SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
-------------
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 1, 1999
RECKSON ASSOCIATES REALTY CORP.
(Exact name of Registrant as specified in its Charter)
Maryland
(State of Incorporation)
1-13762 11-3233650
(Commission File Number) (IRS Employer Id. Number)
225 Broadhollow Road 11747
Melville, New York (Zip Code)
(Address of principal executive offices)
(516) 694-6900
(Registrant's telephone number, including area code)
<PAGE>
This Current Report on Form 8-K is being submitted in order to file
Reckson Associates Realty Corp.'s (the "Company") December 31, 1998 financial
statements, as well as certain other material contracts and other documents of
the Company.
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements
Report of Independent Auditors
Consolidated Balance Sheets of the Company as of December 31, 1998 and
December 31, 1997
Consolidated Statements of Income of the Company for the years ended
December 31, 1998, 1997 and 1996
Consolidated Statement of Stockholders' Equity of the Company for the
years ended December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows of the Company for the year ended
December 31, 1998, 1997 and 1996
Notes to Financial Statements
Schedule III - Real Estate and Accumulated Depreciation
(c) Exhibits
3.1 Articles Supplementary of the Company relating to the Company's
7-5/8% Series A Convertible Cumulative Preferred Stock filed with
the Maryland State Department of Assessments and Taxation
4.1 Specimen Share Certificate of Series A Preferred Stock
10.1 Supplement to the Amended and Restated Agreement of Limited
Partnership of Reckson Operating Partnership, L.P. ("ROP")
Establishing Series A Preferred Units of Limited Partnership
Interest
10.2 Supplement to the Amended and Restated Agreement of Limited
Partnership of ROP Establishing Series B Preferred Units of
Limited Partnership Interest
10.3 Supplement to the Amended and Restated Agreement of Limited
Partnership of ROP Establishing Series C Preferred Units of
Limited Partnership Interest
10.4 Supplement to the Amended and Restated Agreement of Limited
Partnership of ROP Establishing Series D Preferred Units of
Limited Partnership Interest
23.1 Consent of Independent Auditors
27.0 Financial Data Schedule
<PAGE>
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 7(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>
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) provided by 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 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
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.
<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. The Morris Companies properties include 23 industrial buildings
encompassing approximately 4.0 million square feet. 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 the Morris Companies. 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.
<PAGE>
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.
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 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 real estate investment trust ("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.
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).
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.
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 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.
<PAGE>
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.
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.
<PAGE>
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.
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.
<PAGE>
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
========== =========== ==========
<PAGE>
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.
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 thousand 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 is the Company's reconciliation of the numerators and
denominators of the basic and diluted net income per weighted average common
share computations and other related disclosures required by FAS Statement 128
(in thousands except share amounts).
<PAGE>
The following table sets forth the computation of basic and diluted
earnings per share 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>
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 Reckson'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 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.
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. The Morris Companies properties include 23 industrial buildings
encompassing approximately 4.0 million square feet. 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 the Morris Companies. 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.
<PAGE>
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.
<PAGE>
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.
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.
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 of Long
Island, Westchester, Southern Connecticut and New Jersey. 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 evaluates 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 $.48 million.
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.
<PAGE>
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
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.
<PAGE>
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.
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....................... $281,682 $1,455,450 $1,737,132 $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 JUNE 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>
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
RECKSON ASSOCIATES REALTY CORP.
By: /s/ Michael Maturo
--------------------
Michael Maturo
Executive Vice President and
Chief Financial Officer
Date: March 1, 1999
<PAGE>
Exhibit 3.1
RECKSON ASSOCIATES REALTY CORP.
ARTICLES SUPPLEMENTARY
ESTABLISHING AND FIXING THE RIGHTS AND
PREFERENCES OF A SERIES OF SHARES OF PREFERRED STOCK
Reckson Associates Realty Corp., a Maryland corporation (the
"Corporation"), certifies to the State Department of Assessments and Taxation
of Maryland that:
First : Pursuant to the authority expressly vested in the Board of Directors
of the Corporation by Article VI of its Charter, as heretofore amended (which,
as hereafter restated or amended from time to time, are together with these
Articles Supplementary herein called the "Articles"), the Board of Directors
has, by resolution, duly designated and classified 9,200,000 shares of the
Preferred Stock of the Corporation into a series designated 7-5/8% Series A
Convertible Cumulative Preferred Stock and has provided for the issuance of
such series.
Second : The preferences, rights, voting powers, restrictions, limitations as
to distributions, qualifications and terms and conditions of redemption of the
shares of such series of Preferred Stock, which upon any restatement of the
Articles shall be included as part of Article VI of the Articles, are as
follows:
7-5/8% SERIES A CONVERTIBLE CUMULATIVE PREFERRED STOCK
(1) Designation and Number. A series of Preferred Stock of the Corporation
("Preferred Stock"), designated the "7-5/8% Series A Convertible Cumulative
Preferred Stock" (the "Series A Preferred"), is hereby established. The number
of shares of the Series A Preferred shall be 9,200,000.
(2) Rank. The Series A Preferred will, with respect to distribution rights and
rights upon liquidation, dissolution or winding up of the Corporation, rank:
(a) senior to all classes or series of Common Stock of the Corporation
("Common Stock") and to all equity securities issued by the Corporation the
terms of which provide that such equity securities shall rank junior to such
Series A Preferred; (b) on a parity with all equity securities issued by the
Corporation other than those referred to in clauses (a) and (c); and (c)
junior to all equity securities issued by the Corporation that rank senior to
the Series A Preferred in accordance with Section 6(d). The term "equity
securities" shall not include convertible debt securities.
(3) Distributions.
(a) Holders of the shares of Series A Preferred shall be entitled to
receive, when and as authorized by the Board of Directors, out of funds
legally available for the payment of distributions, cumulative cash
distributions at the rate of 7-5/8% per annum of the liquidation preference
per share (equivalent to $1.90625 per annum per share of Series A Preferred ).
Distributions on the Series A Preferred shall be cumulative from the date of
original issue and shall be payable quarterly in arrears on January 31, April
30, July 31 and October 31 of each year or, if not a business day, the next
succeeding business day, commencing July 31, 1998 (each, a "Distribution
Payment Date"). Any distribution payable on the Series A Preferred for a
partial distribution period will be computed on the basis of a 360-day year
consisting of twelve 30-day months. Distributions will be payable to holders
of record as they appear in the stock transfer records of the Corporation at
the close of business on the applicable record date, which shall be such date
designated by the Board of Directors of the Corporation for the payment of
distributions that is not more than 30 nor less than 10 days prior to such
Distribution Payment Date (each, a "Distribution Payment Record Date").
(b) No distributions on the Series A Preferred shall be authorized by the
Board of Directors of the Corporation or be paid or set apart for payment by
the Corporation at such time as the terms and provisions of any agreement of
the Corporation, including any agreement relating to its indebtedness,
prohibits such authorization , payment or setting apart for payment or
provides that such authorization, payment or setting apart for payment would
constitute a breach thereof or a default thereunder, or if such authorization
or payment shall be restricted or prohibited by law.
(c) Distributions on the Series A Preferred will accumulate whether or
not the Corporation has earnings, whether or not there are funds legally
available for the payment of such distributions and whether or not such
distributions are authorized. Accumulated but unpaid distributions on the
Series A Preferred will not bear interest and holders of the Series A
Preferred will not be entitled to any distributions in excess of full
cumulative distributions as described above.
(d) No full distributions will be authorized or paid or set apart for
payment on any equity securities of the Corporation ranking, as to
distributions, on a parity with or junior to the Series A Preferred for any
period unless full distributions have been or contemporaneously are authorized
and paid or authorized and a sum sufficient for the payment thereof is set
apart for such payment on the Series A Preferred for all past distribution
periods and the then current distribution period. When distributions are not
paid in full or a sum sufficient for such full payment is not so set apart
upon the Series A Preferred and the other equity securities of the Corporation
ranking on a parity as to distributions with the Series A Preferred, all
distributions authorized upon the Series A Preferred and any other equity
securities of the Corporation ranking on a parity as to distributions with the
Series A Preferred shall be authorized pro rata so that the amount of
distributions authorized per share of Series A Preferred and such other equity
securities shall in all cases bear to each other the same ratio that
accumulated distributions per share on the Series A Preferred and such other
equity securities (which shall not include any accumulation in respect of
unpaid distributions for prior distribution periods if such equity securities
do not have cumulative distributions) bear to each other. No interest, or sum
of money in lieu of interest, shall be payable in respect of any distribution
payment or payments on Series A Preferred which may be in arrears.
(e) Except as provided in Section 3(d), unless full distributions on the
Series A Preferred have been or contemporaneously are authorized and paid or
authorized and a sum sufficient for the payment thereof is set apart for
payment for all past distribution periods and the then current distribution
period, no distributions (other than in shares of Common Stock or other equity
securities of the Corporation ranking junior to the Series A Preferred as to
distributions and upon liquidation) shall be authorized or paid or set aside
for payment or other distribution shall be authorized or made upon the Common
Stock or any other equity securities of the Corporation ranking junior to or
on a parity with the Series A Preferred as to distributions or upon
liquidation, nor shall any shares of Common Stock or any other equity
securities of the Corporation ranking junior to or on a parity with the Series
A Preferred as to distributions or upon liquidation be redeemed, purchased or
otherwise acquired for any consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of any such shares) by the
Corporation (except (1) by conversion into or exchange for other stock of the
Corporation ranking junior to the Series A Preferred as to distributions and
upon liquidation or (2) redemptions for the purpose of preserving the
Corporation's status as a real estate investment trust (a "REIT") under the
Internal Revenue Code of 1986, as amended (the "Code").
(f) Any distribution payment made on shares of the Series A Preferred
shall first be credited against the earliest accumulated but unpaid
distribution due with respect to such shares which remains payable.
(4) Liquidation Preference.
(a) Upon any voluntary or involuntary liquidation, dissolution or winding
up of the affairs of the Corporation (referred to herein as a "liquidation"),
the holders of the Series A Preferred will be entitled to be paid out of the
assets of the Corporation legally available for distribution to its
stockholders liquidating distributions, in cash or property at its fair market
value as determined by the Corporation's Board of Directors, in the amount of
a liquidation preference of $25.00 per share, plus an amount equal to any
accumulated and unpaid distributions to the date of such liquidation, before
any distribution or payment is made to holders of Common Stock or any other
equity securities of the Corporation ranking junior to the Series A Preferred
as to the distribution of assets upon a liquidation. After payment of the full
amount of the liquidating distributions to which they are entitled, the
holders of Series A Preferred will have no right or claim to any of the
remaining assets of the Corporation.
(b) In the event that, upon any liquidation of the Corporation, the
available assets of the Corporation are insufficient to pay the amount of the
liquidating distributions on all outstanding shares of Series A Preferred and
the corresponding amounts payable on all other equity securities of the
Corporation ranking on a parity with Series A Preferred in the distribution of
assets upon a liquidation, then the holders of Series A Preferred and all
other such equity securities shall share ratably in any such distribution of
assets in proportion to the full liquidating distributions to which they would
otherwise be respectively entitled.
(c) The consolidation or merger of the Corporation with or into any other
entity, or the merger of another entity with or into the Corporation, or a
statutory share exchange by the Corporation, or the sale, lease or conveyance
of all or substantially all of the property or business of the Corporation,
shall not be deemed to constitute a liquidation of the Corporation.
(d) The liquidation preference of the outstanding shares of Series A
Preferred will not be added to the liabilities of the Corporation for the
purpose of determining whether under the Maryland General Corporation Law a
distribution may be made to stockholders of the Corporation whose preferential
rights upon dissolution of the Corporation are junior to those of holders of
Series A Preferred.
(5) Redemption.
(a) Shares of Series A Preferred will not be redeemable prior to April
13, 2003, subject to the provisions of Sections 5(c) and 8. On or after April
13, 2003, the Corporation may redeem shares of the Series A Preferred, in
whole or in part, from time to time, at the following redemption prices per
share if redeemed during the twelve-month period beginning April 13 of the
applicable year, plus all accumulated and unpaid distributions thereon to the
date fixed for redemption, upon not less than 30 nor more than 60 days' prior
written notice.
Year Redemption Price Per Share
---- --------------------------
2003..................................... $25.95313
2004..................................... 25.76250
2005..................................... 25.57187
2006..................................... 25.38124
2007..................................... 25.19061
2008 and thereafter...................... 25.00
(b) The Corporation may not exercise its option to redeem shares of
Series A Preferred unless the redemption price (other than the portion thereof
consisting of accumulated and upaid distributions) is paid solely out of the
sale proceeds of equity securities of the Corporation, and from no other
source. For purposes of the preceding sentence, "equity securities" means
Common Stock, Preferred Stock or other equity securities of the Corporation,
or any shares, interest, participation or other ownership interests (however
designated) , or any rights or options to purchase any of the foregoing (other
than debt securities convertible into or exchangeable for equity securities).
(c) If fewer than all of the outstanding shares of Series A Preferred are
to be redeemed, the shares to be redeemed shall be determined pro rata or by
lot or in such other manner as prescribed by the Board of Directors of the
Corporation. In the event that such redemption is to be by lot, if as a result
of such redemption any holder of Series A Preferred would own, or be deemed by
virtue of the attribution provisions of the Code to own, in excess of 20% of
the issued and outstanding shares of Series A Preferred or 9.0% in value of
all outstanding equity securities of the Corporation, as the case may be,
because such holder's shares were not redeemed, or were only redeemed in part,
then the Corporation, to the extent permitted by operative law, will redeem
the requisite number of shares of Series A Preferred of such stockholder such
that such stockholder will not own, or be deemed by virtue of the attribution
provisions of the Code to own, in excess of 20% of the shares of Series A
Preferred or 9.0% in value of all equity securities of the Corporation, as the
case may be, issued and outstanding subsequent to such redemption.
(d) Notwithstanding anything to the contrary contained herein, the
Corporation may redeem shares of Series A Preferred at any time, whether or
not prior to April 13, 2003, if the Board of Directors of the Corporation
determines that such redemption is (i) necessary or advisable to preserve the
Corporation's status as a REIT or (ii) reasonable or appropriate in order to
comply with any laws, rules or regulations of any governmental authority.
(e) Notice of redemption will be mailed by the Corporation, postage
prepaid, not less than 30 nor more than 60 days prior to the date fixed for
redemption (the "Series A Preferred Stock Redemption Date"), addressed to the
respective holders of record of the Series A Preferred to be redeemed at their
respective addresses as they appear on the stock transfer records of the
Corporation. Each notice of redemption shall state: (i) the redemption date;
(ii) the number of shares of Series A Preferred to be redeemed; (iii) the
redemption price; (iv) the place or places where certificates representing
such shares of Series A Preferred are to be surrendered for payment of the
redemption price; (v) that distributions on the shares to be redeemed will
cease to accumulate on such redemption date; and (vi) the date upon which the
holder's conversion rights as to such shares shall terminate. If fewer than
all the shares of Series A Preferred are to be redeemed, the notice mailed to
each such holder thereof shall also specify the number of shares of Series A
Preferred to be redeemed from each such holder.
(f) At its election, the Corporation, prior to the Series A Preferred
Stock Redemption Date, may irrevocably deposit the redemption price (including
accumulated and unpaid distributions) of the Series A Preferred so called for
redemption in trust for the holders thereof with a bank or trust company, in
which case the notice of redemption to holders of the Series A Preferred to be
redeemed will (i) state the date of such deposit, (ii) specify the office of
such bank or trust company as the place of payment of the redemption price and
(iii) require such holders to surrender the certificates representing such
Series A Preferred at such place on or about the date fixed in such redemption
notice (which may not be later than the Series A Preferred Stock Redemption
Date) against payment of the redemption price (including all accumulated and
unpaid distributions to the Series A Preferred Stock Redemption Date). Any
moneys so deposited which remain unclaimed by the holders of the Series A
Preferred at the end of two years after the Series A Preferred Stock
Redemption Date will be returned by such bank or trust company to the
Corporation.
(g) No failure to give notice of redemption or any defect thereto or in
the mailing thereof shall affect the validity of the proceedings for the
redemption of any shares of Series A Preferred except as to the holder to whom
notice was defective or not given.
(h) On or after the Series A Preferred Stock Redemption Date, each holder
of Series A Preferred to be redeemed must present and surrender the
certificates representing the Series A Preferred to the Corporation at the
place designated in the notice of redemption and thereupon the redemption
price of such shares will be paid to or on the order of the person whose name
appears on such certificates as the owner thereof and each surrendered
certificate will be canceled. In the event that fewer than all the shares of
Series A Preferred are to be redeemed, a new certificate will be issued
representing the unredeemed shares.
(i) From and after the Series A Preferred Stock Redemption Date (unless
the Corporation defaults in payment of the redemption price), all
distributions on the Series A Preferred called for redemption will cease to
accumulate and all rights of the holders thereof, except the right to receive
the redemption price thereof (including all accumulated and unpaid
distributions to the Series A Preferred Stock Redemption Date), will cease and
terminate and such shares will not thereafter be transferred (except with the
consent of the Corporation) on the Corporation's records, and such shares
shall not be deemed to be outstanding for any purpose whatsoever.
(j) Unless full distributions on all shares of Series A Preferred shall
have been or contemporaneously are authorized and paid or authorized and a sum
sufficient for the payment thereof is set apart for payment for all past
distribution periods and the then current distribution period, no shares of
Series A Preferred shall be redeemed unless all outstanding shares of Series A
Preferred are simultaneously redeemed; provided, however, that the foregoing
shall not prevent the purchase or acquisition of shares of Series A Preferred
to preserve the REIT status of the Corporation or pursuant to a purchase or
exchange offer made on the same terms to holders of all outstanding shares of
Series A Preferred.
(k) Unless full distributions on all shares of Series A Preferred have
been or contemporaneously are authorized and paid or authorized and a sum
sufficient for the payment thereof is set apart for payment for all past
distribution periods and the then current distribution period, the Corporation
shall not purchase or otherwise acquire, directly or indirectly, any shares of
Series A Preferred (except by conversion into or exchange for equity
securities of the Corporation ranking junior to the Series A Preferred as to
distributions and upon liquidation); provided, however, that the foregoing
shall not prevent the purchase or acquisition of Series A Preferred to
preserve the REIT status of the Corporation or pursuant to a purchase or
exchange offer made on the same terms to holders of all outstanding shares of
Series A Preferred.
(l) The provisions of Sections 5(j) and 5(k) shall not prevent the
purchase by the Corporation of Series A Preferred in order to ensure the
Corporation remains qualified as a REIT.
(m) Immediately prior to any redemption of Series A Preferred, the
Corporation shall pay, in cash, any accumulated and unpaid distributions to
the Series A Preferred Stock Redemption Date, unless such Series A Preferred
Stock Redemption Date falls after a Distribution Payment Record Date and prior
to the corresponding Distribution Payment Date, in which case each holder of
Series A Preferred at the close of business on such Distribution Payment
Record Date shall be entitled to the distribution payable on such shares on
the corresponding Distribution Payment Date notwithstanding the redemption of
such shares on or prior to such Distribution Payment Date. Except as provided
above, the Corporation will make no payment or allowance for unpaid
distributions, whether or not in arrears, on Series A Preferred for which a
notice of redemption has been given.
(n) Any shares of Series A Preferred that have been redeemed shall, after
such redemption, have the status of authorized but unissued Preferred Stock,
without designation as to series, until such shares are once more designated
as part of a particular series by the Board of Directors of the Corporation.
(o) The Series A Preferred will not have a stated maturity date and will
not be subject to any sinking fund or mandatory redemption provisions.
(6) Voting Rights
(a) Holders of the Series A Preferred will not have any voting rights,
except as set forth below. In any matter in which the Series A Preferred is
entitled to vote, including any action by written consent, each share of
Series A Preferred shall be entitled to one vote.
(b) Whenever distributions on any shares of Series A Preferred shall be
in arrears for six or more quarterly periods (a "Preferred Distribution
Default"), the holders of such shares of Series A Preferred (voting separately
as a class with all other series of Preferred Stock upon which like voting
rights have been conferred and are exercisable) will be entitled to vote for
the election of two additional directors of the Corporation (the "Preferred
Stock Directors") at a special meeting called by the holders of record of at
least 10% of the outstanding shares of Series A Preferred or the holders of
any other series of Preferred Stock so in arrears (unless such request is
received less than 90 days before the date fixed for the next annual or
special meeting of stockholders) or at the next annual meeting of
stockholders, and at each subsequent annual meeting until all distributions
accumulated on such shares of Series A Preferred for the past distribution
periods and the then current distribution period shall have been fully paid or
declared and a sum sufficient for the payment thereof is set aside for
payment. In such cases, the entire Board of Directors of the Corporation will
be increased by two directors.
(c) If and when all accumulated distributions and the distribution for
the current distribution period on the Series A Preferred shall have been paid
in full or set aside for payment in full, the holders of shares of Series A
Preferred shall be divested of the voting rights set forth in Section 6(b)
(subject to revesting in the event of each and every Preferred Distribution
Default) and, if all accumulated distributions and the distribution for the
current distribution period have been paid in full or set aside for payment in
full on all other series of Preferred Stock upon which like voting rights have
been conferred and are exercisable, the term of office of each Preferred Stock
Director so elected shall terminate immediately. So long as a Preferred
Distribution Default shall continue, any vacancy in the office of a Preferred
Stock Director may be filled by written consent of the Preferred Stock
Director remaining in office or, if none remains in office, by a vote of the
holders of record of a majority of the outstanding shares of Series A
Preferred when they have the voting rights set forth in Section 6(b) (voting
separately as a class with all other series of Preferred Stock upon which like
voting rights have been conferred and are exercisable). The Preferred Stock
Directors shall each be entitled to one vote per director on any matter,
presented to the Board of Directors.
(d) So long as any shares of Series A Preferred remain outstanding, the
Corporation shall not, without the affirmative vote or consent of the holders
of record of at least two-thirds of the outstanding shares of the Series A
Preferred given in person or by proxy, either in writing or at a meeting (such
series voting separately as a class), (i) authorize or create, or increase the
authorized or issued amount of, any equity securities ranking senior to the
Series A Preferred with respect to payment of distributions or the
distribution of assets upon a liquidation of the Corporation or reclassify any
authorized stock of the Corporation into any such equity securities, or
create, authorize or issue any obligation or security convertible into or
evidencing the right to purchase any such stock or (ii) amend, alter or repeal
the provisions of the Articles, whether by merger, consolidation or otherwise
(an "Event"), so as to materially and adversely affect any right, preference,
privilege or voting power of the Series A Preferred or the holders thereof;
provided, however, that the holders of the Series A Preferred shall not be
entitled to any voting rights in connection with an Event if as a result of
such Event (a) shares of Series A Preferred remain outstanding with the terms
thereof materially unchanged or (b) the Corporation is not the surviving
entity but the surviving entity issues to the holders of the Series A
Preferred the same number of shares of a separate class of preferred stock
with rights, preferences, privileges and voting powers that are materially
unchanged from the preferences, rights, privileges and other terms of the
Series A Preferred; and provided, further, that (x) any increase in the amount
of the authorized Series A Preferred or the creation or issuance of any other
series of Preferred Stock or (y) any increase in the amount of authorized
shares of such series, in each case ranking on a parity with or junior to the
Series A Preferred with respect to payment of distributions or the
distribution of assets upon a liquidation of the Corporation, shall not be
deemed to materially and adversely affect such rights, preferences, privileges
or voting powers.
(e) The foregoing voting provisions will not apply if, at or prior to the
time when the act with respect to which such vote would otherwise be required
shall be effected, all outstanding shares of Series A Preferred shall have
been converted, redeemed or called for redemption upon proper notice and
sufficient funds shall have been deposited in trust to effect such redemption.
(7) Conversion.
(a) Subject to Section 8, shares of Series A Preferred will be
convertible at any time, at the option of the holders thereof, into Common
Stock at a conversion price of $28.61 per share of Common Stock (equivalent to
a conversion rate of .8738 shares of Common Stock for each share of Series A
Preferred), subject to adjustment as described below (the "Conversion Price");
provided, however, that the right to convert shares of Series A Preferred
called for redemption will terminate at the close of business on the fifth
business day prior to the Series A Preferred Stock Redemption Date.
(b) To exercise the conversion right, the holder of each Series A
Preferred to be converted shall surrender the certificate representing such
Series A Preferred, duly endorsed or assigned to the Corporation or in blank,
at the principal office of the Transfer Agent accompanied by written notice to
the Corporation that such holder elects to convert such Series A Preferred.
Unless the shares issuable on conversion are to be issued in the same name as
the name in which such Series A Preferred is registered, in which case the
Corporation shall bear the related taxes, each share surrendered for
conversion shall be accompanied by instruments of transfer, in form
satisfactory to the Corporation, duly executed by the holder or such holder's
duly authorized attorney and an amount sufficient to pay any transfer or
similar tax (or evidence reasonably satisfactory to the Corporation
demonstrating that such taxes have been paid).
(c) Each conversion shall be deemed to have been effected immediately
prior to the close of business on the date on which the certificates
representing shares of Series A Preferred shall have been surrendered and such
notice (and if applicable, payment of an amount equal to the distribution
payable on such shares) received by the Corporation as aforesaid, and the
person or persons in whose name or names any certificate or certificates
representing shares of Common Stock shall be issuable upon such conversion
shall be deemed to have become the holder or holders of record of the shares
represented thereby at such time on such date, and such conversion shall be at
the Conversion Price in effect at such time and on such date unless the stock
transfer records of the Corporation shall be closed on that date, in which
event such person or persons shall be deemed to have become such holder or
holders of record at the close of business on the next succeeding day on which
such stock transfer records are open, but such conversion shall be at the
Conversion Price in effect on the date on which such shares have been
surrendered and such notice received by the Corporation.
(d) Holders of shares of Series A Preferred at the close of business on a
Distribution Payment Record Date shall be entitled to receive the distribution
payable on such shares on the corresponding Distribution Payment Date
notwithstanding the conversion of such shares following such Distribution
Payment Record Date and prior to such Distribution Payment Date. However,
certificates representing Series A Preferred surrendered for conversion during
the period between the close of business on any Distribution Payment Record
Date and the opening of business on the corresponding Distribution Payment
Date (except shares converted after the issuance of a notice of redemption
with respect to the Series A Preferred Stock Redemption Date during such
period or coinciding with such Distribution Payment Date) must be accompanied
by payment of an amount equal to the distribution payable on the related
shares of Series A Preferred on such Distribution Payment Date. A holder of
Series A Preferred on a Distribution Payment Record Date who (or whose
transferee) tenders any such shares for conversion into Common Stock on such
Distribution Payment Date shall receive the distribution payable by the
Corporation on such Series A Preferred on such date, and the converting holder
need not include payment of the amount of such distribution upon surrender of
certificates representing such Series A Preferred for conversion. Except as
provided above, the Corporation shall make no payment or allowance for unpaid
distributions, whether or not in arrears, on converted shares or for
distribution on the Common Stock that is issued upon such conversion.
As promptly as practicable after the surrender of certificates for Series
A Preferred as aforesaid, the Corporation shall issue and shall deliver at
such office to such holder, or on his written order, a certificate or
certificates for the number of full shares of Common Stock issuable upon the
conversion of such shares in accordance with the provisions of this Section 7,
and any fractional interest in respect of a share of Common Stock arising upon
such conversion shall be settled as provided in Section 7(e).
(e) No fractional shares of Common Stock shall be issued upon conversion
of Series A Preferred. Instead of any fractional share of Common Stock that
would otherwise be deliverable upon the conversion of a share of Series A
Preferred, the Corporation shall pay to the holder of such share an amount in
cash in respect of such fractional interest based upon the Current Market
Price of a share of Common Stock on the Trading Day immediately preceding the
date of conversion. If more than one share of Series A Preferred shall be
surrendered for conversion at one time by the same holder, the number of full
shares of Common Stock issuable upon conversion thereof shall be computed on
the basis of the aggregate number of shares of Series A Preferred so
surrendered.
(f) The Conversion Price shall be adjusted from time to time as follows:
(i) If the Corporation shall after the date on which shares of
Series A Preferred are first issued (the "Issue Date") (A) pay or make a
distribution to holders of its equity securities in Common Stock, (B)
subdivide its outstanding Common Stock into a greater number of shares, (C)
combine its outstanding Common Stock into a smaller number of shares or (D)
issue any equity securities by reclassification of its Common Stock, then the
Conversion Price in effect at the opening of business on the day following the
record date for the determination of stockholders entitled to receive such
distribution or at the opening of business on the day following the day on
which such subdivision, combination or reclassification becomes effective, as
the case may be, shall be adjusted so that the holder of any share of Series A
Preferred thereafter surrendered for conversion shall be entitled to receive
the number of shares of Common Stock that such holder would have owned or have
been entitled to receive after the happening of any of the events described
above had such shares been converted immediately prior to the record date in
the case of a distribution or the effective date in the case of a subdivision,
combination or reclassification. An adjustment made pursuant to this
subsection (i) shall become effective immediately after the opening of
business on the day following such record date (except as provided in Section
7(j)) in the case of a distribution and shall become effective immediately
after the opening of business on the day next following the effective date in
the case of a subdivision, combination or reclassification.
