.
(c) Notwithstanding anything contained herein to the contrary,
Executive is not prohibited by this Section 8 from (i) maintaining his
investment in any Option Property (as such term is defined in the Employer's
final prospectus relating to the initial public offering of the Employer's
Common Stock), (ii) from making investments in any entity that engages, directly
or indirectly, in the acquisition, development, construction, operation,
management or leasing of commercial industrial or office real estate properties,
regardless of where they are located, if the shares or other ownership interests
of such entity are publicly traded and Executive's aggregate investment in such
entity constitutes less than five percent (5%) of the equity ownership of such
entity, or (iii) providing services to RSI and its affiliates.
(d) The provisions of this Section 8 shall survive the termination
of this Agreement.
9. Conflicting Agreements. Executive hereby represents and warrants
that the execution of this Agreement and the performance of his obligations
hereunder will not breach or be in conflict with any other agreement to which he
is a party or is bound, and that he is not now subject to any covenants against
competition or similar covenants which would affect the performance of his
obligations hereunder.
10. Notices. Any notice required or permitted hereunder shall be in
writing and shall be deemed sufficient when given by hand, by nationally
recognized overnight courier or by express, registered or certified mail,
postage prepaid, return receipt requested, and addressed to the Employer or
Executive, as applicable, at the address indicated above (or to such other
address as may be provided by notice).
11. Miscellaneous. This Agreement (i) constitutes the entire agreement
between the parties concerning the subject matter hereof and supersedes any and
all prior agreements or understandings, (ii) may not be assigned by Executive
without the prior written consent of the Employer, and (iii) may be assigned by
the Employer and shall be binding upon, and inure to the benefit of, the
Employer's successors and assigns. Headings herein are for convenience of
reference only and shall not define, limit or interpret the contents hereof.
12. Amendment. This Agreement may be amended, modified or supplemented
by the mutual consent of the parties in writing, but no oral amendment,
modification or supplement shall be effective.
13. Specific Enforcement. The provisions of Sections 6 and 8 of this
Agreement are to be specifically enforced if not performed according to their
terms. Without limiting the generality of the foregoing, the parties acknowledge
that the Employer would be irreparably damaged and there would be no adequate
remedy at law for Executive's breach of Sections 6 and 8 of this Agreement and
further acknowledge that the Employer may seek entry of a temporary restraining
order or preliminary injunction, in addition to any other remedies available at
law or in equity, to enforce the provisions thereof.
14. Severability. If a court of competent jurisdiction adjudicates any
one or more of the provisions hereof as invalid, illegal or unenforceable in any
respect, such provision(s) shall be ineffective only to the extent and duration
of such invalidity, illegality or unenforceability and such invalidity,
illegality or unenforceability shall not affect the remaining substance of such
provision or any other provision of this Agreement and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had been
limited or modified (consistent with its general intent) to the extent necessary
so that it shall be valid, legal and enforceable. If it shall not be possible to
so limit or modify such invalid, illegal or unenforceable provision, this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein, and the parties will use their best
efforts to substitute a valid, legal and enforceable provision which, insofar as
practicable, implements the purpose and intent of the provision originally
contained herein.
15. Governing Law. This Agreement shall be construed and governed by
the laws of the State of New York.
IN WITNESS WHEREOF, this Agreement is entered into as of the date and
year first above written.
RECKSON ASSOCIATES REALTY CORP.
By: /s/ Scott Rechler
----------------------------
Name: Scott Rechler
Title: President
/s/ Donald Rechler
-------------------------------
Donald J. Rechler
<PAGE>
Exhibit 10.8
AMENDMENT AND RESTATEMENT OF
EMPLOYMENT AND NONCOMPETITION AGREEMENT
This AMENDMENT AND RESTATEMENT OF EMPLOYMENT AND NONCOMPETITION
AGREEMENT ("Agreement") is made as of the 1st day of June, 1998 by and among
Scott H. Rechler ("Executive") and Reckson Associates Realty Corp., a Maryland
corporation with a principal place of business at 225 Broadhollow Road,
Melville, New York 11747 (the "Employer") and amends, supersedes and completely
restates the Employment and Noncompetition Agreement made as of June 2, 1995 by
and among the Executive and the Employer.
1. Term. The term of this Agreement shall commence on the date first
above written and, unless earlier terminated as provided in Paragraph 7 below,
shall terminate on the fifth anniversary of such date (the "Original Term");
provided, however, that Sections 6 and 8 hereof shall survive the termination of
this Agreement as provided therein. The Original Term may be extended for such
period or periods, if any, as agreed to by Executive and the Employer (each a
"Renewal Term"). The period of Executive's employment hereunder consisting of
the Original Term and all Renewal Terms is herein referred to as the "Employment
Period".
2. Employment and Duties.
(a) During the Employment Period, Executive shall be employed in the
business of the Employer and its affiliates. Executive shall serve the Employer
as a senior corporate executive with the titles President and Chief Operating
Officer of the Employer. Executive's duties and authority shall be as set forth
in the By-laws of the Employer and as otherwise established by the Board of
Directors of the Employer, shall be commensurate with his titles and positions
with the Employer.
(b) Executive agrees to his employment as described in this
Paragraph 2 and agrees to devote substantially all of his business time and
efforts to the performance of his duties under this Agreement, except as
otherwise approved by the Board of Directors of the Employer; provided, however,
that nothing herein shall be interpreted to preclude Executive from (i)
participating as an officer or director of, or advisor to, any charitable or
other tax exempt organization or otherwise engaging in charitable, fraternal or
trade group activities, (ii) providing services to Reckson Service Industries,
Inc. ("RSI") and its affiliates, or (iii) investing his assets as a passive
investor in other entities or business ventures, provided that he performs no
management or similar role with respect to such entities or ventures and such
investment does not violate Section 8 hereof.
(c) In performing his duties hereunder, Executive shall be available
for reasonable travel as the needs of the Employer's business require. Executive
shall be based in the tri-state metropolitan area of New York, New Jersey and
Connecticut (the "Tri-State metropolitan area").
3. Compensation and Benefits. In consideration of Executive's services
hereunder, the Employer shall compensate Executive as provided in this Section
3.
(a) Base Salary. The Employer shall pay Executive an aggregate
annual salary at the rate of $400,000 per annum during the Employment Period
("Base Salary"), subject to withholding for applicable federal, state and local
taxes. Base Salary shall be payable in accordance with the Employer's normal
business practices, but in no event less frequently than monthly. Executive's
Base Salary shall be reviewed no less frequently than annually by the Employer
and may be increased, but not decreased, by the Employer during the Employment
Period.
(b) Incentive Compensation. In addition to the Base Salary payable
to Executive pursuant to Section 3(a), during the Employment Period Executive
shall be eligible to participate in any incentive compensation plans in effect
with respect to senior executive officers of the Employer, subject to
Executive's compliance with such criteria as the Employer's Board of Directors
may establish for Executive's participation in such plans from time to time. Any
awards to Executive under such plans will be established by the Employer's Board
of Directors, or a committee thereof, in its sole discretion.
(c) Stock Options. During the Employment Period, Executive shall be
eligible to participate in employee stock option plans established from time to
time for the benefit of senior executive officers and other employees of the
Employer in accordance with the terms and conditions of such plans. All
decisions regarding awards to Executive under the Employer's stock option plans
shall be made in the sole discretion of the Employer's Board of Directors, or a
committee thereof.
(d) Expenses. Executive shall be reimbursed for all reasonable
business related expenses incurred by Executive at the request of or on behalf
of the Employer, subject to such reasonable requirements with respect to
substantiation and documentation as may be specified by the Employer.
(e) Medical and Dental Insurance. During the Employment Period,
Executive and Executive's immediate family shall be entitled to participate in
such medical and dental benefit plans as the Employer shall maintain from time
to time for the benefit of senior executive officers of the Employer and their
families, on the terms and subject to the conditions set forth in such plans.
(f) Life Insurance and Disability Insurance. During the Employment
Period, the Employer shall provide Executive with life insurance and
comprehensive disability insurance.
(g) Vacations. Executive shall be entitled to reasonable paid
vacations in accordance with the then regular procedures of the Employer
governing senior executive officers, not to exceed four weeks per annum, in the
aggregate.
(h) Other Benefits. During the Employment Period, the Employer shall
provide to Executive such other benefits, including sick leave and the right to
participate in retirement or pension plans, as are made generally available to
senior executive officers and employees of the Employer from time to time.
4. Indemnification and Liability Insurance. The Employer agrees to
indemnify Executive with respect to any actions commenced against Executive in
his capacity as an officer or director, or former officer or director, of the
Employer or any affiliate thereof for which he may serve in such capacity. The
Employer also agrees to use its best efforts to secure and maintain officers and
directors liability insurance providing coverage for Executive.
5. Employer's Policies. Executive agrees to observe and comply with the
rules and regulations of the Employer as adopted by its Boards of Directors
regarding the performance of his duties and to carry out and perform orders,
directions and policies communicated to him from time to time by the Employer's
Boards of Directors.
6. Nondisclosure Covenant.
(a) General. All records, financial statements and similar documents
obtained, reviewed or compiled by Executive in the course of the performance by
him of services for the Employer, whether or not confidential information or
trade secrets, shall be the exclusive property of the Employer. Executive shall
have no rights in such documents upon any termination of this Agreement.
(b) Confidential Information. Executive will not disclose to any
person or entity (except as required by applicable law or in connection with the
performance of his duties and responsibilities hereunder), or use for his own
benefit or gain, any confidential information of the Employer obtained by him
incident to his employment with the Employer. The term "confidential
information" includes, without limitation, financial information, business
plans, prospects and opportunities which have been discussed or considered by
the management of the Employer but does not include any information which has
become part of the public domain by means other than Executive's non-observance
of his obligations hereunder. This paragraph shall survive the termination of
this Agreement.
7. Termination and Severance Payments.
(a) At-Will Employment. Executive's employment hereunder is "at
will" and may be terminated by the Employer at any time with or without Good
Reason (as defined in Section 7(e) below), by a majority vote of all of the
members of the Board of Directors of the Employer upon written notice to
Executive, subject only to the severance provisions specifically set forth in
this Section 7.
(b) Termination by Executive. The Employment Period and Executive's
employment hereunder may be terminated effective immediately by Executive by
written notice to the Board of Directors of the Employer within 30 days of the
occurrence of (i) a failure of the Board of Directors of the Employer to elect
Executive to offices with the same or substantially the same duties and
responsibilities as set forth in Section 2, (ii) a material failure by the
Employer to comply with the provisions of Section 3 or a material breach by the
Employer of any other provision of this Agreement, or (iii) a Force Out (as such
term is defined in Section 7(e) below).
(c) Certain Benefits upon Termination by Executive. Except as
specifically provided in this Section 7 or otherwise required by law, all
compensation and benefits to Executive under this Agreement shall terminate on
the date of termination of the Employment Period. Notwithstanding the foregoing,
if the Employment Period is terminated pursuant to Section 7(b) or if
Executive's employment is terminated by the Employer other than for Good Reason,
Executive shall be entitled to the following benefits:
(i) The Employer shall continue to pay Executive's Base Salary
for the remaining term of this Agreement after the date of Executive's
termination, at the rate in effect on the date of his termination and
on the same periodic payment dates as payment would have been made to
Executive had the Employment Period not been terminated;
(ii) For the remaining term of this Agreement, Executive shall
continue to receive all benefits described in Section 3 existing on the
date of termination. For purposes of the application of such benefits,
Executive shall be treated as if he had remained in the employ of the
Employer with a Base Salary at the rate in effect on the date of
termination;
(iii) For purposes of any stock option plan of the Employer,
Executive shall be treated as if he had remained in the employ of the
Employer for the remaining term of this Agreement after the date of
Executive's termination so that (x) any stock options or other awards
(including restricted stock grants) of the Executive under such plan
shall continue to vest and become exercisable, and (y) Executive shall
be entitled to exercise any exercisable options or other rights;
(iv) If, in spite of the provisions above, any benefits or
service credits under any benefit plan or program of the Employer may
not be paid or provided under such plan or program to Executive, or to
Executive's dependents, beneficiaries or estate, because Executive is
no longer considered to be an employee of the Employer, the Employer
shall pay or provide for payment of such benefits and service credits
to Executive, or to Executive's dependents, beneficiaries or estate,
for the remaining term of this Agreement; and
(v) Nothing herein shall be deemed to obligate Executive to
seek other employment in the event of any such termination and any
amounts earned or benefits received from such other employment will not
serve to reduce in any way the amounts and benefits payable in
accordance herewith.
(d) Termination by the Employer for Good Reason. If (i) Executive is
terminated for Good Reason or (ii) Executive shall voluntarily terminate his
employment hereunder (other than pursuant to Section 7(b) hereof), then the
Employment Period shall terminate as of the effective date set forth in the
written notice of such termination (the "Termination Date") and Executive shall
be entitled to receive only his Base Salary at the rate then in effect until the
Termination Date and any outstanding stock options held by Executive shall
expire in accordance with the terms of the stock option plan or option agreement
under which the stock options were granted.
(e) Definitions. The following terms shall be defined as set forth
below.
(i) A "Change-in-Control" shall be deemed to have occurred after the
effective date of this Agreement if:
(A) any Person, together with all "affiliates" and
"associates" (as such terms are defined in Rule 12b-2 under the
Securities Exchange Act of 1934 (the "Exchange Act")) of such Person,
shall become the "beneficial owner" (as such term is defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of
the Employer representing 30% or more of either (A) the combined voting
power of the Employer's then outstanding securities having the right to
vote in an election of the Employer's Board of Directors ("Voting
Securities") or (B) the then outstanding shares of all classes of stock
of the Employer (in either such case other than as a result of the
acquisition of securities directly from the Employer); or
(B) individuals who, as of the effective date of this
Agreement, constitute the Employer's Board of Directors (the "Incumbent
Directors") cease for any reason, including, without limitation, as a
result of a tender offer, proxy contest, merger or similar transaction,
to constitute at least a majority of the Employer's Board of Directors,
provided that any person becoming a director of the Employer subsequent
to the effective date of this Agreement whose election or nomination
for election was approved by a vote of at least a majority of the
Incumbent Directors shall, for purposes of this Agreement, be
considered an Incumbent Director; or
(C) the stockholders of the Employer shall approve (1) any
consolidation or merger of the Employer or any subsidiary where the
stockholders of the Employer, immediately prior to the consolidation or
merger, would not, immediately after the consolidation or merger,
beneficially own (as such term is defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, shares representing in the
aggregate at least 60% of the voting shares of the corporation issuing
cash or securities in the consolidation or merger (or of its ultimate
parent corporation, if any), (2) any sale, lease, exchange or other
transfer (in one transaction or a series of transactions contemplated
or arranged by any party as a single plan) of all or substantially all
of the assets of the Employer or (3) any plan or proposal for the
liquidation or dissolution of the Employer;
Notwithstanding the foregoing, a "Change-in-Control" shall not be
deemed to have occurred for purposes of the foregoing clause (A) solely as the
result of an acquisition of securities by the Employer which, by reducing the
number of shares of stock or other Voting Securities outstanding, increases (x)
the proportionate number of shares of stock of the Employer beneficially owned
by any Person to 30% or more of the shares of stock then outstanding or (y) the
proportionate voting power represented by the Voting Securities beneficially
owned by any Person to 30% or more of the combined voting power of all then
outstanding Voting Securities; provided, however, that if any Person referred to
in clause (x) or (y) of this sentence shall thereafter become the beneficial
owner of any additional stock of the Employer or other Voting Securities (other
than pursuant to a share split, stock dividend, or similar transaction), then a
"Change-in-Control" shall be deemed to have occurred for purposes of the
foregoing clause (A).
(ii) A "Force Out" shall be deemed to have occurred in the event of
a Change-in-Control followed by:
(A) a change in duties, responsibilities, status or positions
with the Employer, which, in Executive's reasonable judgment, does not
represent a promotion from or maintaining of Executive's duties,
responsibilities, status or positions as in effect immediately prior to
the Change-in-Control, or any removal of Executive from or any failure
to reappoint or reelect Executive to such positions, except in
connection with the termination of Executive's employment for Good
Reason, disability, retirement or death;
(B) a reduction by the Employer in Executive's Base Salary as
in effect immediately prior to the Change-in-Control;
(C) the failure by the Employer to continue in effect any of
the benefit plans, programs or arrangements in which Executive is
participating at the time of the Change-in-Control of the Employer
(unless Executive is permitted to participate in any substitute benefit
plan, program or arrangement with substantially the same terms and to
the same extent and with the same rights as Executive had with respect
to the benefit plan, program or arrangement that is discontinued) other
than as a result of the normal expiration of any such benefit plan,
program or arrangement in accordance with its terms as in effect at the
time of the Change-in-Control, or the taking of any action, or the
failure to act, by the Employer which would adversely affect
Executive's continued participation in any of such benefit plans,
programs or arrangements on at least as favorable a basis to Executive
as is the case on the date of the Change-in-Control or which would
materially reduce Executive's benefits in the future under any of such
benefit plans, programs or arrangements or deprive Executive of any
material benefits enjoyed by Executive at the time of the
Change-in-Control;
(D) the failure by the Employer to provide and credit
Executive with the number of paid vacation days to which Executive is
then entitled in accordance with the Employer's normal vacation
policies as in effect immediately prior to the Change-in-Control;
(E) the Employer's requiring Executive to be based in an
office located beyond a reasonable commuting distance from Executive's
residence immediately prior to the Change-in-Control, except for
required travel relating to the Employer's business to an extent
substantially consistent with the business travel obligations which
Executive undertook on behalf of the Employer prior to the
Change-in-Control;
(F) the failure by the Employer to obtain from any successor
to the Employer an agreement to be bound by this Agreement pursuant to
Section 11 hereof; or
(G) any refusal by the Employer to continue to allow Executive
to attend to matters or engage in activities not directly related to
the business of the Employer which, prior to the Change-in-Control,
Executive was permitted by the Employer's Boards of Directors to attend
to or engage in.
(iii) "Good Reason" shall mean a finding by the Employer's Board of
Directors that Executive has (A) acted with gross negligence or willful
misconduct in connection with the performance of his material duties hereunder;
(B) defaulted in the performance of his material duties hereunder and has not
corrected such action within 15 days of receipt of written notice thereof; (C)
willfully acted against the best interests of the Employer, which act has had a
material and adverse impact on the financial affairs of the Employer; or (D)
been convicted of a felony or committed a material act of common law fraud
against the Employer or its employees and such act or conviction has had, or the
Employer's Board of Directors reasonably determines will have, a material
adverse effect on the interests of the Employer; provided, however, that a
finding of Good Reason shall not become effective unless and until the Board of
Directors provides the Executive notice that it is considering making such
finding and a reasonable opportunity to be heard by the Board of Directors.
(iv) "Person" shall have the meaning used in Sections 13(d) and
14(d) of the Exchange Act; provided however, that the term "Person" shall not
include (A) any current partner of Reckson Operating Partnership, L.P., any
stockholder or employee of the Employer on the date hereof or any estate or
member of the immediate family of such a partner, stockholder or employee, or
(B) the Employer, any of its subsidiaries, or any trustee, fiduciary or other
person or entity holding securities under any employee benefit plan of the
Employer or any of its subsidiaries.
(f) Termination by Reason of Death. The Employment Period shall
terminate upon Executive's death and in such event, the Employer shall pay
Executive's Base Salary for a period of six (6) months from the date of his
death, or such longer period as the Employer's Boards of Directors may
determine, to Executive's estate or to a beneficiary designated by Executive in
writing prior to his death. Any unexercised or unvested stock options shall
remain exercisable or vest upon Executive's death only to the extent provided in
the applicable option plan and option agreements.
(g) Termination by Reason of Disability. In the event that Executive
shall become unable to efficiently perform his duties hereunder because of any
physical or mental disability or illness, Executive shall be entitled to be paid
his Base Salary until the later of such time when (i) the period of disability
or illness (whether or not the same disability or illness) shall exceed 180
consecutive days during the Employment Period and (ii) Executive becomes
eligible to receive benefits under a comprehensive disability insurance policy
obtained by the Employer (the "Disability Period"). Following the expiration of
the Disability Period, the Employer may terminate this Agreement upon written
notice of such termination. Any unexercised or unvested stock options shall
remain exercisable or vest upon such termination only to the extent provided in
the applicable option plan and option agreements .
(h) Arbitration in the Event of a Dispute Regarding the Nature of
Termination. In the event that the Employer terminates Executive's employment
for Good Reason and Executive contends that Good Reason did not exist, the
Employer's only obligation shall be to submit such claim to arbitration before
the American Arbitration Association ("AAA"). In such a proceeding, the only
issue before the arbitrator will be whether Executive was in fact terminated for
Good Reason. If the arbitrator determines that Executive was not terminated for
Good Reason, the only remedy that the arbitrator may award is entitlement to the
severance payments and benefits specified in Paragraph 7(c), the costs of
arbitration, and Executive's attorneys' fees. If the arbitrator finds that
Executive was terminated for Good Reason, the arbitrator will be without
authority to award Executive anything, the parties will each be responsible for
their own attorneys' fees, and the costs of arbitration will be paid 50% by
Executive and 50% by the Employer.
8. Noncompetition Covenant.
(a) Because Executive's services to the Employer are essential and
because Executive has access to the Employer's confidential information,
Executive covenants and agrees that (i) during the Employment Period and (ii) in
the event that this Agreement is terminated by the Employer for Good Reason or
by Executive other than pursuant to Section 7(b) hereof, during the
Noncompetition Period Executive will not, without the prior written consent of
the Board of Directors of the Employer which shall include the unanimous consent
of the Directors who are not officers of the Employer, directly or indirectly:
(A) engage, participate or assist, as an owner, partner,
employee, consultant, director, officer, trustee or agent, in any
business that engages or attempts to engage in, directly or indirectly,
the acquisition, development, construction, operation, management or
leasing of any commercial industrial or office real estate property
anywhere in the Tri-State metropolitan area, or
(B) intentionally interfere with, disrupt or attempt to
disrupt the relationship, contractual or otherwise, between the
Employer or its affiliates and any tenant, supplier, contractor,
lender, employee or governmental agency or authority.
(b) For purposes of this Section 8, the Noncompetition Period shall
mean the period commencing on the date of termination of Executive's employment
under this Agreement and ending on the latest of (i) the third anniversary of
the effective date of this Agreement, or (ii) the first anniversary of the date
of termination of Executive's employment under this Agreement.
(c) Notwithstanding anything contained herein to the contrary,
Executive is not prohibited by this Section 8 from (i) maintaining his
investment in any Option Property (as such term is defined in the Employer's
final prospectus relating to the initial public offering of the Employer's
Common Stock), (ii) from making investments in any entity that engages, directly
or indirectly, in the acquisition, development, construction, operation,
management or leasing of commercial industrial or office real estate properties,
regardless of where they are located, if the shares or other ownership interests
of such entity are publicly traded and Executive's aggregate investment in such
entity constitutes less than five percent (5%) of the equity ownership of such
entity, or (iii) providing services to RSI and its affiliates.
(d) The provisions of this Section 8 shall survive the termination of
this Agreement.
9. Conflicting Agreements. Executive hereby represents and warrants
that the execution of this Agreement and the performance of his obligations
hereunder will not breach or be in conflict with any other agreement to which he
is a party or is bound, and that he is not now subject to any covenants against
competition or similar covenants which would affect the performance of his
obligations hereunder.
10. Notices. Any notice required or permitted hereunder shall be in
writing and shall be deemed sufficient when given by hand, by nationally
recognized overnight courier or by express, registered or certified mail,
postage prepaid, return receipt requested, and addressed to the Employer or
Executive, as applicable, at the address indicated above (or to such other
address as may be provided by notice).
11. Miscellaneous. This Agreement (i) constitutes the entire agreement
between the parties concerning the subject matter hereof and supersedes any and
all prior agreements or understandings, (ii) may not be assigned by Executive
without the prior written consent of the Employer, and (iii) may be assigned by
the Employer and shall be binding upon, and inure to the benefit of, the
Employer's successors and assigns. Headings herein are for convenience of
reference only and shall not define, limit or interpret the contents hereof.
12. Amendment. This Agreement may be amended, modified or supplemented
by the mutual consent of the parties in writing, but no oral amendment,
modification or supplement shall be effective.
13. Specific Enforcement. The provisions of Sections 6 and 8 of this
Agreement are to be specifically enforced if not performed according to their
terms. Without limiting the generality of the foregoing, the parties acknowledge
that the Employer would be irreparably damaged and there would be no adequate
remedy at law for Executive's breach of Sections 6 and 8 of this Agreement and
further acknowledge that the Employer may seek entry of a temporary restraining
order or preliminary injunction, in addition to any other remedies available at
law or in equity, to enforce the provisions thereof.
14. Severability. If a court of competent jurisdiction adjudicates any
one or more of the provisions hereof as invalid, illegal or unenforceable in any
respect, such provision(s) shall be ineffective only to the extent and duration
of such invalidity, illegality or unenforceability and such invalidity,
illegality or unenforceability shall not affect the remaining substance of such
provision or any other provision of this Agreement and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had been
limited or modified (consistent with its general intent) to the extent necessary
so that it shall be valid, legal and enforceable. If it shall not be possible to
so limit or modify such invalid, illegal or unenforceable provision, this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein, and the parties will use their best
efforts to substitute a valid, legal and enforceable provision which, insofar as
practicable, implements the purpose and intent of the provision originally
contained herein.
15. Governing Law. This Agreement shall be construed and governed by
the laws of the State of New York.
IN WITNESS WHEREOF, this Agreement is entered into as of the date and
year first above written.
RECKSON ASSOCIATES REALTY CORP.
By: /s/ Michael Maturo
----------------------------------
Name: Michael Maturo
Title: Executive Vice President
/s/ Scott H. Rechler
-------------------------------------
Scott H. Rechler
<PAGE>
Exhibit 10.9
AMENDMENT AND RESTATEMENT OF
EMPLOYMENT AND NONCOMPETITION AGREEMENT
This AMENDMENT AND RESTATEMENT OF EMPLOYMENT AND NONCOMPETITION
AGREEMENT ("Agreement") is made as of the 1st day of June, 1998 by and
among Mitchell D. Rechler ("Executive") and Reckson Associates Realty Corp., a
Maryland corporation with a principal place of business at 225 Broadhollow Road,
Melville, New York 11747 (the "Employer") and amends, supersedes and completely
restates the Employment and Noncompetition Agreement made as of June 2, 1995 by
and among the Executive and the Employer.
1. Term. The term of this Agreement shall commence on the date first
above written and, unless earlier terminated as provided in Paragraph 7 below,
shall terminate on the fifth anniversary of such date (the "Original Term");
provided, however, that Sections 6 and 8 hereof shall survive the termination of
this Agreement as provided therein. The Original Term may be extended for such
period or periods, if any, as agreed to by Executive and the Employer (each a
"Renewal Term"). The period of Executive's employment hereunder consisting of
the Original Term and all Renewal Terms is herein referred to as the "Employment
Period".
2. Employment and Duties.
(a) During the Employment Period, Executive shall be employed in the
business of the Employer and its affiliates. Executive shall serve the Employer
as a senior corporate executive with the title Executive Vice President of the
Employer. Executive's duties and authority shall be as set forth in the By-laws
of the Employer and as otherwise established by the Board of Directors of the
Employer, shall be commensurate with his titles and positions with the Employer.
(b) Executive agrees to his employment as described in this
Paragraph 2 and agrees to devote substantially all of his business time and
efforts to the performance of his duties under this Agreement, except as
otherwise approved by the Board of Directors of the Employer; provided, however,
that nothing herein shall be interpreted to preclude Executive from (i)
participating as an officer or director of, or advisor to, any charitable or
other tax exempt organization or otherwise engaging in charitable, fraternal or
trade group activities, (ii) providing services to Reckson Service Industries,
Inc. ("RSI") and its affiliates, or (iii) investing his assets as a passive
investor in other entities or business ventures, provided that he performs no
management or similar role with respect to such entities or ventures and such
investment does not violate Section 8 hereof.
(c) In performing his duties hereunder, Executive shall be available
for reasonable travel as the needs of the Employer's business require. Executive
shall be based in the tri-state metropolitan area of New York, New Jersey and
Connecticut (the "Tri-State metropolitan area").
3. Compensation and Benefits. In consideration of Executive's services
hereunder, the Employer shall compensate Executive as provided in this Section
3.
(a) Base Salary. The Employer shall pay Executive an aggregate
annual salary at the rate of $300,000 per annum during the Employment Period
("Base Salary"), subject to withholding for applicable federal, state and local
taxes. Base Salary shall be payable in accordance with the Employer's normal
business practices, but in no event less frequently than monthly. Executive's
Base Salary shall be reviewed no less frequently than annually by the Employer
and may be increased, but not decreased, by the Employer during the Employment
Period.
(b) Incentive Compensation. In addition to the Base Salary payable
to Executive pursuant to Section 3(a), during the Employment Period Executive
shall be eligible to participate in any incentive compensation plans in effect
with respect to senior executive officers of the Employer, subject to
Executive's compliance with such criteria as the Employer's Board of Directors
may establish for Executive's participation in such plans from time to time. Any
awards to Executive under such plans will be established by the Employer's Board
of Directors, or a committee thereof, in its sole discretion.
(c) Stock Options. During the Employment Period, Executive shall be
eligible to participate in employee stock option plans established from time to
time for the benefit of senior executive officers and other employees of the
Employer in accordance with the terms and conditions of such plans. All
decisions regarding awards to Executive under the Employer's stock option plans
shall be made in the sole discretion of the Employer's Board of Directors, or a
committee thereof.
(d) Expenses. Executive shall be reimbursed for all reasonable
business related expenses incurred by Executive at the request of or on behalf
of the Employer, subject to such reasonable requirements with respect to
substantiation and documentation as may be specified by the Employer.
(e) Medical and Dental Insurance. During the Employment Period,
Executive and Executive's immediate family shall be entitled to participate in
such medical and dental benefit plans as the Employer shall maintain from time
to time for the benefit of senior executive officers of the Employer and their
families, on the terms and subject to the conditions set forth in such plans.
(f) Life Insurance and Disability Insurance. During the Employment
Period, the Employer shall provide Executive with life insurance and
comprehensive disability insurance.
(g) Vacations. Executive shall be entitled to reasonable paid
vacations in accordance with the then regular procedures of the Employer
governing senior executive officers, not to exceed four weeks per annum, in the
aggregate.
(h) Other Benefits. During the Employment Period, the Employer shall
provide to Executive such other benefits, including sick leave and the right to
participate in retirement or pension plans, as are made generally available to
senior executive officers and employees of the Employer from time to time.
4. Indemnification and Liability Insurance. The Employer agrees to
indemnify Executive with respect to any actions commenced against Executive in
his capacity as an officer or director, or former officer or director, of the
Employer or any affiliate thereof for which he may serve in such capacity. The
Employer also agrees to use its best efforts to secure and maintain officers and
directors liability insurance providing coverage for Executive.
5. Employer's Policies. Executive agrees to observe and comply with the
rules and regulations of the Employer as adopted by its Boards of Directors
regarding the performance of his duties and to carry out and perform orders,
directions and policies communicated to him from time to time by the Employer's
Boards of Directors.
6. Nondisclosure Covenant.
(a) General. All records, financial statements and similar documents
obtained, reviewed or compiled by Executive in the course of the performance by
him of services for the Employer, whether or not confidential information or
trade secrets, shall be the exclusive property of the Employer. Executive shall
have no rights in such documents upon any termination of this Agreement.
(b) Confidential Information. Executive will not disclose to any
person or entity (except as required by applicable law or in connection with the
performance of his duties and responsibilities hereunder), or use for his own
benefit or gain, any confidential information of the Employer obtained by him
incident to his employment with the Employer. The term "confidential
information" includes, without limitation, financial information, business
plans, prospects and opportunities which have been discussed or considered by
the management of the Employer but does not include any information which has
become part of the public domain by means other than Executive's non-observance
of his obligations hereunder. This paragraph shall survive the termination of
this Agreement.
7. Termination and Severance Payments.
(a) At-Will Employment. Executive's employment hereunder is "at
will" and may be terminated by the Employer at any time with or without Good
Reason (as defined in Section 7(e) below), by a majority vote of all of the
members of the Board of Directors of the Employer upon written notice to
Executive, subject only to the severance provisions specifically set forth in
this Section 7.
(b) Termination by Executive. The Employment Period and Executive's
employment hereunder may be terminated effective immediately by Executive by
written notice to the Board of Directors of the Employer within 30 days of the
occurrence of (i) a failure of the Board of Directors of the Employer to elect
Executive to offices with the same or substantially the same duties and
responsibilities as set forth in Section 2, (ii) a material failure by the
Employer to comply with the provisions of Section 3 or a material breach by the
Employer of any other provision of this Agreement, or (iii) a Force Out (as such
term is defined in Section 7(e) below).
(c) Certain Benefits upon Termination by Executive. Except as
specifically provided in this Section 7 or otherwise required by law, all
compensation and benefits to Executive under this Agreement shall terminate on
the date of termination of the Employment Period. Notwithstanding the foregoing,
if the Employment Period is terminated pursuant to Section 7(b) or if
Executive's employment is terminated by the Employer other than for Good Reason,
Executive shall be entitled to the following benefits:
(i) The Employer shall continue to pay Executive's Base Salary
for the remaining term of this Agreement after the date of Executive's
termination, at the rate in effect on the date of his termination and
on the same periodic payment dates as payment would have been made to
Executive had the Employment Period not been terminated;
(ii) For the remaining term of this Agreement, Executive shall
continue to receive all benefits described in Section 3 existing on the
date of termination. For purposes of the application of such benefits,
Executive shall be treated as if he had remained in the employ of the
Employer with a Base Salary at the rate in effect on the date of
termination;
(iii) For purposes of any stock option plan of the Employer,
Executive shall be treated as if he had remained in the employ of the
Employer for the remaining term of this Agreement after the date of
Executive's termination so that (x) any stock options or other awards
(including restricted stock grants) of the Executive under such plan
shall continue to vest and become exercisable, and (y) Executive shall
be entitled to exercise any exercisable options or other rights;
(iv) If, in spite of the provisions above, any benefits or
service credits under any benefit plan or program of the Employer may
not be paid or provided under such plan or program to Executive, or to
Executive's dependents, beneficiaries or estate, because Executive is
no longer considered to be an employee of the Employer, the Employer
shall pay or provide for payment of such benefits and service credits
to Executive, or to Executive's dependents, beneficiaries or estate,
for the remaining term of this Agreement; and
(v) Nothing herein shall be deemed to obligate Executive to
seek other employment in the event of any such termination and any
amounts earned or benefits received from such other employment will not
serve to reduce in any way the amounts and benefits payable in
accordance herewith.
(d) Termination by the Employer for Good Reason. If (i) Executive is
terminated for Good Reason or (ii) Executive shall voluntarily terminate his
employment hereunder (other than pursuant to Section 7(b) hereof), then the
Employment Period shall terminate as of the effective date set forth in the
written notice of such termination (the "Termination Date") and Executive shall
be entitled to receive only his Base Salary at the rate then in effect until the
Termination Date and any outstanding stock options held by Executive shall
expire in accordance with the terms of the stock option plan or option agreement
under which the stock options were granted.
(e) Definitions. The following terms shall be defined as set forth
below.
(i) A "Change-in-Control" shall be deemed to have occurred
after the effective date of this Agreement if:
(A) any Person, together with all "affiliates" and
"associates" (as such terms are defined in Rule 12b-2 under
the Securities Exchange Act of 1934 (the "Exchange Act")) of
such Person, shall become the "beneficial owner" (as such term
is defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Employer representing 30% or
more of either (A) the combined voting power of the Employer's
then outstanding securities having the right to vote in an
election of the Employer's Board of Directors ("Voting
Securities") or (B) the then outstanding shares of all classes
of stock of the Employer (in either such case other than as a
result of the acquisition of securities directly from the
Employer); or
(B) individuals who, as of the effective date of this
Agreement, constitute the Employer's Board of Directors (the
"Incumbent Directors") cease for any reason, including,
without limitation, as a result of a tender offer, proxy
contest, merger or similar transaction, to constitute at least
a majority of the Employer's Board of Directors, provided that
any person becoming a director of the Employer subsequent to
the effective date of this Agreement whose election or
nomination for election was approved by a vote of at least a
majority of the Incumbent Directors shall, for purposes of
this Agreement, be considered an Incumbent Director; or
(C) the stockholders of the Employer shall approve
(1) any consolidation or merger of the Employer or any
subsidiary where the stockholders of the Employer, immediately
prior to the consolidation or merger, would not, immediately
after the consolidation or merger, beneficially own (as such
term is defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, shares representing in the aggregate
at least 60% of the voting shares of the corporation issuing
cash or securities in the consolidation or merger (or of its
ultimate parent corporation, if any), (2) any sale, lease,
exchange or other transfer (in one transaction or a series of
transactions contemplated or arranged by any party as a single
plan) of all or substantially all of the assets of the
Employer or (3) any plan or proposal for the liquidation or
dissolution of the Employer;
Notwithstanding the foregoing, a "Change-in-Control" shall not be
deemed to have occurred for purposes of the foregoing clause (A) solely as the
result of an acquisition of securities by the Employer which, by reducing the
number of shares of stock or other Voting Securities outstanding, increases (x)
the proportionate number of shares of stock of the Employer beneficially owned
by any Person to 30% or more of the shares of stock then outstanding or (y) the
proportionate voting power represented by the Voting Securities beneficially
owned by any Person to 30% or more of the combined voting power of all then
outstanding Voting Securities; provided, however, that if any Person referred to
in clause (x) or (y) of this sentence shall thereafter become the beneficial
owner of any additional stock of the Employer or other Voting Securities (other
than pursuant to a share split, stock dividend, or similar transaction), then a
"Change-in-Control" shall be deemed to have occurred for purposes of the
foregoing clause (A).
(ii) A "Force Out" shall be deemed to have occurred in the
event of a Change-in-Control followed by:
(A) a change in duties, responsibilities, status or
positions with the Employer, which, in Executive's reasonable
judgment, does not represent a promotion from or maintaining
of Executive's duties, responsibilities, status or positions
as in effect immediately prior to the Change-in-Control, or
any removal of Executive from or any failure to reappoint or
reelect Executive to such positions, except in connection with
the termination of Executive's employment for Good Reason,
disability, retirement or death;
(B) a reduction by the Employer in Executive's Base
Salary as in effect immediately prior to the
Change-in-Control;
(C) the failure by the Employer to continue in effect
any of the benefit plans, programs or arrangements in which
Executive is participating at the time of the
Change-in-Control of the Employer (unless Executive is
permitted to participate in any substitute benefit plan,
program or arrangement with substantially the same terms and
to the same extent and with the same rights as Executive had
with respect to the benefit plan, program or arrangement that
is discontinued) other than as a result of the normal
expiration of any such benefit plan, program or arrangement in
accordance with its terms as in effect at the time of the
Change-in-Control, or the taking of any action, or the failure
to act, by the Employer which would adversely affect
Executive's continued participation in any of such benefit
plans, programs or arrangements on at least as favorable a
basis to Executive as is the case on the date of the
Change-in-Control or which would materially reduce Executive's
benefits in the future under any of such benefit plans,
programs or arrangements or deprive Executive of any material
benefits enjoyed by Executive at the time of the
Change-in-Control;
(D) the failure by the Employer to provide and credit
Executive with the number of paid vacation days to which
Executive is then entitled in accordance with the Employer's
normal vacation policies as in effect immediately prior to the
Change-in-Control;
(E) the Employer's requiring Executive to be based in
an office located beyond a reasonable commuting distance from
Executive's residence immediately prior to the
Change-in-Control, except for required travel relating to the
Employer's business to an extent substantially consistent with
the business travel obligations which Executive undertook on
behalf of the Employer prior to the Change-in-Control;
(F) the failure by the Employer to obtain from any
successor to the Employer an agreement to be bound by this
Agreement pursuant to Section 11 hereof; or
(G) any refusal by the Employer to continue to allow
Executive to attend to matters or engage in activities not
directly related to the business of the Employer which, prior
to the Change-in-Control, Executive was permitted by the
Employer's Boards of Directors to attend to or engage in.
(iii) "Good Reason" shall mean a finding by the
Employer's Board of Directors that Executive has (A) acted with
gross negligence or willful misconduct in connection with the
performance of his material duties hereunder; (B) defaulted in the
performance of his material duties hereunder and has not corrected
such action within 15 days of receipt of written notice thereof; (C)
willfully acted against the best interests of the Employer, which
act has had a material and adverse impact on the financial affairs
of the Employer; or (D) been convicted of a felony or committed a
material act of common law fraud against the Employer or its
employees and such act or conviction has had, or the Employer's
Board of Directors reasonably determines will have, a material
adverse effect on the interests of the Employer; provided, however,
that a finding of Good Reason shall not become effective unless and
until the Board of Directors provides the Executive notice that it
is considering making such finding and a reasonable opportunity to
be heard by the Board of Directors.
(iv) "Person" shall have the meaning used in Sections
13(d) and 14(d) of the Exchange Act; provided however, that the term
"Person" shall not include (A) any current partner of Reckson
Operating Partnership, L.P., any stockholder or employee of the
Employer on the date hereof or any estate or member of the immediate
family of such a partner, stockholder or employee, or (B) the
Employer, any of its subsidiaries, or any trustee, fiduciary or
other person or entity holding securities under any employee benefit
plan of the Employer or any of its subsidiaries.
(f) Termination by Reason of Death. The Employment Period shall
terminate upon Executive's death and in such event, the Employer shall pay
Executive's Base Salary for a period of six (6) months from the date of his
death, or such longer period as the Employer's Boards of Directors may
determine, to Executive's estate or to a beneficiary designated by Executive in
writing prior to his death. Any unexercised or unvested stock options shall
remain exercisable or vest upon Executive's death only to the extent provided in
the applicable option plan and option agreements.
(g) Termination by Reason of Disability. In the event that Executive
shall become unable to efficiently perform his duties hereunder because of any
physical or mental disability or illness, Executive shall be entitled to be paid
his Base Salary until the later of such time when (i) the period of disability
or illness (whether or not the same disability or illness) shall exceed 180
consecutive days during the Employment Period and (ii) Executive becomes
eligible to receive benefits under a comprehensive disability insurance policy
obtained by the Employer (the "Disability Period"). Following the expiration of
the Disability Period, the Employer may terminate this Agreement upon written
notice of such termination. Any unexercised or unvested stock options shall
remain exercisable or vest upon such termination only to the extent provided in
the applicable option plan and option agreements .
