- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM 10-K [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2000 OR [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to Commission File Number 1-13762 --------------------- RECKSON OPERATING PARTNERSHIP, L. P. (Exact name of registrant as specified in its charter) DELAWARE 11-3233647 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 225 BROADHOLLOW ROAD, MELVILLE, NY 11747 (Address of principal (Zip Code) executive offices) Registrant's telephone number, including area code: (631) 694-6900 --------------------- Securities registered pursuant to Section 12(b) of the Act: None --------------------- Securities registered pursuant to Section 12(g) of the Act: None --------------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K, or any amendment to this Form 10-K. [X] DOCUMENTS INCORPORATED BY REFERENCE Portions of the definitive Proxy Statement of Reckson Associates Realty Corp. relating to its Annual Shareholder's Meeting to be held May 24, 2001 are incorporated by reference into Part III. As of March 22, 2001, 4,839,782 common units of limited partnership interest were held by non-affiliates of the Registrant. There is no established trading market for such units. - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
TABLE OF CONTENTS ITEM NO. PAGE - ------- ------ PART I 1. Business .................................................................... I-1 2. Properties .................................................................. I-8 3. Legal Proceedings ........................................................... I-18 4. Submission of Matters to a Vote of Security Holders ......................... I-18 PART II 5. Market for Registrant's Common Equity and Related Security Matters .......... II-1 6. Selected Financial Data ..................................................... II-2 7. Management's Discussion and Analysis of Financial Condition and Results of Operations .................................................................. II-3 7(a). Quantitative and Qualitative Disclosures about Market Risk .................. II-11 8. Financial Statements and Supplementary Data ................................. II-12 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .................................................................. II-12 PART III 10. Directors and Executive Officers of the Registrant .......................... III-1 11. Executive Compensation ...................................................... III-1 12. Security Ownership of Certain Beneficial Owners and Management .............. III-1 13. Certain Relationships and Related Transactions .............................. III-1 PART IV 14. Financial Statements and Schedules, Exhibits and Reports on Form 8-K ........ IV-1
PART I ITEM 1. BUSINESS GENERAL Reckson Operating Partnership, L. P. (the "Operating Partnership") commenced operations on June 2, 1995. Reckson Associates Realty Corp. (the "Company"), which serves as the sole general partner of the Operating Partnership, is a fully integrated, self administered and self managed real estate investment trust ("REIT"). The Operating Partnership and the Company were formed for the purpose of continuing the commercial real estate business of Reckson Associates, its affiliated partnerships and other entities ("Reckson"). For more than 40 years, Reckson has been engaged in the business of owning, developing, acquiring, constructing, managing and leasing office and industrial properties in the New York tri-state area (the "Tri-State Area"). Based on industry surveys, management believes that the Operating Partnership is one of the largest owners and operators of Class A suburban and commercial business district ("CBD") office properties and industrial properties in the Tri-State Area. As of December 31, 2000, the Operating Partnership owned 188 properties (the "Properties") (including 10 joint venture properties) in the Tri-State Area encompassing approximately 21.3 million rentable square feet, all of which are managed by the Operating Partnership. The Properties consist of 65 Class A suburban office properties (the "Suburban Office Properties") encompassing approximately 9.1 million rentable square feet, 17 Class A CBD Office Properties (the "CBD Office Properties") encompassing approximately 5.3 million rentable square feet (together, the "Office Properties"), 104 industrial properties (the "Industrial Properties") encompassing approximately 6.8 million rentable square feet and two 10,000 square foot retail properties. The Operating Partnership also owns a 357,000 square foot office building located in Orlando, Florida. In addition, as of December 31, 2000, the Operating Partnership had approximately $6.4 million invested in certain mortgage indebtedness encumbering approximately 101 acres of land, approximately $17.1 million in a note receivable secured by a partnership interest in Omni Partners, L. P., owner of the Omni, a 575,000 square foot Class A Office Property located in Uniondale, New York and $36.5 million under three notes which are secured by a minority partner's preferred unit interest in the Operating Partnership (the "Note Receivable Investments"). As of December 31, 2000, the Operating Partnership is in the process of developing a 315,000 square foot office building and also owned approximately 290 acres of land in 13 separate parcels on which the Operating Partnership can develop approximately 1.4 million square feet of office space and approximately 224,000 square feet of industrial space. During 1999 and 2000, the Operating Partnership made investments in REIT-qualified joint ventures with Reckson Strategic Venture Partners, LLC ("RSVP"), a venture capital fund created as a research and development vehicle for the Operating Partnership to invest in alternative real estate sectors (see Corporate Strategies and Growth Opportunities). RSVP is managed by an affiliate of FrontLine Capital Group ("FrontLine"). The Operating Partnership has committed up to $100 million for investments in the form of either (i) RSVP-controlled (REIT-qualified) joint ventures or (ii) loans to FrontLine for FrontLine's investment in RSVP. As of December 31, 2000, the Operating Partnership has invested approximately $41.1 million in RSVP -- controlled (REIT-qualified) joint ventures. In March 2001, the Operating Partnership increased the RSVP Commitment to $110 million and advanced approximately $24 million under the RSVP Commitment to fund additional RSVP-controlled (REIT-qualified) joint ventures. The Office Properties are Class A office buildings and are well-located, well-maintained and professionally managed. In addition, these properties are modern with high finishes or have been modernized to successfully compete with newer buildings and achieve among the highest rent, occupancy and tenant retention rates within their markets. The majority of the Suburban Office Properties are located in ten planned office parks. The Office Properties are tenanted by a diverse industry group of national firms which include consumer products, telecommunication, health care, insurance, financial services and professional service firms such as accounting firms and securities brokerage houses. The Industrial Properties are utilized for distribution, warehousing, research and development and light manufacturing / assembly activities and are located primarily in three planned industrial parks developed by Reckson. I-1
All of the Company's interests in the Properties, the Note Receivable Investments and land are held directly or indirectly by, and all of its operations are conducted through, the Operating Partnership. The Company controls the Operating Partnership as the sole general partner and as of December 31, 2000, owned approximately 88% of the Operating Partnership's outstanding Class A common units of limited partnership and Class B common units of limited partnership interest. The Operating Partnership seeks to maintain cash reserves for normal repairs, replacements, improvements, working capital and other contingencies. The Operating Partnership has established an unsecured credit facility (the "Credit Facility") with a maximum borrowing amount of $575 million scheduled to mature on September 7, 2003. The Credit Facility requires the Operating Partnership to comply with a number of financial and other covenants on an ongoing basis. There are numerous commercial properties that compete with the Operating Partnership in attracting tenants and numerous companies that compete in selecting land for development and properties for acquisition. The Operating Partnership's executive offices are located at 225 Broadhollow Road, Melville, New York 11747 and its telephone number at that location is (631) 694-6900. At December 31, 2000, the Operating Partnership had approximately 317 employees. RECENT DEVELOPMENTS Acquisition Activity. Set forth below is a brief description of the Operating Partnership's major acquisition activity during 2000. On January 13, 2000, the Operating Partnership acquired 1350 Avenue of the Americas, a 540,000 square foot, 35 story, CBD Office Property located in New York City, for a purchase price of approximately $126.5 million. This acquisition was financed through a $70 million secured debt financing and a draw under the Credit Facility. On August 15, 2000, the Operating Partnership acquired 538 Broadhollow Road, a 180,000 square foot Suburban Office Property located in Melville, New York for a purchase price of approximately $25.6 million. This acquisition was financed, in part, through a borrowing under the Credit Facility. In addition, as of December 31, 2000, the Operating Partnership has invested approximately $6.4 million in certain mortgage indebtedness encumbering approximately 101 acres of land. The Operating Partnership has also loaned approximately $17.1 million to its minority partner in Omni, its 575,000 square foot flagship Long Island Suburban Office Property, and effectively increased its economic interest in the property owning partnership. On August 9, 1999, the Operating Partnership executed a contract for the sale, which took place in three stages, of its interest in Reckson Morris Operating Partnership, L. P. ("RMI"), which consisted of 28 properties, comprising approximately 6.1 million square feet and three other big box industrial properties to Keystone Property Trust ("KTR"). In addition, the Operating Partnership also entered into a sale agreement with the Matrix Development Group ("Matrix") relating to a first mortgage note and certain industrial land holdings (the "Matrix Sale"). The combined total sales price of $310 million ($52 million of which is attributable to the Morris Companies and its affiliates in the form of $41.6 million of preferred units of KTR's operating partnership and $10.4 million of debt relief) consisted of (i) approximately $159.7 million in cash, (ii) $41.5 million in convertible preferred and common stock of KTR, (iii) $61.6 million in preferred units of KTR's operating partnership, (iv) approximately $37.1 million of debt relief and (v) approximately $10.1 million in purchase money mortgage notes secured by certain land that is being sold to Matrix. As of December 31, 2000, the Matrix Sale and the sale of the Operating Partnership's interest in RMI was completed. As a result, the Operating Partnership realized a gain of approximately $16.7 million. Such gain has been included in gain on dispositions of real estate on the Operating Partnership's consolidated statements of income. Cash proceeds from the sales were used primarily to repay I-2
borrowings under the Operating Partnership's Credit Facility. In addition, the Operating Partnership redeemed approximately $20 million of the preferred stock of KTR and received principal repayments of approximately $7.2 million related to the purchase money mortgage notes, all of which was used primarily for general operating expenditures. Leasing Activity During the year ended December 31, 2000, the Operating Partnership leased approximately 800,000 square feet at the CBD Office Properties at an average effective rent (i.e., base rent adjusted on a straight-line basis for free rent periods, tenant improvements and leasing commissions) of $32.80 per square foot, approximately 1.9 million square feet at the Suburban Office Properties at an average effective rent of $22.90 per square foot and approximately 1.3 million square feet at the Industrial Properties at an average effective rent of $7.29 per square foot. Included in this leasing data is 753,701 square feet at the Long Island Suburban Office Properties at an average effective rent of $24.07; 590,022 square feet at the Westchester Suburban Office Properties at an average effective rent of $23.01; 319,174 square feet at the Westchester CBD Office Properties at an average effective rent of $23.77; 149,301 square feet at the Connecticut CBD Office Properties at an average effective rent of $26.25; 548,878 square feet at the New Jersey Suburban Office Properties at an average effective rent of $21.19 and 331,442 square feet at the New York City CBD Office Properties at an average effective rent of $44.44. Also included in this leasing data is 1,222,932 square feet at the Long Island Industrial Properties at an average effective rent of $6.88; 48,568 square feet at the Westchester Industries Properties at an average effective rent of $17.26 and 16,150 square feet at the New Jersey Industrial Properties at an average effective rent of $8.96. Financing Activities On September 7, 2000, the Operating Partnership obtained its three year $575 million unsecured revolving Credit Facility from The Chase Manhattan Bank, as administrative agent, UBS Warburg LLC as syndication agent and Deutsche Bank as documentation agent. The Credit Facility matures in September, 2003 and borrowings under the Credit Facility are currently priced off of LIBOR plus 105 basis points. The Credit Facility replaced the Operating Partnership's $500 million unsecured credit facility (together with the Credit Facility, the "Credit Facility") and $75 million term loan. As a result, certain deferred loan costs incurred in connection with such unsecured credit facility and term loan were written off. Such amount is reflected as an extraordinary loss in the Operating Partnership's consolidated statements of income. The Operating Partnership utilizes the Credit Facility primarily to finance real estate investments, fund its real estate development activities and for working capital purposes. At December 31, 2000, the Operating Partnership had availability under the Credit Facility to borrow an additional $358.4 million (of which, $51.3 million has been allocated for outstanding undrawn letters of credit). Other Financing Activities On January 13, 2000, in connection with the acquisition of 1350 Avenue of the Americas, the Operating Partnership obtained a secured $70 million first mortgage commitment which matures in August 2001 and bears interest at LIBOR plus 165 basis points On November 2, 2000, the Operating Partnership obtained a three year secured $250 million first mortgage commitment on the property located at 919 Third Avenue, New York N. Y. Interest rates on borrowings under the commitment are based on LIBOR plus a spread ranging from 110 basis points to 140 basis points based upon the outstanding balance. At closing, $200 million was funded under the commitment at an interest rate of LIBOR plus 120 basis points. In addition, in connection with the $200 million initial funding, the Operating Partnership purchased a LIBOR interest rate hedge that provides for a maximum LIBOR rate of 9.25%. The initial funding was used primarily to repay outstanding borrowings under the Operating Partnership's Credit Facility. I-3
Unit Issuances On June 20, 2000, in conjunction with the Company's exchange of 4,181,818 shares of its Class A common stock for four million shares of its Series B preferred stock, the Operating Partnership issued 4,181,818 Class A common units in exchange for four million shares of Series E preferred units with a liquidation preference value of $100 million. OPERATING STRATEGIES AND GROWTH OPPORTUNITIES The Operating Partnership's primary business objectives are to maximize current return to its partners through increases in distributable cash flow and to increase partner's long-term total return through the appreciation in the value of its Class A common units and Class B common units. The Operating Partnership plans to achieve these objectives by continuing Reckson's operating strategies and capitalizing on the internal and external growth opportunities as described below. Operating Strategies. Management believes that throughout its 40-year operating history, Reckson has created value in its properties through a variety of market cycles by implementing the operating strategies described below. These operating strategies include the implementation of: (i) a multidisciplinary leasing approach that involves architectural design and construction personnel as well as leasing professionals, (ii) innovative property marketing programs such as the broker frequent leasing points program which was established by the Operating Partnership to enhance relationships with the brokerage community and which allows brokers to accumulate points for leasing space in the Operating Partnership's portfolio which can be redeemed for luxurious prizes, (iii) a comprehensive tenant service program and property amenities designed to maximize tenant satisfaction and retention, (iv) cost control management and systems that take advantage of economies of scale that arise from the Operating Partnership's market position and efficiencies attributable to the state-of-the-art energy control systems at many of the Office Properties and (v) an acquisition and development strategy that is continuously adjusted in light of anticipated changes in market conditions and that seeks to capitalize on management's multidisciplinary expertise and market knowledge to modify, upgrade and reposition a property in its marketplace in order to maximize value. The Operating Partnership also intends to adhere to a policy of maintaining a debt ratio (defined as the total debt of the Operating Partnership as a percentage of the sum of the Operating Partnership's total debt and the value of its equity) of less than 50%. As of December 31, 2000, the Operating Partnership's debt ratio was approximately 40.6%. This calculation is net of minority partners' proportionate share of debt and including the Operating Partnership's share of unconsolidated joint venture debt. This debt ratio is intended to provide the Operating Partnership with financial flexibility to select the optimal source of capital (whether through debt or partners contributions) with which to finance external growth. Growth Opportunities. The Operating Partnership intends to achieve its primary business objectives by applying its operating strategies to the internal and external growth opportunities described below. Internal Growth. To the extent the Long Island, Westchester, New Jersey and Southern Connecticut suburban office and industrial markets remain strong with supply constrained markets management believes the Operating Partnership is well positioned to benefit from rental revenue growth through: (i) contractual annual compounding of 3-4% Base Rent increases (defined as fixed gross rental amounts that excludes payments on account of real estate taxes, operating expense escalations and base electrical charges) on approximately 85% of existing leases at the Long Island Properties, (ii) periodic contractual increases in Base Rent on existing leases at the Westchester Properties, the New Jersey Properties and the Southern Connecticut Properties and (iii) the potential for increases to Base Rents as leases expire and space is re-leased at the higher rents that exist in the current market environment as a result of continued tightening of the office and industrial markets with limited new supply. In connection with the Operating Partnership's acquisition and merger transaction with Tower Realty Trust, Inc. (see External Growth below) the Operating Partnership entered the New York City office market. The New York City office market is currently experiencing favorable supply and demand I-4
characteristics exceeding those currently in the Operating Partnership's suburban markets and is also characterized by similar lack of available land supply and other barriers to entry that limit competition. The Operating Partnership's New York City office buildings offer similar potential for increase in Base Rents as described in (iii) above. External Growth. The Operating Partnership seeks to acquire multi-tenant suburban and CBD Class A office and industrial properties located in the Tri-State Area. Management believes that the Tri-State Area presents opportunities to acquire or invest in properties at attractive yields. The Operating Partnership believes that its (i) capital structure, in particular its Credit Facility providing for a maximum borrowing amount of up to $575 million, (ii) ability to acquire a property for Class A common units and thereby defer the seller's income tax on gain, (iii) operating economies of scale, (iv) relationships with financial institutions and private real estate owners, (v) fully integrated operations in its five existing divisions and (vi) its dominant position and franchise in the submarkets in which it owns Properties will enhance the Operating Partnership's ability to identify and capitalize on acquisition opportunities. The Operating Partnership also intends to selectively develop new Class A suburban and CBD office and industrial properties and to continue to redevelop existing Properties as these opportunities arise. For the near future, the Operating Partnership will concentrate its development activities on industrial and Class A Suburban and CBD office properties within the Tri-State Area. The Operating Partnership's expansion into the New York City office market and the opening of its New York City division provides it with additional opportunities to acquire interests in properties at attractive yields. The Operating Partnership also believes that the addition of its New York City division provides additional leasing and operational facilities and enhances its overall franchise value by being the only real estate operating company in the Tri-State Area with significant presence in both Manhattan and each of the surrounding sub-markets. During 1997, the Company formed FrontLine (formerly Reckson Service Industries, Inc.) and RSVP. In connection with the formation of FrontLine, the Operating Partnership established a credit facility with FrontLine (the "FrontLine Facility") in the amount of $100 million for FrontLine to use in its investment activities, operations and other general corporate purposes. As of December 31, 2000, the Operating Partnership had advanced approximately $93.4 million under the FrontLine Facility. 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 ventures (for REIT-qualified investments) or advances made to FrontLine under terms similar to the FrontLine Facility. As of December 31, 2000, approximately $83.2 million had been funded through the RSVP Commitment, of which $41.1 million represents investments in RSVP-controlled (REIT-qualified) joint ventures and $42.1 million represents advances. In March 2001, the Operating Partnership increased the RSVP Commitment to $110 million and advanced approximately $24 million under the RSVP Commitment to fund additional RSVP-controlled (REIT-qualified) joint ventures. In addition, as of December 31, 2000, the Operating Partnership, through its Credit Facility, has allocated approximately $3.2 million in outstanding undrawn letters of credit for the benefit of FrontLine. Both the FrontLine Facility and the RSVP Commitment have a term of five years and advances under each are recourse obligations of FrontLine. Interest accrues on advances made under the credit facilities at a rate equal to the greater of (a) the prime rate plus two percent and (b) 12% per annum, with the rate on amounts that are outstanding for more than one year increasing annually at a rate of four percent of the prior year's rate. Prior to maturity, interest is payable quarterly but only to the extent of net cash flow of FrontLine and on an interest-only basis. As of December 31, 2000, interest accrued under the FrontLine Facility and RSVP Commitment was approximately $13.8 million. FrontLine currently has two distinct operating units: one of which represents its interest in HQ Global Holdings, Inc., the largest provider of flexible officing solutions in the world, and the other which represents interests in technology based partner companies. RSVP invests primarily in real estate and real estate related operating companies generally outside of the Operating Partnership's core office and industrial focus. On August 27, 1998 the Operating Partnership 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 I-5
facilities. The new venture, Dominion Properties LLC (the "Dominion Venture"), is owned by Dominion Venture Group LLC, and by a subsidiary of the Operating Partnership. The Dominion Venture is primarily engaged in acquiring, developing and/or owning government-occupied office buildings and privately operated correctional facilities. Under the Dominion Venture's operating agreement, RSVP may invest up to $100 million, some of which may be invested by the Operating Partnership ( 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 Operating Partnership. The Operating Partnership's investment was funded through the RSVP Commitment. In addition, the Operating Partnership advanced approximately $3.3 million to FrontLine 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, 2000, the Operating Partnership had invested, through the RSVP Commitment, approximately $20.6 million in the Dominion Venture which had investments in 13 government office buildings and three correctional facilities. As of December 31, 2000, the Operating Partnership has invested approximately $11.1 million, through a subsidiary, in RAP Student Housing Properties, LLC ("RAP-SHP"), a company that engages primarily in the acquisition and development of off-campus student housing projects. The Operating Partnership's investment was funded through the RSVP Commitment. In addition, the Operating Partnership has advanced approximately $3.5 million to FrontLine through the RSVP Commitment for an investment in RSVP which was then invested in certain service business activities related to student housing. As of December 31, 2000, RAP-SHP had investments in seven off-campus student housing projects. Additionally, during 2000, RAP-SHP entered into an off-campus development joint venture with Titan Investments II, a third party national developer. The purpose of the venture is to develop or reposition off-campus student housing projects across the United States. As of December 31, 2000, the Operating Partnership has invested approximately $3.4 million, through a subsidiary, in RAP MD, LLC ("RAP-MD"), a company that engages primarily in the acquisition, ownership, management and development of medical office properties. The Operating Partnership's investment was funded through the RSVP Commitment. As of December 31, 2000, RAP- MD had investments in eight medical office properties. On September 28, 2000, the Operating Partnership formed a joint venture (the "Tri-State JV") with Teachers Insurance and Annuity Association ("TIAA") and contributed eight Office Properties aggregating approximately 1.5 million square feet to the Tri-State JV in exchange for approximately $136 million and a 51% majority ownership interest in the Tri-State JV. As a result, the Operating Partnership realized a gain of approximately $15.2 million. Such gain has been included in gain on dispositions of real estate on the Operating Partnership's consolidated statements of income. Cash proceeds received were used primarily to repay borrowings under the Credit Facility. In July 1998, the Operating Partnership formed a joint venture, Metropolitan Partners LLC ("Metropolitan"), with Crescent Real Estate Equities Company, a Texas REIT ("Crescent") for the purpose of acquiring Tower Realty Trust, Inc. ("Tower"). On May 24, 1999 the Company completed the merger with Tower and acquired three Class A CBD Office Properties located in New York City totaling 1.6 million square feet and one Suburban Office Property located on Long Island totaling approximately 101,000 square feet. In addition, pursuant to the merger, the Company also acquired certain office properties, a property under development and land located outside of the Tri-State Area. The Company controls Metropolitan and owns 100% of the common equity; Crescent owns a $85 million preferred equity investment in Metropolitan. Crescent's investment accrues distributions at a rate of 7.5% per annum for a two-year period (May 24, 1999 through May 24, 2001) 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 $85 million preferred interest into either (i) a common membership interest in Metropolitan or (ii) shares of the Company's Class A common stock at a conversion price of $24.61 per share. I-6
Prior to the closing of the merger, the Company arranged for the sale of four of Tower's Class B New York City properties, comprising approximately 701,000 square feet for approximately $84.5 million. Subsequent to the closing of the merger, the Company has sold a real estate joint venture interest and all of the property located outside the Tri-State Area other than one office property located in Orlando, Florida for approximately $171.1 million. The combined consideration consisted of approximately $143.8 million in cash and approximately $27.3 million of debt relief. Net cash proceeds from the sales were used primarily to repay borrowings under the Operating Partnership's Credit Facility. As a result of incurring certain sales and closing costs in connection with the sale of the assets located outside the Tri-State Area, the Operating Partnership has incurred a loss of approximately $4.4 million which has been included in gain (loss) on dispositions of real estate on the Operating Partnership's consolidated statements of income. Subsequent to the closing of the merger, the Operating Partnership acquired title to 919 Third Avenue and 1350 Avenue of the Americas located in New York City. The Operating Partnership holds all of the Properties in its New York City division through Metropolitan. ENVIRONMENTAL MATTERS Under various Federal, state and local laws, ordinances and regulations, an owner of real estate is liable for the costs of removal or remediation of certain hazardous or toxic substances on or in such property. These laws often impose such liability without regard to whether the owner knew of, or was responsible for, the presence of such hazardous or toxic substances. The cost of any required remediation and the owner's liability therefore as to any property is generally not limited under such enactments and could exceed the value of the property and/or the aggregate assets of the owner. The presence of such substances, or the failure to properly remediate such substances, may adversely affect the owner's ability to sell or rent such property or to borrow using such property as collateral. Persons who arrange for the disposal or treatment of hazardous or toxic substances may also be liable for the costs of removal or remediation of such substances at a disposal or treatment facility, whether or not such facility is owned or operated by such person. Certain environmental laws govern the removal, encapsulation or disturbance of asbestos-containing materials ("ACMs") when such materials are in poor condition, or in the event of renovation or demolition. Such laws impose liability for release of ACMs into the air and third parties may seek recovery from owners or operators of real properties for personal injury associated with ACMs. In connection with the ownership (direct or indirect), operation, management and development of real properties, the Operating Partnership may be considered an owner or operator of such properties or as having arranged for the disposal or treatment of hazardous or toxic substances and, therefore, potentially liable for removal or remediation costs, as well as certain other related costs, including governmental fines and injuries to persons and property. All of the Office Properties and all of the Industrial Properties have been subjected to a Phase I or similar environmental audit after April 1, 1994 (which involved general inspections without soil sampling, ground water analysis or radon testing and, for the Properties constructed in 1978 or earlier, survey inspections to ascertain the existence of ACMs were conducted) completed by independent environmental consultant companies (except for 35 Pinelawn Road which was originally developed by Reckson and subjected to a Phase 1 in April 1992). These environmental audits have not revealed any environmental liability that would have a material adverse effect on the Operating Partnership's business. I-7
ITEM 2. PROPERTIES GENERAL As of December 31, 2000, the Operating Partnership owned and operated 188 Properties (including 10 joint venture office properties but excluding the RSVP-controlled joint ventures) in the Tri-State Area encompassing approximately 21.3 million square feet. These properties consist of 65 Class A Suburban Office Properties encompassing approximately 9.1 million square feet and 17 Class A CBD Office Properties encompassing approximately 5.3 million square feet, 104 Industrial Properties encompassing approximately 6.8 million rentable square feet and two free-standing 10,000 square foot retail properties. The Operating Partnership also owns a 357,000 square foot Class A office building in Orlando, Florida. The rentable square feet of each property has been determined for these purposes based on the aggregate leased square footage specified in currently effective leases and, with respect to vacant space, management's estimate. In addition, as of December 31, 2000, the Operating Partnership is in the process of developing a 315,000 square foot office building and owned approximately 290 acres of land in 13 separate parcels of on which the Operating Partnership can develop approximately 1.4 million square feet of office space and approximately 224,000 square feet of industrial space. Reckson has historically emphasized the development and acquisition of properties that are in strong CBD markets or are part of large scale office and industrial parks. Approximately 37% (measured by rentable square footage) of the Office Properties are CBD Office Properties. In addition, approximately 67% of the Suburban Office Properties and approximately 59% of the Industrial Properties are located in such parks (measured by rentable square footage). The Operating Partnership believes that owning properties in planned office and industrial parks provides certain strategic advantages, including the following: (i) certain tenants prefer being located in a park with other high quality companies to enhance their corporate image, (ii) parks afford tenants certain aesthetic amenities such as a common landscaping plan, standardization of signage and common dining and recreational facilities, (iii) tenants may expand (or contract) their business within a park, enabling them to centralize business functions and (iv) a park provides tenants with access to other tenants and may facilitate business relationships between tenants. Set forth below is a summary of certain information relating to the Properties, categorized by Office and Industrial Properties, as of December 31, 2000. OFFICE PROPERTIES General As of December 31, 2000, the Operating Partnership owned or had an interest in 65 Class A Suburban Office Properties encompassing approximately 9.1 million square feet and 17 Class A CBD Office Properties encompassing approximately 5.3 million square feet. As of December 31, 2000, these Office Properties were approximately 97.2% leased (percent leased excludes properties under development) to approximately 1,100 tenants. The Office Properties are Class A office buildings and are well-located, well-maintained and professionally managed. In addition, these properties are modern with high finishes and achieve among the highest rent, occupancy and tenant retention rates within their sub-markets. Forty two of the 65 Suburban Office Properties are located in the following ten planned office parks: the North Shore Atrium, the Huntington Melville Corporate Center, the Nassau West Corporate Center, the Tarrytown Corporate Center, the Executive Hill Office Park, the Reckson Executive Park, the University Square Office Complex, the Summit at Valhalla, the Mt. Pleasant Corporate Center, and the Short Hills Office Complex. The buildings in these office parks offer a full array of amenities including health clubs, racquetball courts, sun decks, restaurants, computer controlled HVAC access systems and conference centers. Management believes that the location, quality of construction and amenities as well as the Operating Partnership's reputation for providing a high level of tenant service have enabled the Operating Partnership to attract and retain a national tenant base. The office tenants include national service companies, such as telecommunications firms, "Big Five" accounting firms, securities brokerage houses, insurance companies and health care providers. I-8
The Office Properties are leased to both national and local tenants. Leases on the Office Properties are typically written for terms ranging from five to ten years and require: (i) payment of a fixed gross rental amount that excludes payments on account of real estate tax, operating expense escalations and base electrical charges ("Base Rent"), (ii) payment of a base electrical charge, (iii) payment of real estate tax escalations over a base year, (iv) payment of compounded annual increases to Base Rent and/or payment of operating expense escalations over a base year, (v) payment of overtime HVAC and electric and (vi) payment of electric escalations over a base year. In virtually all leases, the landlord is responsible for structural repairs. Renewal provisions typically provide for renewal rates at market rates or a percentage thereof, provided that such rates are not less than the most recent renewal rates. The following table sets forth certain information as of December 31, 2000 for each of the Office Properties. OWNERSHIP INTEREST (GROUND LEASE LAND PERCENTAGE EXPIRATION YEAR AREA PROPERTY OWNERSHIP DATE) (1) CONSTRUCTED (ACRES) - ------------------------------------ ------------ ------------ ------------- --------- Office Properties: Huntington Melville Corporate Center, Melville, NY Leasehold 395 North Service Rd ............... 100% (2,081) 1988 7.5 200 Broadhollow Rd ................. 100% Fee 1981 4.6 48 South Service Rd ................ 100% Fee 1986 7.3 35 Pinelawn Rd ..................... 100% Fee 1980 6.0 275 Broadhollow Rd . ............... 51% Fee 1970 5.8 58 South Service Rd (3) . .......... 100% Fee 2000 16.5 1305 Old Walt Whitman Rd ........... 51% Fee 1998(5) 18.1 ---- Total--Huntington Melville Corporate Center (4) .............. 65.8 ---- North Shore Atrium, Syosset, NY 6800 Jericho Turnpike (North Shore Atrium I) ............ 100% Fee 1977 13.0 6900 Jericho Turnpike (North Shore Atrium II) ........... 100% Fee 1982 5.0 ---- Total--North Shore Atrium .......... 18.0 ---- Nassau West Corporate Center, Mitchel Field, NY 50 Charles Lindbergh Blvd. (Nassau West Corporate Leasehold Center II) ........................ 100% (2,082) 1984 9.1 60 Charles Lindbergh Blvd. (Nassau West Corporate Leasehold Center I) ......................... 100% (2,082) 1989 7.8 Leasehold 51 Charles Lindbergh Blvd. ......... 100% (2,084) 1989 6.6 Leasehold 55 Charles Lindbergh Blvd. ......... 100% (2,082) 1982 10.0 333 Earl Ovington Blvd. Leasehold (The Omni) ........................ 60% (2,088) 1991 30.6 Leasehold 90 Merrick Ave. .................... 51% (2,084) 1985 13.2 ---- Total--Nassau West Corporate Center ............................ 77.3 ---- Tarrytown Corporate Center Tarrytown, NY 505 White Plains Road .............. 100% Fee 1974 1.4 520 White Plains Road .............. 60% Fee(6) 1981 6.8 555 White Plains Road .............. 100% Fee 1972 4.2 560 White Plains Road .............. 100% Fee 1980 4.0 580 White Plains Road .............. 100% Fee 1977 6.1 660 White Plains Road .............. 100% Fee 1983 10.9 ---- Total--Tarrytown Corporate Center ............................ 33.4 ---- Reckson Executive Park Rye Brook, NY 1 International Dr. ................ 100% Fee 1983 N/A 2 International Dr. ................ 100% Fee 1983 N/A ANNUAL BASE RENT RENTABLE ANNUAL PER NUMBER NUMBER SQUARE PERCENT BASE LEASED OF TENANT PROPERTY OF FLOORS FEET LEASED RENT (2) SQ. FT. LEASES - ------------------------------------ ----------- ------------ --------- ------------- ----------- ---------- Office Properties: Huntington Melville Corporate Center, Melville, NY 395 North Service Rd ............... 4 187,393 99.3% $ 4,924,316 $ 26.47 4 200 Broadhollow Rd ................. 4 67,432 100.0% $ 1,553,502 $ 23.04 13 48 South Service Rd ................ 4 125,372 100.0% $ 3,145,035 $ 25.08 8 35 Pinelawn Rd ..................... 2 105,241 92.5% $ 2,011,350 $ 20.66 25 275 Broadhollow Rd . ............... 4 124,441 99.6% $ 2,833,490 $ 22.85 13 58 South Service Rd (3) . .......... 4 277,500 -- -- -- -- 1305 Old Walt Whitman Rd ........... 3 167,400 98.1% $ 4,124,735 $ 25.13 6 ------- ----------- -- Total--Huntington Melville Corporate Center (4) .............. 1,054,779 98.6% $18,592,428 $ 24.28 69 --------- ----------- -- North Shore Atrium, Syosset, NY 6800 Jericho Turnpike (North Shore Atrium I) ............ 2 209,028 96.0% $ 4,094,898 $ 20.41 44 6900 Jericho Turnpike (North Shore Atrium II) ........... 4 95,149 100.0% $ 2,156,644 $ 22.67 14 --------- ----------- -- Total--North Shore Atrium .......... 304,177 97.3% $ 6,251,542 $ 21.12 58 --------- ----------- -- Nassau West Corporate Center, Mitchel Field, NY 50 Charles Lindbergh Blvd. (Nassau West Corporate Center II) ........................ 6 211,845 96.5% $ 4,567,615 $ 22.34 23 60 Charles Lindbergh Blvd. (Nassau West Corporate Center I) ......................... 2 195,998 100.0% $ 4,578,271 $ 23.36 7 51 Charles Lindbergh Blvd. ......... 1 108,000 100.0% $ 2,275,649 $ 21.07 1 55 Charles Lindbergh Blvd. ......... 2 214,581 100.0% $ 2,606,170 $ 12.15 2 333 Earl Ovington Blvd. (The Omni) ........................ 10 575,000 99.3% $16,083,501 $ 28.17 32 90 Merrick Ave. .................... 9 221,839 97.3% $ 4,997,745 $ 23.15 20 --------- ----------- -- Total--Nassau West Corporate Center ............................ 1,527,263 98.9% $35,108,951 $ 23.24 85 --------- ----------- -- Tarrytown Corporate Center Tarrytown, NY 505 White Plains Road .............. 2 26,468 95.3% $ 426,143 $ 16.90 21 520 White Plains Road .............. 6 171,761 100.0% $ 3,727,762 $ 21.70 2 555 White Plains Road .............. 5 121,585 94.1% $ 2,692,386 $ 23.53 8 560 White Plains Road .............. 6 126,471 92.7% $ 2,220,688 $ 18.95 14 580 White Plains Road .............. 6 170,726 94.6% $ 3,525,079 $ 21.82 17 660 White Plains Road .............. 6 258,715 92.7% $ 5,090,460 $ 21.23 38 --------- ----------- -- Total--Tarrytown Corporate Center ............................ 875,726 94.8% $17,682,518 $ 21.30 100 --------- ----------- --- Reckson Executive Park Rye Brook, NY 1 International Dr. ................ 3 90,000 100.0% $ 1,170,000 $ 13.00 1 2 International Dr. ................ 3 90,000 100.0% $ 1,170,000 $ 13.00 1 I-9
OWNERSHIP INTEREST (GROUND LEASE LAND PERCENTAGE EXPIRATION YEAR AREA PROPERTY OWNERSHIP DATE) (1) CONSTRUCTED (ACRES) - ------------------------------------ ------------ ------------ ------------- --------- 3 International Dr. ................ 100% Fee 1983 N/A 4 International Dr. ................ 100% Fee 1986 N/A 5 International Dr. ................ 100% Fee 1986 N/A 6 International Dr. ................ 100% Fee 1986 N/A Total--Reckson Executive Park ...... 44.4 ----- Summit at Valhalla Valhalla, NY 100 Summit Dr. ..................... 100% Fee 1988 11.3 200 Summit Dr. ..................... 100% Fee 1990 18.0 500 Summit Dr. ..................... 100% Fee 1986 29.1 ----- Total -- Summit at Valhalla ........ 58.4 ----- Mt. Pleasant Corporate Center ...... 115/117 Stevens Ave. ............... 100% Fee 1984 5.0 ----- Total -- Mt Pleasant Corporate Center ............................ 5.0 ----- Landmark Square Stamford, CT One Landmark Square ................ 100% Fee 1973 N/A Two Landmark Square ................ 100% Fee 1976 N/A Three Landmark Square .............. 100% Fee 1978 N/A Four Landmark Square ............... 100% Fee 1977 N/A Five Landmark Square ............... 100% Fee 1976 N/A Six Landmark Square ................ 100% Fee 1984 N/A Total -- Landmark Square ........... 7.2 ----- Stamford Towers Stamford, CT ....... 680 Washington Blvd. ............... 51% Fee 1989 1.3 750 Washington Blvd. ............... 51% Fee 1989 2.4 ----- Total--Stamford Towers ............. 3.7 ----- Stand-alone Long Island Properties 400 Garden City Plaza Garden City, NY ................... 51% Fee 1989 5.7 88 Duryea Rd. Melville, NY ...................... 100% Fee 1986 1.5 310 East Shore Rd. Great Neck, NY .................... 100% Fee 1981 1.5 333 East Shore Rd. Leasehold Great Neck, NY .................... 100% (2,030) 1976 1.5 520 Broadhollow Rd. Melville, NY ...................... 100% Fee 1978 7.0 1660 Walt Whitman Rd. Melville, NY ...................... 100% Fee 1980 6.5 125 Baylis Rd. Melville, NY ...................... 100% Fee 1980 8.2 150 Motor Parkway Hauppauge, NY ..................... 100% Fee 1984 11.3 1979 Marcus Ave. Lake Success, NY .................. 100% Fee 1987 8.6 120 Mineola Blvd. Mineola, NY ....................... 100% Fee 1989 0.7 538 Broadhollow Road Melville, NY ...................... 100% Fee 1986 7.5 50 Marcus Drive, Melville, NY ...................... 100% Fee 2000(5) 12.9 ----- Total--Stand-alone Long Island ..... 72.9 ----- Stand-alone Westchester Properties 155 White Plains Road, Tarrytown, NY ..................... 100% Fee 1963 13.2 235 Main Street, White Plains, NY ........................ 100% Fee 1974(5) 0.4 245 Main Street White Plains, NY .................. 100% Fee 1983 0.4 120 White Plains Rd. Tarrytown, NY ..................... 51% Fee 1984 9.7 ANNUAL BASE RENT RENTABLE ANNUAL PER NUMBER NUMBER SQUARE PERCENT BASE LEASED OF TENANT PROPERTY OF FLOORS FEET LEASED RENT (2) SQ. FT. LEASES - ------------------------------------ ----------- ------------ ----------- ------------- ----------- ---------- 3 International Dr. ................ 3 91,174 100.0% $ 2,015,775 $ 22.10 5 4 International Dr. ................ 3 86,694 89.3% $ 2,014,051 $ 26.01 8 5 International Dr. ................ 3 90,000 100.0% $ 2,181,374 $ 24.24 1 6 International Dr. ................ 3 94,016 100.0% $ 1,656,258 $ 17.62 8 ------ ----------- - Total--Reckson Executive Park ...... 541,884 98.3% $10,207,458 $ 19.16 24 ------- ----------- -- Summit at Valhalla Valhalla, NY 100 Summit Dr. ..................... 4 249,551 95.7% $ 5,125,534 $ 21.45 9 200 Summit Dr. ..................... 4 240,834 89.7% $ 4,610,306 $ 21.34 13 500 Summit Dr. ..................... 4 208,660 100.0% $ 5,633,820 $ 27.00 1 ------- ----------- -- Total -- Summit at Valhalla ........ 699,045 94.9% $15,369,660 $ 23.17 23 ------- ----------- -- Mt. Pleasant Corporate Center ...... 115/117 Stevens Ave. ............... 3 162,004 95.6% $ 2,895,825 $ 18.70 15 ------- ----------- -- Total -- Mt Pleasant Corporate Center ............................ 162,004 95.6% $ 2,895,825 $ 18.70 15 ------- ----------- -- Landmark Square Stamford, CT One Landmark Square ................ 22 296,716 89.2% $ 6,311,100 $ 23.83 58 Two Landmark Square ................ 3 39,701 87.8% $ 717,196 $ 20.58 10 Three Landmark Square .............. 6 128,286 100.0% $ 1,687,016 $ 13.15 18 Four Landmark Square ............... 5 104,446 93.9% $ 1,723,990 $ 17.57 16 Five Landmark Square ............... 3 57,273 100.0% $ 302,731 $ 5.29 3 Six Landmark Square ................ 10 171,899 96.9% $ 3,920,672 $ 23.53 8 ------- ----------- -- Total -- Landmark Square ........... 798,321 94.0% $14,662,705 $ 19.54 113 ------- ----------- --- Stamford Towers Stamford, CT ....... 680 Washington Blvd. ............... 11 132,759 99.5% $ 3,786,544 $ 28.66 7 750 Washington Blvd. ............... 11 192,108 99.6% $ 4,675,265 $ 24.44 11 ------- ----------- --- Total--Stamford Towers ............. 324,867 99.6% $ 8,461,809 $ 21.15 18 ------- ----------- --- Stand-alone Long Island Properties 400 Garden City Plaza Garden City, NY ................... 5 176,073 96.6% $ 4,100,754 $ 24.12 25 88 Duryea Rd. Melville, NY ...................... 2 25,061 96.7% $ 406,370 $ 16.77 4 310 East Shore Rd. Great Neck, NY .................... 4 50,000 91.2% $ 1,056,684 $ 23.17 20 333 East Shore Rd. Great Neck, NY .................... 2 17,715 99.6% $ 452,678 $ 25.65 9 520 Broadhollow Rd. Melville, NY ...................... 1 83,176 71.1% $ 1,193,719 $ 20.19 2 1660 Walt Whitman Rd. Melville, NY ...................... 1 73,115 99.9% $ 1,435,770 $ 19.66 5 125 Baylis Rd. Melville, NY ...................... 2 98,329 95.3% $ 1,842,756 $ 19.66 15 150 Motor Parkway Hauppauge, NY ..................... 4 191,447 96.1% $ 4,152,752 $ 22.56 23 1979 Marcus Ave. Lake Success, NY .................. 4 326,612 100.0% $ 7,159,400 $ 21.92 29 120 Mineola Blvd. Mineola, NY ....................... 6 101,000 100.0% $ 2,398,421 $ 23.75 16 538 Broadhollow Road Melville, NY ...................... 4 180,339 95.7% $ 4,121,324 $ 23.89 12 50 Marcus Drive, Melville, NY ...................... 2 163,762 100.0% $ 1,074,688 $ 6.56 1 ------- ----------- --- Total--Stand-alone Long Island ..... 1,486,629 96.6% $29,395,316 $ 22.26 161 --------- ----------- --- Stand-alone Westchester Properties 155 White Plains Road, Tarrytown, NY ..................... 2 60,909 99.6% $ 1,168,551 $ 19.27 5 235 Main Street, White Plains, NY ........................ 6 83,237 93.8% $ 1,513,711 $ 19.38 29 245 Main Street White Plains, NY .................. 6 73,543 93.3% $ 1,216,955 $ 17.75 15 120 White Plains Rd. Tarrytown, NY ..................... 6 197,785 99.6% $ 4,730,530 $ 24.03 11 I-10