(ii) If the Corporation shall issue after the Issue Date rights,
options or warrants to all holders of Common Stock entitling them to subscribe
for or purchase shares of Common Stock (or securities convertible into or
exchangeable for Common Stock) at a price per share less than the Fair Market
Value per share of Common Stock on the record date for the determination of
stockholders entitled to receive such rights, options or warrants, then the
Conversion Price in effect at the opening of business on the day following
such record date shall be adjusted to equal the price determined by
multiplying (I) the Conversion Price in effect immediately prior to the
opening of business on the day following the record date for such
determination by (II) a fraction, the numerator of which shall be the sum of
(A) the number of shares of Common Stock outstanding on the close of business
on the record date for such determination and (B) the number of shares that
the aggregate proceeds to the Corporation from the exercise of such rights,
options or warrants for Common Stock would purchase at such Fair Market Value,
and the denominator of which shall be the sum of (A) the number of shares of
Common Stock outstanding on the close of business on the record date for such
determination and (B) the number of additional shares of Common Stock offered
for subscription or purchase pursuant to such rights, options or warrants.
Such adjustment shall become effective immediately after the opening of
business on the day following such record date (except as provided in Section
7(j)). In determining whether any rights, options or warrants entitle the
holders of Common Stock to subscribe for or purchase Common Stock at less than
the Fair Market Value, there shall be taken into account any consideration
received by the Corporation upon issuance and upon exercise of such rights,
options or warrants, the value of such consideration, if other than cash, to
be determined by the Corporation's Chief Executive Officer or the Board of
Directors of the Corporation.
(iii) If the Corporation shall distribute to all holders of its
Common Stock any equity securities of the Corporation (other than Common
Stock) or evidences of its indebtedness or assets (excluding Permitted Common
Stock Cash Distributions and those rights, options and warrants referred to in
and treated under subsection (ii) above), then the Conversion Price shall be
adjusted so that it shall equal the price determined by multiplying (I) the
Conversion Price in effect immediately prior to the close of business on the
record date for the determination of stockholders entitled to receive such
distribution by (II) a fraction, the numerator of which shall be the Fair
Market Value per share of Common Stock on the record date for such
determination less the then fair market value (as determined by the
Corporation's Chief Executive Officer or the Board of Directors of the
Corporation, whose determination shall be conclusive) of the portion of the
equity securities, evidences of indebtedness or assets so distributed
applicable to one share of Common Stock, and the denominator of which shall be
the Fair Market Value per share of Common Stock on the record date for such
determination. Such adjustment shall become effective immediately at the
opening of business on the day following such record date (except as provided
in Section7(j)). For the purposes of this subsection (iii), the distribution
of equity securities, evidences of indebtedness or assets which are
distributed not only to the holders of Common Stock on the record date for the
determination of stockholders entitled to such distribution, but also are
distributed with each share of Common Stock delivered to a person converting a
share of Series A Preferred after such record date, shall not require an
adjustment of the Conversion Price pursuant to this subsection (iii), provided
that on the date, if any, on which a person converting a share of Series A
Preferred would no longer be entitled to receive such equity securities,
evidences of indebtedness or assets with a share of Common Stock (other than
as a result of the termination of all such equity securities, evidences of
indebtedness or assets), a distribution of such equity securities, evidences
of indebtedness or assets shall be deemed to have occurred and the Conversion
Price shall be adjusted as provided in this subsection (iii) (and such day
shall be deemed to be "the record date for the determination of the
stockholders entitled to receive such distribution" within the meaning of the
two preceding sentences).
(iv) Except with respect to any distribution of shares of common
stock of Reckson Service Industries, Inc. as contemplated by the Corporation
on the Issue Date, no adjustment in the Conversion Price shall be required
unless such adjustment would require a cumulative increase or decrease of at
least 1% in the Conversion Price; provided, however, that any adjustments that
by reason of this subsection (iv) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment until made; and
provided, further, that any adjustment shall be required and made in
accordance with the provisions of this Section 7 (other than this subsection
(iv)) not later than such time as may be required in order to preserve the
tax-free nature of a distribution to the holders of Common Stock.
Notwithstanding any other provisions of this Section 7, the Corporation shall
not be required to make any adjustment of the Conversion Price for the
issuance of any Common Stock pursuant to any plan providing for the
reinvestment of distributions or interest payable on securities of the
Corporation and the investment of additional optional amounts in Common Stock
under such plan. All calculations under this Section 7 shall be made to the
nearest cent with ($.005 being rounded upward) or to the nearest one-tenth of
a share (with .05 of a share being rounded upward), as the case may be.
Anything in this subsection (f) to the contrary notwithstanding, the
Corporation shall be entitled, to the extent permitted by law, to make such
reductions in the Conversion Price, in addition to those required by this
subsection (f), as it in its discretion shall determine to be advisable in
order that any share distributions, subdivision, reclassification or
combination of shares, distribution of rights, options or warrants to purchase
shares or securities, or a distribution of other assets (other than cash
distributions) hereafter made by the Corporation to its stockholders shall not
be taxable.
(g) Except as otherwise provided for in Section7(f), if the Corporation
shall be a party to any transaction (including, without limitation, a merger,
consolidation, statutory share exchange, tender offer for all or substantially
all of the Common Stock or sale of all or substantially all of the
Corporation's assets) (each of the foregoing being referred to herein as a
"Transaction"), in each case as a result of which Common Stock shall be
converted into the right to receive shares, stock, securities or other
property (including cash or any combination thereof), each share of Series A
Preferred, if convertible after the consummation of the Transaction, which is
not converted into the right to receive shares, stock, securities or other
property in connection with such Transaction shall thereafter be convertible
into the kind and amount of shares, stock, securities and other property
(including cash or any combination thereof) receivable upon the consummation
of such Transaction by a holder of that number of shares of Common Stock into
which one share of Series A Preferred was convertible immediately prior to
such Transaction, assuming such holder of Common Stock (i) is not a Person
with which the Corporation consolidated or into which the Corporation merged
or which merged into the Corporation or to which such sale or transfer was
made, as the case may be (a "Constituent Person"), or an affiliate of a
Constituent Person and (ii) failed to exercise his rights of the election, if
any, as to the kind or amount of shares, stock, securities and other property
(including cash or any combination thereof) receivable upon such Transaction
(each, a "Non-Electing Share") (provided that if the kind and amount of
shares, stock, securities and other property (including cash or any
combination thereof) receivable upon consummation of such Transaction is not
the same for each Non-Electing Share, the kind and amount receivable by each
Non-Electing Share shall be deemed to be the kind and amount receivable per
share by a plurality of the Non-Electing Shares). The Corporation shall not be
a party to any Transaction unless the terms of such Transaction are consistent
with the provisions of this subsection (g), and it shall not consent or agree
to the occurrence of any Transaction until the Corporation has entered into an
agreement with the successor or purchasing entity, as the case may be, for the
benefit of the holders of the Series A Preferred that will contain provisions
enabling holders of Series A Preferred that remains outstanding after such
Transaction to convert into the consideration received by holders of Common
Stock at the Conversion Price in effect immediately prior to such Transaction.
The provisions of this subsection (g) shall similarly apply to successive
Transactions.
(h) If:
(i) the Corporation shall declare a distribution on the Common Stock
(other than Permitted Common Stock Cash Distributions) or there shall be a
reclassification, subdivision or combination of the Common Stock; or
(ii) the Corporation shall grant to the holders of the Common Stock
of rights, options or warrants to subscribe for or purchase Common Stock at
less than Fair Market Value; or
(iii) the Corporation shall enter into a Transaction; or
(iv) there shall occur the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation,
then the Corporation shall cause to be filed with the Transfer Agent and
shall cause to be mailed to the holders of the Series A Preferred at
their addresses as shown on the stock transfer records of the
Corporation, as promptly as possible, but at least 15 days prior to the
applicable date hereinafter specified, a notice stating (A) the date on
which a record in to be taken for the purpose of such distribution or
rights, options or warrants, or, if a record is not to be taken, the date
as of which the holders of Common Stock of record to be entitled to such
distribution or rights, options or warrants are to be determined or (B)
the date on which such reclassification, subdivision, combination,
Transaction or liquidation, dissolution or winding up is expected to
become effective, and the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange their Common Stock
for securities or other property, if any, deliverable upon such
reclassification, subdivision, combination, Transaction or liquidation,
dissolution or winding up. Failure to give or receive such notice or any
defect therein shall not affect the legality or validity of the
proceedings described in this Section 7.
(i) Whenever the Conversion Price is adjusted as herein provided, the
Corporation shall promptly file with the Transfer Agent an officer's
certificate setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment, which
certificate shall be conclusive evidence of the correctness of such adjustment
absent manifest error. Promptly after delivery of such certificate, the
Corporation shall prepare a notice of such adjustment of the Conversion Price
setting forth the adjusted Conversion Price and the effective date such
adjustment becomes effective and shall mail such notice of such adjustment of
the Conversion Price to the holder of each share of Series A Preferred at such
holder's last address as shown on the stock transfer records of the
Corporation.
(j) In any case in which Section 7(f) provides that an adjustment shall
become effective on the day following the record date for an event, the
Corporation may defer until the occurrence of such event (A) issuing to the
holder of any share of Series A Preferred converted after such record date and
before the occurrence of such event the additional shares of Common Stock
issuable upon such conversion by reason of the adjustment required by such
event over and above the shares of Common Stock issuable upon such conversion
before giving effect to such adjustment and (B) fractionalizing any share of
Series A Preferred and/or paying to such holder any amount of cash in lieu of
any fraction pursuant to Section 7(e).
(k) There shall be no adjustment of the Conversion Price in case of the
issuance of any equity securities of the Corporation in a reorganization,
acquisition or other similar transaction except as specifically set forth in
this Section 7. If any action or transaction would require adjustment of the
Conversion Price pursuant to more than one subsection of Section 7(f), only
one adjustment shall be made, and such adjustment shall be the amount of
adjustment that has the highest absolute value.
(l) If the Corporation shall take any action affecting the Common Stock,
other than action described in this Section 7, that in the opinion of the
Board of Directors of the Corporation would materially adversely affect the
conversion rights of the holders of the Series A Preferred, the Conversion
Price for the Series A Preferred may be adjusted, to the extent permitted by
law, in such manner, if any, and at such time, as the Board of Directors of
the Corporation, in its sole discretion, may determine to be equitable in the
circumstances.
(m) The Corporation shall at all times reserve and keep available, free
from preemptive rights, out of the aggregate of its authorized but unissued
Common Stock, for the purpose of effecting conversion of the Series A
Preferred, the full number of shares of Common Stock deliverable upon the
conversion of all outstanding shares of Series A Preferred not theretofore
converted. For purposes of this subsection (m), the number of shares of Common
Stock that shall be deliverable upon the conversion of all outstanding shares
of Series A Preferred shall be computed as if at the time of computation all
such outstanding shares were held by a single holder.
(n) The Corporation will pay any and all documentary stamp or similar
issue or transfer taxes payable in respect of the issue or delivery of Common
Stock or other securities or property on conversion of the Series A Preferred
pursuant hereto; provided, however, that the Corporation shall not be required
to pay any tax that may be payable in respect of any transfer involved in the
issue or delivery of Common Stock or other securities or property in a name
other than that of the record holder of the Series A Preferred to be
converted, and no such issue or delivery shall be made unless and until the
person requesting such issue or delivery has paid to the Corporation the
amount of any such tax or established, to the reasonable satisfaction of the
Corporation, that such tax has been paid.
(8) Ownership Limitations. Notwithstanding Article VII of the Articles, the
provisions of this Section 8 shall apply with respect to the limitations on
the ownership and acquisition of shares of Series A Preferred.
(a) Restriction on Ownership and Transfer.
(i) Except as provided in Section 8(h), no Person shall Acquire any
shares of Series A Preferred if, as the result of such Acquisition, such
Person shall Beneficially Own or Constructively Own shares of Series A
Preferred in excess of the Ownership Limit;
(ii) Except as provided in Section 8(h), no Person shall
Beneficially Own or Constructively Own any shares of Series A Preferred such
that such Person would Beneficially Own or Constructively Own Capital Stock in
excess of the Aggregate Stock Ownership Limit;
(iii) Except as provided in Section 8(h), any Acquisition (whether
or not such Acquisition is the result of a transaction entered into through
the facilities of the New York Stock Exchange, Inc. (the "NYSE")) that, if
effective, would result in any Person Beneficially Owning Series A Preferred
in excess of the Ownership Limit shall be void Series A ab initio as to the
Acquisition of such Series A Preferred which would be otherwise Beneficially
Owned by such Person in excess of the Ownership Limit; and the intended
transferee shall acquire no rights in such Series A Preferred;
(iv) Except as provided in Section 8(h), any Acquisition (whether or
not such Acquisition is the result of a transaction entered into through the
facilities of the NYSE) that, if effective, would result in any Person
Constructively Owning Series A Preferred in excess of the Ownership Limit
shall be void ab initio as to the Acquisition of such Series A Preferred which
would be otherwise Constructively Owned by such Person in excess of the
Ownership Limit; and the intended transferee shall acquire no rights in such
Series A Preferred; and
(v) Notwithstanding any other provisions contained in this Section
8, any Transfer (whether or not such Transfer is the result of a transaction
entered into through the facilities of the NYSE) or other event that, if
effective, would result in the Corporation being "closely held" within the
meaning of Section 856(h) of the Code, or would otherwise result in the
Corporation failing to qualify as a REIT (including, but not limited to, a
Transfer other event that would result in the Corporation owning (directly or
Constructively) an interest in a tenant that is described in Section
856(d)(2)(B) of the Code if the income derived by the Corporation from such
tenant would cause the Corporation to fail to satisfy any of the gross income
requirements of Section 856(c) of the Code) shall be void ab initio as to the
Transfer of the Series A Preferred or other event which would cause the
Corporation to be "closely held" within the meaning of Section 856(h) of the
Code or would otherwise result in the Corporation failing to qualify as a
REIT; and the intended transferee or owner or Constructive or Beneficial Owner
shall acquire or retain no rights in such Series A Preferred.
(b) Conversion Into and Exchange For Series A Excess Preferred. If,
notwithstanding the other provisions contained in this Section 8, at any time
after the date of the Issue Date, there is a purported Transfer or Acquisition
(whether or not such Transfer or Acquisition is the result of a transaction
entered into through the facilities of the NYSE), change in the capital
structure of the Corporation or other event such that one or more of the
restrictions on ownership and transfers described in Section 8(a), above, has
been violated, then the Series A Preferred being Transferred or Acquired (or
in the case of an event other than a Transfer or Acquisition, the Series A
Preferred owned or Constructively Owned or Beneficially Owned or, if the next
sentence applies, the Series A Preferred identified in the next sentence)
which would cause one or more of the restrictions on ownership or transfer to
be violated (rounded up to the nearest whole share) shall be automatically
converted into an equal number of shares of Series A Excess Preferred. If at
any time of such purported Transfer or Acquisition any of the shares of the
Series A Preferred are then owned by a depositary to permit the trading of
beneficial interests in fractional shares of Series A Preferred, then shares
of Series A Preferred that shall be converted to Series A Excess Preferred
shall be first taken from any Series A Preferred that is not in such
depositary that is Beneficially Owned or Constructively Owned by the Person
whose Beneficial Ownership or Constructive Ownership would otherwise violate
the restrictions of Section 8(a) prior to converting any shares in such
depositary. Any conversion pursuant to this subparagraph shall be effective as
of the close of business on the Business Day prior to the date of such
Transfer or other event.
(c) Remedies For Breach. If the Board of Directors or its designees shall
at any time determine in good faith that a Transfer or other event has taken
place in violation of Section 8(a) or that a Person intends to Transfer or
Acquire, has attempted to Transfer or Acquire or may Transfer or Acquire
direct ownership, beneficial ownership (determined without reference to any
rules of attribution), Beneficial Ownership or Constructive Ownership of any
shares of the Corporation in violation of Section 8(a), the Board of Directors
or its designees shall take such action as it deems advisable to refuse to
give effect to or to prevent such Transfer, Acquisition or other event,
including, but not limited to, causing the Corporation to purchase such shares
upon the terms and conditions specified by the Board of Directors in its sole
discretion, refusing to give effect to such Transfer, Acquisition or other
event on the books of the Corporation or instituting proceedings to enjoin
such Transfer, Acquisition or other event; provided, however, that any
Transfer or Acquisition (or, in the case of events other than a Transfer or
Acquisition, ownership or Constructive Ownership or Beneficial Ownership) in
violation of Section 8(a) shall automatically result in the conversion
described in Section 8(b), irrespective of any action (or non-action) by the
Board of Directors.
(d) Notice of Restricted Transfer. Any Person who Acquires or attempts to
Acquire or Beneficially Owns or Constructively Owns shares of Series A
Preferred in excess of the aforementioned limitations, or any Person who is or
attempts to become a transferee such that Series A Excess Preferred results
under the provisions of these Articles, shall immediately give written notice
or, in the event of a proposed or attempted Transfer, give at least 15 days
prior written notice to the Corporation of such event and shall provide to the
Corporation such other information as it may request in order to determine the
effect of any such Transfer on the corporation's status as a REIT.
(e) Owners Required To Provide Information. From and after the Issue
Date, each Person who is a beneficial owner or Beneficial Owner or
Constructive Owner of Series A Preferred and each Person (including the
stockholder of record) who is holding Series A Preferred for a Beneficial
Owner or Constructive Owner shall provide to the Corporation such information
that the Corporation may request, in good faith, in order to determine the
Corporation's status as a REIT.
(f) Remedies Not Limited. Nothing contained in this Section 8 (but
subject to Section 8(l)) shall limit the authority of the Board of Directors
to take such other action as it deems necessary or advisable to protect the
Corporation and the interests of its stockholders by preservation of the
Corporation's status as a REIT.
(g) Ambiguity. In the case of an ambiguity in the application of any of
the provisions of this Section 8, including any definition contained in
Section 9, the Board of Directors shall have the power to determine the
application of the provisions of this Section 8 with respect to any situation
based on the facts known to it (subject, however, to the provisions of Section
8(l)).
(h) Exceptions.
(i) Subject to Section 8(a)(iv), the Board of Directors, in its sole
and absolute discretion, with the advice of the Corporation's tax counsel, may
exempt a Person from the limitation on a Person Acquiring Series A Preferred
in excess of the Ownership Limit or Beneficially Owning Series A Preferred in
excess of the Aggregate Stock Ownership Limit if such Person is not an
individual for purposes of Section 542(a)(2) of the Code and the Board of
Directors obtains such representations and undertakings from such Person as
are reasonably necessary to ascertain that no individual's Acquisition or
Beneficial Ownership of such Series A Preferred will violate the Ownership
Limit or Beneficially Owning Series A Preferred in excess of the Aggregate
Stock Ownership Limit, as the case may be, and such Person agrees that any
violation of such representations or undertaking (or other action which is
contrary to the restrictions contained in this Section 8) or attempted
violation will result in such Series A Preferred being exchanged for Series A
Excess Preferred in accordance with Section 8(b).
(ii) Subject to Section 8(a)(iv), the Board of Directors, in its
sole and absolute discretion, with advice of the Corporation's tax counsel,
may exempt a Person from the limitation on a Person Constructively Owning or
Acquiring Series A Preferred in excess of the Ownership Limit or Beneficially
Owning or Acquiring Series A Preferred in excess of the Aggregate Stock
Ownership Limit if such Person does not and represents that it will not own,
directly or constructively (by virtue of the application of Section 318 of the
Code, as modified by Section 856(d)(5) of the Code), more than a 9% interest
(as set forth in Section 856(d)(2)(B) of the Code) in a tenant of the
Corporation and the Board of Directors obtains such representations and
undertakings from such Person as are reasonably necessary to ascertain this
fact and such Person agrees that any violation or attempted violation will
result in such Series A Preferred in excess of the Ownership Limit or
Beneficially Owning Series A Preferred in excess of the Aggregate Stock
Ownership Limit being exchanged for Series A Excess Preferred in accordance
with Section 8(b).
(iii) Prior to granting any exception pursuant to Section 8(h)(i) or
8(h)(ii), the Board of Directors may require a ruling from the IRS, or an
opinion of counsel, in either case in form and substance satisfactory to the
Board of Directors, in its sole discretion as it may deem necessary or
advisable in order to determine or ensure the Corporation's status as a REIT;
provided, however, that obtaining a favorable ruling or opinion shall not be
required for the Board of Directors to grant an exception hereunder.
(i) Legend. Each certificate for Series A Preferred shall bear
substantially the following legend:
"The Corporation will furnish to any stockholder, on request and without
charge, a full statement of the information required by Section 2-211(b) of
the Corporations and Associations Article of the Annotated Code of Maryland
with respect to the designations and any preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends and other
distributions, qualifications, and terms and conditions of redemptions of the
stock of each class which the Corporation has authority to issue and, if the
Corporation is authorized to issue any preferred or special class in series,
(i) the differences in the relative rights and preferences between the shares
of each series to the extent set, and (ii) the authority of the Board of
Directors to set such rights and preferences of subsequent series. The
foregoing summary does not purport to be complete and is subject to and
qualified in its entirety by reference to the charter of the Corporation
including all amendments and supplements thereto (the "Charter"), a copy of
which will be sent without charge to each stockholder who so requests. Such
request must be made to the Secretary of the Corporation at its principal
office or to the Transfer Agent.
"The securities represented by this certificate are subject to
restrictions on ownership and transfer for the purpose of the Corporation's
maintenance of its status as a real estate investment trust under the Internal
Revenue Code of 1986, as amended. Except as otherwise provided pursuant to the
Charter of the Corporation, no Person may (i) Acquire any shares of Series A
Preferred if, as a result of such Acquisition, such Person shall Beneficially
Own or Constructively Own shares of Series A Preferred in excess of 20% of the
outstanding Series A Preferred of the Corporation or (ii) Beneficially Own or
Constructively Own any shares of Series A Preferred such that such Person
would Beneficially Own or Constructively Own Capital Stock in excess of 9% in
value of the aggregate of the outstanding shares of Capital Stock of the
Corporation. Any Person who Acquires or attempts to Acquire or Beneficially
Owns or Constructively Owns shares of Series A Preferred in excess of the
aforementioned limitations, or any Person who is or attempts to become a
transferee such that Series A Excess Preferred would result under the
provisions of the Charter, shall immediately give written notice or, in the
event of a proposed or attempted Transfer, give at least 15 days prior written
notice to the Corporation of such event and shall provide to the Corporation
such other information as it may request in order to determine the effect of
any such Transfer on the corporation's status as a REIT. All capitalized terms
in this legend have the meanings defined in the Charter of the Corporation, a
copy of which, including the restrictions on transfer, will be sent to any
stockholder on request and without charge. Transfers in violation of the
restrictions described above shall be void ab initio. If the restrictions on
ownership and transfer are violated, the securities represented hereby will be
designated and treated as shares of Series A Excess Preferred which will be
held in trust by the Corporation. The foregoing summary does not purport to be
complete and is subject to and qualified in its entirety by reference to the
Charter, a copy of which, including the restrictions on transfer, will be sent
without charge to each stockholder who so requests. Such request must be made
to the Secretary of the Corporation at its principal office or to the Transfer
Agent."
(j) Severability. If any provision of this Section 8 or any application
of any such provision is determined to be invalid by any federal or state
court having jurisdiction, the validity of the remaining provisions shall not
be affected and other applications of such provision shall be affected only to
the extent necessary to comply with the determination of such court.
(k) Series A Excess Preferred.
(i) Ownership In Trust. Upon any purported Transfer (whether or not
such Transfer is the result of a transaction entered into through the
facilities of the NYSE) that results in the issuance of Series A Excess
Preferred pursuant to Section 8(b), such Series A Excess Preferred shall be
deemed to have been transferred to the Corporation, as Trustee of a Trust for
the exclusive benefit of such Beneficiary or Beneficiaries to whom an interest
in such Series A Excess Preferred may later be transferred pursuant to Section
8(k)(v). Series A Excess Preferred so held in trust shall be issued and
outstanding shares of stock of the Corporation. The Purported Record
Transferee shall have no rights in such Series A Excess Preferred except the
right to designate a transferee of such Series A Excess Preferred upon the
terms specified in Section 8(k)(v). The Purported Beneficial Transferee shall
have no rights in such Series A Excess Preferred except as provided in this
Section 8.
(ii) Dividend Rights. Series A Excess Preferred will be entitled to
dividends and distributions authorized and declared with respect to the Series
A Preferred from which the Series A Excess Preferred was converted and will be
payable to the Trustee of the Trust in which such Series A Excess Preferred is
held, for the benefit of the Charitable Beneficiary. Dividends and
distributions will be authorized and declared with respect to each share of
Series A Excess Preferred in an amount equal to the dividends and
distributions authorized and declared on each share of Series A Preferred from
which the Series A Excess Preferred was converted. Any dividend or
distribution paid prior to the discovery by the Corporation that Series A
Preferred has been transferred in violation of the provisions of the Articles
shall be repaid by the Purported Record Transferee to the Trustee upon demand.
The Corporation shall rescind any dividend or distribution authorized and
declared but unpaid as void ab initio with respect to the Purported Record
Transferee, and the Corporation shall pay such dividend or distribution when
due to the Trustee of the Trust for the benefit of the Charitable Beneficiary.
(iii) Conversion Rights. Holders of shares of Series A Excess
Preferred shall not be entitled to convert any shares of Series A Excess
Preferred into shares of Common Stock. Any conversion made prior to the
discovery by the Corporation that shares of Series A Preferred have been
converted into Series A Excess Preferred shall be void ab initio and the
Purported Record Transferee shall return the shares of Common Stock into which
the Series A Preferred was converted upon demand to the Corporation for
reconversion into Series A Preferred and deposit into the Trust.
(iv) Rights Upon Liquidation. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of, or any other
distribution of all or substantially all of the assets of the Corporation,
each holder of shares of Series A Excess Preferred shall be entitled to
receive, in the case of Series A Excess Preferred converted from Series A
Preferred, ratably with each other holder of Series A Preferred and Series A
Excess Preferred converted from Series A Preferred, that portion of the assets
of the Corporation available for distribution to its stockholders as the
number of shares of the Series A Excess Preferred held by such holder bears to
the total number of shares of Series A Preferred and Series A Excess Preferred
then outstanding (in the case of Series A Excess Preferred converted from
Series A Preferred).
Any liquidation distributions to be distributed with respect to Series A
Excess Preferred shall be distributed in the same manner as proceeds from the
sale of Series A Excess Preferred are distributed as set forth in Section
8(k)(v).
(v) Non-Transferability of Excess Stock. Series A Excess Preferred
shall not be transferable. In its sole discretion, the Trustee of the Trust
may transfer the interest in the Trust representing shares of Series A Excess
Preferred to any Person if the shares of Series A Excess Preferred would not
be Series A Excess Preferred in the hands of such Person. If such transfer is
made, the interest of the Charitable Beneficiary in the Series A Excess
Preferred shall terminate and the proceeds of the sale shall be payable by the
Trustee to the Purported Record Transferee and the Charitable Beneficiary as
herein set forth. The Purported Record Transferee shall receive from the
Trustee the lesser of (i) the price paid by the Purported Record Transferee
for its shares of Series A Preferred that were converted into Series A Excess
Preferred or, if the Purported Record Transferee did not give value for such
shares (e.g. the stock was received through a gift, devise or other
transaction), the average closing price for the class of shares from which
such shares of Series A Excess Preferred were converted for the ten trading
days immediately preceding such sale or gift, and (ii) the price received by
the Trustee from the sale or other disposition of the Series A Excess
Preferred held in trust. The Trustee may reduce the amount payable to the
Purported Record Transferee by the amount of dividends and distributions which
have been paid to the Purported Record Transferee and are owed by the
Purported Record Transferee to the Trustee pursuant to Section 8(k)(i). Any
proceeds in excess of the amount payable to the Purported Record Transferee
shall be paid by the Trustee to the Charitable Beneficiary. Upon such transfer
of an interest in the Trust, the corresponding shares of Series A Excess
Preferred in the Trust shall be automatically exchanged for an equal number of
shares of Series A Excess Preferred and such shares of Series A Excess
Preferred shall be transferred of record to the transferee of the interest in
the Trust if such shares of Series A Excess Preferred would not be Series A
Excess Preferred in the hands of such transferee. Prior to any transfer of any
interest in the Trust, the Corporation must have waived in writing its
purchase rights under Section 8(k)(vii).