(h) Arbitration in the Event of a Dispute Regarding the Nature of
Termination. In the event that the Employer terminates Executive's employment
for Good Reason and Executive contends that Good Reason did not exist, the
Employer's only obligation shall be to submit such claim to arbitration before
the American Arbitration Association ("AAA"). In such a proceeding, the only
issue before the arbitrator will be whether Executive was in fact terminated for
Good Reason. If the arbitrator determines that Executive was not terminated for
Good Reason, the only remedy that the arbitrator may award is entitlement to the
severance payments and benefits specified in Paragraph 7(c), the costs of
arbitration, and Executive's attorneys' fees. If the arbitrator finds that
Executive was terminated for Good Reason, the arbitrator will be without
authority to award Executive anything, the parties will each be responsible for
their own attorneys' fees, and the costs of arbitration will be paid 50% by
Executive and 50% by the Employer.
8. Noncompetition Covenant.
(a) Because Executive's services to the Employer are essential and
because Executive has access to the Employer's confidential information,
Executive covenants and agrees that (i) during the Employment Period and (ii) in
the event that this Agreement is terminated by the Employer for Good Reason or
by Executive other than pursuant to Section 7(b) hereof, during the
Noncompetition Period Executive will not, without the prior written consent of
the Board of Directors of the Employer which shall include the unanimous consent
of the Directors who are not officers of the Employer, directly or indirectly:
(A) engage, participate or assist, as an owner, partner,
employee, consultant, director, officer, trustee or agent, in any
business that engages or attempts to engage in, directly or indirectly,
the acquisition, development, construction, operation, management or
leasing of any commercial industrial or office real estate property
anywhere in the Tri-State metropolitan area, or
(B) intentionally interfere with, disrupt or attempt to
disrupt the relationship, contractual or otherwise, between the
Employer or its affiliates and any tenant, supplier, contractor,
lender, employee or governmental agency or authority.
(b) For purposes of this Section 8, the Noncompetition Period shall
mean the period commencing on the date of termination of Executive's employment
under this Agreement and ending on the latest of (i) the third anniversary of
the effective date of this Agreement, or (ii) the first anniversary of the date
of termination of Executive's employment under this Agreement.
(c) Notwithstanding anything contained herein to the contrary,
Executive is not prohibited by this Section 8 from (i) maintaining his
investment in any Option Property (as such term is defined in the Employer's
final prospectus relating to the initial public offering of the Employer's
Common Stock), (ii) from making investments in any entity that engages, directly
or indirectly, in the acquisition, development, construction, operation,
management or leasing of commercial industrial or office real estate properties,
regardless of where they are located, if the shares or other ownership interests
of such entity are publicly traded and Executive's aggregate investment in such
entity constitutes less than five percent (5%) of the equity ownership of such
entity, or (iii) providing services to RSI and its affiliates.
(d) The provisions of this Section 8 shall survive the termination
of this Agreement.
9. Conflicting Agreements. Executive hereby represents and warrants
that the execution of this Agreement and the performance of his obligations
hereunder will not breach or be in conflict with any other agreement to which he
is a party or is bound, and that he is not now subject to any covenants against
competition or similar covenants which would affect the performance of his
obligations hereunder.
10. Notices. Any notice required or permitted hereunder shall be in
writing and shall be deemed sufficient when given by hand, by nationally
recognized overnight courier or by express, registered or certified mail,
postage prepaid, return receipt requested, and addressed to the Employer or
Executive, as applicable, at the address indicated above (or to such other
address as may be provided by notice).
11. Miscellaneous. This Agreement (i) constitutes the entire agreement
between the parties concerning the subject matter hereof and supersedes any and
all prior agreements or understandings, (ii) may not be assigned by Executive
without the prior written consent of the Employer, and (iii) may be assigned by
the Employer and shall be binding upon, and inure to the benefit of, the
Employer's successors and assigns. Headings herein are for convenience of
reference only and shall not define, limit or interpret the contents hereof.
12. Amendment. This Agreement may be amended, modified or supplemented
by the mutual consent of the parties in writing, but no oral amendment,
modification or supplement shall be effective.
13. Specific Enforcement. The provisions of Sections 6 and 8 of this
Agreement are to be specifically enforced if not performed according to their
terms. Without limiting the generality of the foregoing, the parties acknowledge
that the Employer would be irreparably damaged and there would be no adequate
remedy at law for Executive's breach of Sections 6 and 8 of this Agreement and
further acknowledge that the Employer may seek entry of a temporary restraining
order or preliminary injunction, in addition to any other remedies available at
law or in equity, to enforce the provisions thereof.
14. Severability. If a court of competent jurisdiction adjudicates any
one or more of the provisions hereof as invalid, illegal or unenforceable in any
respect, such provision(s) shall be ineffective only to the extent and duration
of such invalidity, illegality or unenforceability and such invalidity,
illegality or unenforceability shall not affect the remaining substance of such
provision or any other provision of this Agreement and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had been
limited or modified (consistent with its general intent) to the extent necessary
so that it shall be valid, legal and enforceable. If it shall not be possible to
so limit or modify such invalid, illegal or unenforceable provision, this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein, and the parties will use their best
efforts to substitute a valid, legal and enforceable provision which, insofar as
practicable, implements the purpose and intent of the provision originally
contained herein.
15. Governing Law. This Agreement shall be construed and governed by
the laws of the State of New York.
IN WITNESS WHEREOF, this Agreement is entered into as of the date and
year first above written.
RECKSON ASSOCIATES REALTY CORP.
By: /s/ Scott Rechler
----------------------------
Name: Scott Rechler
Title: President
/s/ Mitchell D. Rechler
-------------------------------
Mitchell D. Rechler
<PAGE>
Exhibit 10.10
AMENDMENT AND RESTATEMENT OF
EMPLOYMENT AND NONCOMPETITION AGREEMENT
This AMENDMENT AND RESTATEMENT OF EMPLOYMENT AND NONCOMPETITION
AGREEMENT ("Agreement") is made as of the 1st day of June, 1998 by and among
Gregg Rechler ("Executive") and Reckson Associates Realty Corp., a Maryland
corporation with a principal place of business at 225 Broadhollow Road,
Melville, New York 11747 (the "Employer") and amends, supersedes and completely
restates the Employment and Noncompetition Agreement made as of June 2, 1995 by
and among the Executive and the Employer.
1. Term. The term of this Agreement shall commence on the date first
above written and, unless earlier terminated as provided in Paragraph 7 below,
shall terminate on the fifth anniversary of such date (the "Original Term");
provided, however, that Sections 6 and 8 hereof shall survive the termination of
this Agreement as provided therein. The Original Term may be extended for such
period or periods, if any, as agreed to by Executive and the Employer (each a
"Renewal Term"). The period of Executive's employment hereunder consisting of
the Original Term and all Renewal Terms is herein referred to as the "Employment
Period".
2. Employment and Duties.
(a) During the Employment Period, Executive shall be employed in the
business of the Employer and its affiliates. Executive shall serve the Employer
as a senior corporate executive with the titles Executive Vice President and
Secretary of the Employer. Executive's duties and authority shall be as set
forth in the By-laws of the Employer and as otherwise established by the Board
of Directors of the Employer, shall be commensurate with his titles and
positions with the Employer.
(b) Executive agrees to his employment as described in this
Paragraph 2 and agrees to devote substantially all of his business time and
efforts to the performance of his duties under this Agreement, except as
otherwise approved by the Board of Directors of the Employer; provided, however,
that nothing herein shall be interpreted to preclude Executive from (i)
participating as an officer or director of, or advisor to, any charitable or
other tax exempt organization or otherwise engaging in charitable, fraternal or
trade group activities, (ii) providing services to Reckson Service Industries,
Inc. ("RSI") and its affiliates, or (iii) investing his assets as a passive
investor in other entities or business ventures, provided that he performs no
management or similar role with respect to such entities or ventures and such
investment does not violate Section 8 hereof.
(c) In performing his duties hereunder, Executive shall be available
for reasonable travel as the needs of the Employer's business require. Executive
shall be based in the tri-state metropolitan area of New York, New Jersey and
Connecticut (the "Tri-State metropolitan area").
3. Compensation and Benefits. In consideration of Executive's services
hereunder, the Employer shall compensate Executive as provided in this Section
3.
(a) Base Salary. The Employer shall pay Executive an aggregate
annual salary at the rate of $300,000 per annum during the Employment Period
("Base Salary"), subject to withholding for applicable federal, state and local
taxes. Base Salary shall be payable in accordance with the Employer's normal
business practices, but in no event less frequently than monthly. Executive's
Base Salary shall be reviewed no less frequently than annually by the Employer
and may be increased, but not decreased, by the Employer during the Employment
Period.
(b) Incentive Compensation. In addition to the Base Salary payable
to Executive pursuant to Section 3(a), during the Employment Period Executive
shall be eligible to participate in any incentive compensation plans in effect
with respect to senior executive officers of the Employer, subject to
Executive's compliance with such criteria as the Employer's Board of Directors
may establish for Executive's participation in such plans from time to time. Any
awards to Executive under such plans will be established by the Employer's Board
of Directors, or a committee thereof, in its sole discretion.
(c) Stock Options. During the Employment Period, Executive shall be
eligible to participate in employee stock option plans established from time to
time for the benefit of senior executive officers and other employees of the
Employer in accordance with the terms and conditions of such plans. All
decisions regarding awards to Executive under the Employer's stock option plans
shall be made in the sole discretion of the Employer's Board of Directors, or a
committee thereof.
(d) Expenses. Executive shall be reimbursed for all reasonable
business related expenses incurred by Executive at the request of or on behalf
of the Employer, subject to such reasonable requirements with respect to
substantiation and documentation as may be specified by the Employer.
(e) Medical and Dental Insurance. During the Employment Period,
Executive and Executive's immediate family shall be entitled to participate in
such medical and dental benefit plans as the Employer shall maintain from time
to time for the benefit of senior executive officers of the Employer and their
families, on the terms and subject to the conditions set forth in such plans.
(f) Life Insurance and Disability Insurance. During the Employment
Period, the Employer shall provide Executive with life insurance and
comprehensive disability insurance.
(g) Vacations. Executive shall be entitled to reasonable paid
vacations in accordance with the then regular procedures of the Employer
governing senior executive officers, not to exceed four weeks per annum, in the
aggregate.
(h) Other Benefits. During the Employment Period, the Employer shall
provide to Executive such other benefits, including sick leave and the right to
participate in retirement or pension plans, as are made generally available to
senior executive officers and employees of the Employer from time to time.
4. Indemnification and Liability Insurance. The Employer agrees to
indemnify Executive with respect to any actions commenced against Executive in
his capacity as an officer or director, or former officer or director, of the
Employer or any affiliate thereof for which he may serve in such capacity. The
Employer also agrees to use its best efforts to secure and maintain officers and
directors liability insurance providing coverage for Executive.
5. Employer's Policies. Executive agrees to observe and comply with the
rules and regulations of the Employer as adopted by its Boards of Directors
regarding the performance of his duties and to carry out and perform orders,
directions and policies communicated to him from time to time by the Employer's
Boards of Directors.
6. Nondisclosure Covenant.
(a) General. All records, financial statements and similar documents
obtained, reviewed or compiled by Executive in the course of the performance by
him of services for the Employer, whether or not confidential information or
trade secrets, shall be the exclusive property of the Employer. Executive shall
have no rights in such documents upon any termination of this Agreement.
(b) Confidential Information. Executive will not disclose to any
person or entity (except as required by applicable law or in connection with the
performance of his duties and responsibilities hereunder), or use for his own
benefit or gain, any confidential information of the Employer obtained by him
incident to his employment with the Employer. The term "confidential
information" includes, without limitation, financial information, business
plans, prospects and opportunities which have been discussed or considered by
the management of the Employer but does not include any information which has
become part of the public domain by means other than Executive's non-observance
of his obligations hereunder. This paragraph shall survive the termination of
this Agreement.
7. Termination and Severance Payments.
(a) At-Will Employment. Executive's employment hereunder is "at
will" and may be terminated by the Employer at any time with or without Good
Reason (as defined in Section 7(e) below), by a majority vote of all of the
members of the Board of Directors of the Employer upon written notice to
Executive, subject only to the severance provisions specifically set forth in
this Section 7.
(b) Termination by Executive. The Employment Period and Executive's
employment hereunder may be terminated effective immediately by Executive by
written notice to the Board of Directors of the Employer within 30 days of the
occurrence of (i) a failure of the Board of Directors of the Employer to elect
Executive to offices with the same or substantially the same duties and
responsibilities as set forth in Section 2, (ii) a material failure by the
Employer to comply with the provisions of Section 3 or a material breach by the
Employer of any other provision of this Agreement, or (iii) a Force Out (as such
term is defined in Section 7(e) below).
(c) Certain Benefits upon Termination by Executive. Except as
specifically provided in this Section 7 or otherwise required by law, all
compensation and benefits to Executive under this Agreement shall terminate on
the date of termination of the Employment Period. Notwithstanding the foregoing,
if the Employment Period is terminated pursuant to Section 7(b) or if
Executive's employment is terminated by the Employer other than for Good Reason,
Executive shall be entitled to the following benefits:
(i) The Employer shall continue to pay Executive's Base Salary
for the remaining term of this Agreement after the date of Executive's
termination, at the rate in effect on the date of his termination and
on the same periodic payment dates as payment would have been made to
Executive had the Employment Period not been terminated;
(ii) For the remaining term of this Agreement, Executive shall
continue to receive all benefits described in Section 3 existing on the
date of termination. For purposes of the application of such benefits,
Executive shall be treated as if he had remained in the employ of the
Employer with a Base Salary at the rate in effect on the date of
termination;
(iii) For purposes of any stock option plan of the Employer,
Executive shall be treated as if he had remained in the employ of the
Employer for the remaining term of this Agreement after the date of
Executive's termination so that (x) any stock options or other awards
(including restricted stock grants) of the Executive under such plan
shall continue to vest and become exercisable, and (y) Executive shall
be entitled to exercise any exercisable options or other rights;
(iv) If, in spite of the provisions above, any benefits or
service credits under any benefit plan or program of the Employer may
not be paid or provided under such plan or program to Executive, or to
Executive's dependents, beneficiaries or estate, because Executive is
no longer considered to be an employee of the Employer, the Employer
shall pay or provide for payment of such benefits and service credits
to Executive, or to Executive's dependents, beneficiaries or estate,
for the remaining term of this Agreement; and
(v) Nothing herein shall be deemed to obligate Executive to
seek other employment in the event of any such termination and any
amounts earned or benefits received from such other employment will not
serve to reduce in any way the amounts and benefits payable in
accordance herewith.
(d) Termination by the Employer for Good Reason. If (i) Executive is
terminated for Good Reason or (ii) Executive shall voluntarily terminate his
employment hereunder (other than pursuant to Section 7(b) hereof), then the
Employment Period shall terminate as of the effective date set forth in the
written notice of such termination (the "Termination Date") and Executive shall
be entitled to receive only his Base Salary at the rate then in effect until the
Termination Date and any outstanding stock options held by Executive shall
expire in accordance with the terms of the stock option plan or option agreement
under which the stock options were granted.
(e) Definitions. The following terms shall be defined as set forth
below.
(i) A "Change-in-Control" shall be deemed to have occurred
after the effective date of this Agreement if:
(A) any Person, together with all "affiliates" and
"associates" (as such terms are defined in Rule 12b-2 under
the Securities Exchange Act of 1934 (the "Exchange Act")) of
such Person, shall become the "beneficial owner" (as such term
is defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Employer representing 30% or
more of either (A) the combined voting power of the Employer's
then outstanding securities having the right to vote in an
election of the Employer's Board of Directors ("Voting
Securities") or (B) the then outstanding shares of all classes
of stock of the Employer (in either such case other than as a
result of the acquisition of securities directly from the
Employer); or
(B) individuals who, as of the effective date of this
Agreement, constitute the Employer's Board of Directors (the
"Incumbent Directors") cease for any reason, including,
without limitation, as a result of a tender offer, proxy
contest, merger or similar transaction, to constitute at least
a majority of the Employer's Board of Directors, provided that
any person becoming a director of the Employer subsequent to
the effective date of this Agreement whose election or
nomination for election was approved by a vote of at least a
majority of the Incumbent Directors shall, for purposes of
this Agreement, be considered an Incumbent Director; or
(C) the stockholders of the Employer shall approve
(1) any consolidation or merger of the Employer or any
subsidiary where the stockholders of the Employer, immediately
prior to the consolidation or merger, would not, immediately
after the consolidation or merger, beneficially own (as such
term is defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, shares representing in the aggregate
at least 60% of the voting shares of the corporation issuing
cash or securities in the consolidation or merger (or of its
ultimate parent corporation, if any), (2) any sale, lease,
exchange or other transfer (in one transaction or a series of
transactions contemplated or arranged by any party as a single
plan) of all or substantially all of the assets of the
Employer or (3) any plan or proposal for the liquidation or
dissolution of the Employer;
Notwithstanding the foregoing, a "Change-in-Control" shall not be
deemed to have occurred for purposes of the foregoing clause (A) solely as the
result of an acquisition of securities by the Employer which, by reducing the
number of shares of stock or other Voting Securities outstanding, increases (x)
the proportionate number of shares of stock of the Employer beneficially owned
by any Person to 30% or more of the shares of stock then outstanding or (y) the
proportionate voting power represented by the Voting Securities beneficially
owned by any Person to 30% or more of the combined voting power of all then
outstanding Voting Securities; provided, however, that if any Person referred to
in clause (x) or (y) of this sentence shall thereafter become the beneficial
owner of any additional stock of the Employer or other Voting Securities (other
than pursuant to a share split, stock dividend, or similar transaction), then a
"Change-in-Control" shall be deemed to have occurred for purposes of the
foregoing clause (A).
(ii) A "Force Out" shall be deemed to have occurred in
the event of a Change-in-Control followed by:
(A) a change in duties, responsibilities, status or
positions with the Employer, which, in Executive's reasonable
judgment, does not represent a promotion from or maintaining
of Executive's duties, responsibilities, status or positions
as in effect immediately prior to the Change-in-Control, or
any removal of Executive from or any failure to reappoint or
reelect Executive to such positions, except in connection with
the termination of Executive's employment for Good Reason,
disability, retirement or death;
(B) a reduction by the Employer in Executive's Base
Salary as in effect immediately prior to the
Change-in-Control;
(C) the failure by the Employer to continue in effect
any of the benefit plans, programs or arrangements in which
Executive is participating at the time of the
Change-in-Control of the Employer (unless Executive is
permitted to participate in any substitute benefit plan,
program or arrangement with substantially the same terms and
to the same extent and with the same rights as Executive had
with respect to the benefit plan, program or arrangement that
is discontinued) other than as a result of the normal
expiration of any such benefit plan, program or arrangement in
accordance with its terms as in effect at the time of the
Change-in-Control, or the taking of any action, or the failure
to act, by the Employer which would adversely affect
Executive's continued participation in any of such benefit
plans, programs or arrangements on at least as favorable a
basis to Executive as is the case on the date of the
Change-in-Control or which would materially reduce Executive's
benefits in the future under any of such benefit plans,
programs or arrangements or deprive Executive of any material
benefits enjoyed by Executive at the time of the
Change-in-Control;
(D) the failure by the Employer to provide and credit
Executive with the number of paid vacation days to which
Executive is then entitled in accordance with the Employer's
normal vacation policies as in effect immediately prior to the
Change-in-Control;
(E) the Employer's requiring Executive to be based in
an office located beyond a reasonable commuting distance from
Executive's residence immediately prior to the
Change-in-Control, except for required travel relating to the
Employer's business to an extent substantially consistent with
the business travel obligations which Executive undertook on
behalf of the Employer prior to the Change-in-Control;
(F) the failure by the Employer to obtain from any
successor to the Employer an agreement to be bound by this
Agreement pursuant to Section 11 hereof; or
(G) any refusal by the Employer to continue to allow
Executive to attend to matters or engage in activities not
directly related to the business of the Employer which, prior
to the Change-in-Control, Executive was permitted by the
Employer's Boards of Directors to attend to or engage in.
(iii) "Good Reason" shall mean a finding by the
Employer's Board of Directors that Executive has (A) acted with
gross negligence or willful misconduct in connection with the
performance of his material duties hereunder; (B) defaulted in the
performance of his material duties hereunder and has not corrected
such action within 15 days of receipt of written notice thereof; (C)
willfully acted against the best interests of the Employer, which
act has had a material and adverse impact on the financial affairs
of the Employer; or (D) been convicted of a felony or committed a
material act of common law fraud against the Employer or its
employees and such act or conviction has had, or the Employer's
Board of Directors reasonably determines will have, a material
adverse effect on the interests of the Employer; provided, however,
that a finding of Good Reason shall not become effective unless and
until the Board of Directors provides the Executive notice that it
is considering making such finding and a reasonable opportunity to
be heard by the Board of Directors.
(iv) "Person" shall have the meaning used in Sections
13(d) and 14(d) of the Exchange Act; provided however, that the term
"Person" shall not include (A) any current partner of Reckson
Operating Partnership, L.P., any stockholder or employee of the
Employer on the date hereof or any estate or member of the immediate
family of such a partner, stockholder or employee, or (B) the
Employer, any of its subsidiaries, or any trustee, fiduciary or
other person or entity holding securities under any employee benefit
plan of the Employer or any of its subsidiaries.
(f) Termination by Reason of Death. The Employment Period shall
terminate upon Executive's death and in such event, the Employer shall pay
Executive's Base Salary for a period of six (6) months from the date of his
death, or such longer period as the Employer's Boards of Directors may
determine, to Executive's estate or to a beneficiary designated by Executive in
writing prior to his death. Any unexercised or unvested stock options shall
remain exercisable or vest upon Executive's death only to the extent provided in
the applicable option plan and option agreements.
(g) Termination by Reason of Disability. In the event that Executive
shall become unable to efficiently perform his duties hereunder because of any
physical or mental disability or illness, Executive shall be entitled to be paid
his Base Salary until the later of such time when (i) the period of disability
or illness (whether or not the same disability or illness) shall exceed 180
consecutive days during the Employment Period and (ii) Executive becomes
eligible to receive benefits under a comprehensive disability insurance policy
obtained by the Employer (the "Disability Period"). Following the expiration of
the Disability Period, the Employer may terminate this Agreement upon written
notice of such termination. Any unexercised or unvested stock options shall
remain exercisable or vest upon such termination only to the extent provided in
the applicable option plan and option agreements .
(h) Arbitration in the Event of a Dispute Regarding the Nature of
Termination. In the event that the Employer terminates Executive's employment
for Good Reason and Executive contends that Good Reason did not exist, the
Employer's only obligation shall be to submit such claim to arbitration before
the American Arbitration Association ("AAA"). In such a proceeding, the only
issue before the arbitrator will be whether Executive was in fact terminated for
Good Reason. If the arbitrator determines that Executive was not terminated for
Good Reason, the only remedy that the arbitrator may award is entitlement to the
severance payments and benefits specified in Paragraph 7(c), the costs of
arbitration, and Executive's attorneys' fees. If the arbitrator finds that
Executive was terminated for Good Reason, the arbitrator will be without
authority to award Executive anything, the parties will each be responsible for
their own attorneys' fees, and the costs of arbitration will be paid 50% by
Executive and 50% by the Employer.
8. Noncompetition Covenant.
(a) Because Executive's services to the Employer are essential and
because Executive has access to the Employer's confidential information,
Executive covenants and agrees that (i) during the Employment Period and (ii) in
the event that this Agreement is terminated by the Employer for Good Reason or
by Executive other than pursuant to Section 7(b) hereof, during the
Noncompetition Period Executive will not, without the prior written consent of
the Board of Directors of the Employer which shall include the unanimous consent
of the Directors who are not officers of the Employer, directly or indirectly:
(A) engage, participate or assist, as an owner, partner,
employee, consultant, director, officer, trustee or agent, in any
business that engages or attempts to engage in, directly or indirectly,
the acquisition, development, construction, operation, management or
leasing of any commercial industrial or office real estate property
anywhere in the Tri-State metropolitan area, or
(B) intentionally interfere with, disrupt or attempt to
disrupt the relationship, contractual or otherwise, between the
Employer or its affiliates and any tenant, supplier, contractor,
lender, employee or governmental agency or authority.
(b) For purposes of this Section 8, the Noncompetition Period shall
mean the period commencing on the date of termination of Executive's employment
under this Agreement and ending on the latest of (i) the third anniversary of
the effective date of this Agreement, or (ii) the first anniversary of the date
of termination of Executive's employment under this Agreement.
(c) Notwithstanding anything contained herein to the contrary,
Executive is not prohibited by this Section 8 from (i) maintaining his
investment in any Option Property (as such term is defined in the Employer's
final prospectus relating to the initial public offering of the Employer's
Common Stock), (ii) from making investments in any entity that engages, directly
or indirectly, in the acquisition, development, construction, operation,
management or leasing of commercial industrial or office real estate properties,
regardless of where they are located, if the shares or other ownership interests
of such entity are publicly traded and Executive's aggregate investment in such
entity constitutes less than five percent (5%) of the equity ownership of such
entity, or (iii) providing services to RSI and its affiliates.
(d) The provisions of this Section 8 shall survive the termination
of this Agreement.
9. Conflicting Agreements. Executive hereby represents and warrants
that the execution of this Agreement and the performance of his obligations
hereunder will not breach or be in conflict with any other agreement to which he
is a party or is bound, and that he is not now subject to any covenants against
competition or similar covenants which would affect the performance of his
obligations hereunder.
10. Notices. Any notice required or permitted hereunder shall be in
writing and shall be deemed sufficient when given by hand, by nationally
recognized overnight courier or by express, registered or certified mail,
postage prepaid, return receipt requested, and addressed to the Employer or
Executive, as applicable, at the address indicated above (or to such other
address as may be provided by notice).
11. Miscellaneous. This Agreement (i) constitutes the entire agreement
between the parties concerning the subject matter hereof and supersedes any and
all prior agreements or understandings, (ii) may not be assigned by Executive
without the prior written consent of the Employer, and (iii) may be assigned by
the Employer and shall be binding upon, and inure to the benefit of, the
Employer's successors and assigns. Headings herein are for convenience of
reference only and shall not define, limit or interpret the contents hereof.
12. Amendment. This Agreement may be amended, modified or supplemented
by the mutual consent of the parties in writing, but no oral amendment,
modification or supplement shall be effective.
13. Specific Enforcement. The provisions of Sections 6 and 8 of this
Agreement are to be specifically enforced if not performed according to their
terms. Without limiting the generality of the foregoing, the parties acknowledge
that the Employer would be irreparably damaged and there would be no adequate
remedy at law for Executive's breach of Sections 6 and 8 of this Agreement and
further acknowledge that the Employer may seek entry of a temporary restraining
order or preliminary injunction, in addition to any other remedies available at
law or in equity, to enforce the provisions thereof.
14. Severability. If a court of competent jurisdiction adjudicates any
one or more of the provisions hereof as invalid, illegal or unenforceable in any
respect, such provision(s) shall be ineffective only to the extent and duration
of such invalidity, illegality or unenforceability and such invalidity,
illegality or unenforceability shall not affect the remaining substance of such
provision or any other provision of this Agreement and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had been
limited or modified (consistent with its general intent) to the extent necessary
so that it shall be valid, legal and enforceable. If it shall not be possible to
so limit or modify such invalid, illegal or unenforceable provision, this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein, and the parties will use their best
efforts to substitute a valid, legal and enforceable provision which, insofar as
practicable, implements the purpose and intent of the provision originally
contained herein.
15. Governing Law. This Agreement shall be construed and governed by
the laws of the State of New York.
IN WITNESS WHEREOF, this Agreement is entered into as of the date and
year first above written.
RECKSON ASSOCIATES REALTY CORP.
By: /s/ Scott Rechler
----------------------------
Name: Scott Rechler
Title: President
/s/ Gregg Rechler
-------------------------------
Gregg Rechler
<PAGE>
Exhibit 10.11
EMPLOYMENT AND NONCOMPETITION AGREEMENT
This EMPLOYMENT AND NONCOMPETITION AGREEMENT ("Agreement") is made as
of the 1st day of June, 1998 by and among Roger Rechler ("Executive") and
Reckson Associates Realty Corp., a Maryland corporation with a principal place
of business at 225 Broadhollow Road, Melville, New York 11747 (the "Employer")
and amends, supersedes and completely restates the Noncompetition Agreement
previously made by and among the Executive and the Employer.
1. Term. The term of this Agreement shall commence on the date first
above written and, unless earlier terminated as provided in Paragraph 7 below,
shall terminate on the fifth anniversary of such date (the "Original Term");
provided, however, that Sections 6 and 8 hereof shall survive the termination of
this Agreement as provided therein. The Original Term may be extended for such
period or periods, if any, as agreed to by Executive and the Employer (each a
"Renewal Term"). The period of Executive's employment hereunder consisting of
the Original Term and all Renewal Terms is herein referred to as the "Employment
Period".
2. Employment and Duties.
(a) During the Employment Period, Executive shall be employed in the
business of the Employer and its affiliates. Executive shall serve the Employer
as a senior corporate executive with the title Executive Vice President of the
Employer. Executive's duties and authority shall be as set forth in the By-laws
of the Employer and as otherwise established by the Board of Directors of the
Employer, shall be commensurate with his titles and positions with the Employer.
(b) Executive agrees to his employment as described in this
Paragraph 2 and agrees to devote substantially all of his business time and
efforts to the performance of his duties under this Agreement, except as
otherwise approved by the Board of Directors of the Employer; provided, however,
that nothing herein shall be interpreted to preclude Executive from (i)
participating as an officer or director of, or advisor to, any charitable or
other tax exempt organization or otherwise engaging in charitable, fraternal or
trade group activities, (ii) providing services to Reckson Service Industries,
Inc. ("RSI") and its affiliates, or (iii) investing his assets as a passive
investor in other entities or business ventures, provided that he performs no
management or similar role with respect to such entities or ventures and such
investment does not violate Section 8 hereof.
(c) In performing his duties hereunder, Executive shall be available
for reasonable travel as the needs of the Employer's business require. Executive
shall be based in the tri-state metropolitan area of New York, New Jersey and
Connecticut (the "Tri-State metropolitan area").
3. Compensation and Benefits. In consideration of Executive's services
hereunder, the Employer shall compensate Executive as provided in this Section
3.
(a) Base Salary. The Employer shall pay Executive an aggregate
annual salary at the rate of $300,000 per annum during the Employment Period
("Base Salary"), subject to withholding for applicable federal, state and local
taxes. Base Salary shall be payable in accordance with the Employer's normal
business practices, but in no event less frequently than monthly. Executive's
Base Salary shall be reviewed no less frequently than annually by the Employer
and may be increased, but not decreased, by the Employer during the Employment
Period.
(b) Incentive Compensation. In addition to the Base Salary payable
to Executive pursuant to Section 3(a), during the Employment Period Executive
shall be eligible to participate in any incentive compensation plans in effect
with respect to senior executive officers of the Employer, subject to
Executive's compliance with such criteria as the Employer's Board of Directors
may establish for Executive's participation in such plans from time to time. Any
awards to Executive under such plans will be established by the Employer's Board
of Directors, or a committee thereof, in its sole discretion.
(c) Stock Options. During the Employment Period, Executive shall be
eligible to participate in employee stock option plans established from time to
time for the benefit of senior executive officers and other employees of the
Employer in accordance with the terms and conditions of such plans. All
decisions regarding awards to Executive under the Employer's stock option plans
shall be made in the sole discretion of the Employer's Board of Directors, or a
committee thereof.
(d) Expenses. Executive shall be reimbursed for all reasonable
business related expenses incurred by Executive at the request of or on behalf
of the Employer, subject to such reasonable requirements with respect to
substantiation and documentation as may be specified by the Employer.
(e) Medical and Dental Insurance. During the Employment Period,
Executive and Executive's immediate family shall be entitled to participate in
such medical and dental benefit plans as the Employer shall maintain from time
to time for the benefit of senior executive officers of the Employer and their
families, on the terms and subject to the conditions set forth in such plans.
(f) Life Insurance and Disability Insurance. During the Employment
Period, the Employer shall provide Executive with life insurance and
comprehensive disability insurance.
(g) Vacations. Executive shall be entitled to reasonable paid
vacations in accordance with the then regular procedures of the Employer
governing senior executive officers, not to exceed four weeks per annum, in the
aggregate.
(h) Other Benefits. During the Employment Period, the Employer shall
provide to Executive such other benefits, including sick leave and the right to
participate in retirement or pension plans, as are made generally available to
senior executive officers and employees of the Employer from time to time.
4. Indemnification and Liability Insurance. The Employer agrees to
indemnify Executive with respect to any actions commenced against Executive in
his capacity as an officer or director, or former officer or director, of the
Employer or any affiliate thereof for which he may serve in such capacity. The
Employer also agrees to use its best efforts to secure and maintain officers and
directors liability insurance providing coverage for Executive.
5. Employer's Policies. Executive agrees to observe and comply with the
rules and regulations of the Employer as adopted by its Boards of Directors
regarding the performance of his duties and to carry out and perform orders,
directions and policies communicated to him from time to time by the Employer's
Boards of Directors.
6. Nondisclosure Covenant.
(a) General. All records, financial statements and similar documents
obtained, reviewed or compiled by Executive in the course of the performance by
him of services for the Employer, whether or not confidential information or
trade secrets, shall be the exclusive property of the Employer. Executive shall
have no rights in such documents upon any termination of this Agreement.
(b) Confidential Information. Executive will not disclose to any
person or entity (except as required by applicable law or in connection with the
performance of his duties and responsibilities hereunder), or use for his own
benefit or gain, any confidential information of the Employer obtained by him
incident to his employment with the Employer. The term "confidential
information" includes, without limitation, financial information, business
plans, prospects and opportunities which have been discussed or considered by
the management of the Employer but does not include any information which has
become part of the public domain by means other than Executive's non-observance
of his obligations hereunder. This paragraph shall survive the termination of
this Agreement.
7. Termination and Severance Payments.
(a) At-Will Employment. Executive's employment hereunder is "at
will" and may be terminated by the Employer at any time with or without Good
Reason (as defined in Section 7(e) below), by a majority vote of all of the
members of the Board of Directors of the Employer upon written notice to
Executive, subject only to the severance provisions specifically set forth in
this Section 7.
(b) Termination by Executive. The Employment Period and Executive's
employment hereunder may be terminated effective immediately by Executive by
written notice to the Board of Directors of the Employer within 30 days of the
occurrence of (i) a failure of the Board of Directors of the Employer to elect
Executive to offices with the same or substantially the same duties and
responsibilities as set forth in Section 2, (ii) a material failure by the
Employer to comply with the provisions of Section 3 or a material breach by the
Employer of any other provision of this Agreement, or (iii) a Force Out (as such
term is defined in Section 7(e) below).
(c) Certain Benefits upon Termination by Executive. Except as
specifically provided in this Section 7 or otherwise required by law, all
compensation and benefits to Executive under this Agreement shall terminate on
the date of termination of the Employment Period. Notwithstanding the foregoing,
if the Employment Period is terminated pursuant to Section 7(b) or if
Executive's employment is terminated by the Employer other than for Good Reason,
Executive shall be entitled to the following benefits:
(i) The Employer shall continue to pay Executive's Base Salary
for the remaining term of this Agreement after the date of Executive's
termination, at the rate in effect on the date of his termination and
on the same periodic payment dates as payment would have been made to
Executive had the Employment Period not been terminated;
(ii) For the remaining term of this Agreement, Executive shall
continue to receive all benefits described in Section 3 existing on the
date of termination. For purposes of the application of such benefits,
Executive shall be treated as if he had remained in the employ of the
Employer with a Base Salary at the rate in effect on the date of
termination;
(iii) For purposes of any stock option plan of the Employer,
Executive shall be treated as if he had remained in the employ of the
Employer for the remaining term of this Agreement after the date of
Executive's termination so that (x) any stock options or other awards
(including restricted stock grants) of the Executive under such plan
shall continue to vest and become exercisable, and (y) Executive shall
be entitled to exercise any exercisable options or other rights;
(iv) If, in spite of the provisions above, any benefits or
service credits under any benefit plan or program of the Employer may
not be paid or provided under such plan or program to Executive, or to
Executive's dependents, beneficiaries or estate, because Executive is
no longer considered to be an employee of the Employer, the Employer
shall pay or provide for payment of such benefits and service credits
to Executive, or to Executive's dependents, beneficiaries or estate,
for the remaining term of this Agreement; and
(v) Nothing herein shall be deemed to obligate Executive to
seek other employment in the event of any such termination and any
amounts earned or benefits received from such other employment will not
serve to reduce in any way the amounts and benefits payable in
accordance herewith.
(d) Termination by the Employer for Good Reason. If (i) Executive is
terminated for Good Reason or (ii) Executive shall voluntarily terminate his
employment hereunder (other than pursuant to Section 7(b) hereof), then the
Employment Period shall terminate as of the effective date set forth in the
written notice of such termination (the "Termination Date") and Executive shall
be entitled to receive only his Base Salary at the rate then in effect until the
Termination Date and any outstanding stock options held by Executive shall
expire in accordance with the terms of the stock option plan or option agreement
under which the stock options were granted.
(e) Definitions. The following terms shall be defined as set forth
below.
(i) A "Change-in-Control" shall be deemed to have occurred
after the effective date of this Agreement if:
(A) any Person, together with all "affiliates" and
"associates" (as such terms are defined in Rule 12b-2 under
the Securities Exchange Act of 1934 (the "Exchange Act")) of
such Person, shall become the "beneficial owner" (as such term
is defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Employer representing 30% or
more of either (A) the combined voting power of the Employer's
then outstanding securities having the right to vote in an
election of the Employer's Board of Directors ("Voting
Securities") or (B) the then outstanding shares of all classes
of stock of the Employer (in either such case other than as a
result of the acquisition of securities directly from the
Employer); or
(B) individuals who, as of the effective date of this
Agreement, constitute the Employer's Board of Directors (the
"Incumbent Directors") cease for any reason, including,
without limitation, as a result of a tender offer, proxy
contest, merger or similar transaction, to constitute at least
a majority of the Employer's Board of Directors, provided that
any person becoming a director of the Employer subsequent to
the effective date of this Agreement whose election or
nomination for election was approved by a vote of at least a
majority of the Incumbent Directors shall, for purposes of
this Agreement, be considered an Incumbent Director; or
(C) the stockholders of the Employer shall approve
(1) any consolidation or merger of the Employer or any
subsidiary where the stockholders of the Employer, immediately
prior to the consolidation or merger, would not, immediately
after the consolidation or merger, beneficially own (as such
term is defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, shares representing in the aggregate
at least 60% of the voting shares of the corporation issuing
cash or securities in the consolidation or merger (or of its
ultimate parent corporation, if any), (2) any sale, lease,
exchange or other transfer (in one transaction or a series of
transactions contemplated or arranged by any party as a single
plan) of all or substantially all of the assets of the
Employer or (3) any plan or proposal for the liquidation or
dissolution of the Employer;
Notwithstanding the foregoing, a "Change-in-Control" shall not be
deemed to have occurred for purposes of the foregoing clause (A) solely as the
result of an acquisition of securities by the Employer which, by reducing the
number of shares of stock or other Voting Securities outstanding, increases (x)
the proportionate number of shares of stock of the Employer beneficially owned
by any Person to 30% or more of the shares of stock then outstanding or (y) the
proportionate voting power represented by the Voting Securities beneficially
owned by any Person to 30% or more of the combined voting power of all then
outstanding Voting Securities; provided, however, that if any Person referred to
in clause (x) or (y) of this sentence shall thereafter become the beneficial
owner of any additional stock of the Employer or other Voting Securities (other
than pursuant to a share split, stock dividend, or similar transaction), then a
"Change-in-Control" shall be deemed to have occurred for purposes of the
foregoing clause (A).
(ii) A "Force Out" shall be deemed to have occurred in the
event of a Change-in-Control followed by:
(A) a change in duties, responsibilities, status or
positions with the Employer, which, in Executive's reasonable
judgment, does not represent a promotion from or maintaining
of Executive's duties, responsibilities, status or positions
as in effect immediately prior to the Change-in-Control, or
any removal of Executive from or any failure to reappoint or
reelect Executive to such positions, except in connection with
the termination of Executive's employment for Good Reason,
disability, retirement or death;
(B) a reduction by the Employer in Executive's Base
Salary as in effect immediately prior to the
Change-in-Control;
(C) the failure by the Employer to continue in effect
any of the benefit plans, programs or arrangements in which
Executive is participating at the time of the
Change-in-Control of the Employer (unless Executive is
permitted to participate in any substitute benefit plan,
program or arrangement with substantially the same terms and
to the same extent and with the same rights as Executive had
with respect to the benefit plan, program or arrangement that
is discontinued) other than as a result of the normal
expiration of any such benefit plan, program or arrangement in
accordance with its terms as in effect at the time of the
Change-in-Control, or the taking of any action, or the failure
to act, by the Employer which would adversely affect
Executive's continued participation in any of such benefit
plans, programs or arrangements on at least as favorable a
basis to Executive as is the case on the date of the
Change-in-Control or which would materially reduce Executive's
benefits in the future under any of such benefit plans,
programs or arrangements or deprive Executive of any material
benefits enjoyed by Executive at the time of the
Change-in-Control;
(D) the failure by the Employer to provide and credit
Executive with the number of paid vacation days to which
Executive is then entitled in accordance with the Employer's
normal vacation policies as in effect immediately prior to the
Change-in-Control;
(E) the Employer's requiring Executive to be based in
an office located beyond a reasonable commuting distance from
Executive's residence immediately prior to the
Change-in-Control, except for required travel relating to the
Employer's business to an extent substantially consistent with
the business travel obligations which Executive undertook on
behalf of the Employer prior to the Change-in-Control;
(F) the failure by the Employer to obtain from any
successor to the Employer an agreement to be bound by this
Agreement pursuant to Section 11 hereof; or
(G) any refusal by the Employer to continue to allow
Executive to attend to matters or engage in activities not
directly related to the business of the Employer which, prior
to the Change-in-Control, Executive was permitted by the
Employer's Boards of Directors to attend to or engage in.
(iii) "Good Reason" shall mean a finding by the Employer's
Board of Directors that Executive has (A) acted with gross negligence
or willful misconduct in connection with the performance of his
material duties hereunder; (B) defaulted in the performance of his
material duties hereunder and has not corrected such action within 15
days of receipt of written notice thereof; (C) willfully acted against
the best interests of the Employer, which act has had a material and
adverse impact on the financial affairs of the Employer; or (D) been
convicted of a felony or committed a material act of common law fraud
against the Employer or its employees and such act or conviction has
had, or the Employer's Board of Directors reasonably determines will
have, a material adverse effect on the interests of the Employer;
provided, however, that a finding of Good Reason shall not become
effective unless and until the Board of Directors provides the
Executive notice that it is considering making such finding and a
reasonable opportunity to be heard by the Board of Directors.