OWNERSHIP INTEREST (GROUND LEASE LAND PERCENTAGE EXPIRATION YEAR AREA NUMBER PROPERTY OWNERSHIP DATE) (1) CONSTRUCTED (ACRES) OF FLOORS - -------------------------------------- ------------ ------------ ------------- --------- ----------- 80 Grasslands Elmsford, NY ........................ 100% Fee 1989 4.9 3 360 Hamilton Avenue White Plains, NY .................... 100% Fee 1977 1.5 12 140 Grand Street White Plains, NY .................... 100% Fee 1991 2.2 9 ----- Total Stand-alone Westchester Properties .......................... 32.3 ----- Executive Hill Office Park West Orange, NJ 100 Executive Dr ..................... 100% Fee 1978 10.1 3 200 Executive Dr ..................... 100% Fee 1980 8.2 4 300 Executive Dr ..................... 100% Fee 1984 8.7 4 10 Rooney Circle ..................... 100% Fee 1971 5.2 3 ----- Total--Executive Hill Office Park 32.2 ----- University Square Princeton, NJ 100 Campus Dr. ....................... 100% Fee 1987 N/A 1 104 Campus Dr. ....................... 100% Fee 1987 N/A 1 115 Campus Dr. ....................... 100% Fee 1987 N/A 1 Total University Square .............. 11.0 ----- Short Hills Office Complex Short Hills, NJ 101 West John F. Kennedy Parkway ............................. 100% Fee 1981 9.0 6 101 East John F. Kennedy Parkway ............................. 100% Fee 1981 6.0 4 51 John F Kennedy Parkway ............ 51% Fee 1988 11.0 5 ----- Total -- Short Hills Office .......... 26.0 ----- Stand-alone New Jersey Properties 1 Paragon Drive Montvale, NJ ........................ 100% Fee 1980 11 2 99 Cherry Hill Road Parsippany, NJ ...................... 100% Fee 1982 8.8 3 119 Cherry Hill Road Parsippany, NJ ...................... 100% Fee 1982 9.3 3 One Eagle Rock Hanover, NJ ......................... 100% Fee 1986 10.4 3 155 Passaic Ave. Fairfield, NJ ....................... 100% Fee 1984 3.6 4 3 University Plaza Hackensack, NJ ...................... 100% Fee 1985 10.6 6 1255 Broad Street Clifton, NJ ......................... 100% Fee 1968 11.1 2 492 River Rd, Nutley, NJ .......................... 100% Fee 1952 17.3 13 ----- Total Stand-alone New Jersey Properties .......................... 82.1 ----- New York City Properties 120 W. 45th Street New York, NY 100% Fee 1989 0.4 40 100 Wall Street New York, NY ........................ 100% Fee 1969 0.5 29 810 Seventh Avenue New York, NY ........................ 100% Fee 1970 0.6 42 919 Third Avenue New York, NY ........................ 100% Fee(7) 1971 1.5 47 1350 Avenue of the Americas New York, NY ........................ 100% Fee 1966 0.6 35 ----- Total -- New York City Office Properties .......................... 3.6 ----- Total--Office Properties (4) ......... 573.3 ===== ANNUAL BASE RENT RENTABLE ANNUAL PER NUMBER SQUARE PERCENT BASE LEASED OF TENANT PROPERTY FEET LEASED RENT (2) SQ. FT. LEASES - -------------------------------------- ------------ ----------- --------------- ----------- ---------- 80 Grasslands Elmsford, NY ........................ 85,104 100.0% $ 1,695,536 $ 19.92 5 360 Hamilton Avenue White Plains, NY .................... 382,000 96.5% $ 7,465,521 $ 20.26 15 140 Grand Street White Plains, NY .................... 130,136 93.0% $ 2,663,153 $ 22.00 17 ------- ------------ -- Total Stand-alone Westchester Properties .......................... 1,012,714 96.7% $ 20,453,957 $ 20.89 97 --------- ------------ -- Executive Hill Office Park West Orange, NJ 100 Executive Dr ..................... 92,872 100.0% $ 1,917,717 $ 20.65 11 200 Executive Dr ..................... 102,630 99.9% $ 2,204,345 $ 20.94 16 300 Executive Dr ..................... 126,196 100.0% $ 2,213,881 $ 17.54 11 10 Rooney Circle ..................... 69,684 100.0% $ 1,406,904 $ 20.19 2 --------- ------------ -- Total--Executive Hill Office Park 391,382 100.0% $ 7,742,847 $ 19.78 40 --------- ------------ -- University Square Princeton, NJ 100 Campus Dr. ....................... 27,350 100.0% $ 622,621 $ 22.76 3 104 Campus Dr. ....................... 70,155 100.0% $ 1,515,517 $ 21.60 2 115 Campus Dr. ....................... 33,600 100.0% $ 721,107 $ 21.46 2 --------- ------------ -- Total University Square .............. 131,105 100.0% $ 2,859,245 $ 21.81 7 --------- ------------ -- Short Hills Office Complex Short Hills, NJ 101 West John F. Kennedy Parkway ............................. 185,233 100.0% $ 2,963,728 $ 16.00 1 101 East John F. Kennedy Parkway ............................. 122,841 100.0% $ 655,152 $ 5.33 1 51 John F Kennedy Parkway ............ 248,962 100.0% $ 8,790,239 $ 33.79 18 --------- ------------ -- Total -- Short Hills Office .......... 557,036 100.0% $ 12,409,119 $ 22.28 20 --------- ------------ -- Stand-alone New Jersey Properties 1 Paragon Drive Montvale, NJ ........................ 104,599 81.6% $ 1,763,074 $ 20.67 16 99 Cherry Hill Road Parsippany, NJ ...................... 93,250 99.0% $ 1,746,078 $ 18.92 16 119 Cherry Hill Road Parsippany, NJ ...................... 95,724 99.9% $ 1,908,205 $ 19.96 17 One Eagle Rock Hanover, NJ ......................... 140,000 100.0% $ 3,223,210 $ 23.02 8 155 Passaic Ave. Fairfield, NJ ....................... 87,986 100.0% $ 1,348,254 $ 15.32 5 3 University Plaza Hackensack, NJ ...................... 216,403 93.2% $ 4,041,680 $ 20.04 21 1255 Broad Street Clifton, NJ ......................... 193,574 100.0% $ 4,259,924 $ 22.01 2 492 River Rd, Nutley, NJ .......................... 130,009 100.0% $ 1,358,105 $ 10.45 1 --------- ------------ -- Total Stand-alone New Jersey Properties .......................... 1,061,545 96.9% $ 19,648,530 $ 19.10 86 --------- ------------ -- New York City Properties 120 W. 45th Street New York, NY 443,109 100.0% $ 15,908,898 $ 35.90 44 100 Wall Street New York, NY ........................ 458,626 99.3% $ 14,063,841 $ 30.89 38 810 Seventh Avenue New York, NY ........................ 692,060 95.1% $ 23,323,658 $ 35.44 36 919 Third Avenue New York, NY ........................ 1,374,966 99.1% $ 32,217,043 $ 23.95 22 1350 Avenue of the Americas New York, NY ........................ 540,000 92.8% $ 15,848,017 $ 31.62 77 --------- ------------ -- Total -- New York City Office Properties .......................... 3,508,761 97.0% $101,361,457 $ 29.45 217 --------- ------------ --- Total--Office Properties (4) ......... 14,437,238 97.2% $323,103,367 $ 23.48 1,133 ========== ============ ===== - ---------- (1) Ground lease expirations assume exercise of renewal options by the lessee. I-11
(2) Represents Base Rent of signed leases at December 31, 2000 adjusted for scheduled contractual increases during the 12 months ending December 31, 2001. Total Base Rent for these purposes reflects the effect of any lease expirations that occur during the 12-month period ending December 31, 2001. Amounts included in rental revenue for financial reporting purposes have been determined on a straight-line basis rather than on the basis of contractual rent as set forth in the foregoing table. (3) Property is currently under development. (4) Percent leases excludes properties under development. (5) Year renovated. (6) The actual fee interest in is held by the County of Westchester Industrial Development Agency. The fee interest in 520 White Plains Road may be acquired if the outstanding principal under certain loan agreements and annual basic installments are prepaid in full. (7) There is a ground lease in place on a small portion of the land which expires in 2066. INDUSTRIAL PROPERTIES General. As of December 31, 2000, the Operating Partnership owned or had an interest in 104 Industrial Properties that encompass approximately 6.8 million rentable square feet. As of December 31, 2000, the Industrial Properties were approximately 97.5% leased (percentage leased excludes properties under development) to approximately 230 tenants. Many of the Industrial Properties have been constructed with high ceiling heights (i.e., above 18 feet), upscale office building facades, parking in excess of zoning requirements, drive-in and/or loading dock facilities and other features which permit them to be leased for industrial and/or office purposes. The Industrial Properties are leased to both national and local tenants. These tenants utilize the Industrial Properties for distribution, warehousing, research and development and light manufacturing/assembly activities. Leases on the Industrial Properties are typically written for terms ranging from three to seven years and require: (i) payment of a Base Rent, (ii) payments of real estate tax escalations over a base year, (iii) payments of compounded annual increases to Base Rent and (iv) reimbursement of all operating expenses. Electric costs are borne and paid directly by the tenant. Certain leases are "triple net" (i.e., the tenant is required to pay in addition to annual Base Rent, all operating expenses and real estate taxes). In virtually all leases, the landlord is responsible for structural repairs. Renewal provisions typically provide for renewal rents at market rates, provided that such rates are not less than the most recent rental rates. Approximately 86% of the Industrial Properties, measured by square footage, are located on Long Island. Sixty eight percent of these properties, as measured by square footage, are located in the following three Industrial Parks developed by Reckson: (i) Vanderbilt Industrial Park, (ii) Airport International Plaza and (iii) County Line Industrial Center. In addition to the Industrial Properties on Long Island, the Operating Partnership owns nine Industrial Properties in the other suburban markets. These properties encompass approximately 940,000 square feet and were approximately 93 % leased as of December 31, 2000. The following table sets forth certain information as of December 31, 2000 for each of the Industrial Properties. OWNERSHIP INTEREST (GROUND LEASE LAND CLEARANCE PERCENTAGE EXPRIRATION YEAR AREA HEIGHT PROPERTY OWNERSHIP DATE CONSTRUCTED (ACRES) (FEET) - ------------------------------- ------------ ------------- ------------- --------- ----------- Industrial Properties: Vanderbilt Industrial Park Hauppauge, NY 360 Vanderbilt Motor Parkway ...................... 100% Fee 1967 4.2 16 410 Vanderbilt Motor Parkway ...................... 100% Fee 1965 3.0 15 595 Old Willets Path .......... 100% Fee 1968 3.5 14 611 Old Willets Path .......... 100% Fee 1963 3.0 14 631/641 Old Willets Path. 100% Fee 1965 1.9 14 651/661 Old Willets Path.. 100% Fee 1966 2.0 14 PRECENTAGE OFFICE/ ANNUAL RESEARCH BASE AND RENT NUMBER DEVELOP- RENTABLE ANNUAL PER OF MENT SQUARE PERCENT BASE LEASED TENANTS PROPERTY FINISH FEET LEASED RENT (2) SQ. FT. LEASES - ------------------------------- ----------- ---------- ----------- ---------- ----------- -------- Industrial Properties: Vanderbilt Industrial Park Hauppauge, NY 360 Vanderbilt Motor Parkway ...................... 62% 54,000 100.0% $543,780 $ 10.07 1 410 Vanderbilt Motor Parkway ...................... 7% 41,784 90.4% $ 98,302 $ 2.60 3 595 Old Willets Path .......... 14% 31,670 100.0% $192,605 $ 6.08 4 611 Old Willets Path .......... 11% 20,000 100.0% $127,550 $ 6.38 2 631/641 Old Willets Path. 31% 25,000 100.0% $ 95,560 $ 3.82 4 651/661 Old Willets Path.. 45% 25,000 100.0% $184,479 $ 7.38 7 I-12
OWNERSHIP INTEREST (GROUND LEASE LAND CLEARANCE PERCENTAGE EXPRIRATION YEAR AREA HEIGHT PROPERTY OWNERSHIP DATE CONSTRUCTED (ACRES) (FEET) - --------------------------- ------------ ------------- ------------- --------- ----------- 681 Old Willets Path ...... 100% Fee 1961 1.3 14 740 Old Willets Path ...... 100% Fee 1965 3.5 14 325 Rabro Dr .............. 100% Fee 1967 2.7 14 250 Kennedy Dr ............ 100% Fee 1979 7.0 16 90 Plant Ave .............. 100% Fee 1972 4.3 16 110 Plant Ave ............. 100% Fee 1974 6.8 18 55 Engineers Rd ........... 100% Fee 1968 3.0 18 65 Engineers Rd ........... 100% Fee 1969 1.8 22 85 Engineers Rd ........... 100% Fee 1968 2.3 18 100 Engineers Rd .......... 100% Fee 1968 5.0 14 150 Engineers Rd .......... 100% Fee 1969 6.8 22 20 Oser Ave ............... 100% Fee 1979 5.0 16 30 Oser Ave ............... 100% Fee 1978 4.4 16 40 Oser Ave ............... 100% Fee 1974 3.1 16 50 Oser Ave ............... 100% Fee 1975 4.1 21 60 Oser Ave ............... 100% Fee 1975 3.3 21 63 Oser Ave ............... 100% Fee 1974 1.2 20 65 Oser Ave ............... 100% Fee 1975 1.2 18 73 Oser Ave ............... 100% Fee 1974 1.2 20 80 Oser Ave ............... 100% Fee 1974 1.1 18 85 Nicon Ct ............... 100% Fee 1978 6.1 30 90 Oser Ave ............... 100% Fee 1973 1.1 16 104 Parkway Dr. ........... 100% Fee 1985 1.8 15 110 Ricefield Ln .......... 100% Fee 1980 2.0 15 120 Ricefield Ln .......... 100% Fee 1983 2.0 15 125 Ricefield Ln .......... 100% Fee 1973 2.0 14 135 Ricefield Ln .......... 100% Fee 1981 2.1 15 85 Adams Dr ............... 100% Fee 1980 1.8 15 395 Oser Ave .............. 100% Fee 1980 6.1 14 185 Oser Ave .............. 100% Fee 1974 2.0 18 25 Davids Dr .............. 100% Fee 1975 3.2 20 45 Adams Ave .............. 100% Fee 1979 2.1 18 225 Oser Ave .............. 100% Fee 1977 1.2 14 180 Oser Ave .............. 100% Fee 1978 3.4 16 360 Oser Ave .............. 100% Fee 1981 1.3 18 400 Oser Ave .............. 100% Fee 1982 9.5 16 375 Oser Ave .............. 100% Fee 1981 1.2 18 425 Rabro Drive ........... 100% Fee 1980 4.0 16 390 Motor Parkway ......... 100% Fee 1980 10.0 14 400 Moreland Road(3) ...... 100% Fee 1967 6.3 17 600 Old Willets Path ...... 100% Fee 1965 4.5 14 ----- Total Vanderbilt Industrial Park (4) ...... 160.4 ----- Airport International Plaza Islip, NY 20 Orville Dr ............. 100% Fee 1978 1.0 16 25 Orville Dr ............. 100% Fee 1970 2.2 16 50 Orville Dr ............. 100% Fee 1976 1.6 15 65 Orville Dr ............. 100% Fee 1971 2.2 14 70 Orville Dr ............. 100% Fee 1975 2.3 22 80 Orville Dr ............. 100% Fee 1988 6.5 16 85 Orville Dr ............. 100% Fee 1974 1.9 14 95 Orville Dr ............. 100% Fee 1974 1.8 14 110 Orville Dr ............ 100% Fee 1979 6.4 24 180 Orville Dr ............ 100% Fee 1982 2.3 16 1101 Lakeland Ave ......... 100% Fee 1983 4.9 20 1385 Lakeland Ave ......... 100% Fee 1973 2.4 16 125 Wilbur Place .......... 100% Fee 1977 4.0 16 140 Wilbur Place .......... 100% Fee 1973 3.1 20 160 Wilbur Place .......... 100% Fee 1978 3.9 16 170 Wilbur Place .......... 100% Fee 1979 4.9 16 4040 Veterans Highway ..... 100% Fee 1972 1.0 14 PRECENTAGE OFFICE/ ANNUAL RESEARCH BASE AND RENT NUMBER DEVELOP- RENTABLE ANNUAL PER OF MENT SQUARE PERCENT BASE LEASED TENANTS PROPERTY FINISH FEET LEASED RENT (2) SQ. FT. LEASES - --------------------------- ----------- ------------ ----------- ------------- --------- -------- 681 Old Willets Path ...... 10% 15,000 100.0% $ 102,414 $ 6.83 1 740 Old Willets Path ...... 5% 30,000 100.0% $ 29,670 $ 0.99 1 325 Rabro Dr .............. 10% 35,000 100.0% $ 204,560 $ 5.84 2 250 Kennedy Dr ............ 9% 127,980 100.0% $ 455,298 $ 3.56 1 90 Plant Ave .............. 13% 75,000 100.0% $ 452,744 $ 6.04 3 110 Plant Ave ............. 8% 125,000 100.0% $ 156,250 $ 1.25 1 55 Engineers Rd ........... 8% 36,000 100.0% $ 351,878 $ 9.77 1 65 Engineers Rd ........... 10% 23,000 100.0% $ 131,198 $ 5.70 1 85 Engineers Rd ........... 5% 40,800 100.0% $ 221,601 $ 5.43 2 100 Engineers Rd .......... 11% 88,000 100.0% $ 79,271 $ 0.90 1 150 Engineers Rd .......... 11% 135,000 100.0% $ 414,528 $ 3.07 1 20 Oser Ave ............... 18% 42,000 98.7% $ 326,963 $ 7.89 2 30 Oser Ave ............... 21% 42,000 82.1% $ 212,926 $ 6.17 4 40 Oser Ave ............... 33% 59,800 80.3% $ 335,405 $ 6.99 11 50 Oser Ave ............... 15% 60,000 100.0% $ 240,000 $ 4.00 1 60 Oser Ave ............... 19% 48,000 100.0% $ 192,000 $ 4.00 1 63 Oser Ave ............... 9% 22,000 100.0% $ 68,961 $ 3.13 1 65 Oser Ave ............... 10% 20,000 100.0% $ 99,670 $ 4.98 1 73 Oser Ave ............... 15% 20,000 100.0% $ 21,271 $ 1.06 1 80 Oser Ave ............... 25% 19,500 100.0% $ 67,516 $ 3.46 1 85 Nicon Ct ............... 10% 104,000 100.0% $ 544,515 $ 5.24 1 90 Oser Ave ............... 26% 37,500 100.0% $ 130,779 $ 3.49 1 104 Parkway Dr. ........... 50% 27,600 100.0% $ 208,033 $ 7.54 1 110 Ricefield Ln .......... 25% 32,264 100.0% $ 166,220 $ 5.15 1 120 Ricefield Ln .......... 24% 33,060 100.0% $ 134,055 $ 4.05 1 125 Ricefield Ln .......... 20% 30,495 100.0% $ 206,643 $ 6.78 1 135 Ricefield Ln .......... 10% 32,340 100.0% $ 209,761 $ 6.49 1 85 Adams Dr ............... 90% 20,000 100.0% $ 278,817 $ 13.94 1 395 Oser Ave .............. 100% 50,000 99.0% $ 441,045 $ 8.91 1 185 Oser Ave .............. 40% 30,000 -- -- -- -- 25 Davids Dr .............. 90% 40,000 100.0% $ 334,516 $ 8.36 1 45 Adams Ave .............. 90% 28,000 100.0% $ 226,333 $ 8.08 1 225 Oser Ave .............. 80% 10,000 99.6% $ 116,175 $ 11.67 1 180 Oser Ave .............. 35% 61,868 89.9% $ 424,419 $ 7.63 8 360 Oser Ave .............. 35% 23,000 100.0% $ 96,600 $ 4.20 1 400 Oser Ave .............. 30% 164,936 89.3% $ 1,256,877 $ 8.53 24 375 Oser Ave .............. 40% 20,000 100.0% $ 154,388 $ 7.72 1 425 Rabro Drive ........... 25% 65,641 99.7% $ 469,536 $ 7.18 1 390 Motor Parkway ......... 4% 181,155 100.0% $ 813,435 $ 4.49 1 400 Moreland Road(3) ...... 10% 56,875 -- -- -- -- 600 Old Willets Path ...... 25% 69,627 100.0% $ 405,061 $ 5.82 1 ------- ----------- -- Total Vanderbilt Industrial Park (4) ...... 2,379,895 96.8% $12,023,608 $ 5.35 108 --------- ----------- --- Airport International Plaza Islip, NY 20 Orville Dr ............. 50% 12,852 100.0% $ 181,720 $ 14.09 1 25 Orville Dr ............. 100% 32,300 100.0% $ 490,561 $ 15.19 2 50 Orville Dr ............. 20% 28,000 99.8% $ 254,320 $ 9.10 3 65 Orville Dr ............. 13% 32,000 100.0% $ 171,588 $ 5.36 2 70 Orville Dr ............. 7% 41,508 100.0% $ 315,731 $ 7.61 2 80 Orville Dr ............. 21% 92,544 100.0% $ 668,272 $ 7.22 9 85 Orville Dr ............. 20% 25,000 100.0% $ 160,569 $ 6.42 2 95 Orville Dr ............. 10% 25,000 100.0% $ 147,583 $ 5.90 1 110 Orville Dr ............ 15% 110,000 100.0% $ 646,433 $ 5.88 1 180 Orville Dr ............ 18% 37,612 100.0% $ 191,971 $ 5.10 2 1101 Lakeland Ave ......... 8% 90,411 100.0% $ 531,315 $ 5.88 1 1385 Lakeland Ave ......... 18% 35,000 64.3% $ 162,344 $ 7.22 2 125 Wilbur Place .......... 31% 62,686 77.1% $ 248,547 $ 5.14 8 140 Wilbur Place .......... 37% 48,500 100.0% $ 210,494 $ 4.34 2 160 Wilbur Place .......... 30% 62,710 100.0% $ 481,790 $ 7.68 2 170 Wilbur Place .......... 28% 72,062 100.0% $ 407,680 $ 5.65 6 4040 Veterans Highway ..... 100% 2,800 100.0% $ 45,051 $ 16.09 1 I-13
OWNERSHIP INTEREST (GROUND LEASE LAND CLEARANCE PERCENTAGE EXPRIRATION YEAR AREA HEIGHT PROPERTY OWNERSHIP DATE CONSTRUCTED (ACRES) (FEET) - ----------------------------- ------------ -------------- ------------- --------- ----------- 120 Wilbur Place ............ 100% Fee 1972 2.8 16 2002 Orville Drive North ...................... 100% Fee 2000 15.8 24 2004 Orville Drive North ...................... 100% Fee 1998 7.4 24 2005 Orville Drive North ...................... 100% Fee 1999 8.7 24 ---- Total Airport International Plaza ........ 87.1 ---- County Line Industrial Center Melville, NY 5 Hub Dr .................... 100% Fee 1979 6.9 20 10 Hub Dr ................... 100% Fee 1975 6.6 20 30 Hub Drive ................ 100% Fee 1976 5.1 20 265 Spagnoli Rd ............. 100% Fee 1978 6.0 20 ---- Total County Line Industrial Center .......... 24.6 ---- Standalone Long Island Properties 32 Windsor Pl. Islip, NY 100% Fee 1971 2.5 18 42 Windsor Pl. Islip, NY 100% Fee 1972 2.4 18 208 Blydenburgh Rd. Islandia, NY ............... 100% Fee 1969 2.4 14 210 Blydenburgh Rd. Islandia, NY ............... 100% Fee 1969 1.2 14 71 Hoffman Ln. Islandia, NY ............... 100% Fee 1970 5.8 16 135 Fell Ct. Islip, NY ...... 100% Fee 1965 3.2 16 ---- Subtotal Islip/Islandia ..... 17.5 ---- 70 Schmitt Boulevard, Farmingdale, NY ............ 100% Fee 1975 4.4 18 105 Price Parkway, Farmingdale, NY ............ 100% Fee 1969 12.0 26 110 Bi County Blvd. Farmingdale, NY ............ 100% Fee 1984 9.5 19 ---- Subtotal Farmingdale ........ 25.9 ---- 70 Maxess Rd, Melville, NY ............... 100% Fee 1969 9.3 15 20 Melville Park Rd, Melville, NY ............... 100% Fee 1965 4.0 23 45 Melville Park Drive, Melville, NY ............... 100% Fee 1998 4.2 24 65 Marcus Drive Melville, NY ............... 100% Fee 1968 5.0 16 ---- Subtotal Melville ........... 22.5 ---- 300 Motor Parkway, Hauppauge, NY .............. 100% Fee 1979 4.2 14 1516 Motor Parkway, Hauppauge, NY .............. 100% Fee 1981 7.9 24 ---- Subtotal Hauppauge .......... 12.1 ---- 933 Motor Parkway Smithtown, NY .............. 100% Fee 1973 5.6 20 65 S. Service Rd , Plainview, NY(5) ........... 100% Fee 1961 1.6 14 85 S. Service Rd. Plainview, NY .............. 100% Fee 1961 1.6 14 19 Nicholas Dr., Yaphank, NY (6) ............ 100% Fee 1989 29.6 24 48 Harbor Park Dr., Port Washington, NY 100% Fee 1976 2.7 16 110 Marcus Dr., Huntington, NY ............. 100% Fee 1980 6.1 20 35 Engle St., Hicksville, NY ............. 100% Leasehold(7) 1966 4.0 24 100 Andrews Rd., Hicksville, NY ............. 100% Fee 1954 11.7 25 ---- PRECENTAGE OFFICE/ ANNUAL RESEARCH BASE AND RENT NUMBER DEVELOP- RENTABLE ANNUAL PER OF MENT SQUARE PERCENT BASE LEASED TENANTS PROPERTY FINISH FEET LEASED RENT (2) SQ. FT. LEASES - ----------------------------- ----------- ------------ ----------- ------------- --------- -------- 120 Wilbur Place ............ 15% 35,000 100.0% $ 196,470 $ 5.61 4 2002 Orville Drive North ...................... 17% 206,000 100.0% $1,569,100 $ 7.62 2 2004 Orville Drive North ...................... 20% 106,515 100.0% $ 732,042 $ 6.87 1 2005 Orville Drive North ...................... 20% 130,010 100.0% $ 945,977 $ 7.28 1 ------- ---------- - Total Airport International Plaza ........ 1,288,510 98.1% $8,759,558 6.93 55 --------- ---------- -- County Line Industrial Center Melville, NY 5 Hub Dr .................... 20% 88,001 100.0% $ 536,268 $ 6.09 2 10 Hub Dr ................... 15% 95,546 100.0% $ 698,888 $ 7.94 3 30 Hub Drive ................ 18% 73,127 100.0% $ 483,286 $ 6.61 2 265 Spagnoli Rd ............. 28% 85,500 100.0% $ 673,610 $ 7.87 3 --------- ---------- -- Total County Line Industrial Center .......... 342,174 100.0% $2,392,052 $ 6.99 10 --------- ---------- -- Standalone Long Island Properties 32 Windsor Pl. Islip, NY 10% 43,000 100.0% $ 144,127 $ 3.35 1 42 Windsor Pl. Islip, NY 8% 65,000 100.0% $ 234,744 $ 3.61 1 208 Blydenburgh Rd. Islandia, NY ............... 17% 24,000 100.0% $ 125,681 $ 5.24 4 210 Blydenburgh Rd. Islandia, NY ............... 16% 20,000 100.0% $ 115,127 $ 5.76 2 71 Hoffman Ln. Islandia, NY ............... 10% 30,400 100.0% $ 193,701 $ 6.37 1 135 Fell Ct. Islip, NY ...... 20% 30,000 100.0% $ 240,992 $ 8.03 1 --------- ---------- -- Subtotal Islip/Islandia ..... 212,400 100.0% $1,054,371 $ 4.96 10 --------- ---------- -- 70 Schmitt Boulevard, Farmingdale, NY ............ 10% 76,312 100.0% $ 559,673 $ 7.33 1 105 Price Parkway, Farmingdale, NY ............ 8.50% 297,000 100.0% $1,430,170 $ 4.82 1 110 Bi County Blvd. Farmingdale, NY ............ 45% 147,303 96.3% $1,250,320 $ 8.82 10 --------- ---------- -- Subtotal Farmingdale ........ 520,615 98.9% $3,240,163 $ 6.29 12 --------- ---------- -- 70 Maxess Rd, Melville, NY ............... 38% 78,000 100.0% $ 692,862 $ 8.88 1 20 Melville Park Rd, Melville, NY ............... 66% 67,922 100.0% $ 393,337 $ 5.79 1 45 Melville Park Drive, Melville, NY ............... 22% 40,247 100.0% $ 562,060 $ 13.97 1 65 Marcus Drive Melville, NY ............... 50% 60,000 100.0% $ 623,162 $ 10.39 1 --------- ---------- -- Subtotal Melville ........... 246,169 100.0% $2,271,421 $ 9.23 4 --------- ---------- -- 300 Motor Parkway, Hauppauge, NY .............. 100% 55,942 96.8% $ 907,004 $ 16.75 9 1516 Motor Parkway, Hauppauge, NY .............. 5% 140,000 100.0% $ 503,883 $ 3.60 1 --------- ---------- -- Subtotal Hauppauge .......... 195,942 99.1% $1,410,887 $ 7.27 10 --------- ---------- -- 933 Motor Parkway Smithtown, NY .............. 26% 48,000 100.0% $ 315,600 $ 6.58 2 65 S. Service Rd , Plainview, NY(5) ........... 10% 10,000 100.0% $ 72,008 $ 7.20 1 85 S. Service Rd. Plainview, NY .............. 60% 20,000 100.0% $ 82,155 $ 4.11 2 19 Nicholas Dr., Yaphank, NY (6) ............ 5% 230,000 100.0% $1,315,250 $ 5.72 1 48 Harbor Park Dr., Port Washington, NY 100% 35,000 100.0% $ 735,646 $ 21.02 1 110 Marcus Dr., Huntington, NY ............. 39% 78,240 100.0% $ 506,119 $ 6.47 1 35 Engle St., Hicksville, NY ............. 8% 120,000 100.0% $ 607,559 $ 5.06 1 100 Andrews Rd., Hicksville, NY ............. 12% 167,500 100.0% $1,146,499 $ 6.84 2 --------- ---------- -- I-14
OWNERSHIP INTEREST (GROUND LEASE LAND CLEARANCE PERCENTAGE EXPRIRATION YEAR AREA HEIGHT PROPERTY OWNERSHIP DATE CONSTRUCTED (ACRES) (FEET) - --------------------------- ------------ ------------- ------------- --------- ----------- Subtotal other ............ 62.9 ----- Total Standalone Long Island Properties ........ 140.9 ----- Standalone Westchester Properties 100 Grasslands Rd., Elmsford, NY ............. 100% Fee 1964 3.6 16 2 Macy Rd., Harrison, NY ............. 100% Fee 1962 5.7 16 500 Saw Mill Rd., Elmsford, NY ............. 100% Fee 1968 7.3 22 ----- Total Standalone Westchester Industrial Properties ............... 16.6 ----- Standalone New Jersey Industrial Properties 40 Cragwood Rd, South Plainfield, NJ ..... 100% Fee 1965 13.5 16 100 Forge Way, Rockaway, NJ ............. 100% Fee 1986 3.5 24 200 Forge Way, Rockaway, NJ ............. 100% Fee 1989 12.7 28 300 Forge Way, Rockaway, NJ ............. 100% Fee 1989 4.2 24 400 Forge Way, Rockaway, NJ ............. 100% Fee 1989 12.8 28 ----- Total New Jersey Standalone Industrial Properties ............... 46.7 ----- Standalone Connecticut Industrial Property 710 Bridgeport Shelton, CT .............. 100% Fee 1971-1979 36.1 22 ----- Total Connecticut Standalone Industrial Property ................. 36.1 ----- Total Industrial Properties (4) ........... 512.4 ===== PRECENTAGE OFFICE/ ANNUAL RESEARCH BASE AND RENT NUMBER DEVELOP- RENTABLE ANNUAL PER OF MENT SQUARE PERCENT BASE LEASED TENANTS PROPERTY FINISH FEET LEASED RENT (2) SQ. FT. LEASES - --------------------------- ----------- ------------ ----------- --------------- --------- -------- Subtotal other ............ 708,740 100.0% $ 4,780,836 $ 6.75 11 ------- ------------ -- Total Standalone Long Island Properties ........ 1,883,866 99.6% $ 12,757,678 $ 6.98 47 --------- ------------ -- Standalone Westchester Properties 100 Grasslands Rd., Elmsford, NY ............. 100% 45,000 87.8% $ 579,637 $ 14.67 3 2 Macy Rd., Harrison, NY ............. 100% 26,000 100.0% $ 394,460 $ 15.16 1 500 Saw Mill Rd., Elmsford, NY ............. 17% 92,000 100.0% $ 846,400 $ 9.20 1 --------- ------------ -- Total Standalone Westchester Industrial Properties ............... 163,000 96.7% $ 1,820,497 $ 11.55 5 --------- ------------ -- Standalone New Jersey Industrial Properties 40 Cragwood Rd, South Plainfield, NJ ..... 49% 135,000 57.5% $ 1,188,697 $ 15.31 3 100 Forge Way, Rockaway, NJ ............. 12% 20,136 100.0% $ 175,842 $ 8.73 5 200 Forge Way, Rockaway, NJ ............. 23% 72,118 100.0% $ 459,752 $ 6.38 2 300 Forge Way, Rockaway, NJ ............. 37% 24,000 100.0% $ 230,050 $ 9.51 2 400 Forge Way, Rockaway, NJ ............. 20% 73,000 100.0% $ 254,120 $ 3.48 2 --------- ------------ -- Total New Jersey Standalone Industrial Properties ............... 324,254 82.4% $ 2,308,461 $ 8.64 14 --------- ------------ -- Standalone Connecticut Industrial Property 710 Bridgeport Shelton, CT .............. 30% 452,414 100.0% $ 2,876,568 $ 6.36 2 --------- ------------ -- Total Connecticut Standalone Industrial Property ................. 452,414 100.0% $ 2,876,568 $ 6.36 2 --------- ------------ -- Total Industrial Properties (4) ........... 6,834,113 97.5% $ 42,938,423 $ 6.50 241 ========= ============ === - ---------- (1) Calculated as the difference from the lowest beam to floor. (2) Represents Base Rent of signed leases at December 31, 2000 adjusted for scheduled contractual increases during the 12 months ending December 31, 2001. Total Base Rent for these purposes reflects the effect of any lease expirations that occur during the 12 month period ending December 31, 2001. Amounts included in rental revenue for financial reporting purposes have been determined on a straight-line basis rather than on the basis of contractual rent as set forth in the foregoing table. (3) Property under redevelopment. (4) Percent leased excludes properties under redevelopment. (5) A tenant has been granted an option exercisable after April 30, 1997 and prior to October 31, 2002 to purchase this property for $600,000. (6) The actual fee interest is currently held by the Town of Brookhaven Industrial Development Agency. The Company may acquire such fee interest by making a nominal payment to the Town of Brookhaven Industrial Development Agency. (7) The Company has entered into a 20 year lease agreement in which it has the right to sublease the premises. RETAIL PROPERTIES As of December 31, 2000, the Operating Partnership owned two free-standing 10,000 square foot retail properties located in Great Neck and Huntington, New York of which one property is fully leased and one property is vacant. DEVELOPMENTS IN PROGRESS As of December 31, 2000, the Operating Partnership had invested approximately $154.7 million in developments in progress. This amount includes approximately $89.0 million relating to existing buildings encompassing approximately 1.3 million square feet. The Operating Partnership estimates that if these I-15
projects were to be completed, total additional development costs would be approximately $28 million. In addition, the Operating Partnership has also invested approximately $ 65.7 million relating to approximately 13 acres of land which it can develop approximately 1.6 million square feet. The Operating Partnership estimates that if these projects were to be completed, total additional development costs would be approximately $250 million. THE OPTION PROPERTIES In connection with the IPO, the Operating Partnership was granted a ten year option to acquire ten properties (the "Option Properties") which were not contributed to the Operating Partnership and are either owned by Reckson or in which Reckson owns a non controlling minority interest. As of December 31, 2000, the Operating Partnership has acquired four of the Option Properties for an aggregate purchase price of approximately $35 million and the issuance of approximately 475,000 Class A common units. In addition, during 1998, one of the Option Properties was sold by Reckson to a third party. The remaining Option Properties consist of three Class A office properties encompassing approximately 311,000 square feet and two industrial properties encompassing approximately 69,000 square feet. HISTORICAL NON-INCREMENTAL REVENUE-GENERATING CAPITAL EXPENDITURES, TENANT IMPROVEMENT COSTS AND LEASING COMMISSIONS The following table sets forth annual and per square foot recurring, non-incremental revenue-generating capital expenditures and non-incremental revenue-generating tenant improvement costs and leasing commissions incurred by the Operating Partnership to retain revenues attributable to existing leased space for the period 1996 through 2000 for the Office Properties and the Industrial Properties. As noted, incremental revenue-generating tenant improvement costs and leasing commissions are excluded from the table set forth immediately below. The historical capital expenditures, tenant improvement costs and leasing commissions set forth below are not necessarily indicative of future recurring, non-incremental revenue-generating capital expenditures or non-incremental revenue-generating tenant improvement costs and leasing commissions. 1996 1997 1998 1999 2000 ------------- --------------- --------------- --------------- --------------- NON-INCREMENTAL REVENUE GENERATING CAPITAL EXPENDITURES Office Properties Total ................................... $ 375,026 $ 1,108,675 $ 2,004,976 $ 2,298,899 $ 3,289,116 Per square foot ......................... $ 0.13 $ 0.22 $ 0.23 $ 0.23 $ 0.33 CBD Office Properties Total ................................... N/A N/A N/A N/A $ 946,718 Per square foot ......................... N/A N/A N/A N/A $ 0.38 Industrial Properties Total ................................... $ 670,751 $ 733,233 $ 1,205,266 $ 1,048,688 $ 813,431 Per square foot ......................... $ 0.18 $ 0.15 $ 0.12 $ 0.11 $ 0.11 NON-INCREMENTAL REVENUE GENERATING TENANT IMPROVEMENT COSTS AND LEASING COMMISSIONS Long Island Office Properties Annual Tenant Improvement Costs ......... $ 523,574 $ 784,044 $ 1,140,251 $ 1,009,357 $ 2,853,706 Per square foot improved ................ 4.28 7.00 3.98 4.73 6.99 Annual Leasing Commissions .............. 119,047 415,822 418,191 551,762 2,208,604 Per square foot leased .................. 0.97 4.83 1.46 2.59 4.96 Total per square foot ................... $ 5.25 $ 11.83 $ 5.44 $ 7.32 $ 11.95 Westchester Office Properties Annual Tenant Improvement Costs ......... $ 834,764 $ 1,211,665 $ 711,160 $ 1,316,611 $ 1,860,027 Per square foot improved ................ 6.33 8.90 4.45 5.62 5.72 I-16
1996 1997 1998 1999 2000 ------------ -------------- ------------ ------------ ------------- Annual Leasing Commissions .............. 264,388 366,257 286,150 457,730 $ 412,226 Per square foot leased .................. 2.00 2.69 1.79 1.96 3.00 Total per square foot ................... $ 8.33 $ 11.59 $ 6.24 $ 7.58 $ 8.72 Connecticut Office Properties Annual Tenant Improvement Costs ......... $ 58,000 $1,022,421 $202,880 $179,043 $ 385,531 Per square foot improved ................ 12.45 13.39 5.92 4.88 4.19 Annual Leasing Commissions .............. 0 256,615 151,063 110,252 453,435 Per square foot leased .................. 0 3.36 4.41 3.00 4.92 Total per square foot ................... $ 12.45 $ 16.75 $ 10.33 $ 7.88 $ 9.11 New Jersey Office Properties Annual Tenant Improvement Costs ......... N/A N/A $654,877 $454,054 $1,580,323 Per square foot improved ................ N/A N/A 3.78 2.29 6.71 Annual Leasing Commissions .............. N/A N/A 396,127 787,065 $1,031,950 Per square foot leased .................. N/A N/A 2.08 3.96 4.44 Total per square foot ................... N/A N/A $ 5.86 $ 6.25 $ 11.15 New York Office Properties Annual Tenant Improvement Costs ......... N/A N/A N/A N/A $ 65,267 Per square foot improved ................ N/A N/A N/A N/A 1.79 Annual Leasing Commissions .............. N/A N/A N/A N/A 418,185 Per square foot leased .................. N/A N/A N/A N/A 11.50 Total per square foot ................... N/A N/A N/A N/A $ 13.29 Industrial Properties Annual Tenant Improvement Costs ......... $380,334 $ 230,466 $283,842 $375,646 $ 650,216 Per square foot improved ................ 0.72 0.55 0.76 0.25 0.95 Annual Leasing Commissions .............. 436,213 81,013 200,154 835,108 436,506 Per square foot leased .................. 0.82 0.19 0.44 0.56 0.64 Total per square foot ................... $ 1.54 $ 0.74 $ 1.20 $ 0.81 $ 1.59 I-17
MORTGAGE INDEBTEDNESS The following table sets forth certain information regarding the mortgage debt of the Operating Partnership, as of December 31, 2000. PRINCIPAL AMOUNT AMORTIZATION PROPERTY OUTSTANDING INTEREST RATE MATURITY DATE SCHEDULE - ---------------------------------------------- ------------------ ----------------- --------------- ------------- (IN THOUSANDS) 6800 Jericho Trunpike ........................ $ 14,324 8.07% 7/1/10 25 year 6900 Jericho Trunpike ........................ 7,560 8.07% 7/1/10 25 year 200 Broadhollow Road ......................... 6,494 7.75% 6/02/02 30 year 395 North Service Road ....................... 20,525 6.45% 10/26/05 (2) 50 Charles Lindbergh Blvd. ................... 15,479 7.50% 7/10/01 (3) 333 Earl Ovington Blvd (The Omni)(1) ......... 55,641 7.72% 8/14/07 25 year 310 East Shore Road .......................... 2,322 8.00% 7/01/02 (3) 80 Orville Drive ............................. 2,616 10.10% 2/01/04 (3) 580 White Plains Road ........................ 13,057 7.86% 9/1/10 25 year Landmark Square .............................. 46,974 8.02% 10/07/06 25 year 110 Bi-County Blvd. .......................... 4,043 9.125% 11/30/12 20 year 100 Summit Lake Drive ........................ 21,541 8.50% 4/01/07 15 year 200 Summit Lake Drive ........................ 20,133 9.25% 1/01/06 25 year 120 West 45th Street ......................... 66,103 6.82%(4) 11/01/27 28 year 810 7th Avenue ............................... 85,600 7.73% 8/1/09 25 year 100 Wall Street .............................. 37,094 7.73% 8/1/09 25 year One Orlando Center ........................... 39,465 6.82%(4) 11/01/27 28 year 1350 Avenue of the Americas .................. 70,000 LIBOR + 1.65% 8/1/01 (3) 919 3rd Avenue ............................... 200,000 LIBOR + 1.20% 10/31/03 (3) --------- Total ........................................ $ 728,971 ========= - ---------- (1) The Company has a 60% general partnership interest in the Omni and its proportionate share of the aggregate principal amount of the mortgage debt is approximately $33.4 million. (2) Principal payments of $34,000 per month. (3) Interest only (4) Subject to interest rate adjustment on November 1, 2004. ITEM 3. LEGAL PROCEEDINGS The Operating Partnership is not presently subject to any material litigation nor, to the Operating Partnership's knowledge, is any litigation threatened against the Operating Partnership, other than routine actions for negligence or other claims and administrative proceedings arising in the ordinary course of business, some of which are expected to be covered by liability insurance and all of which collectively are not expected to have a material adverse effect on the liquidity, results of operations, business or financial condition of the Operating Partnership. ITEM 4. SUBMISSION OF MATTERS TO A VOTE SECURITY HOLDERS None. I-18
PART II ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SECURITY MATTERS There is no established trading market for the Registrant's common equity. As of March 23, 2001, there were 97 holders of the Registrant's common equity. The following table sets forth, for the periods indicated, the distributions declared on the Class A common units and the Class B common units. CLASS A COMMON UNITS QUARTER ENDED DISTRIBUTION - ------------------------------------ ----------------- March 31, 1999 .............. $ .33750 June 30, 1999 ............... $ .37125 (1) September 30, 1999 .......... $ .37125 December 31, 1999 ........... $ .37125 QUARTER ENDED DISTRIBUTION - ------------------------------------- ------------- March 31, 2000 .............. $ .37125 June 30, 2000 ............... $ .38600 (2) September 30, 2000 .......... $ .38600 December 31, 2000 ........... $ .38600 - ---------- (1) Commencing with the distribution for the quarter ending June 30, 1999, the Operating Partnership increased the quarterly distribution to $.37125 per unit, which is equivalent to an annual distribution of $1.485 per unit. (2) Commencing with the distribution for the quarter ending June 30, 2000, the Operating Partnership increased the quarterly distribution to $.386 per unit, which is equivalent to an annual distribution of $1.544 per unit. CLASS B COMMON UNITS QUARTER ENDED DISTRIBUTION - ----------------------------------- ------------------ March 31, 1999 ............. N/A June 30, 1999 .............. $ .2364 (1) September 30, 1999 ......... $ .5600 December 31, 1999 .......... $ .5600 QUARTER ENDED DISTRIBUTION March 31, 2000 ............. $ .5600 June 30, 2000 .............. $ .5867 (2) September 30, 2000 ......... $ .6000 December 31, 2000 .......... $ .6000 - ---------- (1) Represents the period May 25, 1999 through June 30, 1999 (2) Commencing with the distribution for the three month period ended July 31, 2001, the Operating Partnership increased the quarterly distribution to $.60 per unit, which is equivalent to an annual distribution of $2.40 per unit. UNREGISTERED SALES OF EQUITY SECURITIES On June 20, 2000, in conjunction with the Company's exchange of 4,181,818 shares of its Class A common stock for four million shares of its Series B preferred stock, the Operating Partnership issued 4,181,818 Class A common units in exchange for four million shares of Series E preferred units with a liquidation preference value of $100 million. II-1
ITEM 6. SELECTED FINANCIAL DATA (IN THOUSANDS EXCEPT PER UNIT DATA AND PROPERTY COUNT) RECKSON OPERATING PARTNERSHIP, L.P. FOR THE YEAR ENDED DECEMBER 31, ---------------------------- 2000 1999 ------------- -------------- OPERATING DATA: Total revenues ........................................... $ 509,917 $ 403,142 Total expenses ........................................... 371,561 297,476 Income before distribution to preferred unit holders, minority interests and extraordinary loss ............... 138,356 105,666 Minority interests ....................................... 9,120 6,802 Extraordinary (loss) ..................................... 1,571 629 Preferred distributions .................................. 28,012 27,001 Net income available to common unitholders ............... 99,653 71,234 Per Unit Data: (1) Net income per common unit: General Partner -- Class A common unit ................... $ 1.50 $ 1.21 General Partner - Class B common unit .................... $ 2.30 $ 1.94 Limited Partners ......................................... $ 1.50 $ 1.21 Weighted average common units outstanding: General Partner - Class A common unit .................... 43,070 40,270 General Partner -- Class B common unit ................... 10,284 6,744 Limited Partners ......................................... 7,696 7,705 BALANCE SHEET DATA: (PERIOD END) Real estate, before accumulated depreciation ............. $2,770,607 $ 2,208,399 Total assets ............................................. 2,999,794 2,734,577 Mortgage notes payable ................................... 728,971 459,174 Unsecured credit facility ................................ 216,600 297,600 Unsecured term loan ...................................... --- 75,000 Senior unsecured notes ................................... 449,385 449,313 Market value of equity (2) ............................... 2,016,390 1,726,845 Total market capitalization including debt (2 and 3) ..... 3,397,204 2,993,756 OTHER DATA: Funds from operations (4) ................................ $ 169,911 $ 132,444 Total square feet (at end of period) ..................... 21,291 21,385 Number of properties (at end of period) .................. 188 189 RECKSON OPERATING PARTNERSHIP, L.P. FOR THE YEAR ENDED DECEMBER 31, ------------------------------------------- 1998 1997 1996 -------------- -------------- ------------- OPERATING DATA: Total revenues ........................................... $ 266,312 $ 153,348 $ 96,030 Total expenses ........................................... 201,003 107,639 70,935 Income before distribution to preferred unit holders, minority interests and extraordinary loss ............... 65,309 45,709 25,095 Minority interests ....................................... 2,819 920 915 Extraordinary (loss) ..................................... 1,993 2,808 1,259 Preferred distributions .................................. 14,244 --- --- Net income available to common unitholders ............... 46,253 41,981 22,921 Per Unit Data: (1) Net income per common unit: General Partner -- Class A common unit ................... $ .98 $ 1.06 $ .87 General Partner - Class B common unit .................... $ --- $ --- $ --- Limited Partners ......................................... $ .98 $ 1.03 $ .86 Weighted average common units outstanding: General Partner - Class A common unit .................... 39,473 32,727 19,928 General Partner -- Class B common unit ................... --- --- --- Limited Partners ......................................... 7,728 7,016 6,503 BALANCE SHEET DATA: (PERIOD END) Real estate, before accumulated depreciation ............. $ 1,737,133 $ 1,011,228 $ 516,768 Total assets ............................................. 1,854,520 1,113,105 543,391 Mortgage notes payable ................................... 253,463 180,023 161,513 Unsecured credit facility ................................ 465,850 210,250 108,500 Unsecured term loan ...................................... 20,000 --- --- Senior unsecured notes ................................... 150,000 150,000 --- Market value of equity (2) ............................... 1,332,882 1,141,592 653,606 Total market capitalization including debt (2 and 3) ..... 2,119,936 1,668,800 921,423 OTHER DATA: Funds from operations (4) ................................ $ 98,501 $ 69,619 $ 40,938 Total square feet (at end of period) ..................... 21,000 13,645 8,800 Number of properties (at end of period) .................. 204 155 110 - ---------- (1) Based on the weighted average common units outstanding for the period then ended. (2) Based on the market value of the Operating Partnership's common units, the stated value of the Operating .Partnership's preferred units and the number of units outstanding at the end of the period. (3) Debt amount is net of minority partners' proportionate share plus the Operating Partnership's share of joint venture debt. (4) See "Management's Discussion and Analysis" for a discussion of funds from operations. II-2
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the historical financial statements of Reckson Operating Partnership, L.P. (the "Operating Partnership") and related notes. The Operating Partnership considers certain statements set forth herein to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to the Operating Partnership's expectations for future periods. Certain forward-looking statements, including, without limitation, statements relating to the timing and success of acquisitions and the completion of development or redevelopment of properties, the financing of the Operating Partnership's operations, the ability to lease vacant space and the ability to renew or relet space under expiring leases, involve certain risks and uncertainties. Although the Operating Partnership believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, the actual results may differ materially from those set forth in the forward-looking statements and the Operating Partnership can give no assurance that its expectation will be achieved. Certain factors that might cause the results of the Operating Partnership to differ materially from those indicated by such forward-looking statements include, among other factors, general economic conditions, general real estate industry risks, tenant default and bankruptcies, loss of major tenants, the impact of competition and acquisition, redevelopment and development risks including delays in completion and cost overruns, the ability to finance business opportunities, increases in interest rates and local real estate risks such as an oversupply of space or a reduction in demand for real estate in the Operating Partnership's real estate markets. Consequently, such forward-looking statements should be regarded solely as reflections of the Operating Partnership's current operating and development plans and estimates. These plans and estimates are subject to revisions from time to time as additional information becomes available, and actual results may differ from those indicated in the referenced statements. OVERVIEW AND BACKGROUND The Operating Partnership, which commenced operations on June 2 1995, is engaged in the ownership, management, operation, leasing and development of commercial real estate properties, principally office and industrial buildings, and also owns certain undeveloped land located in the New York tri-state area (the "Tri-State Area"). Reckson Associates Realty Corp. (the "Company"), is a self administered and self managed real estate investment trust ("REIT"), and serves as the sole general partner in the Operating Partnership. As of December 31, 2000, the Operating Partnership owned and operated 82 office properties (inclusive of ten office properties which are owned through joint ventures) comprising approximately 14.4 million square feet, 104 industrial properties comprising approximately 6.8 million square feet and two retail properties comprising approximately 20,000 square feet, located in the Tri-State Area. In addition, the Operating Partnership is in the process of developing one office property encompassing approximately 315,000 square feet. The Operating Partnership also owns a 357,000 square foot office building located in Orlando, Florida and approximately 290 acres of land in 13 separate parcels of which the Operating Partnership can develop approximately 1.4 million square feet of office space and approximately 224,000 square feet of industrial space. The Operating Partnership also has invested approximately $6.4 million in mortgage notes encumbering approximately 101 acres of land, approximately $17.1 million in a note receivable secured by a partnership interest in Omni Partners, L.P., owner of the Omni, a 575,000 square foot Class A office property located in Uniondale, New York and $36.5 million under three notes which are secured by a minority partner's preferred interest. On August 9, 1999, the Operating Partnership executed a contract for the sale, which took place in three stages, of its interest in Reckson Morris Operating Partnership, L. P. ("RMI"), which consisted of 28 properties, comprising approximately 6.1 million square feet and three other big box industrial properties to Keystone Property Trust ("KTR"). In addition, the Operating Partnership also entered into a sale agreement with the Matrix Development Group ("Matrix") relating to a first mortgage note and certain industrial land holdings (the "Matrix Sale"). The combined total sales price of $310 million ($52 II-3