(vi) Voting Rights for Series A Excess Preferred. Any vote cast by a
Purported Record Transferee of Series A Excess Preferred prior to the
discovery by the Corporation that Series A Preferred has been transferred in
violation of the provisions of these Articles shall be void ab initio. While
the Series A Excess Preferred is held in trust, the Purported Record
Transferee will be deemed to have given an irrevocable proxy to the Trustee to
vote the shares of Series A Preferred which have been converted into shares of
Series A Excess Preferred for the benefit of the Charitable Beneficiary.
(vii) Purchase Rights in Series A Excess Preferred. Notwithstanding
the provisions of Section 8(k)(v), shares of Series A Excess Preferred shall
be deemed to have been offered for sale to the Corporation, or its designee,
at a price per share equal to the lesser of (i) the price per share in the
transaction that required the issuance of such Series A Excess Preferred (or,
if the Transfer or other event that resulted in the issuance of Series A
Excess Preferred was not a transaction in which the Purported Beneficial
Transferee gave full value for such Series A Excess Preferred, a price per
share equal to the Market Price on the date of the purported Transfer or other
event that resulted in the issuance of Series A Excess Preferred) and (ii) the
Market Price on the date the Corporation, or its designee, accepts such offer.
The Corporation shall have the right to accept such offer for a period of
ninety (90) days after the later of (i) the date of the Transfer or other
event which resulted in the issuance of such shares of Series A Excess
Preferred and (ii) the date the Board of Directors determines in good faith
that a Transfer or other event resulting in the issuance of shares of Series A
Excess Preferred has occurred, if the Corporation does not receive a notice of
such Transfer or other event pursuant to Section 8(d). The Corporation may
appoint a special trustee of the Trust for the purpose of consummating the
purchase of Series A Excess Preferred by the Corporation. In the event that
the Corporation's actions cause a reduction in the number of shares of Series
A Preferred outstanding and such reduction results in the issuance of Series A
Excess Preferred, the Corporation is required to exercise its option to
repurchase such shares of Series A Excess Preferred if the Beneficial Owner
notifies the Corporation that it is unable to sell its rights to such Series A
Excess Preferred.
(l) Settlement. Nothing in this Section 8 shall preclude the settlement
of any transaction entered into through facilities of the NYSE.
(9) Definitions.
"Acquire". The term "Acquire" shall mean the acquisition of Beneficial
Ownership or Constructive Ownership of shares of Preferred Equity Stock by any
means including, without limitation, a Transfer, the exercise of or right to
exercise any rights under any option, warrant, convertible security, pledge or
other security interest or similar right to acquire shares, but shall not
include the acquisition of any such rights unless, as a result, the acquiror
would be considered a Beneficial Owner or Constructive Owner, as defined below
and shall not include Beneficial Ownership or Constructive Ownership that does
not result from an acquisition. The term "Acquisition" shall have the
correlative meaning.
"Aggregate Stock Ownership Limit". The term "Aggregate Stock Ownership
Limit" shall mean not more than 9% in value of the aggregate of the
outstanding shares of Capital Stock. The number and value of shares of the
outstanding shares of Capital Stock shall be determined by the Board of
Directors of the Corporation in good faith, which determination shall be
conclusive for all purposes thereof.
"Beneficial Ownership". The term "Beneficial Ownership" shall mean
ownership of Series A Preferred or Series A Excess Preferred by a Person who
is or would be treated as an owner of such Series A Preferred or Series A
Excess Preferred either directly or constructively through the application of
Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code. The
terms "Beneficial Owner," "Beneficially Owns" and "Beneficially Owned" shall
have the correlative meanings.
"Business Day". The term "Business Day" shall mean any day, other than a
Saturday or Sunday, that is neither a legal holiday nor a day on which banking
institutions in The City of New York are authorized or required by law,
regulation or executive order to close.
"Capital Stock". The term "Capital Stock" shall mean all classes of
series of stock of the Corporation, including, without limitation, Common
Equity and Preferred Equity Stock.
"Charitable Beneficiary". The term "Charitable Beneficiary" shall mean a
beneficiary of the Trust as determined pursuant to Section 8(k).
"Common Equity". The term "Common Equity" shall mean all shares now or
hereafter authorized of any class of common stock of the Corporation,
including the Common Stock, and any other stock of the Corporation, howsoever
designated, authorized after the Initial Issue Date, which has the right
(subject always to prior rights of any class or series of preferred stock) to
participate in the distribution of the assets and earnings of the Corporation
without limit as to per share amount.
"Constructive Ownership". The term "Constructive Ownership" shall mean
ownership of Series A Preferred or Series A Excess Preferred by a Person who
is or would be treated as an owner of such Series A Preferred or Series A
Excess Preferred either directly or constructively through the application of
Section 318 of the Code, as modified by Section 856(d)(5) of the Code. The
terms "Constructive Owner," "Constructively Owns" and "Constructively Owned"
shall have the correlative meanings.
"Current Market Price" of publicly traded Common Stock or any other
equity security of the Corporation or any other issuer for any day shall mean
the last reported sales price, regular way, on such day, or, if no sale takes
place on such day, the average of the reported closing bid and asked prices on
such day, regular way, in either case as reported on the NYSE or, if such
security is not listed or admitted for trading on the NYSE, on the principal
national securities exchange on which such security is listed or admitted for
trading or, if not listed or admitted for trading on any national securities
exchange, on the Nasdaq National Market or, if such security is not quoted on
the Nasdaq National Market, the average of the closing bid and asked prices on
such day in the over-the-counter market as reported by Nasdaq or, if bid and
asked prices for such security on such day shall not have been reported
through Nasdaq the average of the bid and asked prices on such day as
furnished by any NYSE member firm regularly making a market in such security
selected for such purpose by the Corporation's Chief Executive Officer or the
Board of Directors of the Corporation.
"Fair Market Value" shall mean the average of the daily Current Market
Prices per share of Common Stock during the five consecutive Trading Days
selected by the Corporation commencing not more than 20 Trading Days before,
and ending not later than, the earlier of the day in question and the day
before the "ex" date with respect to the issuance or distribution requiring
such computation. The term "ex-date", when used with respect to any issuance
or distribution, means the first day on which the shares of Common Stock trade
regular way, without the right to receive such issuance or distribution, on
the exchange or in the market, as the case may be, for purposes of determining
that day's Current Market Price.
"IRS". The term "IRS" shall mean the United States Internal Revenue
Service.
"Market Price". The term "Market Price" as to any date shall mean the
average of the last sales price reported on the NYSE of Series A Preferred, on
the ten trading days immediately preceding the relevant date, or if not then
traded on the NYSE, the average of the last reported sales price of the Series
A Preferred on the ten trading days immediately preceding the relevant date as
reported on any exchange or quotation system over which the Series A Preferred
may be traded, of it not then traded over any exchange or quotation system,
then the market price of the Series A Preferred on the relevant date as
determined in good faith by the Board of Directors.
"Ownership Limit". The term "Ownership Limit" shall mean not more than
20% (in value or in number of shares, whichever is more restrictive) of the
aggregate of the outstanding shares of Preferred Equity Stock. The number and
value of outstanding shares of Series A Preferred of the Corporation shall be
determined by the Board of Directors of the Corporation in good faith, which
determination shall be conclusive for all purposes hereof.
"Permitted Common Stock Cash Distributions" shall mean those cumulative
cash distributions paid with respect to the Common Stock after March 31, 1998,
which are not in excess of the following: the sum of (i) the Corporation's
cumulative undistributable funds from operations ("FFO"), as determined by the
Board of Directors of the Corporation, at March 31, 1998 plus (ii) the
cumulative amount of FFO, as determined by the Board of Directors of the
Corporation, after March 31, 1998 minus (iii) the cumulative amount of
distributions accumulated or paid on any other Preferred Stock after the Issue
Date.
"Person". The term "Person" shall mean an individual, corporation,
partnership, estate, trust (including a trust qualified under Section 401(a)
or 501(c)(17) of the Code), a portion of a trust permanently set aside for or
to be used exclusively for the purposes described in Section 642(c) of the
Code, association, private foundation within the meaning of Section 509(a) of
the Code, joint stock company or other entity, and also includes a group as
that term is used for purposes of Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended; but does not include an underwriter which
participates in a public offering of the Series A Preferred or any interest
therein, provided that such ownership by such underwriter would not result in
the Corporation being "closely held" within the meaning of Section 856(h) of
the Code, or otherwise result in the Corporation failing to qualify as a REIT.
"Preferred Equity Stock." The term "Preferred Equity Stock" shall mean
shares of stock that are either Series A Preferred or Series A Excess
Preferred.
"Purported Beneficial Transferee." The term "Purported Beneficial
Transferee" shall mean, with respect to any purported Transfer which results
in Series A Excess Preferred, the purported beneficial transferee or owner for
whom the Purported Record Transferee would have acquired or owned shares of
Series A Preferred if such Transfer had been valid under Section 8(a) below.
"Purported Record Transferee". The term "Purported Record Transferee"
shall mean, with respect to any purported Transfer which results in Series A
Excess Preferred Stock, the record holder of the Preferred Equity Stock if
such Transfer had been valid under Section 8(a) below.
"Trading Day" shall mean any day on which the securities in question are
traded on the NYSE or, if such securities are not listed or admitted for
trading on the NYSE, on the principal national securities exchange on which
such securities are listed or admitted or, if not listed or admitted for
trading on any national securities exchange, on the Nasdaq National Market or,
if such securities are not quoted on the Nasdaq National Market, in the
applicable securities market in which the securities are traded.
"Transfer". The term "Transfer" shall mean any sale, transfer, gift,
assignment, devise or other disposition of Preferred Equity Stock, including
(i) the granting of any option or entering into any agreement for the sale,
transfer or other disposition of Preferred Equity Stock or (ii) the sale,
transfer, assignment or other disposition of any securities (or rights
convertible into or exchangeable for Preferred Equity Stock), whether
voluntary or involuntary, whether of record or beneficially or Beneficially or
Constructively Owned (including but not limited to Transfers of interests in
other entities which result in changes in Beneficial or Constructive Ownership
of Preferred Equity Stock), and whether by operation of law or otherwise. The
term "Transferring" and "Transferred" shall have the correlative meanings.
"Transfer Agent" means American Stock Transfer & Trust Company, or such
other agent or agents of the Corporation as may be designated by the Board of
Directors of the Corporation or its designee as the transfer agent for the
Series A Preferred.
"Trust". The term "Trust" shall mean the trust created pursuant to
Section 8(k).
"Trustee". The term "Trustee" shall mean the Person that is appointed by
the Corporation pursuant to Section 8(k) to serve as trustee of the Trust, and
any successor thereto.
(10) Any determination by the Board of Directors pursuant to the terms of the
Series A Preferred shall be final and binding upon the holders thereof and
shall be conclusive for all purposes.
Third : The Shares have been classified and designated by the Board of
Directors under the authority contained in the Charter.
Fourth : These Articles Supplementary have been approved by the Board of
Directors in the manner and by the vote required by law.
Fifth : These Articles Supplementary shall be effective at the time the State
Department of Assessments and Taxation of Maryland accepts these Articles
Supplementary for record.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, RECKSON ASSOCIATES REALTY CORP. has caused these
presents to be signed in its name and on its behalf by its President and Chief
Executive Officer and its corporate seal to be hereunto affixed and attested
by its Secretary, and the said officers of the Corporation further acknowledge
said instrument to be the corporate act of the Corporation, and state under
the penalties of perjury that, to the best of their knowledge, information and
belief, the matters and facts therein set forth with respect to approval are
true in all material respects.
RECKSON ASSOCIATES REALTY CORP.
By: /s/ Scott H. Rechler
-------------------------------------
Scott H. Rechler,
President and Chief Executive Officer
[SEAL]
ATTEST:
/s/ Gregg Rechler
------------------------
Gregg Rechler, Secretary
Exhibit 4.1
NUMBER RAP _____ SHARES
a Corporation Formed Under the Laws
of the State of Maryland
CUSIP ______
RECKSON ASSOCIATES REALTY CORP.
THIS CERTIFIES THAT
_______________________________________________________________
IS THE OWNER OF
FULLY PAID AND NONASSESSABLE SHARES OF 7-5/8% SERIES A CONVERTIBLE CUMULATIVE
PREFERRED STOCK, LIQUIDATION PREFERENCE $25.00 PER SHARE, $.01 PAR VALUE PER
SHARE, OF
RECKSON ASSOCIATES REALTY CORP. (the "Corporation") transferable on the books of
the Corporation by the holder hereof in person or by its duly authorized
attorney, upon surrender of this Certificate properly endorsed. This Certificate
and the shares represented hereby are issued and shall be held subject to all of
the provisions of the charter of the Corporation (the "Charter") and the Bylaws
of the Corporation and any amendments thereto. This Certificate is not valid
unless countersigned and requested by the Transfer Agent and Registrar.
In Witness Whereof, the Corporation has caused this Certificate to be executed
on its behalf by its duly authorized officers.
Dated:
SEE REVERSE FOR CERTAIN
DEFINITIONS AND RESTRICTIONS [SEAL]
Countersigned and Registered:
______________________________
AMERICAN STOCK TRANSFER & TRUST COMPANY President
Transfer Agent and Registrar
By: ______________________________ ______________________________
Authorized Signature Executive Vice President
<PAGE>
IMPORTANT NOTICE
The Corporation will furnish to any stockholder, on request and without
charge, a full statement of the information required by Section 2-211(b) of the
Corporations and Associations Article of the Annotated Code of Maryland with
respect to the designations and any preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends and other
distributions, qualifications, and terms and conditions of redemption of the
stock of each class which the Corporation has authority to issue and, if the
Corporation is authorized to issue any preferred or special class in series, (i)
the differences in the relative rights and preferences between the shares of
each series to the extent set, and (ii) the authority of the Board of Directors
to set such rights and preferences of subsequent series. The foregoing summary
does not purport to be complete and is subject to and qualified in its entirety
by reference to the charter of the Corporation including all amendments and
supplements thereto (the "Charter"), a copy of which will be sent without charge
to each stockholder who so requests. Such request must be made to the Secretary
of the Corporation at its principal office or to the Transfer Agent.
The securities represented by this certificate are subject to
restrictions on ownership and transfer for the purpose of the Corporation's
maintenance of its status as a real estate investment trust under the Internal
Revenue Code of 1986, as amended. Except as otherwise provided pursuant to the
Charter of the Corporation, no person may (i) Acquire any shares of Series A
Preferred Stock, if, as a result of such Acquisition, such Person shall
Beneficially Own or Constructively Own shares of Series A Preferred Stock in
excess of 20% of the outstanding Series A Preferred Stock of the Corporation or
(ii) Beneficially Own or Constructively Own any shares of Series A Preferred
Stock such that such Person would Beneficially Own or Constructively Own Capital
Stock in excess of 9%in value of the aggregate of the outstanding shares of
Capital Stock of the Corporation. Any Person who Acquires or attempts to Acquire
or Beneficially Owns or Constructively Owns shares of Series A preferred Stock
in excess of the aforementioned limitations, or any Person who is or attempts to
become a transferee such that Series A Excess Preferred Stock would result under
the provisions of the Charter, shall immediately give written notice or, in the
event of a proposed or attempted Transfer, give at least 15 days prior written
notice to the Corporation of such event and shall provide to the Corporation
such other information as it may request in order to determine the effect of any
such Transfer on the corporation's status as a REIT. All capitalized terms in
this legend have the meanings defined in the Charter of the Corporation, a copy
of which, including the restrictions on transfer, will be sent to any
stockholder on request and without charge. Transfers in violation of the
restrictions described above shall be void ab initio. If the restrictions on
ownership and transfer are violated, the securities represented hereby will be
designated and treated as shares of Series A Excess Preferred Stock which will
be held in trust by the Corporation. The foregoing summary does not purport to
be complete and is subject to and qualified in its entirety by reference to the
Charter, a copy of which, including the restrictions on transfer, will be sent
without charge to each stockholder who so requests. Such request must be made to
the Secretary of the Corporation at its principal office or to the Transfer
Agent.
----------
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN OR
DESTROYED, THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS
A CONDITION TO THE ISSUANCE OF A REPLACEMENT CERTIFICATE.
----------
The following abbreviations, when used in the inscription on the face
of this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM--as tenants in common UNIF GIFT MIN ACT--______ Custodian _____
TEN ENT--as tenants by the (Cust) (Minor)
entireties under Uniform Gifts to Minors Act of ______
JT TEN-- as joint tenants with (State)
right of survivorship
and not as tenants
in common
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, _______________________ HEREBY SELL, ASSIGN AND TRANSFER
UNTO
Please insert social security or other identifying number of assignee
- -----------------------------------------------
- -----------------------------------------------
- --------------------------------------------------------------------------------
(Please Print or Typewrite Name and Address, Including Zip Code, of Assignee)
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________SHARES
OF CAPITAL STOCK OF THE CORPORATION REPRESENTED BY THIS CERTIFICATE AND DO
HEREBY IRREVOCABLY CONSTITUTE AND APPOINT
_____________________________________________________________________ATTORNEY TO
TRANSFER THE SAID SHARES OF CAPITAL STOCK ON THE BOOKS OF THE CORPORATION WITH
THE POWER OF SUBSTITUTION IN THE PREMISES.
Dated _____________________________ ________________________________________
NOTICE: The Signature To This Assignment
Must Correspond With The Name As Written
Upon The Face Of The Certificate In
Every Particular, Without Alteration Or
Enlargement Or Any Change Whatsoever.
<PAGE>
Exhibit 10.1
SUPPLEMENT TO THE AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
RECKSON OPERATING PARTNERSHIP, L.P.
ESTABLISHING
SERIES A PREFERRED UNITS
OF
LIMITED PARTNERSHIP INTEREST
In accordance with Sections 4.2 and 14.1 B(3) of the Amended and Restated
Agreement of Limited Partnership, dated as of June 2, 1995, as amended on
December 6, 1995 (the "Partnership Agreement"), the Partnership Agreement is
hereby supplemented to establish a series of 9,200,000 preferred units of
limited partnership interest of Reckson Operating Partnership, L.P. (the
"Partnership") (including up to 1,200,000 preferred units which may be issued
in connection with an underwriters' over-allotment option in respect of an
identical number of shares of Series A Preferred Stock (as defined below))
which shall be designated "Series A Preferred Units" having the rights,
preferences, powers, privileges and restrictions, qualifications and
limitations granted to or imposed upon the 7-5/8% Series A Convertible
Cumulative Preferred Stock issued by Reckson Associates Realty Corp. (the
"Company") (the "Series A Preferred Stock") (referred to hereinafter sometimes
as the "Designations") as set forth below and which shall be issued to the
Company. Capitalized terms used and not otherwise defined herein shall have
the meanings set forth in the Partnership Agreement.
WHEREAS, the Company has issued 8 million shares of Series A Preferred
Stock and may issue an additional 1.2 million shares of Series A Preferred
Stock in connection with an underwriters' over-allotment option;
WHEREAS, the Company made a Capital Contribution to the Partnership in an
amount equal to the proceeds raised in connection with the issuance of the
Series A Preferred Stock; and
WHEREAS, pursuant to Section 4.2 of the Partnership Agreement, the
Partnership desires to issue additional Partnership Units to the Company with
substantially similar designations, preferences and other rights to the Series
A Preferred Stock.
NOW THEREFORE, in consideration of the mutual covenants contained herein,
and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
Section 1. Issuance of Series A Preferred Units
Pursuant to Section 4.2 of the Partnership Agreement, the Partnership
hereby issues 9,200,000 additional Partnership Interests (the "Series A
Preferred Units") to the Company. The Series A Preferred Units will have
substantially the same designations, preferences and other rights of the
Series A Preferred Stock, as specified in this amendment and in Exhibit I. In
consideration for the issuance of the Series A Preferred Units, the Company
has made a Capital Contribution to the Partnership in an amount equal to the
proceeds raised in connection with the issuance of the Series A Preferred
Stock.
Section 2. Amendment to Partnership Agreement
Pursuant to Section 14.1.B(3) of the Partnership Agreement, the General
Partner, as general partner of the Partnership and as attorney-in-fact for its
Limited Partners, hereby amends the Partnership Agreement as follows:
(a) Article 1 of the Partnership Agreement is hereby amended by adding
the following definition of "Series A Preferred Units":
"Series A Preferred Units" means the units of limited partnership
interest issued to the Company on April 13, 1998, and any subsequent date, if
any, upon which the underwriters' over-allotment option is exercised, in
connection with the issuance of the Series A Preferred Stock by the Company
and the contribution of the net proceeds therefrom to the Partnership.
(b) Section 5.1 of the Partnership Agreement is deleted and replaced in
its entirety with the following:
Section 5.1 Requirement and Characterization of Distributions
(a) The General Partner shall distribute at least quarterly an amount
equal to 100% of Available Cash generated by the Partnership during such
quarter or shorter period to the Partners who are Partners on the Partnership
Record Date with respect to such quarter or shorter period (i) first, to the
holders of Series A Preferred Units and to all holders of other Preferred
Units that are pari passu with Series A Preferred Units (in proportion to the
amount of distributions authorized and payable with respect to the Series A
Preferred Units or other pari passu Preferred Units owned by them), an amount
that in the aggregate equals the aggregate amount of the distributions
authorized and payable with respect to the Series A Preferred Units and such
other Preferred Units, as the case maybe, for such quarter or shorter period;
and (ii) second, to the Partners in accordance with their respective
Percentage Interests on such Partnership Record Date; provided that in no
event may a Partner receive a distribution of Available Cash with respect to a
Partnership Unit if such Partner is entitled to receive a distribution out of
such Available Cash with respect to a REIT Share for which such Partnership
Unit has been exchanged; and further provided that no distributions shall be
made pursuant to clause (ii) above unless all cumulative distributions with
respect to the Series A Preferred Units and other pari passu Preferred Units
for all past periods and the then current period have been or
contemporaneously are (x) authorized and paid in full or (y) authorized and a
sum sufficient for the full payment thereof is set apart for such payment. The
General Partner shall take such reasonable efforts, as determined by it in its
sole and absolute discretion and consistent with the Company's qualification
as a REIT, to distribute Available Cash to the Limited Partners so as to
preclude any such distribution or portion thereof from being treated as part
of a sale of property to the Partnership by a Limited Partner under Section
707 of the Code or the Regulations thereunder; provided that the General
Partner and the Partnership shall not have liability to a Limited Partner
under any circumstances as a result of any distribution to a Limited Partner
being so treated.
(b) Notwithstanding anything to the contrary above, the Partnership shall
cause to be distributed to the Company an amount equal to the aggregate amount
necessary to redeem any Series A Preferred Stock or other series of redeemable
Preferred Stock issued by the Company which has been called for redemption by
the Company, at such time as is necessary to facilitate any such redemption.
Such distribution will cause a redemption of a like number of Series A
Preferred Units or other series of Preferred Units, as the case may be.
(c) Section 6.1.A of the Partnership Agreement is deleted and replaced in
its entirety with the following:
A. After giving effect to the special allocations set forth in
Section 1 of Exhibit C attached hereto, Net Income shall be allocated (i)
first, to the General Partner to the extent that Net Losses previously
allocated to the General Partner pursuant to clause (iii) of Section 6.1.B
exceed Net Income previously allocated to the General Partner pursuant to this
clause (i) of Section 6.1.A; (ii) second, to the holders of Series A Preferred
Units and to all holders of other Preferred Units that are pari passu with
Series A Preferred Units, to the extent that Net Losses previously allocated
to such holders pursuant to clause (ii) of Section 6.1B exceed Net Income
previously allocated to them pursuant to this clause (ii) of Section 6.1A, pro
rata in accordance with the amounts necessary to reverse such previous
allocations of Net Losses; (iii) third, to the holders of Series A Preferred
Units and to all holders of other Preferred Units that are pari passu with
Series A Preferred Units, until the aggregate amount of Net Income allocated
pursuant to this clause (iii) of Section 6.1A from the inception of the term
of the Partnership equals the aggregate amount distributed to all such holders
pursuant to clause (i) of Section 5.1(a) or the corresponding provisions of
the supplement or amendment to the Partnership Agreement governing such other
Preferred Units, from the inception of the term of the Partnership, pro rata
in accordance with the amounts necessary to fully allocate to each such holder
the maximum amount allocable to such holder for such year (or other period)
under this clause (iii), and (iv) thereafter, to the Partners in accordance
with their respective Percentage Interests.
(d) Section 6.1B of the Partnership Agreement is deleted and replaced in
its entirety with the following:
B. After giving effect to the special allocations set forth in
Section 1 of Exhibit C attached hereto, Net Losses shall be allocated (i)
first, to the Partners in accordance with their respective Percentage
Interests, until each Partner's Adjusted Capital Account balance has been
reduced to zero, excluding, for this purpose, the portion of any such Adjusted
Capital Account balance attributable to Capital Contributions made with
respect to Preferred Units (or attributable to allocations of income under
clause (ii) of Section 6.1A); (ii) second, to Partners holding Series A
Preferred Units and to all holders of other Preferred Units that are pari
passu with Series A Preferred Units, pro rata in accordance with their
Adjusted Capital Account balances, until their Adjusted Capital Account
balances have been reduced to zero; and (iii) thereafter, 100% to the General
Partner.
(e) Section 8.5 of the Partnership Agreement is amended by adding
subsection D thereto as follows:
D. In connection with a redemption by the Company of any or all of
the Series A Preferred Stock or any other series of redeemable Preferred Stock
issued by the Company, the General Partner shall have the right to cause the
Partnership to redeem all or a portion of the Series A Preferred Units or
other series of Preferred Units, as the case may be, that the Company holds,
and such redemption proceeds shall be distributed to the Company pursuant to
the provisions of Section 5.1(b).
(f) Section 13.2.A of the Partnership Agreement is amended by
redesignating subparagraph (4) as subparagraph (5) and inserting new
subparagraph (4) as follows:
(4) To the Partners holding Series A Preferred Units or other
Preferred Units that are pari passu with the Series A Preferred
Units, an amount equal to the aggregate liquidation preference
with respect to such Series A Preferred Units and other
Preferred Units, plus any accrued but unpaid distributions with
respect to such Series A Preferred Units or other Preferred
Units (such amounts paid with respect to accrued distributions
to be treated, for purposes of Section 6.1A, as if they were
distributions made pursuant to clause (i) of Section 5.1(a)),
pro rata in accordance with the aggregate liquidation
preference plus accrued distributions of such Preferred Units
held by each such Partner; and
Section 3. Continuation of Partnership Agreement
The Partnership Agreement and this Amendment shall be read together and
shall have the same force and effect as if the provisions of the Partnership
Agreement and this Amendment were contained in one document. Any provisions of
the Partnership Agreement not amended by this Amendment shall remain in full
force and effect as provided in the Partnership Agreement immediately prior to
the date hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Supplement to
the Partnership Agreement as of the 13th day of April, 1998.
GENERAL PARTNER:
RECKSON ASSOCIATES REALTY CORP.
By: /s/ Gregg Rechler
--------------------------------------------
Name:
Title:
EXISTING LIMITED PARTNERS:
By: Reckson Associates Realty Corp.,
as Attorney-in-Fact for the Limited Partners
By: /s/ Gregg Rechler
---------------------------------------
Name:
Title:
Series A Preferred Unit Holder
RECKSON ASSOCIATES REALTY CORP.
By: /s/ Gregg Rechler
--------------------------------------------
Name:
Title:
<PAGE>
EXHIBIT I
RECKSON OPERATING PARTNERSHIP, L.P.
DESIGNATION OF THE VOTING POWERS, DESIGNATIONS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS AND
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS
OF THE SERIES A PREFERRED PARTNERSHIP UNITS
The following are the terms of the Series A Preferred Partnership Units
established pursuant to this Amendment:
(a) Number. The maximum number of authorized Series A Preferred
Partnership Units (the "Series A Preferred Units") shall be 9,200,000.
Rank. The Series A Preferred Units will, with respect to
distribution rights and rights upon liquidation, dissolution or
winding up of the Operating Partnership, rank: (a) senior to all
classes or series of common units of the Operating Partnership
("Common Units") and to all equity securities issued by the
Operating Partnership the terms of which provide that such equity
securities shall rank junior to such Series A Preferred Units;
(b) on a parity with all equity securities issued by the
Operating Partnership other than those referred to in clauses (a)
and (c); and (c) junior to all equity securities issued by the
Operating Partnership that rank senior to the Series A Preferred
Units in accordance with Section 6(d). The term "equity
securities" shall not include convertible debt securities.
Distributions.