(iv) "Person" shall have the meaning used in Sections 13(d)
and 14(d) of the Exchange Act; provided however, that the term "Person"
shall not include (A) any current partner of Reckson Operating
Partnership, L.P., any stockholder or employee of the Employer on the
date hereof or any estate or member of the immediate family of such a
partner, stockholder or employee, or (B) the Employer, any of its
subsidiaries, or any trustee, fiduciary or other person or entity
holding securities under any employee benefit plan of the Employer or
any of its subsidiaries.
(f) Termination by Reason of Death. The Employment Period shall
terminate upon Executive's death and in such event, the Employer shall pay
Executive's Base Salary for a period of six (6) months from the date of his
death, or such longer period as the Employer's Boards of Directors may
determine, to Executive's estate or to a beneficiary designated by Executive in
writing prior to his death. Any unexercised or unvested stock options shall
remain exercisable or vest upon Executive's death only to the extent provided in
the applicable option plan and option agreements.
(g) Termination by Reason of Disability. In the event that Executive
shall become unable to efficiently perform his duties hereunder because of any
physical or mental disability or illness, Executive shall be entitled to be paid
his Base Salary until the later of such time when (i) the period of disability
or illness (whether or not the same disability or illness) shall exceed 180
consecutive days during the Employment Period and (ii) Executive becomes
eligible to receive benefits under a comprehensive disability insurance policy
obtained by the Employer (the "Disability Period"). Following the expiration of
the Disability Period, the Employer may terminate this Agreement upon written
notice of such termination. Any unexercised or unvested stock options shall
remain exercisable or vest upon such termination only to the extent provided in
the applicable option plan and option agreements .
(h) Arbitration in the Event of a Dispute Regarding the Nature of
Termination. In the event that the Employer terminates Executive's employment
for Good Reason and Executive contends that Good Reason did not exist, the
Employer's only obligation shall be to submit such claim to arbitration before
the American Arbitration Association ("AAA"). In such a proceeding, the only
issue before the arbitrator will be whether Executive was in fact terminated for
Good Reason. If the arbitrator determines that Executive was not terminated for
Good Reason, the only remedy that the arbitrator may award is entitlement to the
severance payments and benefits specified in Paragraph 7(c), the costs of
arbitration, and Executive's attorneys' fees. If the arbitrator finds that
Executive was terminated for Good Reason, the arbitrator will be without
authority to award Executive anything, the parties will each be responsible for
their own attorneys' fees, and the costs of arbitration will be paid 50% by
Executive and 50% by the Employer.
8. Noncompetition Covenant.
(a) Because Executive's services to the Employer are essential and
because Executive has access to the Employer's confidential information,
Executive covenants and agrees that (i) during the Employment Period and (ii) in
the event that this Agreement is terminated by the Employer for Good Reason or
by Executive other than pursuant to Section 7(b) hereof, during the
Noncompetition Period Executive will not, without the prior written consent of
the Board of Directors of the Employer which shall include the unanimous consent
of the Directors who are not officers of the Employer, directly or indirectly:
(A) engage, participate or assist, as an owner, partner,
employee, consultant, director, officer, trustee or agent, in any
business that engages or attempts to engage in, directly or
indirectly, the acquisition, development, construction, operation,
management or leasing of any commercial industrial or office real
estate property anywhere in the Tri-State metropolitan area, or
(B) intentionally interfere with, disrupt or attempt to
disrupt the relationship, contractual or otherwise, between the
Employer or its affiliates and any tenant, supplier, contractor,
lender, employee or governmental agency or authority.
(b) For purposes of this Section 8, the Noncompetition Period shall
mean the period commencing on the date of termination of Executive's employment
under this Agreement and ending on the latest of (i) the third anniversary of
the effective date of this Agreement, or (ii) the first anniversary of the date
of termination of Executive's employment under this Agreement.
(c) Notwithstanding anything contained herein to the contrary,
Executive is not prohibited by this Section 8 from (i) maintaining his
investment in any Option Property (as such term is defined in the Employer's
final prospectus relating to the initial public offering of the Employer's
Common Stock), (ii) from making investments in any entity that engages, directly
or indirectly, in the acquisition, development, construction, operation,
management or leasing of commercial industrial or office real estate properties,
regardless of where they are located, if the shares or other ownership interests
of such entity are publicly traded and Executive's aggregate investment in such
entity constitutes less than five percent (5%) of the equity ownership of such
entity, or (iii) providing services to RSI and its affiliates.
(d) The provisions of this Section 8 shall survive the termination
of this Agreement.
9. Conflicting Agreements. Executive hereby represents and warrants
that the execution of this Agreement and the performance of his obligations
hereunder will not breach or be in conflict with any other agreement to which he
is a party or is bound, and that he is not now subject to any covenants against
competition or similar covenants which would affect the performance of his
obligations hereunder.
10. Notices. Any notice required or permitted hereunder shall be in
writing and shall be deemed sufficient when given by hand, by nationally
recognized overnight courier or by express, registered or certified mail,
postage prepaid, return receipt requested, and addressed to the Employer or
Executive, as applicable, at the address indicated above (or to such other
address as may be provided by notice).
11. Miscellaneous. This Agreement (i) constitutes the entire agreement
between the parties concerning the subject matter hereof and supersedes any and
all prior agreements or understandings, (ii) may not be assigned by Executive
without the prior written consent of the Employer, and (iii) may be assigned by
the Employer and shall be binding upon, and inure to the benefit of, the
Employer's successors and assigns. Headings herein are for convenience of
reference only and shall not define, limit or interpret the contents hereof.
12. Amendment. This Agreement may be amended, modified or supplemented
by the mutual consent of the parties in writing, but no oral amendment,
modification or supplement shall be effective.
13. Specific Enforcement. The provisions of Sections 6 and 8 of this
Agreement are to be specifically enforced if not performed according to their
terms. Without limiting the generality of the foregoing, the parties acknowledge
that the Employer would be irreparably damaged and there would be no adequate
remedy at law for Executive's breach of Sections 6 and 8 of this Agreement and
further acknowledge that the Employer may seek entry of a temporary restraining
order or preliminary injunction, in addition to any other remedies available at
law or in equity, to enforce the provisions thereof.
14. Severability. If a court of competent jurisdiction adjudicates any
one or more of the provisions hereof as invalid, illegal or unenforceable in any
respect, such provision(s) shall be ineffective only to the extent and duration
of such invalidity, illegality or unenforceability and such invalidity,
illegality or unenforceability shall not affect the remaining substance of such
provision or any other provision of this Agreement and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had been
limited or modified (consistent with its general intent) to the extent necessary
so that it shall be valid, legal and enforceable. If it shall not be possible to
so limit or modify such invalid, illegal or unenforceable provision, this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein, and the parties will use their best
efforts to substitute a valid, legal and enforceable provision which, insofar as
practicable, implements the purpose and intent of the provision originally
contained herein.
15. Governing Law. This Agreement shall be construed and governed by
the laws of the State of New York.
IN WITNESS WHEREOF, this Agreement is entered into as of the date and
year first above written.
RECKSON ASSOCIATES REALTY CORP.
By: /s/ Scott Rechler
----------------------------
Name: Scott Rechler
Title: President
/s/ Roger Rechler
-------------------------------
Roger Rechler
<PAGE>
Exhibit 10.12
AMENDMENT AND RESTATEMENT OF
EMPLOYMENT AND NONCOMPETITION AGREEMENT
This AMENDMENT AND RESTATEMENT OF EMPLOYMENT AND NONCOMPETITION AGREEMENT
("Agreement") is made as of the 1st day of June, 1998 by and among Michael
Maturo ("Executive") and Reckson Associates Realty Corp., a Maryland
corporation with a principal place of business at 225 Broadhollow Road,
Melville, New York 11747 (the "Employer") and amends, supersedes and
completely restates the Employment and Noncompetition Agreement made as of
June 2, 1995 by and among the Executive and the Employer.
1. Term. The term of this Agreement shall commence on the date first
----
above written and, unless earlier terminated as provided in Paragraph 7 below,
shall terminate on the fifth anniversary of such date (the "Original Term");
provided, however, that Sections 6 and 8 hereof shall survive the termination
of this Agreement as provided therein. The Original Term may be extended for
such period or periods, if any, as agreed to by Executive and the Employer
(each a "Renewal Term"). The period of Executive's employment hereunder
consisting of the Original Term and all Renewal Terms is herein referred to as
the "Employment Period".
2. Employment and Duties.
---------------------
(a) During the Employment Period, Executive shall be employed in the
business of the Employer and its affiliates. Executive shall serve the
Employer as a senior corporate executive with the titles Executive Vice
President, Chief Financial Officer and Treasurer of the Employer. Executive's
duties and authority shall be as set forth in the By-laws of the Employer and
as otherwise established by the Board of Directors of the Employer, shall be
commensurate with his titles and positions with the Employer.
(b) Executive agrees to his employment as described in this
Paragraph 2 and agrees to devote substantially all of his business time and
efforts to the performance of his duties under this Agreement, except as
otherwise approved by the Board of Directors of the Employer; provided,
however, that nothing herein shall be interpreted to preclude Executive from
(i) participating as an officer or director of, or advisor to, any charitable
or other tax exempt organization or otherwise engaging in charitable,
fraternal or trade group activities, (ii) providing services to Reckson
Service Industries, Inc. ("RSI") and its affiliates, or (iii) investing his
assets as a passive investor in other entities or business ventures, provided
that he performs no management or similar role with respect to such entities
or ventures and such investment does not violate Section 8 hereof.
(c) In performing his duties hereunder, Executive shall be available
for reasonable travel as the needs of the Employer's business require.
Executive shall be based in the tri-state metropolitan area of New York, New
Jersey and Connecticut (the "Tri-State metropolitan area").
3. Compensation and Benefits. In consideration of Executive's
---------------------------
services hereunder, the Employer shall compensate Executive as provided in
this Section 3.
(a) Base Salary. The Employer shall pay Executive an aggregate
------------
annual salary at the rate of $300,000 per annum during the Employment Period
("Base Salary"), subject to withholding for applicable federal, state and
local taxes. Base Salary shall be payable in accordance with the Employer's
normal business practices, but in no event less frequently than monthly.
Executive's Base Salary shall be reviewed no less frequently than annually by
the Employer and may be increased, but not decreased, by the Employer during
the Employment Period.
(b) Incentive Compensation. In addition to the Base Salary payable
-----------------------
to Executive pursuant to Section 3(a), during the Employment Period Executive
shall be eligible to participate in any incentive compensation plans in effect
with respect to senior executive officers of the Employer, subject to
Executive's compliance with such criteria as the Employer's Board of Directors
may establish for Executive's participation in such plans from time to time.
Any awards to Executive under such plans will be established by the Employer's
Board of Directors, or a committee thereof, in its sole discretion.
(c) Stock Options. During the Employment Period, Executive shall be
-------------
eligible to participate in employee stock option plans established from time
to time for the benefit of senior executive officers and other employees of
the Employer in accordance with the terms and conditions of such plans. All
decisions regarding awards to Executive under the Employer's stock option
plans shall be made in the sole discretion of the Employer's Board of
Directors, or a committee thereof.
(d) Expenses. Executive shall be reimbursed for all reasonable
--------
business related expenses incurred by Executive at the request of or on behalf
of the Employer, subject to such reasonable requirements with respect to
substantiation and documentation as may be specified by the Employer.
(e) Medical and Dental Insurance. During the Employment Period,
-----------------------------
Executive and Executive's immediate family shall be entitled to participate in
such medical and dental benefit plans as the Employer shall maintain from time
to time for the benefit of senior executive officers of the Employer and their
families, on the terms and subject to the conditions set forth in such plans.
(f) Life Insurance and Disability Insurance. During the Employment
----------------------------------------
Period, the Employer shall provide Executive with life insurance and
comprehensive disability insurance.
(g) Vacations. Executive shall be entitled to reasonable paid
---------
vacations in accordance with the then regular procedures of the Employer
governing senior executive officers, not to exceed four weeks per annum, in
the aggregate.
(h) Other Benefits.During the Employment Period, the Employer shall
--------------
provide to Executive such other benefits, including sick leave and the right
to participate in retirement or pension plans, as are made generally available
to senior executive officers and employees of the Employer from time to time.
4. Indemnification and Liability Insurance. The Employer agrees to
----------------------------------------
indemnify Executive with respect to any actions commenced against Executive in
his capacity as an officer or director, or former officer or director, of the
Employer or any affiliate thereof for which he may serve in such capacity. The
Employer also agrees to use its best efforts to secure and maintain officers
and directors liability insurance providing coverage for Executive.
5. Employer's Policies. Executive agrees to observe and comply with
-------------------
the rules and regulations of the Employer as adopted by its Boards of
Directors regarding the performance of his duties and to carry out and perform
orders, directions and policies communicated to him from time to time by the
Employer's Boards of Directors.
6. Nondisclosure Covenant.
----------------------
(a) General. All records, financial statements and similar documents
-------
obtained, reviewed or compiled by Executive in the course of the performance
by him of services for the Employer, whether or not confidential information
or trade secrets, shall be the exclusive property of the Employer. Executive
shall have no rights in such documents upon any termination of this Agreement.
(b) Confidential Information. Executive will not disclose to any
-------------------------
person or entity (except as required by applicable law or in connection with
the performance of his duties and responsibilities hereunder), or use for his
own benefit or gain, any confidential information of the Employer obtained by
him incident to his employment with the Employer. The term "confidential
information" includes, without limitation, financial information, business
plans, prospects and opportunities which have been discussed or considered by
the management of the Employer but does not include any information which has
become part of the public domain by means other than Executive's
non-observance of his obligations hereunder. This paragraph shall survive the
termination of this Agreement.
7. Termination and Severance Payments.
----------------------------------
(a) At-Will Employment. Executive's employment hereunder is "at
-------------------
will" and may be terminated by the Employer at any time with or without Good
Reason (as defined in Section 7(e) below), by a majority vote of all of the
members of the Board of Directors of the Employer upon written notice to
Executive, subject only to the severance provisions specifically set forth in
this Section 7.
(b) Termination by Executive. The Employment Period and Executive's
------------------------
employment hereunder may be terminated effective immediately by Executive by
written notice to the Board of Directors of the Employer within 30 days of the
occurrence of (i) a failure of the Board of Directors of the Employer to elect
Executive to offices with the same or substantially the same duties and
responsibilities as set forth in Section 2, (ii) a material failure by the
Employer to comply with the provisions of Section 3 or a material breach by
the Employer of any other provision of this Agreement, or (iii) a Force Out
(as such term is defined in Section 7(e) below).
(c) Certain Benefits upon Termination by Executive. Except as
---------------------------------------------------
specifically provided in this Section 7 or otherwise required by law, all
compensation and benefits to Executive under this Agreement shall terminate on
the date of termination of the Employment Period. Notwithstanding the
foregoing, if the Employment Period is terminated pursuant to Section 7(b) or
if Executive's employment is terminated by the Employer other than for Good
Reason, Executive shall be entitled to the following benefits:
(i) The Employer shall continue to pay Executive's Base Salary for
the remaining term of this Agreement after the date of Executive's
termination, at the rate in effect on the date of his termination and on
the same periodic payment dates as payment would have been made to
Executive had the Employment Period not been terminated;
(ii) For the remaining term of this Agreement, Executive shall
continue to receive all benefits described in Section 3 existing on the
date of termination. For purposes of the application of such benefits,
Executive shall be treated as if he had remained in the employ of the
Employer with a Base Salary at the rate in effect on the date of
termination;
(iii) For purposes of any stock option plan of the Employer,
Executive shall be treated as if he had remained in the employ of the
Employer for the remaining term of this Agreement after the date of
Executive's termination so that (x) any stock options or other awards
(including restricted stock grants) of the Executive under such plan
shall continue to vest and become exercisable, and (y) Executive shall be
entitled to exercise any exercisable options or other rights;
(iv) If, in spite of the provisions above, any benefits or service
credits under any benefit plan or program of the Employer may not be paid
or provided under such plan or program to Executive, or to Executive's
dependents, beneficiaries or estate, because Executive is no longer
considered to be an employee of the Employer, the Employer shall pay or
provide for payment of such benefits and service credits to Executive, or
to Executive's dependents, beneficiaries or estate, for the remaining
term of this Agreement; and
(v) Nothing herein shall be deemed to obligate Executive to seek
other employment in the event of any such termination and any amounts
earned or benefits received from such other employment will not serve to
reduce in any way the amounts and benefits payable in accordance
herewith.
(d) Termination by the Employer for Good Reason. If (i) Executive is
-------------------------------------------
terminated for Good Reason or (ii) Executive shall voluntarily terminate his
employment hereunder (other than pursuant to Section 7(b) hereof), then the
Employment Period shall terminate as of the effective date set forth in the
written notice of such termination (the "Termination Date") and Executive
shall be entitled to receive only his Base Salary at the rate then in effect
until the Termination Date and any outstanding stock options held by Executive
shall expire in accordance with the terms of the stock option plan or option
agreement under which the stock options were granted.
(e) Definitions. The following terms shall be defined as set forth
below.
(i) A "Change-in-Control" shall be deemed to have occurred after the
effective date of this Agreement if:
(A) any Person, together with all "affiliates" and "associates"
(as such terms are defined in Rule 12b-2 under the Securities
Exchange Act of 1934 (the "Exchange Act")) of such Person, shall
become the "beneficial owner" (as such term is defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of
the Employer representing 30% or more of either (A) the combined
voting power of the Employer's then outstanding securities having
the right to vote in an election of the Employer's Board of
Directors ("Voting Securities") or (B) the then outstanding shares
of all classes of stock of the Employer (in either such case other
than as a result of the acquisition of securities directly from the
Employer); or
(B) individuals who, as of the effective date of this
Agreement, constitute the Employer's Board of Directors (the
"Incumbent Directors") cease for any reason, including, without
limitation, as a result of a tender offer, proxy contest, merger or
similar transaction, to constitute at least a majority of the
Employer's Board of Directors, provided that any person becoming a
director of the Employer subsequent to the effective date of this
Agreement whose election or nomination for election was approved by
a vote of at least a majority of the Incumbent Directors shall, for
purposes of this Agreement, be considered an Incumbent Director; or
(C) the stockholders of the Employer shall approve (1) any
consolidation or merger of the Employer or any subsidiary where the
stockholders of the Employer, immediately prior to the consolidation
or merger, would not, immediately after the consolidation or merger,
beneficially own (as such term is defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, shares representing in the
aggregate at least 60% of the voting shares of the corporation
issuing cash or securities in the consolidation or merger (or of its
ultimate parent corporation, if any), (2) any sale, lease, exchange
or other transfer (in one transaction or a series of transactions
contemplated or arranged by any party as a single plan) of all or
substantially all of the assets of the Employer or (3) any plan or
proposal for the liquidation or dissolution of the Employer;
Notwithstanding the foregoing, a "Change-in-Control" shall not be deemed
to have occurred for purposes of the foregoing clause (A) solely as the result
of an acquisition of securities by the Employer which, by reducing the number
of shares of stock or other Voting Securities outstanding, increases (x) the
proportionate number of shares of stock of the Employer beneficially owned by
any Person to 30% or more of the shares of stock then outstanding or (y) the
proportionate voting power represented by the Voting Securities beneficially
owned by any Person to 30% or more of the combined voting power of all then
outstanding Voting Securities; provided, however, that if any Person referred
to in clause (x) or (y) of this sentence shall thereafter become the
beneficial owner of any additional stock of the Employer or other Voting
Securities (other than pursuant to a share split, stock dividend, or similar
transaction), then a "Change-in-Control" shall be deemed to have occurred for
purposes of the foregoing clause (A).
(ii) A "Force Out" shall be deemed to have occurred in the event of
a Change-in-Control followed by:
(A) a change in duties, responsibilities, status or positions
with the Employer, which, in Executive's reasonable judgment, does
not represent a promotion from or maintaining of Executive's duties,
responsibilities, status or positions as in effect immediately prior
to the Change-in-Control, or any removal of Executive from or any
failure to reappoint or reelect Executive to such positions, except
in connection with the termination of Executive's employment for
Good Reason, disability, retirement or death;
(B) a reduction by the Employer in Executive's Base Salary as
in effect immediately prior to the Change-in-Control;
(C) the failure by the Employer to continue in effect any of
the benefit plans, programs or arrangements in which Executive is
participating at the time of the Change-in-Control of the Employer
(unless Executive is permitted to participate in any substitute
benefit plan, program or arrangement with substantially the same
terms and to the same extent and with the same rights as Executive
had with respect to the benefit plan, program or arrangement that is
discontinued) other than as a result of the normal expiration of any
such benefit plan, program or arrangement in accordance with its
terms as in effect at the time of the Change-in-Control, or the
taking of any action, or the failure to act, by the Employer which
would adversely affect Executive's continued participation in any of
such benefit plans, programs or arrangements on at least as
favorable a basis to Executive as is the case on the date of the
Change-in-Control or which would materially reduce Executive's
benefits in the future under any of such benefit plans, programs or
arrangements or deprive Executive of any material benefits enjoyed
by Executive at the time of the Change-in-Control;
(D) the failure by the Employer to provide and credit Executive
with the number of paid vacation days to which Executive is then
entitled in accordance with the Employer's normal vacation policies
as in effect immediately prior to the Change-in-Control;
(E) the Employer's requiring Executive to be based in an office
located beyond a reasonable commuting distance from Executive's
residence immediately prior to the Change-in-Control, except for
required travel relating to the Employer's business to an extent
substantially consistent with the business travel obligations which
Executive undertook on behalf of the Employer prior to the
Change-in-Control;
(F) the failure by the Employer to obtain from any successor to
the Employer an agreement to be bound by this Agreement pursuant to
Section 11 hereof; or
(G) any refusal by the Employer to continue to allow Executive
to attend to matters or engage in activities not directly related to
the business of the Employer which, prior to the Change-in-Control,
Executive was permitted by the Employer's Boards of Directors to
attend to or engage in.
(iii) "Good Reason" shall mean a finding by the Employer's Board of
Directors that Executive has (A) acted with gross negligence or willful
misconduct in connection with the performance of his material duties
hereunder; (B) defaulted in the performance of his material duties
hereunder and has not corrected such action within 15 days of receipt of
written notice thereof; (C) willfully acted against the best interests of
the Employer, which act has had a material and adverse impact on the
financial affairs of the Employer; or (D) been convicted of a felony or
committed a material act of common law fraud against the Employer or its
employees and such act or conviction has had, or the Employer's Board of
Directors reasonably determines will have, a material adverse effect on
the interests of the Employer; provided, however, that a finding of Good
Reason shall not become effective unless and until the Board of Directors
provides the Executive notice that it is considering making such finding
and a reasonable opportunity to be heard by the Board of Directors.
(iv) "Person" shall have the meaning used in Sections 13(d) and
14(d) of the Exchange Act; provided however, that the term "Person" shall
not include (A) any current partner of Reckson Operating Partnership,
L.P., any stockholder or employee of the Employer on the date hereof or
any estate or member of the immediate family of such a partner,
stockholder or employee, or (B) the Employer, any of its subsidiaries, or
any trustee, fiduciary or other person or entity holding securities under
any employee benefit plan of the Employer or any of its subsidiaries.
(f) Termination by Reason of Death. The Employment Period shall
--------------------------------
terminate upon Executive's death and in such event, the Employer shall pay
Executive's Base Salary for a period of six (6) months from the date of his
death, or such longer period as the Employer's Boards of Directors may
determine, to Executive's estate or to a beneficiary designated by Executive
in writing prior to his death. Any unexercised or unvested stock options shall
remain exercisable or vest upon Executive's death only to the extent provided
in the applicable option plan and option agreements.
(g) Termination by Reason of Disability. In the event that Executive
-----------------------------------
shall become unable to efficiently perform his duties hereunder because of any
physical or mental disability or illness, Executive shall be entitled to be
paid his Base Salary until the later of such time when (i) the period of
disability or illness (whether or not the same disability or illness) shall
exceed 180 consecutive days during the Employment Period and (ii) Executive
becomes eligible to receive benefits under a comprehensive disability
insurance policy obtained by the Employer (the "Disability Period"). Following
the expiration of the Disability Period, the Employer may terminate this
Agreement upon written notice of such termination. Any unexercised or unvested
stock options shall remain exercisable or vest upon such termination only to
the extent provided in the applicable option plan and option agreements.
(h) Arbitration in the Event of a Dispute Regarding the Nature of
----------------------------------------------------------------
Termination. In the event that the Employer terminates Executive's employment
- -----------
for Good Reason and Executive contends that Good Reason did not exist, the
Employer's only obligation shall be to submit such claim to arbitration before
the American Arbitration Association ("AAA"). In such a proceeding, the only
issue before the arbitrator will be whether Executive was in fact terminated
for Good Reason. If the arbitrator determines that Executive was not
terminated for Good Reason, the only remedy that the arbitrator may award is
entitlement to the severance payments and benefits specified in Paragraph
7(c), the costs of arbitration, and Executive's attorneys' fees. If the
arbitrator finds that Executive was terminated for Good Reason, the arbitrator
will be without authority to award Executive anything, the parties will each
be responsible for their own attorneys' fees, and the costs of arbitration
will be paid 50% by Executive and 50% by the Employer.
8. Noncompetition Covenant.
(a) Because Executive's services to the Employer are essential and
because Executive has access to the Employer's confidential information,
Executive covenants and agrees that (i) during the Employment Period and (ii)
in the event that this Agreement is terminated by the Employer for Good Reason
or by Executive other than pursuant to Section 7(b) hereof, during the
Noncompetition Period Executive will not, without the prior written consent of
the Board of Directors of the Employer which shall include the unanimous
consent of the Directors who are not officers of the Employer, directly or
indirectly:
(A) engage, participate or assist, as an owner, partner,
employee, consultant, director, officer, trustee or agent, in any
business that engages or attempts to engage in, directly or
indirectly, the acquisition, development, construction, operation,
management or leasing of any commercial industrial or office real
estate property anywhere in the Tri-State metropolitan area, or
(B) intentionally interfere with, disrupt or attempt to disrupt
the relationship, contractual or otherwise, between the Employer or
its affiliates and any tenant, supplier, contractor, lender,
employee or governmental agency or authority.
(b) For purposes of this Section 8, the Noncompetition Period shall
mean the period commencing on the date of termination of Executive's
employment under this Agreement and ending on the latest of (i) the third
anniversary of the effective date of this Agreement, or (ii) the first
anniversary of the date of termination of Executive's employment under this
Agreement.
(c) Notwithstanding anything contained herein to the contrary,
Executive is not prohibited by this Section 8 from (i) maintaining his
investment in any Option Property (as such term is defined in the Employer's
final prospectus relating to the initial public offering of the Employer's
Common Stock), (ii) from making investments in any entity that engages,
directly or indirectly, in the acquisition, development, construction,
operation, management or leasing of commercial industrial or office real
estate properties, regardless of where they are located, if the shares or
other ownership interests of such entity are publicly traded and Executive's
aggregate investment in such entity constitutes less than five percent (5%) of
the equity ownership of such entity, or (iii) providing services to RSI and
its affiliates.
(d) The provisions of this Section 8 shall survive the termination
of this Agreement.
9. Conflicting Agreements. Executive hereby represents and warrants that
----------------------
the execution of this Agreement and the performance of his obligations
hereunder will not breach or be in conflict with any other agreement to which
he is a party or is bound, and that he is not now subject to any covenants
against competition or similar covenants which would affect the performance of
his obligations hereunder.
10. Notices. Any notice required or permitted hereunder shall be in
-------
writing and shall be deemed sufficient when given by hand, by nationally
recognized overnight courier or by express, registered or certified mail,
postage prepaid, return receipt requested, and addressed to the Employer or
Executive, as applicable, at the address indicated above (or to such other
address as may be provided by notice).
11. Miscellaneous. This Agreement (i) constitutes the entire agreement
-------------
between the parties concerning the subject matter hereof and supersedes any
and all prior agreements or understandings, (ii) may not be assigned by
Executive without the prior written consent of the Employer, and (iii) may be
assigned by the Employer and shall be binding upon, and inure to the benefit
of, the Employer's successors and assigns. Headings herein are for convenience
of reference only and shall not define, limit or interpret the contents
hereof.
12. Amendment. This Agreement may be amended, modified or supplemented by
---------
the mutual consent of the parties in writing, but no oral amendment,
modification or supplement shall be effective.
13. Specific Enforcement. The provisions of Sections 6 and 8 of this
---------------------
Agreement are to be specifically enforced if not performed according to their
terms. Without limiting the generality of the foregoing, the parties
acknowledge that the Employer would be irreparably damaged and there would be
no adequate remedy at law for Executive's breach of Sections 6 and 8 of this
Agreement and further acknowledge that the Employer may seek entry of a
temporary restraining order or preliminary injunction, in addition to any
other remedies available at law or in equity, to enforce the provisions
thereof.
14. Severability. If a court of competent jurisdiction adjudicates any
------------
one or more of the provisions hereof as invalid, illegal or unenforceable in
any respect, such provision(s) shall be ineffective only to the extent and
duration of such invalidity, illegality or unenforceability and such
invalidity, illegality or unenforceability shall not affect the remaining
substance of such provision or any other provision of this Agreement and this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision had been limited or modified (consistent with its general intent) to
the extent necessary so that it shall be valid, legal and enforceable. If it
shall not be possible to so limit or modify such invalid, illegal or
unenforceable provision, this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein, and the
parties will use their best efforts to substitute a valid, legal and
enforceable provision which, insofar as practicable, implements the purpose
and intent of the provision originally contained herein.
15. Governing Law. This Agreement shall be construed and governed by the
-------------
laws of the State of New York.
IN WITNESS WHEREOF, this Agreement is entered into as of the date and
year first above written.
RECKSON ASSOCIATES REALTY CORP.
By: /s/ Scott Rechler
-----------------------------
Name: Scott Rechler
Title: President
/s/ Michael Maturo
----------------------------
Michael Maturo
<PAGE>
Exhibit 10.18
THIRD AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
RECKSON FS LIMITED PARTNERSHIP
THIS THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP of
Reckson FS Limited Partnership, a Delaware limited partnership (the
"Partnership"), is hereby made and entered into as of July 21, 1998, by
Reckson Financing LLC., a Delaware limited liability company, as general
partner (the "General Partner"), and Reckson Operating Partnership, L.P., a
Delaware limited partnership, as limited partner (the "Limited Partner",
together with the General Partner, the "Partners").
WHEREAS, the Partnership has been heretofore formed as a limited
partnership under the Uniform Act (as defined below), pursuant to an Agreement
of Limited Partnership of the Partnership, dated as of May 22, 1995 (the
"Original Partnership Agreement"), and a Certificate of Limited Partnership of
the Partnership, filed with the Office of the Secretary of State of the State
of Delaware on May 22, 1995;
WHEREAS, the Original Agreement was amended and restated by
the Amended and Restated Agreement of Limited Partnership of the Partnership,
dated as of June 2, 1995;
WHEREAS, the Amended and Restated Agreement of Limited Partnership
was amended and restated by the Second Amended and Restated Agreement of
Limited Partnership of the Partnership, dated as of April 30, 1997;
WHEREAS, Reckson FS Inc. has transferred its general partnership
interest in the Partnership in exchange for additional partnership units in
the Limited Partner and simultaneously the General Partner has acquired such
general partnership interests through the direction of the Limited Partner;
WHEREAS, Reckson Financing LLC (the "General Partner") shall act as
general partner of the Partnership from and after the date first written
above; and
WHEREAS, the Partners have caused to be filed an Amended and
Restated Certificate of Limited Partnership with the Secretary of State of the
State of Delaware to reflect the admission of the General Partner as the
general partner of the Partnership and the withdrawal of Reckson FS, Inc. as
general partner of the Partnership.
NOW, THEREFORE, in consideration of the mutual covenants, agreements
and premises herein set forth, the parties hereto agree as follows:
ARTICLE 1
GENERAL PROVISIONS
Section 1.1 Formation of the Limited Partnership
------------------------------------
The Partnership has been formed as a limited partnership under and
pursuant to the Delaware Revised Uniform Limited Partnership Act, as amended
from time to time (the "Uniform Act"). The name of the Partnership is "Reckson
FS Limited Partnership". All business of the Partnership shall be conducted
under the Partnership name.
Section 1.2 Registered Office and Agent; Principal
--------------------------------------
Office
------
The registered office of the Partnership in the State of Delaware is
located at 1209 Orange Street, Wilmington, New Castle County, Delaware 19801,
and the registered agent for service of process on the Partnership in the
State of Delaware at such address is The Corporation Trust Company. The
principal office of the Partnership is 225 Broadhollow Road, Melville, New
York 11747, or such other place as the General Partner may from time to time
designate. The Partnership may maintain offices at such other place or places
within or outside the States of Delaware and New York as the General Partner
deems advisable.
Section 1.3 Purpose of the Partnership
-------------------------
The Partnership may engage in any lawful act or business activity for which
partnerships may be organized under the laws of the State of Delaware,
including:
A. acquiring, owning, improving, developing, constructing, leasing,
operating, financing and refinancing, holding, guaranteeing borrowings and/or
granting security interests in connection with borrowings, mortgaging,
selling, disposing of, exchanging or otherwise dealing in or with commercial
real property; and
B. entering into, or modifying, contractual arrangements for the
management of real estate and real estate-related assets in connection with
any of the foregoing.
Section 1.4 Liability of Partners
---------------------
A. The General Partner shall have such liability for the repayment,
satisfaction and discharge of the debts, liabilities and obligations of the
Partnership as is provided by the Uniform Act for the general partners of a
limited partnership.
B. Except as otherwise expressly required by law, the Limited
Partner, in its capacity as such, shall have no liability in excess of (i) the
amount of its capital contributions to the Partnership, (ii) its share of any
undistributed profits and assets of the Partnership, (iii) its obligation to
make other payments expressly provided for in this Agreement, and (iv) the
amount of any distribution wrongfully distributed to it. The Limited Partner
shall not otherwise be liable to the Partnership for the repayment,
satisfaction, or discharge of the Partnership's debts, liabilities, and
obligations. The Limited Partner shall not have any obligation to contribute
money or property in excess of its obligations to the Partnership, nor shall
it be personally liable to any third party for any liability or other
obligation of the Partnership.
Section 1.5 Continuations as Partners
-------------------------
On the date hereof, upon execution and delivery of this Agreement,
Reckson Financing LLC shall hereafter act as the general partner of the
Partnership, and the Limited Partner shall continue as the limited partner of
the Partnership.
ARTICLE 2
MANAGEMENT OF PARTNERSHIP
Section 2.1 Management
----------
Except as otherwise expressly provided in this Agreement, the
General Partner shall have complete and exclusive discretion in the management
and control of the affairs and business of the Partnership and shall have all
powers necessary, convenient, appropriate or incidental to carry out the
purposes, conduct the business and exercise the powers of the Partnership. The
General Partner shall possess and enjoy with respect to the Partnership all of
the rights and powers of a partner of a partnership without limited partners
to the extent permitted by Delaware law. The General Partner shall conduct the
business of the Partnership in accordance with this Agreement and the Uniform
Act.
ARTICLE 3
CAPITAL CONTRIBUTIONS
Section 3.1 Capital Contributions
---------------------
The Partners contributed capital to the Partnership at the time of
the execution of the Amended and Restated Agreement of Limited Partnership.
The Partners may agree from time to time to contribute additional capital to
the Partnership.
ARTICLE 4
CAPITAL ACCOUNTS; PROFITS AND LOSSES; DISTRIBUTIONS
Section 4.1 Establishment and Maintenance of Capital Accounts
-------------------------------------------------
A separate capital account (each, a "Capital Account") shall be
maintained for each Partner in accordance with the rules of Treasury
Regulations Section 1.704-1(b)(2)(iv), and this Section 4.1 shall be
interpreted and applied in a manner consistent therewith. Whenever the
Partnership would be permitted to adjust the Capital Accounts of the Partners
pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(f) to reflect
revaluations of Partnership property, the General Partner may cause the
Partnership to so adjust the Capital Accounts of the Partners.
Section 4.2 Allocation of Profits and Losses
--------------------------------
(a) Except as otherwise provided in this Article 4, all book profits
and losses of the Partnership shall be allocated one percent (1%) to the
General Partner and ninety-nine percent (99%) to the Limited Partner. For this
purpose, book profits and losses shall be the taxable income or loss of the
Partnership as determined for federal income tax purposes increased by the
amount, if any, of tax-exempt income received or accrued by the Partnership
and reduced by the amount, if any, of all expenditures of the Partnership
described in Section 705(a)(2)(B) of the Internal Revenue Code of 1986, as
amended (the "Code") (including expenditures treated as so described under
Treasury Regulations Section 1.704-1(b)(2)(iv)(i)).
(b) In the event that the book value of any property shall differ
from its adjusted basis for federal income tax purposes, either because the
value of such property differs from its adjusted basis upon its contribution
to the Partnership or as the result of a revaluation of the property in
accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(f),
depreciation, depletion, amortization and gain or loss with respect to such
property, as computed for purposes of calculating book profits and losses,
shall be determined in accordance with Treasury Regulations Section
1.704-1(b)(2)(iv)(g).
Section 4.3 Limitation on Losses
--------------------
No allocation shall be made pursuant to this Article 4 to the extent
that it shall cause or increase a deficit balance in any Partner's Capital
Account in excess of such Partner's obligation (including any deemed
obligation under the Treasury Regulations), if any, to restore a deficit in
its Capital Account as of the end of the Partnership taxable year to which
such allocation relates (an "Adjusted Deficit Balance"). In determining
whether a Partner has an Adjusted Deficit Balance, a Partner's Capital Account
shall be reduced by the amounts described in Treasury Regulations Section
1.704-1(b)(2)(ii)(d)(4), (5) and (6). Any items of deduction and loss in
excess of the limitations set forth in this Section 4.3 shall be allocated to
the General Partner.
Section 4.4 Partnership Minimum Gain Chargeback
-----------------------------------
Notwithstanding any other provisions of this Article 4, in the event
that there is a net decrease in Partnership Minimum Gain during a Partnership
taxable year, the Partners shall be allocated items of income and gain in
accordance with Treasury Regulations Section 1.704-2(f). For purposes of this
Article 4, the term "Partnership Minimum Gain" shall have the meaning set
forth in Treasury Regulations Section 1.704-2(b)(2), and any Partner's share
of Partnership Minimum Gain shall be determined in accordance with Treasury
Regulations Section 1.704-2(g). This Section 4.4 is intended to comply with
the minimum gain chargeback requirement of Treasury Regulations Section
1.704-2(f) and shall be interpreted and applied in a manner consistent
therewith.
Section 4.5 Partner Nonrecourse Debt
------------------------
Notwithstanding any other provisions of this Article 4 (other than
Section 4.4), to the extent required by Treasury Regulations Section
1.704-2(i), any items of income, gain, deduction and loss of the Partnership
that are attributable to a nonrecourse debt of the Partnership that
constitutes "partner nonrecourse debt" as defined in Treasury Regulations
Section 1.704-2(b)(4) shall be allocated in accordance with the provisions of
Treasury Regulations Section 1.704-2(i). The allocations required by this
Section 4.5 shall include, without limitation, chargebacks of partner
nonrecourse debt minimum gain in accordance with Treasury Regulations Section
1.704-2(i)(4).
Section 4.6 Qualified Income Offset
-----------------------
Any Partner who unexpectedly receives an adjustment, allocation or
distribution described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4),
(5) or (6) shall be allocated items of income and gain in an amount and manner
sufficient to eliminate as quickly as possible, to the extent required under
the rules in Treasury Regulations Section 1.704-1(b)(2)(ii)(d), any resulting
Adjusted Deficit Balance, calculated after taking into account the allocations
in Section 4.4. This Section 4.6 is intended to constitute a qualified income
offset under Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted and applied in a manner consistent therewith. Section 4.7 Curative
Allocations.
Section 4.7 Curative Allocations
--------------------
Notwithstanding any other provision of this Article 4, the special
allocations set forth in Sections 4.3, 4.4, 4.5 and 4.6 of this Agreement
shall be taken into account in allocating other items of partnership income,
deduction and loss among the Partners so that, to the maximum extent possible,
the net amount of such allocations of other items of income, deduction and
loss and such special allocations shall be equal to the net amount that would
have been allocated to such Partner if the special allocations had not
occurred.
Section 4.8 Tax Allocations
---------------
Solely for income tax purposes, each item of income, gain, loss and
deduction of the Partnership shall be allocated among the Partners in the same
manner as its correlative item of book income, gain, loss or deduction is
allocated under this Article 4 (taking into account the special allocations
set forth in Sections 4.3 through 4.7), subject to the rules of Section
704(c)(1)(A) of the Code and the Treasury Regulations promulgated thereunder
and Treasury Regulations Section 1.704-1(b)(4)(i).
Section 4.9 Operating Distributions
-----------------------
The General Partner may, but shall not be obligated to, distribute
all or any portion of cash from operations to each of the Partners. Any such
distributions shall be made 1% to the General Partner and 99% to the Limited
Partner. Notwithstanding any provision to the contrary contained in this
Agreement, the Partnership, and the General Partner on behalf of the
Partnership, shall not make a distribution to any Partner on account of its
interest in the Partnership if such distribution would violate Section 17-607
of the Uniform Act or other applicable law.
Section 4.10 Distributions upon Liquidation
------------------------------
After payment (or the making of reasonable provision for the
payment) of all liabilities of the Partnership, all net proceeds from the sale
of the Partnership's property upon liquidation of the Partnership and all
other assets of the Partnership shall be distributed to the Partners in
accordance with their positive Capital Account balances in compliance with
Treasury Regulations Section 1.704-1(b)(2)(ii)(b)(2). If any properties of the
Partnership are to be distributed in kind, such properties shall be
distributed on the basis of the fair market value thereof. The liquidator, as
defined in Section 6.2 below, shall use its best efforts to distribute such
properties to the Limited Partner. The fair market value of such properties
shall be determined by the liquidator in its reasonable discretion. In the
event a Partner's interest (but not the Partnership itself) is liquidated
within the meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(g), any
liquidating distributions to such Partner shall be made in accordance with
Treasury Regulations Section 1.704-1(b)(2)(ii)(b)(2).
Section 4.11 Property Contributed as Security. Notwithstanding any
--------------------------------
other provisions of this Article 4, to the extent property is contributed to
the Partnership by the Limited Partner without any corresponding contribution
by the General Partner, all profits, losses and distributions attributable to
such property shall be made 100% to the Limited Partner.
ARTICLE 5
TRANSFERS AND WITHDRAWALS
Section 5.1 Transfer of General Partner's Partnership Interest
--------------------------------------------------
The General Partner may transfer its interest or withdraw as General
Partner upon 60 days' notice to the Limited Partner.
Section 5.2 Additional or Substituted Limited Partners
------------------------------------------
The Limited Partner may assign or transfer its interest in the
Partnership with the consent of the General Partner.