million of which is attributable to the Morris Companies and its affiliates in the form of $41.6 million of preferred units of KTR's operating partnership and $10.4 million of debt relief) consisted of (i) approximately $159.7 million in cash, (ii) $41.5 million in convertible preferred and common stock of KTR, (iii) $61.6 million in preferred units of KTR's operating partnership, (iv) approximately $37.1 million of debt relief and (v) approximately $10.1 million in purchase money mortgage notes secured by certain land that is being sold to Matrix. As of December 31, 2000, the Matrix Sale and the sale of the Operating Partnership's interest in RMI was completed. As a result, the Operating Partnership realized a gain of approximately $16.7 million. Such gain has been included in gain on dispositions of real estate on the Operating Partnership's consolidated statements of income. Cash proceeds from the sales were used primarily to repay borrowings under the Operating Partnership's unsecured credit facility. In addition, the Operating Partnership redeemed approximately $20 million of the preferred stock of KTR and received principal repayments of approximately $7.2 million related to the purchase money mortgage notes, all of which was used primarily for general operating expenditures. In July 1998, the Company formed a joint venture, Metropolitan Partners LLC ("Metropolitan"), with Crescent Real Estate Equities Company, a Texas REIT ("Crescent") for the purpose of acquiring Tower Realty Trust, Inc. ("Tower"). On May 24, 1999 the Company completed the merger with Tower and acquired three Class A office properties located in New York City totaling 1.6 million square feet and one office property located on Long Island totaling approximately 101,000 square feet. In addition, pursuant to the merger, the Company also acquired certain office properties, a property under development and land located outside of the Tri-State Area. The Company controls Metropolitan and owns 100% of the common equity; Crescent owns a $85 million preferred equity investment in Metropolitan. Crescent's investment accrues distributions at a rate of 7.5% per annum for a two-year period (May 24, 1999 through May 24, 2001) 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 $85 million preferred interest into either (i) a common membership interest in Metropolitan or (ii) shares of the Company's Class A common stock at a conversion price of $24.61 per share. Prior to the closing of the merger, the Company arranged for the sale of four of Tower's Class B New York City properties, comprising approximately 701,000 square feet for approximately $84.5 million. Subsequent to the closing of the merger, the Company has sold a real estate joint venture interest and all of the property located outside the Tri-State Area other than one office property located in Orlando, Florida for approximately $171.1 million. The combined consideration consisted of approximately $143.8 million in cash and approximately $27.3 million of debt relief. Net cash proceeds from the sales were used primarily to repay borrowings under the Operating Partnership's unsecured credit facility. As a result of incurring certain sales and closing costs in connection with the sale of the assets located outside the Tri-State Area, the Operating Partnership has incurred a loss of approximately $4.4 million which has been included in gain (loss) on dispositions of real estate on the Operating Partnership's consolidated statements of income. On September 28, 2000, the Operating Partnership formed a joint venture (the "Tri-State JV") with Teachers Insurance and Annuity Association ("TIAA") and contributed eight Class A suburban office properties aggregating approximately 1.5 million square feet to the Tri-State JV in exchange for approximately $136 million and a 51% majority ownership interest in the Tri-State JV. As a result, the Operating Partnership realized a gain of approximately $15.2 million. Such gain has been included in gain on dispositions of real estate on the Operating Partnership's consolidated statements of income. Cash proceeds received were used primarily to repay borrowings under the Operating Partnership's unsecured credit facility. The Operating Partnership has announced that it has withdrawn its offer to purchase a tract of land located in Suffolk County, New York from the State of New York. As a result, as of December 31, 2000, the Operating Partnership incurred a one-time non-recurring charge of $3.2 million in connection with II-4
the discontinuation of this development project. Such amount has been included in gain (loss) on dispositions of real estate on the Operating Partnership's consolidated statements of income. Further, this write off will not impact the Operating Partnership's computation of Funds from Operations. During 1997, the Company formed FrontLine Capital Group ("FrontLine") (formerly Reckson Service Industries, Inc.) and Reckson Strategic Venture Partners, LLC ("RSVP"). In connection with the formation of FrontLine, the Operating Partnership established a credit facility with FrontLine (the "FrontLine Facility") in the amount of $100 million for FrontLine to use in its investment activities, operations and other general corporate purposes. As of December 31, 2000, the Company had advanced approximately $93.4 million under the FrontLine Facility. 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 ventures (for REIT-qualified investments) or advances made to FrontLine under terms similar to the FrontLine Facility. As of December 31, 2000, approximately $83.2 million had been funded through the RSVP Commitment, of which $41.1 million represents investments in RSVP-controlled (REIT-qualified) joint ventures and $42.1 million represents advances. In March 2001, the Operating Partnership increased the RSVP Commitment to $110 million and advanced approximately $24 million under the RSVP Commitment to fund additional RSVP-controlled (REIT-qualified) joint ventures. In addition, as of December 31, 2000, the Company, through its unsecured credit facility, has allocated approximately $3.2 million in outstanding undrawn letters of credit for the benefit of FrontLine. Both the FrontLine Facility and the RSVP Commitment have a term of five years and advances under each are recourse obligations of FrontLine. Interest accrues on advances made under the credit facilities at a rate equal to the greater of (a) the prime rate plus two percent and (b) 12% per annum, with the rate on amounts that are outstanding for more than one year increasing annually at a rate of four percent of the prior year's rate. Prior to maturity, interest is payable quarterly but only to the extent of net cash flow of FrontLine and on an interest-only basis. As of December 31, 2000, interest accrued under the FrontLine Facility and RSVP Commitment was approximately $13.8 million. During November 1999, the Board of Directors of FrontLine and the Operating Partnership approved an amendment to the FrontLine Facility and the RSVP Commitment to permit FrontLine to incur secured debt and to pay interest thereon. In consideration of the amendments, FrontLine has paid the Operating Partnership a fee of approximately $3.6 million in the form of shares of FrontLine common stock. Such fee is has been amortized in income over an estimated nine month benefit period. FrontLine currently has two distinct operating units: one of which represents its interest in HQ Global Holdings, Inc., the largest provider of flexible officing solutions in the world, and the other which represents interests in technology based partner companies. RSVP invests primarily in real estate and real estate related operating companies generally outside of the Operating Partnership's core office and industrial focus. The Operating Partnership and FrontLine 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, FrontLine granted the Operating Partnership a right of first opportunity to make any REIT -qualified investment that becomes available to FrontLine. In addition, if a REIT-qualified investment opportunity becomes available to an affiliate of FrontLine, including RSVP, the Reckson Intercompany Agreement requires such affiliate to allow the Operating Partnership to participate in such opportunity to the extent of FrontLine's interest. Under the Reckson Intercompany Agreement, the Operating Partnership granted FrontLine a right of first opportunity to provide commercial services to the Operating Partnership and its tenants. FrontLine 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 FrontLine to third parties. In addition, the Operating Partnership will give FrontLine 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 FrontLine a right of first refusal to become the lessee of any real property acquired by the Operating Partnership if the Operating Partnership determines that, consistent with the Company's status as a REIT, it is required to enter into a "master" lease agreement. II-5
On August 27, 1998 the Operating Partnership 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 Operating Partnership. The Dominion Venture is primarily engaged in acquiring, developing and/or owning government-occupied office buildings and privately operated correctional facilities. Under the Dominion Venture's operating agreement, RSVP may invest up to $100 million, some of which may be invested by the Operating Partnership ( 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 Operating Partnership. The Operating Partnership's investment was funded through the RSVP Commitment. In addition, the Operating Partnership advanced approximately $3.3 million to FrontLine 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, 2000, the Operating Partnership had invested, through the RSVP Commitment, approximately $20.6 million in the Dominion Venture which had investments in 13 government office buildings and three correctional facilities. As of December 31, 2000, the Operating Partnership has invested approximately $11.1 million, through a subsidiary, in RAP Student Housing Properties, LLC ("RAP-SHP"), a company that engages primarily in the acquisition and development of off-campus student housing projects. The Operating Partnership's investment was funded through the RSVP Commitment. In addition, the Operating Partnership has advanced approximately $3.5 million to FrontLine through the RSVP Commitment for an investment in RSVP which was then invested in certain service business activities related to student housing. As of December 31, 2000, RAP-SHP had investments in seven off-campus student housing projects. Additionally, during 2000, RAP-SHP entered into an off-campus development joint venture with Titan Investments II, a third party national developer. The purpose of the venture is to develop or reposition off-campus student housing projects across the United States. As of December 31, 2000, the Operating Partnership has invested approximately $3.4 million, through a subsidiary, in RAP MD, LLC ("RAP-MD"), a company that engages primarily in the acquisition, ownership, management and development of medical office properties. The Operating Partnership's investment was funded through the RSVP Commitment. As of December 31, 2000, RAP-MD had investments in eight medical office properties. The market capitalization of the Operating Partnership at December 31, 2000 was approximately $3.4 billion. The Operating Partnership's market capitalization is calculated based on the sum of (i) the value of the Operating Partnership's Class A common units and Class B common units (which, for this purpose, is assumed to be the same per unit as the value of a share of the Company's Class A common stock and Class B common stock), (ii) the liquidation preference values of the Operating Partnership's preferred units, (iii) the contributed value of Metropolitan's preferred interest of $85 million and (iv) approximately $1.4 billion (including its share of joint venture debt and net of minority partners' interest) of debt outstanding at December 31, 2000. As a result, the Operating Partnership's total debt to total market capitalization ratio at December 31, 2000 equaled approximately 40.6%. RESULTS OF OPERATIONS The Operating Partnership's total revenues increased by $106.8 million or 26.5% from 1999 to 2000 and $136.8 million or 51.4% from 1998 to 1999. Property operating revenues, which include base rents and tenant escalations and reimbursements ("Property Operating Revenues") increased by $82.9 million or 22.5% from 1999 to 2000 and $116.7 million or 46.2% from 1998 to 1999. The 2000 increase in Property Operating Revenues is substantially attributable to the assets from the Tower Portfolio acquisition on May 24, 1999. This accounts for approximately $31.9 million, or 38.5%, of the increase in Property Operating Revenues. Additionally, approximately $21.0 million of Property Operating Revenues was generated from two properties acquired in 2000. Property Operating Revenues were also positively impacted by approximately $15.3 million from increases in occupancies and rental rates in our "same store" properties, approximately $9.6 million from newly developed properties added to the operating portfolio and II-6
approximately $2.3 million from 919 Third Avenue, which property operating results were included in Property Operating Revenues. These increases offset the impact of approximately $14.8 million of Property Operating Revenues that were generated in 1999 from properties that were sold in the 1999 "Big Box" industrial transaction. The remaining balance of the increase in total revenues for 2000 is primarily attributable to an increase in gain on dispositions of real estate of approximately $11.8 million and an increase of approximately $8.1 million in other income related to interest earned on advances made to FrontLine through the FrontLine Facility and to RSVP through the RSVP Commitment. The 1999 increase in Property Operating Revenues is substantially attributable to the Tower Portfolio acquisition on May 24, 1999. The revenue generated from these assets generated approximately $47.5 million of revenue in 1999. Additionally, approximately $29.1 million of revenue was generated from the Operating Partnership's June 15, 1999 acquisition of the first mortgage note secured by 919 Third Avenue which property operating results were included in Properly Operating Revenues. Property Operating Revenues were also positively effected by approximately $9.9 million from increases in occupancies and rental rates in our "same store" properties and approximately $27.2 million in additional revenue generated from properties acquired during 1998 and new development activity. The remaining balance of the increase in total revenues in 1999 is primarily attributable to the gain on dispositions of real estate of $10.1 million and an increase of approximately $8.7 million in other income related to interest earned on advances made to FrontLine through the FrontLine Facility and to RSVP through the RSVP Commitment. The Operating Partnership's base rent reflects the positive impact of the straight-line rent adjustment of $38.8 million in 2000, $10.7 million in 1999 and $7.7 million in 1998. The 2000 straight-line rent adjustment includes $23.3 million at 919 3rd Avenue which is attributable to rental abatement periods for the three largest tenants. Property operating expenses, real estate taxes and ground rents ("Property Expenses") increased by $31.5 million or 25.0% from 1999 to 2000 and by $41.7 million or 49.5% from 1998 to 1999. These increases are primarily due to the acquisition of the properties included in the Tower Portfolio acquisition on May 24, 1999 and the June 15, 1999 acquisition of the first mortgage note secured by 919 Third Avenue which property operating results were included in Property Expenses. Gross operating margins (defined as Property Operating Revenues less Property Expenses, taken as a percentage of Property Operating Revenues) for 2000, 1999, and 1998 were 65.2%, 65.9% and 66.6%, respectively. The slight decrease in the gross operating margin percentages resulted from a larger proportionate share of gross operating margin derived from office properties, which has a lower gross margin percentage. The higher proportionate share of the gross operating margin attributable to the office properties was a result of the two office properties acquired in 2000, the office properties acquired in the Tower Portfolio acquisition and the disposition of net leased industrial properties in the "Big Box" industrial transaction. This shift in the composition of the portfolio was offset by increases in rental rates and operating efficiencies realized as a result of operating a larger portfolio of properties with concentration of properties in office and industrial parks or in its established sub-markets. Marketing, general and administrative expenses were $25.2 million in 2000, $22.3 million in 1999 and $16.0 million in 1998. The increase in marketing, general and administrative expenses is due to the increased costs of opening and maintaining the Operating Partnership's New York City division and the increase in corporate management and administrative costs associated with the growth of the Operating Partnership. The Operating Partnership's business strategy has been to expand further into the Tri-State Area suburban markets and the New York City market by applying its standards for high quality office and industrial space and premier tenant service to its New Jersey, Westchester, Southern Connecticut and New York City divisions. In doing this, the Operating Partnership seeks to create a superior franchise value that it enjoys in its home base of Long Island. Over the past three years the Operating Partnership has supported this effort by increasing the marketing programs in the other divisions and strengthening the resources and operating systems in these divisions. The cost of these efforts are reflected in both marketing, general and administrative expenses as well as the revenue growth of the Operating Partnership. Marketing, general and administrative expense as a percentage of total revenues were 4.9% in 2000, 5.5% in 1999 and 6.0% in 1998. II-7
Interest expense was $96.3 million in 2000, $74.7 million in 1999 and $47.8 million in 1998. The increase of $21.6 million from 1999 to 2000 is attributable to (i) a full year of interest on the mortgage debt relating to the Tower Portfolio acquisition (ii) interest on a $70 million mortgage note for the 1350 Avenue of the Americas acquisition which occurred on January 13, 2000 and (iii) a full year of interest on the $300 million of senior unsecured notes issued in March 1999. The increase of $26.9 million from 1998 to 1999 is attributable to (i) an increase in mortgage debt including approximately $232 million relating to the Tower Portfolio acquisition (ii) the issuance of $300 million of senior unsecured notes in March 1999 and (iii) an increased average balance on the Operating Partnership's unsecured credit facilities and unsecured term loan. The weighted average balance outstanding on the Operating Partnership's unsecured credit facilities and unsecured term loan was $416.5 million for 2000, $423.8 million for 1999 and $377.9 million for 1998. Included in depreciation and amortization expense is amortized financing costs of $4.1 million in 2000, $3.4 million in 1999 and $1.6 million in 1998. The increase of approximately $700,000 from 1999 to 2000 is primarily attributable to the secured financings of 919 Third Avenue and 1350 Avenue of the Americas. The increase of $1.8 million from 1998 to 1999 is primarily attributable to the increased loan costs incurred in connection with the Operating Partnership increasing its unsecured term loan in January 1999 to $75 million, the issuance of $300 million of senior unsecured notes in March 1999 and the Operating Partnership's $130 million unsecured bridge facility obtained in connection with the Tower Portfolio acquisition in May 1999. Extraordinary losses, net of minority interest resulted in a $1.6 million loss in 2000, a $629,000 loss in 1999 and a $2.0 million loss in 1998. The extraordinary losses were all attributed to the write-offs of certain deferred loan costs incurred in connection with the Operating Partnership's restructuring of its unsecured credit facilities and term loans. LIQUIDITY AND CAPITAL RESOURCES Summary of Cash Flows Net cash provided by operating activities totaled $170.6 million in 2000, $155.0 million in 1999 and $121.1 million in 1998. Increases for each year were primarily attributable to the growth in cash flow provided by the acquisition of properties, the increased occupancy levels of the Operating Partnership's development properties and the increase in rental rates in all of the Operating Partnership's markets. Net cash used in investing activities totaled $281.6 million in 2000, $392.2 million in 1999 and $615.2 million in 1998. Cash used in investing activities related primarily to investments in real estate properties including development costs. The 1999 cash flows were also impacted by the acquisition of the first mortgage note securing 919 Third Avenue and by proceeds from the sales of real estate. In addition, during 1998, the Operating Partnership purchased $40 million of preferred stock of Tower Realty Trust, Inc. in connection with the Tower Portfolio acquisition. Net cash provided by financing activities totaled $106.5 million in 2000, $256.1 million in 1999 and $474.6 million in 1998. Cash provided by financing activities in 2000 was primarily attributable to secured debt financings, the redemption of preferred stock of KTR, minority partner contributions, and advances under the Operating Partnership's unsecured credit facilities and term loan. Cash provided by financing activities in 1999 and 1998 was primarily attributable to proceeds from the issuances of common and preferred units, senior unsecured notes, secured borrowings, minority partner contributions and advances under the Operating Partnership's unsecured credit facilities and term loan. On June 20, 2000, the Operating Partnership issued 4,181,818 Class A common units in exchange for four million shares of Series E preferred units with a liquidation preference value of $100 million. Investing Activities On January 13, 2000, the Operating Partnership acquired 1350 Avenue of the Americas, a 540,000 square foot, 35 story, Class A office property, located in New York City, for a purchase price of approximately $126.5 million. This acquisition was financed through a $70 million secured debt financing and a draw under the Operating Partnership's unsecured credit facility. II-8
On August 15, 2000, the Operating Partnership acquired 538 Broadhollow Road, a 180,000 square foot Class A office property located in Melville, New York for a purchase price of approximately $25.6 million. This acquisition was financed, in part, through a borrowing under the Operating Partnership's unsecured credit facility. In June 1998, the Operating Partnership established the FrontLine Facility in the amount of $100 million for FrontLine's investment activities, operations and for other general corporate purposes. As of December 31, 2000, approximately $93.4 million had been advanced to FrontLine under this facility. In addition, the Operating Partnership approved the commitment to fund investments of up to $100 million with or in RSVP. As of December 31, 2000, the Operating Partnership has funded approximately $83.2 million under this commitment, of which $41.1 million represents investments in RSVP-controlled (REIT -qualified) joint ventures and $42.1 million represents advances. In March 2001, the Operating Partnership increased the RSVP Commitment to $110 million and advanced approximately $24 million under the RSVP Commitment to fund additional RSVP-controlled (REIT-qualified) joint ventures. Financing Activities As of December 31, 2000, the Operating Partnership had a three year $575 million unsecured revolving credit facility (the "Credit Facility") from The Chase Manhattan Bank, as administrative agent, UBS Warburg LLC as syndication agent and Deutsche Bank as documentation agent. The Credit Facility matures in September, 2003 and borrowings under the Credit Facility are currently priced off of LIBOR plus 105 basis points. The Credit Facility replaced the Operating Partnership's $500 million unsecured credit facility (together with the Credit Facility, the "Credit Facility") and $75 million term loan. As a result, certain deferred loan costs incurred in connection with such unsecured credit facility and term loan were written off. Such amount is reflected as an extraordinary loss in the Operating Partnership's consolidated statements of income. The Operating Partnership utilizes the Credit Facility primarily to finance real estate investments, fund its real estate development activities and for working capital purposes. At December 31, 2000, the Operating Partnership had availability under the Credit Facility to borrow an additional $358.4 million (of which, $51.3 million has been allocated for outstanding undrawn letters of credit). On November 2, 2000, the Operating Partnership obtained a three year secured $250 million first mortgage commitment on the property located at 919 Third Avenue, New York N. Y. Interest rates on borrowings under the commitment are based on LIBOR plus a spread ranging from 110 basis points to 140 basis points based upon the outstanding balance. At closing, $200 million was funded under the commitment at an interest rate of LIBOR plus 120 basis points. In addition, in connection with the $200 million initial funding, the Operating Partnership purchased a LIBOR interest rate hedge that provides for a maximum LIBOR rate of 9.25%. The initial funding was used primarily to repay outstanding borrowings under the Operating Partnership's Credit Facility. As of December 31, 2000, in conjunction with the Company's Class B common stock buy back program, the Operating Partnership purchased and retired 1,410,804 Class B common units for approximately $30.3 million. Capitalization The Operating Partnership's indebtedness at December 31, 2000 totaled approximately $1.4 billion (including its share of joint venture debt and net of the minority partners' interests) and was comprised of $216.6 million outstanding under the Credit Facility, approximately $449.4 million of senior unsecured notes and approximately $714.8 million of mortgage indebtedness. Based on the Operating Partnership's total market capitalization of approximately $3.4 billion at December 31, 2000, (calculated based on the value of the Operating Partnership's Class A common units and Class B common units (which, for this purpose, is assumed to be the same per unit as the value of a share of the Company's Class A common stock and Class II-9
B common stock), the liquidation preference value of the Operating Partnership's preferred units, the contributed value of Metropolitan's preferred interest of $85 million and the $1.4 billion of debt), the Operating Partnership's debt represented approximately 40.6% of its total market capitalization. Historically, rental revenue has been the principal source of funds to pay operating expenses, debt service and capital expenditures, excluding non-recurring capital expenditures of the Operating Partnership. The Operating Partnership expects to meet its short term liquidity requirements generally through its net cash provided by operating activities along with the Credit Facility previously discussed. The Operating Partnership expects to meet certain of its financing requirements through long-term secured and unsecured borrowings and the issuance of debt securities and additional equity securities of the Operating Partnership. The Operating Partnership also expects certain strategic dispositions of assets or interests in assets to generate cash flows. The Operating Partnership will refinance existing mortgage indebtedness or indebtedness under the Credit Facility at maturity or retire such debt through the issuance of additional debt securities or additional equity securities. The Operating Partnership anticipates that the current balance of cash and cash equivalents and cash flows from operating activities, together with cash available from borrowings and debt and equity offerings, will be adequate to meet the capital and liquidity requirements of the Operating Partnership in both the short and long-term. In order to qualify as a REIT for federal income tax purposes, the Company is required to make distributions to its stockholders of at least 90% of REIT taxable income. As a result, it is anticipated that the Operating Partnership will make distributions in amounts sufficient to meet this requirement. The Operating Partnership expects to use its cash flow from operating activities for distributions to unit holders and for payment of recurring, non-incremental revenue-generating expenditures. The Operating Partnership intends to invest amounts accumulated for distribution in short-term investments. On October 16, 2000, the Company's Board of Directors announced that it adopted a Shareholder Rights Plan designed to protect its shareholders from various abusive takeover tactics, including attempts to acquire control of the Company at an inadequate price, depriving its shareholders of the full value of their investment. The Operating Partnership has adopted a similar rights plan (the "Rights Plan") which would be triggered in the event the Company's Shareholder Rights Plan is triggered. A description of the Rights Plan is included in the Notes to Financial Statements of the Operating Partnership. INFLATION The office leases generally provide for fixed base rent increases or indexed escalations. In addition, certain office leases provide for separate escalations of real estate taxes and electric costs over a base amount. The industrial leases also generally provide for fixed base rent increases, direct pass through of certain operating expenses and separate real estate tax escalation over a base amount. The Operating Partnership believes that inflationary increases in expenses will generally be offset by contractual rent increases and expense escalations described above. The Credit Facility and certain mortgage notes payable bear interest at a variable rate, which will be influenced by changes in short-term interest rates, and are sensitive to inflation. FUNDS FROM OPERATIONS Management believes that funds from operations ("FFO") is an appropriate measure of the performance for the Operating Partnership. FFO is defined by the National Association of Real Estate Investment Trusts (NAREIT) as net income or loss, excluding gains or losses from debt restructuring and sales of properties plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. FFO does not represent cash generated from operating activities in accordance with GAAP and is not indicative of cash available to fund cash needs. FFO should not be considered as an alternative to net income as an indicator of the Company's operating performance or as an alternative to cash flow as a measure of liquidity. (See Selected Financial Data). In November 1999, NAREIT issued a "White Paper" analysis to address certain interpretive issues under its definition of FFO. The White Paper provides that FFO should include both recurring and non-recurring operating results, except those results defined as "extraordinary items" under GAAP. This revised definition is effective for all periods beginning on or after January 1, 2000. II-10
Since all companies and analysts do not calculate FFO in a similar fashion, the Operating Partnership's calculation of FFO presented herein may not be comparable to similarly titled measures as reported by other companies. The following table presents the Operating Partnership's FFO calculation for the years ended December 31, (in thousands): 2000 1999 1998 ------------ ----------- ----------- Income before extraordinary loss ........................... $ 101,224 $ 71,863 $ 48,246 Less: Extraordinary loss ........................................ 1,571 629 1,993 --------- --------- -------- Net Income ................................................ 99,653 71,234 46,253 Adjustment for Funds From Operations: Add: Real estate depreciation and amortization ................. 90,552 72,124 51,424 Minority interests' in consolidated partnerships .......... 9,120 6,802 2,819 Extraordinary loss ........................................ 1,571 629 1,993 Less: Gain (loss) on dispositions of real estate ................ 18,669 10,052 -- Amount distributed to minority partners in consolidated partnerships ............................................ 12,316 8,293 3,988 --------- --------- -------- Funds From Operations ...................................... $ 169,911 $ 132,444 $ 98,501 --------- --------- -------- Weighted average units outstanding ......................... 61,050 54,719 47,201 ========= ========= ======== ITEM 7 (A). QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The primary market risk facing the Operating Partnership is interest rate risk on its long term debt, mortgage notes and notes receivable. The Operating Partnership will, when advantageous, hedge its interest rate risk using financial instruments. The Operating Partnership is not subject to foreign currency risk. The Operating Partnership manages its exposure to interest rate risk on its variable rate indebtedness by borrowing on a short-term basis under its Credit Facility until such time as it is able to retire the short-term variable rate debt with either a long-term fixed rate debt offering, long term mortgage debt, general partner contributions or through sales or partial sales of assets. The fair market value ("FMV") of the Operating Partnership's long term debt, mortgage notes and notes receivable is estimated based on discounting future cash flows at interest rates that management believes reflects the risks associated with long term debt, mortgage notes and notes receivable of similar risk and duration. The following table sets forth the Operating Partnership's long term debt obligations by scheduled principal cash flow payments and maturity date, weighted average interest rates and estimated fair market value FMV at December 31, 2000 (dollars in thousands): FOR THE YEAR ENDED DECEMBER 31, ---------------------------------------------------------------------- 2001 2002 2003 2004 2005 ------------- ------------- ------------- -------------- ------------- Long term debt: Fixed rate .............. $ 23,225 $ 17,011 $ 8,905 $ 112,370 $ 10,467 Weighted average interest rate ......... 7.59% 7.80% 7.79% 7.50% 7.81% Variable rate ........... $ 70,000 $ -- $ 416,600 $ -- $ -- Weighted average interest rate ......... 8.43% -- 7.91% -- -- THEREAFTER TOTAL (1) F M V -------------- -------------- ------------ Long term debt: Fixed rate .............. $ 736,993 $ 908,971 $ 908,971 Weighted average interest rate ......... 7.56% 7.56% Variable rate ........... $ -- $ 486,600 $ 486,600 Weighted average interest rate ......... -- 7.98% - ---------- (1) Includes unamortized issuance discounts of $615,000 on the 5 and 10 year senior unsecured notes issued on March 26, 1999 which are due at maturity. II-11
In addition, the Operating Partnership has assessed the market risk for its variable rate debt, which is based upon LIBOR, and believes that a one percent increase in the LIBOR rate would have an approximate $4.9 million annual increase in interest expense based on approximately $486.6 million outstanding at December 31, 2000. The following table sets forth the Operating Partnership's mortgage notes and note receivables by scheduled maturity date, weighted average interest rates and estimated FMV at December 31, 2000 (dollars in thousands): FOR THE YEAR ENDED DECEMBER 31, ------------------------------------------------------- 2001 2002 2003 2004 2005 THEREAFTER TOTAL (2) F M V ---------- ------------ -------- ------------- -------- ------------ ------------- ----------- Mortgage notes and notes receivable: Fixed rate .............. $ 15 $ 4,209 $ --- $ 36,500 $ --- $ 16,990 $ 57,714 $ 57,714 Weighted average interest rate ......... 9.00% 10.08% --- 10.23% --- 11.65% 10.63% - ---------- (2) Excludes mortgage note receivable acquisition costs and interest receivables aggregating approximately $506,000. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The response to this item is included in a separate section of this Form 10-K ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. II-12
PART III ITEMS 10, 11, 12, AND 13. The Company is the sole managing general partner of the Operating Partnership. All of the Company's business is conducted through the Operating Partnership. As a result, the information required by items 10, 11, 12, and 13 is identical to the information contained in Items 10, 11, 12 and 13 of the Company's Form 10-K, which incorporates by reference information appearing in the Company's Proxy Statement furnished to shareholders in connection with the Company's 2001 Annual Meeting. Such information is incorporated by reference in this Form 10-K. III-1
PART IV ITEM 14. FINANCIAL STATEMENTS AND SCHEDULES, EXHIBITS AND REPORTS ON FORM 8-K (a)(1 and 2) Financial Statements and Schedules The following consolidated financial information is included as a separate section of this annual report on Form 10-K: PAGE ------ RECKSON OPERATING PARTNERSHIP, L.P. Report of Independent Auditors ................................................... IV-5 Consolidated Balance Sheets as of December 31, 2000 and December 31, 1999 ........ IV-6 Consolidated Statements of Income for the years ended December 31, 2000, 1999, and 1998 ........................................................................... IV-7 Consolidated Statement of Partners' Capital for the years ended December 31, 2000, 1999, and 1998 ................................................................. IV-8 Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999, and 1998. ...................................................................... IV-9 Notes to Financial Statements .................................................... IV-10 Schedule III -- Real Estate and Accumulated Depreciation ......................... IV-25 All other schedules are omitted since the required information is not present in amounts sufficient to require submission of the schedule or because the information required is included in the financial statements and notes thereto. IV-1
(3) Exhibits EXHIBIT FILING NUMBER REFERENCE DESCRIPTION - --------- ----------- ------------------------------------------------------------------------------------------------- 3.1 a Amended and Restated Agreement of Limited Partnership of the Registrant 3.2 f Supplement to the Amended and Restated Agreement of Limited Partnership of the Registrant Establishing Series A Preferred Units of Limited Partnership Interest 3.3 f Supplement to the Amended and Restated Agreement of Limited Partnership of the Registrant Establishing Series B Preferred Units of Limited Partnership Interest 3.4 f Supplement to the Amended and Restated Agreement of Limited Partnership of the Registrant Establishing Series C Preferred Units of Limited Partnership Interest 3.5 f Supplement to the Amended and Restated Agreement of Limited Partnership of the Registrant Establishing Series D Preferred Units of Limited Partnership Interest 3.6 m Supplement to the Amended and Restated Agreement of Limited Partnership of the Registrant Establishing Series B Common Units of Limited Partnership Interest 3.7 m Supplement to the Amended and Restated Agreement of Limited Partnership of the Registrant Establishing Series E Preferred Partnership Units of Limited Partnership 3.8 Supplement to the Amended and Restated Agreement of Limited Partnership of the Registrant Establishing Series F Junior Participating Preferred Partnership Units Issuable Under the Rights Plan 4.1 h Form of 7.40% Notes due 2004 of the Registrant 4.2 h Form of 7.75% Notes due 2009 of the Registrant 4.3 h Indenture, dated March 26, 1999, among the Registrant, Reckson Associates Realty Corp. (the "Company"), and The Bank of New York, as trustee 4.4 Rights Agreement, dated as of October 13, 2000, between the Registrant and American Stock Transfer and Trust Company 10.1 d Third Amended and Restated Agreement of Limited Partnership of Omni Partners, L.P. 10.2 n Amendment and Restatement of Employment and Non-Competition Agreement, dated as of August 15, 2000 between the Company and Donald Rechler 10.3 n Amendment and Restatement of Employment and Non-Competition Agreement, dated as of August 15, 2000 between the Company and Scott Rechler 10.4 n Amendment and Restatement of Employment and Non-Competition Agreement, dated as of August 15, 2000 between the Company and Mitchell Rechler 10.5 n Amendment and Restatement of Employment and Non-Competition Agreement, dated as of August 15, 2000 between the Company and Gregg Rechler 10.6 n Amendment and Restatement of Employment and Non-Competition Agreement, dated as of August 15, 2000 between the Company and Roger Rechler 10.7 n Amendment and Restatement of Employment and Non-Competition Agreement, dated as of August 15, 2000 between the Company and Michael Maturo 10.8 n Amendment and Restatement of Employment and Non-Competition Agreement, dated as of August 15, 2000 between the Company and Jason Barnett 10.9 a Purchase Option Agreements relating to the Reckson Option Properties 10.10 a Purchase Option Agreements relating to the Other Option Properties 10.11 c Amended 1995 Stock Option Plan 10.12 c 1996 Employee Stock Option Plan 10.13 b Ground Leases for certain of the properties 10.14 g Third Amended and Restated Agreement of Limited Partnership of Reckson FS Limited Partnership 10.15 a Indemnity Agreement relating to 100 Oser Avenue 10.16 d Amended and Restated 1997 Stock Option Plan 10.17 d 1998 Stock Option Plan 10.18 d Note Purchase Agreement for the Senior Unsecured Notes 10.19 n Amended and Restated Severance Agreement, dated August 15, 2000 between the Company and Donald Rechler 10.20 n Amended and Restated Severance Agreement, dated August 15, 2000 between the Company and Scott Rechler 10.21 n Amended and Restated Severance Agreement, dated August 15, 2000 between the Company and Mitchell Rechler 10.22 n Amended and Restated Severance Agreement, dated August 15, 2000 between the Company and Gregg Rechler 10.23 n Amended and Restated Severance Agreement, dated August 15, 2000 between the Company and Roger Rechler 10.24 n Amended and Restated Severance Agreement, dated August 15, 2000 between the Company and Michael Maturo 10.25 n Amended and Restated Severance Agreement, dated August 15, 2000 between the Company and Jason Barnett 10.26 e Amended and Restated Operating Agreement of Metropolitan Partners LLC, dated December 8, 1998 10.27 g Intercompany Agreement by and between the Registrant and Reckson Service Industries, Inc., dated May 13, 1998 10.28 m Amended and Restated Credit Agreement dated as of August 4, 1999 between Reckson Service Industries, Inc., as borrower and the Registrant, as Lender relating to Reckson Strategic Venture Partners, LLC ("RSVP Credit Agreement") 10.29 m Amended and Restated Credit Agreement dated as of August 4, 1999 between Reckson Service Industries, Inc., as borrower and the Registrant, as Lender relating to the operations of Reckson Service Industries, Inc. ("RSI Credit Agreement") 10.30 m Letter Agreement, dated November 30, 1999, amending the RSVP Credit Agreement and the RSI Credit Agreement 10.31 j Consolidated, Amended and Restated Fee and Leasehold Mortgage Note relating to 919 Third Avenue 10.32 l Agreement of Purchase and Sale, between NBBRE 919 Third Avenue Associates, L.P., as Seller, and the Registrant, as Purchaser 10.33 j Side Letter to Agreement of Purchase and Sale between NBRE 919 Third Avenue Associates, L.P., as Seller and the Registrant as Purchaser 10.34 k Contribution and Exchange Agreement by and between Reckson Morris Industrial Trust, Reckson Morris Industrial Interim GP, LLC, the Registrant, Robert Morris, Joseph D. Morris, Ronald Schram, Mark M. Bava, The Drew Morris Trust, The Justin Morris Trust, The Keith Morris Trust, Joseph D. Morris Family Limited Partnership and Robert Morris Family Limited Partnership, and American Real Estate Investment L.P. and American Real Estate Corporation 10.35 n $575 million Credit Facility dated as of September 7, 2000 among the Registrant, The Chase Manhattan Bank, NBS Warburg Dillion Read, Deutsche Bank and Chase Securities, Inc. 10.36 n Guaranty Agreement dated as of September 7, 2000 among the Company, the Chase Manhattan Bank and UBS Warburg LLC 10.37 n Operating Agreement dated as of September 28, 2000 between Reckson Tri-State Member LLC (together with its permitted successors and assigns) and TIAA Tri-State LLC 10.38 p Secured Loan Agreement among Metropolitan 919 3rd Avenue LLC (as borrower), Merrill Lynch Mortgage Capital Inc., Bayerische Landesbank, Cayman Islands Branch, Commerzbank AG New York and Grand Cayman Branches, Wells Fargo Bank, National Association and the other lenders signatory thereto 10.39 p Loan Agreement between 1350 LLC, as Borrower, and Secore Financial Corporation, as Lender IV-2
EXHIBIT FILING NUMBER REFERENCE DESCRIPTION - ---------- ----------- -------------------------------------------------------------------------------------------- 10.40 p Agreement of Spreader, Consolidation and Modification of Mortgage Security Agreement among Metropolitan 810 7th Ave., LLC, 100 Wall Company LLC and Monumental Life Insurance Company 10.41 p Consolidated, Amended and Restated Secured Promissory Note relating to Metropolitan 810 7th Ave., LLC and 100 Wall Company LLC 12.1 Statement of Ratios of Earnings to Fixed Charges 21.1 Statement of Subsidiaries 23.0 Consent of Independent Auditors 24.1 Power of Attorney (included in Part IV of the Form 10-K) (a) Previously filed as an exhibit to Registration Statement Form S-11 (No. 333-1280) and incorporated herein by reference. (b) Previously filed as an exhibit to Registration Statement Form S-11 (No. 33-84324) and incorporated herein by reference. (c) Previously filed as an exhibit to the Company's Form 8-K report filed with the SEC on November 25, 1996 and incorporated herein by reference. (d) Previously filed as an exhibit to the Company's Form 10-K filed with the SEC on March 26, 1998 and incorporated herein by reference. (e) Previously filed as an exhibit to the Registrant's Form 8-K report filed with the SEC on December 22, 1998 and incorporated herein by reference. (f) Previously filed as an exhibit to the Company's Form 8-K report filed with the SEC on March 1, 1999 and incorporated herein by reference. (g) Previously filed as an exhibit to the Company's Form 10-K filed with the SEC on March 16, 1999 and incorporated herein by reference. (h) Previously filed as an exhibit to the Registrant's Form 8-K filed with SEC on March 26, 1999 and incorporated herein by reference. (i) Previously filed as an exhibit to the Registrant's Form 8-K filed with SEC on June 7, 1999 and incorporated herein by reference. (j) Previously filed as an exhibit to the Registrant's Form 8-K filed with SEC on June 25, 1999 and incorporated herein by reference. (k) Previously filed as an exhibit to the Registrant's Form 8-K filed with SEC on August 25, 1999 and incorporated herein by reference. (l) Previously filed as an exhibit to the Company's Form 8-K filed with SEC on January 14, 2000 and incorporated herein by reference. (m) Previously filed as an exhibit to the Company's Form 10-K filed with the SEC on March 17, 2000 and incorporated herein by reference. (n) Previously filed as an exhibit to the Registrant's Form 8-K filed with the SEC on October 17, 2000 and incorporated herein by reference. (o) Previously filed as an exhibit to the Registrant's Form 10-Q filed with the SEC on August 11, 2000 and incorporated herein by reference. (p) Previously filed as an exhibit to the Company's Form 10-K filed with the SEC on March 21, 2001 and incorporated herein by reference. (b) Reports on Form 8-K On October 17, 2000, the Registrant filed a report on Form 8-K relating to: (i) the authorization by the Company's Board of Directors of a dividend distribution of one preferred share purchase right for each outstanding shares of Class A common stock of the Company under a shareholder rights plans; (ii) the purchase by a subsidiary of Teachers Insurance and Annuity Association of America from a subsidiary of the Registrant of a 49% interest in RT Tri-State LLC for approximately $136 million; (iii) the Registrant entering into an unsecured revolving credit facility of up to $575 million with The Chase Manhattan Bank, UBS Warburg LLC, Deutsche Bank and Chase Securities Inc; (iv) the Company's entering into employment and noncompetition agreements and severance agreements with each of its executive officers; and (v) the adoption by the Company's Board of Directors of a new bylaw provision. On November 2, 2000, the Company submitted a report on Form 8-K under Item 9 thereof in order to submit its third quarter presentation in satisfaction of the requirements of Regulation FD. On November 3, 2000, the Company submitted a report on Form 8-K under Item 9 thereof in order to submit supplemental operating and financial data for the third quarter presentation in satisfaction of the requirements of Regulation FD. IV-3