(i) Holders of the shares of Series A Preferred Units shall be
entitled to receive, when and as authorized by the General Partner, out
of funds legally available for the payment of distributions, cumulative
cash distributions at the rate of 7-5/8% per annum of the liquidation
preference per unit (equivalent to $1.90625 per annum per Series A
Preferred Unit). Distributions on the Series A Preferred Units shall be
cumulative from the date of original issue and shall be payable quarterly
in arrears on January 31, April 30, July 31 and October 31 of each year
or, if not a business day, the next succeeding business day, commencing
July 31, 1998 (each, a "Distribution Payment Date"). Any distribution
payable on the Series A Preferred Units for a partial distribution period
will be computed on the basis of a 360-day year consisting of twelve
30-day months. Distributions will be payable to holders of record as they
appear in the records of the Operating Partnership at the close of
business on the applicable record date, which shall be such date
designated by the General Partner of the Operating Partnership for the
payment of distributions that is not more than 30 nor less than 10 days
prior to such Distribution Payment Date (each, a "Distribution Payment
Record Date").
(ii) No distributions on the Series A Preferred Units shall be
authorized by the General Partner of the Operating Partnership or be paid
or set apart for payment by the Operating Partnership at such time as the
terms and provisions of any agreement of the Operating Partnership,
including any agreement relating to its indebtedness, prohibits such
authorization, payment or setting apart for payment or provides that such
authorization, payment or setting apart for payment would constitute a
breach thereof or a default thereunder, or if such authorization or
payment shall be restricted or prohibited by law.
(iii) Distributions on the Series A Preferred Units will accumulate
whether or not the Operating Partnership has earnings, whether or not
there are funds legally available for the payment of such distributions
and whether or not such distributions are authorized. Accumulated but
unpaid distributions on the Series A Preferred Units will not bear
interest and holders of the Series A Preferred Units will not be entitled
to any distributions in excess of full cumulative distributions as
described above.
(iv) No full distributions will be authorized or paid or set apart
for payment on any equity securities of the Operating Partnership
ranking, as to distributions, on a parity with or junior to the Series A
Preferred Units for any period unless full distributions have been or
contemporaneously are authorized and paid or authorized and a sum
sufficient for the payment thereof is set apart for such payment on the
Series A Preferred Units for all past distribution periods and the then
current distribution period. When distributions are not paid in full or a
sum sufficient for such full payment is not so set apart upon the Series
A Preferred Units and the other equity securities of the Operating
Partnership ranking on a parity as to distributions with the Series A
Preferred Units, all distributions authorized upon the Series A Preferred
Units and any other equity securities of the Operating Partnership
ranking on a parity as to distributions with the Series A Preferred Units
shall be authorized pro rata so that the amount of distributions
authorized per Series A Preferred Unit and such other equity securities
shall in all cases bear to each other the same ratio that accumulated
distributions per Series A Preferred Unit and such other equity
securities (which shall not include any accumulation in respect of unpaid
distributions for prior distribution periods if such equity securities do
not have cumulative distributions) bear to each other. No interest, or
sum of money in lieu of interest, shall be payable in respect of any
distribution payment or payments on Series A Preferred Units which may be
in arrears.
(v) Except as provided in Section 3(d), unless full distributions on
the Series A Preferred Units have been or contemporaneously are
authorized and paid or authorized and a sum sufficient for the payment
thereof is set apart for payment for all past distribution periods and
the then current distribution period, no distributions (other than in
common units or other equity securities of the Operating Partnership
ranking junior to the Series A Preferred Units as to distributions and
upon liquidation) shall be authorized or paid or set aside for payment or
other distribution shall be authorized or made upon the Common Units or
any other equity securities of the Operating Partnership ranking junior
to or on a parity with the Series A Preferred Units as to distributions
or upon liquidation, nor shall any common units or any other equity
securities of the Operating Partnership ranking junior to or on a parity
with the Series A Preferred Units as to distributions or upon liquidation
be redeemed, purchased or otherwise acquired for any consideration (or
any moneys be paid to or made available for a sinking fund for the
redemption of any such units) by the Operating Partnership (except by
conversion into or exchange for other units of the Operating Partnership
ranking junior to the Series A Preferred Units as to distributions and
upon liquidation).
(vi) Any distribution payment made on Series A Preferred Units shall
first be credited against the earliest accumulated but unpaid
distribution due with respect to such units which remains payable.
(b) Liquidation Preference.
(i) Upon any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Operating Partnership (referred to
herein as a "liquidation"), the holders of the Series A Preferred Units
will be entitled to be paid out of the assets of the Operating
Partnership legally available for distribution to its unitholders
liquidating distributions, in cash or property at its fair market value
as determined by the Operating Partnership's General Partner, in the
amount of a liquidation preference of $25.00 per Unit, plus an amount
equal to any accumulated and unpaid distributions to the date of such
liquidation, before any distribution or payment is made to holders of
Common Units or any other equity securities of the Operating Partnership
ranking junior to the Series A Preferred Units as to the distribution of
assets upon a liquidation. After payment of the full amount of the
liquidating distributions to which they are entitled, the holders of
Series A Preferred Units will have no right or claim to any of the
remaining assets of the Operating Partnership.
(ii) In the event that, upon any liquidation of the Operating
Partnership, the available assets of the Operating Partnership are
insufficient to pay the amount of the liquidating distributions on all
outstanding Series A Preferred Units and the corresponding amounts
payable on all other equity securities of the Operating Partnership
ranking on a parity with Series A Preferred Units in the distribution of
assets upon a liquidation, then the holders of Series A Preferred Units
and all other such equity securities shall share ratably in any such
distribution of assets in proportion to the full liquidating
distributions to which they would otherwise be respectively entitled.
(iii) The consolidation or merger of the Operating Partnership with
or into any other entity, or the merger of another entity with or into
the Operating Partnership, or a statutory unit exchange by the Operating
Partnership, or the sale, lease or conveyance of all or substantially all
of the property or business of the Operating Partnership, shall not be
deemed to constitute a liquidation of the Operating Partnership.
(iv) The liquidation preference of the outstanding Series A
Preferred Units will not be added to the liabilities of the Operating
Partnership for the purpose of determining whether under the Delaware
Revised Uniform Limited Partnership Act a distribution may be made to
unitholders of the Operating Partnership whose preferential rights upon
dissolution of the Operating Partnership are junior to those of holders
of Series A Preferred Units.
(c) Redemption.
(i) The Operating Partnership shall redeem the Series A Preferred
Units, in such a number and at such time as Series A Preferred Stock is
redeemed by the Company, at the following redemption prices per unit if
redeemed during the twelve-month period beginning April 13 of the
applicable year, plus all accumulated and unpaid distributions thereon to
the date fixed for redemption of the Series A Preferred Stock.
Year Redemption Price Per Unit
---- -------------------------
2003................................... $25.95313
2004................................... 25.76250
2005................................... 25.57187
2006................................... 25.38124
2007................................... 25.19061
2008 and thereafter.................... 25.00
(ii) The Operating Partnership may not exercise its option to redeem
Series A Preferred Units unless the redemption price (other than the
portion thereof consisting of accumulated and unpaid distributions) is
paid solely out of the sale proceeds of equity securities of the
Operating Partnership, and from no other source. For purposes of the
preceding sentence, "equity securities" means limited partner interests
or other equity securities of the Operating Partnership, or any shares,
interest, participation or other ownership interests (however
designated), or any rights or options to purchase any of the foregoing
(other than debt securities convertible into or exchangeable for equity
securities).
(iii) At its election, the Operating Partnership, prior to the
Series A Preferred Unit Redemption Date, may irrevocably deposit the
redemption price (including accumulated and unpaid distributions) of the
Series A Preferred Units so called for redemption in trust for the
holders thereof with a bank or trust company, in which case the notice of
redemption to holders of the Series A Preferred Units to be redeemed will
(i) state the date of such deposit, (ii) specify the office of such bank
or trust company as the place of payment of the redemption price and
(iii) require such holders to surrender the certificates representing
such Series A Preferred Units at such place on or about the date fixed in
such redemption notice (which may not be later than the Series A
Preferred Unit Redemption Date) against payment of the redemption price
(including all accumulated and unpaid distributions to the Series A
Preferred Unit Redemption Date). Any moneys so deposited which remain
unclaimed by the holders of the Series A Preferred Units at the end of
two years after the Series A Preferred Unit Redemption Date will be
returned by such bank or trust company to the Operating Partnership.
(iv) From and after the Series A Preferred Unit Redemption Date
(unless the Operating Partnership defaults in payment of the redemption
price), all distributions on the Series A Preferred Units called for
redemption will cease to accumulate and all rights of the holders
thereof, except the right to receive the redemption price thereof
(including all accumulated and unpaid distributions to the Series A
Preferred Unit Redemption Date), will cease and terminate and such units
will not thereafter be transferred (except with the consent of the
Operating Partnership) on the Operating Partnership's records, and such
units shall not be deemed to be outstanding for any purpose whatsoever.
(v) Unless full distributions on all Series A Preferred Units shall
have been or contemporaneously are authorized and paid or authorized and
a sum sufficient for the payment thereof is set apart for payment for all
past distribution periods and the then current distribution period, no
Series A Preferred Units shall be redeemed unless all outstanding Series
A Preferred Units are simultaneously redeemed.
(vi) Unless full distributions on all Series A Preferred Units have
been or contemporaneously are authorized and paid or authorized and a sum
sufficient for the payment thereof is set apart for payment for all past
distribution periods and the then current distribution period, the
Operating Partnership shall not purchase or otherwise acquire, directly
or indirectly, any Series A Preferred Units (except by conversion into or
exchange for equity securities of the Operating Partnership ranking
junior to the Series A Preferred Units as to distributions and upon
liquidation).
(vii) Immediately prior to any redemption of Series A Preferred
Units, the Operating Partnership shall pay, in cash, any accumulated and
unpaid distributions to the Series A Preferred Unit Redemption Date,
unless such Series A Preferred Unit Redemption Date falls after a
Distribution Payment Record Date and prior to the corresponding
Distribution Payment Date, in which case each holder of Series A
Preferred Units at the close of business on such Distribution Payment
Record Date shall be entitled to the distribution payable on such units
on the corresponding Distribution Payment Date notwithstanding the
redemption of such units on or prior to such Distribution Payment Date.
Except as provided above, the Operating Partnership will make no payment
or allowance for unpaid distributions, whether or not in arrears, on
Series A Preferred Units for which a notice of redemption has been given.
(viii) Any Series A Preferred Units that have been redeemed shall,
after such redemption, have the status of authorized but unissued
Preferred Units, without designation as to series, until such units are
once more designated as part of a particular series by the General
Partner of the Operating Partnership.
(ix) The Series A Preferred Units will not have a stated maturity
date and will not be subject to any sinking fund or mandatory redemption
provisions.
(d) Voting Rights.
(i) Holders of the Series A Preferred Units will not have any voting
rights, except as set forth below. In any matter in which the Series A
Preferred Units are entitled to vote, including any action by written
consent, each Series A Preferred Unit shall be entitled to one vote.
(ii) So long as any Series A Preferred Units remain outstanding, the
Operating Partnership shall not, without the affirmative vote or consent
of the holders of record of at least two-thirds of the outstanding Series
A Preferred Units given in person or by proxy, either in writing or at a
meeting (such series voting separately as a class), (i) authorize or
create, or increase the authorized or issued amount of, any equity
securities ranking senior to the Series A Preferred Units with respect to
payment of distributions or the distribution of assets upon a liquidation
of the Operating Partnership or reclassify any authorized units of the
Operating Partnership into any such equity securities, or create,
authorize or issue any obligation or security convertible into or
evidencing the right to purchase any such unit or (ii) amend, alter or
repeal the provisions of the Operating Partnership Agreement, whether by
merger, consolidation or otherwise (an "Event"), so as to materially and
adversely affect any right, preference, privilege or voting power of the
Series A Preferred Units or the holders thereof; provided, however, that
the holders of the Series A Preferred Units shall not be entitled to any
voting rights in connection with an Event if as a result of such Event
(a) Series A Preferred Units remain outstanding with the terms thereof
materially unchanged or (b) the Operating Partnership is not the
surviving entity but the surviving entity issues to the holders of the
Series A Preferred Units the same number of units of a separate class of
preferred units with rights, preferences, privileges and voting powers
that are materially unchanged from the preferences, rights, privileges
and other terms of the Series A Preferred Units; and provided, further,
that (x) any increase in the amount of the authorized Series A Preferred
Units or the creation or issuance of any other series of Preferred Units
or (y) any increase in the amount of authorized units of such series, in
each case ranking on a parity with or junior to the Series A Preferred
Units with respect to payment of distributions or the distribution of
assets upon a liquidation of the Operating Partnership, shall not be
deemed to materially and adversely affect such rights, preferences,
privileges or voting powers.
(iii) The foregoing voting provisions will not apply if, at or prior
to the time when the act with respect to which such vote would otherwise
be required shall be effected, all outstanding Series A Preferred Units
shall have been converted, redeemed or called for redemption upon proper
notice and sufficient funds shall have been deposited in trust to effect
such redemption.
(e) Conversion.
(i) Subject to Section 8, Series A Preferred Units will be
convertible at any time, at the option of the holders thereof, into
Common Units at a conversion price of $28.61 per Common Unit (equivalent
to a conversion rate of .8738 Common Units for each Series A Preferred
Unit), subject to adjustment as described below (the "Conversion Price");
provided, however, that the right to convert Series A Preferred Units
called for redemption will terminate at the close of business on the
fifth business day prior to the Series A Preferred Unit Redemption Date.
(ii) To exercise the conversion right, the holder of each Series A
Preferred Unit to be converted shall surrender the certificate
representing such Series A Preferred Unit, duly endorsed or assigned to
the Operating Partnership or in blank, at the principal office of the
Operating Partnership accompanied by written notice to the Operating
Partnership that such holder elects to convert such Series A Preferred
Unit. Unless the units issuable on conversion are to be issued in the
same name as the name in which such Series A Preferred Units are
registered, in which case the Operating Partnership shall bear the
related taxes, each share surrendered for conversion shall be accompanied
by instruments of transfer, in form satisfactory to the Operating
Partnership, duly executed by the holder or such holder's duly authorized
attorney and an amount sufficient to pay any transfer or similar tax (or
evidence reasonably satisfactory to the Operating Partnership
demonstrating that such taxes have been paid).
(iii) Each conversion shall be deemed to have been effected
immediately prior to the close of business on the date on which the
certificates representing shares of Series A Preferred Units shall have
been surrendered and such notice (and if applicable, payment of an amount
equal to the distribution payable on such shares) received by the
Operating Partnership as aforesaid, and the person or persons in whose
name or names any certificate or certificates representing Common Units
shall be issuable upon such conversion shall be deemed to have become the
holder or holders of record of the units represented thereby at such time
on such date, and such conversion shall be at the Conversion Price in
effect at such time and on such date unless the records of the Operating
Partnership shall be closed on that date, in which event such person or
persons shall be deemed to have become such holder or holders of record
at the close of business on the next succeeding day on which such records
are open, but such conversion shall be at the Conversion Price in effect
on the date on which such units have been surrendered and such notice
received by the Operating Partnership.
(iv) Holders of Series A Preferred Units at the close of business on
a Distribution Payment Record Date shall be entitled to receive the
distribution payable on such units on the corresponding Distribution
Payment Date notwithstanding the conversion of such units following such
Distribution Payment Record Date and prior to such Distribution Payment
Date. However, certificates representing Series A Preferred Units
surrendered for conversion during the period between the close of
business on any Distribution Payment Record Date and the opening of
business on the corresponding Distribution Payment Date (except units
converted after the issuance of a notice of redemption with respect to
the Series A Preferred Unit Redemption Date during such period or
coinciding with such Distribution Payment Date) must be accompanied by
payment of an amount equal to the distribution payable on the related
shares of Series A Preferred Units on such Distribution Payment Date. A
holder of Series A Preferred Units on a Distribution Payment Record Date
who (or whose transferee) tenders any such units for conversion into
Common Units on such Distribution Payment Date shall receive the
distribution payable by the Operating Partnership on such Series A
Preferred Units on such date, and the converting holder need not include
payment of the amount of such distribution upon surrender of certificates
representing such Series A Preferred Units for conversion. Except as
provided above, the Operating Partnership shall make no payment or
allowance for unpaid distributions, whether or not in arrears, on
converted units or for distribution on the Common Units that is issued
upon such conversion.
As promptly as practicable after the surrender of certificates for
Series A Preferred Units as aforesaid, the Operating Partnership shall issue
and shall deliver at such office to such holder,or on his written order, a
certificate or certificates for the number of full Common Units issuable upon
the conversion of such units in accordance with the provisions of this Section
7, and any fractional interest in respect of a Common Unit arising upon such
conversion shall be settled as provided in Section 7(e).
(v) No fractional Common Units shall be issued upon conversion of
Series A Preferred Units. Instead of any fractional Common Unit that
would otherwise be deliverable upon the conversion of a Series A
Preferred Unit, the Operating Partnership shall pay to the holder of such
unit an amount in cash in respect of such fractional interest based upon
the Current Market Price of a Common Unit on the Trading Day immediately
preceding the date of conversion. If more than one Series A Preferred
Unit shall be surrendered for conversion at one time by the same holder,
the number of full Common Units issuable upon conversion thereof shall be
computed on the basis of the aggregate number of Series A Preferred Units
so surrendered.
(vi) The Conversion Price shall be adjusted from time to time as
follows:
(1) If the Operating Partnership shall after the date on which
Series A Preferred Units are first issued (the "Issue Date") (A) pay
or make a distribution to holders of its equity securities in Common
Units, (B) subdivide its outstanding Common Units into a greater
number of units, (C) combine its outstanding Common Units into a
smaller number of units or (D) issue any equity securities by
reclassification of its Common Units, then the Conversion Price in
effect at the opening of business on the day following the record
date for the determination of unitholders entitled to receive such
distribution or at the opening of business on the day following the
day on which such subdivision, combination or reclassification
becomes effective, as the case may be, shall be adjusted so that the
holder of any Series A Preferred Unit thereafter surrendered for
conversion shall be entitled to receive the number of Common Units
that such holder would have owned or have been entitled to receive
after the happening of any of the events described above had such
units been converted immediately prior to the record date in the
case of a distribution or the effective date in the case of a
subdivision, combination or reclassification. An adjustment made
pursuant to this subsection (i) shall become effective immediately
after the opening of business on the day following such record date
(except as provided in Section 7(i) in the case of a distribution
and shall become effective immediately after the opening of business
on the day next following the effective date in the case of a
subdivision, combination or reclassification.
(2) If the Operating Partnership shall issue after the Issue
Date rights, options or warrants to all holders of Common Units
entitling them to subscribe for or purchase Common Units (or
securities convertible into or exchangeable for Common Units) at a
price per unit less than the Fair Market Value per Common Unit on
the record date for the determination of unitholders entitled to
receive such rights, options or warrants, then the Conversion Price
in effect at the opening of business on the day following such
record date shall be adjusted to equal the price determined by
multiplying (I) the Conversion Price in effect immediately prior to
the opening of business on the day following the record date for
such determination by (II) a fraction, the numerator of which shall
be the sum of (A) the number of Common Units outstanding on the
close of business on the record date for such determination and (B)
the number of units that the aggregate proceeds to the Operating
Partnership from the exercise of such rights, options or warrants
for Common Units would purchase at such Fair Market Value, and the
denominator of which shall be the sum of (A) the number of Common
Units outstanding on the close of business on the record date for
such determination and (B) the number of additional Common Units
offered for subscription or purchase pursuant to such rights,
options or warrants. Such adjustment shall become effective
immediately after the opening of business on the day following such
record date (except as provided in Section 7(i)). In determining
whether any rights, options or warrants entitle the holders of
Common Units to subscribe for or purchase Common Units at less than
the Fair Market Value, there shall be taken into account any
consideration received by the Operating Partnership upon issuance
and upon exercise of such rights, options or warrants, the value of
such consideration, if other than cash, to be determined by the
Operating Partnership's Chief Executive Officer or the General
Partner of the Operating Partnership.
(3) If the Operating Partnership shall distribute to all
holders of its Common Units any equity securities of the Operating
Partnership (other than Common Units) or evidences of its
indebtedness or assets (excluding Permitted Common Unit Cash
Distributions and those rights, options and warrants referred to in
and treated under subsection (ii) above), then the Conversion Price
shall be adjusted so that it shall equal the price determined by
multiplying (I) the Conversion Price in effect immediately prior to
the close of business on the record date for the determination of
unitholders entitled to receive such distribution by (II) a
fraction, the numerator of which shall be the Fair Market Value per
Common Unit on the record date for such determination less the then
fair market value (as determined by the Operating Partnership's
Chief Executive Officer or the General Partner of the Operating
Partnership, whose determination shall be conclusive) of the portion
of the equity securities, evidences of indebtedness or assets so
distributed applicable to one Common Unit, and the denominator of
which shall be the Fair Market Value per Common Unit on the record
date for such determination. Such adjustment shall become effective
immediately at the opening of business on the day following such
record date (except as provided in Section 7(i)). For the purposes
of this subsection (iii), the distribution of equity securities,
evidences of indebtedness or assets which are distributed not only
to the holders of Common Units on the record date for the
determination of unitholders entitled to such distribution, but also
are distributed with each Common Unit delivered to a person
converting a Series A Preferred Unit after such record date, shall
not require an adjustment of the Conversion Price pursuant to this
subsection (iii), provided that on the date, if any, on which a
person converting a Series A Preferred Unit would -------- no longer
be entitled to receive such equity securities, evidences of
indebtedness or assets with a Common Unit (other than as a result of
the termination of all such equity securities, evidences of
indebtedness or assets), a distribution of such equity securities,
evidences of indebtedness or assets shall be deemed to have occurred
and the Conversion Price shall be adjusted as provided in this
subsection (iii) (and such day shall be deemed to be "the record
date for the determination of the unitholders entitled to receive
such distribution" within the meaning of the two preceding
sentences).
(4) Except with respect to any distribution of shares of common
stock of Reckson Service Industries, Inc. as contemplated by the
Operating Partnership on the Issue Date, no adjustment in the
Conversion Price shall be required unless such adjustment would
require a cumulative increase or decrease of at least 1% in the
Conversion Price; provided, however, that any adjustments that by
reason of this subsection (iv) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment
until made; and provided, further, that any adjustment shall be
required and made in accordance with the provisions of this Section
7 (other than this subsection (iv)) not later than such time as may
be required in order to preserve the tax-free nature of a
distribution to the holders of Common Units. Notwithstanding any
other provisions of this Section 7, the Operating Partnership shall
not be required to make any adjustment of the Conversion Price for
the issuance of any Common Units pursuant to any plan providing for
the reinvestment of distributions or interest payable on securities
of the Operating Partnership and the investment of additional
optional amounts in Common Units under such plan. All calculations
under this Section 7 shall be made to the nearest cent with ($.005
being rounded upward) or to the nearest one-tenth of a share (with
.05 of a share being rounded upward), as the case may be. Anything
in this subsection (f) to the contrary notwithstanding, the
Operating Partnership shall be entitled, to the extent permitted by
law, to make such reductions in the Conversion Price, in addition to
those required by this subsection (f), as it in its discretion shall
determine to be advisable in order that any unit distributions,
subdivision, reclassification or combination of units, distribution
of rights, options or warrants to purchase units or securities, or a
distribution of other assets (other than cash distributions)
hereafter made by the Operating Partnership to its unitholders shall
not be taxable.
(vii) Except as otherwise provided for in Section7(f), if the
Operating Partnership shall be a party to any transaction (including,
without limitation, a merger, consolidation, statutory unit exchange,
tender offer for all or substantially all of the Common Units or sale of
all or substantially all of the Operating Partnership's assets) (each of
the foregoing being referred to herein as a "Transaction"), in each case
as a result of which Common Units shall be converted into the right to
receive units, stock, securities or other property (including cash or any
combination thereof), each Series A Preferred Unit, if convertible after
the consummation of the Transaction, which is not converted into the
right to receive units, stock, securities or other property in connection
with such Transaction shall thereafter be convertible into the kind and
amount of units, stock, securities and other property (including cash or
any combination thereof) receivable upon the consummation of such
Transaction by a holder of that number of Common Units into which one
Series A Preferred Unit was convertible immediately prior to such
Transaction, assuming such holder of Common Units (i) is not a Person
with which the Operating Partnership consolidated or into which the
Operating Partnership merged or which merged into the Operating
Partnership or to which such sale or transfer was made, as the case may
be (a "Constituent Person"), or an affiliate of a Constituent Person and
(ii) failed to exercise his rights of the election, if any, as to the
kind or amount of units, stock, securities and other property (including
cash or any combination thereof) receivable upon such Transaction (each,
a "Non-Electing Unit") (provided that if the kind and amount of units,
stock, securities and other property (including cash or any combination
thereof) receivable upon consummation of such Transaction is not the same
for each Non-Electing Unit, the kind and amount receivable by each
Non-Electing Unit shall be deemed to be the kind and amount receivable
per unit by a plurality of the Non-Electing Units). The Operating
Partnership shall not be a party to any Transaction unless the terms of
such Transaction are consistent with the provisions of this subsection
(g), and it shall not consent or agree to the occurrence of any
Transaction until the Operating Partnership has entered into an agreement
with the successor or purchasing entity, as the case may be, for the
benefit of the holders of the Series A Preferred Units that will contain
provisions enabling holders of Series A Preferred Units that remains
outstanding after such Transaction to convert into the consideration
received by holders of Common Units at the Conversion Price in effect
immediately prior to such Transaction. The provisions of this subsection
(g) shall similarly apply to successive Transactions.
(viii) If:
(1) the Operating Partnership shall declare a distribution on
the Common Units (other than Permitted Common Unit Cash
Distributions) or there shall be a reclassification, subdivision or
combination of the Common Units; or
(2) the Operating Partnership shall grant to the holders of
the Common Units of rights, options or warrants to subscribe for or
purchase Common Units at less than Fair Market Value; or
(3) the Operating Partnership shall enter into a Transaction;
or
(4) there shall occur the voluntary or involuntary
liquidation, dissolution or winding up of the Operating Partnership,
then the Operating Partnership shall notify the Company and shall cause
to be mailed to the holders of the Series A Preferred Units at their
addresses as shown on the records of the Operating Partnership, as
promptly as possible, but at least 15 days prior to the applicable date
hereinafter specified, a notice stating (A) the date on which a record is
to be taken for the purpose of such distribution or rights, options or
warrants, or, if a record is not to be taken, the date as of which the
holders of Common Units of record to be entitled to such distribution or
rights, options or warrants are to be determined or (B) the date on which
such reclassification, subdivision, combination, Transaction or
liquidation, dissolution or winding up is expected to become effective,
and the date as of which it is expected that holders of Common Units of
record shall be entitled to exchange their Common Units for securities or
other property, if any, deliverable upon such reclassification,
subdivision, combination, Transaction or liquidation, dissolution or
winding up. Failure to give or receive such notice or any defect therein
shall not affect the legality or validity of the proceedings described in
this Section 7.
(ix) In any case in which Section 7(f) provides that an adjustment
shall become effective on the day following the record date for an event,
the Operating Partnership may defer until the occurrence of such event
(A) issuing to the holder of any Series A Preferred Unit converted after
such record date and before the occurrence of such event the additional
Common Units issuable upon such conversion by reason of the adjustment
required by such event over and above the Common Units issuable upon such
conversion before giving effect to such adjustment and (B)
fractionalizing any Series A Preferred Unit and/or paying to such holder
any amount of cash in lieu of any fraction pursuant to Section 7(e).
(x) There shall be no adjustment of the Conversion Price in case of
the issuance of any equity securities of the Operating Partnership in a
reorganization, acquisition or other similar transaction except as
specifically set forth in this Section 7. If any action or transaction
would require adjustment of the Conversion Price pursuant to more than
one subsection of Section 7(f), only one adjustment shall be made, and
such adjustment shall be the amount of adjustment that has the highest
absolute value.
(xi) If the Operating Partnership shall take any action affecting
the Common Units, other than action described in this Section 7, that in
the opinion of the General Partner of the Operating Partnership would
materially adversely affect the conversion rights of the holders of the
Series A Preferred Units, the Conversion Price for the Series A Preferred
Units may be adjusted, to the extent permitted by law, in such manner, if
any, and at such time, as the Officers of the Operating Partnership, in
their sole discretion, may determine to be equitable in the
circumstances.
(xii) The Operating Partnership shall at all times reserve and keep
available, free from preemptive rights, for the purpose of effecting
conversion of the Series A Preferred Units, the full number of Common
Units deliverable upon the conversion of all outstanding Series A
Preferred Units not theretofore converted.