ARTICLE 6
DISSOLUTION AND WINDING UP AFFAIRS
Section 6.1 Dissolution
-----------
The Partnership shall be dissolved and its affairs wound up upon the
happening of any one of the following dissolution events:
(a) the withdrawal, removal, dissolution, insolvency, bankruptcy or
other event of withdrawal of the General Partner or the occurrence of an event
that causes the General Partner to cease to be a general partner of the
Partnership under the Uniform Act unless, (i) at the time, there is at least
one other general partner of the Partnership and such general partner or a
majority of such general partners, if more than one, agrees to continue the
business of the Partnership and said general partner or partners of the
Partnership continue the business of the Partnership, or (ii) within ninety
(90) days after the occurrence of such event, not less than a majority in
interest of the remaining Partners (or such greater percentage in interest as
is required by the Uniform Act) agree in writing to continue the business of
the Partnership and to the appointment, effective as of the date of such
event, if required, of one or more additional general partners of the
Partnership;
(b) an agreement in writing by the Limited Partner and the General
Partner that the Partnership should be dissolved in accordance with applicable
state law;
(c) except as otherwise provided herein, the occurrence of any event
which, under the Uniform Act, mandates the dissolution of the Partnership; and
(d) the expiration of the term of the Partnership specified in
Section 8.2 of this Agreement.
Section 6.2 Winding Up
----------
In the event of the dissolution of the Partnership for any reason,
the "liquidator" (which shall be the General Partner unless dissolution occurs
due to an event specified in Section 6.1(a), in which case the liquidator
shall be the person selected by the Limited Partner) shall commence to wind up
the affairs of the Partnership and to liquidate or distribute its assets as
soon as is reasonably practicable in a prudent business manner. The liquidator
shall have the right to manage the business of the Partnership in accordance
with the terms hereof during the winding up period and to determine in good
faith the time, manner and terms of any sale or sales of Partnership property
pursuant to such liquidation.
Section 6.3 Distribution Upon Dissolution and Termination
---------------------------------------------
Distributions upon dissolution and liquidation of the Partnership
shall be made in accordance with Section 4.10.
ARTICLE 7
EXCULPATION AND INDEMNIFICATION
Section 7.1 Exculpatory Provisions
----------------------
(a) Notwithstanding any other terms of this Agreement, whether
express or implied, or obligation or duty at law or in equity, neither the
General Partner, its affiliates, nor any of their respective officers,
directors, shareholders, partners, employees, representatives or agents nor
any officer, employee, representative or agent of the Partnership and its
affiliates (individually, a "Covered Person" and collectively, the "Covered
Persons") shall be liable to the Partnership or any Partner for any act or
omission (in relation to the Partnership, this Agreement, any related document
or any transaction or investment contemplated hereby or thereby) taken or
omitted in good faith by a Covered Person and in the reasonable belief that
such act or omission is in or is not contrary to the best interests of the
Partnership and is within the scope of authority granted to such Covered
Person by this Agreement, provided that such act or omission does not
constitute fraud, willful misconduct, bad faith or gross negligence
("Disabling Conduct").
(b) A Covered Person may rely and shall incur no liability in acting
or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond, debenture,
paper, document, signature or writing reasonably believed by it to be genuine,
and may rely on a certificate signed by an officer of any Person in order to
ascertain any fact with respect to such Person or within such Person's
knowledge and may rely on an opinion of counsel selected by such Covered
Person with respect to legal matters unless such Covered Person acts in bad
faith.
Section 7.2 Indemnification
---------------
(a) To the fullest extent permitted by law, the Partnership shall
indemnify and hold harmless the General Partner, its affiliates and all
directors, officers, shareholders, partners, employees, representatives and
agents of the General Partner and its affiliates and all officers, employees,
representatives and agents of the Partnership and its affiliates
(individually, an "Indemnified Person" and collectively, the "Indemnified
Persons") from and against any and all losses, claims, demands, liabilities,
expenses (including all fees and expenses), judgements, fines, settlements,
and other amounts arising from any and all claims, demands, actions, suits or
proceedings, civil, criminal, administrative or investigative, in which the
Indemnified Person may be involved, or threatened to be involved, as a party
or otherwise, by reason of its management of the affairs of the Partnership,
or the General Partner or its status as a General Partner, an affiliate
thereof, or partner, director, officer, stockholder, employee, representative
or agent thereof or of the Partnership or a person serving at the request of
the Partnership, the General Partner or any affiliate thereof in another
entity in a similar capacity, which relates to or arises out of the
Partnership, its property, its business or affairs, and regardless of whether
the liability or expense accrued at or relates to, in whole or in part, any
time before, on or after the date hereof. The negative disposition of any
action, suit or proceeding by judgment, order, settlement, conviction or upon
a plea of nolo contendere, or its equivalent, shall not, of itself, create a
presumption that the Indemnified Person acted in a manner contrary to the
standard set forth in Section 7.2(b) below. Any indemnification pursuant to
this Section 7.2 shall be made only out of the assets of the Partnership.
(b) An Indemnified Person shall not be entitled to indemnification under
this Section 7.2 with respect to any claim, issue or matter in which it has
engaged in Disabling Conduct; provided, however, that a court of competent
jurisdiction may determine upon application that, despite such Disabling
Conduct, in view of all the circumstances of the case, the Indemnified Person
is fairly and reasonably entitled to indemnification for such liabilities and
expenses as the court may deem proper.
(c) To the fullest extent permitted by law, expenses (including legal
fees) incurred by an Indemnified Person in defending any claim, demand,
action, suit or proceeding shall, from time to time, be advanced by the
Partnership prior to the final disposition of such claim, demand, action, suit
or proceeding upon receipt by the Partnership of an undertaking by or on
behalf of the Indemnified Person to repay such amount if it shall be
determined that the Indemnified Person is not entitled to be indemnified as
authorized in this Section 7.2.
(d) The indemnification provided by this Section 7.2 shall be in addition
to any other rights to which an Indemnified Person may be entitled under any
agreement, by law or vote of the Partners as a matter of law or otherwise,
both as to action in the Indemnified Person's capacity as the General Partner,
an affiliate thereof or a partner, director, officer, stockholder, partner,
representative, employee or agent thereof, or an officer, employee,
representative or agent of the Partnership or an affiliate thereof and, as to
action in any other capacity, shall continue as to an Indemnified Person who
has ceased to serve in such capacity and shall inure to the benefit of the
heirs, successors, assigns and administrators of an Indemnified Person.
(e) The General Partner and the Partnership may purchase and maintain
insurance, to the extent and in such amounts as the General Partner shall, in
its sole discretion, deem reasonable, on behalf of Indemnified Persons and
such other Persons as the General Partner shall determine, against any
liability that may be asserted against or expenses that may be incurred by
such person in connection with activities of the Partnership or such
indemnities, regardless of whether the Partnership would have the power to
indemnify such Person against such liability under the provisions of this
Agreement. The General Partner and the Partnership may enter into indemnity
contracts with Indemnified Persons and adopt written procedures pursuant to
which arrangements are made for the advancement of expenses and the funding of
obligations under this Section 7.2 and containing such other procedures
regarding indemnification as are appropriate.
(f) In no event may an Indemnified Person subject the Limited Partners to
personal liability by reason of any indemnification of an Indemnified Person
under this Agreement or otherwise.
(g) An Indemnified Person shall not be denied indemnification in whole or
in part under this Section 7.2 because the Indemnified Person had an interest
in the transaction with respect to which the indemnification applies if the
transaction is otherwise permitted by the terms of this Agreement.
(h) The provisions of this Section 7.2 are for the benefit of the
indemnified Persons and their heirs, successors, assigns, administrators and
personal representatives and shall not be deemed to be for the benefit of any
other Persons. The provisions of this Section 7.2 shall not be amended in any
way that would adversely affect the Indemnified Person without the consent of
the Indemnified Person.
7.3 Duties of a General Partner and Others Controlling a General
------------------------------------------------------------
Partner
- ------
To the extent that, at law or in equity, an Indemnified Person has
duties (including fiduciary duties) and liabilities relating thereto to the
Partnership or to the Partners, the General Partner and any other Indemnified
Person acting in connection with the Partnership's business or affairs, shall
not be liable to the Partnership or to any Partner for its good faith reliance
on the provisions of this Agreement. The provisions of this Agreement, to the
extent that they restrict the duties and liabilities of an Indemnified Person
otherwise existing at law or in equity, are agreed by the Partners to replace
such other duties and liabilities of such Indemnified Person.
ARTICLE 8
MISCELLANEOUS
Section 8.1 Books and Records
-----------------
The Partnership shall maintain its records and books of account
separate from those of any other person or entity (including Reckson
Associates Realty Corp., Reckson Financing LLC and Reckson Operating
Partnership, L.P.).
Section 8.2 Term
----
The term of the Partnership commenced on the date the Certificate of
Limited Partnership relating to the Partnership was filed in the office of the
Secretary of State of Delaware in accordance with the Uniform Act and shall
continue until December 31, 2045 unless sooner dissolved and terminated
pursuant to the provisions of this Agreement.
Section 8.3 Amendments
----------
This Agreement may be amended only in a writing signed by each of
the partners of the Partnership.
Section 8.4 Binding Effect
--------------
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
Section 8.5 Counterparts
------------
This Agreement may be executed in counterparts, all of which
together shall constitute one agreement binding on all the parties hereto,
notwithstanding that all such parties are not signatories to the original or
the same counterpart. Each party shall become bound by this Agreement
immediately upon affixing its signature hereto.
Section 8.6 Applicable Law
--------------
This Agreement shall be construed and enforced in accordance with
and governed by the laws of the State of Delaware, without regard to the
principles of conflicts of law.
Section 8.7 Invalidity of Provisions
------------------------
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
Section 8.8 Entire Agreement
----------------
This Agreement contains the entire understanding and agreement among
the Partners with respect to the subject matter hereof and supersedes any
other prior written or oral understandings or agreements among them with
respect thereto.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
GENERAL PARTNER
RECKSON FINANCING LLC
By: Reckson Operating Partnership, L.P.,
Its Sole Member
By: Reckson Associates Realty Corp.,
Its General Partner
By: /s/ Scott Rechler
----------------------------------
Name: Scott Rechler
Title: President
LIMITED PARTNER
RECKSON OPERATING PARTNERSHIP, L.P.
By: Reckson Associates Realty Corp.,
Its General Partner
By: /s/ Scott Rechler
-------------------------------------
Name: Scott Rechler
Title: President
<PAGE>
EXHIBIT 10.24
SEVERANCE AGREEMENT
SEVERANCE AGREEMENT, dated as of the 25th day of February, 1998 (the
"Agreement") by and between Donald J. Rechler (the "Executive"), and Reckson
Associates Realty Corp., a Maryland corporation with a principal place of
business at 225 Broadhollow Road, Melville, New York 11747 (the "Employer").
Terms used in this Agreement with the initial letter capitalized shall,
unless otherwise defined herein, have the meanings specified in the Employment
and Noncompetition Agreement, dated June 2, 1995, between the Employer and the
Executive and in any amendment to or restatement of such agreement (the
"Employment Agreement").
W I T N E S S E T H :
WHEREAS, Executive and Employer have previously entered into the
Employment Agreement; and
WHEREAS, the Employer desires to continue to employ the Executive and the
Executive desires to continue to be employed by the Employer.
NOW THEREFORE, in consideration of the premises and subject to the terms
and conditions set forth herein, the parties hereto agree as follows:
Employment and Noncompetition Agreement. This Agreement is supplementary
to and, except as explicitly set forth herein, does not limit or alter any of
the terms and conditions established under the Employment Agreement.
Term. The term and duration of this Agreement shall be identical to the
term of the Employment Agreement, provided, however, that if a Change-in-Control
shall occur during the Employment Period, the term of this Agreement, the
Employment Agreement and the Employment Period shall continue in effect until
the later of (i) the date on which the term of the Employment Agreement
otherwise would have ended or (ii) the date which is thirty-six months beyond
the end of the calendar year in which the Change-in-Control occurs. Section 1
of the Employment Agreement is hereby amended in accordance with the foregoing.
Termination and Severance Payments. Sections 7(a), (b) and (c) of the
Employment Agreement are hereby superseded in their entirety by this Section 3.
At-Will Employment. Executive's employment pursuant to the Employment
Agreement is "at will" and may be terminated by the Employer at any time with or
without Good Reason, by a majority vote of all of the members of the Board of
Directors of the Employer upon written notice to Executive, subject only to the
severance provisions specifically set forth in this Section 3 and in Sections 7
(d) through 7(h) of the Employment Agreement.
Termination by Executive. The Employment Period and Executive's
employment under the Employment Agreement may be terminated effective
immediately by Executive by written notice to the Board of Directors of the
Employer (i) within 30 days of the occurrence of a failure of the Board of
Directors of the Employer to elect Executive to offices with the same or
substantially the same duties and responsibilities as set forth in Section 2 of
the Employment Agreement, (ii) within 30 days of the occurrence of a material
failure by the Employer to comply with the provisions of Section 3 of the
Employment Agreement or a material breach by the Employer of any other
provision of the Employment Agreement, or (iii) at any time during the 30 day
period beginning on the effective date of a Change in Control and the 30 day
period beginning one year after the effective date of a Change-in-Control.
Certain Benefits upon Termination by Executive. Except as specifically
provided in this Section 3 or in Sections 7(d) through 7(h) of the Employment
Agreement or as otherwise required by law, all compensation and benefits to
Executive under the Employment Agreement shall terminate on the date of
termination of the Employment Period. Notwithstanding the foregoing, if the
Employment Period is terminated pursuant to Section 3(b) or if Executive's
employment is terminated by the Employer other than for Good Reason, Executive
shall be entitled to the following benefits:
The Employer shall pay the Executive (x) his or her full Base Salary
though the date of termination at the rate in effect on such date, (y)
compensation for accrued but unused vacation time, plus (z) a pro rata portion
of the Executive's incentive compensation for the calendar year in which the
event of termination occurs, assuming that the Executive would have received
incentive compensation for such full calendar year equal to the product of (A)
the Base Salary that would be payable to the Executive pursuant to subsection 3
(a) of the Employment Agreement for such full calendar year and (B) the greater
of (a) 1/2 or (b) a percentage equal to the percentage of the Executive's Base
Salary for the immediately preceding fiscal year that was paid to the Executive
as incentive compensation (including all cash and other incentive compensation,
and including shares of Common Stock) for the immediately preceding fiscal year,
expressed as a percentage (the greater of clauses (a) and (b) being herein
referred to as the "Deemed Bonus Percentage");
The Employer shall pay as severance to the Executive, not later than the
tenth day following the date of termination, a lump sum severance payment (the
"Severance Payment") equal to the aggregate of all compensation due to the
Executive hereunder had his or her employment not been so terminated (without
duplication of subsection 3(c)(i) above), including, without limitation, all
incentive compensation which would have been due to the Executive pursuant to
subsection 3(b) of the Employment Agreement, through the expiration of this
Agreement (as such Agreement may continue in effect under Section 2 hereof in
the event of a Change-in-Control) assuming that the Executive would have
received incentive compensation for each calendar year through the expiration
of this Agreement (as such Agreement may continue in effect under Section 2
hereof in the event of a Change-in-Control) equal to the product of (A) the
Base Salary payable to the Executive pursuant to subsection 3(a) of the
Employment Agreement for each such calendar year and (B) the Deemed Bonus
Percentage; provided, however, that such Severance Payment shall not be payable
to the Executive until (x) the Executive has executed and delivered to the
Employer a general release in a form to be determined by the Employer in good
faith, and (y) any applicable revocation period with respect to such release
has expired. For purposes of determining Executive's annual compensation in
the preceding sentence, compensation payable to the Executive by the Employer
12345678901234567890123456789012345678901234567890123456789012345678901234567890
shall include every type and form of compensation includible in the Executive's
gross income in respect of his or her employment by the Employer (including,
without limitation, all income reported on an Internal Revenue Service Form
W-2), compensation income recognized as a result of the Executive's exercise of
stock options or sale of the stock so acquired and including, without
limitation, any annual incentive compensation paid in cash or securities to such
Executive;
An amount equal to the Additional Amount pursuant to Section 5 below;
For the remaining term of the Employment Agreement, Executive shall
continue to receive all benefits described in Section 3 of the Employment
Agreement existing on the date of termination and any other benefits then
provided by Employer to Executive in addition to those described in Section 3 of
the Employment Agreement, including, but not limited to, the life insurance
coverage provided by Employer to Executive and the automobile provided by
Employer to Executive and automobile insurance and maintenance in respect of
such automobile. For purposes of the application of such benefits, Executive
shall be treated as if he or she had remained in the employ of the Employer with
a Base Salary at the rate in effect on the date of termination;
For purposes of any stock option plan of the Employer, (x) any stock
options or other awards (including restricted stock grants) of the Executive
under such plan shall vest and become exercisable upon any such termination,
and (y) Executive shall be treated as if he or she had remained in the employ of
the Employer for the remaining term of the Employment Agreement after the date
of Executive's termination so that Executive shall be entitled to exercise any
exercisable options or other rights;
For purposes of any section 401(k) plan or other deferred compensation
plan of the Employer, Executive shall be treated as if he or she had remained in
the employ of the Employer for the remaining term of the Employment Agreement
after the date of Executive's termination so that Executive may continue to
receive all matching contributions as provided by the Employer in connection
with such plan or any other contributions by Employer in connection with such
plan as in effect immediately prior to such termination;
The amount of any outstanding loans made by the Employer to the Executive
to acquire shares of Common Stock or units of limited partnership interest in
Reckson Operating Partnership, L.P., together with any interest accrued on any
such loans, and any related "tax" loans made by the Employer to the Executive in
respect of tax liabilities owing as the result of the forgiveness of such loans
(including forgiveness pursuant to the terms of this Section 3(c)(vii)),
together with any interest accrued on any such tax loans, shall be deemed
forgiven and Executive shall have no further liability in respect thereof;
If, in spite of the provisions above, any benefits or service credits
under any benefit plan or program of the Employer may not be paid or provided
under such plan or program to Executive, or to Executive's dependents,
beneficiaries or estate, because Executive is no longer considered to be an
employee of the Employer, the Employer shall pay or provide for payment of such
benefits and service credits to Executive, or to Executive's dependents,
beneficiaries or estate, for the remaining term of the Employment Agreement;
and
Nothing herein shall be deemed to obligate Executive to seek other
employment in the event of any such termination and any amounts earned or
benefits received from such other employment will not serve to reduce in any way
the amounts and benefits payable in accordance herewith.
Expenses. Section 3(e) of the Employment Agreement is hereby amended by
this Section 4. In addition to the expenses referred to in Section 3(e) of the
Employment Agreement, the Employer shall pay all legal fees and related expenses
(including the costs of experts, evidence and counsel) incurred by the Executive
as they become due as a result of (i) the termination of the Employment Period
or Executive's employment pursuant to this Agreement or the Employment Agreement
(including all such fees and expenses, if any, incurred in contesting or
disputing any such termination), (ii) the Executive seeking to obtain or enforce
any right or benefit provided by this Agreement, the Employment Agreement or by
any other plan or arrangement maintained by the Employer under which the
Executive is or may be entitled to receive benefits or (iii) any action taken by
the Employer against the Executive, unless and until such time that a final
judgement has been rendered in favor of the Employer and all appeals related to
any such action have been exhausted; provided however, that the circumstances
set forth above occurred on or after a Change-in-Control.
Additional Amount. Whether or not Section 3 is applicable, if in the
opinion of tax counsel selected by the Executive and reasonably acceptable to
the Employer, the Executive has or will receive any compensation or recognize
any income (whether or not pursuant to this Agreement, the Employment Agreement
or any plan or other arrangement of the Employer and whether or not the
Employment Period or the Executive's employment with the Employer has
terminated) which will constitute an "excess parachute payment" within the
meaning of Section 280G(b)(1) of the Code (or for which a tax is otherwise
payable under Section 4999 of the Code), then the Employer shall pay the
Executive an additional amount (the "Additional Amount") equal to the sum of
(i) all taxes payable by the Executive under Section 4999 of the Code with
respect to all such excess parachute payments and any such Additional Amount,
plus (ii) all federal, state and local income taxes payable by Executive with
respect to any such Additional Amount. Any amounts payable pursuant to this
Section 4 shall be paid by the Employer to the Executive within 30 days of each
written request therefor made by the Executive.
Income Tax Payment. Whether or not Section 3 is applicable, if (i) the
Executive has or will receive any compensation or recognize any income (whether
or not pursuant to this Agreement, the Employment Agreement or any plan or other
arrangement of the Employer and whether or not the Employment Period or the
Executive's employment with the Employer has terminated) in connection with a
"Change-in-Control" (as that term may be interpreted in this Agreement, the
Employment Agreement or any plan or other arrangement of the Employer), and
(ii) such compensation or income represents non-cash compensation or income
(including, without limitation, non-cash compensation or income attributable to
the vesting or exercise of stock options and other awards (including restricted
stock grants) under any stock option plan of the Employer), then the Employer
shall pay the Executive in cash an amount (the "Income Tax Payment") equal to
all federal, state and local income taxes payable by Executive with respect to
such non-cash compensation or income. The Income Tax Payment shall be paid by
the Employer to the Executive within 30 days of the written request therefor
made by the Executive.
Notices. Any notice required or permitted hereunder shall be in writing
and shall be deemed sufficient when given by hand, by nationally recognized
overnight courier or by express, registered or certified mail, postage prepaid,
return receipt requested, and addressed to the Employer or Executive, as
applicable, at the address indicated above (or to such other address as may be
provided by notice).
Miscellaneous. This Agreement (i) may not be assigned by Executive
without the prior written consent of the Employer and (ii) may be assigned by
the Employer and shall be binding upon, and inure to the benefit of, the
Employer's successors and assigns. Headings herein are for convenience of
reference only and shall not define, limit or interpret the contents hereof.
Amendment. This Agreement may be amended, modified or supplemented by the
mutual consent of the parties in writing, but no oral amendment, modification or
supplement shall be effective.
Severability. If a court of competent jurisdiction adjudicates any one or
more of the provisions hereof as invalid, illegal or unenforceable in any
respect, such provision(s) shall be ineffective only to the extent and duration
of such invalidity, illegality or unenforceability and such invalidity,
illegality or unenforceability shall not affect the remaining substance of such
provision or any other provision of this Agreement and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had been
limited or modified (consistent with its general intent) to the extent
necessary so that it shall be valid, legal and enforceable. If it shall not be
possible to so limit or modify such invalid, illegal or unenforceable provision,
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein, and the parties will use their best
efforts to substitute a valid, legal and enforceable provision which, insofar
as practicable, implements the purpose and intent of the provision originally
contained herein.
Governing Law. This Agreement shall be construed and governed by the laws
of the State of New York.
IN WITNESS WHEREOF, this Agreement is entered into as of the date and year
first above written.
RECKSON ASSOCIATES REALTY CORP.
By: /s/ Scott Rechler
-----------------------
Name: Scott Rechler
Title: President
By: /s/ Donald J. Rechler
-----------------------
Donald J. Rechler
<PAGE>
EXHIBIT 10.25
SEVERANCE AGREEMENT
SEVERANCE AGREEMENT, dated as of the 25th day of February, 1998 (the
"Agreement") by and between Scott H. Rechler (the "Executive"), and Reckson
Associates Realty Corp., a Maryland corporation with a principal place of
business at 225 Broadhollow Road, Melville, New York 11747 (the "Employer").
Terms used in this Agreement with the initial letter capitalized shall,
unless otherwise defined herein, have the meanings specified in the Employment
and Noncompetition Agreement, dated June 2, 1995, between the Employer and the
Executive and in any amendment to or restatement of such agreement (the
"Employment Agreement").
W I T N E S S E T H :
WHEREAS, Executive and Employer have previously entered into the
Employment Agreement; and
WHEREAS, the Employer desires to continue to employ the Executive and the
Executive desires to continue to be employed by the Employer.
NOW THEREFORE, in consideration of the premises and subject to the terms
and conditions set forth herein, the parties hereto agree as follows:
Employment and Noncompetition Agreement. This Agreement is supplementary
to and, except as explicitly set forth herein, does not limit or alter any of
the terms and conditions established under the Employment Agreement.
Term. The term and duration of this Agreement shall be identical to the
term of the Employment Agreement, provided, however, that if a Change-in-Control
shall occur during the Employment Period, the term of this Agreement, the
Employment Agreement and the Employment Period shall continue in effect until
the later of (i) the date on which the term of the Employment Agreement
otherwise would have ended or (ii) the date which is thirty-six months beyond
the end of the calendar year in which the Change-in-Control occurs. Section 1
of the Employment Agreement is hereby amended in accordance with the foregoing.
Termination and Severance Payments. Sections 7(a), (b) and (c) of the
Employment Agreement are hereby superseded in their entirety by this Section 3.
At-Will Employment. Executive's employment pursuant to the Employment
Agreement is "at will" and may be terminated by the Employer at any time with or
without Good Reason, by a majority vote of all of the members of the Board of
Directors of the Employer upon written notice to Executive, subject only to the
severance provisions specifically set forth in this Section 3 and in Sections
7(d) through 7(h) of the Employment Agreement.
Termination by Executive. The Employment Period and Executive's
employment under the Employment Agreement may be terminated effective
immediately by Executive by written notice to the Board of Directors of the
Employer (i) within 30 days of the occurrence of a failure of the Board of
Directors of the Employer to elect Executive to offices with the same or
substantially the same duties and responsibilities as set forth in Section 2 of
the Employment Agreement, (ii) within 30 days of the occurrence of a material
failure by the Employer to comply with the provisions of Section 3 of the
Employment Agreement or a material breach by the Employer of any other
provision of the Employment Agreement, or (iii) at any time during the 30 day
period beginning on the effective date of a Change in Control and the 30 day
period beginning one year after the effective date of a Change-in-Control.
Certain Benefits upon Termination by Executive. Except as specifically
provided in this Section 3 or in Sections 7(d) through 7(h) of the Employment
Agreement or as otherwise required by law, all compensation and benefits to
Executive under the Employment Agreement shall terminate on the date of
termination of the Employment Period. Notwithstanding the foregoing, if the
Employment Period is terminated pursuant to Section 3(b) or if Executive's
employment is terminated by the Employer other than for Good Reason, Executive
shall be entitled to the following benefits:
The Employer shall pay the Executive (x) his or her full Base Salary
though the date of termination at the rate in effect on such date, (y)
compensation for accrued but unused vacation time, plus (z) a pro rata portion
of the Executive's incentive compensation for the calendar year in which the
event of termination occurs, assuming that the Executive would have received
incentive compensation for such full calendar year equal to the product of (A)
the Base Salary that would be payable to the Executive pursuant to subsection
3(a) of the Employment Agreement for such full calendar year and (B) the greater
of (a) 1/2 or (b) a percentage equal to the percentage of the Executive's Base
Salary for the immediately preceding fiscal year that was paid to the Executive
as incentive compensation (including all cash and other incentive compensation,
and including shares of Common Stock) for the immediately preceding fiscal year,
expressed as a percentage (the greater of clauses (a) and (b) being herein
referred to as the "Deemed Bonus Percentage");
The Employer shall pay as severance to the Executive, not later than the
tenth day following the date of termination, a lump sum severance payment (the
"Severance Payment") equal to the aggregate of all compensation due to the
Executive hereunder had his or her employment not been so terminated (without
duplication of subsection 3(c)(i) above), including, without limitation, all
incentive compensation which would have been due to the Executive pursuant to
subsection 3(b) of the Employment Agreement, through the expiration of this
Agreement (as such Agreement may continue in effect under Section 2 hereof in
the event of a Change-in-Control) assuming that the Executive would have
received incentive compensation for each calendar year through the expiration
of this Agreement (as such Agreement may continue in effect under Section 2
hereof in the event of a Change-in-Control) equal to the product of (A) the
Base Salary payable to the Executive pursuant to subsection 3(a) of the
Employment Agreement for each such calendar year and (B) the Deemed Bonus
Percentage; provided, however, that such Severance Payment shall not be payable
12345678901234567890123456789012345678901234567890123456789012345678901234567890
to the Executive until (x) the Executive has executed and delivered to the
Employer a general release in a form to be determined by the Employer in good
faith, and (y) any applicable revocation period with respect to such release has
expired. For purposes of determining Executive's annual compensation in the
preceding sentence, compensation payable to the Executive by the Employer shall
include every type and form of compensation includible in the Executive's gross
income in respect of his or her employment by the Employer (including, without
limitation, all income reported on an Internal Revenue Service Form W-2),
compensation income recognized as a result of the Executive's exercise of stock
options or sale of the stock so acquired and including, without limitation, any
annual incentive compensation paid in cash or securities to such Executive;
An amount equal to the Additional Amount pursuant to Section 5 below;
For the remaining term of the Employment Agreement, Executive shall
continue to receive all benefits described in Section 3 of the Employment
Agreement existing on the date of termination and any other benefits then
provided by Employer to Executive in addition to those described in Section 3
of the Employment Agreement, including, but not limited to, the life insurance
coverage provided by Employer to Executive and the automobile provided by
Employer to Executive and automobile insurance and maintenance in respect of
such automobile. For purposes of the application of such benefits, Executive
shall be treated as if he or she had remained in the employ of the Employer
with a Base Salary at the rate in effect on the date of termination;
For purposes of any stock option plan of the Employer, (x) any stock
options or other awards (including restricted stock grants) of the Executive
under such plan shall vest and become exercisable upon any such termination, and
(y) Executive shall be treated as if he or she had remained in the employ of the
Employer for the remaining term of the Employment Agreement after the date of
Executive's termination so that Executive shall be entitled to exercise any
exercisable options or other rights;
For purposes of any section 401(k) plan or other deferred compensation
plan of the Employer, Executive shall be treated as if he or she had remained in
the employ of the Employer for the remaining term of the Employment Agreement
after the date of Executive's termination so that Executive may continue to
receive all matching contributions as provided by the Employer in connection
with such plan or any other contributions by Employer in connection with such
plan as in effect immediately prior to such termination;
The amount of any outstanding loans made by the Employer to the Executive
to acquire shares of Common Stock or units of limited partnership interest in
Reckson Operating Partnership, L.P., together with any interest accrued on any
such loans, and any related "tax" loans made by the Employer to the Executive in
respect of tax liabilities owing as the result of the forgiveness of such loans
(including forgiveness pursuant to the terms of this Section 3(c)(vii)),
together with any interest accrued on any such tax loans, shall be deemed
forgiven and Executive shall have no further liability in respect thereof;
If, in spite of the provisions above, any benefits or service credits
under any benefit plan or program of the Employer may not be paid or provided
under such plan or program to Executive, or to Executive's dependents,
beneficiaries or estate, because Executive is no longer considered to be an
employee of the Employer, the Employer shall pay or provide for payment of such
benefits and service credits to Executive, or to Executive's dependents,
beneficiaries or estate, for the remaining term of the Employment Agreement;
and
Nothing herein shall be deemed to obligate Executive to seek other
employment in the event of any such termination and any amounts earned or
benefits received from such other employment will not serve to reduce in any way
the amounts and benefits payable in accordance herewith.
Expenses. Section 3(e) of the Employment Agreement is hereby amended by
this Section 4. In addition to the expenses referred to in Section 3(e) of the
Employment Agreement, the Employer shall pay all legal fees and related expenses
(including the costs of experts, evidence and counsel) incurred by the Executive
as they become due as a result of (i) the termination of the Employment Period
or Executive's employment pursuant to this Agreement or the Employment Agreement
(including all such fees and expenses, if any, incurred in contesting or
disputing any such termination), (ii) the Executive seeking to obtain or enforce
any right or benefit provided by this Agreement, the Employment Agreement or by
any other plan or arrangement maintained by the Employer under which the
Executive is or may be entitled to receive benefits or (iii) any action taken by
the Employer against the Executive, unless and until such time that a final
judgement has been rendered in favor of the Employer and all appeals related to
any such action have been exhausted; provided however, that the circumstances
set forth above occurred on or after a Change-in-Control.
Additional Amount. Whether or not Section 3 is applicable, if in the
opinion of tax counsel selected by the Executive and reasonably acceptable to
the Employer, the Executive has or will receive any compensation or recognize
any income (whether or not pursuant to this Agreement, the Employment Agreement
or any plan or other arrangement of the Employer and whether or not the
Employment Period or the Executive's employment with the Employer has
terminated) which will constitute an "excess parachute payment" within the
meaning of Section 280G(b)(1) of the Code (or for which a tax is otherwise
payable under Section 4999 of the Code), then the Employer shall pay the
Executive an additional amount (the "Additional Amount") equal to the sum of
(i) all taxes payable by the Executive under Section 4999 of the Code with
respect to all such excess parachute payments and any such Additional Amount,
plus (ii) all federal, state and local income taxes payable by Executive with
respect to any such Additional Amount. Any amounts payable pursuant to this
Section 4 shall be paid by the Employer to the Executive within 30 days of each
written request therefor made by the Executive.
Income Tax Payment. Whether or not Section 3 is applicable, if (i) the
Executive has or will receive any compensation or recognize any income (whether
or not pursuant to this Agreement, the Employment Agreement or any plan or other
arrangement of the Employer and whether or not the Employment Period or the
Executive's employment with the Employer has terminated) in connection with a
"Change-in-Control" (as that term may be interpreted in this Agreement, the
Employment Agreement or any plan or other arrangement of the Employer), and (ii)
such compensation or income represents non-cash compensation or income
(including, without limitation, non-cash compensation or income attributable to
the vesting or exercise of stock options and other awards (including restricted
stock grants) under any stock option plan of the Employer), then the Employer
shall pay the Executive in cash an amount (the "Income Tax Payment") equal to
all federal, state and local income taxes payable by Executive with respect to
such non-cash compensation or income. The Income Tax Payment shall be paid by
the Employer to the Executive within 30 days of the written request therefor
made by the Executive.
Notices. Any notice required or permitted hereunder shall be in writing
and shall be deemed sufficient when given by hand, by nationally recognized
overnight courier or by express, registered or certified mail, postage prepaid,
return receipt requested, and addressed to the Employer or Executive, as
applicable, at the address indicated above (or to such other address as may be
provided by notice).
Miscellaneous. This Agreement (i) may not be assigned by Executive
without the prior written consent of the Employer and (ii) may be assigned by
the Employer and shall be binding upon, and inure to the benefit of, the
Employer's successors and assigns. Headings herein are for convenience of
reference only and shall not define, limit or interpret the contents hereof.
Amendment. This Agreement may be amended, modified or supplemented by the
mutual consent of the parties in writing, but no oral amendment, modification or
supplement shall be effective.
Severability. If a court of competent jurisdiction adjudicates any one or
more of the provisions hereof as invalid, illegal or unenforceable in any
respect, such provision(s) shall be ineffective only to the extent and duration
of such invalidity, illegality or unenforceability and such invalidity,
illegality or unenforceability shall not affect the remaining substance of such
provision or any other provision of this Agreement and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had been
limited or modified (consistent with its general intent) to the extent
necessary so that it shall be valid, legal and enforceable. If it shall not be
possible to so limit or modify such invalid, illegal or unenforceable provision,
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein, and the parties will use their best
efforts to substitute a valid, legal and enforceable provision which, insofar as
practicable, implements the purpose and intent of the provision originally
contained herein.
Governing Law. This Agreement shall be construed and governed by the laws
of the State of New York.
IN WITNESS WHEREOF, this Agreement is entered into as of the date and year
first above written.
RECKSON ASSOCIATES REALTY CORP.
By: /s/ Michael Maturo
-----------------------
Name: Michael Maturo
Title: Executive Vice President
By: /s/ Scott Rechler
-----------------------
Scott Rechler
<PAGE>
EXHIBIT 10.26
SEVERANCE AGREEMENT
SEVERANCE AGREEMENT, dated as of the 25th day of February, 1998 (the
"Agreement") by and between Mitchell D. Rechler (the "Executive"), and Reckson
Associates Realty Corp., a Maryland corporation with a principal place of
business at 225 Broadhollow Road, Melville, New York 11747 (the "Employer").
Terms used in this Agreement with the initial letter capitalized shall,
unless otherwise defined herein, have the meanings specified in the Employment
and Noncompetition Agreement, dated June 2, 1995, between the Employer and the
Executive and in any amendment to or restatement of such agreement (the
"Employment Agreement").
W I T N E S S E T H :
WHEREAS, Executive and Employer have previously entered into the
Employment Agreement; and
WHEREAS, the Employer desires to continue to employ the Executive and the
Executive desires to continue to be employed by the Employer.
NOW THEREFORE, in consideration of the premises and subject to the terms
and conditions set forth herein, the parties hereto agree as follows:
Employment and Noncompetition Agreement. This Agreement is supplementary
to and, except as explicitly set forth herein, does not limit or alter any of
the terms and conditions established under the Employment Agreement.
Term. The term and duration of this Agreement shall be identical to the
term of the Employment Agreement, provided, however, that if a Change-in-Control
shall occur during the Employment Period, the term of this Agreement, the
Employment Agreement and the Employment Period shall continue in effect until
the later of (i) the date on which the term of the Employment Agreement
otherwise would have ended or (ii) the date which is thirty-six months beyond
the end of the calendar year in which the Change-in-Control occurs. Section 1
of the Employment Agreement is hereby amended in accordance with the foregoing.
Termination and Severance Payments. Sections 7(a), (b) and (c) of the
Employment Agreement are hereby superseded in their entirety by this Section 3.
At-Will Employment. Executive's employment pursuant to the Employment
Agreement is "at will" and may be terminated by the Employer at any time with or
without Good Reason, by a majority vote of all of the members of the Board of
Directors of the Employer upon written notice to Executive, subject only to the
severance provisions specifically set forth in this Section 3 and in Sections
7(d) through 7(h) of the Employment Agreement.
Termination by Executive. The Employment Period and Executive's employment
under the Employment Agreement may be terminated effective immediately by
Executive by written notice to the Board of Directors of the Employer (i) within
30 days of the occurrence of a failure of the Board of Directors of the Employer
to elect Executive to offices with the same or substantially the same duties and
responsibilities as set forth in Section 2 of the Employment Agreement, (ii)
within 30 days of the occurrence of a material failure by the Employer to comply
with the provisions of Section 3 of the Employment Agreement or a material
breach by the Employer of any other provision of the Employment Agreement, or
(iii) at any time during the 30 day period beginning on the effective date of a
Change in Control and the 30 day period beginning one year after the effective
date of a Change-in-Control.
Certain Benefits upon Termination by Executive. Except as specifically
provided in this Section 3 or in Sections 7(d) through 7(h) of the Employment
Agreement or as otherwise required by law, all compensation and benefits to
Executive under the Employment Agreement shall terminate on the date of
termination of the Employment Period. Notwithstanding the foregoing, if the
Employment Period is terminated pursuant to Section 3(b) or if Executive's
employment is terminated by the Employer other than for Good Reason, Executive
shall be entitled to the following benefits:
The Employer shall pay the Executive (x) his or her full Base Salary
though the date of termination at the rate in effect on such date, (y)
compensation for accrued but unused vacation time, plus (z) a pro rata portion
of the Executive's incentive compensation for the calendar year in which the
event of termination occurs, assuming that the Executive would have received
incentive compensation for such full calendar year equal to the product of (A)
the Base Salary that would be payable to the Executive pursuant to subsection
3(a) of the Employment Agreement for such full calendar year and (B) the greater
of (a) 1/2 or (b) a percentage equal to the percentage of the Executive's Base
Salary for the immediately preceding fiscal year that was paid to the Executive
as incentive compensation (including all cash and other incentive compensation,
and including shares of Common Stock) for the immediately preceding fiscal year,
expressed as a percentage (the greater of clauses (a) and (b) being herein
referred to as the "Deemed Bonus Percentage");
The Employer shall pay as severance to the Executive, not later than the
tenth day following the date of termination, a lump sum severance payment (the
"Severance Payment") equal to the aggregate of all compensation due to the
Executive hereunder had his or her employment not been so terminated (without
duplication of subsection 3(c)(i) above), including, without limitation, all
incentive compensation which would have been due to the Executive pursuant to
subsection 3(b) of the Employment Agreement, through the expiration of this
Agreement (as such Agreement may continue in effect under Section 2 hereof in
the event of a Change-in-Control) assuming that the Executive would have
received incentive compensation for each calendar year through the expiration
of this Agreement (as such Agreement may continue in effect under Section 2
hereof in the event of a Change-in-Control) equal to the product of (A) the
Base Salary payable to the Executive pursuant to subsection 3(a) of the
Employment Agreement for each such calendar year and (B) the Deemed Bonus
Percentage; provided, however, that such Severance Payment shall not be payable
to the Executive until (x) the Executive has executed and delivered to the
Employer a general release in a form to be determined by the Employer in good
faith, and (y) any applicable revocation period with respect to such release
has expired. For purposes of determining Executive's annual compensation in
the preceding sentence, compensation payable to the Executive by the Employer
shall include every type and form of compensation includible in the Executive's
gross income in respect of his or her employment by the Employer (including,
without limitation, all income reported on an Internal Revenue Service Form
W-2), compensation income recognized as a result of the Executive's exercise of
stock options or sale of the stock so acquired and including, without
limitation, any annual incentive compensation paid in cash or securities to such
Executive;
An amount equal to the Additional Amount pursuant to Section 5 below;
For the remaining term of the Employment Agreement, Executive shall
continue to receive all benefits described in Section 3 of the Employment
Agreement existing on the date of termination and any other benefits then
provided by Employer to Executive in addition to those described in Section 3
of the Employment Agreement, including, but not limited to, the life insurance
coverage provided by Employer to Executive and the automobile provided by
Employer to Executive and automobile insurance and maintenance in respect of
such automobile. For purposes of the application of such benefits, Executive
shall be treated as if he or she had remained in the employ of the Employer with
a Base Salary at the rate in effect on the date of termination;
For purposes of any stock option plan of the Employer, (x) any stock
options or other awards (including restricted stock grants) of the Executive
under such plan shall vest and become exercisable upon any such termination, and
(y) Executive shall be treated as if he or she had remained in the employ of the
Employer for the remaining term of the Employment Agreement after the date of
Executive's termination so that Executive shall be entitled to exercise any
exercisable options or other rights;
For purposes of any section 401(k) plan or other deferred compensation
plan of the Employer, Executive shall be treated as if he or she had remained in
the employ of the Employer for the remaining term of the Employment Agreement
after the date of Executive's termination so that Executive may continue to
receive all matching contributions as provided by the Employer in connection
with such plan or any other contributions by Employer in connection with such
plan as in effect immediately prior to such termination;
The amount of any outstanding loans made by the Employer to the Executive
to acquire shares of Common Stock or units of limited partnership interest in
Reckson Operating Partnership, L.P., together with any interest accrued on any
such loans, and any related "tax" loans made by the Employer to the Executive in
respect of tax liabilities owing as the result of the forgiveness of such loans
(including forgiveness pursuant to the terms of this Section 3(c)(vii)),
together with any interest accrued on any such tax loans, shall be deemed
forgiven and Executive shall have no further liability in respect thereof;
If, in spite of the provisions above, any benefits or service credits
under any benefit plan or program of the Employer may not be paid or provided
under such plan or program to Executive, or to Executive's dependents,
beneficiaries or estate, because Executive is no longer considered to be an
employee of the Employer, the Employer shall pay or provide for payment of such
benefits and service credits to Executive, or to Executive's dependents,
beneficiaries or estate, for the remaining term of the Employment Agreement;
and
Nothing herein shall be deemed to obligate Executive to seek other
employment in the event of any such termination and any amounts earned or
benefits received from such other employment will not serve to reduce in any way
the amounts and benefits payable in accordance herewith.