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 22, 2001. RECKSON OPERATING PARTNERSHIP, L.P. By: RECKSON ASSOCIATES REALTY CORP., its general partner By: /s/ Donald J. Rechler --------------------------- Donald J. Rechler, Chairman of the Board and Co-Chief Executive Officer KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned officers and directors of Reckson Associates Realty Corp. ("Reckson Associates"), the corporate general partner of the registrant, hereby severally constitutes and appoints Scott H. Rechler, Michael Maturo and Mitchell D. Rechler, and each of them, his attorney-in-fact and agent, with full power of substitution and resubstitution for him in any and all capacities, to sign any or all amendments to this annual report on Form 10-K for the fiscal year ended December 31, 2000, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto such attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary in connection with such matters and hereby ratifying and confirming all that such attorney-in-fact or his substitutes may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities indicated on March 22, 2001. SIGNATURE TITLE SIGNATURE TITLE - -------------------------- --------------------------- ------------------------ -------------------------- /s/ Donald J. Rechler Chairman of the Board, /s/ Scott H. Rechler President, Co-Chief - ---------------- Co-Chief Executive ---------------- Executive Officer and Donald J. Rechler Officer and Director Scott H. Rechler Director of Reckson (Principal Executive Associates Officer) of Reckson Associates /s/ Roger M. Rechler Vice-Chairman of the /s/ Michael Maturo Executive Vice President, - ---------------- Board, Executive Vice ---------------- Treasurer and Chief Roger M. Rechler President and Director of Michael Maturo Financial Officer Reckson Associates (Principal Financial Officer and Principal Accounting Officer) of Reckson Associates /s/ Mitchell D. Rechler Executive Vice President, /s/ Harvey R. Blau Director of Reckson - ---------------- Co-Chief Operating ---------------- Associates Mitchell D. Rechler Officer and Director of Harvey R. Blau Reckson Associates /s/ Leonard Feinstein Director of Reckson /s/ Herve A. Kevenides Director of Reckson - ---------------- Associates ---------------- Associates Leonard Feinstein Herve A. Kevenides /s/ John V. N. Klein Director of Reckson /s/ Lewis S. Ranieri Director of Reckson - ---------------- Associates ---------------- Associates John V. N. Klein Lewis S. Ranieri /s/ Conrad D. Stephensen Director of Reckson - ---------------- Associates Conrad D. Stephensen IV-4
REPORT OF INDEPENDENT AUDITORS To the Partners Reckson Operating Partnership, L.P. We have audited the accompanying consolidated balance sheets of Reckson Operating Partnership, L. P. (the "Operating Partnership") as of December 31, 2000 and 1999, and the related consolidated statements of income, partners' capital, and cash flows for each of the three years in the period ended December 31 2000. We have also audited the financial statement schedule listed in the index at item 14 (a). These financial statements and financial statement schedule are the responsibility of the Operating Partnership'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 auditing standards generally accepted in the United States. 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 Operating Partnership, L. P. at December 31, 2000 and 1999, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. 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 13, 2001 IV-5
RECKSON OPERATING PARTNERSHIP, L.P. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS EXCEPT UNIT DATA) DECEMBER 31, --------------------------------- 2000 1999 --------------- --------------- ASSETS Commercial real estate properties, at cost (Notes 2, 3, 5, 6,and 8) Land ................................................................. $ 396,482 $ 276,204 Buildings and improvements ........................................... 2,219,448 1,802,611 Developments in progress: ............................................. Land ................................................................. 60,918 60,894 Development costs .................................................... 93,759 68,690 Furniture, fixtures and equipment ..................................... 7,138 6,473 ----------- ----------- 2,777,745 2,214,872 Less accumulated depreciation ...................................... (288,479) (218,385) ----------- ----------- 2,489,266 1,996,487 Investments in real estate joint ventures (Note 8) .................... 43,534 31,531 Investment in mortgage notes and notes receivable (Note 6) ............ 58,220 352,466 Cash and cash equivalents (Note 9) .................................... 16,624 21,122 Tenant receivables .................................................... 11,511 5,117 Investments in and advances to affiliates (Note 8) .................... 180,593 179,762 Deferred rents receivable ............................................. 67,930 32,132 Prepaid expenses and other assets ..................................... 68,759 66,855 Contract and land deposits and pre-acquisition costs .................. 1,676 9,585 Deferred lease and loan costs, less accumulated amortization of $32,773 and $24,484, respectively ............................................ 61,681 39,520 ----------- ----------- Total Assets ......................................................... $ 2,999,794 $ 2,734,577 ----------- ----------- LIABILITIES Mortgage notes payable (Note 2) ....................................... $ 728,971 $ 459,174 Unsecured credit facility (Note 3) .................................... 216,600 297,600 Unsecured term loan (Note 3) .......................................... -- 75,000 Senior unsecured notes (Note 4) ....................................... 449,385 449,313 Accrued expenses and other liabilities (Note 5) ....................... 93,520 81,265 Distributions payable ................................................. 28,801 27,166 ----------- ----------- Total Liabilities .................................................... 1,517,277 1,389,518 ----------- ----------- Commitments and other comments (Notes 9, 10, and 13) .................. -- -- Minority interests' in consolidated partnerships ...................... 226,350 93,086 ----------- ----------- PARTNERS' CAPITAL (Note 7) Preferred Capital, 11,234,518 and 15,234,518 units outstanding, respectively ......................................................... 313,126 413,126 General Partner's Capital: Class A common units, 45,352,286 and 40,375,506 outstanding, respectively ....................................................... 575,570 477,172 Class B common units, 10,283,513 and 10,283,763 outstanding, respectively ....................................................... 270,118 270,689 Limited Partners' Capital, 7,694,642 and 7,701,142 units outstanding, respectively ......................................................... 97,353 90,986 ----------- ----------- Total Partners' Capital .............................................. 1,256,167 1,251,973 ----------- ----------- Total Liabilities and Partners' Capital ............................ $ 2,999,794 $ 2,734,577 =========== =========== (see accompanying notes to financial statements) IV- 6
RECKSON OPERATING PARTNERSHIP, L.P. CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT UNIT DATA) FOR THE YEAR ENDED DECEMBER 31, ------------------------------------------------ 2000 1999 1998 -------------- -------------- -------------- REVENUES (Note 10): Base rents ....................................................... $ 397,327 $ 324,146 $ 224,703 Tenant escalations and reimbursements ............................ 54,750 44,989 27,744 Equity in earnings of service companies and real estate joint ventures ........................................................ 4,383 2,148 1,836 Interest income on mortgage notes and notes receivable ........... 8,212 7,944 7,739 Gain (loss) on disposition of real estate (Note 6) ............... 18,669 10,052 -- Investment and other income ...................................... 26,576 13,863 4,290 ----------- ----------- ----------- Total Revenues .................................................. 509,917 403,142 266,312 ----------- ----------- ----------- EXPENSES: Property operating expenses ...................................... 157,456 125,994 84,280 Marketing, general and administrative ............................ 25,221 22,269 15,971 Interest ......................................................... 96,337 74,709 47,795 Depreciation and amortization .................................... 92,547 74,504 52,957 ----------- ----------- ----------- Total Expenses .................................................. 371,561 297,476 201,003 ----------- ----------- ----------- Income before distributions to preferred unit holders, minority interests and extraordinary loss ....................... 138,356 105,666 65,309 Preferred unit distributions ..................................... (28,012) (27,001) (14,244) Minority partners' interest in consolidated partnerships ......... (9,120) (6,802) (2,819) ----------- ----------- ----------- Income before extraordinary loss ................................. 101,224 71,863 48,246 Extraordinary loss on extinguishment of debts (Note 3) ........... (1,571) (629) (1,993) ----------- ----------- ----------- Net income available to common unit holders ...................... $ 99,653 $ 71,234 $ 46,253 =========== =========== =========== Net income available to: General Partner - Class A common units ........................ $ 64,552 $ 48,791 $ 38,667 General Partner - Class B common units ........................ 23,607 13,110 -- Limited Partners' ............................................. 11,494 9,333 7,586 ----------- ----------- ----------- Total ........................................................... $ 99,653 $ 71,234 $ 46,253 =========== =========== =========== Net income per weighted average units: General Partner - per Class A common unit before extraordinary loss ........................................... $ 1.52 $ 1.22 $ 1.02 Extraordinary loss per Class A general partnership unit ( .02) ( .01) ( .04) ----------- ----------- ----------- Net income per weighted average Class A general partnership common unit ...................................... $ 1.50 $ 1.21 $ .98 =========== =========== =========== General Partner - per Class B common unit before extraordinary loss ........................................... $ 2.34 $ 1.96 $ -- Extraordinary loss per Class B general partnership unit ( .04) ( .02) -- ----------- ----------- ----------- Net income per weighted average Class B general partnership unit ............................................. $ 2.30 $ 1.94 $ -- =========== =========== =========== Limited Partners' - per common unit before extraordinary loss ........................................... $ 1.52 $ 1.22 $ 1.02 Extraordinary loss per limited partnership unit ............... ( .02) ( .01) ( .04) ----------- ----------- ----------- Net income per weighted average limited partnership unit ......................................................... $ 1.50 $ 1.21 $ .98 =========== =========== =========== Weighted average common units outstanding: General Partner - Class A common units ........................ 43,070,000 40,270,000 39,473,000 General Partner - Class B common units ........................ 10,284,000 6,744,000 -- Limited Partners .............................................. 7,696,000 7,705,000 7,728,000 (see accompanying notes to financial statements) IV- 7
RECKSON OPERATING PARTNERSHIP, L.P. CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (IN THOUSANDS) GENERAL PARTNER'S CAPITAL ------------------------------------------- PREFERRED CLASS B CLASS A LIMITED TOTAL CAPITAL COMMON UNITS COMMON UNITS PARTNERS' CAPITAL PARTNERS' CAPITAL ------------- -------------- -------------- ------------------- ------------------ BALANCE JANUARY 1, 1998 .............. $ -- $ -- $ 446,702 $ 85,750 $ 532,452 Net Income ........................... -- -- 38,667 7,586 46,253 Contributions ........................ 263,126 -- 54,089 11,484 328,699 Distributions ........................ -- -- (55,193) (10,695) (65,888) Contribution of a 1% interest in Reckson FS Limited Partnership ...... -- -- 1,076 -- 1,076 ---------- --------- --------- --------- ---------- BALANCE DECEMBER 31, 1998 ............ 263,126 -- 485,341 94,125 842,592 Net Income ........................... -- 13,110 48,791 9,333 71,234 Contributions ........................ 150,000 302,653 1,601 -- 454,254 Distributions ........................ -- (14,787) (58,561) (10,987) (84,335) Retirement of units .................. -- (30,287) -- (1,485) (31,772) ---------- --------- --------- --------- ---------- BALANCE DECEMBER 31, 1999 ............ 413,126 270,689 477,172 90,986 1,251,973 Net Income ........................... -- 23,607 64,552 11,494 99,653 Contributions ........................ -- -- 6,701 -- 6,701 Distributions ........................ -- (24,132) (66,096) (11,765) (101,993) Retirement / redemption of units ..... (100,000) (46) 93,241 6,638 (167) ---------- --------- --------- --------- ---------- BALANCE DECEMBER 31, 2000 ............ $ 313,126 $ 270,118 $ 575,570 $ 97,353 $1,256,167 ========== ========= ========= ========= ========== (see accompanying notes to financial statements) IV- 8
RECKSON OPERATING PARTNERSHIP, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) FOR THE YEAR ENDED DECEMBER 31, --------------------------------------------- 2000 1999 1998 ------------- ------------- ------------- Income before distributions to preferred unit holders .................... $ 127,665 $ 98,235 $ 60,497 Adjustments to reconcile income before distributions to preferred unit holders to net cash provided by operating activities: Depreciation and amortization ........................................... 92,547 74,504 52,957 Extraordinary loss on extinguishment of debts ........................... 1,571 629 1,993 Minority partners' interests in consolidated partnerships ............... 9,120 6,802 2,819 Gain (loss) on dispositions of real estate, securities and mortgage repayment ............................................................. (18,669) (9,657) (52) Distribution from investments in real estate joint ventures ............. 368 442 470 Equity in earnings of service companies and real estate joint ventures. ............................................................. (4,383) (2,148) (1,836) Changes in operating assets and liabilities: Prepaid expenses and other assets ....................................... (9,568) (24,292) (4,597) Tenant and affiliate receivables ........................................ (6,394) 42 (184) Deferred rents receivable ............................................... (35,798) (2,158) (7,553) Accrued expenses and other liabilities .................................. 14,152 12,618 16,605 ---------- ---------- ---------- Net cash provided by operating activities ............................... 170,611 155,017 121,119 ---------- ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of commercial real estate properties .......................... (190,548) (284,741) (449,241) Investment in mortgage notes and notes receivable ....................... -- (295,048) 4,072 Increase (decrease) in contract deposits and preacquisition costs ....... (2,023) (12,650) 8,839 Additions to developments in progress ................................... (13,392) (9,615) (97,570) Additions to commercial real estate properties .......................... (89,818) (28,135) (21,181) Payment of leasing costs ................................................ (24,082) (16,467) (8,802) Investments in securities ............................................... -- -- (42,299) Additions to furniture, fixtures and equipment .......................... (742) (461) (2,071) Investments in real estate joint ventures ............................... (10,780) (15,033) (7,773) Distribution from service companies ..................................... -- -- 15 Proceeds from dispositions of real estate, securities and mortgage note receivable repayments ............................................ 49,810 269,916 809 ---------- ---------- ---------- Net cash used in investing activities ................................... (281,575) (392,234) (615,202) ---------- ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from secured borrowings ........................................ 297,163 125,548 11,458 Principal payments on secured borrowings ................................ (27,367) (4,714) (4,735) Proceeds from redemption of KTR preferred stock ......................... 19,903 Proceeds from issuance of senior unsecured notes, net of issuance costs ................................................................. -- 299,262 -- Payment of loan costs and prepayment penalties .......................... (11,649) (8,264) (4,738) Investments in and advances to affiliates ............................... (14,568) (126,249) (24,409) Proceeds from unsecured credit facilities and term loans ................ 689,600 397,500 413,100 Principal payments on unsecured credit facilities and term loans ........ (845,600) (510,750) (137,500) Contributions ........................................................... 4,010 149,512 272,734 Distributions ........................................................... (128,369) (104,246) (57,683) Retirement of units ..................................................... -- (30,287) -- Contributions by minority partners in consolidated partnerships ......... 135,975 75,500 10,000 Distributions to minority partners in consolidated partnerships ......... (12,632) (6,701) (3,592) ---------- ---------- ---------- Net cash provided by financing activities ................................ 106,466 256,111 474,635 ---------- ---------- ---------- Net increase (decrease) in cash and cash equivalents ..................... (4,498) 18,894 (19,448) Cash and cash equivalents at beginning of period ......................... 21,122 2,228 21,676 ---------- ---------- ---------- Cash and cash equivalents at end of period ............................... $ 16,624 $ 21,122 $ 2,228 ---------- ---------- ---------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for interest, including interest capitalized ........................................................... $ 106,106 $ 77,014 $ 52,622 ---------- ---------- ---------- (see accompanying notes to financial statements) IV- 9
RECKSON OPERATING PARTNERSHIP, L.P. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES DESCRIPTION OF BUSINESS Reckson Operating Partnership, L.P. (the "Operating Partnership") is engaged in the ownership, management, operation, leasing and development of commercial real estate properties, principally office and industrial buildings and also owns certain undeveloped land (collectively, the "Properties") located in the New York tri-state area (the "Tri-State Area"). ORGANIZATION AND FORMATION OF THE OPERATING PARTNERSHIP The Operating Partnership commenced operations on June 2, 1995. The sole general partner in the Operating Partnership, Reckson Associates Realty Corp. (the "Company") is a self administered and self managed real estate investment trust ("REIT"). During June, 1995, the Company contributed approximately $162 million in cash to the Operating Partnership in exchange for an approximate 73% general partnership interest. The Operating Partnership executed various option and purchase agreements whereby it issued units in the Operating Partnership ("Units") to the continuing investors and assumed certain 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 July 1998, the Company formed Metropolitan Partners, LLC ("Metropolitan") for the purpose of acquiring Tower Realty Trust, Inc. ("Tower"). On May 24, 1999 the Company completed the merger with Tower and acquired three Class A office properties located in New York City totaling 1.6 million square feet and one office property located on Long Island totaling approximately 101,000 square feet. In addition, pursuant to the merger, the Company also acquired certain office properties, a property under development and land located outside of the Tri-State Area. All of the assets acquired in the merger, located outside the Tri-State Area, other than a 357,000 square foot office property located in Orlando, Florida, have been sold (see note 6). BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying consolidated financial statements include the consolidated financial position of the Operating Partnership and its subsidiaries at December 31, 2000 and 1999 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000. The Operating Partnership's investments in Metropolitan, Omni Partners, L.P. ("Omni"), the Tri-State JV (see note 6) and certain industrial joint venture properties formerly owned by Reckson Morris Operating Partnership, L.P. ("RMI") are reflected in the accompanying financial statements on a consolidated basis with a reduction for minority partners' interest. The Operating Partnership's investment in RMI was reflected in the accompanying financial statements on a consolidated basis with a reduction for minority partner's interest through September 26, 1999. On September 27, 1999, the Operating Partnership sold its interest in RMI to Keystone Property Trust ("KTR"). The operating results of the service businesses currently conducted by Reckson Management Group, Inc. ("RMG") and Reckson Construction Group, Inc. ("RCG") are reflected in the accompanying financial statements on the equity method of accounting. 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. IV-10
RECKSON OPERATING PARTNERSHIP, L.P. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED) The minority interests at December 31, 2000 represent a convertible preferred interest in Metropolitan, a 49% interest in the Tri-State JV and a 40% interest in Omni. The merger with Tower was accounted for as a purchase in accordance with Accounting Principles Board Opinion No. 16. Accordingly, the fair value of the consideration given by the Operating Partnership, in accordance with the accounting principles generally accepted in the United States ("GAAP"), was used as the valuation basis for the merger. The assets acquired and liabilities assumed by the Operating Partnership were recorded at the fair value as of the closing date of the merger. Use of Estimates The preparation of financial statements in conformity with GAAP 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 Operating Partnership considers highly liquid investments with a maturity of three months or less when purchased, to be cash equivalents. Tenant's lease security deposits aggregating approximately $6.1 million and $5.1 million at December 31, 2000 and 1999, respectively have been included in cash and cash equivalents on the accompanying balance sheets. Deferred Costs Tenant leasing commissions and related costs incurred in connection with leasing tenant space are capitalized and amortized over the life of the related lease. In addition, loan costs incurred are capitalized and amortized over the term of the related loan. Income Taxes No provision has been made for income taxes in the accompanying consolidated financial statements since such taxes, if any, are the responsibility of the individual partners. Revenue Recognition Minimum rental income is recognized on a straight-line basis over the term of a 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 Operating Partnership records interest income on investments in mortgage notes and notes receivable on an accrual basis of accounting. The Operating Partnership does not accrue interest on impaired loans where, in the judgment of management, collection of interest according to the contractual IV-11
RECKSON OPERATING PARTNERSHIP, L.P. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED) terms is considered doubtful. Among the factors the Operating Partnership 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. Gain (loss) on dispositions of real estate are recorded when title is conveyed to the buyer, subject to the buyer's financial commitment being sufficient to provide economic substance to the sale. Net Income Per Common Partnership Unit Net income per Class A common partnership unit and Class B Common partnership unit is determined by allocating net income after preferred distributions and minority partners' interest in consolidated partnerships income to the general and limited partners based on their weighted average distribution per common partnership units outstanding during the respective periods presented. Distributions to Preferred Unit Holders Holders of preferred units of limited and general partnership interest are entitled to distributions based on the stated rates of return (subject to adjustment) for those units. Segment Reporting In 1997, the FASB issued Statement No. 131 "Disclosures about segments of an Enterprise and Related Information" ("Statement 131") which is effective for fiscal years beginning after December 15, 1997. Statement 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 Operating Partnership's financial position or results of operations but did affect the disclosure of segment information (see Note 11). Recent Pronouncements In June 1999, the FASB issued Statement No. 137, amending Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities", which extended the required date of adoption to the years beginning after June 15, 2000. The Operating Partnership will adopt the new Statement effective January 1, 2001. Because of the Operating Partnership's minimal use of derivatives, management does not anticipate that the adoption of the new Statement will have a significant effect on earnings or the financial position of the Operating Partnership. Reclassifications Certain prior year amounts have been reclassified to conform to the current year presentation. 2. MORTGAGE NOTES PAYABLE At December 31, 2000, there were 19 mortgage notes payable with an aggregate outstanding principal amount of approximately $729 million. Properties with an aggregate carrying value at December 31, 2000 of approximately $1,362 million are pledged as collateral against the mortgage notes payable. In addition, approximately $47 million of the $729 million are recourse to the Operating Partnership. The mortgage notes bear interest at rates ranging from 6.45% to 10.10%, and mature between 2001 and 2027. The weighted average interest rates on the outstanding mortgage notes payable at December 31, 2000, 1999 and 1998 were approximately 7.8%, 7.6% and 7.8%, respectively. Certain of the mortgage notes payable are guaranteed by certain minority partners in the Operating Partnership. IV-12
RECKSON OPERATING PARTNERSHIP, L.P. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 2. MORTGAGE NOTES PAYABLE - (CONTINUED) Scheduled principal repayments during the next five years and thereafter are as follows (in thousands): YEAR ENDED DECEMBER 31, - -------------------------------- 2001 ......................... $ 93,225 2002 ......................... 17,011 2003 ......................... 208,905 2004 ......................... 12,370 2005 ......................... 10,467 Thereafter ................... 386,993 --------- $ 728,971 ========= On January 13, 2000, in connection with the acquisition of 1350 Avenue of the Americas, the Operating Partnership obtained a secured $70 million first mortgage commitment which matures in August 2001 and bears interest at LIBOR plus 165 basis points. On November 2, 2000, in connection with the acquisition of 919 Third Avenue, the Operating Partnership obtained a three year secured $250 million first mortgage commitment. Interest rates on borrowings under the commitment are based on LIBOR plus a spread ranging from 110 basis points to 140 basis points based upon the outstanding balance. At closing, $200 million was funded under the commitment at an interest rate of LIBOR plus 120 basis points. In addition, in connection with the $200 million initial funding, the Operating Partnership purchased a LIBOR interest rate hedge that provides for a maximum LIBOR rate of 9.25%. The initial funding was used primarily to repay outstanding borrowings under the Operating Partnership's unsecured credit facility. 3. UNSECURED CREDIT FACILITY As of December 31, 2000, the Operating Partnership had a three year $575 million unsecured revolving credit facility (the "Credit Facility") from The Chase Manhattan Bank, as administrative agent, UBS Warburg LLC as syndication agent and Deutsche Bank as documentation agent. The Credit Facility matures in September, 2003 and borrowings under the Credit Facility are currently priced off of LIBOR plus 105 basis points. The Credit Facility replaced the Operating Partnership's $500 million unsecured credit facility (together with the Credit Facility, the "Credit Facility") and $75 million term loan. As a result, certain deferred loan costs incurred in connection with such unsecured credit facility and term loan were written off. Such amount is reflected as an extraordinary loss in the accompanying consolidated statements of income. The Operating Partnership utilizes the Credit Facility primarily to finance real estate investments, fund its real estate development activities and for working capital purposes. At December 31, 2000, the Operating Partnership had availability under the Credit Facility to borrow an additional $358.4 million (of which, $51.3 million has been allocated for outstanding undrawn letters of credit). The Operating Partnership capitalized interest incurred on borrowings to fund certain development costs in the amount of $11.5 million, $9.8 million and $7.3 million for the years ended December 31, 2000, 1999 and 1998, respectively. IV-13
RECKSON OPERATING PARTNERSHIP, L.P. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED ) 4. SENIOR UNSECURED NOTES As of December 31, 2000, the Operating Partnership had outstanding approximately $449.4 million (net of issuance discounts) of senior unsecured notes (the "Senior Unsecured Notes"). The following table sets forth the Operating Partnership's Senior Unsecured Notes and other related disclosures (dollars in thousands): FACE COUPON ISSUANCE AMOUNT RATE TERM MATURITY - ------------------------------- ------------ ---------- ---------- ---------------- August 27, 1997 ......... $ 150,000 7.20% 10 years August 28, 2007 March 26, 1999 .......... $ 100,000 7.40% 5 years March 15, 2004 March 26, 1999 .......... $ 200,000 7.75% 10 years March 15, 2009 Interest on the Senior Unsecured Notes is payable semiannually with principal and unpaid interest due on the scheduled maturity dates. In addition, the Senior Unsecured Notes issued on March 26, 1999 were issued at an aggregate discount of $738,000. Such discount is being amortized over the term of the Senior Unsecured Notes to which they relate. 5. LAND LEASES AND AIR RIGHTS The Operating Partnership leases, pursuant to noncancellable operating leases, the land on which fourteen of its buildings were constructed. The leases, which contain renewal options, expire between 2009 and 2236. The leases either contain provisions for scheduled increases in the minimum rent at specified intervals or for adjustments to rent based upon the fair market value of the underlying land or other indexes 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 $2.7 million and $2.6 million at December 31, 2000 and 1999, respectively. These amounts are included in accrued expenses and other liabilities on the accompanying balance sheets. In addition, the Operating Partnership, through the acquisition of certain properties, is subject to three air rights lease agreements. These lease agreements have terms expiring between 2048 and 2236, including renewal options. Future minimum lease commitments relating to the land leases and air rights lease agreements during the next five years and thereafter are as follows (in thousands): YEAR ENDED DECEMBER 31, LAND LEASES AIR RIGHTS - ---------------------------- ------------- ----------- 2001 ..................... $ 2,114 $ 940 2002 ..................... 2,059 941 2003 ..................... 2,058 944 2004 ..................... 2,182 954 2005 ..................... 2,185 954 Thereafter ............... 51,084 137,791 -------- --------- $ 61,682 $ 142,524 ======== ========= 6. COMMERCIAL REAL ESTATE INVESTMENTS The Tower Merger In July 1998, the Company formed a joint venture, Metropolitan Partners LLC ("Metropolitan"), with Crescent Real Estate Equities Company, a Texas REIT ("Crescent") for the purpose of acquiring Tower Realty Trust, Inc. ("Tower"). On May 24, 1999 the Company completed the merger with Tower IV-14
RECKSON OPERATING PARTNERSHIP, L.P. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 6. COMMERCIAL REAL ESTATE INVESTMENTS - (CONTINUED) and acquired three Class A office properties located in New York City totaling 1.6 million square feet and one office property located on Long Island totaling approximately 101,000 square feet. In addition, pursuant to the merger, the Company also acquired certain office properties, a property under development and land located outside of the Tri-State Area. The Company controls Metropolitan and owns 100% of the common equity; Crescent owns a $85 million preferred equity investment in Metropolitan. Crescent's investment accrues distributions at a rate of 7.5% per annum for a two-year period (May 24, 1999 through May 24, 2001) 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 $85 million preferred interest into either (i) a common membership interest in Metropolitan or (ii) shares of the Company's Class A common stock at a conversion price of $24.61 per share. Prior to the closing of the merger, the Company arranged for the sale of four of Tower's Class B New York City properties, comprising approximately 701,000 square feet for approximately $84.5 million. Subsequent to the closing of the merger, the Company has sold a real estate joint venture interest and all of the property located outside the Tri-State Area other than one office property located in Orlando, Florida for approximately $171.1 million. The combined consideration consisted of approximately $143.8 million in cash and approximately $27.3 million of debt relief. Net cash proceeds from the sales were used primarily to repay borrowings under the Credit Facility. As a result of incurring certain sales and closing costs in connection with the sale of the assets located outside the Tri-State Area, the Operating Partnership has incurred a loss of approximately $4.4 million which has been included in gain (loss) on dispositions of real estate on the accompanying consolidated statements of income. "Big Box" Industrial Investment Activity On August 9, 1999, the Operating Partnership executed a contract for the sale, which took place in three stages, of its interest in RMI, which consisted of 28 properties, comprising approximately 6.1 million square feet and three other big box industrial properties to KTR. In addition, the Operating Partnership also entered into a sale agreement with the Matrix Development Group ("Matrix") relating to a first mortgage note and certain industrial land holdings (the "Matrix Sale"). The combined total sales price of $310 million ($52 million of which is attributable to the Morris Companies and its affiliates in the form of $41.6 million of preferred units of KTR's operating partnership and $10.4 million of debt relief) consisted of (i) approximately $159.7 million in cash, (ii) $41.5 million in convertible preferred and common stock of KTR, (iii) $61.6 million in preferred units of KTR's operating partnership, (iv) approximately $37.1 million of debt relief and (v) approximately $10.1 million in purchase money mortgage notes secured by certain land that is being sold to Matrix. As of December 31, 2000, the Matrix Sale and the sale of the Operating Partnership's interest in RMI was completed. As a result, the Operating Partnership realized a gain of approximately $16.7 million. Such gain has been included in gain on dispositions of real estate on the accompanying consolidated statements of income. Cash proceeds from the sales were used primarily to repay borrowings under the Credit Facility. In addition, the Operating Partnership redeemed approximately $20 million of the preferred stock of KTR and received principal repayments of approximately $7.2 million related to the purchase money mortgage notes, all of which was used primarily for general operating expenditures. Other Real Estate Investment Activities On April 13, 1999, the Operating Partnership received approximately $25.8 million from the redemption of a mortgage note receivable which secured three office properties located in Garden City, IV-15
RECKSON OPERATING PARTNERSHIP, L.P. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 6. COMMERCIAL REAL ESTATE INVESTMENTS - (CONTINUED) Long Island, encompassing approximately 400,000 square feet. As a result, the Operating Partnership recognized a gain of approximately $4.3 million. Such gain has been included in gain on dispositions of real estate on the accompanying consolidated statements of income. On June 15, 1999, the Operating Partnership acquired the first mortgage note secured by a 47 story, 1.4 million square foot Class A office property located at 919 Third Avenue in New York City for approximately $277.5 million. The first mortgage note entitled the Operating Partnership to all the net cash flow of the property and to substantial rights regarding the operations of the property, with the Operating Partnership anticipating to ultimately obtain title to the property. This acquisition was financed with proceeds from the issuance of six million Series E preferred units of general partnership interest (see note 7) and through an advance under the Credit Facility. Current financial accounting guidelines provides that where a lender has virtually the same risks and potential rewards as those of a real estate owner it should recognize the full economics associated with the operations of the property. As such, the Operating Partnership has recognized real estate operations of 919 Third Avenue in the accompanying consolidated statements of income from the date of acquisition. On July 28, 2000, the Operating Partnership consented to the filing of a consensual, pre-packaged bankruptcy plan with the current fee owner and on November 2, 2000 the Operating Partnership obtained title to the property. On January 13, 2000, the Operating Partnership acquired 1350 Avenue of the Americas, a 540,000 square foot, 35 story, Class A office property, located in New York City, for a purchase price of approximately $126.5 million. This acquisition was financed through a $70 million secured debt financing and a draw under the Credit Facility. On August 15, 2000, the Operating Partnership acquired 538 Broadhollow Road, a 180,000 square foot Class A office property located in Melville, New York for a purchase price of approximately $25.6 million. This acquisition was financed, in part, through a borrowing under the Credit Facility. On September 28, 2000, the Operating Partnership formed a joint venture (the "Tri-State JV") with Teachers Insurance and Annuity Association ("TIAA") and contributed eight Class A suburban office properties aggregating approximately 1.5 million square feet to the Tri-State JV in exchange for approximately $136 million and a 51% majority ownership interest in the Tri-State JV. As a result, the Operating Partnership realized a gain of approximately $15.2 million. Such gain has been included in gain on dispositions of real estate on the accompanying consolidated statements of income. Cash proceeds received were used primarily to repay borrowings under the Credit Facility. In addition, as of December 31, 2000, the Operating Partnership has invested approximately $6.4 million in mortgage notes encumbering approximately 101 acres of land, approximately $17.1 million in a note receivable secured by a partnership interest in Omni Partner's, L.P., owner of the Omni, a 575,000 square foot Class A office property located in Uniondale, New York and $36.5 million under three notes which bear interest at rates ranging from 10.5% to 11% per annum and are secured by a minority partner's preferred unit interest. The Operating Partnership has announced that it has withdrawn its offer to purchase a tract of land located in Suffolk County, New York from the State of New York. As a result, as of December 31, 2000, the Company incurred a one-time non-recurring charge of $3.2 million in connection with the discontinuation of this development project. Such amount has been included in gain (loss) on dispositions of real estate on the accompanying consolidated statements of income. 7. PARTNERS' CAPITAL On May 24, 1999, in conjunction with the Tower acquisition, the Operating Partnership issued 11,694,567 Class B common units of general partnership interest to the Company which were valued for GAAP purposes at $26 per unit for total consideration of approximately $304.1 million. The Class B IV-16
RECKSON OPERATING PARTNERSHIP, L.P. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 7. PARTNERS' CAPITAL - (CONTINUED) common units are entitled to receive an initial annual distribution of $2.24 per unit which distribution is subject to adjustment annually. On July 1, 2000, the annual distribution on the Class B common units was increased to $2.40 per unit. The Class B common units are exchangeable at any time, at the option of the holder, into an equal number of Class A common units subject to customary antidilution adjustments. The Class B common units will be exchanged for an equal number of Class A common units upon the exchange, if any, by the Company of Class A common stock for Class B common stock at any time following November 23, 2003. On June 2, 1999, in connection with the Company's issuance of Series B convertible preferred stock, the Operating Partnership issued six million Series E preferred units of general partnership interest to the Company in exchange for approximately $150 million. The Series E preferred units have a liquidation preference of $25 per unit, and an initial distribution rate of 7.85% per annum with such rate increasing to 8.35% per annum on April 30, 2000 and to 8.85% per annum from and after April 30, 2001. The Series E preferred units are convertible into Class A common units at a price of $26.05 per unit and are redeemable by the Operating Partnership on or after March 2, 2002. Proceeds from the issuance of the Series E preferred units were used as partial consideration in the acquisition of the first mortgage note secured by 919 Third Avenue located in New York City. On June 20, 2000, the Operating Partnership issued 4,181,818 Class A common units in exchange for four million Series E preferred units with a liquidation preference value of $100 million. The Board of Directors of the Company has authorized a purchase buy back program for the Company's Class B common stock. As a result, as of December 31, 2000, in conjunction with the Company's Class B common stock buy back program, the Operating Partnership purchased and retired 1,410,804 Class B common units for approximately $30.3 million. On October 16, 2000, the Company's Board of Directors announced that it adopted a Shareholder Rights Plan designed to protect its shareholders from various abusive takeover tactics, including attempts to acquire control of the Company at an inadequate price, depriving its shareholders of the full value of their investment. The Operating Partnership has adopted a similar rights plan (the "Rights Plan") which would be triggered in the event the Company's Shareholders Rights Plan is triggered. The Rights Plan was not adopted in response to any known effort to acquire control of the Operating Partnership or the Company. Under the Rights Plan, each Class A common unitholder will receive a dividend of one Right for each Class A common unit owned. The Rights will be exercisable only if a person or group acquires, or announces their intent to acquire, 15% or more of the Company's Class A common stock, or announces a tender offer the consummation of which would result in beneficial ownership by a person or group of 15% or more of the Company's Class A common stock. Each Right will entitle the holder to purchase one one-thousandth of a unit of a new series of junior participating preferred units of the Operating Partnership at an initial exercise price of $84.44. If any person acquires beneficial ownership of 15% or more of the outstanding shares of Class A common stock of the Company, then all Rights holders (except the acquiring person if such person is a holder of Rights) will be entitled to purchase the Operating Partnership's Class A common units at a discounted price. If the Company is acquired in a merger after such an acquisition, all Rights holders (except the acquiring person if such person is a holder of Rights) will also be entitled to purchase stock in the buyer at a discount in accordance with the Rights Plan. The distribution of Rights was made to Class A common unitholders of record at the close of business on October 27, 2000 and Class A common units that are newly-issued after that date (including Class A common units issued upon conversion of the outstanding Class B common units) will also carry IV-17
RECKSON OPERATING PARTNERSHIP, L.P. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 7. PARTNERS' CAPITAL - (CONTINUED) Rights until the Rights become detached from the Class A common units. The Rights will expire at the close of business on October 13, 2010, unless earlier redeemed by the Operating Partnership. The Rights distribution is not taxable to unitholders. 8. RELATED PARTY TRANSACTIONS The Operating Partnership, 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. The Operating Partnership in connection with its formation was granted a ten year option period to acquire ten properties which are either owned by the Reckson Group, the predecessor to the Company, or in which the Reckson Group owns a non-controlling minority interest. As of December 31, 2000, one of these properties was sold by the Reckson Group to a third party and four of these properties were acquired by the Operating Partnership for a aggregate purchase price of approximately $35 million, which included the issuance of approximately 475,000 Units valued at approximately $8.8 million. During July 1999, the Operating Partnership sold its interest in a 852,000 square foot development property to RCG in exchange for a $12.3 million note. The note accrues interest annually at the rate of 12%, has a five year maturity and is prepayable in whole or in part. During October 1999, RCG made a payment to the Operating Partnership, in the form of 97 shares of its preferred stock, valued at approximately $4.0 million, towards accrued interest and principal due under the note. The Operating Partnership and FrontLine 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, FrontLine granted the Operating Partnership a right of first opportunity to make any REIT -qualified investment that becomes available to FrontLine. In addition, if a REIT-qualified investment opportunity becomes available to an affiliate of FrontLine, including RSVP, the Reckson Intercompany Agreement requires such affiliate to allow the Operating Partnership to participate in such opportunity to the extent of FrontLine's interest. Under the Reckson Intercompany Agreement, the Operating Partnership granted FrontLine a right of first opportunity to provide commercial services to the Operating Partnership and its tenants. FrontLine 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 FrontLine to third parties. In addition, the Operating Partnership will give FrontLine 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 FrontLine a right of first refusal to become the lessee of any real property acquired by the Operating Partnership if the Operating Partnership determines that, consistent with the Company's status as a REIT, it is required to enter into a "master" lease agreement. RSVP-Controlled REIT-Qualified Joint Venture Investments On August 27, 1998 the Operating Partnership 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 Operating Partnership. The Dominion Venture is primarily engaged in acquiring, developing and/or owning government-occupied office buildings and privately operated correctional facilities. Under the Dominion Venture's operating agreement, RSVP may invest up to $100 million, some of which may be invested by the Operating Partnership (the "RSVP IV-18