(xiii) The Operating Partnership will pay any and all documentary
stamp or similar issue or transfer taxes payable in respect of the issue
or delivery of Common Units or other securities or property on conversion
of the Series A Preferred Units pursuant hereto; provided, however, that
the Operating Partnership shall not be required to pay any tax that may
be payable in respect of any transfer involved in the issue or delivery
of Common Units or other securities or property in a name other than that
of the record holder of the Series A Preferred Units to be converted, and
no such issue or delivery shall be made unless and until the person
requesting such issue or delivery has paid to the Operating Partnership
the amount of any such tax or established, to the reasonable satisfaction
of the Operating Partnership, that such tax has been paid.
(8) Ownership Limitations. The Series A Preferred Units shall be owned and
held solely by the General Partner.
(9) General. The rights of the General Partner, in its capacity as holder of
the Series A Preferred Units, are in addition to and not in limitation on any
other rights or authority of the General Partner, in any other capacity, under
the Partnership Agreement. In addition, nothing contained herein shall be
deemed to limit or otherwise restrict any rights or authority of the General
Partner under the Partnership Agreement, other than in its capacity as the
holder of the Series A Preferred Units.
(10) Definitions.
"Business Day". The term "Business Day" shall mean any day, other than a
Saturday or Sunday, that is neither a legal holiday nor a day on which banking
institutions in The City of New York are authorized or required by law,
regulation or executive order to close.
"Current Market Price" of the common units shall be equal to the current
market value of the Company's Common Stock, par value $0.01 per share,
multiplied by the applicable Conversion Factor or any other equity security of
the Company or the Operating Partnership or any other issuer for any day shall
mean the last reported sales price, regular way, on such day, or, if no sale
takes place on such day, the average of the reported closing bid and asked
prices on such day, regular way, in either case as reported on the NYSE or, if
such security is not listed or admitted for trading on the NYSE, on the
principal national securities exchange on which such security is listed or
admitted for trading or, if not listed or admitted for trading on any national
securities exchange, on the Nasdaq National Market or, if such security is not
quoted on the Nasdaq National Market, the average of the closing bid and asked
prices on such day in the over-the-counter market as reported by Nasdaq or, if
bid and asked prices for such security on such day shall not have been
reported through Nasdaq the average of the bid and asked prices on such day as
furnished by any NYSE member firm regularly making a market in such security
selected for such purpose by the Operating Partnership's Chief Executive
Officer or the General Partner of the Operating Partnership.
"Fair Market Value" shall mean the average of the daily Current Market
Prices multiplied by the applicable Conversion Factor during the five
consecutive Trading Days selected by the Operating Partnership commencing not
more than 20 Trading Days before, and ending not later than, the earlier of
the day in question and the day before the "ex" date with respect to the
issuance or distribution requiring such computation. The term "ex-date", when
used with respect to any issuance or distribution, means the first day on
which the share of Common Stock trade regular way, without the right to
receive such issuance or distribution, on the exchange or in the market, as
the case may be, for purposes of determining that day's Current Market Price.
"Market Price". The term "Market Price" as to any date shall mean the
average of the last sales price reported on the NYSE of Common Stock,
multiplied by the applicable Conversion Factor, on the ten trading days
immediately preceding the relevant date, or if not then traded on the NYSE,
the average of the last reported sales price of the Common Stock multiplied by
the applicable Conversion Factor on the ten trading days immediately preceding
the relevant date as reported on any exchange or quotation system over which
the Common Stock may be traded, of it not then traded over any exchange or
quotation system, then the market price of the Common Stock multiplied by the
applicable Conversion Factor on the relevant date as determined in good faith
by the General Partner.
"Permitted Common Unit Cash Distributions" shall mean those cumulative
cash distributions paid with respect to the Common Units after March 31, 1998,
which are not in excess of the following: the sum of (i) the Operating
Partnership's cumulative undistributable funds from operations ("FFO"), as
determined by the General Partner of the Operating Partnership, at March 31,
1998 plus (ii) the cumulative amount of FFO, as determined by the General
Partner of the Operating Partnership, after March 31, 1998 minus (iii) the
cumulative amount of distributions accumulated or paid on any other Preferred
Units after the Issue Date.
"Person". The term "Person" shall mean an individual, Operating
Partnership, partnership, estate, trust (including a trust qualified under
Section 401(a) or 501(c)(17) of the Code), a portion of a trust permanently
set aside for or to be used exclusively for the purposes described in Section
642(c) of the Code, association, private foundation within the meaning of
Section 509(a) of the Code, joint stock company or other entity, and also
includes a group as that term is used for purposes of Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended; but does not include an
underwriter which participates in a public offering of the Series A Preferred
Units or any interest therein, provided that such ownership by such
underwriter would not result in the Operating Partnership being "closely held"
within the meaning of Section 856(h) of the Code.,
"Trading Day" shall mean any day on which the securities in question are
traded on the NYSE or, if such securities are not listed or admitted for
trading on the NYSE, on the principal national securities exchange on which
such securities are listed or admitted or, if not listed or admitted for
trading on any national securities exchange, on the Nasdaq National Market or,
if such securities are not quoted on the Nasdaq National Market, in the
applicable securities market in which the securities are traded.
Exhibit 10.2
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
In accordance with Sections 4.2 and 14.1 B(3) of the Amended and
Restated Agreement of Limited Partnership, dated as of June 2, 1995, as
amended on December 6, 1995 and on April 13, 1998 (the "Partnership
Agreement"), the Partnership Agreement is hereby supplemented to establish a
series of 25,000 preferred units of limited partnership interest of Reckson
Operating Partnership, L.P. (the "Company") which shall be designated "Series
B Preferred Units" having the rights, preferences, powers, privileges and
restrictions, qualifications and limitations granted to or imposed upon the
Series B Preferred Units (referred to hereinafter sometimes as the
"Designations") as set forth below and which shall be issued onto the parties
and in the amounts set forth on Schedule A hereto. The Company may issue the
Series C Preferred Units pursuant to the Supplement to the Amended and
Restated Agreement of Limited Partnership Establishing Series C Preferred
Units of Limited Partnership Interest of even date herewith ("Series C
Preferred Units," and together with the Series B Preferred Units, the
"Preferred Units") and, subject to the limitations set forth below, other
additional series of Preferred Units whose rights, preferences, powers,
privileges and restrictions, qualifications and limitations regarding
Distributions (as hereinafter defined) and/or liquidation are either
subordinate to, or pari passu with, the Designations of the Series B Preferred
Units. Capitalized terms used and not otherwise defined herein shall have the
meanings set forth in the Partnership Agreement.
1. STATED VALUE. The stated value of the Series B Preferred Units
shall be one thousand dollars ($1,000.00) per unit (the "Stated Value").
2. DISTRIBUTIONS.
(a) Subject to Section 2(b) below, commencing from the date of
initial issuance of Series B Preferred Units (the "Date of Issuance"),
distributions (the "Distributions") on each Series B Preferred Unit shall be
payable in arrears quarterly, in an amount equal to the greater of: (i) $17.50
(as such amount may be adjusted pursuant to Section 2(c) hereof) or (ii) the
quarterly distribution attributable to each Series B Preferred Unit if such
unit had been converted into Common Units (as hereinafter defined), pursuant
to Section 4 hereof, except that the Preferred Conversion Factor to be
utilized for this purpose shall be calculated using a Conversion Price of
$25.01 (subject to adjustment as provided in Section 4(iv) hereof) in lieu of
the Conversion Price set forth in Section 4(iii), subject to a maximum
increase as a result of the provisions of this Section 2(a)(ii) for any one
fiscal year of the Company of 5% of the Distributions on the Series B
Preferred Units for the immediately preceding fiscal year of the Company.
Subsequent to any such fiscal year, any increase that would have been made to
the Distribution in such fiscal year, but was not made due to the foregoing 5%
limit, shall be made up to an amount that does not exceed a 5% increase over
the distribution on the Series B Preferred Units during the immediately
preceding fiscal year of the Company. In each fiscal year thereafter, the
excess, if any, over the 5% limit applicable to the immediately preceding
fiscal year shall cumulate with the respective excesses, if any, over the 5%
limit applicable to other fiscal years prior to such immediately preceding
fiscal year and shall be carried forward and increase the then current
Distribution, but in no event shall any such increase exceed a 5% increase
over the Distribution on the Series B Preferred Units for the immediately
preceding fiscal year. Notwithstanding anything appearing to the contrary in
this Section 2(a), the Distribution to be made on Series B Preferred Units to
any holder thereof on the Distribution Payment Date (as defined below)
immediately following the Date of Issuance shall be made based upon the number
of days during the period preceding that initial Distribution Payment Date
that Series B Preferred Units were outstanding. The Distributions shall be
declared and payable quarterly in arrears on or about January 31, April 30,
July 31 and October 31 of each year, or, if not a business day, the next
succeeding business day, commencing July 31, 1998 (a "Distribution Payment
Date"). If on any Distribution Payment Date the Company shall not be permitted
under Delaware law to pay all or a portion of any such declared Distributions,
the Company shall take such action as may be lawfully permitted in order to
enable the Company to the extent permitted by Delaware law, lawfully to pay
such Distributions. Distributions shall be cumulative from the Date of
Issuance, whether or not in any Distribution period such Distribution shall be
declared or there shall be funds of the Company legally available for payment
of such Distributions. No Distributions shall be declared or paid on any class
of Common Units or any other class or series of Preferred Units, other than
Distributions declared and paid on the Series A Preferred Units, the Series C
Preferred Units and, subject to the limitations set forth in Section 7(b)(ii),
any other series of Preferred Units which, by the terms of such series are
pari passu with the Series B Preferred Units with respect to payment of
distributions and distribution of assets upon liquidation (such Preferred
Units hereinafter referred to as "Qualifying Preferred Units"), until all
Distributions, if any, due and legally payable on the Series B Preferred Units
have been paid to the holders of such units. The record date for the payment
of Distributions on the Series B Preferred Units on any Distribution Payment
Date shall be the day immediately prior to such Distribution Payment Date.
(b) Reduction of Distribution Amount Due to Pre-Payment Premiums.
Notwithstanding the provisions of Section 2(a), during any period that those
certain mortgage loans between Cappelli Associates II and M&T Real Estate,
Inc., dated March 27, 1997 (the "M&T Note"), and between Cappelli Associates
VI and Huntoon Hastings Capital Corp., dated December 19, 1995 (the "Huntoon
Hastings Note," and together with the M&T Note, the "Mortgage Loans"), remain
subject to the prepayment premium or prepayment penalty set forth in Exhibit A
to Rider A to the M&T Note or Section 1 of the Addendum to the Huntoon
Hastings Note (the "Pre-Payment Premiums")), the quarterly Distribution
payable on each Series B Preferred Unit shall be reduced to $15.625 (the
"Reduced Rate"); provided, however, (i) that the Reduced Rate shall only apply
to such Preferred Units, having an aggregate stated value of $44,667,000 or
less, as may be designated in writing by Louis R. Cappelli on behalf of the
holders of the Preferred Units, and the Reduced Rate shall not be applicable
to any other Preferred Units, and (ii) in no event shall the Reduced Rate be
applicable, or the provisions of this Section 2(b) be effective, subsequent to
April 1, 2007. To the extent Louis R. Cappelli does not make such designation
in writing, Distributions with respect to each Series B Unit and Series C Unit
shall be reduced equally. If there shall be less than an aggregate of
$44,667,000 in stated value of Preferred Units outstanding while any
Pre-Payment Premiums remain payable (or while any Pre-Payment Premiums are
treated as continuing as provided in this Section 2(b) after having been paid
by the Company) the Reduced Rate shall be further reduced so as to result in
an annual aggregate reduction in Distributions in respect of Preferred Units
of $335,000 per annum (or proportionately lesser amount, as described below,
if only one of the Mortgage Loans remains outstanding and subject to a
Prepayment Premium) from the annual aggregate distributions that would
otherwise have been payable pursuant to Section 2(a) hereof. If the Mortgage
Loans mature or may be repaid prior to their maturity without the incurrence
of any Pre-Payment Premium, or if the holder of any Preferred Units deposits
with the Company in cash an amount equal to the then current Pre-Payment
Premium with the Company upon five (5) days notice by such holder to the
Company of such holder's intention to deposit such amount, then thereafter the
Distribution payable in respect of Preferred Units shall be as provided in
Section 2(a) herein. If the Company repays one or both of the Mortgage Loans
and, in connection therewith, incurs a Pre-Payment Premium, the reduced
Distribution payable with respect to the Preferred Units provided for in this
Section 2(b) shall continue in effect as if the Mortgage Loans remained
outstanding subject to the Pre-Payment Premiums until such time as such repaid
Mortgage Loans would have matured (in accordance with their terms as in effect
on the date hereof) or could have been repaid without the incurrence of
Pre-Payment Premiums, or until such time as a holder of Preferred Units
deposits an amount of cash with the Company equal to the PrePayment Premiums
that would have existed at the time of such deposit had one or both (as the
case may be) of the Mortgage Loans not been repaid by the Company. If one of
the Mortgage Loans matures or may be prepaid prior to maturity without the
incurrence of a Pre-Payment Premium or a holder of Preferred Units has
deposited with the Company in cash an amount equal to the Pre-Payment Premium
in respect of one of the Mortgage Loans, and the other Mortgage Loan remains
outstanding, and subject to a Pre-Payment Premium, the reduction in the
Distribution provided for in this Section 2(b) shall be reduced by (x)
$145,000 in the event the M&T Note matures or may be prepaid prior to maturity
without the incurrence of a Pre-Payment Premiums or a holder of Preferred
Units has deposited with the Company in cash an amount equal to the
Pre-Payment Premium in respect of such Note or (y) $190,000 in the event the
Huntoon Hastings Note matures or may be prepaid prior to maturity without the
incurrence of a Pre-Payment Premium or a holder of Preferred Units has
deposited with the Company in cash an amount equal to the Pre-Payment Premium
in respect of such Note. Any reduction made in accordance with the prior
sentence shall be promptly confirmed in a written notice given by the Company
to each holder of Series B Preferred Units that are subject to the reduction
of distribution amount pursuant to this Section 2(b).
(c) Adjustment of Distribution Amount due to Changes in Dividends on
Common Stock. Commencing two years subsequent to the date hereof, the
Distribution set forth in Section 2(a)(i), as such Distribution may be reduced
pursuant to Section 2(b), shall be increased or decreased by an amount equal
to (i) the Distribution amount immediately prior to such increase or decrease
multiplied by (ii) that percentage which is equal to 50% of the percentage
increase or decrease, as the case may be, occurring from and after that date
which is two years subsequent to the date hereof in the dollar amount of the
regular quarterly dividend on in respect of the common stock of RA, par value
$0.01 ("RA Common Stock"), subject to a maximum increase as a result of the
provisions of this Section 2(c), for any one fiscal year of the Company, of 5%
of the Distribution for the Series B Preferred Units for the immediately
preceding fiscal year of the Company for any one year period. Subsequent to
any such fiscal year, any increase that would have been made to the
Distribution in such fiscal year, but was not made due to the foregoing 5%
limit, shall be made up to an amount that does not exceed a 5% increase over
the Distribution paid on the Series B Preferred Units during the immediately
preceding fiscal year of the Company. In each fiscal year thereafter, the
excess, if any, over the 5% limit applicable to the immediately preceding
fiscal year shall cumulate with the respective excesses, if any, over the 5%
limit applicable to any fiscal years prior to such immediately preceding
fiscal year and shall be carried forward and increase the then current
distribution, but in no event shall any such increase exceed a 5% increase
over the Distribution on the Series B Preferred Units for the immediately
preceding fiscal year. In no event shall the Distribution be decreased as a
result of this Section 2(c) to less than the distribution provided for in
Section 2(a) or, if such Distribution has been reduced pursuant to the terms
of Section 2(b), to less than such reduced Distribution.
(d) For purposes of this Supplement, "Business Day" shall mean any
day, excluding Saturday, Sunday and any other day on which commercial banks in
New York are authorized or required by law to close.
3. LIQUIDATION. The Series B Preferred Units shall be preferred as
to assets over any class of Common Units and over any other class of preferred
units of the Company, other than the Series A Preferred Units, the Series C
Preferred Units and any new Qualifying Preferred Units, such that in the event
of the voluntary or involuntary liquidation, dissolution or winding up of the
Company, the holders of the Series B Preferred Units shall be entitled to have
set apart for them, or to be paid out of the assets of the Company, before any
distribution is made to or set apart for the holders of the Common Units or
any other series of preferred units or any other capital interest heretofore
or hereafter issued, other than Qualifying Preferred Units and any other class
or series of preferred units, the authorization, creation and issuance of
which shall have been approved by the requisite percentage of outstanding
Series B Preferred Units, as provided in Section 7(a)(ii) hereof, an amount in
cash equal to the Stated Value per unit plus any "Accrued Distributions" (as
defined below) as of such date of payment. "Accrued Distributions" shall mean,
as of any date of determination, an amount equal to the amount of
Distributions, determined at the rate fixed for the payment of Distributions
on the Series B Preferred Units on such date as provided in Section 2 hereof,
which would be paid on the Series B Preferred Units for the period of time
elapsed from the most recent actual Distribution Payment Date to the date of
determination (including any amounts cumulating from prior Distribution
periods in accordance with Section 2(a) hereof and any amounts carried forward
from prior Distribution periods in accordance with Section 2(c) hereof). If
the assets or surplus funds to be distributed to the holders of the Series B
Preferred Units are insufficient to permit the payment to such holders of
their full preferential amount, the assets and surplus funds legally available
for distribution shall be distributed ratably among the holders of the Series
A Preferred Units, the Series B Preferred Units, the Series C Preferred Units
and any other Qualifying Preferred Units in proportion to the respective full
preferential amounts such holders are otherwise entitled to receive.
4. CONVERSION OR EXCHANGE OF SERIES B PREFERRED UNITS.
The holders of Series B Preferred Units shall have the following
conversion and exchange rights:
(i) Right to Convert or Exchange. Each Series B Preferred Unit, at
the option of the holder as set forth below, shall be (a) convertible at any
time and at the Conversion Price set forth below, into common units of limited
partnership interests of the Company ("Common Units") and (b) exchangeable at
any time for shares of preferred stock of the General Partner ("RA Preferred
Stock") (subject to the Company's right to redeem Series B Preferred Units
presented for exchange for RA Preferred Stock for cash as set forth below) or
(c) convertible at any time on or prior to the date which is two years after
the date hereof, into units of Series C Preferred Units.
(ii) Mechanics of Conversion or Exchange. Each holder of Series B
Preferred Units who desires to convert the same into Common Units or Series C
Preferred Units or to exchange the same for RA Preferred Stock shall provide
notice to the Company in the form of the Notice of Conversion or Exchange
attached as Schedule B hereto (a "Conversion Notice") via telecopy, hand
delivery or other mail or messenger service. The original Conversion Notice
and the certificate or certificates representing the Series B Preferred Units
for which conversion is elected (the "Original Certificate"), shall be
delivered to the Company by nationally recognized courier, duly endorsed. The
date upon which a Conversion Notice is initially received by the Company shall
be a "Notice Date."
The Company shall issue and deliver within fourteen (14) Business
Days after the Notice Date, to such holder of Series B Preferred Units at the
address of the holder on the books of the Company, (i) a certificate or
certificates for the number of Common Units, Series C Preferred Units or RA
Preferred Stock (as the case may be) to which the holder shall be entitled as
set forth herein, and (ii) if the Series B Preferred Units represented by the
Original Certificate have been converted only in part, a new certificate
evidencing the Series B Preferred Units not subject to the conversion or
exchange; provided that the Original Certificate representing the Series B
Preferred Units to be converted is received by the transfer agent or the
Company within three Business Days after the Notice Date and the person or
persons entitled to receive the Common Units, Series C Preferred Units or RA
Preferred Stock (as the case may be) issuable upon such conversion or exchange
shall be treated for all purposes as the record holder or holders of such
shares or units on such date such Original Certificate is received (the
"Conversion Date"). If the Original Certificate representing the Series B
Preferred Units to be converted or exchanged is not received by the transfer
agent or the Company within three Business Days after the Notice Date, the
Conversion Notice shall become null and void.
(iii) Conversion into Common Units. Each Series B Preferred Unit
shall be convertible into a number of Common Units or fraction of Common Units
(such number or fraction, as the case may be, being referred to hereinafter as
the "Preferred Conversion Factor") determined in accordance with the following
formula as of the relevant Conversion Date:
Redemption Price
Preferred Conversion Factor = ----------------------
Conversion Price
where
Redemption Price = For each Series B Preferred Unit
for which conversion is elected, such
Series B Preferred Unit's Stated Value,
plus any Accrued Distributions; and
Conversion Price = $32.513.
provided, however, that if the closing price of RA Common Stock (the "Current
Price") on the New York Stock Exchange (or, if not then traded on the New York
Stock Exchange, on the primary market on which RA Common Stock is then traded,
or, if not then traded on a market, then at the average of the closing bid and
asked prices in over the counter trading) on the Conversion Date (or if not a
trading date, then the next succeeding trading date) is less than or equal to
$25.01 (the "Average Price"), then, except as set forth in the immediately
following proviso, the Conversion Price shall be equal to the Average Price;
and provided, further, that in no event shall the number of Common Units (or
fraction thereof) into which a Series B Preferred Unit is convertible as of
any Conversion Date be less than that number which, when multiplied by the
Current Price as of the Conversion Date, equals 80% of the Redemption Price as
of such Conversion Date.
(iv) Adjustment to Preferred Conversion Factor. The Preferred
Conversion Factor (and the Conversion Price) shall be subject to adjustment
from time to time hereafter as follows:
(a) In case the Company shall, at any time or from time to time
prior to conversion of all Series B Preferred Units, (A) pay a dividend or
make a distribution on the outstanding Common Units, in Common Units, (B)
split or subdivide the outstanding Common Units into a larger number of Common
Units, (C) effect a reverse unit split or otherwise combine the outstanding
Common Units into a smaller number of Common Units or (D) issue by
reclassification of the Common Units any units of partnership interest in the
Company, then, and in each such case, the Preferred Conversion Factor (and the
Conversion Price) in effect immediately prior to such event or the record date
therefor, whichever is earlier, shall be adjusted so that the holder of any
Series B Preferred Units thereafter surrendered for conversion shall be
entitled to receive the number of Common Units or other securities of the
Company which such holder would have owned or have been entitled to receive
after the happening of any of the events described above, had such Series B
Preferred Units been surrendered for conversion immediately prior to the
happening of such event or the record date therefor, whichever is earlier. An
adjustment made pursuant to this Section 4(iv)(a) shall become effective (x)
in the case of any such dividend or distribution, immediately after the close
of business on the record date for the determination of holders of Common
Units entitled to receive such dividend or distribution, or (y) in the case of
any such subdivision, reclassification, reverse unit split or combination, at
the close of business on the day upon which such Company action becomes
effective.
(b) In case the Company shall, at any time or from time to time
prior to conversion of all Series B Preferred Units, declare, order, pay or
make a dividend or other distribution (including, without limitation, any
distribution of units or other securities or property or rights or warrants to
subscribe for securities of the Company entitling holders thereof to subscribe
for or purchase such securities at a price per share less than the fair market
value of such securities, by way of dividend or spinoff), on its Common Units,
other than (A) regular and customary quarterly distributions of Common Units
which are referred to in Section 4(iv)(a) hereof, then, and in each such case,
the Preferred Conversion Factor (and the Conversion Price) shall be adjusted
so that the holder of each Series B Preferred Unit shall be entitled to
receive, upon the conversion thereof, the number of Common Units determined by
multiplying (1) the applicable Preferred Conversion Factor on the day
immediately prior to the record date fixed for the determination of Common
Unit holders entitled to receive such dividend or distribution by (2) a
fraction, the numerator of which shall be the Deemed Market Price (as
hereinafter defined) of a Common Unit on such record date, and the denominator
of which shall be such Deemed Market Price per Common Unit less the fair
market value (as determined in good faith by the Board of Directors of the
General Partner) of such dividend or distribution allocable to one Common
Unit. An adjustment made pursuant to this Section 4(iv)(b) shall be made upon
the opening of business on the next Business Day following the date on which
any such dividend or distribution is made and shall be effective retroactively
immediately after the close of business on the record date fixed for the
determination of Common Unit holders entitled to receive such dividend or
distribution. For purposes of this Section 4(iv), "Deemed Market Price" shall
mean, as of any date, (a) the "daily market value" of a REIT Share, determined
in the manner provided in the definition of "Value", as of such date,
multiplied by (b) the Conversion Factor (as such term is defined in Article 1
of the Partnership Agreement) in effect as of such date.
(c) In case the Company shall, at any time or from time to time
prior to conversion of all Series B Preferred Units, issue Common Units to
then existing Holders of Common Units (or securities convertible into or
exchangeable for Common Units, whether or not the rights to convert or
exchange such securities are then exercisable) at a price per Common Unit (or
having a conversion price per Common Unit, as applicable) less than the Deemed
Market Price of a Common Unit, as of the date of issuance of such Common Units
or of such convertible securities, as the case may be, then, and in each such
case, the Preferred Conversion Factor (and the Conversion Price) shall be
adjusted so that the holder of each Series B Preferred Unit shall be entitled
to receive, upon conversion thereof, the number of Common Units determined by
multiplying (A) the Preferred Conversion Factor on the day immediately prior
to such date by (B) a fraction, the numerator of which shall be the sum of (1)
the number of Common Units outstanding on such date and (2) the number of
additional Common Units issued (or into which the convertible securities may
convert), and the denominator of which shall be the sum of (x) the number of
Common Units outstanding on such date and (y) the number of Common Units which
the aggregate consideration receivable by the Company for the total number of
Common Units so issued (or into which the convertible securities may convert)
would purchase at the Deemed Market Price of a Common Unit as of such date.
Any adjustment made pursuant to this Section 4(iv)(c) shall be made and become
effective on the next Business Day following the date on which any such
issuance is made and shall be effective retroactively immediately after the
close of business on such date. For purposes of this Section 4(iv)(c):
(I) if the Company shall issue Common Units for consideration
other than cash, the price per Common Unit at which such Common
Units are issued shall be deemed to be the fair market value (as
determined in good faith by the Board of Directors of the General
Partner) of the portion of such non-cash consideration allocable to
one Common Unit; and
(II) the aggregate consideration receivable by the Company in
connection with the issuance of Common Units or of securities
convertible into Common Units shall be deemed to be equal to the sum
of the aggregate offering price (before deduction of underwriting
discounts or commissions and expenses payable to third parties) of
all such securities plus the minimum aggregate amount, if any,
payable upon conversion of any such convertible securities into
Common Units.
(d) In case the Company shall, at any time or from time to time
prior to conversion of all Series B Preferred Units, make a tender offer or
exchange offer for Common Units at a price per Common Unit greater than the
Deemed Market Price of a Common Unit as of the date of such repurchase (the
number of Common Units so repurchased, multiplied by the amount by which such
price per Common Unit exceeds the Deemed Market Price of a Common Unit as of
such date, being referred to in this Section 4(iv)(d) as the "Excess Amount"),
then, and in each such case, the Preferred Conversion Factor (and the
Conversion Price) shall be adjusted, in accordance with the applicable
provisions of Sections 4(iv)(a) and 4(iv)(b) above, as if, in lieu of such
repurchase, the Company had (x) made a distribution of property having a fair
market value(as determined in good faith by the Board of Directors of the
General Partner) equal to the Excess Amount, with such distribution made to
holders of Common Units (including holders of Common Units so repurchased) on
the date of such repurchase, and (y) effected a reverse split of the Common
Units in the proportion required to reduce the number of Common Units
outstanding by the number of Common Units repurchased by the Company in such
repurchase.
(e) For purposes of this Section 4(iv), the number of Common
Units at any time outstanding shall not include any Common Units then owned or
held by or for the account of the Company.
(f) In case of any capital reorganization, recapitalization or
reclassification of outstanding Common Units (other than a recapitalization or
reclassification covered by Section 4(iv)(a) hereof), or in case of any
consolidation or merger of the Company with or into another entity, or in case
of any sale or conveyance to another entity of the property of the Company as
an entirety or substantially as an entirety (each of the foregoing being
referred to as a "Transaction"), each Series B Preferred Unit then outstanding
shall thereafter be convertible into, in lieu of the Common Units issuable
upon such conversion prior to consummation of such Transaction, the kind and
amount of units of partnership interest and other securities and property
(including cash) receivable upon the consummation of such Transaction by a
holder of that number of Common Units into which one Series B Preferred Unit
was convertible immediately prior to such Transaction (including, on a pro
rata basis, the cash, securities or property received by holders of Common
Units in any tender or exchange offer that is a step in such Transactions). In
any such case, if necessary, appropriate adjustment (as reasonably determined
by the Board of Directors of the General Partner) shall be made in the
application of the provisions set forth in this Section 4 with respect to
rights and interests thereafter of the holders of Series B Preferred Units, to
the end that the provisions set forth herein for the protection of the
conversion rights of the Series B Preferred Units shall thereafter be
applicable, as nearly as possible, to any such other units and other
securities and property deliverable upon conversion of the Series B Preferred
Units remaining outstanding (with such adjustments in the conversion price and
number of units issuable upon conversion and such other adjustments in the
provisions hereof as the Board of Directors of the General Partner shall
reasonably determine to be appropriate). In case securities or property other
than Common Units shall be issuable or deliverable upon conversion as
aforesaid, then all references in this Section 4(iv)(f) shall be deemed to
apply, so far as appropriate and as nearly as possible, to such other
securities or property.
