-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DMAgyj1QJbYMSeB1v7VfXUg5RK12QWjXAo4eJlI7226dCmUdwlygXqkBEI0ago+i V5TFBpvdPAQ4AfYPjA+1MA== 0000905148-99-000346.txt : 19990302 0000905148-99-000346.hdr.sgml : 19990302 ACCESSION NUMBER: 0000905148-99-000346 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19990301 ITEM INFORMATION: FILED AS OF DATE: 19990301 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RECKSON ASSOCIATES REALTY CORP CENTRAL INDEX KEY: 0000930548 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 113233650 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-13762 FILM NUMBER: 99554435 BUSINESS ADDRESS: STREET 1: 225 BROADHOLLOW RD CITY: MELVILLE STATE: NY ZIP: 11747 BUSINESS PHONE: 5166946900 MAIL ADDRESS: STREET 1: 225 BROADHOLLOW RD CITY: MELVILLE STATE: NY ZIP: 11747 8-K 1 T:\EDGAR\547138.TXT 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) 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 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 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)
RECKSON ASSOCIATES REALTY CORP. CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT SHARE AMOUNTS) For the Year Ended December 31, ----------------------------------------- 1998 1997 1996 ----------- ----------- ----------- 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 =========== =========== ===========
(see accompanying notes to financial statements) RECKSON ASSOCIATES REALTY CORP. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (IN THOUSANDS)
Limited Additional Total Partners' Common Preferred Paid Retained Stockholders' Minority Stock Stock in Capital Earnings Equity Interest --------- --------- --------- --------- ------------ --------- 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 ========= ========= ========= ========= ========= =========
(see accompanying notes to financial statements)
RECKSON ASSOCIATES REALTY CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) For the Year Ended December 31, ----------------------------------- 1998 1997 1996 --------- --------- --------- 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 ========= ======= =========
(see accompanying notes to financial statements) 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. 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. 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. 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. 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. 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. 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. 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. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The Company's pro forma information follows for the years ended December 31: 1998 1997 1996 --------- ----------- ---------- Pro forma net income (in thousands) ....................... $ 32,846 $ 34,287 $ 17,431 ========== =========== ========== Basic pro forma earnings per share .......................... $ .83 $ 1.05 $ .88 ========== =========== ========== Diluted pro forma earnings per share .......................... $ .82 $ 1.03 $ .86 ========== =========== ========== A summary of the Company's stock option activity, and related information follows: Weighted-Average Options Exercise Price(1) ------- ----------------- Outstanding - December 31, 1995 ......... 864,060 $ 12.23 Granted ............................. 621,478 $ 16.94 Exercised ........................... (27,954) $ 12.39 Forfeited ........................... (36,370) $ 12.77 --------- Outstanding - December 31, 1996 ......... 1,421,214 $ 14.28 Granted ............................. 1,123,300 $ 26.67 Exercised ........................... (126,429) $ 14.94 Forfeited ........................... (10,319) $ 16.33 --------- Outstanding- December 31, 1997 .......... 2,407,766 $ 20.16 Granted ............................. 2,431,132 $ 24.03 Exercised ........................... (74,837) $ 14.76 Forfeited ........................... (30,417) $ 25.44 --------- Outstanding - December 31, 1998 ......... 4,733,644 $ 22.22 ========= - ---------- (1) Prices through December 31, 1996 are split adjusted The weighted average fair value of options granted for the years ended December 31, 1996, 1997 and 1998 was $.86, $1.47 and $2.06, respectively. In addition, there were 403,564 options at a weighted average per share exercise price of $13.95, 1,758,534 options at a weighted average per share exercise price of $20.16 and 4,527,144 options at a weighted average per share exercise price of $22.22 exercisable at December 31, 1996, 1997 and 1998, respectively. 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). 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):
1998 1997 1996 ------------ ---------- ---------- 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 ========== ========== ==========