Expenses. Section 3(e) of the Employment Agreement is hereby amended by
this Section 4. In addition to the expenses referred to in Section 3(e) of the
Employment Agreement, the Employer shall pay all legal fees and related expenses
(including the costs of experts, evidence and counsel) incurred by the Executive
as they become due as a result of (i) the termination of the Employment Period
or Executive's employment pursuant to this Agreement or the Employment Agreement
(including all such fees and expenses, if any, incurred in contesting or
disputing any such termination), (ii) the Executive seeking to obtain or enforce
any right or benefit provided by this Agreement, the Employment Agreement or by
any other plan or arrangement maintained by the Employer under which the
Executive is or may be entitled to receive benefits or (iii) any action taken by
the Employer against the Executive, unless and until such time that a final
judgement has been rendered in favor of the Employer and all appeals related to
any such action have been exhausted; provided however, that the circumstances
set forth above occurred on or after a Change-in-Control.
Additional Amount. Whether or not Section 3 is applicable, if in the
opinion of tax counsel selected by the Executive and reasonably acceptable to
the Employer, the Executive has or will receive any compensation or recognize
any income (whether or not pursuant to this Agreement, the Employment Agreement
or any plan or other arrangement of the Employer and whether or not the
Employment Period or the Executive's employment with the Employer has
terminated) which will constitute an "excess parachute payment" within the
meaning of Section 280G(b)(1) of the Code (or for which a tax is otherwise
payable under Section 4999 of the Code), then the Employer shall pay the
Executive an additional amount (the "Additional Amount") equal to the sum of
(i) all taxes payable by the Executive under Section 4999 of the Code with
respect to all such excess parachute payments and any such Additional Amount,
plus (ii) all federal, state and local income taxes payable by Executive with
respect to any such Additional Amount. Any amounts payable pursuant to this
Section 4 shall be paid by the Employer to the Executive within 30 days of each
written request therefor made by the Executive.
Income Tax Payment. Whether or not Section 3 is applicable, if (i) the
Executive has or will receive any compensation or recognize any income (whether
or not pursuant to this Agreement, the Employment Agreement or any plan or other
arrangement of the Employer and whether or not the Employment Period or the
Executive's employment with the Employer has terminated) in connection with a
"Change-in-Control" (as that term may be interpreted in this Agreement, the
Employment Agreement or any plan or other arrangement of the Employer), and (ii)
such compensation or income represents non-cash compensation or income
(including, without limitation, non-cash compensation or income attributable to
the vesting or exercise of stock options and other awards (including restricted
stock grants) under any stock option plan of the Employer), then the Employer
shall pay the Executive in cash an amount (the "Income Tax Payment") equal to
all federal, state and local income taxes payable by Executive with respect to
such non-cash compensation or income. The Income Tax Payment shall be paid by
the Employer to the Executive within 30 days of the written request therefor
made by the Executive.
Notices. Any notice required or permitted hereunder shall be in writing
and shall be deemed sufficient when given by hand, by nationally recognized
overnight courier or by express, registered or certified mail, postage prepaid,
return receipt requested, and addressed to the Employer or Executive, as
applicable, at the address indicated above (or to such other address as may be
provided by notice).
Miscellaneous. This Agreement (i) may not be assigned by Executive
without the prior written consent of the Employer and (ii) may be assigned by
the Employer and shall be binding upon, and inure to the benefit of, the
Employer's successors and assigns. Headings herein are for convenience of
reference only and shall not define, limit or interpret the contents hereof.
Amendment. This Agreement may be amended, modified or supplemented by the
mutual consent of the parties in writing, but no oral amendment, modification or
supplement shall be effective.
Severability. If a court of competent jurisdiction adjudicates any one or
more of the provisions hereof as invalid, illegal or unenforceable in any
respect, such provision(s) shall be ineffective only to the extent and duration
of such invalidity, illegality or unenforceability and such invalidity,
illegality or unenforceability shall not affect the remaining substance of such
provision or any other provision of this Agreement and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had been
limited or modified (consistent with its general intent) to the extent
necessary so that it shall be valid, legal and enforceable. If it shall not be
possible to so limit or modify such invalid, illegal or unenforceable provision,
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein, and the parties will use their best
efforts to substitute a valid, legal and enforceable provision which, insofar
as practicable, implements the purpose and intent of the provision originally
contained herein.
Governing Law. This Agreement shall be construed and governed by the laws
of the State of New York.
IN WITNESS WHEREOF, this Agreement is entered into as of the date and year
first above written.
RECKSON ASSOCIATES REALTY CORP.
By: /s/ Scott Rechler
-----------------------
Name: Scott Rechler
Title: President
By: /s/ Mitchell D. Rechler
-----------------------
Mitchell D. Rechler
<PAGE>
EXHIBIT 10.27
SEVERANCE AGREEMENT
SEVERANCE AGREEMENT, dated as of the 25th day of February, 1998 (the
"Agreement") by and between Gregg M. Rechler (the "Executive"), and Reckson
Associates Realty Corp., a Maryland corporation with a principal place of
business at 225 Broadhollow Road, Melville, New York 11747 (the "Employer").
Terms used in this Agreement with the initial letter capitalized shall,
unless otherwise defined herein, have the meanings specified in the Employment
and Noncompetition Agreement, dated June 2, 1995, between the Employer and the
Executive and in any amendment to or restatement of such agreement (the
"Employment Agreement").
W I T N E S S E T H :
WHEREAS, Executive and Employer have previously entered into the
Employment Agreement; and
WHEREAS, the Employer desires to continue to employ the Executive and the
Executive desires to continue to be employed by the Employer.
NOW THEREFORE, in consideration of the premises and subject to the terms
and conditions set forth herein, the parties hereto agree as follows:
Employment and Noncompetition Agreement. This Agreement is supplementary
to and, except as explicitly set forth herein, does not limit or alter any of
the terms and conditions established under the Employment Agreement.
Term. The term and duration of this Agreement shall be identical to the
term of the Employment Agreement, provided, however, that if a Change-in-Control
shall occur during the Employment Period, the term of this Agreement, the
Employment Agreement and the Employment Period shall continue in effect until
the later of (i) the date on which the term of the Employment Agreement
otherwise would have ended or (ii) the date which is thirty-six months beyond
the end of the calendar year in which the Change-in-Control occurs. Section 1
of the Employment Agreement is hereby amended in accordance with the foregoing.
Termination and Severance Payments. Sections 7(a), (b) and (c) of the
Employment Agreement are hereby superseded in their entirety by this Section 3.
At-Will Employment. Executive's employment pursuant to the Employment
Agreement is "at will" and may be terminated by the Employer at any time with or
without Good Reason, by a majority vote of all of the members of the Board of
Directors of the Employer upon written notice to Executive, subject only to the
severance provisions specifically set forth in this Section 3 and in Sections
7(d) through 7(h) of the Employment Agreement.
Termination by Executive. The Employment Period and Executive's
employment under the Employment Agreement may be terminated effective
immediately by Executive by written notice to the Board of Directors of the
Employer (i) within 30 days of the occurrence of a failure of the Board of
Directors of the Employer to elect Executive to offices with the same or
substantially the same duties and responsibilities as set forth in Section 2 of
the Employment Agreement, (ii) within 30 days of the occurrence of a material
failure by the Employer to comply with the provisions of Section 3 of the
Employment Agreement or a material breach by the Employer of any other
provision of the Employment Agreement, or (iii) at any time during the 30 day
period beginning on the effective date of a Change in Control and the 30 day
period beginning one year after the effective date of a Change-in-Control.
Certain Benefits upon Termination by Executive. Except as specifically
provided in this Section 3 or in Sections 7(d) through 7(h) of the Employment
Agreement or as otherwise required by law, all compensation and benefits to
Executive under the Employment Agreement shall terminate on the date of
termination of the Employment Period. Notwithstanding the foregoing, if the
Employment Period is terminated pursuant to Section 3(b) or if Executive's
employment is terminated by the Employer other than for Good Reason, Executive
shall be entitled to the following benefits:
The Employer shall pay the Executive (x) his or her full Base Salary
though the date of termination at the rate in effect on such date, (y)
compensation for accrued but unused vacation time, plus (z) a pro rata portion
of the Executive's incentive compensation for the calendar year in which the
event of termination occurs, assuming that the Executive would have received
incentive compensation for such full calendar year equal to the product of (A)
the Base Salary that would be payable to the Executive pursuant to subsection
3(a) of the Employment Agreement for such full calendar year and (B) the greater
of (a) 1/2 or (b) a percentage equal to the percentage of the Executive's Base
Salary for the immediately preceding fiscal year that was paid to the Executive
as incentive compensation (including all cash and other incentive compensation,
and including shares of Common Stock) for the immediately preceding fiscal year,
expressed as a percentage (the greater of clauses (a) and (b) being herein
referred to as the "Deemed Bonus Percentage");
The Employer shall pay as severance to the Executive, not later than the
tenth day following the date of termination, a lump sum severance payment (the
"Severance Payment") equal to the aggregate of all compensation due to the
Executive hereunder had his or her employment not been so terminated (without
duplication of subsection 3(c)(i) above), including, without limitation, all
incentive compensation which would have been due to the Executive pursuant to
subsection 3(b) of the Employment Agreement, through the expiration of this
Agreement (as such Agreement may continue in effect under Section 2 hereof in
the event of a Change-in-Control) assuming that the Executive would have
received incentive compensation for each calendar year through the expiration
of this Agreement (as such Agreement may continue in effect under Section 2
hereof in the event of a Change-in-Control) equal to the product of (A) the
Base Salary payable to the Executive pursuant to subsection 3(a) of the
Employment Agreement for each such calendar year and (B) the Deemed Bonus
Percentage; provided, however, that such Severance Payment shall not be payable
to the Executive until (x) the Executive has executed and delivered to the
Employer a general release in a form to be determined by the Employer in good
faith, and (y) any applicable revocation period with respect to such release has
expired. For purposes of determining Executive's annual compensation in the
preceding sentence, compensation payable to the Executive by the Employer shall
include every type and form of compensation includible in the Executive's gross
income in respect of his or her employment by the Employer (including, without
limitation, all income reported on an Internal Revenue Service Form W-2),
compensation income recognized as a result of the Executive's exercise of stock
options or sale of the stock so acquired and including, without limitation, any
annual incentive compensation paid in cash or securities to such Executive;
An amount equal to the Additional Amount pursuant to Section 5 below;
For the remaining term of the Employment Agreement, Executive shall
continue to receive all benefits described in Section 3 of the Employment
Agreement existing on the date of termination and any other benefits then
provided by Employer to Executive in addition to those described in Section 3
of the Employment Agreement, including, but not limited to, the life insurance
coverage provided by Employer to Executive and the automobile provided by
Employer to Executive and automobile insurance and maintenance in respect of
such automobile. For purposes of the application of such benefits, Executive
shall be treated as if he or she had remained in the employ of the Employer
with a Base Salary at the rate in effect on the date of termination;
For purposes of any stock option plan of the Employer, (x) any stock
options or other awards (including restricted stock grants) of the Executive
under such plan shall vest and become exercisable upon any such termination,
and (y) Executive shall be treated as if he or she had remained in the employ
of the Employer for the remaining term of the Employment Agreement after the
date of Executive's termination so that Executive shall be entitled to exercise
any exercisable options or other rights;
For purposes of any section 401(k) plan or other deferred compensation
plan of the Employer, Executive shall be treated as if he or she had remained in
the employ of the Employer for the remaining term of the Employment Agreement
after the date of Executive's termination so that Executive may continue to
receive all matching contributions as provided by the Employer in connection
with such plan or any other contributions by Employer in connection with such
plan as in effect immediately prior to such termination;
The amount of any outstanding loans made by the Employer to the Executive
to acquire shares of Common Stock or units of limited partnership interest in
Reckson Operating Partnership, L.P., together with any interest accrued on any
such loans, and any related "tax" loans made by the Employer to the Executive in
respect of tax liabilities owing as the result of the forgiveness of such loans
(including forgiveness pursuant to the terms of this Section 3(c)(vii)),
together with any interest accrued on any such tax loans, shall be deemed
forgiven and Executive shall have no further liability in respect thereof;
If, in spite of the provisions above, any benefits or service credits
under any benefit plan or program of the Employer may not be paid or provided
under such plan or program to Executive, or to Executive's dependents,
beneficiaries or estate, because Executive is no longer considered to be an
employee of the Employer, the Employer shall pay or provide for payment of such
benefits and service credits to Executive, or to Executive's dependents,
beneficiaries or estate, for the remaining term of the Employment Agreement;
and
Nothing herein shall be deemed to obligate Executive to seek other
employment in the event of any such termination and any amounts earned or
benefits received from such other employment will not serve to reduce in any way
the amounts and benefits payable in accordance herewith.
Expenses. Section 3(e) of the Employment Agreement is hereby amended by
this Section 4. In addition to the expenses referred to in Section 3(e) of the
Employment Agreement, the Employer shall pay all legal fees and related expenses
(including the costs of experts, evidence and counsel) incurred by the Executive
as they become due as a result of (i) the termination of the Employment Period
or Executive's employment pursuant to this Agreement or the Employment Agreement
(including all such fees and expenses, if any, incurred in contesting or
disputing any such termination), (ii) the Executive seeking to obtain or enforce
any right or benefit provided by this Agreement, the Employment Agreement or by
any other plan or arrangement maintained by the Employer under which the
Executive is or may be entitled to receive benefits or (iii) any action taken by
the Employer against the Executive, unless and until such time that a final
judgement has been rendered in favor of the Employer and all appeals related to
any such action have been exhausted; provided however, that the circumstances
set forth above occurred on or after a Change-in-Control.
Additional Amount. Whether or not Section 3 is applicable, if in the
opinion of tax counsel selected by the Executive and reasonably acceptable to
the Employer, the Executive has or will receive any compensation or recognize
any income (whether or not pursuant to this Agreement, the Employment Agreement
or any plan or other arrangement of the Employer and whether or not the
Employment Period or the Executive's employment with the Employer has
terminated) which will constitute an "excess parachute payment" within the
meaning of Section 280G(b)(1) of the Code (or for which a tax is otherwise
payable under Section 4999 of the Code), then the Employer shall pay the
Executive an additional amount (the "Additional Amount") equal to the sum of (i)
all taxes payable by the Executive under Section 4999 of the Code with respect
to all such excess parachute payments and any such Additional Amount, plus (ii)
all federal, state and local income taxes payable by Executive with respect to
any such Additional Amount. Any amounts payable pursuant to this Section 4
shall be paid by the Employer to the Executive within 30 days of each written
request therefor made by the Executive.
Income Tax Payment. Whether or not Section 3 is applicable, if (i) the
Executive has or will receive any compensation or recognize any income (whether
or not pursuant to this Agreement, the Employment Agreement or any plan or other
arrangement of the Employer and whether or not the Employment Period or the
Executive's employment with the Employer has terminated) in connection with a
"Change-in-Control" (as that term may be interpreted in this Agreement, the
Employment Agreement or any plan or other arrangement of the Employer), and (ii)
such compensation or income represents non-cash compensation or income
(including, without limitation, non-cash compensation or income attributable to
the vesting or exercise of stock options and other awards (including restricted
stock grants) under any stock option plan of the Employer), then the Employer
shall pay the Executive in cash an amount (the "Income Tax Payment") equal to
all federal, state and local income taxes payable by Executive with respect to
such non-cash compensation or income. The Income Tax Payment shall be paid by
the Employer to the Executive within 30 days of the written request therefor
made by the Executive.
Notices. Any notice required or permitted hereunder shall be in writing
and shall be deemed sufficient when given by hand, by nationally recognized
overnight courier or by express, registered or certified mail, postage prepaid,
return receipt requested, and addressed to the Employer or Executive, as
applicable, at the address indicated above (or to such other address as may be
provided by notice).
Miscellaneous. This Agreement (i) may not be assigned by Executive
without the prior written consent of the Employer and (ii) may be assigned by
the Employer and shall be binding upon, and inure to the benefit of, the
Employer's successors and assigns. Headings herein are for convenience of
reference only and shall not define, limit or interpret the contents hereof.
Amendment. This Agreement may be amended, modified or supplemented by the
mutual consent of the parties in writing, but no oral amendment, modification or
supplement shall be effective.
Severability. If a court of competent jurisdiction adjudicates any one or
more of the provisions hereof as invalid, illegal or unenforceable in any
respect, such provision(s) shall be ineffective only to the extent and duration
of such invalidity, illegality or unenforceability and such invalidity,
illegality or unenforceability shall not affect the remaining substance of such
provision or any other provision of this Agreement and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had been
limited or modified (consistent with its general intent) to the extent necessary
so that it shall be valid, legal and enforceable. If it shall not be possible
to so limit or modify such invalid, illegal or unenforceable provision, this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein, and the parties will use their best
efforts to substitute a valid, legal and enforceable provision which, insofar
as practicable, implements the purpose and intent of the provision originally
contained herein.
Governing Law. This Agreement shall be construed and governed by the laws
of the State of New York.
IN WITNESS WHEREOF, this Agreement is entered into as of the date and year
first above written.
RECKSON ASSOCIATES REALTY CORP.
By: /s/ Scott Rechler
-----------------------
Name: Scott Rechler
Title: President
By: /s/ Gregg M. Rechler
-----------------------
Gregg M. Rechler
<PAGE>
EXHIBIT 10.28
SEVERANCE AGREEMENT
SEVERANCE AGREEMENT, dated as of the 1st day of June, 1998 (the
"Agreement") by and between Roger Rechler (the "Executive"), and Reckson
Associates Realty Corp., a Maryland corporation with a principal place of
business at 225 Broadhollow Road, Melville, New York 11747 (the "Employer").
Terms used in this Agreement with the initial letter capitalized shall,
unless otherwise defined herein, have the meanings specified in the Employment
and Noncompetition Agreement, dated as of the date hereof, between the Employer
and the Executive and in any amendment to or restatement of such agreement (the
"Employment Agreement").
W I T N E S S E T H :
WHEREAS, Executive and Employer have previously entered into the
Employment Agreement; and
WHEREAS, the Employer desires to continue to employ the Executive and the
Executive desires to continue to be employed by the Employer.
NOW THEREFORE, in consideration of the premises and subject to the terms
and conditions set forth herein, the parties hereto agree as follows:
Employment and Noncompetition Agreement. This Agreement is supplementary
to and, except as explicitly set forth herein, does not limit or alter any of
the terms and conditions established under the Employment Agreement.
Term. The term and duration of this Agreement shall be identical to the
term of the Employment Agreement, provided, however, that if a
Change-in-Control shall occur during the Employment Period, the term of this
Agreement, the Employment Agreement and the Employment Period shall continue in
effect until the later of (i) the date on which the term of the Employment
Agreement otherwise would have ended or (ii) the date which is thirty-six months
beyond the end of the calendar year in which the Change-in-Control occurs.
Section 1 of the Employment Agreement is hereby amended in accordance with the
foregoing.
Termination and Severance Payments. Sections 7(a), (b) and (c) of the
Employment Agreement are hereby superseded in their entirety by this Section 3.
At-Will Employment. Executive's employment pursuant to the Employment
Agreement is "at will" and may be terminated by the Employer at any time with or
without Good Reason, by a majority vote of all of the members of the Board of
Directors of the Employer upon written notice to Executive, subject only to the
severance provisions specifically set forth in this Section 3 and in Sections
7(d) through 7(h) of the Employment Agreement.
Termination by Executive. The Employment Period and Executive's
employment under the Employment Agreement may be terminated effective
immediately by Executive by written notice to the Board of Directors of the
Employer (i) within 30 days of the occurrence of a failure of the Board of
Directors of the Employer to elect Executive to offices with the same or
substantially the same duties and responsibilities as set forth in Section 2 of
the Employment Agreement, (ii) within 30 days of the occurrence of a material
failure by the Employer to comply with the provisions of Section 3 of the
Employment Agreement or a material breach by the Employer of any other provision
of the Employment Agreement, or (iii) at any time during the 30 day period
beginning on the effective date of a Change in Control and the 30 day period
beginning one year after the effective date of a Change-in-Control.
Certain Benefits upon Termination by Executive. Except as specifically
provided in this Section 3 or in Sections 7(d) through 7(h) of the Employment
Agreement or as otherwise required by law, all compensation and benefits to
Executive under the Employment Agreement shall terminate on the date of
termination of the Employment Period. Notwithstanding the foregoing, if the
Employment Period is terminated pursuant to Section 3(b) or if Executive's
employment is terminated by the Employer other than for Good Reason, Executive
shall be entitled to the following benefits:
The Employer shall pay the Executive (x) his or her full Base Salary
though the date of termination at the rate in effect on such date, (y)
compensation for accrued but unused vacation time, plus (z) a pro rata portion
of the Executive's incentive compensation for the calendar year in which the
event of termination occurs, assuming that the Executive would have received
incentive compensation for such full calendar year equal to the product of (A)
the Base Salary that would be payable to the Executive pursuant to subsection
3(a) of the Employment Agreement for such full calendar year and (B) the
greater of (a) 1/2 or (b) a percentage equal to the percentage of the
Executive's Base Salary for the immediately preceding fiscal year that was paid
to the Executive as incentive compensation (including all cash and other
incentive compensation, and including shares of Common Stock) for the
immediately preceding fiscal year, expressed as a percentage (the greater of
clauses (a) and (b) being herein referred to as the "Deemed Bonus Percentage");
The Employer shall pay as severance to the Executive, not later than the
tenth day following the date of termination, a lump sum severance payment (the
"Severance Payment") equal to the aggregate of all compensation due to the
Executive hereunder had his or her employment not been so terminated (without
duplication of subsection 3(c)(i) above), including, without limitation, all
incentive compensation which would have been due to the Executive pursuant to
subsection 3(b) of the Employment Agreement, through the expiration of this
Agreement (as such Agreement may continue in effect under Section 2 hereof in
the event of a Change-in-Control) assuming that the Executive would have
received incentive compensation for each calendar year through the expiration
of this Agreement (as such Agreement may continue in effect under Section 2
hereof in the event of a Change-in-Control) equal to the product of (A) the
Base Salary payable to the Executive pursuant to subsection 3(a) of the
Employment Agreement for each such calendar year and (B) the Deemed Bonus
Percentage; provided, however, that such Severance Payment shall not be
payable to the Executive until (x) the Executive has executed and delivered to
the Employer a general release in a form to be determined by the Employer in
good faith, and (y) any applicable revocation period with respect to such
release has expired. For purposes of determining Executive's annual
compensation in the preceding sentence, compensation payable to the Executive
by the Employer shall include every type and form of compensation includible in
the Executive's gross income in respect of his or her employment by the Employer
(including, without limitation, all income reported on an Internal Revenue
Service Form W-2), compensation income recognized as a result of the Executive's
exercise of stock options or sale of the stock so acquired and including,
without limitation, any annual incentive compensation paid in cash or securities
to such Executive;
An amount equal to the Additional Amount pursuant to Section 5 below;
For the remaining term of the Employment Agreement, Executive shall continue
to receive all benefits described in Section 3 of the Employment Agreement
existing on the date of termination and any other benefits then provided by
Employer to Executive in addition to those described in Section 3 of the
Employment Agreement, including, but not limited to, the life insurance coverage
provided by Employer to Executive and the automobile provided by Employer to
Executive and automobile insurance and maintenance in respect of such
automobile. For purposes of the application of such benefits, Executive shall
be treated as if he or she had remained in the employ of the Employer with a
Base Salary at the rate in effect on the date of termination;
For purposes of any stock option plan of the Employer, (x) any stock
options or other awards (including restricted stock grants) of the Executive
under such plan shall vest and become exercisable upon any such termination, and
(y) Executive shall be treated as if he or she had remained in the employ of the
Employer for the remaining term of the Employment Agreement after the date of
Executive's termination so that Executive shall be entitled to exercise any
exercisable options or other rights;
For purposes of any section 401(k) plan or other deferred compensation
plan of the Employer, Executive shall be treated as if he or she had remained in
the employ of the Employer for the remaining term of the Employment Agreement
after the date of Executive's termination so that Executive may continue to
receive all matching contributions as provided by the Employer in connection
with such plan or any other contributions by Employer in connection with such
plan as in effect immediately prior to such termination;
The amount of any outstanding loans made by the Employer to the Executive
to acquire shares of Common Stock or units of limited partnership interest in
Reckson Operating Partnership, L.P., together with any interest accrued on any
such loans, and any related "tax" loans made by the Employer to the Executive
in respect of tax liabilities owing as the result of the forgiveness of such
loans (including forgiveness pursuant to the terms of this Section 3(c)(vii)),
together with any interest accrued on any such tax loans, shall be deemed
forgiven and Executive shall have no further liability in respect thereof;
If, in spite of the provisions above, any benefits or service credits
under any benefit plan or program of the Employer may not be paid or provided
under such plan or program to Executive, or to Executive's dependents,
beneficiaries or estate, because Executive is no longer considered to be an
employee of the Employer, the Employer shall pay or provide for payment of such
benefits and service credits to Executive, or to Executive's dependents,
beneficiaries or estate, for the remaining term of the Employment Agreement; and
Nothing herein shall be deemed to obligate Executive to seek other
employment in the event of any such termination and any amounts earned or
benefits received from such other employment will not serve to reduce in any way
the amounts and benefits payable in accordance herewith.
Expenses. Section 3(e) of the Employment Agreement is hereby amended by
this Section 4. In addition to the expenses referred to in Section 3(e) of the
Employment Agreement, the Employer shall pay all legal fees and related expenses
(including the costs of experts, evidence and counsel) incurred by the Executive
as they become due as a result of (i) the termination of the Employment Period
or Executive's employment pursuant to this Agreement or the Employment Agreement
(including all such fees and expenses, if any, incurred in contesting or
disputing any such termination), (ii) the Executive seeking to obtain or enforce
any right or benefit provided by this Agreement, the Employment Agreement or by
any other plan or arrangement maintained by the Employer under which the
Executive is or may be entitled to receive benefits or (iii) any action taken by
the Employer against the Executive, unless and until such time that a final
judgement has been rendered in favor of the Employer and all appeals related to
any such action have been exhausted; provided however, that the circumstances
set forth above occurred on or after a Change-in-Control.
Additional Amount. Whether or not Section 3 is applicable, if in the
opinion of tax counsel selected by the Executive and reasonably acceptable to
the Employer, the Executive has or will receive any compensation or recognize
any income (whether or not pursuant to this Agreement, the Employment Agreement
or any plan or other arrangement of the Employer and whether or not the
Employment Period or the Executive's employment with the Employer has
terminated) which will constitute an "excess parachute payment" within the
meaning of Section 280G(b)(1) of the Code (or for which a tax is otherwise
payable under Section 4999 of the Code), then the Employer shall pay the
Executive an additional amount (the "Additional Amount") equal to the sum of
(i) all taxes payable by the Executive under Section 4999 of the Code with
respect to all such excess parachute payments and any such Additional Amount,
plus (ii) all federal, state and local income taxes payable by Executive with
respect to any such Additional Amount. Any amounts payable pursuant to this
Section 4 shall be paid by the Employer to the Executive within 30 days of each
written request therefor made by the Executive.
Income Tax Payment. Whether or not Section 3 is applicable, if (i) the
Executive has or will receive any compensation or recognize any income (whether
or not pursuant to this Agreement, the Employment Agreement or any plan or other
arrangement of the Employer and whether or not the Employment Period or the
Executive's employment with the Employer has terminated) in connection with a
"Change-in-Control" (as that term may be interpreted in this Agreement, the
Employment Agreement or any plan or other arrangement of the Employer), and (ii)
such compensation or income represents non-cash compensation or income
(including, without limitation, non-cash compensation or income attributable to
the vesting or exercise of stock options and other awards (including restricted
stock grants) under any stock option plan of the Employer), then the Employer
shall pay the Executive in cash an amount (the "Income Tax Payment") equal to
all federal, state and local income taxes payable by Executive with respect to
such non-cash compensation or income. The Income Tax Payment shall be paid by
the Employer to the Executive within 30 days of the written request therefor
made by the Executive.
Notices. Any notice required or permitted hereunder shall be in writing
and shall be deemed sufficient when given by hand, by nationally recognized
overnight courier or by express, registered or certified mail, postage prepaid,
return receipt requested, and addressed to the Employer or Executive, as
applicable, at the address indicated above (or to such other address as may be
provided by notice).
Miscellaneous. This Agreement (i) may not be assigned by Executive
without the prior written consent of the Employer and (ii) may be assigned by
the Employer and shall be binding upon, and inure to the benefit of, the
Employer's successors and assigns. Headings herein are for convenience of
reference only and shall not define, limit or interpret the contents hereof.
Amendment. This Agreement may be amended, modified or supplemented by the
mutual consent of the parties in writing, but no oral amendment, modification or
supplement shall be effective.
Severability. If a court of competent jurisdiction adjudicates any one or
more of the provisions hereof as invalid, illegal or unenforceable in any
respect, such provision(s) shall be ineffective only to the extent and duration
of such invalidity, illegality or unenforceability and such invalidity,
illegality or unenforceability shall not affect the remaining substance of such
provision or any other provision of this Agreement and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had been
limited or modified (consistent with its general intent) to the extent necessary
so that it shall be valid, legal and enforceable. If it shall not be possible
to so limit or modify such invalid, illegal or unenforceable provision, this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein, and the parties will use their best
efforts to substitute a valid, legal and enforceable provision which, insofar
as practicable, implements the purpose and intent of the provision originally
contained herein.
Governing Law. This Agreement shall be construed and governed by the laws
of the State of New York.
IN WITNESS WHEREOF, this Agreement is entered into as of the date and year
first above written.
RECKSON ASSOCIATES REALTY CORP.
By: /s/ Scott Rechler
-----------------------
Name: Scott Rechler
Title: President
By: /s/ Roger Rechler
-----------------------
Roger Rechler
<PAGE>
EXHIBIT 10.29
SEVERANCE AGREEMENT
SEVERANCE AGREEMENT, dated as of the 25th day of February, 1998 (the
"Agreement") by and between Michael Maturo (the "Executive"), and Reckson
Associates Realty Corp., a Maryland corporation with a principal place of
business at 225 Broadhollow Road, Melville, New York 11747 (the "Employer").
Terms used in this Agreement with the initial letter capitalized shall,
unless otherwise defined herein, have the meanings specified in the Employment
and Noncompetition Agreement, dated June 15, 1995, between the Employer and the
Executive and in any amendment to or restatement of such agreement (the
"Employment Agreement").
W I T N E S S E T H :
WHEREAS, Executive and Employer have previously entered into the
Employment Agreement; and
WHEREAS, the Employer desires to continue to employ the Executive and the
Executive desires to continue to be employed by the Employer.
NOW THEREFORE, in consideration of the premises and subject to the terms
and conditions set forth herein, the parties hereto agree as follows:
1. Employment and Noncompetition Agreement. This Agreement is supplementary
to and, except as explicitly set forth herein, does not limit or alter any of
the terms and conditions established under the Employment Agreement.
2. Term. The term and duration of this Agreement shall be identical to the
term of the Employment Agreement, provided, however, that if a
Change-in-Control shall occur during the Employment Period, the term of this
Agreement, the Employment Agreement and the Employment Period shall continue in
effect until the later of (i) the date on which the term of the Employment
Agreement otherwise would have ended or (ii) the date which is thirty-six months
beyond the end of the calendar year in which the Change-in-Control occurs.
Section 1 of the Employment Agreement is hereby amended in accordance with the
foregoing.
3. Termination and Severance Payments. Sections 7(a), (b) and (c) of the
Employment Agreement are hereby superseded in their entirety by this Section 3.
(a) At-Will Employment. Executive's employment pursuant to the
Employment Agreement is "at will" and may be terminated by the Employer at any
time with or without Good Reason, by a majority vote of all of the members of
the Board of Directors of the Employer upon written notice to Executive, subject
only to the severance provisions specifically set forth in this Section 3 and in
Sections 7(d) through 7(h) of the Employment Agreement.
(b) Termination by Executive. The Employment Period and Executive's
employment under the Employment Agreement may be terminated effective
immediately by Executive by written notice to the Board of Directors of the
Employer (i) within 30 days of the occurrence of a failure of the Board of
Directors of the Employer to elect Executive to offices with the same or
substantially the same duties and responsibilities as set forth in Section 2 of
the Employment Agreement, (ii) within 30 days of the occurrence of a material
failure by the Employer to comply with the provisions of Section 3 of the
Employment Agreement or a material breach by the Employer of any other provision
of the Employment Agreement, or (iii) at any time during the 30 day period
beginning on the effective date of a Change in Control and the 30 day period
beginning one year after the effective date of a Change-in-Control.
(c) Certain Benefits upon Termination by Executive. Except as
specifically provided in this Section 3 or in Sections 7(d) through 7(h) of the
Employment Agreement or as otherwise required by law, all compensation and
benefits to Executive under the Employment Agreement shall terminate on the date
of termination of the Employment Period. Notwithstanding the foregoing, if the
Employment Period is terminated pursuant to Section 3(b) or if Executive's
employment is terminated by the Employer other than for Good Reason, Executive
shall be entitled to the following benefits:
(i) The Employer shall pay the Executive (x) his or her full Base
Salary though the date of termination at the rate in effect on such date, (y)
compensation for accrued but unused vacation time, plus (z) a pro rata portion
of the Executive's incentive compensation for the calendar year in which the
event of termination occurs, assuming that the Executive would have received
incentive compensation for such full calendar year equal to the product of (A)
the Base Salary that would be payable to the Executive pursuant to subsection
3(a) of the Employment Agreement for such full calendar year and (B) the greater
of (a) 1/2 or (b) a percentage equal to the percentage of the Executive's Base
Salary for the immediately preceding fiscal year that was paid to the Executive
as incentive compensation (including all cash and other incentive compensation,
and including shares of Common Stock) for the immediately preceding fiscal year,
expressed as a percentage (the greater of clauses (a) and (b) being herein
referred to as the "Deemed Bonus Percentage");
(ii) The Employer shall pay as severance to the Executive, not
later than the tenth day following the date of termination, a lump sum severance
payment (the "Severance Payment") equal to the aggregate of all compensation due
to the Executive hereunder had his or her employment not been so terminated
(without duplication of subsection 3(c)(i) above), including, without
limitation, all incentive compensation which would have been due to the
Executive pursuant to subsection 3(b) of the Employment Agreement, through the
expiration of this Agreement (as such Agreement may continue in effect under
Section 2 hereof in the event of a Change-in-Control) assuming that the
Executive would have received incentive compensation for each calendar year
through the expiration of this Agreement (as such Agreement may continue in
effect under Section 2 hereof in the event of a Change-in-Control) equal to the
product of (A) the Base Salary payable to the Executive pursuant to subsection
3(a) of the Employment Agreement for each such calendar year and (B) the Deemed
Bonus Percentage; provided, however, that such Severance Payment shall not be
payable to the Executive until (x) the Executive has executed and delivered to
the Employer a general release in a form to be determined by the Employer in
good faith, and (y) any applicable revocation period with respect to such
release has expired. For purposes of determining Executive's annual
compensation in the preceding sentence, compensation payable to the Executive
by the Employer shall include every type and form of compensation includible in
the Executive's gross income in respect of his or her employment by the Employer
(including, without limitation, all income reported on an Internal Revenue
Service Form W-2), compensation income recognized as a result of the Executive's
exercise of stock options or sale of the stock so acquired and including,
without limitation, any annual incentive compensation paid in cash or securities
to such Executive;
(iii) An amount equal to the Additional Amount pursuant to Section
5 below;
(iv) For the remaining term of the Employment Agreement, Executive
shall continue to receive all benefits described in Section 3 of the Employment
Agreement existing on the date of termination and any other benefits then
provided by Employer to Executive in addition to those described in Section 3 of
the Employment Agreement, including, but not limited to, the life insurance
coverage provided by Employer to Executive and the automobile provided by
Employer to Executive and automobile insurance and maintenance in respect of
such automobile. For purposes of the application of such benefits, Executive
shall be treated as if he or she had remained in the employ of the Employer with
a Base Salary at the rate in effect on the date of termination;
(v) For purposes of any stock option plan of the Employer, (x)
any stock options or other awards (including restricted stock grants) of the
Executive under such plan shall vest and become exercisable upon any such
termination, and (y) Executive shall be treated as if he or she had remained in
the employ of the Employer for the remaining term of the Employment Agreement
after the date of Executive's termination so that Executive shall be entitled to
exercise any exercisable options or other rights;
(vi) For purposes of any section 401(k) plan or other deferred
compensation plan of the Employer, Executive shall be treated as if he or she
had remained in the employ of the Employer for the remaining term of the
Employment Agreement after the date of Executive's termination so that Executive
may continue to receive all matching contributions as provided by the Employer
in connection with such plan or any other contributions by Employer in
connection with such plan as in effect immediately prior to such termination;
(vii) The amount of any outstanding loans made by the Employer to
the Executive to acquire shares of Common Stock or units of limited partnership
interest in Reckson Operating Partnership, L.P., together with any interest
accrued on any such loans, and any related "tax" loans made by the Employer to
the Executive in respect of tax liabilities owing as the result of the
forgiveness of such loans (including forgiveness pursuant to the terms of this
Section 3(c)(vii)), together with any interest accrued on any such tax loans,
shall be deemed forgiven and Executive shall have no further liability in
respect thereof;
(viii) If, in spite of the provisions above, any benefits or service
credits under any benefit plan or program of the Employer may not be paid or
provided under such plan or program to Executive, or to Executive's dependents,
beneficiaries or estate, because Executive is no longer considered to be an
employee of the Employer, the Employer shall pay or provide for payment of such
benefits and service credits to Executive, or to Executive's dependents,
beneficiaries or estate, for the remaining term of the Employment Agreement;
and
(ix) Nothing herein shall be deemed to obligate Executive to seek
other employment in the event of any such termination and any amounts earned or
benefits received from such other employment will not serve to reduce in any way
the amounts and benefits payable in accordance herewith.
4. Expenses. Section 3(e) of the Employment Agreement is hereby amended by
this Section 4. In addition to the expenses referred to in Section 3(e) of the
Employment Agreement, the Employer shall pay all legal fees and related expenses
(including the costs of experts, evidence and counsel) incurred by the Executive
as they become due as a result of (i) the termination of the Employment Period
or Executive's employment pursuant to this Agreement or the Employment Agreement
(including all such fees and expenses, if any, incurred in contesting or
disputing any such termination), (ii) the Executive seeking to obtain or enforce
any right or benefit provided by this Agreement, the Employment Agreement or by
any other plan or arrangement maintained by the Employer under which the
Executive is or may be entitled to receive benefits or (iii) any action taken by
the Employer against the Executive, unless and until such time that a final
judgement has been rendered in favor of the Employer and all appeals related to
any such action have been exhausted; provided however, that the circumstances
set forth above occurred on or after a Change-in-Control.
5. Additional Amount. Whether or not Section 3 is applicable, if in the
opinion of tax counsel selected by the Executive and reasonably acceptable to
the Employer, the Executive has or will receive any compensation or recognize
any income (whether or not pursuant to this Agreement, the Employment Agreement
or any plan or other arrangement of the Employer and whether or not the
Employment Period or the Executive's employment with the Employer has
terminated) which will constitute an "excess parachute payment" within the
meaning of Section 280G(b)(1) of the Code (or for which a tax is otherwise
payable under Section 4999 of the Code), then the Employer shall pay the
Executive an additional amount (the "Additional Amount") equal to the sum of
(i) all taxes payable by the Executive under Section 4999 of the Code with
respect to all such excess parachute payments and any such Additional Amount,
plus (ii) all federal, state and local income taxes payable by Executive with
respect to any such Additional Amount. Any amounts payable pursuant to this
Section 4 shall be paid by the Employer to the Executive within 30 days of each
written request therefor made by the Executive.
6. Income Tax Payment. Whether or not Section 3 is applicable, if (i) the
Executive has or will receive any compensation or recognize any income (whether
or not pursuant to this Agreement, the Employment Agreement or any plan or other
arrangement of the Employer and whether or not the Employment Period or the
Executive's employment with the Employer has terminated) in connection with a
"Change-in-Control" (as that term may be interpreted in this Agreement, the
Employment Agreement or any plan or other arrangement of the Employer), and (ii)
such compensation or income represents non-cash compensation or income
(including, without limitation, non-cash compensation or income attributable to
the vesting or exercise of stock options and other awards (including restricted
stock grants) under any stock option plan of the Employer), then the Employer
shall pay the Executive in cash an amount (the "Income Tax Payment") equal to
all federal, state and local income taxes payable by Executive with respect to
such non-cash compensation or income. The Income Tax Payment shall be paid by
the Employer to the Executive within 30 days of the written request therefor
made by the Executive.
7. Notices. Any notice required or permitted hereunder shall be in writing
and shall be deemed sufficient when given by hand, by nationally recognized
overnight courier or by express, registered or certified mail, postage prepaid,
return receipt requested, and addressed to the Employer or Executive, as
applicable, at the address indicated above (or to such other address as may be
provided by notice).
8. Miscellaneous. This Agreement (i) may not be assigned by Executive
without the prior written consent of the Employer and (ii) may be assigned by
the Employer and shall be binding upon, and inure to the benefit of, the
Employer's successors and assigns. Headings herein are for convenience of
reference only and shall not define, limit or interpret the contents hereof.
9. Amendment. This Agreement may be amended, modified or supplemented by the
mutual consent of the parties in writing, but no oral amendment, modification or
supplement shall be effective.
10. Severability. If a court of competent jurisdiction adjudicates any one or
more of the provisions hereof as invalid, illegal or unenforceable in any
respect, such provision(s) shall be ineffective only to the extent and duration
of such invalidity, illegality or unenforceability and such invalidity,
illegality or unenforceability shall not affect the remaining substance of such
provision or any other provision of this Agreement and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had been
limited or modified (consistent with its general intent) to the extent necessary
so that it shall be valid, legal and enforceable. If it shall not be possible
to so limit or modify such invalid, illegal or unenforceable provision, this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein, and the parties will use their best
efforts to substitute a valid, legal and enforceable provision which, insofar as
practicable, implements the purpose and intent of the provision originally
contained herein.
11. Governing Law. This Agreement shall be construed and governed by the laws
of the State of New York.
IN WITNESS WHEREOF, this Agreement is entered into as of the date and year
first above written.