(g) Notwithstanding anything contained herein to the contrary,
the Company will not effect any Transaction unless, prior to the consummation
thereof, the entity which will be the surviving entity as a result of such
Transaction (the "Surviving Entity") shall assume, by written instrument
mailed to each holder of Series B Preferred Units, the obligation to deliver
to such holder all cash, Surviving Entity common units or other securities to
which, in accordance with the foregoing provisions, such holder is entitled.
(f) If any adjustment under this Section 4(iv) would create a
fractional Common Unit or a right to acquire a fractional Common Unit, such
fractional Common Units shall be issued by the Company.
(v) Exchange for RA Preferred Stock. Each Series B Preferred Unit
shall be exchangeable, at the option of the holder of such Series B Preferred
Unit, for shares of RA Preferred Stock with a stated value equal to the stated
value of the Series B Preferred Units and otherwise with the same terms as the
Series B Preferred Units other than the conversion and exchange rights
provided for in this Section 4, provided that the Company may, in respect of
any Conversion Notice regarding such an exchange, elect to redeem all of the
Series B Preferred Units that are the subject of such Conversion Notice for
cash in an amount equal to the stated value of such Series B Preferred Units
plus any accrued distributions thereon.
(vi) Conversion into Series C Preferred Units. At any time prior to
the date which is two years from the date hereof, each Series B Preferred Unit
shall be exchangeable for a Series C Preferred Unit with an identical stated
value.
(vii) Reservation of Units/Preferred Stock Issuable Upon Conversion
or Exchange. The Company shall at all times reserve and keep available out of
its authorized but unissued Common Units and Series C Preferred Units, and RA
shall at all times reserve and keep available out of its authorized but
unissued shares of RA Preferred Stock, solely for the purpose of effecting the
conversion or exchange of the Series B Preferred Units, such number of units
or shares as shall from time to time be sufficient to effect the conversion or
exchange of all then outstanding Series B Preferred Units; and if at any time
the number of authorized but unissued Common Units, Series C Preferred Units
or RA Preferred Stock shall not be sufficient to effect the conversion or
exchange of all then outstanding Series B Preferred Units, the Company and/or
RA (as the case may be) will take such action as may be necessary to increase
its authorized but unissued Common Units, Series C Preferred Units and/or RA
Preferred Stock to such number of units or shares as shall be sufficient for
such purpose.
(viii) No Impairment. The Company will not, by amendment of the
Partnership Agreement or this Supplement or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, and will at all times in good faith assist in the
carrying out of all of the provisions of this Section 4 and in the taking of
all such action as may be necessary or appropriate in order to protect the
conversion rights of the Series B Preferred Units hereunder against
impairment. Without limiting the generality of the foregoing, if any event
occurs as to which the foregoing provisions of this Section are not strictly
applicable or,if strictly applicable, would not, in the good faith judgment of
the Board of Directors of the General Partner, fairly protect the conversion
rights of the Series B Preferred Units in accordance with the essential intent
and principles of such provisions, the Company shall make such adjustments in
the application of such provision, in accordance with such essential intent
and principles, as shall be reasonably necessary, in the good faith opinion of
the Board of Directors of the General Partner, to protect such conversion
rights as aforesaid.
5. STATUS OF CONVERTED UNITS. In the event any Series B Preferred
Units shall be converted or exchanged as contemplated by this Supplement, the
units so converted or exchanged shall be canceled, and shall not be issuable
by the Company as Series B Preferred Units.
6. DISTRIBUTIONS ON CONVERTED OR EXCHANGED UNITS. The initial
distribution to be made with respect to Common Units, Series C Preferred Units
or RA Preferred Stock received pursuant to the conversion or exchange of
Series B Preferred Units shall be prorated based upon the number of days
during the quarter that such Common Units, Series C Preferred Units or shares
of RA Preferred Stock were outstanding.
7. VOTING RIGHTS. (a) Except as otherwise specifically provided by
the Revised Uniform Limited Partnership Act of the State of Delaware or as
otherwise provided herein, the holders of Series B Preferred Units shall be
entitled to vote on any matters required or permitted to be submitted to the
holders of Common Units for their approval, and such holders of Series B
Preferred Units, holders of Series C Preferred Units and holders of Common
Units shall vote as a single class, with the holders of Series B Preferred
Units having a number of votes equal to the number of Series B Preferred Units
then outstanding, multiplied by the Preferred Conversion Ratio in effect as of
the date of such vote.
(b) In addition to, and not in limitation of, the provisions of
Section 7(a) above (and notwithstanding anything appearing to the contrary in
the Partnership Agreement), the Company shall not, without the affirmative
consent of the holders of at least sixty-six and two-thirds percent (66-2/3%)
of the then outstanding Series B Preferred Units:
(i) increase or decrease (other than by conversion) the total
number of authorized units of Series B Preferred Units;
(ii) in any manner authorize, create or issue any additional
preferred units or any class or series of capital interests, in either case
(A) ranking, either as to payment of distributions or distribution of assets,
prior to the Series B Preferred Units or (B) which in any manner adversely
affects the holders of Series B Preferred Units;
(iii) in any manner alter, change, modify, amend or supplement
the designations or the powers, preferences or rights (including, without
limitation, conversion rights), or the qualifications, limitations or
restrictions of the Series B Preferred Units or, any other terms or provisions
of this Supplement or otherwise take any action in contravention of the rights
of the holders of Series B Preferred Units as set forth in this Supplement;
(iv) reclassify the Common Units or any other units of any
class or series of capital interests hereafter created junior to the Series B
Preferred Units into units or other interests of any class or series of
capital interests (A) ranking, either as to payment of distributions or
distribution of assets prior to the Series B Preferred Units, or (B) which in
any manner adversely affects the holders of Series B Preferred Units; or
(v) reclassify the Series A Preferred Units or any other
Qualifying Preferred Units now existing or hereafter created into units or
other interests of any class or series of capital interests (A) ranking, either
as to payment of distributions or distribution of assets prior, to the Series B
Preferred Units, or (B) which in any manner adversely affects the holders of
the Series B Preferred Units.
8. NOTICE OF CERTAIN EVENTS. If at any time, to the extent permitted
hereunder, the Company and/or RA proposes:
(a) to pay any distribution or dividend payable in securities
(of any class or classes) or any obligations, stock or units
convertible into or exchangeable for Common Units, Series C
Preferred Units or RA Common Stock upon either of their capital
securities, including, without limitation, (i) Common Units, Series
C Preferred Units or Common Stock or (ii) a cash distribution other
than its customary quarterly cash distribution (collectively, an
"Extraordinary Distribution");
(b) to grant to the holders of its Common Units, Series C
Preferred Units or Common Stock generally any rights or warrants
(excluding any warrants or other rights granted to any employee,
director, officer, contractor or consultant of the Company or RA
pursuant to any plan approved by the general partner of the Company
or the Board of Directors of the General Partner) (a "Rights
Distribution");
(c) to effect any capital reorganization or reclassification of
capital securities of the Company or the General Partner;
(d) to consolidate with, or merge into, any other company or to
transfer its property as an entirety or substantially as an
entirety; or
(e) to take any other action, or to consummate any other
transaction, which could result in an adjustment of the Preferred
Conversion Factor (and the Conversion Price) pursuant to Section
4(iv) hereof; or
(f) to effect the liquidation, dissolution or winding up of the
Company or the General Partner,
then, in any one or more of the foregoing cases, the Company shall give, by
certified or registered mail, postage prepaid, addressed to the holders of
Series B Preferred Units at the address of such holders as shown on the record
books of the Company, (i) at least thirty (30) days' prior written notice of
the date on which the books of the Company shall close or of a record date
fixed for such dividend, distribution or subscription rights or for
determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, (ii) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, at least
thirty (30) days' prior written notice of the date when the same shall take
place, and (iii) in the case of any other action or transaction that could
result in an adjustment of the Preferred Conversion Ratio (or the Conversion
Price), at least 30 days' prior written notice of the date when such
adjustment shall first become effective. Any notice given in accordance with
the foregoing clause (i) shall also specify, in the case of any such dividend,
distribution or option rights, the date on which the holders of any class of
capital securities shall be entitled thereto.
9. RANK AND LIMITATIONS OF PREFERRED UNITS. All Series B Preferred
Units shall rank equally with each other unit of Series B Preferred Units and
shall be identical in all respects.
10. PARTNERSHIP AGREEMENT. (i) The term "transfer" as used in
Article 11 of the Partnership Agreement shall not include (a) any conversion
of Series B Preferred Units into Common Units, (b) any exchange of Series B
Preferred Units for shares of RA Preferred Stock or (c) any conversion of
Series B Preferred Units into Series C Preferred Units.
(ii) For purposes of Article 11 of the Partnership
Agreement, the General Partner (and any successor general partner under the
Partnership Agreement) shall hereby be deemed to have consented to the pledge
of Series B Preferred Units by Louis A. Cappelli (or any related party) and to
any related subsequent transfer of Series B Preferred Units to the pledgee of
such Units in connection with a foreclosure on such Units or an
assignment-in-lieu of foreclosure on such pledge.
11. COVENANT OF THE COMPANY AND RA. So long as any Series B
Preferred Units are outstanding, the Company and the General Partner agree to
(i) (a) maintain the one-to-one equivalence of a share of Common Stock and a
Common Unit or (b) maintain the provisions set forth in the Partnership
Agreement as of the date hereof regarding adjustments to the Conversion Factor
(as such term is defined in the Partnership Agreement) and (ii) not issue any
capital stock or other capital interest which would cause any capital interest
in the Partnership to be senior to the Series B Preferred Units in respect of
payment of distributions or distribution of assets, except as set forth in
Section 7(b)(ii) herein.
IN WITNESS WHEREOF, the parties hereto have executed this Supplement to
the Partnership Agreement as of the 20th day of April, 1998.
GENERAL PARTNER:
RECKSON ASSOCIATES REALTY CORP.
By: /s/ Scott H. Rechler
------------------------------------
Name:
Title:
EXISTING LIMITED PARTNERS
By: Reckson Associates Realty Corp.
as Attorney-in-Fact for the
Limited Partners
By: /s/ Scott H. Rechler
-------------------------------
Name:
SERIES B PREFERRED UNIT HOLDERS
-------------------------------
/s/ Louis R. Cappelli
-----------------------------
Louis R. Cappelli
/s/ Luca A. Cappelli
-----------------------------
Luca A. Cappelli
/s/ Barbara Cappelli
------------------------------
Barbara Cappelli
/s/ Gina Cappelli
------------------------------
Gina Cappelli
/s/ Susan Cappelli
------------------------------
Susan Cappelli
/s/ Michael Cappelli
------------------------------
Michael Cappelli
/s/ Constance Cappelli
------------------------------
Constance Cappelli
Schedule A
<TABLE>
<CAPTION>
Name and Address Number of units (stated value $1,000) of Series B Preferred Units
- ---------------- -----------------------------------------------------------------
<S> <C>
Luca A. Cappelli 3,080.948
[address]
Louis R. Cappelli 3,080.947
Barbara Cappelli 3,767.621
Constance Cappelli 3,767.621
Susan Cappelli 3,767.621
Michael Cappelli 3,767.621
Gina Cappelli 3,767.621
----------
Total 25,000
======
</TABLE>
Schedule B
Notice of Conversion or Exchange
The undersigned holder of Series B Preferred Units hereby irrevocably
requests Reckson Operating Partnership, L.P., a Delaware limited partnership
(the "Partnership") to (check one):
_
|_| convert into Series C Preferred Units of the Partnership;
_
|_| convert into common units of limited partnership interest of the
Partnership; or
_
|_| exchange for shares of Preferred Stock of Reckson Associates Realty
Corp.("RA")
________ Series B Preferred Units in accordance with the terms of the Amended
and Restated Agreement of Limited Partnership of the Partnership and the
Supplement thereto establishing the Series B Preferred Units; and the
undersigned irrevocably (i) surrenders such units and all right, title and
interest therein; and (ii) directs that the Series C Preferred Units of the
Partnership/the common units of the Partnership/preferred stock of RA or, in
lieu thereof in respect of an exchange for Shares of Preferred Stock of RA,
cash, deliverable in accordance with this Notice be delivered to the address
specified below, and in the name(s) and at the address(es) specified below.
The undersigned hereby represents, warrants, and certifies that the
undersigned (a) has good and unencumbered title to the Series B Preferred
Units that are the subject of this Notice, free and clear of the rights or
interests of any other person or entity; (b) has the full right, power, and
authority to request the conversion or exchange requested herein; and (c) has
obtained the consent or approval of all person or entities, if any, having the
right to consent or approve such conversion or exchange of units.
Dated: ____________
Name:_____________________________________
(Please Print)
_____________________________________
(Signature)
_____________________________________
(Street Address)
_____________________________________
(City) (State)(Zip Code)
If applicable, units/preferred stock is to be issued to:
Name: ____________________
Please indicate social security number:
Exhibit 10.3
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
In accordance with Sections 4.2 and 14.1 B(3) of the Amended and
Restated Agreement of Limited Partnership, dated as of June 2, 1995, as
amended on December 6, 1995 and on April 13, 1998 (the "Partnership
Agreement"), the Partnership Agreement is hereby supplemented to establish a
series of 11,518.029 preferred units (subject to increase as set forth below)
of limited partnership interest of Reckson Operating Partnership, L.P. (the
"Company") which shall be designated "Series C Preferred Units" having the
rights, preferences, powers, privileges and restrictions, qualifications and
limitations granted to or imposed upon the Series C Preferred Units (referred
to hereinafter sometimes as the "Designations") as set forth below and which
shall be issued to the parties and in the amounts set forth on Schedule A
hereto. The Company may issue the Series B Preferred Units pursuant to the
Supplement to the Amended and Restated Agreement of Limited Partnership
Establishing Series B Preferred Units of Limited Partnership Interest of even
date herewith ("Series B Preferred Units," and, together with the Series C
Preferred Units, the "Preferred Units") and, subject to the limitations set
forth below, other additional series of Preferred Units whose rights,
preferences, powers, privileges and restrictions, qualifications and
limitations regarding Distributions (as hereinafter defined) and/or
liquidation are either subordinate to, or pari passu with, the Designations of
the Series C Preferred Units. Additional Series C Preferred Units shall be
issuable in connection with the conversion of Series B Preferred Units.
Capitalized terms used and not otherwise defined herein shall have the
meanings set forth in the Partnership Agreement.
1. STATED VALUE. The stated value of the Series C Preferred Units
shall be one thousand dollars ($1,000.00) per unit (the "Stated Value").
2. DISTRIBUTIONS.
(a) Subject to Section 2(b) below, commencing from the date of
initial issuance of Series C Preferred Units (the "Date of Issuance"),
distributions (the "Distributions") on each Series C Preferred Unit shall be
payable in arrears quarterly, in an amount equal to the greater of: (i) $17.50
(as such amount may be adjusted pursuant to Section 2(c) hereof) or (ii) the
quarterly distribution attributable to each Series C Preferred Unit if such
unit had been converted into Common Units (as hereinafter defined), pursuant
to Section 4 hereof, except that the Preferred Conversion Factor to be
utilized for this purpose shall be calculated using a Conversion Price of
$25.01 (subject to adjustment as provided in Section 4(iv) hereof) in lieu of
the Conversion Price set forth in Section 4(iii), subject to a maximum
increase as a result of the provisions of this Section 2(a)(ii), for any one
fiscal year of the Company, of 5% of the Distributions on the Series C
Preferred Units for the immediately preceding fiscal year of the Company.
Subsequent to any such fiscal year, any increase that would have been made to
the Distribution in such fiscal year, but was not made due to the foregoing 5%
limit, shall be made up to an amount that does not exceed a 5% increase over
the distribution on the Series C Preferred Units during the immediately
preceding fiscal year of the Company. In each fiscal year thereafter, the
excess, if any, over the 5% limit applicable to the immediately preceding
fiscal year shall cumulate with the respective excesses, if any, over the 5%
limit applicable to other fiscal years prior to such immediately preceding
fiscal year and shall be carried forward and increase the then current
Distribution, but in no event shall any such increase exceed a 5% increase
over the Distribution on the Series C Preferred Units for the immediately
preceding fiscal year. Notwithstanding anything appearing to the contrary in
this Section 2(a), the Distribution to be made on Series C Preferred Units to
any holder thereof on the Distribution Payment Date (as defined below)
immediately following the Date of Issuance shall be made based upon the number
of days during the period preceding that initial Distribution Payment Date
that Series C Preferred Units were outstanding. The Distributions shall be
declared and payable quarterly in arrears on or about January 31, April 30,
July 31 and October 31 of each year, or, if not a business day, the next
succeeding business day, commencing July 31, 1998 (a "Distribution Payment
Date"). If on any Distribution Payment Date the Company shall not be permitted
under Delaware law to pay all or a portion of any such declared Distributions,
the Company shall take such action as may be lawfully permitted in order to
enable the Company to the extent permitted by Delaware law, lawfully to pay
such Distributions. Distributions shall be cumulative from the Date of
Issuance, whether or not in any Distribution period such Distribution shall be
declared or there shall be funds of the Company legally available for payment
of such Distributions. No Distributions shall be declared or paid on any class
of Common Units or any other class or series of Preferred Units, other than
Distributions declared and paid on the Series A Preferred Units, the Series B
Preferred Units and, subject to the limitations set forth in Section 7(b)(ii),
any other series of Preferred Units which, by the terms of such series are
pari passu with the Series C Preferred Units with respect to payment of
distributions and distribution of assets upon liquidation (such Preferred
Units hereinafter referred to as "Qualifying Preferred Units"), until all
Distributions, if any, due and legally payable on the Series C Preferred Units
have been paid to the holders of such units. The record date for the payment
of Distributions on the Series C Preferred Units on any Distribution Payment
Date shall be the day immediately prior to such Distribution Payment Date.
(b) Reduction of Distribution Amount Due to Pre-Payment Premiums.
Notwithstanding the provisions of Section 2(a), during any period that those
certain mortgage loans between Cappelli Associates II and M&T Real Estate,
Inc. dated March 27, 1997, (the "M&T Note") and between Cappelli Associates VI
and Huntoon Hastings Capital Corp., dated December 19, 1995 (the "Huntoon
Hastings Note," and together with the M&T Note, the "Mortgage Loans"), remain
subject to the prepayment premium or prepayment penalty set forth in Exhibit A
to Rider A to the M&T Note or Section 1 of the Addendum to the Huntoon
Hastings Note (the "Pre-Payment Premiums"), the quarterly Distribution payable
on each Series C Preferred Unit shall be reduced to $15.625 (the "Reduced
Rate"); provided, however (i) that the Reduced Rate shall only apply to such
Preferred Units, having an aggregate stated value of $44,667,000 or less, as
may be designated in writing by Louis R. Cappelli on behalf of the holders of
the Preferred Units, and the Reduced Rate shall not be applicable to any other
Preferred Units, and (ii) in no event shall the Reduced Rate be applicable, or
the provisions of this Section 2(b) be effective, subsequent to April 1, 2007.
To the extent Louis R. Cappelli does not make such designation in writing,
Distributions with respect to each Series B Unit and Series C Unit shall be
reduced equally. If there shall be less than an aggregate of $44,667,000 in
stated value of Preferred Units outstanding while any Pre-Payment Premiums
remain payable (or while any Pre-Payment Premiums are treated as continuing as
provided in this Section 2(b) after having been paid by the Company) the
Reduced Rate shall be further reduced so as to result in an annual aggregate
reduction in Distributions in respect of Preferred Units of $335,000 per annum
(or a proportionately lesser amount, as described below, if only one of the
Mortgage Loans remains outstanding and subject to a Prepayment Premium) from
the annual aggregate distributions that would otherwise have been payable
pursuant to Section 2(a) hereof. If the Mortgage Loans mature or may be repaid
prior to their maturity without the incurrence of any Pre-Payment Premium, or
if the holder of any Preferred Units deposits with the Company an amount of
cash equal to the then current Pre-Payment Premium with the Company upon five
(5) days notice by such holder to the Company of such holder's intention to
deposit such amount, then thereafter the Distribution payable in respect of
Preferred Units shall be as provided in Section 2(a) herein. If the Company
repays one or both of the Mortgage Loans and, in connection therewith, incurs
a Pre-Payment Premium, the reduced Distribution payable with respect to the
Preferred Units provided for in this Section 2(b) shall continue in effect as
if the Mortgage Loans remained outstanding subject to the Pre-Payment Premiums
until such time as such repaid Mortgage Loans would have matured (in
accordance with their terms as in effect on the date hereof) or could have
been repaid without the incurrence of Pre-Payment Premiums, or until such time
as a holder of Preferred Units deposits an amount of cash with the Company
equal to the Pre-Payment Premiums that would have existed at the time of such
deposit had one or both (as the case may be) of the Mortgage Loans not been
repaid by the Company. If one of the Mortgage Loans matures or may be prepaid
prior to maturity without the incurrence of a Pre-Payment Premium or a holder
of Preferred Units has deposited with the Company in cash an amount equal to
the Pre-Payment Premium in respect of one of the Mortgage Loans, and the other
Mortgage Loan remains outstanding and subject to a Pre-Payment Premium, the
reduction in the Distribution provided for in this Section 2(b) shall be
reduced by (x) $145,000 in the event the M&T Note matures or may be prepaid
prior to maturity without the incurrence of a Pre-Payment Premium or a holder
of Preferred Units has deposited with the Company in cash an amount equal to
the PrePayment Premium in respect of such Note or (y) $190,000 in the event
the Huntoon Hastings Note matures or may be prepaid prior to maturity without
the incurrence of a Pre-Payment Premium or a holder of Preferred Units has
deposited with the Company in cash an amount equal to the Pre-Payment Premium
in respect of such Note. Any reduction made in accordance with the prior
sentence shall be promptly confirmed in a written notice given by the Company
to each holder of Series C Preferred Units that are subject to the reduction
in Distribution provided for in this Section 2(b).
(c) Adjustment of Distribution Amount due to Changes in Dividends on
Common Stock. Commencing two years subsequent to the date hereof, the
Distribution set forth in Section 2(a)(i), as such Distribution may be reduced
pursuant to Section 2(b), shall be increased or decreased by an amount equal
to (i) the Distribution Amount immediately prior to such increase or decrease,
multiplied by (ii) that percentage which is equal to 50% of the percentage
increase or decrease, as the case may be, occurring from and after that date
which is two years subsequent to the date hereof in the dollar amount of the
regular quarterly dividend on the common stock of RA, par value $0.01 ("RA
Common Stock"), subject to a maximum increase as a result of the provisions of
this Section 2(c), for any one fiscal year of the Company, of 5% of the
Distribution for the Series C Preferred Units for the immediately preceding
fiscal year of the Company. Subsequent to any such fiscal year, any increase
that would have been made to the Distribution in such fiscal year, but was not
made due to the foregoing 5% limit, shall be made up to an amount that does
not exceed a 5% increase over the Distribution on the Series C Preferred Units
during the immediately preceding fiscal year of the Company. In each fiscal
year thereafter, the excess, if any, over the 5% limit applicable to the
immediately preceding fiscal year shall cumulate with the respective excesses,
if any, over the 5% limit applicable to any fiscal year prior to such
immediately preceding fiscal year and shall be carried forward and increase
the then current Distribution, but in no event shall any such increase exceed
a 5% increase over the Distribution on the Series C Preferred Units for the
immediately preceding fiscal year. In no event shall the distribution be
decreased as a result of this Section 2(c) to less than the Distribution
provided for in Section 2(a) or, if such Distribution has been reduced
pursuant to the terms of Section 2(b), to less than such reduced Distribution.
(d) For purposes of this Supplement, "Business Day" shall mean any
day, excluding Saturday, Sunday and any other day on which commercial banks in
New York are authorized or required by law to close.
3. LIQUIDATION. The Series C Preferred Units shall be preferred as
to assets over any class of Common Units and over any other class of preferred
units of the Company, other than the Series A Preferred Units, the Series B
Preferred Units and any other Qualifying Preferred Units, such that in the
event of the voluntary or involuntary liquidation, dissolution or winding up
of the Company, the holders of the Series C Preferred Units shall be entitled
to have set apart for them, or to be paid out of the assets of the Company,
before any distribution is made to or set apart for the holders of the Common
Units or any other series of preferred units or any other capital interest
heretofore or hereafter issued, other than the Series B Preferred Units and
any other Qualifying Preferred Units and any other class or series of
preferred units, the authorization, creation and issuance of which shall have
been approved by the requisite percentage of outstanding Series C Preferred
Units, as provided in Section 7(a)(ii) hereof, an amount in cash equal to the
Stated Value per unit plus any "Accrued Distributions" (as defined below) as
of such date of payment. "Accrued Distributions" shall mean, as of any date of
determination, an amount equal to the amount of Distributions, determined at
the rate fixed for the payment of Distributions on the Series C Preferred
Units on such date as provided in Section 2 hereof, which would be paid on the
Series C Preferred Units for the period of time elapsed from the most recent
actual Distribution Payment Date to the date of determination (including any
amounts cumulating from prior Distribution periods in accordance with Section
2(a) hereof and any amounts carried forward from prior Distribution periods in
accordance with Section 2(c) hereof). If the assets or surplus funds to be
distributed to the holders of the Series A Preferred Units, the Series C
Preferred Units are insufficient to permit the payment to such holders of
their full preferential amount, the assets and surplus funds legally available
for distribution shall be distributed ratably among the holders of the Series
C Preferred Units, the Series B Preferred Units and any other Qualifying
Preferred Units in proportion to the respective full preferential amounts such
holders are otherwise entitled to receive.
4. CONVERSION OR EXCHANGE OF SERIES C PREFERRED UNITS.
The holders of Series C Preferred Units shall have the
following conversion and exchange rights:
(i) Right to Convert or Exchange. Each Series C Preferred Unit,
at the option of the holder as set forth below, shall be (a) convertible at
any time and at the Conversion Price set forth below, into common units of
limited partnership interests of the Company ("Common Units") and (b)
exchangeable at any time for shares of preferred stock of the General Partner
("RA Preferred Stock") (subject to the Company's right to redeem Series C
Preferred Units presented for exchange for RA Preferred Stock for cash as set
forth below).
(ii) Mechanics of Conversion or Exchange. Each holder of Series
C Preferred Units who desires to convert the same into Common Units or to
exchange the same for RA Preferred Stock shall provide notice to the Company
in the form of the Notice of Conversion or Exchange attached as Schedule B
hereto (a "Conversion Notice") via telecopy, hand delivery or other mail or
messenger service. The original Conversion Notice and the certificate or
certificates representing the Series C Preferred Units for which conversion is
elected (the "Original Certificate") shall be delivered to the Company by
nationally recognized courier, duly endorsed. The date upon which a Conversion
Notice is initially received by the Company shall be a "Notice Date."
The Company shall issue and deliver within fourteen (14) Business
Days after the Notice Date, to such holder of Series C Preferred Units at the
address of the holder on the books of the Company, (i) a certificate or
certificates for the number of Common Units or RA Preferred Stock (as the case
may be) to which the holder shall be entitled as set forth herein, and (ii) if
the Series C Preferred Units represented by the Original Certificate have been
converted only in part, a new certificate evidencing the Series C Preferred
Units not subject to the conversion or exchange; provided that the Original
Certificate representing the Series C Preferred Units to be converted is
received by the transfer agent or the Company within three Business Days after
the Notice Date and the person or persons entitled to receive the Common Units
or RA Preferred Stock (as the case may be) issuable upon such conversion or
exchange shall be treated for all purposes as the record holder or holders of
such shares of Common Units on such date such Original Certificate is received
(the "Conversion Date"). If the Original Certificate representing the Series C
Preferred Units to be converted or exchanged is not received by the transfer
agent or the Company within three Business Days after the Notice Date, the
Conversion Notice shall become null and void.