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. In July 1998, the Company formed a joint venture, Metropolitan Partners LLC, a Delaware limited liability company ("Metropolitan"), with Crescent Real Estate Equities Company, a Texas real estate investment trust ("Crescent"). Pursuant to a merger agreement executed on July 9, 1998 and amended and restated on August 11, 1998 (the "Initial Merger Agreement") between Metropolitan, the Company, Crescent and Tower Realty Trust Inc., a Maryland corporation ("Tower"), Metropolitan agreed, subject to the terms and conditions of the Merger Agreement, to purchase the common stock of Tower. Prior to the execution of the Initial Merger Agreement, Metropolitan identified certain potential tax issues regarding Tower's operations. Metropolitan entered into the Initial Merger Agreement only after Tower made detailed representations and warranties purporting to address these issues. In the course of due diligence, however, Metropolitan, the Company and Crescent discovered that these representations and warranties may not be correct and discussed these concerns with Tower, specifically advising Tower that they were not terminating the Initial Merger Agreement at that time. Metropolitan, the Company and Crescent invited Tower to respond to these concerns. However, on November 2, 1998, Tower filed a complaint in the Supreme Court of the State of New York alleging Metropolitan, the Company and Crescent willfully breached the Initial Merger Agreement. Tower, in the complaint, was seeking declaratory and other relief, including damages of not less than $75 million and specific performance by Metropolitan, the Company and Crescent of their obligations under the Initial Merger Agreement. On December 8, 1998,the Company, Metropolitan and Tower executed a revised merger agreement (the "Revised Merger Agreement"), pursuant to which Tower will be merged (the "Merger") into Metropolitan, with Metropolitan surviving the Merger. Concurrently with the Merger, Tower Realty Operating Partnership, L.P. ("Tower OP") will be merged with and into a subsidiary of Metropolitan. The consideration to be issued in the mergers will be comprised of (i) 25% cash and (ii) 75% of shares of Class B Exchangeable Common Stock, par value $.01 per share, of the Company (the "Class B Common Stock"), or in certain circumstances described below, shares of Class B Common Stock and unsecured notes of the Operating Partnership. The Company controls Metropolitan and owns 100% of the common equity; Crescent owns a preferred equity investment in Metropolitan. The Revised Merger Agreement replaces the Initial Merger Agreement (which at that time was a 50/50 joint venture between the Company and Crescent) relating to the acquisition by Metropolitan of Tower for $24 per share. Pursuant to the terms of the Revised Merger Agreement, holders of shares of outstanding common stock of Tower ("Tower Common Stock"), and outstanding units of limited partnership interest of Tower OP will have the option to elect to receive cash or shares of Class B Common Stock, subject to proration. Under the terms of the transaction, Metropolitan will effectively pay for each share of Tower Common Stock and each unit of limited partnership interest of Tower OP the sum of (i) $5.75 in cash, and (ii) 0.6273 of a share of Class B Common Stock. The shares of Class B Common Stock are entitled to receive an initial annual dividend of $2.24 per share and is subject to adjustment annually. The shares of Class B Common Stock are exchangeable at any time, at the option of the holder, into an equal number of shares of common stock, par value $.01 per share, of the Company subject to customary antidilution adjustments. The Company, at its option, may redeem any or all of the Class B Common Stock in exchange for an equal number of shares of the Company's common stock at any time following the four year, six-month anniversary of the issuance of the Class B Common Stock. The Company's Board of Directors have recommended to the Company's stockholders the approval of a proposal to issue a number of shares of Class B Common Stock equal to 75% of the sum of (i) the number of outstanding shares of the Tower Common Stock and (ii) the number of Tower OP limited partnership units, in each case, at the effective time of the mergers. If the stockholders of the Company do not approve the issuance of the Class B Common Stock as proposed, the Revised Merger Agreement provides that approximately one-third of the consideration that was to be paid in the form of Class B Common Stock will be replaced by senior unsecured notes of the Operating Partnership, which notes will bear interest at the rate of 7% per annum and have a term of ten years. In addition, if the stockholders of the Company do not approve the issuance of Class B Common Stock as proposed and the Board of Directors of the Company withdraws or amends or modifies in any material respect its recommendation for, approval of such proposal, then the total principal amount of notes to be issued and distributed in the Merger will be increased by $15 million. Simultaneously with the execution of the Revised Merger Agreement, Metropolitan and Tower executed and consummated a stock purchase agreement (the "Series A Stock Purchase Agreement") pursuant to which Metropolitan purchased from Tower approximately 2.2 million shares of Series A Convertible Preferred Stock, par value $.01 per share, of Tower (the "Tower Preferred Stock"), for an aggregate purchase price of $40 million, $30 million of which was funded through a capital contribution by the Company to Metropolitan and which is included in prepaid expenses and other assets on the 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 ============= 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):
Southern Consolidated Long Island Westchester New Jersey Connecticut RMI Other Totals --------------- -------------- ----------------- -------------- ------------- ------------- ----------- 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 =============== ========= =========== ============ ============= ============= ============
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. 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. 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):