RECKSON OPERATING PARTNERSHIP, L.P. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 8. RELATED PARTY TRANSACTIONS - (CONTINUED) Capital"). The initial contribution of RSVP Capital was approximately $39 million of which approximately $10.1 million was invested by a subsidiary of the Operating Partnership. The Operating Partnership's investment was funded through the RSVP Commitment. In addition, the Operating Partnership advanced approximately $3.3 million to FrontLine 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, 2000, the Operating Partnership had invested, through the RSVP Commitment, approximately $20.6 million in the Dominion Venture which had investments in 13 government office buildings and three correctional facilities. As of December 31, 2000, the Operating Partnership has invested approximately $11.1 million, through a subsidiary, in RAP Student Housing Properties, LLC ("RAP-SHP"), a company that engages primarily in the acquisition and development of off-campus student housing projects. The Operating Partnership's investment was funded through the RSVP Commitment. In addition, the Operating Partnership has advanced approximately $3.5 million to FrontLine through the RSVP Commitment for an investment in RSVP which was then invested in certain service business activities related to student housing. As of December 31, 2000, RAP-SHP had investments in seven off-campus student housing projects. Additionally, during 2000, RAP-SHP entered into an off-campus development joint venture with Titan Investments II, a third party national developer. The purpose of the venture is to develop or reposition off-campus student housing projects across the United States. As of December 31, 2000, the Operating Partnership has invested approximately $3.4 million, through a subsidiary, in RAP MD, LLC ("RAP-MD"), a company that engages primarily in the acquisition, ownership, management and development of medical office properties. The Operating Partnership's investment was funded through the RSVP Commitment. As of December 31, 2000, RAP-MD had investments in eight medical office properties. 9. FAIR VALUE OF FINANCIAL INSTRUMENTS In accordance with FASB Statement No. 107, "Disclosures About Fair Value of Financial Instruments", management has made the following disclosures of estimated fair value at December 31, 2000 as required by FASB Statement No. 107. Cash equivalents and variable rate debt are carried at amounts which reasonably approximate their fair values. The fair value of the Operating Partnership's long term debt, mortgage notes and notes receivable is estimated based on discounting future cash flows at interest rates that management believes reflects the risks associated with long term debt, mortgage notes and notes receivable of similar risk and duration. In addition, management believes that the estimated aggregate fair value of these assets and liabilities approximates their carrying values. 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. 10. RENTAL INCOME The office and industrial 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 Operating Partnership for increases in certain operating costs and real estate taxes above base year costs. IV-19
RECKSON OPERATING PARTNERSHIP, L.P. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 10. RENTAL INCOME - (CONTINUED) Expected future minimum rents to be received over the next five years and thereafter from leases in effect at December 31, 2000 are as follows (in thousands): 2001 ......................... $ 378,057 2002 ......................... 380,665 2003 ......................... 355,064 2004 ......................... 324,183 2005 ......................... 278,782 Thereafter ................... 1,465,457 ----------- $ 3,182,208 =========== 11. SEGMENT DISCLOSURE The Operating Partnership's portfolio consists of Class A office properties located within the New York City metropolitan area and Class A suburban office and industrial properties located and operated within the Tri-State Area (the "Core Portfolio"). The Operating Partnership's portfolio also includes one office property located in Orlando, Florida, certain industrial joint venture properties formerly owned by RMI and for the period commencing January 6, 1998 and ending September 26, 1999, industrial properties which were owned by RMI and subsequently sold to KTR. The Operating Partnership has managing directors who report directly to the Chief Operating Officer and Chief Financial Officer who have been identified as the Chief Operating Decision Makers because of their final authority over resource allocation, decisions and performance assessment. In addition, the Operating Partnership does not consider (i) interest incurred on its Credit Facility, term loan and Senior Unsecured Notes, (ii) the operating performance of the office property located in Orlando, Florida and (iii) commencing January 1, 2000, the operating performance of the industrial joint venture properties formerly owned by RMI as part of its Core Portfolio's property operating performance. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. IV-20
RECKSON OPERATING PARTNERSHIP, L.P. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 11. SEGMENT DISCLOSURE - (CONTINUED) The following tables set forth the components of the Operating Partnership's revenues and expenses and other related disclosures, as required by Statement 131, for the years ended December 31 (in thousands): 2000 ------------------------------------------- CORE CONSOLIDATED PORTFOLIO OTHER TOTALS -------------- ------------- -------------- REVENUES: Base rents, tenant escalations and reimbursements .............. $ 442,326 $ 9,751 $ 452,077 Equity in earnings of real estate joint ventures and service companies ............... -- 4,383 4,383 Other income ..................... 1,212 52,245 53,457 ----------- --------- ----------- Total Revenues ................... 443,538 66,379 509,917 ----------- --------- ----------- EXPENSES: Property expenses ................. 154,930 2,526 157,456 Marketing, general and administrative ................... 20,606 4,615 25,221 Interest .......................... 40,465 55,872 96,337 Depreciation and amortization ..... 84,401 8,146 92,547 ----------- --------- ----------- Total Expenses .................... 300,402 71,159 371,561 ----------- --------- ----------- Income (loss) before preferred distributions, minority interests and extraordinary loss ............................. $ 143,136 $ (4,780) $ 138,356 =========== ========= =========== Total assets ...................... $ 2,428,500 $ 571,294 $ 2,999,794 =========== ========= =========== 1999 ------------------------------------------------------ CORE CONSOLIDATED PORTFOLIO RMI OTHER TOTALS -------------- ---------- -------------- ------------- REVENUES: Base rents, tenant escalations and reimbursements .............. $ 340,293 $15,394 $ 13,448 $ 369,135 Equity in earnings of real estate joint ventures and service companies ............... -- -- 2,148 2,148 Other income ..................... 448 9 31,402 31,859 ----------- ------- ---------- ----------- Total Revenues ................... 340,741 15,403 46,998 403,142 ----------- ------- ---------- ----------- EXPENSES: Property expenses ................. 119,270 2,406 4,318 125,994 Marketing, general and administrative ................... 16,981 548 4,740 22,269 Interest .......................... 25,167 445 49,097 74,709 Depreciation and amortization ..... 64,097 3,663 6,744 74,504 ----------- ------- ---------- ----------- Total Expenses .................... 225,515 7,062 64,899 297,476 ----------- ------- ---------- ----------- Income (loss) before preferred distributions, minority interests and extraordinary loss ............................. $ 115,226 $ 8,341 $ (17,901) $ 105,666 =========== ======= ========== =========== Total assets ...................... $ 2,142,696 $ 0 $ 591,881 $ 2,734,577 =========== ======= ========== =========== 12. NON-CASH INVESTING AND FINANCING ACTIVITIES Additional supplemental disclosures of non-cash investing and financing activities are as follows: On May 24, 1999, in conjunction with the Tower portfolio acquisition, the Operating Partnership issued 11,694,567 shares of Class B common units which were valued for GAAP purposes at approximately $304.1 million and assumed approximately $133.4 million of indebtedness for a total non cash investment of approximately $437.5 million. During June 1999, in connection with the sale of an office property, the Operating Partnership obtained a $1.2 million purchase money mortgage as partial consideration for the sale. During July 1999, the Operating Partnership sold its interest in a 852,000 square foot development property to RCG in exchange for a $12.3 million note. During October 1999, the Operating Partnership accepted 97 shares of preferred stock of RCG as payment of $4.0 million of principal and interest due under the note. During September 1999, in connection with the Matrix Sale and the first stage closing of RMI, the Operating Partnership received as partial consideration for the sale $41.5 million of common and preferred stock of KTR and approximately $10.1 million in purchase money mortgages from Matrix. In addition, the Operating Partnership was also relieved of approximately $26.7 million of secured indebtedness. During November 1999, the Operating Partnership received approximately $3.6 million of common stock of FrontLine as consideration for amending the FrontLine Facility and the RSVP Commitment. In May 2000, the Operating Partnership contributed the common stock it received from FrontLine to RMG in exchange for 50 shares of non voting preferred stock, 97 shares of 8% preferred stock and a $1.4 million note. IV-21
RECKSON OPERATING PARTNERSHIP, L.P. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 12. NON-CASH INVESTING AND FINANCING ACTIVITIES - (CONTINUED) On June 20, 2000, in conjunction with the Company's exchange of 4,181,818 shares of its Class A common stock for four million shares of its Series B preferred stock, the Operating Partnership issued 4,181,818 Class A common units in exchange for four million shares of Series E preferred units with a liquidation preference value of $100 million. 13. COMMITMENTS AND OTHER COMMENTS The Operating Partnership had outstanding undrawn letters of credit against its Credit Facility of approximately $51.3 million and $52.3 million at December 31, 2000 and 1999, respectively. 14. QUARTERLY FINANCIAL DATA (UNAUDITED) The following summary represents the Operating Partnership's results of operations for each fiscal quarter during 2000 and 1999 (in thousands, except unit data): 2000 ---------------------------------------------------------------------- FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER --------------- ---------------- --------------- --------------- Total revenues ............................ $ 117,658 $ 125,448 $ 140,294 $ 126,517 =========== =========== =========== =========== Income before distributions to preferred unit holders, minority interests and extraordinary loss ....................... $ 28,772 $ 35,709 $ 44,208 $ 29,667 Preferred unit distributions .............. (7,985) (7,857) (6,085) (6,085) Minority partners' interest in consolidated partnerships ............................. (1,975) (1,925) (1,874) (3,346) Extraordinary loss ........................ -- -- (1,571) -- ----------- ----------- ----------- ----------- Net income available to common unit holders .................................. $ 18,812 $ 25,927 $ 34,678 $ 20,236 =========== =========== =========== =========== Net income available to: General Partner -- Class A common units $ 11,946 $ 16,563 $ 22,753 $ 13,290 General Partner -- Class B common units 4,589 6,281 8,050 4,687 Limited Partners' ........................ 2,277 3,083 3,875 2,259 ----------- ----------- ----------- ----------- Total ..................................... $ 18,812 $ 25,927 $ 34,678 $ 20,236 =========== =========== =========== =========== Net income per common unit: General Partner -- Class A common units $ .30 $ .40 $ .50 $ .29 General Partner -- Class B common units $ .45 $ .61 $ .78 $ .46 Limited Partners' ........................ $ .30 $ .40 $ .50 $ .29 Weighted average common units outstanding: General Partner -- Class A common units 40,382,000 41,343,000 45,178,000 45,326,000 General Partner -- Class B common units 10,284,000 10,284,000 10,284,000 10,284,000 Limited Partners' ........................ 7,700,000 7,695,000 7,695,000 7,695,000 IV-22
RECKSON OPERATING PARTNERSHIP, L.P. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 14. QUARTERLY FINANCIAL DATA (UNAUDITED) - (CONTINUED) 1999 ---------------------------------------------------------------------- FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER --------------- ---------------- --------------- --------------- Total revenues ............................ $ 76,107 $ 90,846 $ 125,731 $ 110,458 =========== =========== =========== =========== Income before distributions to preferred unit holders, minority interests and extraordinary loss ....................... $ 20,091 $ 20,728 $ 35,709 $ 29,138 Preferred unit distributions .............. (5,041) (5,989) (7,985) (7,986) Minority partners' interest in consolidated partnerships ............................. (1,168) (1,615) (2,150) (1,869) Extraordinary loss ........................ -- -- (629) -- ----------- ----------- ----------- ----------- Net income available to common unit holders .................................. $ 13,882 $ 13,124 $ 24,945 $ 19,283 =========== =========== =========== =========== Net income available to: General Partner -- Class A common units $ 11,641 $ 9,550 $ 15,409 $ 12,191 General Partner -- Class B common units -- 1,747 6,596 4,767 Limited Partners' ........................ 2,241 1,827 2,940 2,325 ----------- ----------- ----------- ----------- Total ..................................... $ 13,882 $ 13,124 $ 24,945 $ 19,283 =========== =========== =========== =========== Net income per common unit: General Partner -- Class A common units $ .29 $ .24 $ .38 $ .30 General Partner -- Class B common units $ -- $ .36 $ .58 $ .46 Limited Partners' ........................ $ .29 $ .24 $ .38 $ .30 Weighted average common units outstanding: General Partner -- Class A common units 40,049,000 40,285,000 40,367,000 40,375,000 General Partner -- Class B common units --- 4,883,000 11,457,000 10,469,000 Limited Partners' ........................ 7,710,000 7,705,000 7,702,000 7,701,000 15. PRO FORMA RESULTS (UNAUDITED) The following unaudited pro forma operating results of the Operating Partnership for the year ended December 31, 2000 have been prepared as if the property acquisitions and dispositions made during 2000 had occurred on January 1, 2000. 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 Operating Partnership would have been had the events occurred as of January 1, 2000, nor does it purport to represent the results of operations for future periods (in thousands except per unit data): Total Revenues ...................................................... $ 508,381 ========= Income before distributions to preferred unit holders, minority interests and extraordinary loss ................................... $ 135,532 ========= Net income available to General Partner -- Class A common units . $ 54,117 ========= Net Income per weighted average Class A common unit ................. $ 1.26 ========= Net Income available to General Partner -- Class B common units . $ 19,782 ========= Net Income per weighted average Class B common unit ................. $ 1.92 ========= Net Income available to Limited Partners ............................ $ 9,640 ========= Net income per weighted average limited partnership unit ............ $ 1.26 ========= IV-23
RECKSON OPERATING PARTNERSHIP, L.P. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED ) 16. OTHER INVESTMENTS AND ADVANCES During 1997, the Company formed FrontLine (formerly Reckson Service Industries, Inc.) and RSVP. In connection with the formation of FrontLine, the Operating Partnership established a credit facility with FrontLine (the "FrontLine Facility") in the amount of $100 million for FrontLine to use in its investment activities, operations and other general corporate purposes. As of December 31, 2000, the Operating Partnership had advanced approximately $93.4 million under the FrontLine Facility. 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 ventures (for REIT-qualified investments) or advances made to FrontLine under terms similar to the FrontLine Facility. As of December 31, 2000, approximately $83.2 million had been funded through the RSVP Commitment, of which $41.1 million represents investments in RSVP-controlled (REIT-qualified) joint ventures and $42.1 million represents advances. In March 2001, the Operating Partnership increased the RSVP Commitment to $110 million and advanced approximately $24 million under the RSVP Commitment to fund additional RSVP-controlled (REIT-qualified) joint ventures (unaudited). In addition, as of December 31, 2000, the Operating Partnership, through its Credit Facility, has allocated approximately $3.2 million in outstanding undrawn letters of credit for the benefit of FrontLine. Both the FrontLine Facility and the RSVP Commitment have a term of five years and advances under each are recourse obligations of FrontLine. Interest accrues on advances made under the credit facilities at a rate equal to the greater of (a) the prime rate plus two percent and (b) 12% per annum, with the rate on amounts that are outstanding for more than one year increasing annually at a rate of four percent of the prior year's rate. Prior to maturity, interest is payable quarterly but only to the extent of net cash flow of FrontLine and on an interest-only basis. As of December 31, 2000, interest accrued under the FrontLine Facility and RSVP Commitment was approximately $13.8 million. During November 1999, the Board of Directors of FrontLine and the Operating Partnership approved an amendment to the FrontLine Facility and the RSVP Commitment to permit FrontLine to incur secured debt and to pay interest thereon and to issue preferred stock and to pay dividends thereon. In consideration of the amendments, FrontLine paid the Operating Partnership a fee of approximately $3.6 million in the form of shares of FrontLine common stock. Such fee has been recognized in income over an estimated nine month benefit period. FrontLine currently has two distinct operating units: one of which represents its interest in HQ Global Holdings, Inc., the largest provider of flexible officing solutions in the world, and the other which represents interests in technology based partner companies. RSVP invests primarily in real estate and real estate related operating companies generally outside of the Operating Partnership's core office and industrial focus. IV-24
RECKSON OPERATING PARTNERSHIP, L.P. SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2000 (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) -- $ 1,940 $ 9,955 -- 10,608 85 Nicon Court Hauppauge, New York ..................... -- 797 2,818 -- 64 104 Parkway Drive So., Hauppauge, New York ..................... -- 54 804 -- 200 125 Ricefield Lane Hauppauge, New York ..................... -- 13 852 -- 330 110 Ricefield Lane Hauppauge, New York ..................... -- 33 1,043 1 57 120 Ricefield Lane Hauppauge, New York ..................... -- 16 1,051 -- 192 135 Ricefield Lane Hauppauge, New York ..................... -- 24 906 -- 473 1997 Portfolio Acquisition, Hauppauge, New York (10 additional buildings in Vanderbilt Industrial Park) ............. -- 930 (B) 20,619 1 3,069 425 Rabro Drive Hauppauge, New York ..................... -- 665 3,489 -- 71 600 Old Willets Path Hauppauge, New York ..................... -- 295 3,521 -- 727 Airport International Plaza, Islip, New York (17 buildings in an industrial park)..... 2,616 (C) 1,263 13,608 -- 11,055 120 Wilbur Place Islip, New York ......................... -- 202 1,154 8 117 2004 Orville Drive North Islip, New York ......................... -- 633 4,226 -- 1,413 2005 Orville Drive North Islip, New York ......................... -- 984 5,410 -- 984 County Line Industrial Center, Melville, New York (3 buildings in an industrial park) ..... -- 628 3,686 -- 2,823 30 Hub Drive Melville, New York ...................... -- 469 1,571 -- 312 32 Windsor Place, Islip, New York ......................... -- 32 321 -- 46 COLUMN A COLUMN E COLUMN F COLUMN G COLUMN H - ------------------------------------------ -------------------------------- -------------- -------------- ----------- GROSS AMOUNT AT WHICH CARRIED AT CLOSE OF PERIOD -------------------------------- BUILDINGS AND ACCUMULATED DATE OF DATE DESCRIPTION LAND IMPROVEMENTS TOTAL DEPRECIATION CONSTRUCTION ACQUIRED - ------------------------------------------ ------- --------------- -------- -------------- -------------- ----------- Vanderbilt Industrial Park, Hauppauge, New York (27 buildings in an industrial park) 1,940 20,563 22,503 14,499 1961-1979 1961-1979 85 Nicon Court Hauppauge, New York ..................... 797 2,882 3,679 480 1984 1995 104 Parkway Drive So., Hauppauge, New York ..................... 54 1,004 1,058 161 1985 1996 125 Ricefield Lane Hauppauge, New York ..................... 13 1,182 1,195 296 1973 1996 110 Ricefield Lane Hauppauge, New York ..................... 34 1,100 1,134 191 1980 1996 120 Ricefield Lane Hauppauge, New York ..................... 16 1,243 1,259 168 1983 1996 135 Ricefield Lane Hauppauge, New York ..................... 24 1,379 1,403 367 1981 1996 1997 Portfolio Acquisition, Hauppauge, New York (10 additional buildings in Vanderbilt Industrial Park) ............. 931 23,688 24,619 3,445 1974-1982 1997 425 Rabro Drive Hauppauge, New York ..................... 665 3,560 4,225 433 1980 1997 600 Old Willets Path Hauppauge, New York ..................... 295 4,248 4,543 358 1999 1999 Airport International Plaza, Islip, New York (17 buildings in an industrial park)..... 1,263 24,663 25,926 15,729 1970-1988 1970-1988 120 Wilbur Place Islip, New York ......................... 210 1,271 1,481 116 1972 1998 2004 Orville Drive North Islip, New York ......................... 633 5,639 6,272 921 1998 1998 2005 Orville Drive North Islip, New York ......................... 984 6,394 7,378 387 1999 1999 County Line Industrial Center, Melville, New York (3 buildings in an industrial park) ..... 628 6,509 7,137 4,636 1975-1979 1975-1979 30 Hub Drive Melville, New York ...................... 469 1,883 2,352 358 1976 1996 32 Windsor Place, Islip, New York ......................... 32 367 399 357 1971 1971 COLUMN A COLUMN I - ------------------------------------------ -------------- LIFE ON WHICH DEPRECIATION DESCRIPTION IS COMPUTED - ------------------------------------------ -------------- Vanderbilt Industrial Park, Hauppauge, New York (27 buildings in an industrial park) 10 - 30 Years 85 Nicon Court Hauppauge, New York ..................... 10 - 30 Years 104 Parkway Drive So., Hauppauge, New York ..................... 10 - 30 Years 125 Ricefield Lane Hauppauge, New York ..................... 10 - 30 Years 110 Ricefield Lane Hauppauge, New York ..................... 10 - 30 Years 120 Ricefield Lane Hauppauge, New York ..................... 10 - 30 Years 135 Ricefield Lane Hauppauge, New York ..................... 10 - 30 Years 1997 Portfolio Acquisition, Hauppauge, New York (10 additional buildings in Vanderbilt Industrial Park) ............. 10 - 30 Years 425 Rabro Drive Hauppauge, New York ..................... 10 - 30 Years 600 Old Willets Path Hauppauge, New York ..................... 10 - 30 Years Airport International Plaza, Islip, New York (17 buildings in an industrial park)..... 10 - 30 Years 120 Wilbur Place Islip, New York ......................... 10 - 30 Years 2004 Orville Drive North Islip, New York ......................... 10 - 30 Years 2005 Orville Drive North Islip, New York ......................... 10 - 30 Years County Line Industrial Center, Melville, New York (3 buildings in an industrial park) ..... 10 - 30 Years 30 Hub Drive Melville, New York ...................... 10 - 30 Years 32 Windsor Place, Islip, New York ......................... 10 - 30 Years Continued IV-25
RECKSON OPERATING PARTNERSHIP, L.P SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2000 (CONTINUED) (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 - ----------------------------------- ------------- -------- --------------- ------ --------------- 42 Windsor Place Islip, New York .................. -- 48 327 -- 548 505 Walt Whitman Rd., Huntington, New York ............. -- 140 42 -- 59 1170 Northern Blvd., N. Great Neck, New York .......... -- 30 99 -- 34 50 Charles Lindbergh Blvd., Mitchel Field, New York .......... 15,479 A 12,089 -- 5,361 200 Broadhollow Road Melville, New York ............... 6,494 338 3,354 -- 3,430 48 South Service Road Melville, New York ............... -- 1,652 10,245 -- 5,108 395 North Service Road Melville, New York ............... 20,525 A 15,551 -- 7,298 6800 Jericho Turnpike Syosset, New York ................ 14,324 582 6,566 -- 9,357 6900 Jericho Turnpike Syosset, New York ................ 7,560 385 4,228 -- 3,572 300 Motor Parkway Hauppauge, New York .............. -- 276 1,136 -- 1,665 88 Duryea Road Melville, New York ............... -- 200 1,565 -- 748 210 Blydenburgh Road Islandia, New York ............... -- 11 158 -- 156 208 Blydenburgh Road Islandia, New York ............... -- 12 192 -- 147 71 Hoffman Lane Islandia, New York ............... -- 19 260 -- 172 933 Motor Parkway Hauppauge, New York .............. -- 106 375 -- 396 65 and 85 South Service Road Plainview, New York .............. -- 40 218 -- 17 333 Earl Ovington Blvd., (Omni) Mitchel Field, New York .......... 55,641 A 67,221 -- 19,025 135 Fell Court Islip, New York .................. -- 462 1,265 -- 261 40 Cragwood Road South Plainfield, New Jersey ..... -- 725 7,131 -- 5,873 110 Marcus Drive Huntington, New York ............. -- 390 1,499 -- 107 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 - ----------------------------------- -------- --------------- --------- -------------- -------------- ---------- -------------- 42 Windsor Place Islip, New York .................. 48 875 923 768 1972 1972 10 - 30 Years 505 Walt Whitman Rd., Huntington, New York ............. 140 101 241 85 1950 1968 10 - 30 Years 1170 Northern Blvd., N. Great Neck, New York .......... 30 133 163 130 1947 1962 10 - 30 Years 50 Charles Lindbergh Blvd., Mitchel Field, New York .......... -- 17,450 17,450 9,985 1984 1984 10 - 30 Years 200 Broadhollow Road Melville, New York ............... 338 6,784 7,122 4,087 1981 1981 10 - 30 Years 48 South Service Road Melville, New York ............... 1,652 15,353 17,005 7,957 1986 1986 10 - 30 Years 395 North Service Road Melville, New York ............... -- 22,849 22,849 11,974 1988 1988 10 - 30 Years 6800 Jericho Turnpike Syosset, New York ................ 582 15,923 16,505 9,443 1977 1978 10 - 30 Years 6900 Jericho Turnpike Syosset, New York ................ 385 7,800 8,185 4,161 1982 1982 10 - 30 Years 300 Motor Parkway Hauppauge, New York .............. 276 2,801 3,077 1,510 1979 1979 10 - 30 Years 88 Duryea Road Melville, New York ............... 200 2,313 2,513 1,359 1980 1980 10 - 30 Years 210 Blydenburgh Road Islandia, New York ............... 11 314 325 302 1969 1969 10 - 30 Years 208 Blydenburgh Road Islandia, New York ............... 12 339 351 337 1969 1969 10 - 30 Years 71 Hoffman Lane Islandia, New York ............... 19 432 451 431 1970 1970 10 - 30 Years 933 Motor Parkway Hauppauge, New York .............. 106 771 877 627 1973 1973 10 - 30 Years 65 and 85 South Service Road Plainview, New York .............. 40 235 275 226 1961 1961 10 - 30 Years 333 Earl Ovington Blvd., (Omni) Mitchel Field, New York .......... -- 86,246 86,246 23,633 1990 1995 10 - 30 Years 135 Fell Court Islip, New York .................. 462 1,526 1,988 381 1965 1992 10 - 30 Years 40 Cragwood Road South Plainfield, New Jersey ..... 725 13,004 13,729 7,381 1970 1983 10 - 30 Years 110 Marcus Drive Huntington, New York ............. 390 1,606 1,996 1,230 1980 1980 10 - 30 Years Continued IV-26
RECKSON OPERATING PARTNERSHIP, L.P SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2000 (CONTINUED) (IN THOUSANDS) COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - -------------------------------- ------------- ------------------------ ---------------------- ---------------------------------- COST CAPITALIZED, SUBSEQUENT TO GROSS AMOUNT AT WHICH INITIAL COST ACQUISITION CARRIED AT CLOSE OF PERIOD ------------------------ ---------------------- ---------------------------------- BUILDINGS AND BUILDINGS AND BUILDINGS AND DESCRIPTION ENCUMBRANCE LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS TOTAL - -------------------------------- ------------- -------- --------------- ------ --------------- -------- --------------- --------- 333 East Shore Road Great Neck, New York .......... -- A 564 -- 271 -- 835 835 310 East Shore Road Great Neck, New York .......... 2,322 485 2,009 -- 1,610 485 3,619 4,104 70 Schmitt Blvd. Farmingdale, New York ......... -- 727 3,408 -- 33 727 3,441 4,168 19 Nicholas Drive Yaphank, New York ............. -- 160 7,399 -- 6,042 160 13,441 13,601 1516 Motor Parkway Hauppauge, New York ........... -- 603 6,722 -- 271 603 6,993 7,596 125 Baylis Road Melville, New York ............ -- 1,601 8,626 -- 2,026 1,601 10,652 12,253 35 Pinelawn Road Melville, New York ............ -- 999 7,073 -- 2,165 999 9,238 10,237 520 Broadhollow Road Melville, New York ............ -- 457 5,572 -- 1,669 457 7,241 7,698 1660 Walt Whitman Road Melville, New York ............ -- 370 5,072 -- 463 370 5,535 5,905 70 Maxess Road Melville, New York ............ -- 367 1,859 95 2,957 462 4,816 5,278 20 Melville Park Rd., Melville, New York ............ -- 391 2,650 -- 101 391 2,751 3,142 105 Price Parkway Farmingdale, New York ......... -- 2,030 6,327 -- 469 2,030 6,796 8,826 48 Harbor Park Drive Port Washington, New York ..... -- 1,304 2,247 -- 93 1,304 2,340 3,644 60 Charles Lindbergh Mitchel Field, New York ....... -- A 20,800 -- 1,904 -- 22,704 22,704 155 White Plains Road, Tarrytown, New York ........... -- 1,613 2,542 -- 921 1,613 3,463 5,076 235 Main Street White Plains, New York ........ -- 933 5,375 -- 1,233 933 6,608 7,541 245 Main Street White Plains, New York ........ -- 1,235 7,284 1 806 1,236 8,090 9,326 505 White Plains Road Tarrytown, New York ........... -- 210 1,332 -- 271 210 1,603 1,813 555 White Plains Road Tarrytown, New York ........... -- 712 4,133 51 4,517 763 8,650 9,413 560 White Plains Road Tarrytown, New York ........... -- 1,521 8,756 -- 2,011 1,521 10,767 12,288 COLUMN A COLUMN F COLUMN G COLUMN H COLUMN I - -------------------------------- -------------- -------------- ---------- -------------- LIFE ON WHICH ACCUMULATED DATE OF DATE DEPRECIATION DESCRIPTION DEPRECIATION CONSTRUCTION ACQUIRED IS COMPUTED - -------------------------------- -------------- -------------- ---------- -------------- 333 East Shore Road Great Neck, New York .......... 582 1976 1976 10 - 30 Years 310 East Shore Road Great Neck, New York .......... 1,773 1981 1981 10 - 30 Years 70 Schmitt Blvd. Farmingdale, New York ......... 613 1965 1995 10 - 30 Years 19 Nicholas Drive Yaphank, New York ............. 1,623 1989 1995 10 - 30 Years 1516 Motor Parkway Hauppauge, New York ........... 1,245 1981 1995 10 - 30 Years 125 Baylis Road Melville, New York ............ 1,814 1980 1995 10 - 30 Years 35 Pinelawn Road Melville, New York ............ 1,939 1980 1995 10 - 30 Years 520 Broadhollow Road Melville, New York ............ 1,837 1978 1995 10 - 30 Years 1660 Walt Whitman Road Melville, New York ............ 992 1980 1995 10 - 30 Years 70 Maxess Road Melville, New York ............ 800 1967 1995 10 - 30 Years 20 Melville Park Rd., Melville, New York ............ 420 1965 1996 10 - 30 Years 105 Price Parkway Farmingdale, New York ......... 1,140 1969 1996 10 - 30 Years 48 Harbor Park Drive Port Washington, New York ..... 391 1976 1996 10 - 30 Years 60 Charles Lindbergh Mitchel Field, New York ....... 3,945 1989 1996 10 - 30 Years 155 White Plains Road, Tarrytown, New York ........... 523 1963 1996 10 - 30 Years 235 Main Street White Plains, New York ........ 1,159 1974 1996 10 - 30 Years 245 Main Street White Plains, New York ........ 1,515 1983 1996 10 - 30 Years 505 White Plains Road Tarrytown, New York ........... 347 1974 1996 10 - 30 Years 555 White Plains Road Tarrytown, New York ........... 2,302 1972 1996 10 - 30 Years 560 White Plains Road Tarrytown, New York ........... 2,602 1980 1996 10 - 30 Years Continued IV-27
RECKSON OPERATING PARTNERSHIP, L.P SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2000 (CONTINUED) (IN THOUSANDS) COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - ------------------------------- ------------- ------------------------ ---------------------- ---------------------------------- COST CAPITALIZED, SUBSEQUENT TO GROSS AMOUNT AT WHICH INITIAL COST ACQUISITION CARRIED AT CLOSE OF PERIOD ------------------------ ---------------------- ---------------------------------- BUILDINGS AND BUILDINGS AND BUILDINGS AND DESCRIPTION ENCUMBRANCE LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS TOTAL - ------------------------------- ------------- -------- --------------- ------ --------------- -------- --------------- --------- 580 White Plains Road Tarrytown, New York .......... 13,057 2,414 14,595 -- 3,056 2,414 17,651 20,065 660 White Plains Road Tarrytown, New York .......... -- 3,929 22,640 45 4,801 3,974 27,441 31,415 Landmark Square Stamford, Connecticut ........ 46,974 11,603 64,466 832 27,610 12,435 92,076 104,511 110 Bi -County Blvd. Farmingdale, New York ........ 4,043 2,342 6,665 -- 187 2,342 6,852 9,194 One Eagle Rock, East Hanover, New Jersey ..... -- 803 7,563 -- 3,025 803 10,588 11,391 710 Bridgeport Avenue Shelton, Connecticut ......... -- 5,405 21,620 7 719 5,412 22,339 27,751 101 JFK Expressway Short Hills, New Jersey ...... -- 7,745 43,889 -- 1,154 7,745 45,043 52,788 10 Rooney Circle West Orange, New Jersey ...... -- 1,302 4,615 1 425 1,303 5,040 6,343 Executive Hill Office Park West Orange, New Jersey ...... -- 7,629 31,288 4 1,299 7,633 32,587 40,220 3 University Plaza Hackensack, New Jersey ....... -- 7,894 11,846 -- 2,425 7,894 14,271 22,165 One Paragon Drive Montvale, New Jersey ......... -- 2,773 9,901 -- 687 2,773 10,588 13,361 150 Motor Parkway Hauppauge, New York .......... -- 1,114 20,430 -- 2,688 1,114 23,118 24,232 Reckson Executive Park Ryebrook, New York ........... -- 18,343 55,028 -- 2,168 18,343 57,196 75,539 University Square Princeton, New Jersey ........ -- 3,288 8,888 -- 419 3,288 9,307 12,595 100 Andrews Road Hicksville, New York ......... -- 2,337 1,711 151 5,742 2,488 7,453 9,941 2 Macy Road Harrison, New York ........... -- 642 2,131 -- 66 642 2,197 2,839 80 Grasslands Elmsford, New York ........... -- 1,208 6,728 -- 436 1,208 7,164 8,372 65 Marcus Drive Melville, New York ........... -- 295 1,966 56 883 351 2,849 3,200 Triad V -- 1979 Marcus Rd., Lake Success, New York ....... -- 3,528 31,786 -- 7,921 3,528 39,707 43,235 100 Forge Way Rockaway, New Jersey ......... -- 315 902 -- 90 315 992 1,307 COLUMN A COLUMN F COLUMN G COLUMN H COLUMN I - ------------------------------- -------------- -------------- ---------- -------------- LIFE ON WHICH ACCUMULATED DATE OF DATE DEPRECIATION DESCRIPTION DEPRECIATION CONSTRUCTION ACQUIRED IS COMPUTED - ------------------------------- -------------- -------------- ---------- -------------- 580 White Plains Road Tarrytown, New York .......... 3,515 1997 1996 10 - 30 Years 660 White Plains Road Tarrytown, New York .......... 5,523 1983 1996 10 - 30 Years Landmark Square Stamford, Connecticut ........ 12,076 1973-1984 1996 10 - 30 Years 110 Bi -County Blvd. Farmingdale, New York ........ 972 1984 1997 10 - 30 Years One Eagle Rock, East Hanover, New Jersey ..... 1,683 1986 1997 10 - 30 Years 710 Bridgeport Avenue Shelton, Connecticut ......... 2,893 1971-1979 1997 10 - 30 Years 101 JFK Expressway Short Hills, New Jersey ...... 5,478 1981 1997 10 - 30 Years 10 Rooney Circle West Orange, New Jersey ...... 699 1971 1997 10 - 30 Years Executive Hill Office Park West Orange, New Jersey ...... 3,968 1978-1984 1997 10 - 30 Years 3 University Plaza Hackensack, New Jersey ....... 1,785 1985 1997 10 - 30 Years One Paragon Drive Montvale, New Jersey ......... 1,320 1980 1997 10 - 30 Years 150 Motor Parkway Hauppauge, New York .......... 2,986 1984 1997 10 - 30 Years Reckson Executive Park Ryebrook, New York ........... 6,192 1983-1986 1997 10 - 30 Years University Square Princeton, New Jersey ........ 940 1987 1997 10 - 30 Years 100 Andrews Road Hicksville, New York ......... 1,194 1954 1996 10 - 30 Years 2 Macy Road Harrison, New York ........... 234 1962 1997 10 - 30 Years 80 Grasslands Elmsford, New York ........... 778 1989/1964 1997 10 - 30 Years 65 Marcus Drive Melville, New York ........... 454 1968 1996 10 - 30 Years Triad V -- 1979 Marcus Rd., Lake Success, New York ....... 4,514 1987 1998 10 - 30 Years 100 Forge Way Rockaway, New Jersey ......... 107 1986 1998 10 - 30 Years Continued IV-28
RECKSON OPERATING PARTNERSHIP, L.P SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2000 (CONTINUED) (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 - ----------------------------------- ------------- ----------------- --------------- -------- --------------- 200 Forge Way Rockaway, New Jersey ............. -- 1,128 3,228 -- 178 300 Forge Way Rockaway, New Jersey ............. -- 376 1,075 -- 254 400 Forge Way Rockaway, New Jersey ............. -- 1,142 3,267 -- 179 51 - 55 Charles Lindbergh Blvd. Mitchel Field, New York .......... -- A 27,975 -- 4,258 155 Passaic Avenue Fairfield, New Jersey ............ -- 3 (A) 3,538 -- 2,126 100 Summit Drive Valhalla, New York ............... 21,541 3,007 41,351 -- 4,140 115/117 Stevens Avenue Valhalla, New York ............... -- 1,094 22,490 -- 733 200 Summit Lake Drive Valhalla, New York ............... 20,133 4,343 37,305 -- 1,961 140 Grand Street White Plains, New York ........... -- 1,932 18,744 -- 309 500 Summit Lake Drive Valhalla, New York ............... -- 7,052 37,309 -- 7,794 99 Cherry Hill Road Parsippany, New Jersey ........... -- 2,360 7,508 -- 373 119 Cherry Hill Road Parsippany, New Jersey ........... -- 2,512 7,622 -- 879 45 Melville Park Road Melville, New York ............... -- 355 1,487 -- 1,822 500 Saw Mill River Road Elmsford, New York ............... -- 1,542 3,796 -- 185 120 W.45th Street New York, New York ............... 66,103 28,757 (A) 162,809 (10) 1,237 1255 Broad Street Clifton, New Jersey .............. -- 1,329 15,869 -- 3,976 810 7th Avenue New York, New York ............... 85,600 26,984 (A) 152,767 112 9,155 120 Mineola Blvd. Mineola, New York ................ -- 1,869 10,603 5 256 100 Wall Street New York, New York ............... 37,094 11,749 66,517 90 4,568 One Orlando Orlando, Florida ................. 39,465 9,386 51,136 29 1,639 COLUMN A KCOLUMN 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 - ----------------------------------- -------- --------------- --------- -------------- -------------- ---------- -------------- 200 Forge Way Rockaway, New Jersey ............. 1,128 3,406 4,534 342 1989 1998 10 - 30 Years 300 Forge Way Rockaway, New Jersey ............. 376 1,329 1,705 176 1989 1998 10 - 30 Years 400 Forge Way Rockaway, New Jersey ............. 1,142 3,446 4,588 346 1989 1998 10 - 30 Years 51 - 55 Charles Lindbergh Blvd. Mitchel Field, New York .......... -- 32,233 32,233 4,495 1981 1998 10 - 30 Years 155 Passaic Avenue Fairfield, New Jersey ............ 3 5,664 5,667 623 1984 1998 10 - 30 Years 100 Summit Drive Valhalla, New York ............... 3,007 45,491 48,498 4,441 1988 1998 10 - 30 Years 115/117 Stevens Avenue Valhalla, New York ............... 1,094 23,223 24,317 2,128 1984 1998 10 - 30 Years 200 Summit Lake Drive Valhalla, New York ............... 4,343 39,266 43,609 3,493 1990 1998 10 - 30 Years 140 Grand Street White Plains, New York ........... 1,932 19,053 20,985 1,746 1991 1998 10 - 30 Years 500 Summit Lake Drive Valhalla, New York ............... 7,052 45,103 52,155 3,569 1986 1998 10 - 30 Years 99 Cherry Hill Road Parsippany, New Jersey ........... 2,360 7,881 10,241 676 1982 1998 10 - 30 Years 119 Cherry Hill Road Parsippany, New Jersey ........... 2,512 8,501 11,013 706 1982 1998 10 - 30 Years 45 Melville Park Road Melville, New York ............... 355 3,309 3,664 407 1998 1998 10 - 30 Years 500 Saw Mill River Road Elmsford, New York ............... 1,542 3,981 5,523 399 1968 1998 10 - 30 Years 120 W.45th Street New York, New York ............... 28,747 164,046 192,793 9,065 1998 1999 10 - 30 Years 1255 Broad Street Clifton, New Jersey .............. 1,329 19,845 21,174 1,057 1999 1999 10 - 30 Years 810 7th Avenue New York, New York ............... 27,096 161,922 189,018 8,785 1970 1999 10 - 30 Years 120 Mineola Blvd. Mineola, New York ................ 1,874 10,859 12,733 608 1977 1999 10 - 30 Years 100 Wall Street New York, New York ............... 11,839 71,085 82,924 3,845 1969 1999 10 - 30 Years One Orlando Orlando, Florida ................. 9,415 52,775 62,190 2,770 1987 1999 10 - 30 Years Continued IV-29
RECKSON OPERATING PARTNERSHIP, L.P SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2000 (CONTINUED) (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 - -------------------------------- ------------- ------------------ --------------- --------- --------------- 1350 Avenue of the Americas New York, New York ............ 70,000 19,222 109,168 -- 6,142 919 3rd. Avenue New York, New York ............ 200,000 101,644 (A) 205,736 -- 316 538 Broadhollow Road Melville, New York ............ -- 3,900 21,413 -- 867 360 Hamilton Avenue White Plains, New York (D) .... -- 2,838 34,606 -- 19,048 492 River Road Nutley, New Jersey ............ -- 2,615 5,102 -- 1,525 275 Broadhollow Road Melville, New York ............ -- 3,850 12,958 -- 1 400 Garden City Plaza Garden City, New York ......... -- 9,081 17,004 -- 69 90 Merrick Avenue East Meadow, New York ......... -- (A) 23,804 -- 19 120 White Plains Road Tarrytown, New York ........... -- 3,852 24,861 -- 16 100 White Plains Road Tarrytown, New York ........... -- 79 472 -- 7 51 JFK Parkway Short Hills, New Jersey ....... -- 10,053 62,504 1 115 680 Washington Blvd Stamford, Connecticut ......... -- 4,561 23,698 -- 6 750 Washington Blvd Stamford, Connecticut ......... -- 7,527 31,940 -- 23 1305 Walt Whitman Road Melville, New York ............ -- 3,934 24,040 -- 4 Land held for development ...... -- 60,823 -- -- -- Developments in progress ....... -- -- 77,076 -- -- Other property ................. -- -- -- -- 9,777 ------- ------- ------- -- ------ Total .......................... $728,971 $ 455,920 $2,037,742 $1,480 $275,465 ======== =========== ========== ====== ======== COLUMN A COLUMN E COLUMN F COLUMN G COLUMN H - -------------------------------- ------------------------------------------- -------------- -------------- ---------- GROSS AMOUNT AT WHICH CARRIED AT CLOSE OF PERIOD ------------------------------------------- BUILDINGS AND ACCUMULATED DATE OF DATE DESCRIPTION LAND IMPROVEMENTS TOTAL DEPRECIATION CONSTRUCTION ACQUIRED - -------------------------------- ----------- ----------------- ------------- -------------- -------------- ---------- 1350 Avenue of the Americas New York, New York ............ 19,222 115,310 134,532 3,500 1966 2000 919 3rd. Avenue New York, New York ............ 101,644 206,052 307,696 1,085 1970 2000 538 Broadhollow Road Melville, New York ............ 3,900 22,280 26,180 239 2000 2000 360 Hamilton Avenue White Plains, New York (D) .... 2,838 53,654 56,492 1,494 2000 2000 492 River Road Nutley, New Jersey ............ 2,615 6,627 9,242 38 2000 2000 275 Broadhollow Road Melville, New York ............ 3,850 12,959 16,809 896 1970 1997 400 Garden City Plaza Garden City, New York ......... 9,081 17,073 26,154 811 1989 1997 90 Merrick Avenue East Meadow, New York ......... -- 23,823 23,823 3,393 1985 1997 120 White Plains Road Tarrytown, New York ........... 3,852 24,877 28,729 1,401 1984 1997 100 White Plains Road Tarrytown, New York ........... 79 479 558 5 1984 1997 51 JFK Parkway Short Hills, New Jersey ....... 10,054 62,619 72,673 3,201 1988 1998 680 Washington Blvd Stamford, Connecticut ......... 4,561 23,704 28,265 1,143 1989 1998 750 Washington Blvd Stamford, Connecticut ......... 7,527 31,963 39,490 1,482 1989 1998 1305 Walt Whitman Road Melville, New York ............ 3,934 24,044 27,978 959 1999 1999 Land held for development ...... 60,823 -- 60,823 -- N/A Various Developments in progress ....... -- 77,076 77,076 -- Other property ................. -- 9,777 (B) 9,777 1,209 ------- ------- ------- ----- Total .......................... $457,400 $2,313,207 $2,770,607 $284,315 ======== ========== ========== ======== COLUMN A COLUMN I - -------------------------------- -------------- LIFE ON WHICH DEPRECIATION DESCRIPTION IS COMPUTED - -------------------------------- -------------- 1350 Avenue of the Americas New York, New York ............ 10 - 30 Years 919 3rd. Avenue New York, New York ............ 10 - 30 Years 538 Broadhollow Road Melville, New York ............ 10 - 30 Years 360 Hamilton Avenue White Plains, New York (D) .... 10 - 30 Years 492 River Road Nutley, New Jersey ............ 10 - 30 Years 275 Broadhollow Road Melville, New York ............ 10 - 30 Years 400 Garden City Plaza Garden City, New York ......... 10 - 30 Years 90 Merrick Avenue East Meadow, New York ......... 10 - 30 Years 120 White Plains Road Tarrytown, New York ........... 10 - 30 Years 100 White Plains Road Tarrytown, New York ........... 10 - 30 Years 51 JFK Parkway Short Hills, New Jersey ....... 10 - 30 Years 680 Washington Blvd Stamford, Connecticut ......... 10 - 30 Years 750 Washington Blvd Stamford, Connecticut ......... 10 - 30 Years 1305 Walt Whitman Road Melville, New York ............ 10 - 30 Years Land held for development ...... N/A Developments in progress ....... Other property ................. Total .......................... - ------ A These land parcels, or a portion of the land parcels, on which the building and improvements were constructed are subject to a ground lease. B The land parcel on which the building and improvements were constructed for one property is subject to a ground lease. C The Encumbrance of $2,616 is related to one property. D As of December 31, 2000, this property was partially under development. As a result, certain costs have been classified as development costs on the Company's accompanying balance sheet. The aggregate cost of Federal Income Tax purposes was approximately $ 2,169 million at December 31, 2000. IV-30
RECKSON OPERATING PARTNERSHIP, L.P. SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION (IN THOUSANDS) The changes in real estate for each of the periods in the three years ended December 31, 2000 are as follows: 2000 1999 1998 ------------- ------------- ------------- Real estate balance at beginning of period ................ $2,208,399 $1,737,133 $1,011,228 Improvements / revaluations ............................... 166,260 57,571 134,582 Disposal, including write-off of fully depreciated building improvements ............................................. (52,092) (317,864) -- Acquisitions .............................................. 448,040 731,559 591,323 ---------- ---------- ---------- Balance at end of period .................................. $2,770,607 $2,208,399 $1,737,133 ========== ========== ========== 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, 2000 are as follows: 2000 1999 1998 ----------- ----------- ----------- Balance at beginning of period ............................ $215,112 $156,231 $108,652 Depreciation for period ................................... 71,478 65,471 47,579 Disposal, including write-off of fully depreciated building improvements ............................................. (2,275) (6,590) -- -------- -------- -------- Balance at end of period .................................. $284,315 $215,112 $156,231 ======== ======== ======== IV-31
EXHIBIT 3.8
SUPPLEMENT TO THE AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
RECKSON OPERATING PARTNERSHIP, L.P.