(iii) Conversion into Common Units. Each Series C Preferred
Unit shall be convertible into a number of Common Units or fraction of Common
Units (such number or fraction, as the case may be, being referred to
hereinafter as the "Preferred Conversion Factor") determined in accordance
with the following formula as of the relevant Conversion Date:
Redemption Price
Preferred Conversion Factor = ----------------------
Conversion Price
where
Redemption Price = For each Series C Preferred Unit for which
conversion is elected, such Series C
Preferred Unit's Stated Value, plus any
Accrued Distributions; and
Conversion Price = $29.38675
(iv) Adjustment to Preferred Conversion Factor. The Preferred
Conversion Factor (and the Conversion Price) shall be subject to adjustment
from time to time hereafter as follows:
(a) In case the Company shall, at any time or from time to time
prior to conversion of all Series C Preferred Units, (A) pay a dividend or
make a distribution on the outstanding Common Units, in Common Units, (B)
split or subdivide the outstanding Common Units into a larger number of Common
Units, (C) effect a reverse unit split or otherwise combine the outstanding
Common Units into a smaller number of Common Units or (D) issue by
reclassification of the Common Units any units of partnership interest in the
Company, then, and in each such case, the Preferred Conversion Factor (and the
Conversion Price) in effect immediately prior to such event or the record date
therefor, whichever is earlier, shall be adjusted so that the holder of any
Series C Preferred Units thereafter surrendered for conversion shall be
entitled to receive the number of Common Units or other securities of the
Company which such holder would have owned or have been entitled to receive
after the happening of any of the events described above, had such Series C
Preferred Units been surrendered for conversion immediately prior to the
happening of such event or the record date therefor, whichever is earlier. An
adjustment made pursuant to this Section 4(iv)(a) shall become effective (x)
in the case of any such dividend or distribution, immediately after the close
of business on the record date for the determination of holders of Common
Units entitled to receive such dividend or distribution, or (y) in the case of
any such subdivision, reclassification, reverse unit split or combination, at
the close of business on the day upon which such Company action becomes
effective.
(b) In case the Company shall, at any time or from time to time
prior to conversion of all Series C Preferred Units, declare, order, pay or
make a dividend or other distribution (including, without limitation, any
distribution of units or other securities or property or rights or warrants to
subscribe for securities of the Company entitling holders thereof to subscribe
for or purchase such securities at a price per share less than the fair market
value of such securities, by way of dividend or spinoff), on its Common Units,
other than (A) regular and customary quarterly distributions by the Company of
Available Cash, or (B) dividends or distributions of Common Units which are
referred to in Section 4(iv)(a) hereof, then, and in each such case, the
Preferred Conversion Factor (and the Conversion Price) shall be adjusted so
that the holder of each Series C Preferred Unit shall be entitled to receive,
upon the conversion thereof, the number of Common Units determined by
multiplying (1) the applicable Preferred Conversion Factor on the day
immediately prior to the record date fixed for the determination of Common
Unit holders entitled to receive such dividend or distribution by (2) a
fraction, the numerator of which shall be the Deemed Market Price (as
hereinafter defined) of a Common Unit on such record date, and the denominator
of which shall be such Deemed Market Price per Common Unit less the fair
market value (as determined in good faith by the Board of Directors of the
General Partner) of such dividend or distribution allocable to one Common
Unit. An adjustment made pursuant to this Section 4 (iv) (b) shall be made
upon the opening of business on the next Business Day following the date on
which any such dividend or distribution is made and shall be effective
retroactively immediately after the close of business on the record date fixed
for the determination of Common Unit holders entitled to receive such dividend
or distribution. For purposes of this Section 4(iv), "Deemed Market Price"
shall mean, as of any date, (a) the "daily market value" of a REIT Share
determined in the manner provided in the definition of "Value", as of such
date, multiplied by (b) the Conversion Factor (as such term is defined in
Article 1 of the Partnership Agreement) in effect as of such date.
(c) In case the Company shall, at any time or from time to time
prior to conversion of all Series C Preferred Units, issue Common Units to
then existing Holders of Common Units (or securities convertible into or
exchangeable for Common Units, whether or not the rights to convert or
exchange such securities are then exercisable) at a price per Common Unit (or
having a conversion price per Common Unit, as applicable) less than the Deemed
Market Price of a Common Unit as of the date of issuance of such Common Units
or of such convertible securities, as the case may be, then, and in each such
case, the Preferred Conversion Factor (and the Conversion Price) shall be
adjusted so that the holder of each Series C Preferred Unit shall be entitled
to receive, upon conversion thereof, the number of Common Units determined by
multiplying (A) the Preferred Conversion Factor on the day immediately prior
to such date by (B) a fraction, the numerator of which shall be the sum of (1)
the number of Common Units outstanding on such date and (2) the number of
additional Common Units issued (or into which the convertible securities may
convert), and the denominator of which shall be the sum of (x) the number of
Common Units outstanding on such date and (y) the number of Common Units which
the aggregate consideration receivable by the Company for the total number of
Common Units so issued (or into which the convertible securities may convert)
would purchase at the Deemed Market Price of a Common Unit as of such date.
Any adjustment made pursuant to this Section 4(iv)(c) shall be made and become
effective on the next Business Day following the date on which any such
issuance is made and shall be effective retroactively immediately after the
close of business on such date. For purposes of this Section 4(iv)(c):
(I) if the Company shall issue Common Units for consideration
other than cash, the price per Common Unit at which such Common
Units are issued shall be deemed to be the fair market value (as
determined in good faith by the Board of Directors of the General
Partner) of the portion of such non-cash consideration allocable to
one Common Unit; and
(II) the aggregate consideration receivable by the Company in
connection with the issuance of Common Units or of securities
convertible into Common Units shall be deemed to be equal to the sum
of the aggregate offering price (before deduction of underwriting
discounts or commissions and expenses payable to third parties) of
all such securities plus the minimum aggregate amount, if any,
payable upon conversion of any such convertible securities into
Common Units.
(d) In case the Company shall, at any time or from time to time
prior to conversion of all Series C Preferred Units, make a tender offer or
exchange offer for Common Units at a price per Common Unit greater than the
Deemed Market Price of a Common Unit as of the date of such repurchase (the
number of Common Units so repurchased, multiplied by the amount by which such
price per Common Unit exceeds the Deemed Market Price of a Common Unit as of
such date, being referred to in this Section 4(iv)(d) as the "Excess Amount"),
then, and in each such case, the Preferred Conversion Factor (and the
Conversion Price) shall be adjusted, in accordance with the applicable
provisions of Sections 4(iv)(a) and 4(iv)(b) above, as if, in lieu of such
repurchase, the Company had (x) made a distribution of property having a fair
market value (as determined in good faith by the Board of Directors of the
General Partner) equal to the Excess Amount, with such distribution made to
holders of Common Units (including holders of Common Units so repurchased) on
the date of such repurchase, and (y) effected a reverse split of the Common
Units in the proportion required to reduce the number of Common Units
outstanding by the number of Common Units repurchased by the Company in such
repurchase.
(e) For purposes of this Section 4(iv), the number of Common Units
at any time outstanding shall not include any Common Units then owned or held
by or for the account of the Company.
(f) In case of any capital reorganization, recapitalization or
reclassification of outstanding Common Units (other than a recapitalization or
reclassification covered by Section 4(iv)(a) hereof), or in case of any
consolidation or merger of the Company with or into another entity, or in case
of any sale or conveyance to another entity of the property of the Company as
an entirety or substantially as an entirety (each of the foregoing being
referred to as a "Transaction"), each Series C Preferred Unit then outstanding
shall thereafter be convertible into, in lieu of the Common Units issuable
upon such conversion prior to consummation of such Transaction, the kind and
amount of units of partnership interest and other securities and property
(including cash) receivable upon the consummation of such Transaction by a
holder of that number of Common Units into which one Series C Preferred Unit
was convertible immediately prior to such Transaction (including, on a pro
rata basis, the cash, securities or property received by holders of Common
Units in any tender or exchange offer that is a step in such Transaction). In
any such case, if necessary, appropriate adjustment (as reasonably determined
by the Board of Directors of the General Partner) shall be made in the
application of the provisions set forth in this Section 4 with respect to
rights and interests thereafter of the holders of Series C Preferred Units, to
the end that the provisions set forth herein for the protection of the
conversion rights of the Series C Preferred Units shall thereafter be
applicable, as nearly as possible, to any such other units and other
securities and property deliverable upon conversion of the Series C Preferred
Units remaining outstanding (with such adjustments in the conversion price and
number of units issuable upon conversion and such other adjustments in the
provisions hereof as the Board of Directors of the General Partner shall
reasonably determine to be appropriate). In case securities or property other
than Common Units shall be issuable or deliverable upon conversion as
aforesaid, then all references in this Section 4(iv)(f) shall be deemed to
apply, so far as appropriate and as nearly as possible, to such other
securities or property.
(g) Notwithstanding anything contained herein to the contrary, the
Company will not effect any Transaction unless, prior to the consummation
thereof, the entity which will be the surviving entity as a result of such
Transaction (the "Surviving Entity") shall assume, by written instrument
mailed to each holder of Series C Preferred Units, the obligation to deliver
to such holder all cash, Surviving Entity common units or other securities to
which, in accordance with the foregoing provisions, such holder is entitled.
(h) If any adjustment under this Section 4(iv) would create a
fractional Common Unit or a right to acquire a fractional Common Unit, such
fractional Common Units shall be issued by the Company.
(v) Exchange for RA Preferred Stock. Each Series C Preferred
Unit shall be exchangeable, at the option of the holder of such Series C
Preferred Unit, for shares of RA Preferred Stock with a stated value equal to
the stated value of the Series C Preferred Units and otherwise with the same
terms as the Series C Preferred Units other than the conversion and exchange
rights provided for in this Section 4, provided that the Company may, in
respect of any Conversion Notice regarding such an exchange, elect to redeem
all of the Series C Preferred Units that are the subject of such Conversion
Notice for cash in an amount equal to the stated value of such Series C
Preferred Units plus any accrued distributions thereon.
(vi) Reservation of Common Units/Preferred Stock Issuable Upon
Conversion or Exchange. The Company shall at all times reserve and keep
available out of its authorized but unissued Common Units, and RA shall at all
times reserve and keep available out of its authorized but unissued shares of
RA Preferred Stock, solely for the purpose of effecting the conversion or
exchange of the Series C Preferred Units, such number of Common Units as shall
from time to time be sufficient to effect the conversion or exchange of all
then outstanding Series C Preferred Units; and if at any time the number of
authorized but unissued Common Units or RA Preferred Stock shall not be
sufficient to effect the conversion or exchange of all then outstanding Series
C Preferred Units, the Company and/or RA (as the case may be) will take such
action as may be necessary to increase its authorized but unissued Common
Units and/or RA Preferred Stock to such number of units or shares as shall be
sufficient for such purpose.
(vii) No Impairment. The Company will not, by amendment of the
Partnership Agreement or this Supplement or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, and will at all times in good faith assist in the
carrying out of all of the provisions of this Section 4 and in the taking of
all such action as may be necessary or appropriate in order to protect the
conversion rights of the Series C Preferred Units hereunder against
impairment. Without limiting the generality of the foregoing, if any event
occurs as to which the foregoing provisions of this Section 4 are not strictly
applicable or, if strictly applicable, would not, in the good faith judgment
of the Board of Directors of the General Partner, fairly protect the
conversion rights of the Series C Preferred Units in accordance with the
essential intent and principles of such provisions, the Company shall make
such adjustments in the application of such provisions, in accordance with
such essential intent and principles, as shall be reasonably necessary, in the
good faith opinion of the Board of Directors of the General Partner, to
protect such conversion rights as aforesaid.
5. STATUS OF CONVERTED UNITS. In the event any Series C Preferred
Units shall be converted or exchanged as contemplated by this Supplement, the
units so converted or exchanged shall be canceled, and shall not be issuable
by the Company as Series C Preferred Units.
6. DISTRIBUTIONS ON CONVERTED OR EXCHANGED UNITS. The initial
distribution to be made with respect to Common Units or RA Preferred Stock
received pursuant to the conversion or exchange of Series C Preferred Units
shall be prorated based upon the number of days during the quarter that such
Common Units or shares of RA Preferred Stock were outstanding.
7. VOTING RIGHTS. (a) Except as otherwise specifically provided by
the Revised Uniform Limited Partnership Act of the State of Delaware or as
otherwise provided herein, the holders of Series C Preferred Units shall be
entitled to vote on any matters required or permitted to be submitted to the
holders of Common Units for their approval, and such holders of Series C
Preferred Units, holders of Series B Preferred Units and holders of Common
Units shall vote as a single class, with the holders of Series C Preferred
Units having a number of votes equal to the number of Series C Preferred Units
then outstanding multiplied by the Preferred Conversion Ratio in effect as of
the date of such vote.
(b) In addition to, and not in limitation of, the provisions of
Section 7(a) above (and notwithstanding anything appearing to the contrary in
the Partnership Agreement), the Company shall not, without the affirmative
consent of the holders of at least sixty-six and two-thirds percent (66-2/3%)
of the then outstanding Series C Preferred Units:
(i) increase (other than in respect of conversions of
Series B Preferred Units) or decrease (other than by conversion or exchange)
the total number of authorized units of Series C Preferred Units;
(ii) in any manner authorize, create or issue any
additional preferred units or any class or series of capital interests, in
either case (A) ranking, either as to payment of distributions or distribution
of assets, prior to the Series C Preferred Units or (B) which in any manner
adversely affects the holders of Series C Preferred Units;
(iii) in any manner alter, change, modify, amend or
supplement the designations or the powers, preferences or rights (including,
without limitation, conversion and exchange rights), or the qualifications,
limitations or restrictions of the Series C Preferred Units or any other terms
or provisions of this Supplement or otherwise take any action in contravention
of the rights of the holders of Series C Preferred Units as set forth in this
Supplement;
(iv) reclassify the Common Units or any other units of any
class or series of capital interests hereafter created junior to the Series C
Preferred Units into units or other interests of any class or series (A)
ranking, either as to payment of distributions or distribution of assets prior
to the Series C Preferred Units, or (B) which in any manner adversely affects
the holders of Series C Preferred Units; or
(v) reclassify the Series A Preferred Units or any other
Qualifying Preferred Units now existing or hereafter created into units or
other interests of any class or series of capital interests (A) ranking,
either as to payment of distributions or distribution of assets, prior to the
Series C Preferred Units, or (B) which in any manner adversely affects the
holders of the Series C Preferred Units.
8. NOTICE OF CERTAIN EVENTS. If at any time, to the extent permitted
hereunder, the Company and/or RA proposes:
(a) to pay any distribution or dividend payable in securities
(of any class or classes) or any obligations, stock or units
convertible into or exchangeable for Common Units or the RA Common
Stock upon either of their capital securities, including, without
limitation (i) Common Units or RA Common Stock or (ii) a cash
distribution other than its customary quarterly cash distribution
(collectively, an "Extraordinary Distribution");
(b) to grant to the holders of its Common Units or Common Stock
generally any rights or warrants (excluding any warrants or other
rights granted to any employee, director, officer, contractor or
consultant of the Company or the General Partner pursuant to any
plan approved by the general partner of the Company or the Board of
Directors of the General Partner) (a "Rights Distribution");
(c) to effect any capital reorganization or reclassification of
capital securities of the Company or the General Partner;
(d) to consolidate with, or merge into, any other company or to
transfer its property as an entirety or substantially as an
entirety; or
(e) to take any other action, or to consummate any other
transaction, which could result in an adjustment of the Preferred
Conversion Factor (and the Conversion Price) pursuant to Section
4(iv) hereof; or
(f) to effect the liquidation, dissolution or winding up of the
Company or the General Partner,
then, in any one or more of the foregoing cases, the Company shall give, by
certified or registered mail, postage prepaid, addressed to the holders of
Series C Preferred Units at the address of such holders as shown on the record
books of the Company, (i) at least thirty (30) days' prior written notice of
the date on which the books of the Company shall close or of a record date
fixed for such dividend, distribution or subscription rights or for
determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, (ii) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, at least
thirty (30) days' prior written notice of the date when the same shall take
place, and (iii) in the case of any other action or transaction that could
result in an adjustment of the Preferred Conversion Ratio (or the Conversion
Price), at least 30 days' prior written notice of the date when such
adjustment shall first become effective. Any notice given in accordance with
the foregoing clause (i) shall also specify, in the case of any such dividend,
distribution or option rights, the date on which the holders of any class of
capital securities shall be entitled thereto.
9. RANK AND LIMITATIONS OF PREFERRED UNITS. All Series C Preferred
Units shall rank equally with each other unit of Series C Preferred Units and
shall be identical in all respects.
10. PARTNERSHIP AGREEMENT. (i) The term "transfer" as used as
Article 11 of the Partnership Agreement shall not include (a) any conversion
of Series C Preferred Units into Common Units or (b) any exchange of Series C
Preferred Units for RA Preferred Stock.
(ii) For purposes of Article 11 of the Partnership Agreement,
the General Partner (and any successor general partner under the Partnership
Agreement) shall hereby be deemed to have consented to the pledge of Series C
Preferred Units by Louis A. Cappelli (or any related party) and to any related
subsequent transfer of Series C Preferred Units to the pledgee of such Units
in connection with a foreclosure on such Units or an assignment-in-lieu of
foreclosure on such pledge.
11. COVENANT OF THE COMPANY AND RA. So long as any Series C
Preferred Units are outstanding, the Company and the General Partner agree to
(i) (a) maintain the one-to-one equivalence of a share of Common Stock and a
Common Unit or (b) maintain the provisions set forth in the Partnership
Agreement as of the date hereof regarding adjustments to the Conversion Factor
(as such term is defined in the Partnership Agreement) and (ii) not issue any
capital stock or other capital interest which would cause any capital interest
in the Partnership to be senior to the Series C Preferred Units in respect of
payment of distributions or distribution of assets, except as set forth in
Section 7(b)(ii) herein.
IN WITNESS WHEREOF, the parties hereto have executed this Supplement to
the Partnership Agreement as of the day of April, 1998.
GENERAL PARTNER
RECKSON ASSOCIATES REALTY CORP.
By: /s/ Scott H. Rechler
----------------------------------------------
Name:
Title:
EXISTING LIMITED PARTNERS
By: Reckson Associates Realty Corp.
as Attorney-in-Fact for the Limited Partners
By: /s/ Scott H. Rechler
---------------------------------------------
Name:
Title:
SERIES C PREFERRED UNIT HOLDERS
-------------------------------
/s/ Louis R. Cappelli
-----------------------------
Louis R. Cappelli
/s/ Luca A. Cappelli
-----------------------------
Luca A. Cappelli
Schedule A
Name and Address Number of Series C Preferred Units (stated value $1,000)
- ---------------- --------------------------------------------------------
Luca A. Cappelli 936.653
[address]
Louis R. Capelli 10,581.376
----------
[address]
Total 11,518.029
==========
Schedule B
Notice of Conversion or Exchange
The undersigned holder of Series C Preferred Units hereby irrevocably
requests Reckson Operating Partnership, L.P., a Delaware limited partnership
(the "Partnership") to (check one):
_
|_| convert into common units of limited partnership interest of the
Partnership; or
_
|_| exchange for shares of Preferred Stock of Reckson Associates Realty
Corp. ("RA")
____ Series C Preferred Units in accordance with the terms of the Amended and
Restated Agreement of Limited Partnership of the Partnership and the
Supplement thereto establishing the Series C Preferred Units; and the
undersigned irrevocably (i) surrenders such units and all right, title and
interest therein; and (ii) directs that the common units of the
Partnership/preferred stock of RA or, in lieu thereof in respect of an
exchange for shares of Preferred Stock of RA, cash, deliverable in accordance
with this Notice be delivered to the address specified below, and in the
name(s) and at the address(es) specified below. The undersigned hereby
represents, warrants, and certifies that the undersigned (a) has good and
unencumbered title to the Series C Preferred Units that are the subject of
this Notice, free and clear of the rights or interests of any other person or
entity; (b) has the full right, power, and authority to request the conversion
or exchange requested herein; and (c) has obtained the consent or approval of
all person or entities, if any, having the right to consent or approve such
conversion or exchange of units.
Dated: ____________
Name:____________________________________
(Please Print)
____________________________________
(Signature)
____________________________________
(Street Address)
____________________________________
(City) (State) (Zip Code)
If applicable, common units/preferred stock is to be issued to:
Name:_______________________
Please indicate social security number:
Exhibit 10.4
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
In accordance with Sections 4.2 and 14.1 B(3) of the Amended and
Restated Agreement of Limited Partnership, dated as of June 2, 1995, as
amended on December 6, 1995 and on April 13, 1998 (the "Partnership
Agreement"), and Section 38 of the Contribution Agreement, dated as of March
31, 1998 among Reckson Operating Partnership, L.P. and each of the
Contributing Parties listed on Schedule 1 thereto, the Partnership Agreement
is hereby supplemented to establish a series of 6,000 preferred units (subject
to increase as set forth below) of limited partnership interest of Reckson
Operating Partnership, L.P. (the "Company") which shall be designated "Series
D Preferred Units" having the rights, preferences, powers, privileges and
restrictions, qualifications and limitations granted to or imposed upon the
Series D Preferred Units (referred to hereinafter sometimes as the
"Designations") as set forth below and which shall be issued to the parties
and in the amounts set forth on Schedule A hereto. The Company has previously
issued (x) the Series B Preferred Units pursuant to the Supplement to the
Amended and Restated Agreement of Limited Partnership Establishing Series B
Preferred Units of Limited Partnership Interest, dated as of March 31, 1998
("Series B Preferred Units") and (y) the Series C Preferred Units pursuant to
the Supplement to the Amended and Restated Agreement of Limited Partnership
Establishing Series C Preferred Units of Limited Partnership Interest, dated
as of March 31, 1998 ("Series C Preferred Units") (the Series B Preferred
Units, the Series C Preferred Units and the Series D Preferred Units shall be
collectively referred to herein as the "Preferred Units"). Subject to the
limitations set forth below, the Company may issue other additional series of
Preferred Units whose rights, preferences, powers, privileges and
restrictions, qualifications and limitations regarding Distributions (as
hereinafter defined) and/or liquidation are either subordinate to, or pari
passu with, the Designations of the Series D Preferred Units. Capitalized
terms used and not otherwise defined herein shall have the meanings set forth
in the Partnership Agreement.
1. STATED VALUE. The stated value of the Series D Preferred Units
shall be one thousand dollars ($1,000.00) per unit (the "Stated Value").
2. DISTRIBUTIONS.
(a) Subject to Section 2(b) below, commencing from the date of
initial issuance of Series D Preferred Units (the "Date of Issuance"),
distributions (the "Distributions") on each Series D Preferred Unit shall be
payable in arrears quarterly, in an amount equal to the greater of: (i) $17.50
(as such amount may be adjusted pursuant to Section 2(c) hereof) or (ii) the
quarterly distribution attributable to each Series D Preferred Unit if such
unit had been converted into Common Units (as hereinafter defined), pursuant
to Section 4 hereof, except that the Preferred Conversion Factor to be
utilized for this purpose shall be calculated using a Conversion Price of
$24.78 (subject to adjustment as provided in Section 4(iv) hereof) in lieu of
the Conversion Price set forth in Section 4(iii), subject to a maximum
increase as a result of the provisions of this Section 2(a)(ii), for any one
fiscal year of the Company, of 5% of the Distributions on the Series D
Preferred Units for the immediately preceding fiscal year of the Company.
Subsequent to any such fiscal year, any increase that would have been made to
the Distribution in such fiscal year, but was not made due to the foregoing 5%
limit, shall be made up to an amount that does not exceed a 5% increase over
the distribution on the Series D Preferred Units during the immediately
preceding fiscal year of the Company. In each fiscal year thereafter, the
excess, if any, over the 5% limit applicable to the immediately preceding
fiscal year shall cumulate with the respective excesses, if any, over the 5%
limit applicable to other fiscal years prior to such immediately preceding
fiscal year and shall be carried forward and increase the then current
Distribution, but in no event shall any such increase exceed a 5% increase
over the Distribution on the Series D Preferred Units for the immediately
preceding fiscal year. Notwithstanding anything appearing to the contrary in
this Section 2(a), the Distribution to be made on Series D Preferred Units to
any holder thereof on the Distribution Payment Date (as defined below)
immediately following the Date of Issuance shall be made based upon the number
of days during the period preceding that initial Distribution Payment Date
that Series D Preferred Units were outstanding. The Distributions shall be
declared and payable quarterly in arrears on or about January 31, April 30,
July 31 and October 31 of each year, or, if not a business day, the next
succeeding business day, commencing July 31, 1998 (a "Distribution Payment
Date"). If on any Distribution Payment Date the Company shall not be permitted
under Delaware law to pay all or a portion of any such declared Distributions,
the Company shall take such action as may be lawfully permitted in order to
enable the Company to the extent permitted by Delaware law, lawfully to pay
such Distributions. Distributions shall be cumulative from the Date of
Issuance, whether or not in any Distribution period such Distribution shall be
declared or there shall be funds of the Company legally available for payment
of such Distributions. No Distributions shall be declared or paid on any class
of Common Units or any other class or series of Preferred Units, other than
Distributions declared and paid on the Series A Preferred Units, the Series B
Preferred Units, the Series C Preferred Units and, subject to the limitations
set forth in Section 7(b)(ii), any other series of Preferred Units which, by
the terms of such series are pari passu with the Series D Preferred Units with
respect to payment of distributions and distribution of assets upon
liquidation (such Preferred Units hereinafter referred to as "Qualifying
Preferred Units"), until all Distributions, if any, due and legally payable on
the Series D Preferred Units have been paid to the holders of such units. The
record date for the payment of Distributions on the Series D Preferred Units
on any Distribution Payment Date shall be the day immediately prior to such
Distribution Payment Date.
(b) Reduction of Distribution Amount Due to Pre-Payment Premiums.
Notwithstanding the provisions of Section 2(a), during any period that those
certain mortgage loans between Cappelli Associates II and M&T Real Estate,
Inc. dated March 27, 1997, (the "M&T Note") and between Cappelli Associates VI
and Huntoon Hastings Capital Corp., dated December 19, 1995 (the "Huntoon
Hastings Note," and together with the M&T Note, the "Mortgage Loans"), remain
subject to the prepayment premium or prepayment penalty set forth in Exhibit A
to Rider A to the M&T Note or Section 1 of the Addendum to the Huntoon
Hastings Note (the "Pre-Payment Premiums"), the quarterly Distribution payable
on each Series D Preferred Unit shall be reduced to $15.625 (the "Reduced
Rate"); provided, however (i) that the Reduced Rate shall only apply to such
Preferred Units, having an aggregate stated value of $44,667,000 or less, as
may be designated in writing by Louis R. Cappelli on behalf of the holders of
the Preferred Units, and the Reduced Rate shall not be applicable to any other
Preferred Units, and (ii) in no event shall the Reduced Rate be applicable, or
the provisions of this Section 2(b) be effective, subsequent to April 1, 2007.
To the extent Louis R. Cappelli does not make such designation in writing,
Distributions with respect to each Series B, Series C and Series D Unit shall
be reduced equally. If there shall be less than an aggregate of $44,667,000 in
stated value of Preferred Units outstanding while any Pre-Payment Premiums
remain payable (or while any Pre-Payment Premiums are treated as continuing as
provided in this Section 2(b) after having been paid by the Company) the
Reduced Rate shall be further reduced so as to result in an annual aggregate
reduction in Distributions in respect of Preferred Units of $335,000 per annum
(or a proportionately lesser amount, as described below, if only one of the
Mortgage Loans remains outstanding and subject to a Prepayment Premium) from
the annual aggregate distributions that would otherwise have been payable
pursuant to Section 2(a) hereof. If the Mortgage Loans mature or may be repaid
prior to their maturity without the incurrence of any Pre-Payment Premium, or
if the holder of any Preferred Units deposits with the Company an amount of
cash equal to the then current Pre-Payment Premium with the Company upon five
(5) days notice by such holder to the Company of such holder's intention to
deposit such amount, then thereafter the Distribution payable in respect of
Preferred Units shall be as provided in Section 2(a) herein. If the Company
repays one or both of the Mortgage Loans and, in connection therewith, incurs
a Pre-Payment Premium, the reduced Distribution payable with respect to the
Preferred Units provided for in this Section 2(b) shall continue in effect as
if the Mortgage Loans remained outstanding subject to the Pre-Payment Premiums
until such time as such repaid Mortgage Loans would have matured (in
accordance with their terms as in effect on the date hereof) or could have
been repaid without the incurrence of Pre-Payment Premiums, or until such time
as a holder of Preferred Units deposits an amount of cash with the Company
equal to the Pre-Payment Premiums that would have existed at the time of such
deposit had one or both (as the case may be) of the Mortgage Loans not been
repaid by the Company. If one of the Mortgage Loans matures or may be prepaid
prior to maturity without the incurrence of a Pre-Payment Premium or a holder
of Preferred Units has deposited with the Company in cash an amount equal to
the Pre-Payment Premium in respect of one of the Mortgage Loans, and the other
Mortgage Loan remains outstanding and subject to a Pre-Payment Premium, the
reduction in the Distribution provided for in this Section 2(b) shall be
reduced by (x) $145,000 in the event the M&T Note matures or may be prepaid
prior to maturity without the incurrence of a Pre-Payment Premium or a holder
of Preferred Units has deposited with the Company in cash an amount equal to
the Pre-Payment Premium in respect of such Note or (y) $190,000 in the event
the Huntoon Hastings Note matures or may be prepaid prior to maturity without
the incurrence of a Pre-Payment Premium or a holder of Preferred Units has
deposited with the Company in cash an amount equal to the Pre-Payment Premium
in respect of such Note. Any reduction made in accordance with the prior
sentence shall be promptly confirmed in a written notice given by the Company
to each holder of Series D Preferred Units that are subject to the reduction
in Distribution provided for in this Section 2(b).