1998 ------------------------------------------------------------------------------ First Quarter Second Quarter Third Quarter Fourth Quarter ----------------- -------------- ------------- ------------------ 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 ================== ============== ============== ==================
1997 ------------------------------------------------------------------------------ First Quarter Second Quarter Third Quarter Fourth Quarter ---------------- ---------------- -------------- -------------------- 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 ============= ============== ============== ==============
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 ============ RECKSON ASSOCIATES REALTY CORP. SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1998 (IN THOUSANDS)
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 ----------- ----------- ---- ------------ ---- ------------ 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
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 ----------- ---- ------------ ----- ------------ ------------ -------- ----------- 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-
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 ----------- ----------- ---- ------------ ---- ------------ 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
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 ----------- ---- ------------ ----- ------------ ------------ -------- ----------- 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-
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 ----------- ----------- ---- ------------ ---- ------------ 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
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 ---- ------------ ----- ------------ ------------ -------- ----------- 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-
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 ----------- ----------- ---- ------------ ---- ------------ 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 --- ---
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 ----------- ---- ------------ ----- ------------ ------------ -------- ----------- 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-
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 ----------- ----------- ---- ------------ ---- ------------ 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
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 ----------- 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-
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 ------------ ----------- ---- ------------- ---- ------------ 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 ======== ========= ========== ==== ========
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 ----------- 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 ======== ========== ========== ======== - -------------------------------------------------------------------------------
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. The changes in real estate for each of the periods in the three years ended December 31, 1998 are as follows:
JANUARY 1, 1998 JANUARY 1, 1997 JUNE 1, 1996 TO TO TO DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996 ----------------- ----------------- ----------------- 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 =========== ========== ========
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: JANUARY 1, 1998 JANUARY 1, 1997 JANUARY 1, 1996 TO TO TO DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996 ----------------- ----------------- ----------------- 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 ======== ========= =========
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 EX-3.1 2 T:\EDGAR\238441.TXT 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] 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 EX-4.1 3 T:\EDGAR\547138.SUB 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 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. EX-10.1 4 T:\EDGAR\239136.TXT 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. 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: 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. EX-10.2 5 T:\EDGAR\146975.TXT 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
Name and Address Number of units (stated value $1,000) of Series B Preferred Units - ---------------- ----------------------------------------------------------------- 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 ======
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: EX-10.3 6 T:\EDGAR\146974.TXT 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: EX-10.4 7 T:\EDGAR\456040.TXT 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
Name and Address Number of Series D Preferred Units (stated value $1,000) - ---------------- -------------------------------------------------------- Louis R. Cappelli 6,000 c/o Cappelli Enterprises, Inc. 115 Stevens Avenue Valhalla, New York 10595
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: __________ EX-23.1 8 T:\EDGAR\547138.SUB 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 EX-27 9 FDS --
5 0000930548 RECKSON ASSOCIATES REALTY CORP. 1,000 U.S. DOLLARS 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 1 2,349 0 81,040 0 0 83,389 1,743,223 (159,049) 1,854,816 70,623 889,313 0 92 400 705,572 1,854,816 252,447 266,373 0 101,140 0 0 47,795 64,481 0 64,481 0 (1,670) 0 37,895 .96 .95
-----END PRIVACY-ENHANCED MESSAGE-----