RECKSON ASSOCIATES REALTY CORP.
By: /s/ Scott Rechler
-----------------------
Name: Scott Rechler
Title: President
By: /s/ Michael Maturo
-----------------------
Michael Maturo
<PAGE>
EXHIBIT 10.35
INTERCOMPANY AGREEMENT
THIS INTERCOMPANY AGREEMENT (the "Agreement") is made and entered into as
of the 13th day of May, 1998, by and between Reckson Operating Partnership,
L.P., a Delaware limited partnership (the "Operating Partnership"), and Reckson
Service Industries, Inc., a Delaware corporation ("RSI").
W I T N E S S E T H:
WHEREAS, Reckson Associates Realty Corp., a Maryland corporation
("Reckson"), is the managing general partner of, and owns a supermajority
interest in, the Operating Partnership;
WHEREAS, the Operating Partnership has determined that it is precluded
from pursuing, or is limited in the manner in which it pursues, various
business opportunities due to the status of Reckson as a real estate investment
trust ("REIT") under sections 856 through 860 of the Internal Revenue Code of
1986, as amended (the "Code");
WHEREAS, RSI has been formed primarily to provide various commercial
services to the Operating Partnership and its tenants and other third parties
and is expected to pursue real estate or real estate related investment
opportunities through one or more real estate opportunity funds, including
Reckson Strategic Venture Partners, LLC ("RSVP"), which may make or acquire
real estate or real estate-related investments other than REIT-Qualified
Investments (as hereinafter defined) and REIT-Qualified Investments that the
Operating Partnership has decided not to pursue;
WHEREAS, based upon management's knowledge of and relationships with the
Operating Partnership's tenants, the parties hereto believe that RSI will be
able to offer on competitive market terms a high quality level of services to
the Operating Partnership and its tenants and other third parties, which
services are currently provided by third parties in a more limited and
fragmented manner or are not currently provided at all;
WHEREAS, the Operating Partnership believes that RSI, particularly through
RSVP or other real estate opportunity funds, may source attractive
opportunities for REIT-Qualified Investments, which may be in sectors outside
of the Operating Partnership's traditional markets; and
WHEREAS, in light of the purposes for which RSI was formed, the Operating
Partnership and RSI desire to enter into this Agreement in order to (i) reduce
any potential conflict of interest by allocating to each party a right of first
opportunity with respect to certain matters referred to herein and (ii) provide
access to certain information for the benefit of the other party.
NOW, THEREFORE, in consideration of the premises and mutual undertakings
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by each of the parties hereto, the
undersigned parties hereby agree as follows:
1. Definitions. Except as may be otherwise herein expressly provided, the
following terms and phrases shall have the meanings as set forth below:
(a) "Affiliate" means any entity in which a majority of the
beneficial ownership interests are owned by another specified entity or by any
entity controlled by, controlling or under common control with another
specified entity.
(b) "Master Lease Opportunity" means the opportunity to become the
lessee under a "master" lease arrangement of a property owned or subsequently
acquired by the Operating Partnership if the Operating Partnership, in its sole
discretion, determines that, consistent with the status of Reckson as a REIT,
the Operating Partnership is required to enter into such a "master" lease
arrangement for such property and that RSI or an Affiliate of RSI is qualified
to be the lessee based on experience in the industry and financial and legal
qualifications.
(c) "REIT Opportunity" means a direct or indirect opportunity to
invest in (i) real estate, real estate mortgages, real estate derivatives, or
entities that invest primarily in or have a substantial portion of their assets
in the aforementioned types of assets, or (ii) any other investment which may
be structured in a manner so as to be a REIT-Qualified Investment, as
determined by the Operating Partnership in its sole discretion. The Operating
Partnership shall have the right from time to time to provide written notice to
RSI specifying certain more limited criteria for a REIT Opportunity. Any such
written notice from the Operating Partnership may be modified or canceled by
written notice given by the Operating Partnership at any time. The definition
of REIT Opportunity shall be modified as appropriate from time to time in
accordance with any such written notices sent by the Operating Partnership.
(d) A "REIT-Qualified Investment" means an investment, the income
from which would qualify under the 95% gross income test set forth in section
856(c)(2) of the Code, the ownership of which would not cause a REIT to violate
the asset limitations set forth in section 856(c)(5) of the Code, and which
otherwise meets the federal income tax requirements applicable to REITs.
(e) "Service Provider Opportunity" means (i) the opportunity to
provide to the Operating Partnership and its tenants and other third parties
commercial services (other than customary services) utilized by lessees of real
estate or (ii) a Master Lease Opportunity. RSI shall have the right from time
to time to provide written notice to the Operating Partnership specifying more
limited criteria for a Service Provider Opportunity. Any such written notice
from RSI may be modified or canceled by written notice given by RSI at any
time. The definition of Service Provider Opportunity shall be modified as
appropriate from time to time in accordance with any such written notices sent
by RSI.
2. Operating Partnership Right of First Opportunity.
(a) During the term of this Agreement, if RSI develops a REIT
Opportunity, or if any REIT Opportunity otherwise becomes available to RSI,
then, subject to the provisions of Section 2(b), RSI shall offer such REIT
Opportunity first to the Operating Partnership. In the event that an Affiliate
of RSI (including, but not limited to, RSVP) develops a REIT Opportunity, or if
any REIT Opportunity otherwise becomes available to such Affiliate, then,
subject to the provisions of Section 2(b), RSI shall (i) cause such Affiliate
to offer such REIT Opportunity to the Operating Partnership in the form of
joint venture with such Affiliate to the extent of RSI's interest therein and
(ii) to the extent that such joint venture has invested funds in excess of 25%
of such Affiliate's total common equity in a particular real estate sector,
cause such Affiliate to offer all subsequent REIT Opportunities in such sector
directly to the Operating Partnership. The offer of a REIT Opportunity to the
Operating Partnership shall be made by written notice (the "RSI Notice"), which
RSI Notice shall contain a detailed description of the material terms and
conditions of the REIT Opportunity developed by or made available to RSI or the
applicable Affiliate, as the case may be, including, without limitation, any
noncompetition provisions. The Operating Partnership shall have ten days (the
"Ten-Day Period") from the date of receipt of the RSI Notice to notify RSI or
the applicable Affiliate, as the case may be, in writing that it has accepted
or rejected the REIT Opportunity. If the Operating Partnership does not respond
by the end of the Ten-Day Period, the Operating Partnership shall be deemed to
have rejected the REIT Opportunity. If the Operating Partnership accepts a REIT
Opportunity, but subsequently decides not to pursue such opportunity, or for
any other reason fails to consummate a REIT Opportunity, the Operating
Partnership shall immediately provide written notice that it is no longer
pursuing such REIT Opportunity to RSI or the applicable Affiliate, as the case
may be.
(b) If the Operating Partnership rejects a REIT Opportunity, or
accepts a REIT Opportunity but thereafter provides, or is required by the
provisions hereof to provide, written notice to RSI or the applicable
Affiliate, as the case may be, that it is no longer pursuing such REIT
Opportunity, RSI or such Affiliate, as the case may be, shall, for a period of
six months or, to the extent that there are ongoing discussions relating
thereto, a period of one year after the Operating Partnership Withdrawal Date
(as hereinafter defined), be entitled to acquire the related REIT-Qualified
Investment (i) on terms and conditions that are not materially more favorable
to RSI or such Affiliate, as the case may be, than the terms and conditions set
forth in the RSI Notice relating to such REIT Opportunity or (ii) if the
Operating Partnership, at any time after the RSI Notice, negotiated different
terms or conditions with respect to such REIT Opportunity, then on terms and
conditions that are not materially more favorable than the terms and conditions
negotiated by the Operating Partnership. If RSI or an Affiliate of RSI
(including, but not limited to, RSVP) enters into a binding agreement to
acquire a REIT-Qualified Investment within a six-month or one year period, as
applicable, after the Operating Partnership Withdrawal Date and subsequently
one or more additional REIT Opportunities in the same real estate sector become
available to RSI or such Affiliate, as the case may be, then RSI or such
Affiliate, as the case may be, shall be under no obligation to offer such REIT
Opportunity to the Operating Partnership and RSI or such Affiliate, as the case
may be, may immediately enter into a binding agreement to acquire such
Qualified Investment. If RSI or such Affiliate, as the case may be, does not
enter into a binding agreement to acquire such REIT-Qualified Investment within
such six-month or one-year period, as applicable, or if the terms and
conditions are materially more favorable to RSI than the terms and conditions
set forth in the RSI Notice (or, if applicable, than the terms and conditions
negotiated by the Operating Partnership subsequent to the RSI Notice), then RSI
or such Affiliate, as the case may be, shall again be required to comply with
the procedures set forth above in Section 2(a) if it desires to enter into a
binding agreement to acquire such REIT-Qualified Investment. The Operating
Partnership Withdrawal Date means any one of the following dates, as
applicable: (i) the date that the Operating Partnership notifies RSI or the
applicable Affiliate, as the case may be, that it has rejected the REIT
Opportunity, (ii) if the Operating Partnership does not respond to RSI or the
applicable Affiliate, as the case may be, regarding the REIT Opportunity, the
expiration date of the Ten-Day Period, or (iii) if the Operating Partnership
accepts the REIT Opportunity but subsequently ceases to pursue the opportunity,
the earlier of (A) 30 days after the date on which the Operating Partnership
ceases to pursue the REIT Opportunity or (B) the date of receipt by RSI or the
applicable Affiliate, as the case may be, of written notice from the Operating
Partnership that it is no longer pursuing the REIT Opportunity.
(c) RSI agrees to use commercially reasonable efforts to assist the
Operating Partnership in consummating any REIT Opportunity accepted by the
Operating Partnership that was developed by, or otherwise became available to,
RSI (including, without limitation, structuring such opportunity as a
REIT-Qualified Investment) and RSI shall cause its Affiliates to do the same.
Any expenses incurred that are directly related to structuring an investment as
a REIT-Qualified Investment shall be borne solely by the Operating Partnership.
3. RSI Access to Tenants; RSI Right of First Opportunity for Service
Provider Opportunity.
(a) During the term of this Agreement, the Operating Partnership
shall provide RSI with access to its tenants so that RSI may offer services
directly to such tenants, including, but not limited to, providing an updated
listing of all of the tenants of the Operating Partnership on a semi-annual
basis and the names of contacts at such tenants. The Operating Partnership will
use commercially reasonable efforts to facilitate the solicitation of such
tenants by RSI in respect of non-customary commercial services to be provided
by them and, if the Operating Partnership develops a Service Provider
Opportunity as a result of such efforts or otherwise, or if a Service Provider
Opportunity otherwise becomes available to the Operating Partnership, the
Operating Partnership shall offer such Service Provider Opportunity first to
RSI. If the Operating Partnership accepts a REIT Opportunity presented to it by
RSI or its Affiliates, then the Service Provider Opportunity in respect of such
REIT Opportunity and any future investments by the Operating Partnership in the
same real estate sector shall also be subject to the right of first opportunity
provided for in this Section 3(a).
The offer of a Service Provider Opportunity to RSI shall be made by
written notice (the "Operating Partnership Notice"), which Operating
Partnership Notice shall contain a detailed description of the material terms
and conditions of the Service Provider Opportunity developed by or made
available to the Operating Partnership. The Operating Partnership shall
thereafter provide or cause to be provided promptly to RSI such additional
information relating to the Service Provider Opportunity as RSI reasonably may
request. For a period of 30 days after the date that the Operating Partnership
delivers the Operating Partnership Notice, the Operating Partnership and RSI
shall negotiate with each other on an exclusive basis with respect to such
Service Provider Opportunity. RSI shall offer to provide services to the
Operating Partnership in respect of a Service Provider Opportunity at market
rates and on terms and conditions as attractive as the best available for
comparable services in the market or (it being understood that RSI will provide
market information on such services to the Operating Partnership during such
30-day period) those offered by RSI to third parties. If the Operating
Partnership and RSI are unable to enter into a mutually satisfactory
arrangement with respect to such Service Provider Opportunity within such
30-day period, or if RSI determines that it is not interested in pursuing such
Service Provider Opportunity (in which event RSI shall provide written notice
to the Operating Partnership promptly after such determination), then the
Operating Partnership shall be entitled, for a period of six months or, to the
extent that there are ongoing discussions relating thereto, one year after the
expiration of such 30-day period, to enter into a binding agreement with
respect to such Service Provider Opportunity with any party on terms and
conditions that are not materially more favorable to the Operating Partnership
than the terms and conditions last proposed in writing by the Operating
Partnership to RSI. If the Operating Partnership does not enter into a binding
agreement with respect to such Service Provider Opportunity within such
six-month or one-year period, as applicable, or if the terms and conditions are
more materially favorable to the Operating Partnership than the terms and
conditions last proposed in writing by the Operating Partnership to RSI, the
Operating Partnership shall again be required to comply with the procedures set
forth above in this Section 3(a) if it desires to pursue such Service Provider
Opportunity.
(b) Notwithstanding anything to the contrary contained in this
Agreement, (1) the Operating Partnership shall not be required to offer to RSI
any Service Provider Opportunity in connection with a proposed acquisition
involving a Master Lease Opportunity until a binding contract has been entered
into with respect to such acquisition, and the consummation of any agreement
between the Operating Partnership and RSI with respect to a Service Provider
Opportunity shall be subject to the actual closing of such acquisition by the
Operating Partnership, (2) the Operating Partnership shall have the right, in
its sole discretion, to decide not to pursue, or to discontinue at any time
pursuing, any investment opportunity, even if such opportunity, if pursued,
would create a Service Provider Opportunity, and (3) the Operating Partnership
shall have no obligation to offer any opportunity other than a Service Provider
Opportunity to RSI.
(c) The Operating Partnership agrees to use commercially reasonable
efforts to assist RSI in structuring and consummating all dealings with outside
parties in connection with any Service Provider Opportunity that was developed
by, or otherwise became available to, the Operating Partnership. The Operating
Partnership shall have the right, in its sole discretion, to structure any
investment as a REIT- Qualified Investment, even if such structuring prevents
the Operating Partnership from creating a Service Provider Opportunity for RSI.
4. General Terms and Conditions for Rights of First Opportunity/
Notification Rights.
(a) Unless waived or unless agreed to as part of an investment, each
party shall bear its own expenses with respect to any opportunity to which this
Agreement is applicable, and each party agrees that it shall not be entitled to
any compensation from the other party with respect to any such opportunity
(b) A party shall not be required to comply with the right of first
opportunity and notification requirements set forth in this Agreement during
any period in which the other party or any Affiliate of such other party is in
default of this Agreement or any other agreement entered into by the parties
hereto or any of their Affiliates, if such default is material and remains
uncured for fifteen days after receipt of notice thereof.
(c) The Operating Partnership shall not enter into any arrangement or
agreement to provide any Service Provider Opportunity to any party other than
RSI, and RSI shall not, and shall cause its Affiliates not to, enter into any
arrangement or agreement to provide REIT Opportunities to any party other than
the Operating Partnership, except, in each case, as permitted in this
Agreement.
(d) Any REIT Opportunity which is offered to and accepted by the
Operating Partnership under this Agreement may be entered into by or on behalf
of the Operating Partnership or by any designee which is an Affiliate of the
Operating Partnership. Any Service Provider Opportunity which is offered to and
accepted by RSI under this Agreement may be entered into by or on behalf of RSI
or by any Affiliate of RSI.
(e) All first opportunity and notification rights set forth in this
Agreement shall be subordinated to any seller consent and confidentiality
requirements. Accordingly, no party shall be required to comply with the first
opportunity and notification rights set forth in this Agreement if such
compliance would violate any seller consent or confidentiality requirements.
(f) While it is the intention of the parties to align their
businesses in accordance with the terms of this Agreement, each party shall act
independently in its own best interests, and neither party shall be considered
a partner or agent of the other party or to owe any fiduciary or other common
law duty to the other party.
(g) All provisions hereof requiring the giving of notice shall be
satisfied through the giving of notice to the Board of Directors of Reckson or
RSI, as the case may be, or a committee of such Board formed for the specific
purpose of addressing matters covered in this Agreement.
5. Services of Officers and Directors. It is acknowledged and agreed
that the directors and executive officers of either party hereto may serve in
similar capacities with the other party hereto.
6. RSI Ownership Limitation. So long as this Agreement is in effect,
the certificate of incorporation of RSI shall contain provisions to the effect
that (i) no stockholder of RSI may own, or be deemed to own by virtue of the
attribution provisions of Section 856(d)(5) of the Code, more than 9.9% of the
aggregate number or value of the outstanding shares of RSI common stock
("Common Stock"), (ii) no stockholder of RSI may own more than 9.9% in value of
all of the outstanding shares of capital stock of RSI, taking into account all
classes of such capital stock outstanding, (iii) any shares of RSI stock owned
or purported to be owned in violation of the foregoing restrictions shall
automatically be transferred to a trust for the benefit of a charitable
beneficiary and be subject to "Excess Stock" provisions similar to those
contained in Article VII of the Articles of Amendment and Restatement of
Reckson, and (iv) stockholders of RSI shall be required to disclose to RSI upon
demand such information with respect to the ownership of RSI capital stock as
the Company deems necessary to determine Reckson's compliance with the REIT
provisions of the Code, provided that the ownership limitations described in
clauses (i) and (ii) above shall be subject to exceptions so as to enable a
stockholder (x) to acquire and own any Common Stock distributed by Reckson to
its shareholders, (y) to acquire and own Common Stock in satisfaction of
obligations under that certain standby agreement between RSI and RSI Standby
LLC with respect to the purchase of Common Stock subject to certain
subscription rights distributed by RSI to its shareholders that expire
unexercised, and (z) to acquire and own employee stock options and Common Stock
issued pursuant to the exercise of employee stock options. The board of
directors of RSI shall not grant any waivers or exemptions from the foregoing
limitations without the consent of the board of directors of Reckson, which may
be granted or withheld in Reckson's sole discretion. RSI shall request from its
stockholders, pursuant to the provision described in clause (iv) above, such
information as Reckson shall direct RSI to request, and RSI shall promptly
advise Reckson of the responses it receives to such request.
7. Specific Performance. Each party hereto hereby acknowledges that
the obligations undertaken by it pursuant to this Agreement are unique and that
the other party hereto would likely have no adequate remedy at law if such
party shall fail to perform its obligations hereunder, and such party therefor
confirms that the other party's right to specific performance of the terms of
this Agreement is essential to protect the rights and interests of the other
party. Accordingly, in addition to any other remedies that a party hereto may
have at law or in equity, such party shall have the right to have all
obligations, covenants, agreements and other provisions of this Agreement
specifically performed by the other party hereto and the right to obtain a
temporary restraining order or a temporary or permanent injunction to secure
specific performance and to prevent a breach or threatened breach of this
Agreement by the other party hereto. Each party submits to the jurisdiction of
the courts of the State of Delaware for this purpose.
8. Affiliates. Each party hereto shall cause all Affiliates under its
control to comply with the terms hereof. Reckson, by its signature below,
hereby agrees that it shall comply with the terms of this Agreement applicable
to the Operating Partnership.
9. Term. The term of this Agreement shall commence as of the date
first written above and shall terminate on May 13, 2008. This Agreement may
be extended at the option of either of the parties hereto for two additional
five-year periods, upon notice given to the other party within six months of
the expiration hereof. Notwithstanding the foregoing, a party hereto may
terminate this Agreement if the other party or any Affiliate of such other
party is in default of this Agreement or any other agreement entered into by
the parties hereto or any of their Affiliates, if such default is material and
remains uncured for fifteen days after receipt of notice thereof.
10. Miscellaneous.
(a) Notices. Notices shall be sent to the parties at the following
addresses:
Reckson Operating Partnership, L.P.
225 Broadhollow Road
Melville, NY 11747
Facsimile: 516-756-1764
Attention: Jason M. Barnett, Esq.
with a copy to:
Edward F. Petrosky, Esq.
Brown & Wood LLP
One World Trade Center
NY, NY 10048
Facsimile: 212-839-5599
Reckson Service Industries, Inc.
225 Broadhollow Road
Melville, NY 11747
Facsimile: 516-756-1764
Attention: Scott H. Rechler
with a copy to:
Mitchell Rechler, Secretary
Notices may be sent by certified mail, return receipt requested, Federal
Express or comparable overnight delivery service, or facsimile. Notice will be
deemed received on the fourth business day following deposit in U.S. mail and
on the first business day following deposit with Federal Express or other
delivery service, or transmission by facsimile. Any party to this Agreement may
change its address for notice by giving written notice to the other party at
the address and in accordance with the procedures provided above.
(b) Reasonable and Necessary Restrictions. Each of the parties hereto
hereby acknowledges and agrees that the restrictions, prohibitions and other
provisions of this Agreement are reasonable, fair and equitable in scope, term
and duration, are necessary to protect the legitimate business interests of the
parties hereto and are a material inducement to the parties hereto to enter
into the transactions described in and contemplated by the recitals hereto.
Each party hereto covenants that it will not sue to challenge the
enforceability of this Agreement or raise any equitable defense to its
enforcement.
(c) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective successors and
assigns. Except as otherwise permitted in this Agreement, this Agreement shall
not be assigned without the express written consent of each of the parties
hereto. Notwithstanding the foregoing, this Agreement may be assigned without
the consent of any party hereto in connection with any merger, consolidation,
reorganization or other combination of a party with or into another entity
where the party is not the surviving entity.
(d) Amendments; Waivers. No termination, cancellation, modification,
amendment, deletion, addition or other change in this Agreement, or any
provision hereof, or waiver of any right or remedy herein provided, shall be
effective for any purpose unless such change or waiver is specifically set
forth in a writing signed by the party or parties to be bound thereby. The
waiver of any right or remedy with respect to any occurrence on one occasion
shall not be deemed a waiver of such right or remedy with respect to such
occurrence on any other occasion.
(e) Choice of Law. This Agreement and the rights and obligations of
the parties hereunder shall be governed by and construed in accordance with the
laws of the State of New York, without regard to the principles of choice of
law thereof.
(f) Severability. In the event that one or more of the terms or
provisions of this Agreement or the application thereof to any person(s) or in
any circumstance(s) shall, for any reason and to any extent, be found by a
court of competent jurisdiction to be invalid, illegal or unenforceable, such
court shall have the power, and hereby is directed, to substitute for or limit
such invalid term(s), provision(s) or application(s) and to enforce such
substituted or limited terms or provisions, or the application thereof. Subject
to the foregoing, the invalidity, illegality or enforceability of any one or
more of the terms or provisions of this Agreement, as the same may be amended
from time to time, shall not affect the validity, legality or enforceability of
any other term or provision hereof.
(g) Entire Agreement; No Third-Party Beneficiaries. This Agreement
constitutes the entire agreement and supersedes all prior agreements,
understandings, negotiations and discussions, whether written or oral, between
the parties hereto with respect to the subject matter hereof, so that no such
external or separate agreement relating to the subject matter of this Agreement
shall have any effect or be binding, unless the same is referred to
specifically in this Agreement or is executed by the parties after the date
hereof. This Agreement is not intended to confer upon any other person any
rights or remedies hereunder and shall not be enforceable by any party not a
signatory to this Agreement.
(h) Gender; Number. As the context requires, any word used herein in
the singular shall extend to and include the plural, any word used in the
plural shall extend to and include the singular and any word used in any gender
or the neuter shall extend to and include each other gender or be neutral.
(i) Headings. The headings of the sections hereof are inserted for
convenience of reference only and are not intended to be a part of or affect
the meaning or interpretation of this Agreement or of any term or provision
hereof.
(j) Counterparts. This Agreement may be executed in two or more
counterparts, each of which together shall be deemed to be an original and all
of which together shall be deemed to constitute one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed by one of its duly authorized signatories as of
the date first above written.
RECKSON OPERATING PARTNERSHIP, L.P.
By: Reckson Associates Realty Corp.,
its sole general partner
By: /s/ Mitchell D. Rechler
------------------------------------
Name: Mitchell D. Rechler
Title: Executive Vice President
RECKSON SERVICE INDUSTRIES, INC.
By: /s/ Scott Rechler
------------------------------------
Name: Scott Rechler
Title: President
<PAGE>
EXHIBIT 10.36
CREDIT AGREEMENT
dated as of
June 15, 1998
between
RECKSON SERVICE INDUSTRIES, INC.,
as Borrower
and
RECKSON OPERATING PARTNERSHIP, L.P.,
as Lender
relating to
RECKSON STRATEGIC VENTURE PARTNERS, LLC
<PAGE>
Table of Contents
Page
ARTICLE I.
DEFINITIONS
Section 1.1 Definitions....................................................1
(a) Terms Generally...........................................1
(b) Other Terms...............................................1
ARTICLE II.
THE REVOLVING CREDIT FACILITY
Section 2.1 Commitment and Loans...........................................6
Section 2.2 Borrowing Procedure............................................6
Section 2.3 Termination and Reduction of Commitment........................6
Section 2.4 Repayment......................................................6
Section 2.5 Optional Prepayment............................................7
ARTICLE III.
INTEREST AND FEES
Section 3.1 Interest Rate..................................................7
Section 3.2 Interest on Overdue Amounts....................................7
Section 3.3 Maximum Interest Rate..........................................8
ARTICLE IV.
DISBURSEMENT AND PAYMENT
Section 4.1 Method and Time of Payments.....................................8
Section 4.2 Compensation for Losses.........................................9
Section 4.3 Withholding and Additional Costs................................9
(a) Withholding...................................................9
(b) Additional Costs.............................................10
(c) Certificate, Etc.............................................10
Section 4.4 Expenses; Indemnity............................................10
Section 4.5 Survival.......................................................11
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
Section 5.1 Representations and Warranties.................................11
(a) Good Standing and Power......................................11
(b) Authority....................................................11
(c) Authorizations...............................................12
(d) Binding Obligation...........................................12
(e) Litigation...................................................12
(f) No Conflicts.................................................12
(g) Taxes........................................................12
(h) Properties...................................................12
(i) Compliance with Laws and Charter Documents...................13
(j) No Material Adverse Effect...................................13
(k) Disclosure...................................................13
Section 5.2 Survival.......................................................13
ARTICLE VI.
CONDITIONS PRECEDENT
Section 6.1 Conditions to the Availability of the Commitment...............13
(a) This Agreement...............................................13
(b) Certificate of Incorporation and By-Laws.....................13
(c) Representations and Warranties...............................14
(d) Other Documents..............................................14
(e) REIT Status of Reckson.......................................14
(f) Certain Loans Subject to Reckson's Approval..................14
Section 6.2 Conditions to All Loans........................................14
(a) Borrowing Request............................................14
(b) No Default...................................................14
(c) Debt-to-Equity Ratio.........................................14
(d) Representations and Warranties; Covenants....................14
Section 6.3 Satisfaction of Conditions Precedent...........................15
ARTICLE VII.
COVENANTS
Section 7.1 Affirmative Covenants..........................................15
(a) Financial Statements; Compliance Certificates................15
(b) Existence....................................................15
(c) Compliance with Law and Agreements...........................16
(d) Authorizations...............................................16
(e) Inspection...................................................16
(f) Maintenance of Records.......................................16
(g) Notice of Defaults and Adverse Developments..................16
Section 7.2 Negative Covenants.............................................16
(a) Mergers, Consolidations and Sales of Assets..................17
(b) Liens........................................................17
(c) Indebtedness.................................................17
(d) Dividends....................................................17
(e) Certain Amendments...........................................17
ARTICLE VIII.
EVENTS OF DEFAULT
Section 8.1 Events of Default..............................................17
ARTICLE IX.
EVIDENCE OF LOANS; TRANSFERS
Section 9.1 Evidence of Loans..............................................19
ARTICLE X.
MISCELLANEOUS
Section 10.1 Applicable Law................................................20
Section 10.2 Waiver of Jury................................................20
Section 10.3 Jurisdiction and Venue; Service of Process....................20
Section 10.4 Confidentiality...............................................21
Section 10.5 Amendments and Waivers........................................21
Section 10.6 Cumulative Rights; No Waiver..................................21
Section 10.7 Notices.......................................................21
Section 10.8 Certain Acknowledgments.......................................22
Section 10.9 Separability..................................................22
Section 10.10 Parties in Interest..........................................22
Section 10.11 Execution in Counterparts....................................22
<PAGE>
CREDIT AGREEMENT, dated as of June 15, 1998, between Reckson Service
Industries, Inc., a Delaware corporation, and Reckson Operating Partnership,
L.P., a Delaware limited partnership relating to Reckson Strategic Venture
Partners, LLC ("RSVP").
W I T N E S S E T H:
WHEREAS, the Borrower has requested the Lender to commit to lend to
the Borrower up to $100 million on a revolving basis for investment in RSVP;
and
WHEREAS, the Lender is willing to make revolving credit loans on the
terms and conditions provided herein;
NOW, THEREFORE, the parties agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.1 Definitions.
(a) Terms Generally. The definitions ascribed to terms in this Agreement
apply equally to both the singular and plural forms of such terms. Whenever the
context may require, any pronoun shall be deemed to include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be interpreted as if followed by the phrase "without
limitation". The phrase "individually or in the aggregate" shall be deemed
general in scope and not to refer to any specific Section or clause of this
Agreement. All references herein to Articles, Sections, Exhibits and Schedules
shall be deemed references to Articles and Sections of, and Exhibits and
Schedules to, this Agreement unless the context shall otherwise require. The
table of contents, headings and captions herein shall not be given effect in
interpreting or construing the provisions of this Agreement. Except as
otherwise expressly provided herein, all references to "dollars" or "$" shall
be deemed references to the lawful money of the United States of America.
(b) Other Terms. The following terms have the meanings ascribed to them
below or in the Sections of this Agreement indicated below:
"Adjusted Indebtedness" means, with respect to the Borrower, the
Borrower's Indebtedness determined without regard for any amounts
described in clause (viii) of the definition of "Indebtedness."
"Affiliate" means, with respect to any Person, any other Person that
controls, is controlled by, or is under common control with, such Person.
"Agreement" means this credit agreement, as it may be amended,
modified or supplemented from time to time.
"Available Commitment" means, on any day, an amount equal to (i) the
Commitment on such day minus (ii) the aggregate outstanding principal
amount of Loans on such day.
"Borrower" means Reckson Service Industries, Inc., a Delaware
corporation.
"Borrowing Date" means, with respect to any Loan, the Business Day
set forth in the relevant Borrowing Request as the date upon which the
Borrower desires to borrow such Loan;
"Borrowing Request" means a request by the Borrower for a Loan, which
shall specify (i) the requested Borrowing Date and (ii) the aggregate
amount of such Loan.
"Business Day" means any day that is not a Saturday, Sunday or other
day on which commercial banks in The City of New York are authorized by
law to close.
"Capital Lease Obligations" means, with respect to any Person, the
obligation of such Person to pay rent or other amounts under any lease
with respect to any property (whether real, personal or mixed) acquired or
leased by such Person that is required to be accounted for as a liability
on a consolidated balance sheet of such Person.
"Commitment" means $100 million less (i) the amount of loans made by
the Lender to the Borrower for the funding of investments made by RSVP
prior to the spin-off distribution of shares of common stock of Borrower
by Reckson and (ii) the amount of any investments made by the Lender in
joint venture investments made with RSVP, and as such amount may be
reduced from time to time pursuant to Section 2.3.
"Commitment Termination Date" means the earlier to occur of (i) June
15, 2003 and (ii) the date, if any, on which the Commitment is terminated.
"Confidential Information" means information delivered to the Lender
by or on behalf of the Borrower in connection with the transactions
contemplated by or otherwise pursuant to this Agreement that is
confidential or proprietary in nature at the time it is so delivered or
information obtained by the Lender in the course of its review of the
books or records of the Borrower contemplated herein; provided that such
term shall not include information W that was publicly known or otherwise
known to the Lender prior to the time of such disclosure, (ii) that
subsequently becomes publicly known through no act or omission by the
Lender or any Person acting on the Lender's behalf, (iii) that otherwise
becomes known to the Lender other than through disclosure by the Borrower
or (iv) that constitutes financial information delivered to the Lender
that is otherwise publicly available.
"Default" means any event or circumstance which, with the giving of
notice or the passage of time, or both, would be an Event of Default.
"EBITDA" means for any fiscal period, the Consolidated Net Income or
Consolidated Net Loss, as the case may be, for such fiscal period, after
restoring thereto amounts deducted for (a) extraordinary losses (or
deducting therefrom any amounts included therein on account of
extraordinary gains) and special charges, (b) depreciation and
amortization (including write-offs or write-downs) and special charges,
(c) the amount of interest expense of the Borrower and its Subsidiaries,
if any, determined on a consolidated basis in accordance with GAAP, for
such period on the aggregate principal amount of their consolidated
indebtedness, (d) the amount of tax expense of the Borrower and its
Subsidiaries, if any, determined on a consolidated basis in accordance
with GAAP, for such period and (e) the aggregate amount of fixed and
contingent rentals payable by the Borrower and its Subsidiaries, if any,
determined on a consolidated basis in accordance with GAAP, for such
period with respect to leases of real and personal property.
"Effective Date" has the meaning assigned to such term in Section
6.1.
"Event of Default" has the meaning assigned to such term in Section
8.1.
"GAAP" means generally accepted accounting principles, as set forth
in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such
other statements by such other entities as may be approved by a
significant segment of the accounting profession of the United States of
America.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guaranty" means, with respect to any Person, any obligation,
contingent or otherwise, of such Person guaranteeing or having the
economic effect of guaranteeing any Indebtedness of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, and
including any obligation of such Person (i) to purchase or pay (or advance
or supply funds for the purchase or payment of) such Indebtedness or to
purchase (or to advance or supply funds for the purchase of) any security
for the payment of such Indebtedness, (ii) to purchase property,
securities or services for the purpose of assuring the holder of such
Indebtedness of the payment of such Indebtedness or (iii) to maintain
working capital, equity capital or the financial condition or liquidity of
the primary obligor so as to enable the primary obligor to pay such
Indebtedness. The term "Guaranteed" shall have the corresponding meaning.
"Indebtedness" means, with respect to any Person, (i) all obligations
of such Person for borrowed money or for the deferred purchase price of
property or services (including all obligations, contingent or otherwise,
of such Person in connection with letters of credit, bankers' acceptances,
interest rate swap agreements, interest rate cap agreements or other
similar instruments, including currency swaps) other than indebtedness to
trade creditors and service providers incurred in the ordinary course of
business and payable on usual and customary terms, (ii) all obligations of
such Person evidenced by bonds, notes, debentures or other similar
instruments, (iii) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the remedies available to
the seller or lender under such agreement are limited to repossession or
sale of such property), (iv) all Capital Lease Obligations of such Person,
(v) all obligations of the types described in clauses (i), (ii), (iii) or
(iv) above secured by (or for which the obligee has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in any
property (including accounts, contract rights and other intangibles) owned
by such Person, even though such Person has not assumed or become liable
for the payment of such Indebtedness, (vi) all preferred stock issued by
such Person which is redeemable, prior to full satisfaction of the
Borrower's obligations under this Agreement (including repayment in full
of the Loans and all interest accrued thereon), other than at the option
of such Person, valued at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends, (vii) all
Indebtedness of others Guaranteed by such Person and (viii) all
Indebtedness of any partnership of which such Person is a general partner.
"Indemnitee" has the meaning assigned to such term in Section 4.4(b).
"Intercompany Agreement" means the intercompany agreement, dated as
of the date hereof, by and between the Borrower and the Lender.
"Interest Period" means, with respect to any Loan, each three-month
period commencing on the date such Loan is made or at the end of the
preceding Interest Period, as the case may be; provided, however, that:
(i) any Interest Period that would otherwise end on a day that
is not a Business Day shall be extended to the next Business Day,
unless such Business Day falls in another calendar month, in which
case such Interest Period shall end on the next preceding Business
Day;
(ii) any Interest Period that begins on the last Business Day of
a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (iii) below, end on the last
Business Day of a calendar month; and
(iii) any Interest Period that would otherwise end after the
Commitment Termination Date then in effect shall end on such
Commitment Termination Date.
"Lender" means Reckson Operating Partnership, L.P., a Delaware
limited partnership.
"Lien" means, with respect to any asset of a Person, (i) any
mortgage, deed of trust, lien, pledge, encumbrance, charge or security
interest in or on such asset, (ii) the interest of a vendor or lessor
under any conditional sale agreement, capital lease or title retention
agreement relating to such asset, and (iii) in the case of securities, any
purchase option, call or similar right of any other Person with respect to
such securities.
"Loans" has the meaning assigned to such term in Section 2.1.
"Material Adverse Effect" means any material and adverse effect on
(i) the consolidated business, properties, condition (financial or
otherwise) or operations, present or prospective, of the Borrower and its
Subsidiaries, (ii) the ability of the Borrower timely to perform any of
its material obligations, or of the Lender to exercise any remedy, under
this Agreement or (iii) the legality, validity, binding nature or
enforceability of this Agreement.
"Net Assets" means, with respect to the Borrower, the greater of (i)
the sum of the Borrower's paid-in capital and retained earnings or (ii)
the excess of the Value of all of the Borrower's assets of any kind over
the Borrower's Adjusted Indebtedness.
"Permitted Liens" means, collectively, the following: (i) Liens
expressly approved by the Lender, which approval shall not be unreasonably
withheld; (ii) Liens imposed by any Governmental Authority for taxes,
assessments or charges not yet due or that are being contested in good
faith by appropriate proceedings and for which adequate reserves are being
maintained (in accordance with GAAP); and (iii) Liens existing on the date
hereof.
"Person" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association,
corporation, institution, public benefit corporation, entity or government
(whether Federal, state, county, city, municipal or otherwise, including
any instrumentality, division, agency, body or department thereof).
"Prime Rate" means the prime rate (or if a range is given, the
highest prime rate) listed under "Money Rates" in The Wall Street Journal
for such date or, if The Wall Street Journal is not published on such
date, then in The Wall Street Journal most recently published.
"Reckson" means Reckson Associates Realty Corp., a Maryland
corporation.
"Responsible Officer" means the chief executive officer, president,
chief financial officer, chief accounting officer, treasurer or any vice
president, senior vice president or executive vice president of the
General Partner.
"RSI Facility Agreement" means the credit agreement dated the date
hereof between Borrower and Lender in respect of the operations of Reckson
Service Industries, Inc.
"RSVP Platform" means a particular real estate market sector in which
RSVP invests.
"SEC" means the Securities and Exchange Commission (or any successor
Governmental Authority).
"Subsidiary" means, at any time and with respect to any Person, any
other Person the shares of stock or other ownership interests of which
having ordinary voting power to elect a majority of the board of directors
or with respect to other matters of such Person are at the time owned, or
the management or policies of which is otherwise at the time controlled,
directly or indirectly through one or more intermediaries (including other
Subsidiaries) or both, by such first Person. Unless otherwise qualified or
the context indicates clearly to the contrary, all references to a
"Subsidiary" or "Subsidiaries" in this Agreement refer to a Subsidiary or
Subsidiaries of the Borrower.
"Taxes" has the meaning assigned to such term in Section 4.3(a).
"Value" means, with respect to any asset owned by the Borrower, the
present value of the net cash flow reasonably projected by the Borrower to
be received with respect to its ownership of such assets, discounted at an
interest rate that the Borrower reasonably determines appropriate given
the risks associated with such asset and such projected net cash flow, but
in no event at an interest rate lower than 2% above the Prime Rate in
effect at the time that the determination of Value is made.
ARTICLE II.
THE REVOLVING CREDIT FACILITY
Section 2.1 Commitment and Loans. Until the Commitment Termination Date,
subject to the terms and conditions of this Agreement, the Lender agrees to
make revolving credit loans (collectively, "Loans") in dollars to the Borrower
in an aggregate principal amount at any one time outstanding not to exceed the
Commitment.
Section 2.2 Borrowing Procedure. In order to borrow a Loan, the Borrower
shall give a Borrowing Request to the Lender, by telephone, telex or telecopy
or in writing, not later than 10:30 A.M., New York time, on the third Business
Day before the Borrowing Date (or such later time or date as the Lender may in
its sole discretion permit). (If any Borrowing Request is made otherwise than
in writing, Borrower shall promptly confirm such Borrowing Request in writing.)
Subject to satisfaction, or waiver by the Lender, of each of the applicable
conditions precedent contained in Article VI, on the Borrowing Date the Lender
shall make available, in immediately available funds, to the Borrower the
amount of the requested Loan.
Section 2.3 Termination and Reduction of Commitment. The Borrower may
terminate the Commitment, or reduce the amount thereof, by giving written
notice to the Lender, not later than 5:00 P.M., New York time, on the fifth
Business Day prior to the date of termination or reduction (or such later time
or date as the Lender may in its sole discretion permit).
Section 2.4 Repayment. Loans shall be repaid, together with all accrued
and unpaid interest thereon, on the Commitment Termination Date.
Section 2.5 Optional Prepayment. The Borrower may prepay Loans by giving
notice (specifying the Loans to be prepaid in whole or in part, the principal
amount thereof to be prepaid and the date of prepayment) to the Lender, by
telephone, telex, telecopy or in writing not later than 12:00 noon, New York
time, on the fourth Business Day preceding the proposed date of prepayment (or
such later time or date as the Lender may in its sole discretion permit). (If
any such prepayment notice is made otherwise than in writing, Borrower shall
promptly confirm such notice in writing.) Each such prepayment shall be at the
aggregate principal amount of the principal being prepaid, together with
accrued interest on the principal being prepaid to the date of prepayment and
the amounts required by Section 4.3. Subject to the terms and conditions of
this Agreement, prepaid Loans may be reborrowed.
ARTICLE III.
INTEREST AND FEES
Section 3.1 Interest Rate. Each Loan shall bear interest from the date
made until the date repaid, payable in arrears, with respect to Interest
Periods of three months or less, on the last day of such Interest Period, and
with respect to Interest Periods longer than three months, on the day which is
three months after the commencement of such Interest Period and on the last day
of such Interest Period, at a rate per annum equal to the greater of (i) the
sum of (x) 2% and (y) the Prime Rate for the applicable Interest Period and
(ii) 12%. With respect to each Loan outstanding for one year or longer, such
12% rate shall increase to 12.48%, 12.98%, 13.50% and 14.04% as of the
anniversary of the making of such Loan, for the second, third, fourth and fifth
years that such Loan is outstanding, respectively. Notwithstanding the
foregoing, if the amount of interest to be paid by the Borrower to the Lender
exceeds the amount of EBITDA of the Borrower for the immediately preceding
calendar quarter (ending the last day of September, December, March, or June),
the Borrower shall not be obligated to repay the amount of interest in excess
of EBITDA of the Borrower for such period. Any such amount of unpaid interest
shall be added to principal and shall accrue interests thereon. Payments under
the Notes shall be applied first to any fees, costs or expenses due under the
Notes or hereunder, then to interest, and then to principal. Notwithstanding
any other provision of this Agreement, all outstanding principal and interest
of the Loan and all other amounts payable hereunder, if not sooner paid, shall
be due and payable on the Commitment Termination Date.