ESTABLISHING
SERIES F JUNIOR PARTICIPATING PREFERRED PARTNERSHIP 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, April 13, 1998, June 30, 1998 and May 24, 1999 (the
"Partnership Agreement"), the Partnership Agreement is hereby supplemented to
establish a series of up to 100,000 preferred units of limited partnership
interest of Reckson Operating Partnership, L.P. (the "Partnership") which shall
be designated "Series F Junior Participating Preferred Units" having the rights,
preferences, powers, privileges and restrictions, qualifications and limitations
substantially similar to those granted to or imposed upon the Series C Junior
Participating Preferred Stock, par value $.01 per share ("Series C Preferred
Stock") of Reckson Associates Realty Corp. (the "Company") as set forth in the
Articles Supplementary adopted the Company and filed with the Secretary of State
of the State of Maryland 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 Partnership and American Stock Transfer & Trust Company
("Rights Agent") have entered into a Rights Agreement dated as of January 3,
2000 ("Partnership Rights Agreement");
WHEREAS, concurrently with the entering into of Partnership Rights
Agreement the Partnership shall declare and make a distribution to the holders
of Class A Common Partnership Units of one Right for each Class A Common
Partnership Unit held; and
WHEREAS, pursuant to Section 4.2 of the Partnership Agreement, the
Partnership desires to designate the Series F Junior Participating Preferred
Units with substantially similar designation, preferences and other rights to
the Series C Preferred Stock;
1
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. Designation of Series F Junior Participating Preferred
Units.
Pursuant to Section 4.2 of the Partnership Agreement, the Partnership
hereby designates 100,000 additional partnership units which shall be the Series
F Junior Participating Preferred Units. The Series F Junior Participating
Preferred Units will have substantially the same designation, preferences and
other rights of the Series C Preferred Stock, as specified in this amendment and
in Exhibit I hereto.
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 F Preferred Units":
"Series F Preferred Units" means the units of limited partnership
interest designated by the Partnership as of October 13, 2000, in
connection with the designation of the Series C Preferred Stock by the
Company.
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.
2
IN WITNESS WHEREOF, the parties hereto have executed this Supplement to
the Partnership Agreement as of the 13th day of October, 2000.
GENERAL PARTNER
RECKSON ASSOCIATES REALTY CORP.
By: __________________________
Name:
Title:
EXISTING LIMITED PARTNERS
By: Reckson Associates Realty Corp.,
as Attorney-in-Fact for the Limited
Partners
By: __________________________
Name:
Title:
SERIES F JUNIOR PARTICIPATING
PREFERRED UNIT HOLDER
RECKSON ASSOCIATES REALTY CORP.
By: __________________________
Name:
Title:
3
Exhibit I
RECKSON OPERATING PARTNERSHIP, L.P. DESIGNATION OF THE VOTING POWERS,
DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING AND OTHER SPECIAL RIGHTS
AND QUALIFICATIONS, LIMITATIONS, OR RESTRICTIONS OF THE SERIES F Junior
Participating PREFERRED PARTNERSHIP UNITS.
The following are the terms of the Series F Junior Participating Junior
Participating Preferred Partnership Units established pursuant to this
Amendment:
4
SERIES F JUNIOR PARTICIPATING PREFERRED PARTNERSHIP UNITS
1. Designation and Number.
A series of preferred units of the Partnership, designated the "Series
F Junior Participating Preferred Units" (the "Series F Preferred Units") is
hereby established. The number the Series F Preferred Units shall be 100,000.
Such number of units may be increased or decreased at the discretion of the
General Partner; provided, however, that no decrease shall reduce the number of
Series C Preferred Units to a number less than that of the Series F Preferred
Units then outstanding plus the number of Series C Preferred Units issuable upon
exercise of outstanding rights, options or warrants or upon conversion of
outstanding securities issued by the Partnership.
2. Distributions.
(a) The holders of Series F Preferred Units shall be entitled
to receive, when, as and if declared by the General Partner out of funds legally
available for the purpose, quarterly distributions payable in cash January 31,
April 30, July 31 and October 31 in each year (each such date being referred to
herein as a "Quarterly Distribution Payment Date"), commencing on the first
Quarterly Distribution Payment Date after the first issuance (the "First
Issuance") of a unit or fraction of a unit of Series F Preferred Units, in an
amount per unit (rounded to the nearest cent) equal to the greater of (i) $10.00
and (ii) 1,000 times the aggregate per unit amount of all cash distributions and
1,000 times the aggregate per unit amount (payable in kind) of all non-cash
distributions, other than a distribution payable in Class A Common Partnership
Units or by way of a subdivision of the outstanding Class A Common Partnership
Units, declared on the Class A Common Partnership Units, since the immediately
preceding Quarterly Distribution Payment Date, or, with respect to the first
Quarterly Distribution Payment Date, since the first issuance of any unit or
fraction of a unit of Series F Preferred Units. In the event the Partnership
shall at any time after the First Issuance declare or pay any distribution on
the Class A Common Partnership Units payable in Class A Common Partnership
Units, or effect a subdivision or combination or consolidation of the
outstanding Class A Common Partnership Units (by reclassification or otherwise
than by payment of a distribution of Class A Common Partnership Units) into a
greater or lesser number of Class A Common Partnership Units, then in each such
case the amount to which holders of Series F Preferred Units were entitled
immediately prior to such event under the preceding sentence shall be adjusted
by multiplying such amount by a fraction, the numerator of which is the number
of Class A Common Partnership Units outstanding immediately after such event and
the denominator of which is the number of Class A Common Partnership Units that
were outstanding immediately prior to such event.
(b) On or after the First Issuance, no distribution on Class A
Common Partnership Units shall be declared unless concurrently therewith a
distribution is declared on the Series F Preferred Units as provided in
paragraph (a) above; and the declaration of any such distribution on the Class A
Common Partnership Units shall be
5
expressly conditioned upon payment or declaration of and provision for a
distribution on the Series F Preferred Units as above provided. In the event no
distribution shall have been declared on the Class A Common Partnership Units
during the period between any Quarterly Distribution Payment Date and the next
subsequent Quarterly Distribution Payment Date, a distribution of $10.00 per
unit on the Series F Preferred Units shall nevertheless be payable on such
subsequent Quarterly Distribution Payment Date.
(c) Whenever quarterly distributions or other distributions
payable on the Series F Preferred Units as provided in paragraph (a) above are
in arrears, thereafter and until all accrued and unpaid distributions, whether
or not declared, on Series F Preferred Units outstanding shall have been paid in
full, the Partnership shall not redeem or purchase or otherwise acquire for
consideration units of any ranking junior (either as to distribution or upon
liquidation, dissolution or winding up) to the Series F Preferred Units,
provided that the Partnership may at any time redeem, purchase or otherwise
acquire units of any such junior units in exchange for any units of the
Partnership ranking junior (as to distributions and upon dissolution,
liquidation or winding up) to the Series F Preferred Units.
(d) Distributions shall begin to accrue and be cumulative on
outstanding Series F Preferred Units from the Quarterly Distribution Payment
Date next preceding the date of issue of such Series F Preferred Units, unless
the date of issue of such units is prior to the record date for the first
Quarterly Distribution Payment Date, in which case distributions on such units
shall begin to accrue from the date of issue of such units, or unless the date
of issue is a Quarterly Distribution Payment Date or is a date after the record
date for the determination of holders of Series F Preferred Units entitled to
receive a quarterly distribution and before such Quarterly Distribution Payment
Date, in either of which events such distributions shall begin to accrue and be
cumulative from such Quarterly Distribution Payment Date. Accrued but unpaid
distributions shall not bear interest. The General Partner may fix a record date
for the determination of holders of Series F Preferred Units entitled to receive
payment of a distribution declared thereon, which record date shall be no more
than 30 days prior to the date fixed for the payment thereof.
3. Dissolution, Liquidation and Winding Up.
In the event of any voluntary or involuntary dissolution, liquidation
or winding up of the affairs of the Partnership (hereinafter referred to as a
"Liquidation"), the holders of Series F Preferred Units shall be entitled to
receive the greater of (a) $10.00 per unit, plus an amount equal to accrued and
unpaid distributions thereon, whether or not declared, to the date of such
payment and (b) the aggregate amount per unit equal to 1,000 times the aggregate
amount to be distributed per unit to holders of Class A Common Partnership
Units. In the event the Partnership shall at any time after the First Issuance
declare or pay any distribution on the Class A Common Partnership Units payable
in Class A Common Partnership Units, or effect a subdivision or combination or
consolidation of the
6
outstanding Class A Common Partnership Units (by reclassification or otherwise
than by way of distribution in Class A Common Partnership Units) into a greater
or lesser number of Class A Common Partnership Units, then in each such case the
aggregate amount to which holders of Series F Preferred Units were entitled
immediately prior to such event under the preceding sentence shall be adjusted
by multiplying such amount by a fraction the numerator of which is the number of
Class A Common Partnership Units outstanding immediately after such event and
the denominator of which is the number of Class A Common Partnership Units that
were outstanding immediately prior to such event.
4. Voting Rights.
The holders of Series F Preferred Units shall have the following voting
rights:
(a) Each Series F Preferred Unit shall entitle the holder
thereof to one thousand (1,000) votes on all matters submitted to a vote of the
unitholders of the Partnership. In the event the Partnership shall at any time
after the First Issuance declare or pay any distribution on the Class A Common
Partnership Units payable in Class A Common Partnership Units, or effect a
subdivision or combination or consolidation of the outstanding units of Class A
Common Partnership Units (by reclassification or otherwise than by payment of a
distribution in Class A Common Partnership Units) into a greater or lesser
number of units of Class A Common Partnership Units, then in each such case the
aggregate number of votes to which holders of Series F Preferred Units were
entitled immediately prior to such event under the preceding sentence shall be
adjusted by multiplying such number by a fraction the numerator of which is the
number of Class A Common Partnership Units outstanding immediately after such
event and the denominator of which is the number of Class A Common Partnership
Units that were outstanding immediately prior to such event.
(b) Except as otherwise provided herein, or by law or the
Partnership Agreement, the holders of Series F Preferred Units and the holders
of Class A Common Partnership Units shall vote together as one class on all
matters submitted to a vote of unitholders of the Partnership.
(c) Except as otherwise set forth herein or required by law or
the Partnership Agreement, holders of Series F Preferred Units shall have no
special voting rights and their consent shall not be required (except to the
extent they are entitled to vote with holders of Class A Common Partnership
Units as set forth herein) for the taking of any partnership action. No consent
of the holders of outstanding Series F Preferred Units at any time outstanding
shall be required in order to permit the General Partner to: (i) increase the
number of authorized Series F Preferred Units or to decrease such number to a
number not below the sum of the number of Series F Preferred Units then
outstanding and the number of units with respect to which there are outstanding
rights to purchase; or (ii) issue preferred partnership units which are senior
to the Series F Preferred Units, junior to the Series F Preferred Units or on a
parity with the Series F Preferred Units.
7
5. Consolidation, Merger, etc.
In case the Partnership shall enter into any consolidation, merger,
combination or other transaction in which the Class A Common Partnership Units
are exchanged for or changed into other securities, cash and/or any other
property, then in any such case each Series F Preferred Unit shall at the same
time be similarly exchanged or changed into an amount per unit, subject to the
provision for adjustment hereinafter set forth, equal to 1,000 times the
aggregate amount of securities, cash and/or any other property (payable in
kind), as the case may be, into which or for which each Class A Common
Partnership Unit is changed or exchanged. In the event the Partnership shall at
any time after the First Issuance declare or pay any distribution on the Class A
Common Partnership Units payable in Class A Common Partnership Units, or effect
a subdivision or combination or consolidation of the outstanding Class A Common
Partnership Units (by reclassification or otherwise than by payment of a
distribution in Class A Common Partnership Unit) into a greater or lesser number
of Class A Common Partnership Units, then in each such case the amount set forth
in the preceding sentence with respect to the exchange or change of Series F
Preferred Units shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of Class A Common Partnership Units outstanding
immediately after such event and the denominator of which is the number of Class
A Common Partnership Units that were outstanding immediately prior to such
event.
6. Redemption.
The Series F Preferred Units shall not be redeemable.
7. Conversion Rights.
The Series F Preferred Units are not convertible into Class A Common
Partnership Units or any other security of the Partnership.
8. Ranking.
The Series F Preferred Units shall rank junior to all other classes and
series of the Partnership's Preferred Partnership Units as to payment of
distributions and the distribution of assets, unless the terms of any such
series shall provide otherwise.
8
EXHIBIT 4.4
RECKSON OPERATING PARTNERSHIP, L.P.
and
AMERICAN STOCK TRANSFER & TRUST COMPANY
RIGHTS AGREEMENT
Dated as of October 13, 2000
TABLE OF CONTENTS
Page
----
Section 1. Certain Definitions..................................................................................1
Section 2. Appointment of Rights Agent..........................................................................5
Section 3. Issuance of Right Certificates.......................................................................5
Section 4. Form of Right Certificate............................................................................6
Section 5. Countersignature and Registration....................................................................7
Section 6. Transfer, Split-Up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificate...............................................8
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights........................................9
Section 8. Cancellation and Destruction of Right Certificates..................................................11
Section 9. Reservation and Availability of Preferred Units.....................................................11
Section 10. Preferred Units Record Date.........................................................................12
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights.........................13
Section 12. Certificate of Adjusted Purchase Price or Number of Securities......................................20
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power................................20
Section 14. Fractional Rights and Fractional Units..............................................................25
Section 15. Rights of Action....................................................................................26
Section 16. Agreement of Right Holders..........................................................................27
Section 17. Right Certificate Holder Not Deemed a Unitholder....................................................27
Section 18. Concerning the Rights Agent.........................................................................28
Section 19. Merger or Consolidation or Change of Name of Rights Agent...........................................29
Section 20. Duties of Rights Agent..............................................................................29
i
Section 21. Change of Rights Agent..............................................................................32
Section 22. Issuance of New Right Certificates..................................................................33
Section 23. Redemption and Termination..........................................................................33
Section 24. Exchange............................................................................................34
Section 25. Notice of Certain Events............................................................................35
Section 26. Notices.............................................................................................36
Section 27. Supplements and Amendments..........................................................................37
Section 28. Determination and Actions by the General Partner....................................................38
Section 29. Successors..........................................................................................38
Section 30. Benefits of this Agreement..........................................................................38
Section 31. Severability........................................................................................39
Section 32. Governing Law.......................................................................................39
Section 33. Counterparts........................................................................................39
Section 34. Descriptive Headings................................................................................39
Exhibit A - Form of Supplement to the Amended and Restated Agreement of
Limited Partnership
Exhibit B - Form of Right Certificate
ii
Defined Term Cross Reference Sheet
Term Location
- --------------------------------- ------------------------
Acquiring Person Section 1(a)
Act Section 1(b)
Adjustment Units Section 11(a)(ii)
Adjusted Number of Units Section 11(a)(iii)
Adjusted Purchase Price Section 11(a)(iii)
Affiliate Section 1(c)
Agreement Preface
Associate Section 1(c)
Beneficial Owner Section 1(d)
Beneficially Own Section 1(d)
Business Day Section 1(e)
Close of Business Section 1(f)
Common Shares Section 1(g)
Corporation Section 1(h)
current per unit market price Section 11(d)(i)
Distribution Date Section 3(a)
Documents Section 18
equivalent preferred units Section 11(b)
Excess Shares Section 1(j)
Exchange Act Section 1(c)
Exchange Ratio Section 24(a)
Final Expiration Date Section 7(a)
First Issuance Exhibit A, Page A5
General Partner Section 1(l)
Interested Stockholder Section 1(m)
Liquidation Exhibit A, Page A6
Nasdaq Section 11(d)(i)
Ownership Section 1(n)
Partnership Preface
Partnership Agreement Section 1(o)
Partnership Principal Party Section 13(c)
Partnership Rights Agreement Exhibit A Recitals
Partnership Section 13 Event Section 13(a)(2)
Partnership Unit Section 1(p)
Permitted Offer Section 1(q)
Person Section 1(r)
Preferred Units Section 1(s)
Principal Party Section 13(b)
Proration Factor Section 11(a)(iii)
Purchase Price Section 4(a)
i
Quarterly Distribution Payment Date Exhibit A, Page A5
Record Date Preface
Redemption Date Section 7(a)
Redemption Price Section 23(a)(i)
Right Preface
Right Certificate Section 3(a)
Rights Agent Preface
Section 11(a)(ii) Event Section 11(a)(ii)
Section 13 Event Section 13(a)
Security Section 11(d)(i)
Series F Preferred Units Exhibit A, Page A2
Shares Acquisition Date Section 1(w)
Subsidiary Section 1(x)
then outstanding Section 1(d)(iii)
Trading Day Section 11(d)(i)
Triggering Event Section 11(a)(ii), 13(a)
unit equivalent Section 11(a)(iii)
voting securities Section 13(a)
ii
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of October 13, 2000 (this "Agreement"),
between Reckson Operating Partnership, L.P., a limited partnership organized
under the laws of Delaware (the "Partnership"), and American Stock Transfer &
Trust Company (the "Rights Agent").
The General Partner (as hereinafter defined) of the Partnership has
authorized and declared a distribution of one preferred unit purchase right (a
"Right") for each Partnership Unit (as hereinafter defined) of the Partnership
outstanding at the Close of Business on October 27, 2000 (the "Record Date"),
each Right representing the right to purchase one one-thousandth of a Preferred
Unit (as hereinafter defined), upon the terms and subject to the conditions
herein set forth, and has further authorized and directed the issuance of one
Right with respect to each Partnership Unit that shall become outstanding
between the Record Date and the earliest of the Distribution Date, the
Redemption Date or the Final Expiration Date (as such terms are hereinafter
defined); provided, however, that Rights may be issued with respect to
Partnership Units that shall become outstanding after the Distribution Date and
prior to the earlier of the Redemption Date and the Final Expiration Date in
accordance with the provisions of Section 22 of this Agreement.
Accordingly, in consideration of the promises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions.
For purposes of this Agreement, the following terms have the meanings
indicated:
(a) "Acquiring Person" shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the Beneficial Owner
of 15% or more of the then outstanding Common Shares (other than as a result of
a Permitted Offer (as hereinafter defined)) or was such a Beneficial Owner at
any time after the date hereof, whether or not such person continues to be the
Beneficial Owner of 15% or more of the then outstanding Common Shares.
Notwithstanding the foregoing, (A) the term "Acquiring Person" shall not include
(i) the Corporation, (ii) any Subsidiary of the Corporation, (iii) any employee
benefit plan of the Corporation or of any Subsidiary of the Corporation, (iv)
any Person or entity organized, appointed or established by the Corporation for
or pursuant to the terms of any such plan, or (v) any Person, who or which
together with all Affiliates and Associates of such Person becomes the
Beneficial Owner of 15% or more of the then outstanding Common Shares as a
result of the acquisition of Common Shares directly from the Corporation and (B)
no Person shall be deemed to be an "Acquiring Person" either (X) as a result of
the acquisition of Common Shares by the Corporation which, by reducing the
number of Common Shares outstanding, increases the proportional number of shares
beneficially owned by such Person together with all Affiliates and Associates of
such Person; except that if (i) a Person would become an
1
Acquiring Person (but for the operation of this subclause X) as a result of the
acquisition of Common Shares by the Corporation, and (ii) after such share
acquisition by the Corporation, such Person, or an Affiliate or Associate of
such Person, becomes the Beneficial Owner of any additional Common Shares, then
such Person shall be deemed an Acquiring Person, or (Y) if such Person became an
Acquiring Person inadvertently, (i) promptly after such Person discovers that
such Person would otherwise have become an Acquiring Person (but for the
operation of this subclause Y), such Person notifies the Board of Directors of
the Corporation that such Person did so inadvertently and (ii) within 2 days
after such notification, such Person is the Beneficial Owner of less than 15% of
the outstanding Common Shares.
(b) "Act" shall mean the Securities Act of 1933, as amended and as in
effect on the date of this Agreement.
(c) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended and in effect on the date of
this Agreement (the "Exchange Act").
(d) A Person shall be deemed the "Beneficial Owner" of and shall be
deemed to "Beneficially Own" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding, or upon the exercise of conversion rights,
exchange rights, rights (other than the Rights), warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the Beneficial
Owner of, or to Beneficially Own, securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any of such Person's
Affiliates or Associates until such tendered securities are accepted for
purchase or exchange; or (B) the right to vote pursuant to any agreement,
arrangement or understanding; provided, however, that a Person shall not be
deemed the Beneficial Owner of, or to Beneficially Own, any security if the
agreement, arrangement or understanding to vote such security (1) arises solely
from a revocable proxy or consent given to such Person in response to a public
proxy or consent solicitation made pursuant to, and in accordance with, the
applicable rules and regulations promulgated under the Exchange Act and (2) is
not also then reportable on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate thereof) with which such Person (or
any of such
2
Person's Affiliates or Associates) has any agreement, arrangement or
understanding (other than customary agreements with and between underwriters and
selling group members with respect to a bona fide public offering of securities)
relating to the acquisition, holding, voting (except to the extent contemplated
by the proviso to Section 1(d)(ii)(B)) or disposing of any securities of the
Corporation.
Notwithstanding anything in this definition of Beneficial Ownership to
the contrary, the phrase "then outstanding," when used with reference to a
Person's Beneficial Ownership of securities of the Corporation, shall mean the
number of such securities then issued and outstanding together with the number
of such securities not then actually issued and outstanding which such Person
would be deemed to own beneficially hereunder.
(e) "Business Day" shall mean any day other than a Saturday, Sunday or
U.S. federal holiday.
(f) "Close of Business" on any given date shall mean 5:00 P.M., New
York City, New York time, on such date; provided, however, that if such date is
not a Business Day it shall mean 5:00 P.M., New York City, New York time, on the
next succeeding Business Day.
(g) "Common Shares" when used with reference to the Corporation shall
mean the shares of class A common stock, par value $.01 per share, of the
Corporation or, in the event of a subdivision, combination or consolidation with
respect to such shares of common stock, the shares of common stock resulting
from such subdivision, combination or consolidation. "Common Shares" when used
with reference to any Person other than the Corporation shall mean the capital
stock (or equity interest) with the greatest voting power of such other Person
or, if such other Person is a Subsidiary of another Person, the Person or
Persons which ultimately control such first-mentioned Person.
(h) "Corporation" means Reckson Associates Realty Corp., a Maryland
corporation.
(i) "Distribution Date" shall have the meaning set forth in Section 3
hereof.
(j) "Excess Shares" means shares of "Excess Stock" as defined in the
Corporation's Articles of Incorporation or "Class B Excess Common" as defined in
the articles supplementary establishing the rights and preferences of the
Corporation's class B common stock, par value $.01 per share.
(k) "Final Expiration Date" shall have the meaning set forth in Section
7 hereof.
3
(l) "General Partner" means Reckson Associates Realty Corp., a Maryland
corporation, in its capacity as the general partner of the Partnership, or any
person who becomes an additional or successor general partner of the
Partnership.
(m) "Interested Stockholder" shall mean any Acquiring Person or any
Affiliate or Associate of an Acquiring Person or any other Person in which any
such Acquiring Person, Affiliate or Associate has an interest, or any other
Person acting directly or indirectly on behalf of or in concert with any such
Acquiring Person, Affiliate or Associate.
(n) "Ownership" means ownership of rights or capital stock of the
Corporation by a Person who is or would be treated as an owner of such rights or
capital stock directly or constructively through the application of (a) section
544 of the Internal Revenue Code as modified by section 856(h) of the Internal
Revenue Code or (b) section 318 of the Internal Revenue Code as modified by
section 856(d)(5) of the Internal Revenue Code. "Owner", "Own" and "Owned" shall
have correlative meanings.
(o) "Partnership Agreement" means the Agreement of Limited Partnership
of Reckson Operating Partnership, L.P., dated June 2, 1995, as amended and
restated and all supplements thereto.
(p) "Partnership Unit" means a Class A Common Partnership Unit of the
Partnership.
(q) "Permitted Offer" shall mean a tender or exchange offer which is
for all outstanding Common Shares at a price and on terms determined, prior to
the purchase of shares under such tender or exchange offer, by at least a
majority of the members of the Board of Directors of the Corporation who are not
officers of the Corporation and who are not Acquiring Persons or Persons who
would become Acquiring Persons as a result of the offer in question or
Affiliates, Associates, nominees or representatives of any such Person, to be
adequate (taking into account all factors that such Directors deem relevant
including, without limitation, prices that could reasonably be achieved if the
Corporation or its assets were sold on an orderly basis designed to realize
maximum value) and otherwise in the best interests of the Corporation and its
stockholders (other than the Person or any Affiliate or Associate thereof on
whose behalf the offer is being made) taking into account all factors that such
directors may deem relevant.
(r) "Person" shall mean any individual, firm, partnership, corporation,
limited liability company, trust, association, joint venture or other entity,
and shall include any successor (by merger or otherwise) of such entity.
(s) "Preferred Units" shall mean Series F Preferred Units of the
Partnership.
(t) "Redemption Date" shall have the meaning set forth in Section 7
hereof.
4
(u) "Section 11(a)(ii) Event" shall mean any event described in Section
11(a)(ii) hereof.
(v) "Section 13 Event" shall mean any event described in clause (x),
(y) or (z) of Section 13(a) hereof.
(w) "Shares Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to the Exchange Act) by the Corporation or
an Acquiring Person that an Acquiring Person has become such; provided, that, if
such Person is determined not to have become an Acquiring Person pursuant to
Section 1(a)(B)(Y) hereof, then no Shares Acquisition Date shall be deemed to
have occurred.
(x) "Subsidiary" of any Person shall mean any corporation or other
Person of which a majority of the voting power of the voting equity securities
or equity interest is owned, directly or indirectly, by such Person.
(y) "Triggering Event" shall mean any Section 11(a)(ii) Event or any
Section 13 Event.
Section 2. Appointment of Rights Agent.
The Partnership hereby appoints the Rights Agent to act as agent for
the Partnership in accordance with the terms and conditions hereof, and the
Rights Agent hereby accepts such appointment. The Partnership may from time to
time appoint such co-Rights Agents as it may deem necessary or desirable upon
ten (10) days' prior written notice to the Rights Agent. The Rights Agent shall
have no duty to supervise, and shall in no event be liable for, the acts and
omissions of any such co-Rights Agent.
Section 3. Issuance of Right Certificates.
(a) Until the earlier of (i) the Shares Acquisition Date or (ii) the
Close of Business on the tenth day (or such later date as may be determined by
the General Partner) after the date of the commencement by any Person (other
than the Corporation, any Subsidiary of the Corporation, any employee benefit
plan of the Corporation or of any Subsidiary of the Corporation or any Person or
entity organized, appointed or established by the Corporation for or pursuant to
the terms of any such plan) of, or of the first public announcement of the
intention of any Person (other than the Corporation, any Subsidiary of the
Corporation, any employee benefit plan of the Corporation or of any Subsidiary
of the Corporation or any Person or entity organized, appointed or established
by the Corporation for or pursuant to the terms of any such plan) to commence
(which intention to commence remains in effect for five Business Days after such
announcement), a tender or exchange offer the consummation of which would result
in any Person becoming an Acquiring Person (including, in the case of both (i)
and (ii), any
5
such date which is after the date of this Agreement and prior to the issuance of
the Rights), the earlier of such dates being herein referred to as the
"Distribution Date," (x) the Rights will be attached to the Partnership Units
registered in the names of the holders thereof and not by separate Right
Certificates, and (y) the right to receive Right Certificates will be
transferable only in connection with the transfer of the underlying Partnership
Units (including a transfer to the Partnership); provided, however, that if a
tender or exchange offer is terminated prior to the occurrence of a Distribution
Date, then no Distribution Date shall occur as a result of such tender or
exchange offer. As soon as practicable after the Distribution Date, the
Partnership will prepare and execute, the Rights Agent will countersign, and the
Partnership will send or cause to be sent by first- class, postage-prepaid mail,
to each record holder of Partnership Units as of the Close of Business on the
Distribution Date, at the address of such holder shown on the records of the
Partnership, a Right Certificate, substantially in the form of Exhibit B hereto
(a "Right Certificate"), evidencing one Right for each Partnership Unit so held.
As of and after the Distribution Date, the Rights will be evidenced solely by
such Right Certificates.
(b) With respect to Partnership Units outstanding as of the Record
Date, until the Distribution Date, the Rights will be attached to such
Partnership Units and the surrender for transfer of any Partnership Units
outstanding on the Record Date, shall also constitute the transfer of the Rights
associated with such Partnership Units. As a result of the execution of this
Agreement, on October 13, 2000, each Partnership Unit outstanding on such date
shall, subject to the terms and conditions of this Agreement, also represent one
Right and shall, subject to the terms and conditions of this Agreement,
represent the right to purchase one one-thousandth of a Preferred Unit.
(c) In the event that the Partnership purchases or acquires any
Partnership Units after the Record Date but prior to the Distribution Date, any
Rights associated with such Partnership Units shall be deemed canceled and
retired so that the Partnership shall not be entitled to exercise any Rights
associated with the Partnership Units which are no longer outstanding.
Section 4. Form of Right Certificate.
(a) The Right Certificates (and the forms of election to purchase and
of assignment to be printed on the reverse thereof) shall be substantially in
the form set forth in Exhibit B hereto and may have such marks of identification
or designation and such legends, summaries or endorsements printed thereon as
the Partnership may deem appropriate (which do not affect the duties or
responsibilities of the Rights Agent) and as are not inconsistent with the
provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. Subject to the provisions of Section 7,
Section 11 and Section 22 hereof, the Right Certificates shall entitle the
holders thereof to purchase such number of one one-thousandths of a Preferred
Unit as shall be set forth therein at the
6
price per one one-thousandth of a Preferred Unit set forth therein (the
"Purchase Price"), but the amount and type of securities purchasable upon the
exercise of each Right and the Purchase Price thereof shall be subject to
adjustment as provided herein.
(b) Any Right Certificate issued pursuant to Section 3(a) or Section 22
hereof that represents Rights which are null and void pursuant to Section 7(e)
of this Agreement and any Right Certificate issued pursuant to Section 6 or
Section 11 hereof upon transfer, exchange, replacement or adjustment of any
other Right Certificate referred to in this sentence, shall contain (to the
extent feasible) the following legend:
"The Rights represented by this Right Certificate are or were
Beneficially Owned by a Person who was or became an Acquiring Person or
an Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement). Accordingly, this Right Certificate
and the Rights represented hereby are null and void."
Provisions of Section 7(e) of this Agreement shall be operative whether
or not the foregoing legend is contained on any such Right Certificate. The
Partnership shall notify the Rights Agent to the extent that this Section 4(b)
applies.
Section 5. Countersignature and Registration.
The Right Certificates shall be executed on behalf of the Partnership
by the General Partner, either manually or by facsimile signature. The Right
Certificates shall be countersigned by the Rights Agent and shall not be valid
for any purpose unless so countersigned. In case any officer of the General
Partner who shall have signed any of the Right Certificates shall cease to be an
officer of the General Partner before countersignature by the Rights Agent and
issuance and delivery by the General Partner, such Rights Certificates may
nevertheless be countersigned by the Rights Agent and issued and delivered by
the General Partner with the same force and effect as though the person who
signed such Right Certificates had not ceased to be such officer of the General
Partner; and any Right Certificate may be signed on behalf of the General
Partner by any Person who, at the actual date of the execution of such Right
Certificate, shall be a proper officer of the General Partner to sign such Right
Certificate, although at the date of the execution of this Agreement any such
Person was not such an officer.
Following the Distribution Date and receipt by the Rights Agent of a
list of record holders of Rights, the Rights Agent will keep or cause to be
kept, at its office set forth in Section 26 hereof or offices designated as the
appropriate place for surrender of such Right Certificate or transfer, books for
registration and transfer of the Right Certificates issued hereunder. Such books
shall show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each of the Right
Certificates and the certificate number and the date of each of the Right
Certificates.
7
Section 6. Transfer, Split-Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right
Certificate.
Subject to the provisions of Section 4(b), Section 7(e) and Section 14
hereof, at any time after the Close of Business on the Distribution Date, and at
or prior to the Close of Business on the earlier of the Redemption Date or the
Final Expiration Date, any Right Certificate or Right Certificates may be
transferred, split up, combined or exchanged for another Right Certificate or
Right Certificates, entitling the registered holder to purchase a like number of
one one-thousandths of a Preferred Unit (or, following a Triggering Event, other
securities, as the case may be) as the Right Certificate or Right Certificates
surrendered then entitle such holder (or former holder in the case of a
transfer) to purchase. Any registered holder desiring to transfer, split up,
combine or exchange any Right Certificate or Right Certificates shall make such
request in writing delivered to the Rights Agent, and shall surrender the Right
Certificate or Right Certificates to be transferred, split up, combined or
exchanged at the office or offices of the Rights Agent designated for such
purpose. Neither the Rights Agent nor the Partnership shall be obligated to take
any action whatsoever with respect to the transfer of any such surrendered Right
Certificate until the registered holder shall have completed and signed the
certificate contained in the form of assignment on the reverse side of such
Right Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Partnership or the Rights Agent shall reasonably
request. Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e)
and Section 14 hereof, countersign and deliver to the Person entitled thereto a
Right Certificate or Right Certificates, as the case may be, as so requested.