(c) Adjustment of Distribution Amount due to Changes in Dividends on
Common Stock. Commencing two years subsequent to the date hereof, the
Distribution set forth in Section 2(a)(i), as such Distribution may be reduced
pursuant to Section 2(b), shall be increased or decreased by an amount equal
to (i) the Distribution Amount immediately prior to such increase or decrease,
multiplied by (ii) that percentage which is equal to 50% of the percentage
increase or decrease, as the case may be, occurring from and after that date
which is two years subsequent to the date hereof in the dollar amount of the
regular quarterly dividend on the common stock of RA, par value $0.01 ("RA
Common Stock"), subject to a maximum increase as a result of the provisions of
this Section 2(c), for any one fiscal year of the Company, of 5% of the
Distribution for the Series D Preferred Units for the immediately preceding
fiscal year of the Company. Subsequent to any such fiscal year, any increase
that would have been made to the Distribution in such fiscal year, but was not
made due to the foregoing 5% limit, shall be made up to an amount that does
not exceed a 5% increase over the Distribution on the Series D Preferred Units
during the immediately preceding fiscal year of the Company. In each fiscal
year thereafter, the excess, if any, over the 5% limit applicable to the
immediately preceding fiscal year shall cumulate with the respective excesses,
if any, over the 5% limit applicable to any fiscal year prior to such
immediately preceding fiscal year and shall be carried forward and increase
the then current Distribution, but in no event shall any such increase exceed
a 5% increase over the Distribution on the Series D Preferred Units for the
immediately preceding fiscal year. In no event shall the distribution be
decreased as a result of this Section 2(c) to less than the Distribution
provided for in Section 2(a) or, if such Distribution has been reduced
pursuant to the terms of Section 2(b), to less than such reduced Distribution.
(d) For purposes of this Supplement, "Business Day" shall mean any
day, excluding Saturday, Sunday and any other day on which commercial banks in
New York are authorized or required by law to close.
3. LIQUIDATION. The Series D Preferred Units shall be preferred as
to assets over any class of Common Units and over any other class of preferred
units of the Company, other than the Series A Preferred Units, the Series B
Preferred Units and the Series C Preferred Units and any other Qualifying
Preferred Units, such that in the event of the voluntary or involuntary
liquidation, dissolution or winding up of the Company, the holders of the
Series D Preferred Units shall be entitled to have set apart for them, or to
be paid out of the assets of the Company, before any distribution is made to
or set apart for the holders of the Common Units or any other series of
preferred units or any other capital interest heretofore or hereafter issued,
other than the Series B Preferred Units and the Series C Preferred Units and
any other Qualifying Preferred Units and any other class or series of
preferred units, the authorization, creation and issuance of which shall have
been approved by the requisite percentage of outstanding Series D Preferred
Units, as provided in Section 7(a)(ii) hereof, an amount in cash equal to the
Stated Value per unit plus any "Accrued Distributions" (as defined below) as
of such date of payment. "Accrued Distributions" shall mean, as of any date of
determination, an amount equal to the amount of Distributions, determined at
the rate fixed for the payment of Distributions on the Series D Preferred
Units on such date as provided in Section 2 hereof, which would be paid on the
Series D Preferred Units for the period of time elapsed from the most recent
actual Distribution Payment Date to the date of determination (including any
amounts cumulating from prior Distribution periods in accordance with Section
2(a) hereof and any amounts carried forward from prior Distribution periods in
accordance with Section 2(c) hereof). If the assets or surplus funds to be
distributed to the holders of the Series A Preferred Units, the Series D
Preferred Units are insufficient to permit the payment to such holders of
their full preferential amount, the assets and surplus funds legally available
for distribution shall be distributed ratably among the holders of the Series
D Preferred Units, the Series C Preferred Units, the Series B Preferred Units
and any other Qualifying Preferred Units in proportion to the respective full
preferential amounts such holders are otherwise entitled to receive.
4. CONVERSION OR EXCHANGE OF SERIES D PREFERRED UNITS.
The holders of Series D Preferred Units shall have the
following conversion and exchange rights:
(i) Right to Convert or Exchange. Each Series D Preferred Unit,
at the option of the holder as set forth below, shall be (a) convertible at
any time and at the Conversion Price set forth below, into common units of
limited partnership interests of the Company ("Common Units") and (b)
exchangeable at any time for shares of preferred stock of the General Partner
("RA Preferred Stock") (subject to the Company's right to redeem Series D
Preferred Units presented for exchange for RA Preferred Stock for cash as set
forth below).
(ii) Mechanics of Conversion or Exchange. Each holder of Series
D Preferred Units who desires to convert the same into Common Units or to
exchange the same for RA Preferred Stock shall provide notice to the Company
in the form of the Notice of Conversion or Exchange attached as Schedule B
hereto (a "Conversion Notice") via telecopy, hand delivery or other mail or
messenger service. The original Conversion Notice and the certificate or
certificates representing the Series D Preferred Units for which conversion is
elected (the "Original Certificate") shall be delivered to the Company by
nationally recognized courier, duly endorsed. The date upon which a Conversion
Notice is initially received by the Company shall be a "Notice Date."
The Company shall issue and deliver within fourteen (14) Business
Days after the Notice Date, to such holder of Series D Preferred Units at the
address of the holder on the books of the Company, (i) a certificate or
certificates for the number of Common Units or RA Preferred Stock (as the case
may be) to which the holder shall be entitled as set forth herein, and (ii) if
the Series D Preferred Units represented by the Original Certificate have been
converted only in part, a new certificate evidencing the Series D Preferred
Units not subject to the conversion or exchange; provided that the Original
Certificate representing the Series D Preferred Units to be converted is
received by the transfer agent or the Company within three Business Days after
the Notice Date and the person or persons entitled to receive the Common Units
or RA Preferred Stock (as the case may be) issuable upon such conversion or
exchange shall be treated for all purposes as the record holder or holders of
such shares of Common Units on such date such Original Certificate is received
(the "Conversion Date"). If the Original Certificate representing the Series D
Preferred Units to be converted or exchanged is not received by the transfer
agent or the Company within three Business Days after the Notice Date, the
Conversion Notice shall become null and void.
(iii) Conversion into Common Units. Each Series D Preferred
Unit shall be convertible into a number of Common Units or fraction of Common
Units (such number or fraction, as the case may be, being referred to
hereinafter as the "Preferred Conversion Factor") determined in accordance
with the following formula as of the relevant Conversion Date:
Redemption Price
Preferred Conversion Factor = ----------------------
Conversion Price
where
Redemption Price = For each Series D Preferred Unit for
which conversion is elected, such Series D
Preferred Unit's Stated Value, plus any
Accrued Distributions; and
Conversion Price = $29.1165
(iv) Adjustment to Preferred Conversion Factor. The Preferred
Conversion Factor (and the Conversion Price) shall be subject to adjustment
from time to time hereafter as follows:
(a) In case the Company shall, at any time or from time to time
prior to conversion of all Series D Preferred Units, (A) pay a dividend or
make a distribution on the outstanding Common Units, in Common Units, (B)
split or subdivide the outstanding Common Units into a larger number of Common
Units, (C) effect a reverse unit split or otherwise combine the outstanding
Common Units into a smaller number of Common Units or (D) issue by
reclassification of the Common Units any units of partnership interest in the
Company, then, and in each such case, the Preferred Conversion Factor (and the
Conversion Price) in effect immediately prior to such event or the record date
therefor, whichever is earlier, shall be adjusted so that the holder of any
Series D Preferred Units thereafter surrendered for conversion shall be
entitled to receive the number of Common Units or other securities of the
Company which such holder would have owned or have been entitled to receive
after the happening of any of the events described above, had such Series D
Preferred Units been surrendered for conversion immediately prior to the
happening of such event or the record date therefor, whichever is earlier. An
adjustment made pursuant to this Section 4(iv)(a) shall become effective (x)
in the case of any such dividend or distribution, immediately after the close
of business on the record date for the determination of holders of Common
Units entitled to receive such dividend or distribution, or (y) in the case of
any such subdivision, reclassification, reverse unit split or combination, at
the close of business on the day upon which such Company action becomes
effective.
(b) In case the Company shall, at any time or from time to time
prior to conversion of all Series D Preferred Units, declare, order, pay or
make a dividend or other distribution (including, without limitation, any
distribution of units or other securities or property or rights or warrants to
subscribe for securities of the Company entitling holders thereof to subscribe
for or purchase such securities at a price per share less than the fair market
value of such securities, by way of dividend or spinoff), on its Common Units,
other than (A) regular and customary quarterly distributions by the Company of
Available Cash, or (B) dividends or distributions of Common Units which are
referred to in Section 4(iv)(a) hereof, then, and in each such case, the
Preferred Conversion Factor (and the Conversion Price) shall be adjusted so
that the holder of each Series D Preferred Unit shall be entitled to receive,
upon the conversion thereof, the number of Common Units determined by
multiplying (1) the applicable Preferred Conversion Factor on the day
immediately prior to the record date fixed for the determination of Common
Unit holders entitled to receive such dividend or distribution by (2) a
fraction, the numerator of which shall be the Deemed Market Price (as
hereinafter defined) of a Common Unit on such record date, and the denominator
of which shall be such Deemed Market Price per Common Unit less the fair
market value (as determined in good faith by the Board of Directors of the
General Partner) of such dividend or distribution allocable to one Common
Unit. An adjustment made pursuant to this Section 4 (iv) (b) shall be made
upon the opening of business on the next Business Day following the date on
which any such dividend or distribution is made and shall be effective
retroactively immediately after the close of business on the record date fixed
for the determination of Common Unit holders entitled to receive such dividend
or distribution. For purposes of this Section 4(iv), "Deemed Market Price"
shall mean, as of any date, (a) the "daily market value" of a REIT Share
determined in the manner provided in the definition of "Value", as of such
date, multiplied by (b) the Conversion Factor (as such term is defined in
Article 1 of the Partnership Agreement) in effect as of such date.
(c) In case the Company shall, at any time or from time to time
prior to conversion of all Series D Preferred Units, issue Common Units to
then existing Holders of Common Units (or securities convertible into or
exchangeable for Common Units, whether or not the rights to convert or
exchange such securities are then exercisable) at a price per Common Unit (or
having a conversion price per Common Unit, as applicable) less than the Deemed
Market Price of a Common Unit as of the date of issuance of such Common Units
or of such convertible securities, as the case may be, then, and in each such
case, the Preferred Conversion Factor (and the Conversion Price) shall be
adjusted so that the holder of each Series D Preferred Unit shall be entitled
to receive, upon conversion thereof, the number of Common Units determined by
multiplying (A) the Preferred Conversion Factor on the day immediately prior
to such date by (B) a fraction, the numerator of which shall be the sum of (1)
the number of Common Units outstanding on such date and (2) the number of
additional Common Units issued (or into which the convertible securities may
convert), and the denominator of which shall be the sum of (x) the number of
Common Units outstanding on such date and (y) the number of Common Units which
the aggregate consideration receivable by the Company for the total number of
Common Units so issued (or into which the convertible securities may convert)
would purchase at the Deemed Market Price of a Common Unit as of such date.
Any adjustment made pursuant to this Section 4(iv)(c) shall be made and become
effective on the next Business Day following the date on which any such
issuance is made and shall be effective retroactively immediately after the
close of business on such date. For purposes of this Section 4(iv)(c):
(I) if the Company shall issue Common Units for consideration
other than cash, the price per Common Unit at which such Common
Units are issued shall be deemed to be the fair market value (as
determined in good faith by the Board of Directors of the General
Partner) of the portion of such non-cash consideration allocable to
one Common Unit; and
(II) the aggregate consideration receivable by the Company in
connection with the issuance of Common Units or of securities
convertible into Common Units shall be deemed to be equal to the sum
of the aggregate offering price (before deduction of underwriting
discounts or commissions and expenses payable to third parties) of
all such securities plus the minimum aggregate amount, if any,
payable upon conversion of any such convertible securities into
Common Units.
(d) In case the Company shall, at any time or from time to time
prior to conversion of all Series D Preferred Units, make a tender offer or
exchange offer for Common Units at a price per Common Unit greater than the
Deemed Market Price of a Common Unit as of the date of such repurchase (the
number of Common Units so repurchased, multiplied by the amount by which such
price per Common Unit exceeds the Deemed Market Price of a Common Unit as of
such date, being referred to in this Section 4(iv)(d) as the "Excess Amount"),
then, and in each such case, the Preferred Conversion Factor (and the
Conversion Price) shall be adjusted, in accordance with the applicable
provisions of Sections 4(iv)(a) and 4(iv)(b) above, as if, in lieu of such
repurchase, the Company had (x) made a distribution of property having a fair
market value (as determined in good faith by the Board of Directors of the
General Partner) equal to the Excess Amount, with such distribution made to
holders of Common Units (including holders of Common Units so repurchased) on
the date of such repurchase, and (y) effected a reverse split of the Common
Units in the proportion required to reduce the number of Common Units
outstanding by the number of Common Units repurchased by the Company in such
repurchase.
(e) For purposes of this Section 4(iv), the number of Common Units
at any time outstanding shall not include any Common Units then owned or held
by or for the account of the Company.
(f) In case of any capital reorganization, recapitalization or
reclassification of outstanding Common Units (other than a recapitalization or
reclassification covered by Section 4(iv)(a) hereof), or in case of any
consolidation or merger of the Company with or into another entity, or in case
of any sale or conveyance to another entity of the property of the Company as
an entirety or substantially as an entirety (each of the foregoing being
referred to as a "Transaction"), each Series D Preferred Unit then outstanding
shall thereafter be convertible into, in lieu of the Common Units issuable
upon such conversion prior to consummation of such Transaction, the kind and
amount of units of partnership interest and other securities and property
(including cash) receivable upon the consummation of such Transaction by a
holder of that number of Common Units into which one Series D Preferred Unit
was convertible immediately prior to such Transaction (including, on a pro
rata basis, the cash, securities or property received by holders of Common
Units in any tender or exchange offer that is a step in such Transaction). In
any such case, if necessary, appropriate adjustment (as reasonably determined
by the Board of Directors of the General Partner) shall be made in the
application of the provisions set forth in this Section 4 with respect to
rights and interests thereafter of the holders of Series D Preferred Units, to
the end that the provisions set forth herein for the protection of the
conversion rights of the Series D Preferred Units shall thereafter be
applicable, as nearly as possible, to any such other units and other
securities and property deliverable upon conversion of the Series D Preferred
Units remaining outstanding (with such adjustments in the conversion price and
number of units issuable upon conversion and such other adjustments in the
provisions hereof as the Board of Directors of the General Partner shall
reasonably determine to be appropriate). In case securities or property other
than Common Units shall be issuable or deliverable upon conversion as
aforesaid, then all references in this Section 4(iv)(f) shall be deemed to
apply, so far as appropriate and as nearly as possible, to such other
securities or property.
(g) Notwithstanding anything contained herein to the contrary, the
Company will not effect any Transaction unless, prior to the consummation
thereof, the entity which will be the surviving entity as a result of such
Transaction (the "Surviving Entity") shall assume, by written instrument
mailed to each holder of Series D Preferred Units, the obligation to deliver
to such holder all cash, Surviving Entity common units or other securities to
which, in accordance with the foregoing provisions, such holder is entitled.
(h) If any adjustment under this Section 4(iv) would create a
fractional Common Unit or a right to acquire a fractional Common Unit, such
fractional Common Units shall be issued by the Company.
(i) Exchange for RA Preferred Stock. Each Series D Preferred
Unit shall be exchangeable, at the option of the holder of such Series D
Preferred Unit, for shares of RA Preferred Stock with a stated value equal to
the stated value of the Series D Preferred Units and otherwise with the same
terms as the Series D Preferred Units other than the conversion and exchange
rights provided for in this Section 4, provided that the Company may, in
respect of any Conversion Notice regarding such an exchange, elect to redeem
all of the Series D Preferred Units that are the subject of such Conversion
Notice for cash in an amount equal to the stated value of such Series D
Preferred Units plus any accrued distributions thereon.
(ii) Reservation of Common Units/Preferred Stock Issuable Upon
Conversion or Exchange. The Company shall at all times reserve and keep
available out of its authorized but unissued Common Units, and RA shall at all
times reserve and keep available out of its authorized but unissued shares of
RA Preferred Stock, solely for the purpose of effecting the conversion or
exchange of the Series D Preferred Units, such number of Common Units as shall
from time to time be sufficient to effect the conversion or exchange of all
then outstanding Series D Preferred Units; and if at any time the number of
authorized but unissued Common Units or RA Preferred Stock shall not be
sufficient to effect the conversion or exchange of all then outstanding Series
D Preferred Units, the Company and/or RA (as the case may be) will take such
action as may be necessary to increase its authorized but unissued Common
Units and/or RA Preferred Stock to such number of units or shares as shall be
sufficient for such purpose.
(iii) No Impairment. The Company will not, by amendment of the
Partnership Agreement or this Supplement or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, and will at all times in good faith assist in the
carrying out of all of the provisions of this Section 4 and in the taking of
all such action as may be necessary or appropriate in order to protect the
conversion rights of the Series D Preferred Units hereunder against
impairment. Without limiting the generality of the foregoing, if any event
occurs as to which the foregoing provisions of this Section 4 are not strictly
applicable or, if strictly applicable, would not, in the good faith judgment
of the Board of Directors of the General Partner, fairly protect the
conversion rights of the Series D Preferred Units in accordance with the
essential intent and principles of such provisions, the Company shall make
such adjustments in the application of such provisions, in accordance with
such essential intent and principles, as shall be reasonably necessary, in the
good faith opinion of the Board of Directors of the General Partner, to
protect such conversion rights as aforesaid.
5. STATUS OF CONVERTED UNITS. In the event any Series D Preferred
Units shall be converted or exchanged as contemplated by this Supplement, the
units so converted or exchanged shall be canceled, and shall not be issuable
by the Company as Series D Preferred Units.
6. DISTRIBUTIONS ON CONVERTED OR EXCHANGED UNITS. The initial
distribution to be made with respect to Common Units or RA Preferred Stock
received pursuant to the conversion or exchange of Series D Preferred Units
shall be prorated based upon the number of days during the quarter that such
Common Units or shares of RA Preferred Stock were outstanding.
7. VOTING RIGHTS. (a) Except as otherwise specifically provided by
the Revised Uniform Limited Partnership Act of the State of Delaware or as
otherwise provided herein, the holders of Series D Preferred Units shall be
entitled to vote on any matters required or permitted to be submitted to the
holders of Common Units for their approval, and such holders of Series D
Preferred Units, holders of Series C Preferred Units, holders of Series B
Preferred Units and holders of Common Units shall vote as a single class, with
the holders of Series D Preferred Units having a number of votes equal to the
number of Series D Preferred Units then outstanding multiplied by the
Preferred Conversion Ratio in effect as of the date of such vote.
(b) In addition to, and not in limitation of, the provisions of
Section 7(a) above (and notwithstanding anything appearing to the contrary in
the Partnership Agreement), the Company shall not, without the affirmative
consent of the holders of at least sixty-six and two-thirds percent (66-2/3%)
of the then outstanding Series D Preferred Units:
(i) increase or decrease (other than by conversion or exchange)
the total number of authorized units of Series D Preferred Units;
(ii) in any manner authorize, create or issue any additional
preferred units or any class or series of capital interests, in either
case (A) ranking, either as to payment of distributions or distribution
of assets, prior to the Series D Preferred Units or (B) which in any
manner adversely affects the holders of Series D Preferred Units;
(iii) in any manner alter, change, modify, amend or supplement
the designations or the powers, preferences or rights (including, without
limitation, conversion and exchange rights), or the qualifications,
limitations or restrictions of the Series D Preferred Units or any other
terms or provisions of this Supplement or otherwise take any action in
contravention of the rights of the holders of Series D Preferred Units as
set forth in this Supplement;
(iv) reclassify the Common Units or any other units of any
class or series of capital interests hereafter created junior to the
Series D Preferred Units into units or other interests of any class or
series (A) ranking, either as to payment of distributions or distribution
of assets prior to the Series D Preferred Units, or (B) which in any
manner adversely affects the holders of Series D Preferred Units; or
(v) reclassify the Series A Preferred Units or any other
Qualifying Preferred Units now existing or hereafter created into units
or other interests of any class or series of capital interests (A)
ranking, either as to payment of distributions or distribution of assets,
prior to the Series D Preferred Units, or (B) which in any manner
adversely affects the holders of the Series D Preferred Units.
8. NOTICE OF CERTAIN EVENTS. If at any time, to the extent permitted
hereunder, the Company and/or RA proposes:
(a) to pay any distribution or dividend payable in securities (of
any class or classes) or any obligations, stock or units convertible into or
exchangeable for Common Units or the RA Common Stock upon either of their
capital securities, including, without limitation (i) Common Units or RA
Common Stock or (ii) a cash distribution other than its customary quarterly
cash distribution (collectively, an "Extraordinary Distribution");
(b) to grant to the holders of its Common Units or Common Stock
generally any rights or warrants (excluding any warrants or other rights
granted to any employee, director, officer, contractor or consultant of the
Company or the General Partner pursuant to any plan approved by the general
partner of the Company or the Board of Directors of the General Partner) (a
"Rights Distribution");
(c) to effect any capital reorganization or reclassification of
capital securities of the Company or the General Partner;
(d) to consolidate with, or merge into, any other company or to
transfer its property as an entirety or substantially as an entirety; or
(e) to take any other action, or to consummate any other
transaction, which could result in an adjustment of the Preferred Conversion
Factor (and the Conversion Price) pursuant to Section 4(iv) hereof; or
(f) to effect the liquidation, dissolution or winding up of the
Company or the General Partner, then, in any one or more of the foregoing
cases, the Company shall give, by certified or registered mail, postage
prepaid, addressed to the holders of Series D Preferred Units at the address
of such holders as shown on the record books of the Company, (i) at least
thirty (30) days' prior written notice of the date on which the books of the
Company shall close or of a record date fixed for such dividend, distribution
or subscription rights or for determining rights to vote in respect of any
such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding-up, (ii) in the case of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, at least thirty (30) days' prior written notice of
the date when the same shall take place, and (iii) in the case of any other
action or transaction that could result in an adjustment of the Preferred
Conversion Ratio (or the Conversion Price), at least thirty (30) days' prior
written notice of the date when such adjustment shall first become effective.
Any notice given in accordance with the foregoing clause (i) shall also
specify, in the case of any such dividend, distribution or option rights, the
date on which the holders of any class of capital securities shall be entitled
thereto.
9. RANK AND LIMITATIONS OF PREFERRED UNITS. All Series D Preferred
Units shall rank equally with each other unit of Series D Preferred Units and
shall be identical in all respects.
10. PARTNERSHIP AGREEMENT. (i) The term "transfer" as used as
Article 11 of the Partnership Agreement shall not include (a) any conversion
of Series D Preferred Units into Common Units or (b) any exchange of Series D
Preferred Units for RA Preferred Stock.
(ii) For purposes of Article 11 of the Partnership Agreement,
the General Partner (and any successor general partner under the Partnership
Agreement) shall hereby be deemed to have consented to the pledge of Series D
Preferred Units by Louis A. Cappelli (or any related party) and to any related
subsequent transfer of Series D Preferred Units to the pledgee of such Units
in connection with a foreclosure on such Units or an assignment-in-lieu of
foreclosure on such pledge.
11. COVENANT OF THE COMPANY AND RA. So long as any Series D
Preferred Units are outstanding, the Company and the General Partner agree to
(i) (a) maintain the one-to-one equivalence of a share of Common Stock and a
Common Unit or (b) maintain the provisions set forth in the Partnership
Agreement as of the date hereof regarding adjustments to the Conversion Factor
(as such term is defined in the Partnership Agreement) and (ii) not issue any
capital stock or other capital interest which would cause any capital interest
in the Partnership to be senior to the Series D Preferred Units in respect of
payment of distributions or distribution of assets, except as set forth in
Section 7(b)(ii) herein.
IN WITNESS WHEREOF, the parties hereto have executed this Supplement to
the Partnership Agreement as of the 30th day of June, 1998.
GENERAL PARTNER
RECKSON ASSOCIATES REALTY CORP.
By: /s/ Scott H. Rechler
----------------------------------------
Name:
Title:
EXISTING LIMITED PARTNERS
By: Reckson Associates Realty Corp.
as Attorney-in-Fact for the Limited Partners
By: /s/ Scott H. Rechler
-----------------------------------------
Name:
Title:
SERIES D PREFERRED UNIT HOLDERS
-------------------------------
/s/ Louis R. Cappelli
---------------------------------------------
Louis R. Cappelli
Schedule A
<TABLE>
<CAPTION>
Name and Address Number of Series D Preferred Units (stated value $1,000)
- ---------------- --------------------------------------------------------
<S> <C>
Louis R. Cappelli 6,000
c/o Cappelli Enterprises, Inc.
115 Stevens Avenue
Valhalla, New York 10595
</TABLE>
Schedule B
Notice of Conversion or Exchange
The undersigned holder of Series D Preferred Units hereby irrevocably
requests Reckson Operating Partnership, L.P., a Delaware limited partnership
(the "Partnership") to (check one):
__
/__/ convert into common units of limited partnership interest of the
Partnership; or
__
/__/ exchange for shares of Preferred Stock of Reckson Associates Realty
Corp. ("RA")
_______ Series D Preferred Units in accordance with the terms of the Amended
and Restated Agreement of Limited Partnership of the Partnership and the
Supplement thereto establishing the Series D Preferred Units; and the
undersigned irrevocably (i) surrenders such units and all right, title and
interest therein; and (ii) directs that the common units of the
Partnership/preferred stock of RA or, in lieu thereof in respect of an
exchange for shares of Preferred Stock of RA, cash, deliverable in accordance
with this Notice be delivered to the address specified below, and in the
name(s) and at the address(es) specified below. The undersigned hereby
represents, warrants, and certifies that the undersigned (a) has good and
unencumbered title to the Series D Preferred Units that are the subject of
this Notice, free and clear of the rights or interests of any other person or
entity; (b) has the full right, power, and authority to request the conversion
or exchange requested herein; and (c) has obtained the consent or approval of
all person or entities, if any, having the right to consent or approve such
conversion or exchange of units.
Dated: _________________
Name: __________________________________
(Please Print)
__________________________________
(Signature)
__________________________________
(Street Address)
__________________________________
(City) (State) (Zip Code)
If applicable, common units/preferred stock is to be issued to:
Name: ________________________________
Please indicate social security number: __________
Exhibit 23.1
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. (the "Company") and
Reckson Operating Partnership, L.P. of our report dated February 11, 1999, with
respect to the consolidated financial statements and schedule of the Company
for each of the years in the three year period ended December 31, 1998 included
in this Form 8-K filed with the Securities and Exchange Commission on March 1,
1999.
Ernst & Young LLP
New York, New York
March 1, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000930548
<NAME> RECKSON ASSOCIATES REALTY CORP.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 2,349
<SECURITIES> 0
<RECEIVABLES> 81,040
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 83,389
<PP&E> 1,743,223
<DEPRECIATION> (159,049)
<TOTAL-ASSETS> 1,854,816
<CURRENT-LIABILITIES> 70,623
<BONDS> 889,313
0
92
<COMMON> 400
<OTHER-SE> 705,572
<TOTAL-LIABILITY-AND-EQUITY> 1,854,816
<SALES> 252,447
<TOTAL-REVENUES> 266,373
<CGS> 0
<TOTAL-COSTS> 101,140
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 47,795
<INCOME-PRETAX> 64,481
<INCOME-TAX> 0
<INCOME-CONTINUING> 64,481
<DISCONTINUED> 0
<EXTRAORDINARY> (1,670)
<CHANGES> 0
<NET-INCOME> 37,895
<EPS-PRIMARY> .96
<EPS-DILUTED> .95
</TABLE>