Section 3.2 Interest on Overdue Amounts. All overdue amounts (including
principal, interest and fees) hereunder, and, during the continuance of any
Event of Default that shall have occurred, each Loan, shall bear interest,
payable on demand, at a rate per annum equal to the greater of (i) the sum of
(x) 3% and (y) Prime Rate for the applicable Interest Period and (ii) 13%. With
respect to each Loan outstanding for one year or longer, such 13% rate shall
increase to 13.48%, 13.98%, 14.50% and 15.04% as of the anniversary of the
making of such Loan for the second, third, fourth and fifth years that such
Loan is outstanding, respectively.
Section 3.3 Maximum Interest Rate. (a) Nothing in this Agreement shall
require the Borrower to pay interest at a rate exceeding the maximum rate
permitted by applicable law. Neither this Section nor Section 10.1 is intended
to limit the rate of interest payable for the account of the Lender to the
maximum rate permitted by the laws of the State of New York (or any other
applicable law) if a higher rate is permitted with respect to the Lender by
supervening provisions of U.S. Federal law.
(b) If the amount of interest payable for the account of the Lender on any
interest payment date in respect of the immediately preceding interest
computation period, computed pursuant to this Article III, would exceed the
maximum amount permitted by applicable law to be charged by the Lender, the
amount of interest payable for its account on such interest payment date shall
automatically be reduced to such maximum permissible amount.
(c) If the amount of interest payable for the account of the Lender in
respect of any interest computation period is reduced pursuant to Section
3.3(b) and the amount of interest payable for its account in respect of any
subsequent interest computation period would be less than the maximum amount
permitted by law to be charged by the Lender, then the amount of interest
payable for its account in respect of such subsequent interest computation
period shall be automatically increased to such maximum permissible amount;
provided that at no time shall the aggregate amount by which interest paid for
the account of the Lender has been increased pursuant to this Section 3.3(c)
exceed the aggregate amount by which interest paid for its account has
theretofore been reduced pursuant to Section 3.3(b).
ARTICLE IV.
DISBURSEMENT AND PAYMENT
Section 4.1 Method and Time of Payments.
(a) All payments by the Borrower hereunder shall be made without setoff or
counterclaim to the Lender, for its account, in dollars and in immediately
available funds to the account of the Lender theretofore designated in writing
to the Borrower not later than 12:00 noon, New York time, on the date when due
or, in the case of payments pursuant to Sections 4.3 and 4.4 or payments
otherwise specified as payable upon demand, forthwith upon written demand
therefor.
(b) Whenever any payment from the Borrower shall be due on a day that is
not a Business Day, the date of payment thereof shall be extended to the next
succeeding Business Day. If the date for any payment of principal is extended
by operation of law or otherwise, interest thereon shall be payable for such
extended time.
<PAGE>
Section 4.2 Compensation for Losses. (a) If (i) the Borrower prepays
Loans, (ii) the Borrower revokes any Borrowing Request or (iii) Loans (or
portions thereof) shall become or be declared to be due prior to the scheduled
maturity thereof, then the Borrower shall pay to the Lender an amount that will
compensate the Lender for any loss (other than lost profit) or premium or
penalty incurred by the Lender as a result of such prepayment, declaration or
revocation in respect of funds obtained for the purpose of making or
maintaining the Lender's Loans, or any portion thereof. Such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
that would have accrued on the amount so paid or prepaid, or not borrowed, for
the period from the date of such payment or prepayment or failure to borrow to
the last day of such Interest Period (or, in the case of a failure to borrow,
the Interest Period that would have commenced on the expected Borrowing Date)
in each case at the applicable rate of interest for such Loan over (ii) the
amount of interest (as reasonably determined by the Lender) that would have
accrued on such amount were it on deposit for a comparable period with leading
banks in the London interbank market.
(b) If requested by the Borrower, in connection with a payment due
pursuant to this Section 4.2, the Lender shall provide to the Borrower a
certificate setting forth in reasonable detail the amount required to be paid
by the Borrower to the Lender and the computations made by the Lender to
determine such amount. In the absence of manifest error, such certificate shall
be conclusive as to the amount required to be paid.
Section 4.3 Withholding and Additional Costs.
(a) Withholding. All payments under this Agreement (including payments of
principal and interest) shall be payable to the Lender free and clear of any
and all present and future taxes, levies, imposts, duties, deductions,
withholdings, fees, liabilities and similar charges (collectively, "Taxes").
If any Taxes are required to be withheld or deducted from any amount payable
under this Agreement, then the amount payable under this Agreement shall be
increased to the amount which, after deduction from such increased amount of
all Taxes required to be withheld or deducted therefrom, will yield to the
Lender the amount stated to be payable under this Agreement. The Borrower shall
also hold the Lender harmless and indemnify it for any stamp or other taxes
with respect to the preparation, execution, delivery, recording, performance or
enforcement of this Agreement (all of which shall be included within "Taxes") .
If any of the Taxes specified in this Section 4.3(a) are paid by the Lender,
the Borrower shall, upon demand of the Lender, promptly reimburse the Lender
for such payments, together with any interest, penalties and expenses incurred
in connection therewith. The Borrower shall deliver to the Lender certificates
or other valid vouchers for all Taxes or other charges deducted from or paid
with respect to payments made by the Borrower hereunder.
(b) Additional Costs. Subject to Section 4.3(c), and without duplication
of any amounts payable described in Section 4.2 or 4.3(a), if after the date
hereof any change in any law or regulation or in the interpretation thereof by
any court or administrative or Governmental Authority charged with the
administration thereof or the enactment of any law or regulation shall either
(1) impose, modify or deem applicable any reserve, special deposit or similar
requirement against the Lender's Commitment or Loans or (2) impose on the
Lender any other condition regarding this Agreement, its Commitment or the
Loans and the result of any event referred to in clause (1) or (2) shall be to
increase the cost to the Lender of maintaining its Commitment or any Loans made
by the Lender (which increase in cost shall be calculated in accordance with
the Lender's reasonable averaging and attribution methods) by an amount which
the Lender deems to be material, then, upon demand by the Lender, the Borrower
shall pay to the Lender an amount equal to such increase in cost.
(c) Certificate, Etc. If requested by the Borrower, in connection with any
demand for payment pursuant to this Section 4.3, the Lender shall provide to
the Borrower a certificate setting forth in reasonable detail the basis for
such demand, the amount required to be paid by the Borrower to the Lender, the
computations made by the Lender to determine such amount and satisfaction of
the conditions set forth in the next sentence. Anything to the contrary herein
notwithstanding, the Lender shall not have the right to demand any payment or
compensation under this Section 4.3 (i) with respect to any period more than
180 days prior to the date it has made a demand pursuant to this Section 4.3,
and (ii) to the extent that the Lender determines in good faith that the
interest rate on the relevant Loans appropriately accounts for any increased
cost or reduced rate of return. In the absence of manifest error, the
certificate referred to above shall be conclusive as to the amount required to
be paid.
Section 4.4 Expenses; Indemnity. (a) The Borrower agrees: (i) to pay or
reimburse the Lender for all reasonable out-of-pocket costs and expenses
incurred in connection with the preparation and execution of, and any
amendment, supplement or modification to, this Agreement and any other
documents prepared in connection herewith or therewith, and the consummation of
the transactions contemplated hereby and thereby, including, without
limitation, the reasonable fees and disbursements of Brown & Wood LLP, counsel
to the Lender; and (ii) to pay or reimburse the Lender for all reasonable costs
and expenses incurred in connection with the enforcement or preservation of any
rights under this Agreement and any such other documents, including, without
limitation, the reasonable fees and disbursements of counsel to the Lender. The
Borrower also agrees to indemnify the Lender against any transfer taxes,
documentary taxes, assessments or charges made by any Governmental Authority by
reason of the execution and delivery of this Agreement.
(b) The Borrower agrees to indemnify the Lender and its directors,
officers, partners, employees, agents and Affiliates (for purposes of this
paragraph, each, an "Indemnitee") against, and to hold each Indemnitee harmless
from, any and all claims, liabilities, damages, losses, costs, charges and
expenses (including fees and expenses of counsel) incurred by or asserted
against any Indemnitee arising out of, in any way connected with, or as a
result of (i) the execution or delivery of this Agreement or any agreement or
instrument contemplated by this Agreement, the performance by the parties
thereto of their respective obligations under this Agreement or the
consummation of the transactions and the other transactions contemplated by
this Agreement, (ii) the use of the proceeds of the Loans or (iii) any claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether or not any Indemnitee is a party thereto; provided that such indemnity
shall not, as to any Indemnitee, be available to the extent that such losses,
claims, damages, liabilities or related expenses are determined by a court of
competent jurisdiction by final and nonappealable judgment to have resulted
from the gross negligence or willful misconduct of such Indemnitee.
(c) All amounts due under this Section 4.4 shall be payable in immediately
available funds upon written demand therefor.
Section 4.5 Survival. The provisions of Sections 4.2, 4.3 and 4.4 shall
remain operative and in full force and effect regardless of the expiration of
the term of this Agreement, the consummation of the transactions contemplated
hereby, the repayment of any of the Loans, the reduction or termination of the
Commitment, the invalidity or unenforceability of any term or provision of this
Agreement, or any investigation made by or on behalf of the Lender.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
Section 5.1 Representations and Warranties. The Borrower represents and
warrants to the Lender as follows:
(a) Good Standing and Power. The Borrower and each Subsidiary is a
limited partnership or corporation, duly organized and validly existing in good
standing under the laws of the jurisdiction of its organization; each has the
power to own its property and to carry on its business as now being conducted;
and each is duly qualified to do business and is in good standing in each
jurisdiction in which the character of the properties owned or leased by it
therein or in which the transaction of its business makes such qualification
necessary, except where the failure to be so qualified, or to be in good
standing, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.
(b) Authority. The Borrower has full power and authority to execute and
deliver, and to incur and perform its obligations under, this Agreement, which
has been duly authorized by all proper and necessary action. No consent or
approval of limited partners is required as a condition to the validity or
performance of, or the exercise by the Lender of any of its rights or remedies
under, this Agreement.
(c) Authorizations. All authorizations, consents, approvals,
registrations, notices, exemptions and licenses with or from any Governmental
Authority or other Person necessary for the execution, delivery and performance
by the Borrower of, and the incurrence and performance of each of its
obligations under, this Agreement, and the exercise by the Lender of its
remedies under this Agreement have been effected or obtained and are in full
force and effect.
(d) Binding Obligation. This Agreement constitutes the valid and legally
binding obligation of the Borrower enforceable in accordance with its terms,
subject as to enforcement to bankruptcy, insolvency, reorganization, moratorium
and similar laws of general applicability relating to or affecting creditors'
rights and to general equity principles.
(e) Litigation. There are no proceedings or investigations now pending or,
to the knowledge of the Borrower, threatened before any court or arbitrator or
before or by any Governmental Authority which, individually or in the
aggregate, if determined adversely to the interests of the Borrower or any
Subsidiary, could reasonably be expected to have a Material Adverse Effect.
(f) No Conflicts. There is no statute, regulation, rule, order or
judgment, and no provision of any agreement or instrument binding upon the
Borrower or any Subsidiary, or affecting their properties, and no provision of
the certificate of limited partnership, certificate of incorporation, agreement
of limited partnership or by-laws (or similar constitutive instruments) of the
Borrower or any Subsidiary, that would prohibit, conflict with or in any way
impair the execution or delivery of, or the incurrence or performance of any
obligations of the Borrower under, this Agreement, or result in or require the
creation or imposition of any Lien on property of the Borrower or any
Subsidiary as a consequence of the execution, delivery and performance of this
Agreement.
(g) Taxes. The Borrower and the Subsidiaries each has filed or caused to
be filed all tax returns that are required to be filed and paid all taxes that
are required to be shown to be due and payable on said returns or on any
assessment made against it or any of its property and all other taxes,
assessments, fees, liabilities, penalties or other charges imposed on it or any
of its property by any Governmental Authority, except for any taxes,
assessments, fees, liabilities, penalties or other charges which are being
contested in good faith and (unless the amount thereof is not material to the
Borrower's consolidated financial condition) for which adequate reserves have
been established in accordance with GAAP.
(h) Properties. The Borrower and the Subsidiaries each has good and
marketable title to, or valid leasehold interests in, all of its respective
properties and assets. All such assets and properties are so owned or held free
and clear of all Liens, except Permitted Liens.
(i) Compliance with Laws and Charter Documents. Neither the Borrower nor
any Subsidiary is, or as a result of performing any of its obligations under
this Agreement will be, in violation of (a) any law, statute, rule, regulation
or order of any Governmental Authority applicable to it or its properties or
assets or (b) its certificate of limited partnership, certificate of
incorporation, agreement of limited partnership, by-laws or any similar
document.
(j) No Material Adverse Effect. Since May 15, 1997, there has not
occurred or arisen any event, condition or circumstance that, individually or
in the aggregate, could reasonably be expected to have a Material Adverse
Effect.
(k) Disclosure. All information relating to the Borrower or its
Subsidiaries delivered in writing to the Lender in connection with the
negotiation, execution and delivery of this Agreement is true and complete in
all material respects. There is no material fact of which the Borrower is aware
which, individually or in the aggregate, would reasonably be expected adversely
to influence the Lender's credit analysis relating to the Borrower and its
Subsidiaries which has not been disclosed to the Lender in writing.
Section 5.2 Survival. All representations and warranties made by the
Borrower in this Agreement, and in the certificates or other instruments
prepared or delivered in connection with or pursuant to this Agreement, shall
be considered to have been relied upon by the Lender, (ii) survive the making
of Loans regardless of any investigation made by, or on behalf of, the Lender
and (iii) continue in full force and effect as long as the Commitment has not
been terminated and, thereafter, so long as any Loan, fee or other amount
payable under this Agreement remains unpaid.
ARTICLE VI.
CONDITIONS PRECEDENT
Section 6.1 Conditions to the Availability of the Commitment. The
obligations of the Lender hereunder are subject to, and the Lender's Commitment
shall not become available until the earliest date (the "Effective Date") on
which each of the following conditions precedent shall have been satisfied or
waived in writing by the Lender:
(a) This Agreement. The Lender shall have received this Agreement duly
executed and delivered by the Borrower.
(b) Certificate of Incorporation and By-Laws. The Lender shall have
received the following:
(i) a copy of the Certificate of Incorporation of the Borrower, as in
effect on the Effective Date, certified by the Secretary of State of
Delaware, and a certificate from such Secretary of State as to the good
standing of the Borrower, in each case as of a date reasonably close to
the Effective Date; and
(ii) a certificate of a Responsible Officer of the Borrower, dated
the Effective Date, and stating that attached thereto is a true and
complete copy of the By-Laws of the Borrower as in effect on such date.
(c) Representations and Warranties. The representations and warranties
contained in Section 5.1 shall be true and correct on the Effective Date, and
the Lender shall have received a certificate, signed by a Responsible Officer
of the Borrower, to that effect.
(d) Other Documents. The Lender shall have received such other
certificates, opinions and other documents as the Lender reasonably may
require.
(e) REIT Status of Reckson. The borrowing shall not, in the sole judgment
of the Lender, endanger Reckson's status as a REIT.
(f) Certain Loans Subject to Reckson's Approval. In respect of any Loan or
Loans aggregating $25 million in a single RSVP Platform, Reckson shall have
approved the Lender's making such Loan in its sole discretion.
Section 6.2 Conditions to All Loans. The obligations of the Lender to
make each Loan are subject to the conditions precedent that, on the date of
each Loan and after giving effect thereto, each of the following conditions
precedent shall have been satisfied, or waived in writing by the Lender:
(a) Borrowing Request. The Lender shall have received a Borrowing
Request in accordance with the terms of this Agreement.
(b) No Default. No Default or Event of Default shall have occurred and be
continuing, nor shall any Default or Event of Default occur as a result of the
making of such Loan.
(c) Debt-to-Equity Ratio. The Lender shall have received from the
Borrower a certificate demonstrating that the ratio of the Borrower's
Adjusted Indebtedness to the Borrower's Net Assets, taking into account
the requested Loan and the assets, if any, to be acquired by the Borrower
with the proceeds of such Loan, shall not exceed 4-to-1.
(d) Representations and Warranties; Covenants . The representations
and warranties contained in Section 5.1 shall have been true and correct
when made and (except to the extent that any representation or warranty
speaks as of a date certain) shall be true and correct on the Borrowing
Date with the same effect as though such representations and warranties
were made on such Borrowing Date; and the Borrower shall have complied
with all of its covenants and agreements under this Agreement.
Section 6.3 Satisfaction of Conditions Precedent. Each of (i) the
delivery by the Borrower of a Borrowing Request (unless the Borrower notifies
the Lender in writing to the contrary prior to the Borrowing Date) and (ii) the
acceptance of the proceeds of a Loan shall be deemed to constitute a
certification by the Borrower that, as of the Borrowing Date, each of the
conditions precedent contained in Section 6.2 has been satisfied with respect
to the Loan then being made.
ARTICLE VII.
COVENANTS
Section 7.1 Affirmative Covenants. Until satisfaction in full of all the
obligations of the Borrower under this Agreement and termination of the
Commitment of the Lender hereunder, the Borrower will:
(a) Financial Statements; Compliance Certificates. Furnish to the Lender:
(i) as soon as available, but in no event more than 60 days
following the end of each of the first three quarters of each fiscal
year, copies of the Borrower's Quarterly Report on Form 10-Q being
filed with the SEC, which shall include a consolidated balance sheet
and consolidated income statement of the Borrower and the
Subsidiaries for such quarter;
(ii) as soon as available, but in no event more than 120 days
following the end of each fiscal year, a copy of the Borrower's
Annual Report on Form 10-K being filed with the SEC, which shall
include the consolidated financial statements of the Borrower and the
Subsidiaries, together with a report thereon by Ernst & Young LLP (or
another firm of independent certified public accountants reasonably
satisfactory to the Lender), for such year;
(iii) within five Business Days of any Responsible Officer of
the Borrower obtaining knowledge of any Default or Event of Default,
if such Default or Event of Default is then continuing, a certificate
of a Responsible Officer of the Borrower stating that such
certificate is a "Notice of Default" and setting forth the details
thereof and the action which the Borrower is taking or proposes to
take with respect thereto; and
(iv) such additional information, reports or statements,
regarding the business, financial condition or results of operations
of the Borrower and its Subsidiaries, as the Lender from time to time
may reasonably request.
(b) Existence. Except as permitted by Section 7.2(a), maintain its
existence in good standing and qualify and remain qualified to do business
in each jurisdiction in which the character of the properties owned or
leased by it therein or in which the transaction of its business is such
that the failure to qualify, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
(c) Compliance with Law and Agreements. Comply, and cause each
Subsidiary to comply, with all applicable laws, ordinances, orders, rules,
regulations and requirements of all Governmental Authorities and with all
agreements except where the necessity of compliance therewith is contested
in good faith by appropriate proceedings or where the failure to comply
therewith, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
(d) Authorizations. Obtain, make and keep in full force and effect
all authorizations from and registrations with Governmental Authorities
required for the validity or enforceability of this Agreement.
(e) Inspection. Permit, and cause each Subsidiary to permit, the
Lender to have one or more of its officers and employees, or any other
Person designated by the Lender, to visit and inspect any of the
properties of the Borrower and the Subsidiaries and to examine the minute
books, books of account and other records of the Borrower and the
Subsidiaries, and to photocopy extracts from such minute books, books of
account and other records, and to discuss its affairs, finances and
accounts with its officers and with the Borrower's independent
accountants, during normal business hours and at such other reasonable
times, for the purpose of monitoring the Borrower's compliance with its
obligations under this Agreement.
(f) Maintenance of Records. Keep, and cause each Subsidiary to keep,
proper books of record and account in which full, true and correct entries
will be made of all dealings or transactions of or in relation to its
business and affairs.
(g) Notice of Defaults and Adverse Developments. Promptly notify the
Lender upon the discovery by any Responsible officer of the occurrence of
(i) any Default or Event of Default; (ii) any event, development or
circumstance whereby the financial statements most recently furnished to
the Lender fail in any material respect to present fairly, in accordance
with GAAP, the financial condition and operating results of the Borrower
and the Subsidiaries as of the date of such financial statements; (iii)
any material litigation or proceedings that are instituted or threatened
(to the knowledge of the Borrower) against the Borrower or any Subsidiary
or any of their respective assets; (iv) any event, development or
circumstance which, individually or in the aggregate, could reasonably be
expected to result in an event of default (or, with the giving of notice
or lapse of time or both, an event of default) under any Indebtedness and
the amount thereof; and (v) any other development in the business or
affairs of the Borrower or any Subsidiary if the effect thereof would
reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect; in each case describing the nature thereof and
the action the Borrower proposes to take with respect thereto.
Section 7.2 Negative Covenants. Until satisfaction in full of all the
obligations of the Borrower under this Agreement and termination of the
Commitment of the Lender hereunder, the Borrower will not:
(a) Mergers, Consolidations and Sales of Assets. Wind up, liquidate or
dissolve its affairs or enter into any merger, consolidation or share exchange,
or convey, sell, lease or otherwise dispose of (or agree to do any of the
foregoing at any future time), whether in one or a series of transactions, all
or any substantial part of its assets, or permit any Subsidiary so to do,
unless such transaction or series of transactions are expressly approved by the
Lender, which approval shall not be unreasonably withheld.
(b) Liens . Create, incur, assume or suffer to exist any Lien upon or with
respect to any of its property or assets, whether now owned or hereafter
acquired, or assign or otherwise convey any right to receive income, except
Permitted Liens.
(c) Indebtedness. Create, incur, issue, assume, guarantee or suffer to
exist any Indebtedness, except:
(i) Indebtedness to the Lender under this Agreement or under the RSI
Facility Agreement,
(ii) Non-recourse Indebtedness of the Borrower and any Subsidiary
secured by mortgages, encumbrances or liens specifically permitted by
Section 7.2(b), and
(iii) Indebtedness expressly approved by the Lender in writing, which
approval may be withheld in the Lender's sole discretion.
(d) Dividends. Declare any dividends on any of its shares of capital
stock unless such dividend or distribution is expressly approved in writing by
the Lender.
(e) Certain Amendments. Amend, modify or waive, or permit to be amended,
modified or waived, any provision of its Certificate of Incorporation unless,
within not less than 5 days prior to such amendment, modification or waiver (or
such later time as the Lender may in its sole discretion permit), the Borrower
shall have given the Lender notice thereof, including all relevant terms and
conditions thereof, and the Lender shall have consented in writing thereto.
ARTICLE VIII.
EVENTS OF DEFAULT
Section 8.1 Events of Default. If one or more of the following events
(each, an "Event of Default") shall occur:
(a) The Borrower shall fail duly to pay any principal of any Loan when
due, whether at maturity, by notice of intention to prepay or otherwise; or
(b) The Borrower shall fail duly to pay any interest, fee or any other
amount payable under this Agreement within two days after the same shall be
due; or
(c) Borrower shall fail duly to observe or perform any term, covenant, or
agreement contained in Section 7.2; or
(d) The Borrower shall fail duly to observe or perform any other term,
covenant or agreement contained in this Agreement, and such failure shall have
continued unremedied for a period of 30 days; or
(e) Any representation or warranty made or deemed made by the Borrower in
this Agreement, or any statement or representation made in any certificate,
report or opinion delivered by or on behalf of the Borrower in connection with
this Agreement, shall prove to have been false or misleading in any material
respect when so made or deemed made; or
(f) The Borrower shall fail to pay any Indebtedness (other than
obligations here under) in an amount of $100,000 or more when due; or any such
Indebtedness having an aggregate principal amount outstanding of $100,000 or
more shall become or be declared to be due prior to the expressed maturity
thereof; or
(g) An involuntary case or other proceeding shall be commenced against the
Borrower seeking liquidation, reorganization or other relief with respect to it
or its debts under any applicable bankruptcy, insolvency, reorganization or
similar law or seeking the appointment of a custodian, receiver, liquidator,
assignee, trustee, sequestrator or similar official of it or any substantial
part of its property, and such involuntary case or other proceeding shall
remain undismissed and unstayed for a period of more than 60 days; or an order
or decree approving or ordering any of the foregoing shall be entered and
continued unstayed and in effect; or
(h) The Borrower shall commence a voluntary case or proceeding under any
applicable bankruptcy, insolvency, reorganization or similar law or any other
case or proceeding to be adjudicated a bankrupt or insolvent, or any of them
shall consent to the entry of a decree or order for relief in respect of the
Borrower in an involuntary case or proceeding under any applicable bankruptcy,
insolvency, reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against any of them, or any of them
shall file a petition or answer or consent seeking reorganization or relief
under any applicable law, or any of them shall consent to the filing of such
petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator or similar official of
the Borrower or any substantial part of its property, or the Borrower shall
make an assignment for the benefit of creditors, or the Borrower shall admit in
writing its inability to pay its debts generally as they become due, or the
Borrower shall take corporate action in furtherance of any such action;
(i) One or more judgments against the Borrower or attachments against its
property, which in the aggregate exceed $100,000, or the operation or result of
which could be to interfere materially and adversely with the conduct of the
business of the Borrower remain unpaid, unstayed on appeal, undischarged,
unbonded, or undismissed for a period of more than 30 days; or
(j) Any court or governmental or regulatory authority shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
judgment, decree, injunction or other order (whether temporary, preliminary or
permanent) which is in effect and which prohibits, enjoins or otherwise
restricts, in a manner that, individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect, any of the transactions
contemplated under this Agreement; or
(k) Any Event of Default shall occur and be continuing under the RSI
Facility Agreement.
then, and at any time during the continuance of such Event of Default, the
Lender may, by written notice to the Borrower, take either or both of the
following actions, at the same or different times: (i) terminate forthwith the
Commitment and (ii) declare any Loans then outstanding to be due, whereupon the
principal of the Loans so declared to be due, together with accrued interest
thereon and any unpaid amounts accrued under this Agreement, shall become
forthwith due, without presentment, demand, protest or any other notice of any
kind (all of which are hereby expressly waived by the Borrower); provided that,
in the case of any Event of Default described in Section 8.1(g) or (h)
occurring with respect to the Borrower, the Commitment shall automatically and
immediately terminate and the principal of all Loans then outstanding, together
with accrued interest thereon and any unpaid amounts accrued under this
Agreement, shall automatically and immediately become due without presentment,
demand, protest or any other notice of any kind (all of which are hereby
expressly waived by the Borrower).
ARTICLE IX.
EVIDENCE OF LOANS; TRANSFERS
Section 9.1 Evidence of Loans. (a) The Lender shall maintain accounts
evidencing the indebtedness of the Borrower to the Lender resulting from each
Loan made by the Lender from time to time, including the amounts of principal
and interest payable and paid to the Lender in respect of Loans.
(b) The Lender's written records described above shall be available
for inspection during ordinary business hours by the Borrower from time to time
upon reasonable prior notice to the Lender.
(c) The entries made in the Lender's written or electronic records and
the foregoing accounts shall be prima facie evidence of the existence and
amounts of the indebtedness of the Borrower therein recorded; provided,
however, that the failure of the Lender to maintain any such account or such
records, as applicable, or any error therein, shall not in any manner affect
the validity or enforceability of any obligation of the Borrower to repay any
Loan actually made by the Lender in accordance with the terms of this
Agreement.
ARTICLE X.
MISCELLANEOUS
Section 10.1 Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
Section 10.2 Waiver of Jury. THE BORROWER AND THE LENDER EACH HEREBY
WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, OR THE
RELATIONSHIPS ESTABLISHED HEREUNDER.
Section 10.3 Jurisdiction and Venue; Service of Process. (a) The Borrower
and the Lender each hereby irrevocably submits to the non-exclusive
jurisdiction of any state or federal court in the Borough of Manhattan, The
City of New York for the purpose of any suit, action, proceeding or judgment
relating to or arising out of this Agreement and to the laying of venue in the
Borough of Manhattan The City of New York. The Borrower and the Lender each
hereby irrevocably waives, to the fullest extent permitted by applicable law,
any objection to the laying of the venue of any such suit, action or proceeding
brought in the aforesaid courts and hereby irrevocably waives any claim that
any such suit, action or proceeding brought in any such court has been brought
in an inconvenient forum.
(b) Borrower agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to the
Borrower at its address set forth in subsection 10.7 or at such other address
of which the Lender shall have been notified pursuant thereto. The Borrower
further agrees that nothing herein shall affect the right to effect service of
process in any other manner permitted by law or shall limit the right to sue in
any other jurisdiction; and
(c) The Borrower waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this subsection any special, exemplary, punitive or
consequential damages.
Section 10.4 Confidentiality. The Lender agrees (on behalf of itself and
each of its Affiliates, partners, officers, employees and representatives) to
use its best efforts to keep confidential, in accordance with their customary
procedures for handling confidential information of this nature and in
accordance with commercially reasonable business practices, any Confidential
Information; provided that nothing herein shall limit the disclosure of any
such information (i) to the extent required by statute, rule, regulation or
judicial process, (ii) to counsel for the Lender, (iii) to auditors or
accountants, (iv) by the Lender to an Affiliate thereof, or (v) in connection
with any litigation relating to enforcement of this Agreement; provided
further, that, unless specifically prohibited by applicable law or court order,
the Lender shall, prior to disclosure thereof, notify the Borrower of any
request for disclosure of any Confidential Information (x) by any Governmental
Authority or representative thereof or (y) pursuant to legal process.
Section 10.5 Amendments and Waivers. (a) Any provision of this Agreement
may be amended, modified, supplemented or waived, but only by a written
amendment or supplement, or written waiver, signed by the Borrower and the
Lender.
(b) Except to the extent expressly set forth therein, any waiver shall be
effective only in the specific instance and for the specific purpose for which
such waiver is given.
Section 10.6 Cumulative Rights; No Waiver. Each and every right granted
to the Lender hereunder or under any other document delivered in connection
herewith, or allowed it by law or equity, shall be cumulative and not exclusive
and may be exercised from time to time. No failure on the part of the Lender to
exercise, and no delay in exercising, any right will operate as a waiver
thereof, nor will any single or partial exercise by the Lender of any right
preclude any other or future exercise thereof or the exercise of any other
right.
Section 10.7 Notices. Any communication, demand or notice to be given
hereunder will be duly given when delivered in writing or by telecopy to a
party at its address as indicated below or such other address as such party may
specify in a notice to the other party hereto. A communication, demand or
notice given pursuant to this Agreement shall be addressed:
If to the Borrower, to:
Reckson Service Industries, Inc.
225 Broadhollow Road
Melville, New York 11747
Telecopy: (516) 719-7400
Attention: Chief Financial Officer
<PAGE>
If to the Lender, to:
Reckson Operating Partnership, L.P.
225 Broadhollow Road
Melville, New York 11747
Telecopy: (516) 694-6900
Attention: Chief Financial Officer
This Section 10. 7 shall not apply to notices referred to in Article II of
this Agreement, except to the extent set forth therein.
Section 10.8 Certain Acknowledgments. The Borrower hereby confirms and
acknowledges that (a) the Lender does not have any fiduciary or similar
relationship to the Borrower by virtue of this Agreement and the transactions
contemplated herein and that the relationship established by this Agreement
between the Lender and the Borrower is solely that of creditor and debtor and
(b) no joint venture exists between the Borrower and the Lender by virtue of
this Agreement and the transactions contemplated herein.
Section 10.9 Separability. In case any one or more of the provisions
contained in this Agreement shall be invalid, illegal or unenforceable in any
respect under any law, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
Section 10.10 Parties in Interest. This Agreement shall be binding upon
and inure to the benefit of the Borrower and the Lender and their respective
successors and assigns, except that the Borrower may not assign any of its
rights hereunder without the prior written consent of the Lender, and any
purported assignment by the Borrower without such consent shall be void.
Section 10.11 Execution in Counterparts. This Agreement may be executed in
any number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an
original, but all the counterparts shall together constitute one and the same
instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the date first above written.
RECKSON SERVICE INDUSTRIES, INC.,
as Borrower
By: /s/ Scott Rechler
----------------------------------
Name: Scott Rechler
Title: President
RECKSON OPERATING PARTNERSHIP, L.P.,
as Lender
By: RECKSON ASSOCIATES REALTY CORP.,
its general partner
By: /s/ Mitchell D. Rechler
----------------------------------
Name: Mitchell D. Rechler
Title: Executive Vice President
<PAGE>
Exhibit 10.37
CREDIT AGREEMENT
dated as of
June 15, 1998
between
RECKSON SERVICE INDUSTRIES, INC.,
as Borrower
and
RECKSON OPERATING PARTNERSHIP, L.P.,
as Lender
relating to the operations of
RECKSON SERVICE INDUSTRIES, INC.
<PAGE>
Table of Contents
Page
ARTICLE I.
DEFINITIONS
Section 1.1 Definitions....................................................1
(a) Terms Generally..............................................1
(b) Other Terms..................................................1
ARTICLE II.
THE REVOLVING CREDIT FACILITY
Section 2.1 Commitment and Loans............................................6
Section 2.2 Borrowing Procedure.............................................6
Section 2.3 Termination and Reduction of Commitment.........................6
Section 2.4 Repayment.......................................................6
Section 2.5 Optional Prepayment.............................................7
ARTICLE III.
INTEREST AND FEES
Section 3.1 Interest Rate....................................................7
Section 3.2 Interest on Overdue Amounts......................................7
Section 3.3 Maximum Interest Rate............................................7
Section 3.3 Neither this Section nor Section 10..............................8
ARTICLE IV.
DISBURSEMENT AND PAYMENT
Section 4.1 Method and Time of Payments......................................8
Section 4.2 Compensation for Losses..........................................8
Section 4.2 Loans, or any portion thereof....................................9
Section 4.3 Withholding and Additional Costs.................................9
(a) Withholding....................................................9
(b) Additional Costs...............................................9
(c) Certificate, Etc..............................................10
Section 4.4 Expenses; Indemnity.............................................10
Section 4.5 Survival........................................................10
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
Section 5.1 Representations and Warranties..................................11
(a) Good Standing and Power.......................................11
(b) Authority.....................................................11
(c) Authorizations................................................11
(d) Binding Obligation............................................11
(e) Litigation....................................................11
(f) No Conflicts..................................................12
(g) Taxes.........................................................12
(h) Properties....................................................12
(i) Compliance with Laws and Charter Documents....................12
(j) No Material Adverse Effect....................................12
(k) Disclosure....................................................12
Section 5.2 Survival........................................................13
ARTICLE VI.
CONDITIONS PRECEDENT
Section 6.1 Conditions to the Availability of the Commitment................13
(a) This Agreement................................................13
(b) Certificate of Incorporation and By-Laws......................13
(c) Representations and Warranties................................13
(d) Other Documents...............................................13
(e) REIT Status of Reckson........................................13
(f) Certain Loans Subject to Reckson's Approval...................13
Section 6.2 Conditions to All Loans.........................................14
(a) Borrowing Request.............................................14
(b) No Default....................................................14
(c) Debt-to-Equity Ratio..........................................14
(d) Representations and Warranties; Covenants.....................14
Section 6.3 Satisfaction of Conditions Precedent............................14
ARTICLE VII.
COVENANTS
Section 7.1 Affirmative Covenants...........................................14
(a) Financial Statements; Compliance Certificates.................14
(b) Existence.....................................................15
(c) Compliance with Law and Agreements............................15
(d) Authorizations................................................15
(e) Inspection....................................................15
(f) Maintenance of Records........................................16
(g) Notice of Defaults and Adverse Developments...................16
Section 7.2 Negative Covenants..............................................16
(a) Mergers, Consolidations and Sales of Assets...................16
(b) Liens.........................................................16
(c) Indebtedness..................................................16
(d) Dividends.....................................................17
(e) Certain Amendments............................................17
ARTICLE VIII.
EVENTS OF DEFAULT
Section 8.1 Events of Default...............................................17
ARTICLE IX.
EVIDENCE OF LOANS; TRANSFERS
Section 9.1 Evidence of Loans...............................................19
ARTICLE X.
MISCELLANEOUS
Section 10.1 Applicable Law.................................................19
Section 10.2 Waiver of Jury.................................................19
Section 10.3 Jurisdiction and Venue; Service of Process.....................19
Section 10.4 Confidentiality................................................20
Section 10.5 Amendments and Waivers.........................................20
Section 10.6 Cumulative Rights; No Waiver...................................20
Section 10.7 Notices........................................................20
Section 10.8 Certain Acknowledgments........................................21
Section 10.9 Separability...................................................21
Section 10.10 Parties in Interest...........................................21
Section 10.11 Execution in Counterparts.....................................21
<PAGE>
CREDIT AGREEMENT, dated as of June 15, 1998, between Reckson Service
Industries, Inc., a Delaware corporation, and Reckson Operating Partnership,
L.P., a Delaware limited partnership, relating to the operations of Reckson
Service Industries, Inc.
W I T N E S S E T H:
WHEREAS, the Borrower has requested the Lender to commit to lend to
the Borrower up to $100 million on a revolving basis for acquisitions of assets
and general corporate purposes; and WHEREAS, the Lender is willing to make
revolving credit loans on the terms and conditions provided herein; NOW,
THEREFORE, the parties agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.1 Definitions.
(a) Terms Generally . The definitions ascribed to terms in this Agreement
apply equally to both the singular and plural forms of such terms. Whenever the
context may require, any pronoun shall be deemed to include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be interpreted as if followed by the phrase "without
limitation". The phrase "individually or in the aggregate" shall be deemed
general in scope and not to refer to any specific Section or clause of this
Agreement. All references herein to Articles, Sections, Exhibits and Schedules
shall be deemed references to Articles and Sections of, and Exhibits and
Schedules to, this Agreement unless the context shall otherwise require. The
table of contents, headings and captions herein shall not be given effect in
interpreting or construing the provisions of this Agreement. Except as
otherwise expressly provided herein, all references to "dollars" or "$" shall
be deemed references to the lawful money of the United States of America.
(b) Other Terms . The following terms have the meanings ascribed to them
below or in the Sections of this Agreement indicated below:
"Adjusted Indebtedness" means, with respect to the Borrower, the
Borrower's Indebtedness determined without regard for any amounts
described in clause (viii) of the definition of "Indebtedness."
"Affiliate" means, with respect to any Person, any other Person that
controls, is controlled by, or is under common control with, such Person.
"Agreement" means this credit agreement, as it may be amended,
modified or supplemented from time to time.
"Available Commitment" means, on any day, an amount equal to (i) the
Commitment on such day minus (ii) the aggregate outstanding principal
amount of Loans on such day.
"Borrower" means Reckson Service Industries, Inc., a Delaware
corporation.
"Borrowing Date" means, with respect to any Loan, the Business Day
set forth in the relevant Borrowing Request as the date upon which the
Borrower desires to borrow such Loan;
"Borrowing Request" means a request by the Borrower for a Loan, which
shall specify (i) the requested Borrowing Date and (ii) the aggregate
amount of such Loan.
"Business Day" means any day that is not a Saturday, Sunday or other
day on which commercial banks in The City of New York are authorized by
law to close.
"Capital Lease Obligations" means, with respect to any Person, the
obligation of such Person to pay rent or other amounts under any lease
with respect to any property (whether real, personal or mixed) acquired or
leased by such Person that is required to be accounted for as a liability
on a consolidated balance sheet of such Person.
"Commercial Services" means businesses that provide services for
occupants of office, industrial and other property types that Reckson may
not be permitted to provide under Federal tax laws applicable to a real
estate investment trust or that have not traditionally been provided by
Reckson.
"Commitment" means $100 million, as such amount may be reduced from
time to time pursuant to Section 2.3.
"Commitment Termination Date" means the earlier to occur of (i) June
15, 2003 and (ii) the date, if any, on which the Commitment is terminated.
"Confidential Information" means information delivered to the Lender
by or on behalf of the Borrower in connection with the transactions
contemplated by or otherwise pursuant to this Agreement that is
confidential or proprietary in nature at the time it is so delivered or
information obtained by the Lender in the course of its review of the
books or records of the Borrower contemplated herein; provided that such
term shall not include information W that was publicly known or otherwise
known to the Lender prior to the time of such disclosure, (ii) that
subsequently becomes publicly known through no act or omission by the
Lender or any Person acting on the Lender's behalf, (iii) that otherwise
becomes known to the Lender other than through disclosure by the Borrower
or (iv) that constitutes financial information delivered to the Lender
that is otherwise publicly available. "Default" means any event or
circumstance which, with the giving of notice or the passage of time, or
both, would be an Event of Default.
"EBITDA" means for any fiscal period, the Consolidated Net Income or
Consolidated Net Loss, as the case may be, for such fiscal period, after
restoring thereto amounts deducted for (a) extraordinary losses (or
deducting therefrom any amounts included therein on account of
extraordinary gains) and special charges, (b) depreciation and
amortization (including write-offs or write-downs) and special charges,
(c) the amount of interest expense of the Borrower and its Subsidiaries,
if any, determined on a consolidated basis in accordance with GAAP, for
such period on the aggregate principal amount of their consolidated
indebtedness, (d) the amount of tax expense of the Borrower and its
Subsidiaries, if any, determined on a consolidated basis in accordance
with GAAP, for such period and (e) the aggregate amount of fixed and
contingent rentals payable by the Borrower and its Subsidiaries, if any,
determined on a consolidated basis in accordance with GAAP, for such
period with respect to leases of real and personal property.
"Effective Date" has the meaning assigned to such term in Section
6.1.
"Event of Default" has the meaning assigned to such term in Section
8.1.
"GAAP" means generally accepted accounting principles, as set forth
in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such
other statements by such other entities as may be approved by a
significant segment of the accounting profession of the United States of
America. "Governmental Authority" means any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions
of or pertaining to government.
"Guaranty" means, with respect to any Person, any obligation,
contingent or otherwise, of such Person guaranteeing or having the
economic effect of guaranteeing any Indebtedness of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, and
including any obligation of such Person (i) to purchase or pay (or advance
or supply funds for the purchase or payment of) such Indebtedness or to
purchase (or to advance or supply funds for the purchase of) any security
for the payment of such Indebtedness, (ii) to purchase property,
securities or services for the purpose of assuring the holder of such
Indebtedness of the payment of such Indebtedness or (iii) to maintain
working capital, equity capital or the financial condition or liquidity of
the primary obligor so as to enable the primary obligor to pay such
Indebtedness. The term "Guaranteed" shall have the corresponding meaning.