The Partnership may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer, split
up, combination or exchange of Right Certificates. If the Partnership requires
the payment referred to in the immediately preceding sentence, then the Rights
Agent shall not be required to process any transaction until it receives notice
from the Partnership that the Partnership has received such payment.
Upon receipt by the Partnership and the Rights Agent of evidence
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Partnership's request,
reimbursement to the Partnership and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Partnership will make and deliver a new
Right Certificate of like tenor to the Rights Agent for countersignature and
delivery to the registered holder in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.
8
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights.
(a) Subject to Section 7(e) hereof, the registered holder of any Right
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Distribution Date
upon surrender of the Right Certificate, with the form of election to purchase
and the certificate on the reverse side thereof duly executed, to the Rights
Agent at the office or offices of the Rights Agent designated for such purpose,
together with payment of the aggregate Purchase Price for the total number of
one one-thousandths of a Preferred Unit (or other securities, as the case may
be) as to which such surrendered Rights are exercised, at or prior to the
earliest of (i) the Close of Business on October 13, 2010 (the "Final Expiration
Date"), (ii) the time at which the Rights are redeemed as provided in Section 23
hereof (the "Redemption Date"); (iii) the time at which the Rights are exchanged
as provided in Section 24 hereof, or (iv) the consummation of a transaction
contemplated by Section 13(d) hereof.
(b) The Purchase Price for each one one-thousandth of a Preferred Unit
pursuant to the exercise of a Right shall initially be $84.44, shall be subject
to adjustment from time to time as provided in the next sentence and in Sections
11 and 13(a) hereof and shall be payable in accordance with paragraph (c) below.
Anything in this Agreement to the contrary notwithstanding, in the event that at
any time after the date of this Agreement and prior to the Distribution Date,
the Partnership shall (i) declare or pay any distribution on the Partnership
Units payable in Partnership Units or (ii) effect a subdivision, combination or
consolidation of the Partnership Units (by reclassification or otherwise than by
payment of distribution in Partnership Units) into a greater or lesser number of
Partnership Units, then in any such case, each Partnership Unit outstanding
following such subdivision, combination or consolidation shall continue to have
one Right associated therewith and the Purchase Price following any such event
shall be proportionately adjusted to equal the result obtained by multiplying
the Purchase Price immediately prior to such event by a fraction the numerator
of which shall be the total number of Partnership Units outstanding immediately
prior to the occurrence of the event and the denominator of which shall be the
total number of Partnership Units outstanding immediately following the
occurrence of such event. The adjustment provided for in the preceding sentence
shall be made successively whenever such a distribution is made or paid or such
a subdivision, combination or consolidation is effected.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly executed,
accompanied by payment of the Purchase Price for the Preferred Units (or other
securities, as the case may be) to be purchased and an amount equal to any
applicable tax or governmental charge required to be paid by the holder of such
Right Certificate in accordance with Section 6 hereof by certified check,
cashier's check or money order payable to the order of the Partnership, the
Rights Agent shall thereupon promptly (i) (A) if the Partnership, in its sole
discretion, shall have elected to deposit the Preferred Units issuable upon
exercise of
9
the Rights hereunder into a depositary, requisition from the depositary agent
depositary receipts representing such number of one one-thousandths of a
Preferred Unit as are to be purchased and the Partnership will direct the
depositary agent to comply with such requests, (ii) when appropriate,
requisition from the Partnership the amount of cash to be paid in lieu of
issuance of fractional Units in accordance with Section 14 hereof, (iii) after
receipt of such depositary receipts, cause the same to be delivered to or upon
the order of the registered holder of such Right Certificate, registered in such
name or names as may be designated by such holder, and (iv) when appropriate,
after receipt thereof, deliver such cash to or upon the order of the registered
holder of such Right Certificate. In the event that the Partnership is obligated
to issue other securities (including Partnership Units) of the Partnership
pursuant to Section 11(a) hereof, the Partnership will make all arrangements
necessary so that such other securities are available for distribution by the
Rights Agent, if and when necessary to comply with this Agreement.
In addition, in the case of an exercise of the Rights by a holder
pursuant to Section 11(a)(ii), the Rights Agent shall return such Right
Certificate to the registered holder thereof after imprinting, stamping or
otherwise indicating thereon that the rights represented by such Right
Certificate no longer include the rights provided by Section 11(a)(ii) of this
Agreement and if less than all the Rights represented by such Right Certificate
were so exercised, the Rights Agent shall indicate on the Right Certificate the
number of Rights represented thereby which continue to include the rights
provided by Section 11(a)(ii).
(d) In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent to the registered holder of such Right Certificate or to his
duly authorized assigns, subject to the provisions of Section 6 and Section 14
hereof, or the Rights Agent shall place an appropriate notation on the Right
Certificate with respect to those Rights exercised.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Section 11(a)(ii) Event, any Rights
Beneficially Owned by (i) an Acquiring Person or an Affiliate or Associate of an
Acquiring Person, (ii) a transferee of an Acquiring Person (or of any Affiliate
or Associate thereof) who becomes a transferee after the Acquiring Person
becomes such, or (iii) a transferee of an Acquiring Person (or of any Affiliate
or Associate thereof) who becomes a transferee prior to or concurrently with the
Acquiring Person becoming such and receives such Rights pursuant to either (A) a
transfer (whether or not for consideration) from the Acquiring Person to holders
of equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has a continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the General Partner has
determined is part of an agreement, arrangement or understanding which has as a
primary purpose or effect the avoidance of this Section 7(e), shall become null
and void without any further action and
10
no holder of such Rights shall have any rights whatsoever with respect to such
Rights, whether under any provision of this Agreement or otherwise. The
Partnership shall notify the Rights Agent when this Section 7(e) applies and
shall use all reasonable efforts to insure that the provisions of this Section
7(e) and Section 4(b) hereof are complied with, but neither the Partnership nor
the Rights Agent shall have any liability to any holder of Right Certificates or
other Person as a result of the Partnership's failure to make any determinations
with respect to an Acquiring Person or its Affiliates, Associates or transferees
hereunder.
(f) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Partnership shall be obligated to undertake any action
with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i) properly completed and signed the certificate contained in the form of
election to purchase set forth on the reverse side of the Right Certificate
surrendered for such exercise, and (ii) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Partnership or the Rights Agent shall reasonably
request.
Section 8. Cancellation and Destruction of Right Certificates.
All Right Certificates surrendered for the purpose of exercise,
transfer, split up, combination or exchange shall, if surrendered to the
Partnership or to any of its agents, be delivered to the Rights Agent for
cancellation or in canceled form, or, if surrendered to the Rights Agent, shall
be canceled by it, and no Right Certificates shall be issued in lieu thereof
except as expressly permitted by any of the provisions of this Agreement. The
Partnership shall deliver to the Rights Agent for cancellation and retirement,
and the Rights Agent shall so cancel and retire, any other Right Certificate
purchased or acquired by the Partnership otherwise than upon the exercise
thereof. The Rights Agent shall deliver all canceled Right Certificates to the
Partnership, or shall, at the written request of the Partnership, destroy such
canceled Right Certificates, and in such case shall deliver a certificate of
destruction thereof to the Partnership.
Section 9. Reservation and Availability of Preferred Units.
At all times prior to the occurrence of a Section 11(a)(ii) Event, the
Partnership will cause to be reserved and kept available, the number of
Preferred Units that will be sufficient to permit the exercise in full of all
outstanding Rights and, after the occurrence of a Section 11(a)(ii) Event,
shall, to the extent reasonably practicable, so reserve and keep available a
sufficient number of Common Units (and/or other securities) which may be
required to permit the exercise in full of the Rights pursuant to this
Agreement.
The Partnership covenants and agrees that it will take all such action
as may be necessary to ensure that all Preferred Units (or Partnership Units
and/or other securities,
11
as the case may be) delivered upon exercise of Rights shall, at the time of
delivery of such units or other securities (subject to payment of the Purchase
Price), be duly and validly authorized and issued (and, to the extent
applicable, fully paid and non-assessable) units or securities.
The Partnership further covenants and agrees that it will pay when due
and payable any and all U.S. federal and state taxes and charges (other than
taxes and charges based on income) which may be payable in respect of the
issuance or delivery of the Right Certificates or of any Preferred Units (or
Partnership Units and/or other securities, as the case may be) upon the exercise
of Rights. The Partnership shall not, however, be required to pay any tax or
other charge which may be payable in respect of any transfer or delivery of
Right Certificates to a Person other than, or the issuance or delivery of
certificates or depositary receipts for the Preferred Units (or Partnership
Units and/or other securities, as the case may be) in a name other than that of,
the registered holder of the Right Certificate evidencing Rights surrendered for
exercise, or to issue or to deliver any certificates or depositary receipts for
Preferred Units (or Partnership Units and/or other securities, as the case may
be) upon the exercise of any Rights, until any such tax or other charge shall
have been paid (any such tax or other charge being payable by the holder of such
Right Certificate at the time of surrender) or until it has been established to
the Partnership's reasonable satisfaction that no such tax or other charge is
due.
Section 10. Preferred Units Record Date.
Each Person in whose name any Preferred Units (or Partnership Units
and/or other securities, as the case may be) are issued upon the exercise of
Rights shall for all purposes be deemed to have become the holder of record of
the Preferred Units (or Partnership Units and/or other securities, as the case
may be) represented thereby on the date upon which the Right Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and any applicable taxes and other governmental charges) was made; provided,
however, that, if the date of such surrender and payment is a date upon which
the Preferred Units (or Partnership Units and/or other securities, as the case
may be) transfer books of the Partnership are closed, such person shall be
deemed to have become the record holder of such units on the next succeeding
Business Day on which the Preferred Units (or Partnership Units and/or other
securities, as the case may be) transfer books of the Partnership are open.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights.
The Purchase Price, the number and kind of Units covered by each Right
and the number of Rights outstanding are subject to adjustment from time to time
as provided in this Section 11.
12
(a) (i) In the event the Partnership shall at any time after the
date of this Agreement (A) declare a distribution on the Preferred Units payable
in Preferred Units, (B) subdivide the outstanding Preferred Units, (C) combine
the outstanding Preferred Units into a smaller number of Preferred Units or (D)
issue any units in a reclassification of the Preferred Units (including any such
reclassification in connection with a consolidation or merger in which the
Partnership is the continuing or surviving entity), except as otherwise provided
in this Section 11(a) and Section 7(e) hereof, the Purchase Price in effect at
the time of the record date for such distribution or of the effective date of
such subdivision, combination or reclassification, and the number and kind of
units issuable on such date, shall be proportionately adjusted so that the
holder of any Right exercised after such time shall be entitled to receive the
aggregate number and kind of units which, if such Right had been exercised
immediately prior to such date and at a time when the Preferred Units transfer
books of the Partnership were open, such holder would have owned upon such
exercise and been entitled to receive by virtue of such subdivision, combination
or reclassification. If an event occurs which would require an adjustment under
both Section 11(a)(i) and Section 11(a)(ii), the adjustment provided for in this
Section 11(a)(i) shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii).
(ii) In the event any Person, alone or together with its
Affiliates and Associates, shall become an Acquiring Person, then proper
provision shall be made so that each holder of a Right (except as provided below
and in Section 7(e) hereof) shall, for a period of 60 days after the later of
the occurrence of any such event or the effective date of an appropriate
registration statement under the Act pursuant to Section 9 hereof, have a right
to receive, upon exercise thereof at a price equal to the then current Purchase
Price, in accordance with the terms of this Agreement, such number of
Partnership Units (or, in the discretion of the General Partner, one
one-thousandths of a Preferred Unit) as shall equal the result obtained by (x)
multiplying the then current Purchase Price by the then number of one
one-thousandths of a Preferred Unit for which a Right was exercisable
immediately prior to the first occurrence of a Section 11(a)(ii) Event, and
dividing that product by (y) 50% of the then current per unit market price of
the Partnership's Partnership Units (determined pursuant to Section 11(d)
hereof) on the date of such first occurrence (such number of units being
referred to as the "Adjustment Units"); provided, however, that if the
transaction that would otherwise give rise to the foregoing adjustment is also
subject to the provisions of Section 13 hereof, then only the provisions of
Section 13 hereof shall apply and no adjustment shall be made pursuant to this
Section 11(a)(ii);
(iii) In the event that there shall not be sufficient
securities to permit the exercise in full of the Rights in accordance with the
foregoing subparagraph (ii) and the Rights become so exercisable (and the
General Partner has determined to make the Rights exercisable into fractions of
a Preferred Unit), notwithstanding any other provision of this Agreement, to the
extent necessary and permitted by applicable law, each Right
13
shall thereafter represent the right to receive, upon exercise thereof at the
then current Purchase Price in accordance with the terms of this Agreement, (x)
a number of (or fractions of) Partnership Units (up to the maximum number of
Partnership Units which may permissibly be issued) and (y) a number of (or
fractions of) one one-thousandths of a Preferred Unit or a number of (or
fractions of) other equity securities of the Partnership (or, in the discretion
of the General Partner, debt) which the General Partner has determined to have
the same aggregate current market value (determined pursuant to Section 11(d)(i)
and (ii) hereof, to the extent applicable) as one Partnership Unit (such number
of, or fractions of, Preferred Units, debt, or other equity securities or debt
of the Partnership being referred to as a "unit equivalent") equal in the
aggregate to the number of Adjustment Units; provided, however, if sufficient
Partnership Units and/or unit equivalents are unavailable, then the Partnership
shall, to the extent permitted by applicable law, take all such action as may be
necessary to authorize additional Partnership Units or unit equivalents for
issuance upon exercise of the Rights, including the calling of a meeting of or
seeking the consent of unitholders, if applicable; and provided, further, that
if the Partnership is unable to cause sufficient Partnership Units and/or unit
equivalents to be available for issuance upon exercise in full of the Rights,
then each Right shall thereafter represent the right to receive the Adjusted
Number of Units upon exercise at the Adjusted Purchase Price (as such terms are
hereinafter defined). As used herein, the term "Adjusted Number of Units" shall
be equal to that number of (or fractions of) Partnership Units (and/or unit
equivalents) equal to the product of (x) the number of Adjustment Units and (y)
a fraction, the numerator of which is the number of Partnership Units (and/or
equivalents) available for issuance upon exercise of the Rights and the
denominator of which is the aggregate number of Adjustment Units otherwise
issuable upon exercise in full of all Rights (assuming there were a sufficient
number of Partnership Units available) (such fraction being referred to as the
"Proration Factor"). The "Adjusted Purchase Price" shall mean the product of the
Purchase Price and the Proration Factor. The General Partner may, but shall not
be required to, establish procedures to allocate the right to receive
Partnership Units and unit equivalents upon exercise of the Rights among holders
of Rights.
(b) In case the Partnership shall fix a record date for the issuance of
rights (other than the Rights), options or warrants to all holders of Preferred
Units entitling them (for a period expiring within 45 calendar days after such
record date) to subscribe for or purchase Preferred Units (or securities having
the same rights, privileges and preferences as the Preferred Units ("equivalent
preferred units")) or securities convertible into Preferred Units or equivalent
preferred units at a price per Preferred Unit or equivalent preferred unit (or
having a conversion price per unit, if a security convertible into Preferred
Units or equivalent preferred units) less than the then current per unit market
price of the Preferred Units (as determined pursuant to Section 11(d) hereof) on
such record date, the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
number of Preferred Units
14
outstanding on such record date plus the number of Preferred Units which the
aggregate offering price of the total number of Preferred Units and/or
equivalent preferred units so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such current per unit market price, and the denominator of which shall be the
number of Preferred Units outstanding on such record date plus the number of
additional Preferred Units and/or equivalent preferred units to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible). In case such subscription price may be paid
in a consideration part or all of which shall be in a form other than cash, the
value of such consideration shall be determined in good faith by the General
Partner, whose determination shall be described in a statement filed with the
Rights Agent and shall be binding on the Rights Agent and the holders of the
Rights. Preferred Units owned by or held for the account of the Partnership
shall not be deemed outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date is fixed; and
in the event that such rights, options or warrants are not so issued, the
Purchase Price shall be adjusted to be the Purchase Price which would then be in
effect if such record date had not been fixed.
(c) In case the Partnership shall fix a record date for the making of a
distribution to all holders of the Preferred Units (including any such
distribution made in connection with a consolidation or merger in which the
Partnership is the continuing or surviving entity) of evidences of indebtedness
or assets (other than a regular quarterly cash distribution or a distribution
payable in Preferred Units) or subscription rights or warrants (excluding those
referred to in Section 11(b) hereof), the Purchase Price to be in effect after
such record date shall determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the then current per unit market price (as determined pursuant to
Section 11(d) hereof) of the Preferred Units on such record date, less the fair
market value (as determined in good faith by the General Partner, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and the holders of the Rights) of the
portion of the assets or evidences of indebtedness so to be distributed or of
such subscription rights or warrants applicable to one Preferred Unit and the
denominator of which shall be such current per unit market price of the
Preferred Units. Such adjustments shall be made successively whenever such a
record date is fixed; and in the event that such distribution is not so made,
the Purchase Price shall again be adjusted to be the Purchase Price which would
then be in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the "current
per unit market price" of any security (a "Security") that is publicly traded
for the purpose of this Section 11(d)(i) on any date shall be deemed to be the
average of the daily closing prices per unit of such Security for the thirty
(30) consecutive Trading Days (as such term is hereinafter defined) immediately
prior to and not including such date; provided, however,
15
that in the event that the current per unit market price of the Security is
determined during a period following the announcement by the issuer of such
Security of (A) a dividend or distribution on such Security payable in units of
such Security or securities convertible into such units, or (B) any subdivision,
combination or reclassification of such Security and prior to the expiration of
thirty (30) Trading Days after and not including the ex-dividend date for such
dividend or distribution, or the record date for such subdivision, combination
or reclassification, then, and in each such case, the current per unit market
price shall be appropriately adjusted to reflect the current market price per
unit equivalent of such Security. The closing price for each day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Security is not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Security is listed or admitted to trading or, if the Security is
not listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices as reported on the Nasdaq Stock Market ("Nasdaq") or such other market or
system then in use, or, if on any such date the Security is not quoted by any
such organization, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the Security selected by the
General Partner. If on any such date no such market maker is making a market in
the Security, the fair value of the Security on such date as determined in good
faith by the General Partner shall be used. The term "Trading Day" shall mean a
day on which the principal national securities exchange on which the Security is
listed or admitted to trading is open for the transaction of business or, if the
Security is not listed or admitted to trading on any national securities
exchange, a Business Day. Subject to Section 11(d)(ii), if any Security is not
publicly traded, "current per unit market price" of such Security shall mean the
fair market value per unit as determined in good faith by the General Partner,
whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent and the holders of the Rights.
(ii) For the purpose of any computation hereunder, the
"current per unit market price" of the Preferred Units if they are publicly
traded shall be determined in accordance with the method set forth in Section
11(d)(i). If the Preferred Units are not publicly traded, the "current per unit
market price" of the Preferred Units shall be conclusively deemed to be the
current per unit market price of the Partnership Units as determined pursuant to
Section 11(d)(i) (appropriately adjusted to reflect any split, distribution or
similar transaction occurring after the date hereof), multiplied by one thousand
(1,000). If neither the Partnership Units nor the Preferred Units are publicly
listed or traded, "current per unit market price" shall mean the fair market
value per unit as determined in good faith by the General Partner, whose
determination shall be
16
described in a statement filed with the Rights Agent and shall be binding on the
Rights Agent and the holders of the Rights.
(e) Anything herein to the contrary notwithstanding, no adjustment in
the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Purchase Price; provided, however,
that any adjustments which by reason of this Section 11(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest one one-thousandth of a Preferred Unit or one
one-thousandth of any other unit or security as the case may be. Notwithstanding
the first sentence of this Section 11(e), any adjustment required by this
Section 11 shall be made no later than the earlier of (i) three (3) years from
the date of the transaction which mandates such adjustment or (ii) the Final
Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)(ii)
or Section 13(a) hereof, the holder of any Right thereafter exercised shall
become entitled to receive any units of the Partnership other than Preferred
Units, thereafter the number of other units so receivable upon exercise of any
Right shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the
Preferred Units contained in Section 11(a) through (c), inclusive, and the
provisions of Sections 7, 9, 10, 13 and 14 with respect to the Preferred Units
shall apply on like terms to any such other units.
(g) All Rights originally issued by the Partnership subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the Adjusted Purchase Price, the number of one one-thousandths of a
Preferred Unit purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Partnership shall have exercised its election so
provided in Section 11(i) hereof, upon adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and 11(c) hereof, each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the Adjusted Purchase Price, that number of
one one-thousandths of a Preferred Unit calculated to the nearest one
one-thousandth of a Preferred Unit) obtained by (i) multiplying (A) the number
of Preferred Units covered by a Right immediately prior to this adjustment of
the Purchase Price by (B) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Partnership may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in lieu of any adjustment in
the number of one one-thousandths of a Preferred Unit purchasable upon the
exercise of a Right. Each of the Rights outstanding after such adjustment of the
number of Rights shall be
17
exercisable for the number of one one-thousandths of a Preferred Unit for which
a Right was exercisable immediately prior to such adjustment. Each Right held of
record prior to such adjustment of the number of Rights shall become that number
of Rights (calculated to the nearest one one-thousandth) obtained by dividing
the Purchase Price in effect immediately prior to adjustment of the Purchase
Price by the Purchase Price in effect immediately after adjustment of the
Purchase Price. The Partnership shall make a public announcement of its election
to adjust the number of Rights, indicating the record date for the adjustment,
and, if known at the time, the amount of the adjustment to be made, a copy of
which public announcement shall promptly be delivered to the Rights Agent. This
record date may be the date on which the Purchase Price is adjusted or any day
thereafter, but, if the Right Certificates have been issued, shall be at least
ten (10) days later than the date of the public announcement. If Right
Certificates have been issued, upon each adjustment of the number of Rights
pursuant to this Section 11(i), the Partnership shall, as promptly as
practicable, cause to be distributed to holders of record of Right Certificates
on such record date Right Certificates evidencing, subject to Section 14 hereof,
the additional Rights to which such holders shall be entitled as a result of
such adjustment, or, at the option of the Partnership, shall cause to be
distributed to such holders of record in substitution and replacement for the
Right Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Partnership, new Right Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Right Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein and shall be registered in
the names of the holders of record of Right Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of one one-thousandths of a Preferred Unit issuable upon the exercise
of the Rights, the Right Certificates theretofore and thereafter issued may
continue to express the Purchase Price and the number of one one-thousandths of
a Preferred Unit which were expressed in the initial Right Certificates issued
hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par value, if any, of the number of one
one-thousandths of a Preferred Unit, Common Units or other securities issuable
upon exercise of the Rights, the Partnership shall take any action which may, in
the opinion of its counsel, be necessary in order that the Partnership may
validly and legally issue such number of fully paid and non-assessable one
one-thousandths of a Preferred Unit, Common Units or other securities at such
adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Partnership may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the Preferred Units, Partnership Units or other
18
securities of the Partnership, if any, issuable upon such exercise over and
above the Preferred Units, Partnership Units or other securities of the
Partnership, if any, issuable upon exercise on the basis of the Purchase Price
in effect prior to such adjustment; provided, however, that the Partnership
shall deliver to such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional units or other
securities, as the case may be, upon the occurrence of the event requiring such
adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Partnership shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that (1) (i) any consolidation or subdivision of the Preferred Units, (ii)
issuance wholly for cash of Preferred Units at less than the current market
price, (iii) issuance wholly for cash of Preferred Units or securities which by
their terms are convertible into or exchangeable for Preferred Units, (iv) unit
distributions or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Partnership to holders of its Preferred Units
shall not be taxable to holders of Preferred Units or (2) the Purchase Price is
reduced to correspond to any similar reduction that may be effected pursuant to
Section 11 (m) of Rights Agreements, dated as of October 13, 2000, between the
Corporation and American Stock Transfer & Trust Company.
(n) The Partnership covenants and agrees that it shall not, at any time
after the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Partnership in a transaction which does not violate Section
11(o) hereof), (ii) merge with or into any other Person (other than a Subsidiary
of the Partnership in a transaction which does not violate Section 11(o)
hereof), or (iii) sell or transfer (or permit any Subsidiary to sell or
transfer), in one transaction, or a series of related transactions, assets or
earning power aggregating more than 50% of the assets or earning power of the
Partnership and its Subsidiaries (taken as a whole) to any other Person or
Persons (other than the Partnership and/or any of its Subsidiaries in one or
more transactions each of which does not violate Section 11(o) hereof), if (x)
at the time of or immediately after such consolidation, merger, sale or transfer
there are any charter or bylaw provisions or any rights, warrants or other
instruments or securities outstanding or agreements in effect or other actions
taken, which would materially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights or (y) prior to, simultaneously with or
immediately after such consolidation, merger or sale, the security holders of
the Person who constitutes, or would constitute, the Principal Party for
purposes of Section 13(a) hereof shall have received a distribution of Rights
previously owned by such Person or any of its Affiliates and Associates. The
Partnership shall not consummate any such consolidation, merger, sale or
transfer unless prior thereto the Partnership and such other Person shall have
executed and delivered to the Rights Agent a supplemental agreement evidencing
compliance with this Section 11(n).
19
(o) The Partnership covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23, Section 24 or Section 27
hereof, take (or permit any Subsidiary to take) any action the purpose of which
is to, or if at the time such action is taken it is reasonably foreseeable that
the effect of such action is to, materially diminish or otherwise eliminate the
benefits intended to be afforded by the Rights.
(p) The exercise of Rights under Section 11(a)(ii) shall only result in
the loss of rights under Section 11(a)(ii) to the extent so exercised and shall
not otherwise affect the rights represented by the Rights under this Agreement,
including the rights represented by Section 13.
Section 12. Certificate of Adjusted Purchase Price or Number of
Securities.
Whenever an adjustment is made as provided in Section 11 or 13 hereof,
the Partnership shall promptly (a) prepare a certificate setting forth such
adjustment, and a brief reasonably detailed statement of the facts and
computations accounting for such adjustment, (b) file with the Rights Agent and
with each transfer agent for the Partnership Units and the Preferred Units a
copy of such certificate and (c) mail a brief summary thereof to each holder of
a Right Certificate in accordance with Section 25 hereof. The Rights Agent shall
be fully protected in relying on any such certificate and on any adjustment
therein contained and shall have no duty with respect to and shall not be deemed
to have knowledge of such adjustment unless and until it shall have received
such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power.
(a) In the event that, on or following the Shares Acquisition Date,
directly or indirectly, (x) the Corporation shall consolidate with, or merge
with and into, any Interested Stockholder or, if in such merger or consolidation
all holders of Common Shares are not treated alike, any other Person, (y) the
Corporation shall consolidate with, or merge with, any Interested Stockholder
or, if in such merger or consolidation all holders of Common Shares are not
treated alike, any other Person, and the Corporation shall be the continuing or
surviving corporation of such consolidation or merger (other than, in a case of
any transaction described in (x) or (y), a merger or consolidation which would
result in all of the securities generally entitled to vote in the election of
directors ("voting securities") of the Corporation outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into securities of the surviving entity) all of the voting securities
of the Corporation or such surviving entity outstanding immediately after such
merger or consolidation and the holders of such securities not having changed as
a result of such merger or consolidation), or (z) the Corporation shall sell or
otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise
transfer), in one transaction or a series of related transactions, assets or
earning power aggregating more than 50% of the assets or earning power of the
Corporation and
20
its Subsidiaries (taken as a whole) to any Interested Stockholder or
Stockholders or, if in such transaction all holders of Common Shares are not
treated alike, any other Person (other than the Corporation or any Subsidiary of
the Corporation in one or more transactions each of which does not violate
Section 11(o) hereof), then, and in each such case (except as provided in
Section 13(d) hereof), proper provision shall be made so that
(1) if in connection with such Section 13 Event there does not
also occur substantially concurrently a Partnership Section 13
Event (as defined below) or to the extent that a holder of a
Right does not elect to be governed by subparagraph (2) of
this Section 13(a), (i) each holder of a Right, except as
provided in Section 7(e) hereof, shall thereafter have the
right to receive, upon the exercise thereof at a price equal
to the then current Purchase Price, in accordance with the
terms of this Agreement and in lieu of Preferred Units, such
number of Common Shares of the Principal Party (as hereinafter
defined), not subject to any liens, encumbrances, rights of
first refusal or other adverse claims, as shall equal the
result obtained by (A) multiplying the then current Purchase
Price by the number of one one-thousandths of a Preferred Unit
for which a Right is then exercisable (without taking into
account any adjustment previously made pursuant to Section
11(a)(ii)) and dividing that product by (B) 50% of the then
current per share market price of the Common Shares of such
Principal Party (determined pursuant to Section 11(d) hereof)
on the date of consummation of such Section 13 Event; (ii)
such Principal Party shall thereafter be liable for, and shall
assume, by virtue of such Section 13 Event, all the
obligations and duties of the Partnership pursuant to this
Agreement; (iii) the term "Partnership" shall thereafter be
deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 hereof shall apply
only to such Principal Party following the first occurrence of
a Section 13 Event; and (iv) such Principal Party shall take
such steps (including, but not limited to, the reservation of
a sufficient number of its Common Shares) in connection with
the consummation of any such transaction as may be necessary
to assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to
such number of freely tradable shares of Common Shares
thereafter deliverable upon the exercise of the Rights; or
(2) if in connection with such Section 13 Event there also occurs
substantially concurrently with respect to the Partnership a
merger, consolidation, sale or transfer of the type described
in clauses (x), (y) or (z) of this Section 13(a) (a
"Partnership Section 13 Event") and the holder of a Right at
the time of exercise of such Right elects to be governed by
this subparagraph (2), (i) each electing holder of a Right,
except as provided in Section 7(e) hereof, shall thereafter
have the right to receive, upon the exercise thereof at a
price equal to the then current Purchase Price, in accordance
with the terms of this
21
Agreement and in lieu of Preferred Units, such number of
common securities of the Partnership Principal Party (as
defined below) not subject to any liens, encumbrances, rights
of first refusal or other adverse claims as shall have the
right (x) to convert into, (y) be exchanged for, or (z) be
redeemed for cash in an amount equal the current market value
at the time of redemption of, in each case, a number of Common
Shares of the Principal Party equal the result obtained by (A)
multiplying the then current Purchase Price by the number of
one one-thousandths of a Preferred Unit for which a Right is
then exercisable (without taking into account any adjustment
previously made pursuant to Section 11(a)(ii)) and dividing
that product by (B) 50% of the then current per unit market
price of the Common Shares of such Principal Party (determined
pursuant to Section 11(d) hereof) on the date of consummation
of such Partnership Section 13 Event (ii) such Partnership
Principal Party shall thereafter be liable for, and shall
assume, by virtue of such Section 13 Event, all the
obligations and duties of the Partnership pursuant to this
Agreement; (iii) the term "Partnership" shall thereafter be
deemed to refer to such Partnership Principal Party, it being
specifically intended that the provisions of Section 11 hereof
shall apply only to such Partnership Principal Party following
the first occurrence of a Partnership Section 13 Event; and
(iv) such Partnership Principal Party and such Principal Party
shall take such steps (including, but not limited to, the
reservation of a sufficient number of their relevant
securities) in connection with the consummation of any such
transaction as may be necessary to assure that the provisions
hereof shall thereafter be applicable, as nearly as reasonably
may be, in relation to such number of common units, common
shares or other such common securities of the Partnership
Principal Party and Common Shares of the Principal Party
thereafter deliverable upon the exercise of the Rights.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause (x) or
(y) of the first sentence of Section 13(a), the Person that is the issuer of any
securities into which Common Shares of the Corporation are converted in such
merger or consolidation, and if no securities are so issued, the Person that is
the other party to such merger or consolidation (including, if applicable, the
Corporation or the Partnership, as the case may be, if it is the surviving
entity); and (ii) in the case of any transaction described in clause (z) of the
first sentence of Section 13(a), the Person that is the party receiving the
greatest portion of the assets or earning power transferred pursuant to such
transaction or transactions; provided, however, that in any of the foregoing
cases, (1) if the Common Shares of such Person are not at such time and have not
been continuously over the preceding twelve (12) month period registered under
Section 12 of the Exchange Act, and such Person is a direct or indirect
Subsidiary of another Person the Common Shares of
22
which are and have been so registered, "Principal Party" shall refer to such
other Person; (2) in case such Person is a Subsidiary, directly or indirectly,
of more than one Person, the Common Shares of two or more of which are and have
been so registered, "Principal Party" shall refer to whichever of such Persons
is the issuer of the Common Shares having the greatest aggregate market value;
and (3) in case such Person is owned, directly or indirectly, by a joint venture
formed by two or more Persons that are not owned, directly or indirectly, by the
same Person, the rules set forth in (1) and (2) above shall apply to each of the
chains of ownership having an interest in such joint venture as if such party
were a Subsidiary of both or all of such joint venturers and the Principal
Parties in each such chain shall bear the obligations set forth in this Section
13 in the same ratio as their direct or indirect interests in such Person bear
to the total of such interests.
(c) "Partnership Principal Party" shall mean, in the case of a
Partnership Section 13 Event, the Person into or with which the Partnership
merges or consolidates, or to whom the Partnership transfers 50% or more of its
assets or earning power and that is the issuer of any securities which are
convertible (directly or indirectly) into, exchangeable for, or redeemable for
Common Shares of the Principal Party or cash based on the value of Common Shares
of the Principal Party.
(d) The Partnership shall not consummate any Partnership Section 13
Event unless the Principal Party and/or Partnership Principal Party shall have a
sufficient number of its authorized shares of common stock, or other common
securities, as the case may be which have not been issued or reserved for
issuance to permit the exercise in full of the Rights in accordance with this
Section 13 and unless prior thereto the Partnership and such Principal Party, or
Partnership Principal Party, shall have executed and delivered to the Rights
Agent a supplemental agreement providing for the terms set forth in paragraphs
(a) and (b) of this Section 13 and further providing that, as soon as
practicable after the date of any consolidation, merger, sale or transfer
mentioned in paragraph (a) of this Section 13, the Principal Party, or
Partnership Principal Party, at its own expense shall:
(i) prepare and file a registration statement under the Act
with respect to the Rights and the securities purchasable upon exercise of the
Rights on an appropriate form, and will use its best efforts to cause such
registration statement to (A) become effective as soon as practicable after such
filing and (B) remain effective (with a prospectus at all times meeting the
requirements of the Act) until the Final Expiration Date;
(ii) use its best efforts to qualify or register the Rights
and the securities purchasable upon exercise of the Rights under the blue sky
laws of such jurisdictions as may be necessary or appropriate; and
23
(iii) deliver to holders of the Rights historical financial
statements for the Principal Party or Partnership Principal Party, as the case
may be which comply in all respects with the requirements for registration on
Form 10 under the Exchange Act; provided, however, that the Principal Party
and/or the Partnership Principal Party may be relieved of its obligations under
the forgoing clauses (i) and (ii) if it receives the written waiver of holders
of a majority of the Rights (excluding any Rights that are null and void
pursuant to Section 7(e)).
The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers. The rights under this
Section 13 shall be in addition to the rights to exercise Rights and adjustments
under Section 11(a)(ii) and shall survive any exercise thereof.
(e) The Partnership shall not consummate any Partnership Section 13
Event unless the Principal Party or Partnership Principal Party, as the case may
be, shall provide to the holders of, or holders of Rights to purchase, common
securities of the Partnership Principal Party that may be converted into or
exchanged for Common Shares of the Principal Party, registration rights with
respect to such Principal Party Common Shares that are substantially the same as
any registration rights such holders have with respect to their Partnership
Units or any securities into which such Partnership Units are convertible or
exchangeable and to which such holders are entitled immediately prior to the
relevant Section 13 Event.
(f) Notwithstanding anything in this Agreement to the contrary, Section
13 shall not be applicable to a transaction described in subparagraphs (x) and
(y) of Section 13(a) or in a Partnership Section 13 Event if: (i) such
transaction is consummated with a Person or Persons who acquired Common Shares
pursuant to a Permitted Offer (or a wholly owned Subsidiary of any such Person
or Persons); (ii) the price per Common Share offered in such transaction is not
less than the price per Common Share paid to all holders of Common Shares whose
shares were purchased pursuant to such Permitted Offer; and (iii) the form of
consideration offered in such transaction is the same as the form of
consideration paid pursuant to such Permitted Offer. Upon consummation of any
such transaction contemplated by this Section 13(f), all Rights hereunder shall
expire.
Section 14. Fractional Rights and Fractional Units.
(a) The Partnership shall not be required to issue fractions of Rights
or to distribute Right Certificates which evidence fractional Rights. In lieu of
such fractional Rights, there shall be paid to the registered holders of the
Right Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Section 14(a), the current
market value of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable. The closing price for any day shall be the last
sale
24
price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Rights are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Rights are listed or admitted to trading or, if the Rights are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices as reported on Nasdaq or such other market or system then in use or, if
on any such date the Rights are not quoted by any such organization, the average
of the closing bid and asked prices as furnished by a professional market maker
making a market in the Rights selected by the General Partner. If on any such
date no such market maker is making a market in the Rights, the fair value of
the Rights on such date as fair value of the Rights on such date as determined
in good faith by the General Partner.
(b) The Partnership shall not be required to issue fractions of
Preferred Units (other than fractions which are one one-thousandth or integral
multiples of one one-thousandth of a Preferred Unit) upon exercise of the Rights
or to distribute certificates which evidence fractional Preferred Units (other
than fractions which are one one-thousandth or integral multiples of one
one-thousandth of a Preferred Unit). Fractions of Preferred Units in integral
multiples of one one-thousandth of a Preferred Unit may, at the election of the
Partnership, be evidenced by depositary receipts, pursuant to an appropriate
agreement between the Partnership and a depositary selected by it; provided that
such agreement shall provide that the holders of such depositary receipts shall
have the rights, privileges and preferences to which they are entitled as
beneficial owners of the Preferred Units represented by such depositary
receipts. In lieu of fractional Preferred Units that are not one one-thousandth
or integral multiples of one one-thousandth of a Preferred Unit, the Partnership
shall pay to the registered holders of Right Certificates at the time such
Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one Preferred Unit. For the purposes of
this Section 14(b), the current market value of a Preferred Unit shall be the
closing price of a Preferred Unit (as determined pursuant to Section 11(d)(ii)
hereof) for the Trading Day immediately prior to the date of such exercise.
(c) Following the occurrence of one of the transactions or events
specified in Section 11 giving rise to the right to receive Partnership Units,
unit equivalents (other than Preferred Units) or other securities upon the
exercise of a Right, the Partnership shall not be required to issue fractions of
such Partnership Units, unit equivalents or other securities upon exercise of
the Rights or to distribute certificates which evidence fractions of such
Partnership Units, unit equivalents or other securities. In lieu of fractional
units of such Partnership Units, unit equivalents or other securities, the
Partnership may pay to the registered holders of Right Certificates at the time
such Rights are exercised as herein
25
provided an amount in cash equal to the same fraction of the current market
value of a unit of such Partnership Units, unit equivalents or other securities.
For purposes of this Section 14(c), the current market value shall be determined
in the manner set forth in Section 11(d) hereof for the Trading Day immediately
prior to the date of such exercise and, if such unit equivalent is not traded,
each such equivalent shall have the value of one one-thousandth of a Preferred
Unit.
(d) The holder of a Right by the acceptance of the Right expressly
waives his right to receive any fractional Rights or any fractional unit upon
exercise of a Right (except as provided above). The Rights Agent shall not be
deemed to have knowledge of, and shall have no duty in respect of, the issuance
of fractional Rights or fractional units until it shall have received
instructions from the Partnership concerning the issuance of the fractional
Rights or fractional units upon which instructions the Rights Agent may
conclusively rely.
Section 15. Rights of Action.
All rights of action in respect of this Agreement, excepting
the rights of action given to the Rights Agent under Section 18 hereof, are
vested in the respective registered holders of the Right Certificates (and,
prior to the Distribution Date, the registered holders of the Partnership
Units); and any registered holder of any Right Certificate (or, prior to the
Distribution Date, of the Partnership Units), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Partnership Units), may, in his own behalf and for his
own benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Partnership to enforce, or otherwise act in respect of,
his right to exercise the Rights evidenced by such Right Certificate (or, prior
to the Distribution Date, of the Partnership Units) in the manner provided in
such Right Certificate and in this Agreement. Without limiting the foregoing or
any remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and will be entitled to specific performance of the
obligations under, and injunctive relief against actual or threatened violations
of the obligations of any Person subject to, this Agreement.
Section 16. Agreement of Right Holders.
Every holder of a Right, by accepting the same, consents and agrees
with the Partnership and the Rights Agent and with every other holder of a Right
that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of the Partnership Units;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights
26
Agent if surrendered at the office or offices of the Rights Agent designated for
such purpose, duly endorsed or accompanied by a proper instrument of transfer
and with the appropriate form fully executed;
(c) subject to Section 7(f) hereof, the Partnership and the Rights
Agent may deem and treat the Person in whose name the Right Certificate (or,
prior to the Distribution Date, the associated Partnership Units) is registered
as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Right Certificate
or the associated Partnership Units made by anyone other than the Partnership or
the Rights Agent) for all purposes whatsoever, and neither the Partnership nor
the Rights Agent, subject to the last sentence of Section 7(e) hereof, shall be
required to be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither
the Partnership nor the Rights Agent shall have any liability to any holder of a
Right or a beneficial interest in a Right or other Person as a result of its
inability to perform any of its obligations under this Agreement by reason of
any preliminary or permanent injunction or other order, judgment, decree or
ruling (whether interlocutory or final) issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Partnership must use its
best efforts to have any such order, judgment, decree or ruling lifted or
otherwise overturned as soon as possible.
Section 17. Right Certificate Holder Not Deemed a Unitholder.
No holder, as such, of any Right Certificate shall be entitled to vote,
receive distributions or be deemed for any purpose the holder of the Preferred
Units or any other securities of the Partnership which may at any time be
issuable on the exercise of the Rights represented thereby, nor shall anything
contained herein or in any Right Certificate be construed to confer upon the
holder of any Right Certificate, as such, any of the rights of a unitholder of
the Partnership or a stockholder of any other Person whose securities are
purchasable pursuant to the Rights or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any partnership (if applicable) or corporate
action, or to receive notice of meetings or other actions affecting unitholders
or stockholders (except as provided in Section 25 hereof), or to receive
distributions or to exercise any preemptive or subscription rights, or
otherwise, until the Right or Rights evidenced by such Right Certificate shall
have been exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
The Partnership agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent,
27
its reasonable expenses and counsel fees and other disbursements incurred in the
preparation, execution, delivery, amendment, administration and execution of
this Agreement and the exercise and performance of its duties hereunder. The
Partnership also agrees to indemnify the Rights Agent for, and to hold it
harmless against, any loss, liability, damage, judgment, fine, penalty, claim,
demand, settlement, cost or expense, incurred without gross negligence, bad
faith or willful misconduct on the part of the Rights Agent, for any action
taken, suffered or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including without limitation the costs and
expenses of defending against any claim of liability in the premises. The
indemnity provided for herein shall survive the expiration of the Rights and the
termination of this Agreement.