"Indebtedness" means, with respect to any Person, (i) all obligations
of such Person for borrowed money or for the deferred purchase price of
property or services (including all obligations, contingent or otherwise,
of such Person in connection with letters of credit, bankers' acceptances,
interest rate swap agreements, interest rate cap agreements or other
similar instruments, including currency swaps) other than indebtedness to
trade creditors and service providers incurred in the ordinary course of
business and payable on usual and customary terms, (ii) all obligations of
such Person evidenced by bonds, notes, debentures or other similar
instruments, (iii) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the remedies available to
the seller or lender under such agreement are limited to repossession or
sale of such property), (iv) all Capital Lease Obligations of such Person,
(v) all obligations of the types described in clauses (i), (ii), (iii) or
(iv) above secured by (or for which the obligee has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in any
property (including accounts, contract rights and other intangibles) owned
by such Person, even though such Person has not assumed or become liable
for the payment of such Indebtedness, (vi) all preferred stock issued by
such Person which is redeemable, prior to full satisfaction of the
Borrower's obligations under this Agreement (including repayment in full
of the Loans and all interest accrued thereon), other than at the option
of such Person, valued at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends, (vii) all
Indebtedness of others Guaranteed by such Person and (viii) all
Indebtedness of any partnership of which such Person is a general partner.
"Indemnitee" has the meaning assigned to such term in Section 4.4(b).
"Intercompany Agreement" means the intercompany agreement, dated as
of the date hereof, by and between the Borrower and the Lender.
"Interest Period" means, with respect to any Loan, each three-month
period commencing on the date such Loan is made or at the end of the
preceding Interest Period, as the case may be; provided, however, that:
(i) any Interest Period that would otherwise end on a day that
is not a Business Day shall be extended to the next Business Day,
unless such Business Day falls in another calendar month, in which
case such Interest Period shall end on the next preceding Business
Day;
(ii) any Interest Period that begins on the last Business Day of
a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (iii) below, end on the last
Business Day of a calendar month; and
(iii) any Interest Period that would otherwise end after the
Commitment Termination Date then in effect shall end on such
Commitment Termination Date.
"Lender" means Reckson Operating Partnership, L.P., a Delaware
limited partnership.
"Lien" means, with respect to any asset of a Person, (i) any
mortgage, deed of trust, lien, pledge, encumbrance, charge or security
interest in or on such asset, (ii) the interest of a vendor or lessor
under any conditional sale agreement, capital lease or title retention
agreement relating to such asset, and (iii) in the case of securities, any
purchase option, call or similar right of any other Person with respect to
such securities.
"Loans" has the meaning assigned to such term in Section 2.1.
"Material Adverse Effect" means any material and adverse effect on
(i) the consolidated business, properties, condition (financial or
otherwise) or operations, present or prospective, of the Borrower and its
Subsidiaries, (ii) the ability of the Borrower timely to perform any of
its material obligations, or of the Lender to exercise any remedy, under
this Agreement or (iii) the legality, validity, binding nature or
enforceability of this Agreement.
"Net Assets" means, with respect to the Borrower, the greater of (i)
the sum of the Borrower's paid-in capital and retained earnings or (ii)
the excess of the Value of all of the Borrower's assets of any kind over
the Borrower's Adjusted Indebtedness.
"Permitted Liens" means, collectively, the following: (i) Liens
expressly approved by the Lender, which approval shall not be unreasonably
withheld; (ii) Liens imposed by any Governmental Authority for taxes,
assessments or charges not yet due or that are being contested in good
faith by appropriate proceedings and for which adequate reserves are being
maintained (in accordance with GAAP); and (iii) Liens existing on the date
hereof.
"Person" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association,
corporation, institution, public benefit corporation, entity or government
(whether Federal, state, county, city, municipal or otherwise, including
any instrumentality, division, agency, body or department thereof).
"Prime Rate" means the prime rate (or if a range is given, the
highest prime rate) listed under "Money Rates" in The Wall Street Journal
for such date or, if The Wall Street Journal is not published on such
date, then in The Wall Street Journal most recently published.
"Reckson" means Reckson Associates Realty Corp., a Maryland
corporation.
"Responsible Officer" means the chief executive officer, president,
chief financial officer, chief accounting officer, treasurer or any vice
president, senior vice president or executive vice president of the
General Partner.
"RSVP-ROP Facility Agreement" means the credit agreement dated the
date hereof between Borrower and Lender in respect of the operations of
Reckson Strategic Venture Partners, LLC.
"SEC" means the Securities and Exchange Commission (or any successor
Governmental Authority).
"Subsidiary" means, at any time and with respect to any Person, any
other Person the shares of stock or other ownership interests of which
having ordinary voting power to elect a majority of the board of directors
or with respect to other matters of such Person are at the time owned, or
the management or policies of which is otherwise at the time controlled,
directly or indirectly through one or more intermediaries (including other
Subsidiaries) or both, by such first Person. Unless otherwise qualified or
the context indicates clearly to the contrary, all references to a
"Subsidiary" or "Subsidiaries" in this Agreement refer to a Subsidiary or
Subsidiaries of the Borrower.
"Taxes" has the meaning assigned to such term in Section 4.3(a).
"Value" means, with respect to any asset owned by the Borrower, the
present value of the net cash flow reasonably projected by the Borrower to
be received with respect to its ownership of such assets, discounted at an
interest rate that the Borrower reasonably determines appropriate given
the risks associated with such asset and such projected net cash flow, but
in no event at an interest rate lower than 2% above the Prime Rate in
effect at the time that the determination of Value is made.
ARTICLE II.
THE REVOLVING CREDIT FACILITY
Section 2.1 Commitment and Loans . Until the Commitment Termination
Date, subject to the terms and conditions of this Agreement, the Lender agrees
to make revolving credit loans (collectively, "Loans") in dollars to the
Borrower in an aggregate principal amount at any one time outstanding not to
exceed the Commitment.
Section 2.2 Borrowing Procedure. In order to borrow a Loan, the Borrower
shall give a Borrowing Request to the Lender, by telephone, telex or telecopy
or in writing, not later than 10:30 A.M., New York time, on the third Business
Day before the Borrowing Date (or such later time or date as the Lender may in
its sole discretion permit). (If any Borrowing Request is made otherwise than
in writing, Borrower shall promptly confirm such Borrowing Request in writing.)
Subject to satisfaction, or waiver by the Lender, of each of the applicable
conditions precedent contained in Article VI, on the Borrowing Date the Lender
shall make available, in immediately available funds, to the Borrower the
amount of the requested Loan.
Section 2.3 Termination and Reduction of Commitment . The Borrower may
terminate the Commitment, or reduce the amount thereof, by giving written
notice to the Lender, not later than 5:00 P.M., New York time, on the fifth
Business Day prior to the date of termination or reduction (or such later time
or date as the Lender may in its sole discretion permit).
Section 2.4 Repayment. Loans shall be repaid, together with all accrued
and unpaid interest thereon, on the Commitment Termination Date.
Section 2.5 Optional Prepayment. The Borrower may prepay Loans by giving
notice (specifying the Loans to be prepaid in whole or in part, the principal
amount thereof to be prepaid and the date of prepayment) to the Lender, by
telephone, telex, telecopy or in writing not later than 12:00 noon, New York
time, on the fourth Business Day preceding the proposed date of prepayment (or
such later time or date as the Lender may in its sole discretion permit). (If
any such prepayment notice is made otherwise than in writing, Borrower shall
promptly confirm such notice in writing.) Each such prepayment shall be at the
aggregate principal amount of the principal being prepaid, together with
accrued interest on the principal being prepaid to the date of prepayment and
the amounts required by Section 4.3. Subject to the terms and conditions of
this Agreement, prepaid Loans may be reborrowed.
ARTICLE III.
INTEREST AND FEES
Section 3.1 Interest Rate. Each Loan shall bear interest from the date
made until the date repaid, payable in arrears, with respect to Interest
Periods of three months or less, on the last day of such Interest Period, and
with respect to Interest Periods longer than three months, on the day which is
three months after the commencement of such Interest Period and on the last day
of such Interest Period, at a rate per annum equal to the greater of (i) the
sum of (x) 2% and (y) the Prime Rate for the applicable Interest Period and
(ii) 12%. With respect to each Loan outstanding for one year or longer, such
12% rate shall increase to 12.48%, 12.98%, 13.50% and 14.04% as of the
anniversary of the making of such Loan, for the second, third, fourth and fifth
years that such Loan is outstanding, respectively. Notwithstanding the
foregoing, if the amount of interest to be paid by the Borrower to the Lender
exceeds the amount of EBITDA of the Borrower for the immediately preceding
calendar quarter (ending the last day of September, December, March, or June),
the Borrower shall not be obligated to repay the amount of interest in excess
of EBITDA of the Borrower for such period. Any such amount of unpaid interest
shall be added to principal and shall accrue interests thereon. Payments under
the Notes shall be applied first to any fees, costs or expenses due under the
Notes or hereunder, then to interest, and then to principal. Notwithstanding
any other provision of this Agreement, all outstanding principal and interest
of the Loan and all other amounts payable hereunder, if not sooner paid, shall
be due and payable on the Commitment Termination Date.
Section 3.2 Interest on Overdue Amounts. All overdue amounts (including
principal, interest and fees) hereunder, and, during the continuance of any
Event of Default that shall have occurred, each Loan, shall bear interest,
payable on demand, at a rate per annum equal to the greater of (i) the sum of
(x) 3% and (y) Prime Rate for the applicable Interest Period and (ii) 13%. With
respect to each Loan outstanding for one year or longer, such 13% rate shall
increase to 13.48%, 13.98%, 14.50% and 15.04% as of the anniversary of the
making of such Loan for the second, third, fourth and fifth years that such
Loan is outstanding, respectively.
Section 3.3 Maximum Interest Rate. (a) Nothing in this Agreement shall
require the Borrower to pay interest at a rate exceeding the maximum rate
permitted by applicable law. Neither this Section nor Section 10.1 is intended
to limit the rate of interest payable for the account of the Lender to the
maximum rate permitted by the laws of the State of New York (or any other
applicable law) if a higher rate is permitted with respect to the Lender by
supervening provisions of U.S. Federal law.
(b) If the amount of interest payable for the account of the Lender on any
interest payment date in respect of the immediately preceding interest
computation period, computed pursuant to this Article III, would exceed the
maximum amount permitted by applicable law to be charged by the Lender, the
amount of interest payable for its account on such interest payment date shall
automatically be reduced to such maximum permissible amount.
(c) If the amount of interest payable for the account of the Lender in
respect of any interest computation period is reduced pursuant to Section
3.3(b) and the amount of interest payable for its account in respect of any
subsequent interest computation period would be less than the maximum amount
permitted by law to be charged by the Lender, then the amount of interest
payable for its account in respect of such subsequent interest computation
period shall be automatically increased to such maximum permissible amount;
provided that at no time shall the aggregate amount by which interest paid for
the account of the Lender has been increased pursuant to this Section 3.3(c)
exceed the aggregate amount by which interest paid for its account has
theretofore been reduced pursuant to Section 3.3(b).
ARTICLE IV.
DISBURSEMENT AND PAYMENT
Section 4.1 Method and Time of Payments .
(a) All payments by the Borrower hereunder shall be made without setoff or
counterclaim to the Lender, for its account, in dollars and in immediately
available funds to the account of the Lender theretofore designated in writing
to the Borrower not later than 12:00 noon, New York time, on the date when due
or, in the case of payments pursuant to Sections 4.3 and 4. 4 or payments
otherwise specified as payable upon demand, forthwith upon written demand
therefor.
(b) Whenever any payment from the Borrower shall be due on a day that is
not a Business Day, the date of payment thereof shall be extended to the next
succeeding Business Day. If the date for any payment of principal is extended
by operation of law or otherwise, interest thereon shall be payable for such
extended time.
Section 4.2 Compensation for Losses. (a) If (i) the Borrower prepays
Loans, (ii) the Borrower revokes any Borrowing Request or (iii) Loans (or
portions thereof) shall become or be declared to be due prior to the scheduled
maturity thereof, then the Borrower shall pay to the Lender an amount that will
compensate the Lender for any loss (other than lost profit) or premium or
penalty incurred by the Lender as a result of such prepayment, declaration or
revocation in respect of funds obtained for the purpose of making or
maintaining the Lender's Loans, or any portion thereof. Such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
that would have accrued on the amount so paid or prepaid, or not borrowed, for
the period from the date of such payment or prepayment or failure to borrow to
the last day of such Interest Period (or, in the case of a failure to borrow,
the Interest Period that would have commenced on the expected Borrowing Date)
in each case at the applicable rate of interest for such Loan over (ii) the
amount of interest (as reasonably determined by the Lender) that would have
accrued on such amount were it on deposit for a comparable period with leading
banks in the London interbank market.
(b) If requested by the Borrower, in connection with a payment due
pursuant to this Section 4.2, the Lender shall provide to the Borrower a
certificate setting forth in reasonable detail the amount required to be paid
by the Borrower to the Lender and the computations made by the Lender to
determine such amount. In the absence of manifest error, such certificate shall
be conclusive as to the amount required to be paid.
Section 4.3 Withholding and Additional Costs .
(a) Withholding. All payments under this Agreement (including payments of
principal and interest) shall be payable to the Lender free and clear of any
and all present and future taxes, levies, imposts, duties, deductions,
withholdings, fees, liabilities and similar charges (collectively, "Taxes") .
If any Taxes are required to be withheld or deducted from any amount payable
under this Agreement, then the amount payable under this Agreement shall be
increased to the amount which, after deduction from such increased amount of
all Taxes required to be withheld or deducted therefrom, will yield to the
Lender the amount stated to be payable under this Agreement. The Borrower shall
also hold the Lender harmless and indemnify it for any stamp or other taxes
with respect to the preparation, execution, delivery, recording, performance or
enforcement of this Agreement (all of which shall be included within "Taxes") .
If any of the Taxes specified in this Section 4.3(a) are paid by the Lender,
the Borrower shall, upon demand of the Lender, promptly reimburse the Lender
for such payments, together with any interest, penalties and expenses incurred
in connection therewith. The Borrower shall deliver to the Lender certificates
or other valid vouchers for all Taxes or other charges deducted from or paid
with respect to payments made by the Borrower hereunder.
(b) Additional Costs. Subject to Section 4.3(c), and without duplication
of any amounts payable described in Section 4.2 or 4.3(a), if after the date
hereof any change in any law or regulation or in the interpretation thereof by
any court or administrative or Governmental Authority charged with the
administration thereof or the enactment of any law or regulation shall either
(1) impose, modify or deem applicable any reserve, special deposit or similar
requirement against the Lender's Commitment or Loans or (2) impose on the
Lender any other condition regarding this Agreement, its Commitment or the
Loans and the result of any event referred to in clause (1) or (2) shall be to
increase the cost to the Lender of maintaining its Commitment or any Loans made
by the Lender (which increase in cost shall be calculated in accordance with
the Lender's reasonable averaging and attribution methods) by an amount which
the Lender deems to be material, then, upon demand by the Lender, the Borrower
shall pay to the Lender an amount equal to such increase in cost.
(c) Certificate, Etc. If requested by the Borrower, in connection with any
demand for payment pursuant to this Section 4.3, the Lender shall provide to
the Borrower a certificate setting forth in reasonable detail the basis for
such demand, the amount required to be paid by the Borrower to the Lender, the
computations made by the Lender to determine such amount and satisfaction of
the conditions set forth in the next sentence. Anything to the contrary herein
notwithstanding, the Lender shall not have the right to demand any payment or
compensation under this Section 4.3 (i) with respect to any period more than
180 days prior to the date it has made a demand pursuant to this Section 4.3,
and (ii) to the extent that the Lender determines in good faith that the
interest rate on the relevant Loans appropriately accounts for any increased
cost or reduced rate of return. In the absence of manifest error, the
certificate referred to above shall be conclusive as to the amount required to
be paid.
Section 4.4 Expenses; Indemnity. (a) The Borrower agrees: (i) to pay or
reimburse the Lender for all reasonable out-of-pocket costs and expenses
incurred in connection with the preparation and execution of, and any
amendment, supplement or modification to, this Agreement and any other
documents prepared in connection herewith or therewith, and the consummation of
the transactions contemplated hereby and thereby, including, without
limitation, the reasonable fees and disbursements of Brown & Wood LLP, counsel
to the Lender; and (ii) to pay or reimburse the Lender for all reasonable costs
and expenses incurred in connection with the enforcement or preservation of any
rights under this Agreement and any such other documents, including, without
limitation, the reasonable fees and disbursements of counsel to the Lender. The
Borrower also agrees to indemnify the Lender against any transfer taxes,
documentary taxes, assessments or charges made by any Governmental Authority by
reason of the execution and delivery of this Agreement.
(b) The Borrower agrees to indemnify the Lender and its directors,
officers, partners, employees, agents and Affiliates (for purposes of this
paragraph, each, an "Indemnitee") against, and to hold each Indemnitee harmless
from, any and all claims, liabilities, damages, losses, costs, charges and
expenses (including fees and expenses of counsel) incurred by or asserted
against any Indemnitee arising out of, in any way connected with, or as a
result of (i) the execution or delivery of this Agreement or any agreement or
instrument contemplated by this Agreement, the performance by the parties
thereto of their respective obligations under this Agreement or the
consummation of the transactions and the other transactions contemplated by
this Agreement, (ii) the use of the proceeds of the Loans or (iii) any claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether or not any Indemnitee is a party thereto; provided that such indemnity
shall not, as to any Indemnitee, be available to the extent that such losses,
claims, damages, liabilities or related expenses are determined by a court of
competent jurisdiction by final and nonappealable judgment to have resulted
from the gross negligence or willful misconduct of such Indemnitee.
(c) All amounts due under this Section 4.4 shall be payable in immediately
available funds upon written demand therefor.
Section 4.5 Survival. The provisions of Sections 4.2, 4.3 and 4.4 shall
remain operative and in full force and effect regardless of the expiration of
the term of this Agreement, the consummation of the transactions contemplated
hereby, the repayment of any of the Loans, the reduction or termination of the
Commitment, the invalidity or unenforceability of any term or provision of this
Agreement, or any investigation made by or on behalf of the Lender.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
Section 5.1 Representations and Warranties. The Borrower represents and
warrants to the Lender as follows:
(a) Good Standing and Power . The Borrower and each Subsidiary is a
limited partnership or corporation, duly organized and validly existing in
good standing under the laws of the jurisdiction of its organization; each
has the power to own its property and to carry on its business as now
being conducted; and each is duly qualified to do business and is in good
standing in each jurisdiction in which the character of the properties
owned or leased by it therein or in which the transaction of its business
makes such qualification necessary, except where the failure to be so
qualified, or to be in good standing, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.
(b) Authority . The Borrower has full power and authority to execute
and deliver, and to incur and perform its obligations under, this
Agreement, which has been duly authorized by all proper and necessary
action. No consent or approval of limited partners is required as a
condition to the validity or performance of, or the exercise by the Lender
of any of its rights or remedies under, this Agreement.
(c) Authorizations . All authorizations, consents, approvals,
registrations, notices, exemptions and licenses with or from any
Governmental Authority or other Person necessary for the execution,
delivery and performance by the Borrower of, and the incurrence and
performance of each of its obligations under, this Agreement, and the
exercise by the Lender of its remedies under this Agreement have been
effected or obtained and are in full force and effect.
(d) Binding Obligation . This Agreement constitutes the valid and
legally binding obligation of the Borrower enforceable in accordance with
its terms, subject as to enforcement to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
(e) Litigation . There are no proceedings or investigations now
pending or, to the knowledge of the Borrower, threatened before any court
or arbitrator or before or by any Governmental Authority which,
individually or in the aggregate, if determined adversely to the interests
of the Borrower or any Subsidiary, could reasonably be expected to have a
Material Adverse Effect.
(f) No Conflicts . There is no statute, regulation, rule, order or
judgment, and no provision of any agreement or instrument binding upon the
Borrower or any Subsidiary, or affecting their properties, and no
provision of the certificate of limited partnership, certificate of
incorporation, agreement of limited partnership or by-laws (or similar
constitutive instruments) of the Borrower or any Subsidiary, that would
prohibit, conflict with or in any way impair the execution or delivery of,
or the incurrence or performance of any obligations of the Borrower under,
this Agreement, or result in or require the creation or imposition of any
Lien on property of the Borrower or any Subsidiary as a consequence of the
execution, delivery and performance of this Agreement.
(g) Taxes . The Borrower and the Subsidiaries each has filed or
caused to be filed all tax returns that are required to be filed and paid
all taxes that are required to be shown to be due and payable on said
returns or on any assessment made against it or any of its property and
all other taxes, assessments, fees, liabilities, penalties or other
charges imposed on it or any of its property by any Governmental
Authority, except for any taxes, assessments, fees, liabilities, penalties
or other charges which are being contested in good faith and (unless the
amount thereof is not material to the Borrower's consolidated financial
condition) for which adequate reserves have been established in accordance
with GAAP.
(h) Properties . The Borrower and the Subsidiaries each has good and
marketable title to, or valid leasehold interests in, all of its
respective properties and assets. All such assets and properties are so
owned or held free and clear of all Liens, except Permitted Liens.
(i) Compliance with Laws and Charter Documents . Neither the Borrower
nor any Subsidiary is, or as a result of performing any of its obligations
under this Agreement will be, in violation of (a) any law, statute, rule,
regulation or order of any Governmental Authority applicable to it or its
properties or assets or (b) its certificate of limited partnership,
certificate of incorporation, agreement of limited partnership, by-laws or
any similar document.
(j) No Material Adverse Effect . Since May 15, 1997, there has not
occurred or arisen any event, condition or circumstance that, individually
or in the aggregate, could reasonably be expected to have a Material
Adverse Effect.
(k) Disclosure . All information relating to the Borrower or its
Subsidiaries delivered in writing to the Lender in connection with the
negotiation, execution and delivery of this Agreement is true and complete
in all material respects. There is no material fact of which the Borrower
is aware which, individually or in the aggregate, would reasonably be
expected adversely to influence the Lender's credit analysis relating to
the Borrower and its Subsidiaries which has not been disclosed to the
Lender in writing.
Section 5.2 Survival. All representations and warranties made by the
Borrower in this Agreement, and in the certificates or other instruments
prepared or delivered in connection with or pursuant to this Agreement, shall
be considered to have been relied upon by the Lender, (ii) survive the making
of Loans regardless of any investigation made by, or on behalf of, the Lender
and (iii) continue in full force and effect as long as the Commitment has not
been terminated and, thereafter, so long as any Loan, fee or other amount
payable under this Agreement remains unpaid.
ARTICLE VI.
CONDITIONS PRECEDENT
Section 6.1 Conditions to the Availability of the Commitment. The
obligations of the Lender hereunder are subject to, and the Lender's Commitment
shall not become available until the earliest date (the "Effective Date") on
which each of the following conditions precedent shall have been satisfied or
waived in writing by the Lender:
(a) This Agreement . The Lender shall have received this Agreement
duly executed and delivered by the Borrower.
(b) Certificate of Incorporation and By-Laws . The Lender shall have
received the following:
(i) a copy of the Certificate of Incorporation of the Borrower,
as in effect on the Effective Date, certified by the Secretary of
State of Delaware, and a certificate from such Secretary of State as
to the good standing of the Borrower, in each case as of a date
reasonably close to the Effective Date; and
(ii) a certificate of a Responsible Officer of the Borrower,
dated the Effective Date, and stating that attached thereto is a true
and complete copy of the By-Laws of the Borrower as in effect on such
date.
(c) Representations and Warranties . The representations and
warranties contained in Section 5.1 shall be true and correct on the
Effective Date, and the Lender shall have received a certificate, signed
by a Responsible Officer of the Borrower, to that effect.
(d) Other Documents . The Lender shall have received such other
certificates, opinions and other documents as the Lender reasonably may
require.
(e) REIT Status of Reckson . The borrowing shall not, in the sole
judgment of the Lender, endanger Reckson's status as a REIT.
(f) Certain Loans Subject to Reckson's Approval. In respect of any
Loan or Loans aggregating in excess of $10 million, any single Commercial
Service, as well as any Loan relating to an investment by Borrower in any
area other than Commercial Services, Reckson shall have approved the
Lender's making such Loan in its sole discretion.
Section 6.2 Conditions to All Loans. The obligations of the Lender to make
each Loan are subject to the conditions precedent that, on the date of each
Loan and after giving effect thereto, each of the following conditions
precedent shall have been satisfied, or waived in writing by the Lender:
(a) Borrowing Request . The Lender shall have received a Borrowing
Request in accordance with the terms of this Agreement.
(b) No Default . No Default or Event of Default shall have occurred
and be continuing, nor shall any Default or Event of Default occur as a
result of the making of such Loan.
(c) Debt-to-Equity Ratio. The Lender shall have received from the
Borrower a certificate demonstrating that the ratio of the Borrower's
Adjusted Indebtedness to the Borrower's Net Assets, taking into account
the requested Loan and the assets, if any, to be acquired by the Borrower
with the proceeds of such Loan, shall not exceed 4-to-1.
(d) Representations and Warranties; Covenants . The representations
and warranties contained in Section 5. 1 shall have been true and correct
when made and (except to the extent that any representation or warranty
speaks as of a date certain) shall be true and correct on the Borrowing
Date with the same effect as though such representations and warranties
were made on such Borrowing Date; and the Borrower shall have complied
with all of its covenants and agreements under this Agreement.
Section 6.3 Satisfaction of Conditions Precedent. Each of (i) the
delivery by the Borrower of a Borrowing Request (unless the Borrower notifies
the Lender in writing to the contrary prior to the Borrowing Date) and (ii) the
acceptance of the proceeds of a Loan shall be deemed to constitute a
certification by the Borrower that, as of the Borrowing Date, each of the
conditions precedent contained in Section 6. 2 has been satisfied with respect
to the Loan then being made.
ARTICLE VII.
COVENANTS
Section 7.1 Affirmative Covenants. Until satisfaction in full of all the
obligations of the Borrower under this Agreement and termination of the
Commitment of the Lender hereunder, the Borrower will:
(a) Financial Statements; Compliance Certificates. Furnish to the Lender:
(i) as soon as available, but in no event more than 60 days
following the end of each of the first three quarters of each fiscal
year, copies of the Borrower's Quarterly Report on Form 10-Q being
filed with the SEC, which shall include a consolidated balance sheet
and consolidated income statement of the Borrower and the
Subsidiaries for such quarter;
(ii) as soon as available, but in no event more than 120 days
following the end of each fiscal year, a copy of the Borrower's
Annual Report on Form 10-K being filed with the SEC, which shall
include the consolidated financial statements of the Borrower and the
Subsidiaries, together with a report thereon by Ernst & Young LLP (or
another firm of independent certified public accountants reasonably
satisfactory to the Lender), for such year;
(iii) within five Business Days of any Responsible Officer of
the Borrower obtaining knowledge of any Default or Event of Default,
if such Default or Event of Default is then continuing, a certificate
of a Responsible Officer of the Borrower stating that such
certificate is a "Notice of Default" and setting forth the details
thereof and the action which the Borrower is taking or proposes to
take with respect thereto; and
(iv) such additional information, reports or statements,
regarding the business, financial condition or results of operations
of the Borrower and its Subsidiaries, as the Lender from time to time
may reasonably request.
(b) Existence. Except as permitted by Section 7. 2(a), maintain its
existence in good standing and qualify and remain qualified to do business
in each jurisdiction in which the character of the properties owned or
leased by it therein or in which the transaction of its business is such
that the failure to qualify, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
(c) Compliance with Law and Agreements. Comply, and cause each
Subsidiary to comply, with all applicable laws, ordinances, orders, rules,
regulations and requirements of all Governmental Authorities and with all
agreements except where the necessity of compliance therewith is contested
in good faith by appropriate proceedings or where the failure to comply
therewith, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
(d) Authorizations. Obtain, make and keep in full force and effect
all authorizations from and registrations with Governmental Authorities
required for the validity or enforceability of this Agreement.
(e) Inspection. Permit, and cause each Subsidiary to permit, the
Lender to have one or more of its officers and employees, or any other
Person designated by the Lender, to visit and inspect any of the
properties of the Borrower and the Subsidiaries and to examine the minute
books, books of account and other records of the Borrower and the
Subsidiaries, and to photocopy extracts from such minute books, books of
account and other records, and to discuss its affairs, finances and
accounts with its officers and with the Borrower's independent
accountants, during normal business hours and at such other reasonable
times, for the purpose of monitoring the Borrower's compliance with its
obligations under this Agreement.
(f) Maintenance of Records . Keep, and cause each Subsidiary to keep,
proper books of record and account in which full, true and correct entries
will be made of all dealings or transactions of or in relation to its
business and affairs.
(g) Notice of Defaults and Adverse Developments . Promptly notify the
Lender upon the discovery by any Responsible officer of the occurrence of
(i) any Default or Event of Default; (ii) any event, development or
circumstance whereby the financial statements most recently furnished to
the Lender fail in any material respect to present fairly, in accordance
with GAAP, the financial condition and operating results of the Borrower
and the Subsidiaries as of the date of such financial statements; (iii)
any material litigation or proceedings that are instituted or threatened
(to the knowledge of the Borrower) against the Borrower or any Subsidiary
or any of their respective assets; (iv) any event, development or
circumstance which, individually or in the aggregate, could reasonably be
expected to result in an event of default (or, with the giving of notice
or lapse of time or both, an event of default) under any Indebtedness and
the amount thereof; and (v) any other development in the business or
affairs of the Borrower or any Subsidiary if the effect thereof would
reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect; in each case describing the nature thereof and
the action the Borrower proposes to take with respect thereto.
Section 7.2 Negative Covenants. Until satisfaction in full of all the
obligations of the Borrower under this Agreement and termination of the
Commitment of the Lender hereunder, the Borrower will not:
(a) Mergers, Consolidations and Sales of Assets . Wind up, liquidate or
dissolve its affairs or enter into any merger, consolidation or share exchange,
or convey, sell, lease or otherwise dispose of (or agree to do any of the
foregoing at any future time), whether in one or a series of transactions, all
or any substantial part of its assets, or permit any Subsidiary so to do,
unless such transaction or series of transactions are expressly approved by the
Lender, which approval shall not be unreasonably withheld.
(b) Liens. Create, incur, assume or suffer to exist any Lien upon or with
respect to any of its property or assets, whether now owned or hereafter
acquired, or assign or otherwise convey any right to receive income, except
Permitted Liens.
(c) Indebtedness . Create, incur, issue, assume, guarantee or suffer to
exist any Indebtedness, except:
(i) Indebtedness to the Lender under this Agreement or under the
RSVP-ROP Facility Agreement,
(ii) Non-recourse Indebtedness of the Borrower and any Subsidiary
secured by mortgages, encumbrances or liens specifically permitted by
Section 7. 2(b), and
(iii) Indebtedness expressly approved by the Lender in writing, which
approval may be withheld in the Lender's sole discretion.
(d) Dividends . Declare any dividends on any of its shares of capital
stock unless such dividend or distribution is expressly approved in
writing by the Lender.
(e) Certain Amendments . Amend, modify or waive, or permit to be
amended, modified or waived, any provision of its Certificate of
Incorporation unless, within not less than 5 days prior to such amendment,
modification or waiver (or such later time as the Lender may in its sole
discretion permit), the Borrower shall have given the Lender notice
thereof, including all relevant terms and conditions thereof, and the
Lender shall have consented in writing thereto.
ARTICLE VIII.
EVENTS OF DEFAULT
Section 8.1 Events of Default. If one or more of the following events
(each, an "Event of Default") shall occur:
(a) The Borrower shall fail duly to pay any principal of any Loan when
due, whether at maturity, by notice of intention to prepay or otherwise; or
(b) The Borrower shall fail duly to pay any interest, fee or any other
amount payable under this Agreement within two days after the same shall be
due; or
(c) Borrower shall fail duly to observe or perform any term, covenant, or
agreement contained in Section 7. 2; or
(d) The Borrower shall fail duly to observe or perform any other term,
covenant or agreement contained in this Agreement, and such failure shall have
continued unremedied for a period of 30 days; or
(e) Any representation or warranty made or deemed made by the Borrower in
this Agreement, or any statement or representation made in any certificate,
report or opinion delivered by or on behalf of the Borrower in connection with
this Agreement, shall prove to have been false or misleading in any material
respect when so made or deemed made; or
(f) The Borrower shall fail to pay any Indebtedness (other than
obligations here under) in an amount of $100,000 or more when due; or any such
Indebtedness having an aggregate principal amount outstanding of $100,000 or
more shall become or be declared to be due prior to the expressed maturity
thereof; or
(g) An involuntary case or other proceeding shall be commenced against the
Borrower seeking liquidation, reorganization or other relief with respect to it
or its debts under any applicable bankruptcy, insolvency, reorganization or
similar law or seeking the appointment of a custodian, receiver, liquidator,
assignee, trustee, sequestrator or similar official of it or any substantial
part of its property, and such involuntary case or other proceeding shall
remain undismissed and unstayed for a period of more than 60 days; or an order
or decree approving or ordering any of the foregoing shall be entered and
continued unstayed and in effect; or
(h) The Borrower shall commence a voluntary case or proceeding under any
applicable bankruptcy, insolvency, reorganization or similar law or any other
case or proceeding to be adjudicated a bankrupt or insolvent, or any of them
shall consent to the entry of a decree or order for relief in respect of the
Borrower in an involuntary case or proceeding under any applicable bankruptcy,
insolvency, reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against any of them, or any of them
shall file a petition or answer or consent seeking reorganization or relief
under any applicable law, or any of them shall consent to the filing of such
petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator or similar official of
the Borrower or any substantial part of its property, or the Borrower shall
make an assignment for the benefit of creditors, or the Borrower shall admit in
writing its inability to pay its debts generally as they become due, or the
Borrower shall take corporate action in furtherance of any such action;
(i) One or more judgments against the Borrower or attachments against its
property, which in the aggregate exceed $100,000, or the operation or result of
which could be to interfere materially and adversely with the conduct of the
business of the Borrower remain unpaid, unstayed on appeal, undischarged,
unbonded, or undismissed for a period of more than 30 days; or
(j) Any court or governmental or regulatory authority shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
judgment, decree, injunction or other order (whether temporary, preliminary or
permanent) which is in effect and which prohibits, enjoins or otherwise
restricts, in a manner that, individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect, any of the transactions
contemplated under this Agreement; or
(k) Any Event of Default shall occur and be continuing under the RSVP-ROP
Facility Agreement.
then, and at any time during the continuance of such Event of Default, the
Lender may, by written notice to the Borrower, take either or both of the
following actions, at the same or different times: (i) terminate forthwith the
Commitment and (ii) declare any Loans then outstanding to be due, whereupon the
principal of the Loans so declared to be due, together with accrued interest
thereon and any unpaid amounts accrued under this Agreement, shall become
forthwith due, without presentment, demand, protest or any other notice of any
kind (all of which are hereby expressly waived by the Borrower); provided that,
in the case of any Event of Default described in Section 8. 1(g) or (h)
occurring with respect to the Borrower, the Commitment shall automatically and
immediately terminate and the principal of all Loans then outstanding, together
with accrued interest thereon and any unpaid amounts accrued under this
Agreement, shall automatically and immediately become due without presentment,
demand, protest or any other notice of any kind (all of which are hereby
expressly waived by the Borrower).
ARTICLE IX.
EVIDENCE OF LOANS; TRANSFERS
Section 9.1 Evidence of Loans. (a) The Lender shall maintain accounts
evidencing the indebtedness of the Borrower to the Lender resulting from each
Loan made by the Lender from time to time, including the amounts of principal
and interest payable and paid to the Lender in respect of Loans.
(b) The Lender's written records described above shall be available for
inspection during ordinary business hours by the Borrower from time to time
upon reasonable prior notice to the Lender.
(c) The entries made in the Lender's written or electronic records and the
foregoing accounts shall be prima facie evidence of the existence and amounts
of the indebtedness of the Borrower therein recorded; provided, however, that
the failure of the Lender to maintain any such account or such records, as
applicable, or any error therein, shall not in any manner affect the validity
or enforceability of any obligation of the Borrower to repay any Loan actually
made by the Lender in accordance with the terms of this Agreement.
ARTICLE X.
MISCELLANEOUS
Section 10.1 Applicable Law . THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
Section 10.2 Waiver of Jury . THE BORROWER AND THE LENDER EACH HEREBY
WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, OR THE
RELATIONSHIPS ESTABLISHED HEREUNDER.
Section 10.3 Jurisdiction and Venue; Service of Process. (a) The Borrower
and the Lender each hereby irrevocably submits to the non-exclusive
jurisdiction of any state or federal court in the Borough of Manhattan, The
City of New York for the purpose of any suit, action, proceeding or judgment
relating to or arising out of this Agreement and to the laying of venue in the
Borough of Manhattan The City of New York. The Borrower and the Lender each
hereby irrevocably waives, to the fullest extent permitted by applicable law,
any objection to the laying of the venue of any such suit, action or proceeding
brought in the aforesaid courts and hereby irrevocably waives any claim that
any such suit, action or proceeding brought in any such court has been brought
in an inconvenient forum.
(b) Borrower agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to the
Borrower at its address set forth in subsection 10.7 or at such other address
of which the Lender shall have been notified pursuant thereto. The Borrower
further agrees that nothing herein shall affect the right to effect service of
process in any other manner permitted by law or shall limit the right to sue in
any other jurisdiction; and
(c) The Borrower waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this subsection any special, exemplary, punitive or
consequential damages.
Section 10.4 Confidentiality. The Lender agrees (on behalf of itself and
each of its Affiliates, partners, officers, employees and representatives) to
use its best efforts to keep confidential, in accordance with their customary
procedures for handling confidential information of this nature and in
accordance with commercially reasonable business practices, any Confidential
Information; provided that nothing herein shall limit the disclosure of any
such information (i) to the extent required by statute, rule, regulation or
judicial process, (ii) to counsel for the Lender, (iii) to auditors or
accountants, (iv) by the Lender to an Affiliate thereof, or (v) in connection
with any litigation relating to enforcement of this Agreement; provided
further, that, unless specifically prohibited by applicable law or court order,
the Lender shall, prior to disclosure thereof, notify the Borrower of any
request for disclosure of any Confidential Information (x) by any Governmental
Authority or representative thereof or (y) pursuant to legal process.
Section 10.5 Amendments and Waivers. (a) Any provision of this Agreement
may be amended, modified, supplemented or waived, but only by a written
amendment or supplement, or written waiver, signed by the Borrower and the
Lender.
(b) Except to the extent expressly set forth therein, any waiver shall be
effective only in the specific instance and for the specific purpose for which
such waiver is given.
Section 10.6 Cumulative Rights; No Waiver. Each and every right granted
to the Lender hereunder or under any other document delivered in connection
herewith, or allowed it by law or equity, shall be cumulative and not exclusive
and may be exercised from time to time. No failure on the part of the Lender to
exercise, and no delay in exercising, any right will operate as a waiver
thereof, nor will any single or partial exercise by the Lender of any right
preclude any other or future exercise thereof or the exercise of any other
right.
Section 10.7 Notices. Any communication, demand or notice to be given
hereunder will be duly given when delivered in writing or by telecopy to a
party at its address as indicated below or such other address as such party may
specify in a notice to the other party hereto. A communication, demand or
notice given pursuant to this Agreement shall be addressed:
If to the Borrower, to:
Reckson Service Industries, Inc.
225 Broadhollow Road
Melville, New York 11747
Telecopy: (516) 719-7400
Attention: Chief Financial Officer
If to the Lender, to:
Reckson Operating Partnership, L.P.
225 Broadhollow Road
Melville, New York 11747
Telecopy: (516) 694-6900
Attention: Chief Financial Officer
This Section 10.7 shall not apply to notices referred to in
Article II of this Agreement, except to the extent set forth therein.
Section 10.8 Certain Acknowledgments. The Borrower hereby confirms and
acknowledges that (a) the Lender does not have any fiduciary or similar
relationship to the Borrower by virtue of this Agreement and the transactions
contemplated herein and that the relationship established by this Agreement
between the Lender and the Borrower is solely that of creditor and debtor and
(b) no joint venture exists between the Borrower and the Lender by virtue of
this Agreement and the transactions contemplated herein.
Section 10.9 Separability. In case any one or more of the provisions
contained in this Agreement shall be invalid, illegal or unenforceable in any
respect under any law, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
Section 10.10 Parties in Interest. This Agreement shall be binding upon
and inure to the benefit of the Borrower and the Lender and their respective
successors and assigns, except that the Borrower may not assign any of its
rights hereunder without the prior written consent of the Lender, and any
purported assignment by the Borrower without such consent shall be void.
Section 10.11 Execution in Counterparts . This Agreement may be executed
in any number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an
original, but all the counterparts shall together constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
RECKSON SERVICE INDUSTRIES, INC.,
as Borrower
By: /s/ Scott Rechler
-------------------------------------
Name: Scott Rechler
Title: President
RECKSON OPERATING PARTNERSHIP, L.P.,
as Lender
By: RECKSON ASSOCIATES REALTY CORP.,
its general partner
By: /s/ Mitchell D. Rechler
-------------------------------------
Name: Mitchell D. Rechler
Title: Executive Vice President
<PAGE>
Exhibit 12.1
Reckson Associates Realty Corp.
Ratios of Earnings to Fixed Charges
The following table set forth the Company's consolidated ratios of earnings to
fixed charges for the periods shown:
June 3, January For the
For the years ended December 31, 1995 to 1, 1995 year ended
- ---------- ---------- ---------- December to June December
1998 1997 1996 31, 1995 2, 1995 31, 1994
- ---------- ---------- ---------- --------- ---------- ------------
2.11x 2.77x 2.72x 2.71x 1.02x (1) $ 493,000 (1,2)
(1) Prior to completion of the IPO on June 2, 1995, the Company's
predecessors operated in a manner as to minimize net taxable income to the
owners. The IPO and the related formation transactions permitted the Company
to deleverage its properties significantly, resulting in a significantly
improved ratio of earnings to fixed charges.
(2) The excess of fixed charges over earnings amounted to approximately
$493,000.
The Company's consolidated ratio of earnings to fixed charges and preferred
dividends and distributions for the year ended December 31, 1998 was 1.89x.
The Company had no preferred capital outstanding prior to April 1998.
<PAGE>
Exhibit 21.1
Reckson Associates Realty Corp.
Statement of Subsidiaries
Name State of Organization
- ----------------------------------- -----------------------
Reckson Operating Partnership, L.P Maryland
Omni Partners, L.P. Delaware
Reckson FS Limited Partnership Delaware
Reckson Morris industrial Trust Maryland
Reckson Management Group, Inc. New York
Reckson Construction Group, Inc. New York
Reckson Short Hills, LLC Delaware
Reckson / Stamford Towers, LLC Delaware
<PAGE>
EXHIBIT 23.0
RECKSON ASSOCIATES REALTY CORP.
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
Form S-3 No. 333-67129 of Reckson Associates Realty Corp. of our report dated
February 11, 1999, with respect to the consolidated financial statements and
schedule of Reckson Associates Realty Corp. included in this Annual Report
Form 10-K for the year ended December 31, 1998.
Ernst & Young, LLP
New York, New York
March 16, 1999
<PAGE>
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