The Rights Agent shall be authorized and protected and shall incur no
liability for, or in respect of, any action taken, suffered or omitted by it in
connection with, its acceptance and administration of this Agreement in reliance
upon any Right Certificate, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document (collectively, "Documents")
believed by it to be genuine and to be signed, executed and, where necessary,
verified or acknowledged, by the proper Person or Persons. The Rights Agent
shall not be deemed to have knowledge of, and shall have no duty in respect of,
any such Documents, until it receives notice or instructions in respect thereof.
In no case will the Rights Agent be liable for special, indirect, punitive,
incidental or consequential loss or damage of any kind whatsoever, even if the
Rights Agent has been advised of the likelihood of such loss or damage.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
Any Person into which the Rights Agent or any successor Rights Agent
may be merged or with which it may be consolidated, or any Person resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any Person succeeding to the stock transfer or all or
substantially all of the stockholder services business of the Rights Agent or
any successor Rights Agent, shall be the successor to the Rights Agent under
this Agreement without the execution or filing of any paper or any further act
on the part of any of the parties hereto, provided that such Person would be
eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights Agent shall succeed
to the agency created by this Agreement, any of the Right Certificates shall
have been countersigned but not delivered, any such successor Rights Agent may
adopt the countersignature of a predecessor Rights Agent and deliver such Right
Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Right
Certificates shall have the full force provided in the Right
28
Certificates and in this Agreement. In case at any time the name of the Rights
Agent shall be changed and at such time any of the Right Certificates shall have
been countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Right Certificates so
countersigned; and in case at that time any of the Right Certificates shall not
have been countersigned, the Rights Agent may countersign such Right
Certificates either in its prior name or in its changed name; and in all such
cases such Right Certificates shall have the full force provided in the Right
Certificates and in this Agreement.
Section 20. Duties of Rights Agent.
The Rights Agent undertakes only those duties and obligations expressly
imposed by this Agreement (and no implied duties or obligations) upon the
following terms and conditions, by all of which the Partnership and the holders
of Right Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Partnership), and the advice or opinion of such counsel shall be
full and complete authorization and protection to the Rights Agent and the
Rights Agent shall incur no liability for or in respect of, any action taken,
suffered or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of an Acquiring Person and the
determination of the current market price of any Security) be proved or
established by the Partnership prior to taking, suffering or omitting any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board, the
Chief Executive Officer (or any co-Chief Executive Officer), the President, any
Vice President, the Treasurer or the Secretary of the General Partner of the
Partnership and delivered to the Rights Agent; and such certificate shall be
full authorization and protection to the Rights Agent and the Rights Agent shall
incur no liability in respect of any action taken, suffered or omitted in good
faith by it under the provisions of this Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder only for its own gross
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for, or by reason of any
liability in respect of, the statements of fact or recitals contained in this
Agreement or in the Right Certificates (except its countersignature on such
Right Certificates) or be required to verify the same, but all such statements
and recitals are and shall be deemed to have been made by the Partnership only.
29
(e) The Rights Agent shall not be under any liability or responsibility
in respect of the validity of this Agreement or the execution and delivery
hereof (except the due execution hereof by the Rights Agent) or in respect of
the validity or execution of any Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Partnership of any
covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any change in the exercisability of the Rights
(including the Rights becoming null and void pursuant to Section 7(e) hereof) or
any adjustment required under the provisions of Section 11 or Section 13 hereof
or responsible for the manner, method or amount of any such adjustment or the
ascertaining of the existence of facts that would require any such adjustment
(except with respect to the exercise of Rights evidenced by Right Certificates
after receipt of the certificate described in Section 12 hereof); nor shall it
by any act hereunder be deemed to make any representation or warranty as to the
authorization of any Preferred Units or Partnership Units to be issued pursuant
to this Agreement or any Right Certificate or as to whether any Preferred Units
or Partnership Units will, when issued, be validly authorized and issued, fully
paid and non-assessable.
(f) The Partnership agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to only accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer (or any co-Chief
Executive Officer), the President, any Vice President, the Treasurer or the
Secretary of the General Partner and to apply to such officers for advice or
instructions in connection with its duties, and such instructions shall be full
authorization and protection to the Rights Agent and the Rights Agent shall
incur no liability for or in respect of any action taken, suffered or omitted by
it in good faith or lack of action in accordance with instructions of any such
officer or for any delay in acting while waiting for those instructions. Any
application by the Rights Agent for written instructions from the Partnership
may, at the option of the Rights Agent, set forth in writing any action proposed
to be taken or omitted by the Rights Agent under this Agreement and the date on
or after which such action shall be taken or suffered or such omission shall be
effective. The Rights Agent shall not be liable or responsible for any action
taken or suffered by, or omission of, the Rights Agent in accordance with a
proposal included in any such application on or after the date specified in such
application (which date shall not be less than five Business Days after the date
the General Partner actually receives such application, unless any such officer
shall have consented in writing to an earlier date) unless, prior to taking any
such action (or the effective date in the case of an omission), the Rights Agent
shall have received written instruction from any one of the Chairman of the
Board, the Chief Executive Officer (or
30
any co-Chief Executive Officer), the President, any Vice President, the
Treasurer or the Secretary of the General Partner in response to such
application specifying the action to be taken, suffered or omitted.
(h) The Rights Agent and any stockholder, affiliate, director, officer
or employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Partnership or become pecuniarily interested in any
transaction in which the Partnership may be interested, or contract with or lend
money to the Partnership or otherwise act as fully and freely as though it were
not Rights Agent under this Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Partnership or for any other
Person or legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Partnership or any other Person resulting from any
such act, default, neglect or misconduct, absent gross negligence, bad faith or
willful misconduct in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
it believes that repayment of such funds or adequate indemnification against
such risk or liability is not reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has not been
completed, the Rights Agent shall not take any further action with respect to
such requested exercise of transfer without first consulting with the
Partnership.
Section 21. Change of Rights Agent.
The Rights Agent or any successor Rights Agent may resign and be
discharged from its duties under this Agreement upon thirty (30) days' notice in
writing mailed to the Partnership and to each transfer agent of the Partnership
Units or Preferred Units by registered or certified mail, and to the holders of
the Right Certificates by first-class mail. The Partnership may remove the
Rights Agent or any successor Rights Agent upon sixty (60) days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the Partnership Units or Preferred Units by
registered or certified mail, and to holders of the Right Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Partnership shall appoint a successor
to the Rights Agent. If the Partnership
31
shall fail to make such appointment within a period of sixty (60) days after
giving notice of such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
the holder of a Right Certificate (who shall, with such notice, submit his Right
Certificate for inspection by the Partnership), then the registered holder of
any Right Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Partnership or by such a court, shall be a Person organized and doing
business under the laws of the United States or of the State of New York (or of
any other state of the United States so long as such Person is authorized to do
business in the State of New York), in good standing, having an office in the
State of New York, and which is subject to supervision or examination by federal
or state authority. After appointment, the successor Rights Agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment the Partnership shall file
notice thereof in writing with the predecessor Rights Agent and each transfer
agent of the Partnership Units or Preferred Units, and mail a notice thereof in
writing to the registered holders of the Right Certificates. Failure to give any
notice provided for in this Section 21, however, or any defect therein, shall
not affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates.
Notwithstanding any of the provisions of this Agreement or of the
Rights to the contrary, the Partnership may, at its option, issue new Right
Certificates evidencing Rights in such form as may be approved by the General
Partner to reflect any adjustment or change in the Purchase Price and the number
or kind or class of units or other securities or property purchasable under the
Right Certificates made in accordance with the provisions of this Agreement.
In addition, in connection with the issuance or sale of Partnership
Units following the Distribution Date and prior to the earlier of the Redemption
Date and the Final Expiration Date, the Partnership (a) shall with respect to
Partnership Units so issued or sold pursuant to the exercise of options or under
any employee plan or arrangement, or upon the exercise, conversion or exchange
of securities, notes or debentures issued by the Partnership, and (b) may, in
any other case, if deemed necessary or appropriate by the General Partner, issue
Right Certificates representing the appropriate number of Rights in connection
with such issuance or sale; provided, however, that (i) the Partnership shall
not be obligated to issue any such Right Certificates if, and to the extent
that, the Partnership shall be advised by counsel that such issuance would
create a significant risk
32
of material adverse tax consequences to the Partnership or the Person to whom
such Right Certificate would be issued, and (ii) no Right Certificate shall be
issued if, and to the extent that, appropriate adjustment shall otherwise have
been made in lieu of the issuance thereof.
Section 23. Redemption and Termination.
(a) (i) The General Partner may, at its option, redeem all but not less
than all of the then outstanding Rights at a redemption price of $.01 per Right,
as such amount may be appropriately adjusted to reflect any unit split, unit
distribution or similar transaction occurring after the date hereof (such
redemption price being hereinafter referred to as the "Redemption Price"), at
any time prior to the earlier of (x) the occurrence of a Section 11(a)(ii) Event
or (y) the Final Expiration Date.
(ii) In addition, the General Partner may, at its option, at any time
following the occurrence of a Section 11(a)(ii) Event and the expiration of any
period during which the holder of Rights may exercise the rights under Section
11(a)(ii) but prior to any Section 13 Event redeem all but not less than all of
the then outstanding Rights at the Redemption Price (x) in connection with any
merger, consolidation or sale or other transfer (in one transaction or in a
series of related transactions) of assets or earning power aggregating 50% or
more of the earning power of the Corporation and its subsidiaries (taken as a
whole) in which all holders of Partnership Units are treated alike and not
involving (other than as a holder of Partnership Units being treated like all
other such holders) an Interested Stockholder or (y)(aa) if and for so long as
the Acquiring Person is not thereafter the Beneficial Owner of 15% of the Common
Shares, and (bb) at the time of redemption no other Persons are Acquiring
Persons.
(b) In the case of a redemption permitted under Section 23(a)(i),
immediately upon the date for redemption determined by the General Partner
ordering the redemption of the Rights, and without any further action and
without any notice, the right to exercise the Rights will terminate and the only
right thereafter of the holders of Rights shall be to receive the Redemption
Price for each Right so held. In the case of a redemption permitted only under
Section 23(a)(ii), the right to exercise the Rights will terminate and represent
only the right to receive the Redemption Price upon the later of ten (10)
Business Days following the giving of such notice or the expiration of any
period during which the rights under Section 11(a)(ii) may be exercised. The
Partnership shall promptly give public notice and notify the Rights Agent of any
such redemption; provided, however, that the failure to give, or any defect in,
any such notice shall not affect the validity of such redemption. Within ten
(10) days after such date for redemption of the Rights as determined by the
General Partner, the Partnership shall mail a notice of redemption to all the
holders of the then outstanding Rights at their last addresses as they appear
upon the registry books of the Rights Agent or, prior to the Distribution Date,
on the registry books of the transfer agent for the Partnership Units. Any
notice which is mailed in the manner herein provided shall be deemed given,
33
whether or not the holder receives the notice. Each such notice of redemption
will state the method by which the payment of the Redemption Price will be made.
Neither the Partnership nor any of its Affiliates or Associates may redeem,
acquire or purchase for value any Rights at any time in any manner other than
that specifically set forth in this Section 23 and other than in connection with
the purchase of Partnership Units prior to the Distribution Date.
(c) The Partnership may, at its option, discharge all of its
obligations with respect to the Rights by (i) issuing a press release announcing
the manner of redemption of the Rights in accordance with this Agreement and
(ii) mailing payment of the Redemption Price to the registered holders of the
Rights at their last addresses as they appear on the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry books of the
transfer agent of the Partnership Units, and upon such action, all outstanding
Rights and Right Certificates shall be null and void without any further action
by the Partnership.
Section 24. Exchange.
(a) The General Partner may, at its option, at any time after the time
that any Person becomes an Acquiring Person, exchange all or part of the then
outstanding and exercisable Rights (which shall not include Rights that have
become null and void pursuant to the provisions of Section 7(e)) for Partnership
Units of the Partnership at an exchange ratio of one Partnership Unit per Right,
appropriately adjusted to reflect any unit split, unit distribution or similar
transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing,
the General Partner shall not be empowered to effect such exchange at any time
after any Person (other than the Partnership, any Subsidiary of the Partnership,
any employee benefit plan of the Partnership or any such Subsidiary, any Person
organized, appointed or established by the Partnership for or pursuant to the
terms of any such plan or any trustee, administrator or fiduciary of such a
plan), together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the Partnership Units then outstanding.
(b) Immediately upon the action of the General Partner ordering the
exchange of any Rights pursuant to subsection (a) of this Section 24 and without
any further action and without any notice, the right to exercise such Rights
shall terminate and the only right thereafter of the holders of such Rights
shall be to receive that number of Partnership Units equal to the number of such
Rights held by such holder multiplied by the Exchange Ratio. The Partnership
shall promptly give public notice and notify the Rights Agent of any such
exchange; provided, however, that the failure to give, or any defect in, such
notice shall not affect the validity of such exchange. The Partnership promptly
shall mail a notice of any such exchange to all of the holders of such Rights at
their last addresses as they appear upon the registry books of the Rights Agent.
Any notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the
34
notice. Each such notice of exchange will state the method by which the exchange
of the Partnership Units for Rights will be effected and, in the event of any
partial exchange, the number of Rights will be exchanged. Any partial exchange
shall be effected pro rata based on the number of Rights (other than Rights
which have become null and void pursuant to the provisions of Section 7(e)) held
by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Partnership, at
its option, may substitute Preferred Units (or equivalent preferred units, as
such term is defined in Section 11(b) hereof) for some or all of the Partnership
Units exchangeable for Rights, at the initial rate of one one-thousandth of a
preferred unit (or equivalent preferred unit) for each Partnership Unit, as
appropriately adjusted to reflect adjustments in the voting rights of the
Preferred Units pursuant to the terms thereof, so that the fraction of a
Preferred Unit delivered in lieu of each Partnership Unit shall have the same
voting rights as one Partnership Unit.
Section 25. Notice of Certain Events.
(a) In case the Partnership shall propose (i) to pay any distribution
payable in units of any class to the holders of its Preferred Units or to make
any other distribution to the holders of its Preferred Units (other than a
regularly quarterly cash distribution), (ii) to offer to the holders of its
Preferred Units rights or warrants to subscribe for or to purchase any
additional Preferred Units or units of any class or any other securities, rights
or options, (iii) to effect any reclassification of its Preferred Units (other
than a reclassification involving only the subdivision of outstanding Preferred
Units), (iv) to effect any consolidation or merger into or with any other Person
(other than a Subsidiary of the Partnership in a transaction which does not
violate Section 11(n) hereof), or to effect any sale or other transfer (or to
permit one or more of its Subsidiaries to effect any sale or other transfer) in
one or more transactions, of 50% or more of the assets or earning power of the
Partnership and its Subsidiaries (taken as a whole) to any other Person or
Persons (other than the Partnership and/or any of its Subsidiaries in one or
more transactions each of which does not violate Section 11(n) hereof), or (v)
to effect the liquidation, dissolution or winding up of the Partnership, then,
in each such case, the Partnership shall give to the Rights Agent and to each
holder of a Right Certificate, in accordance with Section 26 hereof, a notice of
such proposed action and file a certificate with the Rights Agent to that
effect, which shall specify the record date for the purposes of such
distribution, or distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the Preferred Units, if any such date is to be fixed,
and such notice shall be so given in the case of any action covered by clause
(i) or (ii) above at least twenty (20) days prior to the record date for
determining holders of the Preferred Units for purposes of such action, and in
the case of any such other action, at least twenty (20) days prior to the date
of the taking of such
35
proposed action or the date of participation therein by the holders of the
Preferred Units, whichever shall be the earlier.
(b) In case of a Section 11(a)(ii) Event, then (i) the Partnership
shall as soon as practicable thereafter give to each holder of a Right
Certificate, in accordance with Section 26 hereof, a notice of the occurrence of
such event, which notice shall describe such event and the consequences of such
event to holders of Rights under Section 11(a)(ii) hereof, and (ii) all
references in the preceding paragraph (a) to Preferred Units shall be deemed
thereafter to refer also to Partnership Units and/or, if appropriate, other
securities of the Partnership.
Section 26. Notices.
Notices or demands authorized by this Agreement to be given or made by
the Rights Agent or by the holder of any Right Certificate to or on the
Partnership shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed (until another address is filed in writing with the
Rights Agent) as follows:
Reckson Operating Partnership, L.P.
225 Broadhollow Road
Melville, New York 11747
Attention: Jason Barnett
Subject to the provisions of Section 21 hereof, any notice or demand
authorized by this Agreement to be given or made by the Partnership or by the
holder of any Right Certificate to or on the Rights Agent shall be sufficiently
given or made if sent by first-class mail, postage prepaid, addressed (until
another address is filed in writing with the Partnership) as follows:
American Stock Transfer & Trust Company
59 Maiden Lane
New York, New York 10038
Attention: Paula Caroppoli
Notices or demands authorized by this Agreement to be given or made by
the Partnership or the Rights Agent to the holder of any Right Certificate or,
if prior to the Distribution Date, to the holders of Partnership Units shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Partnership.
Section 27. Supplements and Amendments.
Except as set forth in the penultimate sentence of this Section 27, prior to the
Distribution Date, the Partnership may and the Rights Agent shall, if the
Partnership so directs, supplement or amend any provision of this Agreement
without the approval of an
36
holders of Partnership Units. From and after the Distribution Date, the
Partnership may and the Rights Agent shall, if the Partnership so directs,
supplement or amend this Agreement without the approval of any holders of Right
Certificates in order (i) to cure any ambiguity, (ii) to correct or supplement
any provision contained herein which may be defective or inconsistent with any
other provisions herein, (iii) to shorten or lengthen any time period hereunder
or (iv) to change or supplement the provisions hereunder in any manner which the
Partnership may deem necessary or desirable and which shall not adversely affect
the interests of the holders of Right Certificates (other than an Acquiring
Person or an Affiliate or Associate of an Acquiring Person); provided, however,
that this Agreement may not be supplemented or amended to lengthen, pursuant to
clause (iii) of this sentence, (A) a time period relating to when the Rights may
be redeemed at such time as the Rights are not then redeemable, or (B) any other
time period unless any such lengthening is for the purpose of protecting,
enhancing or clarifying the rights of, and/or the benefits to, the holders of
Rights. Upon the delivery of a certificate from the General Partner which states
that the proposed supplement or amendment is in compliance with the terms of
this Section 27, and if requested by the Rights Agent an opinion of counsel, the
Rights Agent shall execute such supplement or amendment, provided that such
supplement or amendment does not adversely affect the rights or obligations of
the Rights Agent under Section 18 or Section 20 of this Agreement. Prior to the
Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Partnership Units.
Section 28. Determination and Actions by the General Partner.
The General Partner shall have the exclusive power and authority to administer
this Agreement and to exercise all rights and powers specifically granted to the
General Partner or the Partnership, or as may be necessary or advisable in the
administration of this Agreement, including, without limitation, the right and
power to (i) interpret the provisions of this Agreement, and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including, without limitation, a determination to redeem or not
redeem the Rights or to amend the Agreement and whether any proposed amendment
adversely affects the interests of the holders of Right Certificates). For all
purposes of this Agreement, any calculation of the number of Common Shares or
other securities outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding Common Shares or
Partnership Units or any other securities of which any Person is the Beneficial
Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i)
of the General Rules and Regulations under the Exchange Act as in effect on the
date of this Agreement. All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all omissions with
respect to the foregoing) which are done or made by the General Partner in good
faith (and the Rights Agent shall be able to assume that the General Partner
acted in such good faith), shall (x) be final, conclusive and binding on the
Partnership, the Rights Agent, the holders of the Right Certificates and all
other
37
Persons, and (y) not subject the General Partner to any liability to the holders
of the Right Certificates.
Section 29. Successors.
All the covenants and provisions of this Agreement by or for the benefit of the
Partnership or the Rights Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder.
Section 30. Benefits of this Agreement.
Nothing in this Agreement shall be construed to give to any person or other
entity other than the Partnership, the Rights Agent and the registered holders
of the Right Certificates (and, prior to the Distribution Date, the Partnership
Units) any legal or equitable right, remedy or claim under this Agreement; but
this Agreement shall be for the sole and exclusive benefit of the Partnership,
the Rights Agent and the registered holders of the Right Certificates (and,
prior to the Distribution Date, the Partnership Units).
Section 31. Severability.
If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction or other authority to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
Section 32. Governing Law.
This Agreement, each Right and each Right Certificate issued hereunder
shall be deemed to be a contract made under the laws of the State of Delaware
and for all purposes shall be governed by and construed in accordance with the
laws of such State applicable to contracts to be made and performed entirely
within such State; except that all provisions regarding the rights, duties and
obligations of the Rights Agent shall be governed by and construed in accordance
with the laws of the State of New York applicable to contracts made and to be
performed entirely within such State.
Section 33. Counterparts.
This Agreement may be executed in any number of counterparts and each
of such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same instrument.
38
Section 34. Descriptive Headings.
Descriptive headings of the several Sections of this Agreement are
inserted for convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.
39
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the date and year first above written.
RECKSON OPERATING
PARTNERSHIP, L.P.
Attest:
By: Reckson Associates Realty Corp., its
general partner
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
AMERICAN STOCK
TRANSFER & TRUST
COMPANY
Attest:
By:_____________________________ By:_______________________________
Name: __________________________ Name: ____________________________
Title: ___________________________ Title: ___________________________
40
Exhibit A
SUPPLEMENT TO THE AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
RECKSON OPERATING PARTNERSHIP, L.P.
ESTABLISHING
SERIES F JUNIOR PARTICIPATING PREFERRED PARTNERSHIP 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, April 13, 1998, June 30, 1998 and May 24, 1999 (the
"Partnership Agreement"), the Partnership Agreement is hereby supplemented to
establish a series of up to 100,000 preferred units of limited partnership
interest of Reckson Operating Partnership, L.P. (the "Partnership") which shall
be designated "Series F Junior Participating Preferred Units" having the rights,
preferences, powers, privileges and restrictions, qualifications and limitations
substantially similar to those granted to or imposed upon the Series C Junior
Participating Preferred Stock, par value $.01 per share ("Series C Preferred
Stock") of Reckson Associates Realty Corp. (the "Company") as set forth in the
Articles Supplementary adopted the Company and filed with the Secretary of State
of the State of Maryland 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 Partnership and American Stock Transfer & Trust Company
("Rights Agent") have entered into a Rights Agreement dated as of January 3,
2000 ("Partnership Rights Agreement");
WHEREAS, concurrently with the entering into of Partnership Rights
Agreement the Partnership shall declare and make a distribution to the holders
of Class A Common Partnership Units of one Right for each Class A Common
Partnership Unit held; and
A-1
WHEREAS, pursuant to Section 4.2 of the Partnership Agreement, the
Partnership desires to designate the Series F Junior Participating Preferred
Units with substantially similar designation, preferences and other rights to
the Series C 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. Designation of Series F Junior Participating Preferred
Units.
Pursuant to Section 4.2 of the Partnership Agreement, the Partnership
hereby designates 100,000 additional partnership units which shall be the Series
F Junior Participating Preferred Units. The Series F Junior Participating
Preferred Units will have substantially the same designation, preferences and
other rights of the Series C Preferred Stock, as specified in this amendment and
in Exhibit I hereto.
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 F Preferred Units":
"Series F Preferred Units" means the units of limited partnership
interest designated by the Partnership as of October 13, 2000, in
connection with the designation of the Series C Preferred Stock by the
Company.
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.
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IN WITNESS WHEREOF, the parties hereto have executed this Supplement to
the Partnership Agreement as of the 13th day of October, 2000.
GENERAL PARTNER
RECKSON ASSOCIATES REALTY CORP.
By: ____________________________________
Name:
Title:
EXISTING LIMITED PARTNERS
By: Reckson Associates Realty Corp.,
as Attorney-in-Fact for the Limited
Partners
By: ____________________________________
Name:
Title:
SERIES F JUNIOR PARTICIPATING
PREFERRED UNIT HOLDER
RECKSON ASSOCIATES REALTY CORP.
By: ____________________________________
Name:
Title:
A-3
Exhibit I
RECKSON OPERATING PARTNERSHIP, L.P. DESIGNATION OF THE VOTING POWERS,
DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING AND OTHER SPECIAL RIGHTS
AND QUALIFICATIONS, LIMITATIONS, OR RESTRICTIONS OF THE SERIES F Junior
Participating PREFERRED PARTNERSHIP UNITS.
The following are the terms of the Series F Junior Participating Junior
Participating Preferred Partnership Units established pursuant to this
Amendment:
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SERIES F JUNIOR PARTICIPATING PREFERRED PARTNERSHIP UNITS
1. Designation and Number.
A series of preferred units of the Partnership, designated the "Series
F Junior Participating Preferred Units" (the "Series F Preferred Units") is
hereby established. The number the Series F Preferred Units shall be 100,000.
Such number of units may be increased or decreased at the discretion of the
General Partner; provided, however, that no decrease shall reduce the number of
Series C Preferred Units to a number less than that of the Series F Preferred
Units then outstanding plus the number of Series C Preferred Units issuable upon
exercise of outstanding rights, options or warrants or upon conversion of
outstanding securities issued by the Partnership.
2. Distributions.
(a) The holders of Series F Preferred Units shall be entitled to
receive, when, as and if declared by the General Partner out of funds legally
available for the purpose, quarterly distributions payable in cash January 31,
April 30, July 31 and October 31 in each year (each such date being referred to
herein as a "Quarterly Distribution Payment Date"), commencing on the first
Quarterly Distribution Payment Date after the first issuance (the "First
Issuance") of a unit or fraction of a unit of Series F Preferred Units, in an
amount per unit (rounded to the nearest cent) equal to the greater of (i) $10.00
and (ii) 1,000 times the aggregate per unit amount of all cash distributions and
1,000 times the aggregate per unit amount (payable in kind) of all non-cash
distributions, other than a distribution payable in Class A Common Partnership
Units or by way of a subdivision of the outstanding Class A Common Partnership
Units, declared on the Class A Common Partnership Units, since the immediately
preceding Quarterly Distribution Payment Date, or, with respect to the first
Quarterly Distribution Payment Date, since the first issuance of any unit or
fraction of a unit of Series F Preferred Units. In the event the Partnership
shall at any time after the First Issuance declare or pay any distribution on
the Class A Common Partnership Units payable in Class A Common Partnership
Units, or effect a subdivision or combination or consolidation of the
outstanding Class A Common Partnership Units (by reclassification or otherwise
than by payment of a distribution of Class A Common Partnership Units) into a
greater or lesser number of Class A Common Partnership Units, then in each such
case the amount to which holders of Series F Preferred Units were entitled
immediately prior to such event under the preceding sentence shall be adjusted
by multiplying such amount by a fraction, the numerator of which is the number
of Class A Common Partnership Units outstanding immediately after such event and
the denominator of which is the number of Class A Common Partnership Units that
were outstanding immediately prior to such event.
(b) On or after the First Issuance, no distribution on Class A
Common Partnership Units shall be declared unless concurrently therewith a
distribution is declared on the Series F Preferred Units as provided in
paragraph (a) above; and the
A-5
declaration of any such distribution on the Class A Common Partnership Units
shall be expressly conditioned upon payment or declaration of and provision for
a distribution on the Series F Preferred Units as above provided. In the event
no distribution shall have been declared on the Class A Common Partnership Units
during the period between any Quarterly Distribution Payment Date and the next
subsequent Quarterly Distribution Payment Date, a distribution of $10.00 per
unit on the Series F Preferred Units shall nevertheless be payable on such
subsequent Quarterly Distribution Payment Date.
(c) Whenever quarterly distributions or other distributions
payable on the Series F Preferred Units as provided in paragraph (a) above are
in arrears, thereafter and until all accrued and unpaid distributions, whether
or not declared, on Series F Preferred Units outstanding shall have been paid in
full, the Partnership shall not redeem or purchase or otherwise acquire for
consideration units of any ranking junior (either as to distribution or upon
liquidation, dissolution or winding up) to the Series F Preferred Units,
provided that the Partnership may at any time redeem, purchase or otherwise
acquire units of any such junior units in exchange for any units of the
Partnership ranking junior (as to distributions and upon dissolution,
liquidation or winding up) to the Series F Preferred Units.
(d) Distributions shall begin to accrue and be cumulative on
outstanding Series F Preferred Units from the Quarterly Distribution Payment
Date next preceding the date of issue of such Series F Preferred Units, unless
the date of issue of such units is prior to the record date for the first
Quarterly Distribution Payment Date, in which case distributions on such units
shall begin to accrue from the date of issue of such units, or unless the date
of issue is a Quarterly Distribution Payment Date or is a date after the record
date for the determination of holders of Series F Preferred Units entitled to
receive a quarterly distribution and before such Quarterly Distribution Payment
Date, in either of which events such distributions shall begin to accrue and be
cumulative from such Quarterly Distribution Payment Date. Accrued but unpaid
distributions shall not bear interest. The General Partner may fix a record date
for the determination of holders of Series F Preferred Units entitled to receive
payment of a distribution declared thereon, which record date shall be no more
than 30 days prior to the date fixed for the payment thereof.
3. Dissolution, Liquidation and Winding Up.
In the event of any voluntary or involuntary dissolution, liquidation
or winding up of the affairs of the Partnership (hereinafter referred to as a
"Liquidation"), the holders of Series F Preferred Units shall be entitled to
receive the greater of (a) $10.00 per unit, plus an amount equal to accrued and
unpaid distributions thereon, whether or not declared, to the date of such
payment and (b) the aggregate amount per unit equal to 1,000 times the aggregate
amount to be distributed per unit to holders of Class A Common Partnership
Units. In the event the Partnership shall at any time after the First Issuance
declare or pay any distribution on the Class A Common Partnership Units payable
in Class A Common
A-6
Partnership Units, or effect a subdivision or combination or consolidation of
the outstanding Class A Common Partnership Units (by reclassification or
otherwise than by way of distribution in Class A Common Partnership Units) into
a greater or lesser number of Class A Common Partnership Units, then in each
such case the aggregate amount to which holders of Series F Preferred Units were
entitled immediately prior to such event under the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of Class A Common Partnership Units outstanding immediately after such
event and the denominator of which is the number of Class A Common Partnership
Units that were outstanding immediately prior to such event.
4. Voting Rights.
The holders of Series F Preferred Units shall have the following voting
rights:
(a) Each Series F Preferred Unit shall entitle the holder thereof to
one thousand (1,000) votes on all matters submitted to a vote of the unitholders
of the Partnership. In the event the Partnership shall at any time after the
First Issuance declare or pay any distribution on the Class A Common Partnership
Units payable in Class A Common Partnership Units, or effect a subdivision or
combination or consolidation of the outstanding units of Class A Common
Partnership Units (by reclassification or otherwise than by payment of a
distribution in Class A Common Partnership Units) into a greater or lesser
number of units of Class A Common Partnership Units, then in each such case the
aggregate number of votes to which holders of Series F Preferred Units were
entitled immediately prior to such event under the preceding sentence shall be
adjusted by multiplying such number by a fraction the numerator of which is the
number of Class A Common Partnership Units outstanding immediately after such
event and the denominator of which is the number of Class A Common Partnership
Units that were outstanding immediately prior to such event.
(b) Except as otherwise provided herein, or by law or the
Partnership Agreement, the holders of Series F Preferred Units and the holders
of Class A Common Partnership Units shall vote together as one class on all
matters submitted to a vote of unitholders of the Partnership.
(c) Except as otherwise set forth herein or required by law or the
Partnership Agreement, holders of Series F Preferred Units shall have no special
voting rights and their consent shall not be required (except to the extent they
are entitled to vote with holders of Class A Common Partnership Units as set
forth herein) for the taking of any partnership action. No consent of the
holders of outstanding Series F Preferred Units at any time outstanding shall be
required in order to permit the General Partner to: (i) increase the number of
authorized Series F Preferred Units or to decrease such number to a number not
below the sum of the number of Series F Preferred Units then outstanding and the
number of units with respect to which there are outstanding rights to purchase;
or
A-7
(ii) issue preferred partnership units which are senior to the Series F
Preferred Units, junior to the Series F Preferred Units or on a parity with the
Series F Preferred Units.
5. Consolidation, Merger, etc.
In case the Partnership shall enter into any consolidation, merger,
combination or other transaction in which the Class A Common Partnership Units
are exchanged for or changed into other securities, cash and/or any other
property, then in any such case each Series F Preferred Unit shall at the same
time be similarly exchanged or changed into an amount per unit, subject to the
provision for adjustment hereinafter set forth, equal to 1,000 times the
aggregate amount of securities, cash and/or any other property (payable in
kind), as the case may be, into which or for which each Class A Common
Partnership Unit is changed or exchanged. In the event the Partnership shall at
any time after the First Issuance declare or pay any distribution on the Class A
Common Partnership Units payable in Class A Common Partnership Units, or effect
a subdivision or combination or consolidation of the outstanding Class A Common
Partnership Units (by reclassification or otherwise than by payment of a
distribution in Class A Common Partnership Unit) into a greater or lesser number
of Class A Common Partnership Units, then in each such case the amount set forth
in the preceding sentence with respect to the exchange or change of Series F
Preferred Units shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of Class A Common Partnership Units outstanding
immediately after such event and the denominator of which is the number of Class
A Common Partnership Units that were outstanding immediately prior to such
event.
6. Redemption.
The Series F Preferred Units shall not be redeemable.
7. Conversion Rights.
The Series F Preferred Units are not convertible into Class A Common
Partnership Units or any other security of the Partnership.
8. Ranking.
The Series F Preferred Units shall rank junior to all other classes and
series of the Partnership's Preferred Partnership Units as to payment of
distributions and the distribution of assets, unless the terms of any such
series shall provide otherwise.
A-8
Exhibit B
(Form of Right Certificate)
Certificate No. R-_______ _______ Rights
NOT EXERCISABLE AFTER OCTOBER 13, 2010, UNLESS EXTENDED PRIOR THERETO BY THE
GENERAL PARTNER OR EARLIER IF REDEEMED BY THE PARTNERSHIP. THE RIGHTS ARE
SUBJECT TO REDEMPTION, AT THE OPTION OF THE PARTNERSHIP, AT $0.01 PER RIGHT ON
THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON
(AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF
SUCH RIGHTS MAY BECOME NULL AND VOID.
[THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY
OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR
ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED
HEREBY ARE NULL AND VOID.]*
Right Certificate
Reckson Operating Partnership, L.P.
This certifies that ________________________, or registered assigns, is
the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of October 13, 2000 (the "Rights Agreement"),
between Reckson Operating Partnership, L.P., a Delaware limited partnership (the
"Partnership"), and American Stock Transfer & Trust Company (the "Rights
Agent"), to purchase from the Partnership at any time after the Distribution
Date (as such term is defined in the Rights Agreement) and prior to 5:00 P.M.,
New York City, New York time, on October 13, 2010 (unless the Rights evidenced
hereby shall have been previously redeemed by the Partnership) at the office or
offices of the Rights Agent designated for such purpose, or at the office of its
successor as Rights Agent, one one-thousandth of a unit of Series F Preferred
Unit (the "Preferred Units"), of the Partnership, at a purchase price of $84.44
per one one-
- --------
* The portion of the legend in brackets shall be inserted only if
applicable and shall replace the preceding sentence.
B-1
thousandth of Preferred Unit (the "Purchase Price"), upon presentation and
surrender of this Right Certificate with the Form of Election to Purchase duly
executed. The number of Rights evidenced by this Right Certificate (and the
number of one one-thousandths of a Preferred Unit which may be purchased upon
exercise hereof) set forth above, and the Purchase Price set forth above, are
the number and Purchase Price as of October 13, 2000 based on the Preferred
Units as constituted at such date.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Right
Certificate are Beneficially Owned by (i) an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of any such Acquiring Person, Associate or
Affiliate who becomes a transferee after the Acquiring Person becomes such, or
(iii) under certain circumstances specified in the Rights Agreement, a
transferee of any such Acquiring Person, Associate or Affiliate who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such,
such Rights shall become null and void and no holder hereof shall have any right
with respect to such Rights from and after the occurrence of such Section
11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the number
of one one-thousandths of a Preferred Unit or other securities which may be
purchased upon the exercise of the Rights evidenced by this Right Certificate
are subject to modification and adjustment upon the happening of certain events,
including Triggering Events (as such term is defined in the Rights Agreement).
This Right Certificate is subject to all of the terms, covenants and
restrictions of the Rights Agreement, which terms, covenants and restrictions
are hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Partnership and the holders of the Right Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the principal executive offices of
the Partnership and the office or offices of the Rights Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal office of the Rights Agent, may be exchanged for
another Right Certificate or Right Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
Preferred Units or other securities as the Rights evidenced by the Right
Certificate or Right Certificates surrendered shall have entitled such holder to
purchase. If this Right Certificate shall be exercised in part, the holder shall
be entitled to receive upon surrender hereof another Right Certificate or Right
Certificates for the number of whole Rights not exercised.
B-2
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate may be redeemed by the Partnership at a redemption price of
$0.01 per Right (subject to adjustment as provided in the Rights Agreement)
payable in cash.
No fractional Preferred Units will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are one
one-thousandth or integral multiples of one one-thousandth of a Preferred Unit,
which may, at the election of the Partnership, be evidenced by depositary
receipts), but in lieu thereof a cash payment will be made, as provided in the
Rights Agreement.
No holder of this Right Certificate shall be entitled to vote or
receive distributions or be deemed for any purpose the holder of the Preferred
Units or of any other securities of the Partnership which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a unitholder of the Partnership or any right to vote upon any
matter submitted to unitholders at any meeting thereof, or to give or withhold
consent to any partnership action, or to receive notice of meetings or other
actions affecting unitholders (except as provided in the Rights Agreement), or
to receive distributions or to exercise any preemptive or subscription rights,
or otherwise, until the Right or Rights evidenced by this Right Certificate
shall have been exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
B-3
WITNESS the facsimile signature of the proper officers of the
Partnership and its corporate seal.
[SEAL]
ATTEST: RECKSON OPERATING PARTNERSHIP,
L.P.
By: Reckson Associates Realty Corp., its
general partner
By:______________________________________
Name:
Title:
Countersigned:
AMERICAN STOCK TRANSFER & TRUST COMPANY,
as Rights Agent
By:_____________________________
Authorized Officer
B-4
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED_________________ hereby sells, assigns and transfers
unto
________________________________________________________________________________
________________________________________________________________________________
(Please print name and address of transferee)
________________________________________________________________________________
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint _______________ Attorney, to
transfer the within Right Certificate on the books of the within-named
Partnership, with full power of substitution.
Dated: ____________, ____
____________________________________________
Signature
Signature Guaranteed:
- ------------------------------------------------------
The undersigned hereby certifies that (1) the Rights evidenced by this
Right Certificate are not being sold, assigned or transferred by or on behalf of
a Person who is or was an Acquiring Person or an Affiliate or Associate thereof
(as such terms are defined in the Rights Agreement) and (2) after due inquiry
and to the best knowledge of the undersigned, the undersigned did not acquire
the Rights evidenced by this Right Certificate from any Person who is or was an
Acquiring Person or an Affiliate or Associate thereof (as such terms are defined
in the Rights Agreement).
____________________________________________
Signature
B-5
Form of Reverse Side of Right Certificate -- continued
- --------------------------------------------------------------------------------
FORM OF ELECTION TO PURCHASE
(To be executed by the registered holder if such holder
desires to exercise Rights
represented by the Right Certificate.)
To the Rights Agent:
The undersigned hereby irrevocably elects to exercise _________________
Rights represented by this Right Certificate to purchase the Preferred Units,
Partnership Units or other securities issuable upon the exercise of such Rights
and requests that certificates for such Preferred Units, Partnership Units or
other securities be issued in the name of:
Please insert social security
or other identifying number ___________________________________________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number ________________________________________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
B-6
Form of Reverse Side of Right Certificate -- continued
- --------------------------------------------------------------------------------
Dated: _______________, ____
-------------------------------
Signature
Signature Guaranteed:
B-7
Form of Reverse Side of Right Certificate -- continued.
- --------------------------------------------------------------------------------
The undersigned hereby certifies that (1) the Rights evidenced by this
Right Certificate are not being exercised by or on behalf of a Person who is or
was an Acquiring Person or an Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement) and (2) after due inquiry and to the best
knowledge of the undersigned, the undersigned did not acquire the Rights
evidenced by this Rights Certificate from any Person who is or was an Acquiring
Person or an Affiliate or Associate thereof (as such terms are defined in the
Rights Agreement).
-------------------------------
Signature
- --------------------------------------------------------------------------------
NOTICE
The signature on the foregoing Forms of Assignment and Election and
certificates must conform to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any change
whatsoever.
In the event the certification set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may be, is not
completed, the Partnership and the Rights Agent will deem the Beneficial Owner
of the Rights evidenced by this Right Certificate to be an Acquiring Person or
an Affiliate or Associate thereof (as such terms are defined in the Rights
Agreement) and such Assignment or Election to Purchase will not be honored.
B-8
EXHIBIT 12.1
RECKSON OPERATING PARTNERSHIP, L. P.
RATIOS OF EARNINGS TO FIXED CHARGES
AND
RATIOS OF EARNINGS TO FIXED CHARGES AND PREFERRED DISTRIBUTIONS
The following table sets forth the Operating Partnership's consolidated
ratios of earnings to fixed charges for the years ended December 31:
2000 1999 1998 1997 1996
- ----------------------- --------------- ----------------- --------------------- ---------------------
2.11x 2.07x 2.00x 2.69x 2.71x
The following table sets forth the Operating Partnership's consolidated
ratios of earnings to fixed charges and preferred distributions for the years
ended December 31:
2000 1999 1998
- ------------------------- --------------------- -----------------------
1.62x 1.54x 1.60x
The Operating Partnership had no preferred capital outstanding prior to
April 1998.
EXHIBIT 21.1
RECKSON OPERATING PARTNERSHIP, L. P.
STATEMENT OF SUBSIDIARIES
Name State of Organization
- ------------------------------- ---------------------
Omni Partners, L. P. Delaware
Reckson FS Limited Partnership Delaware
Metropolitan Partners, LLC Delaware
Reckson Management Group, Inc. New York
Reckson Construction Group, Inc. New York
RT Tri-State LLC Delaware
Metropolitan 919 3rd Avenue LLC Delaware
1350 LLC Delaware
Magnolia Associates, LTD Florida
Metropolitan 810 7th Avenue LLC Delaware
100 Wall Company LLC New York
EXHIBIT 23.0
RECKSON OPERATING PARTNERSHIP, L. P.
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement Form S-3 (No. 333-67129) and in the related Prospectus of Reckson
Operating Partnership L.P., of our report dated February 13, 2001, with respect
to the consolidated financial statements and schedule of Reckson Operating
Partnership L.P., included in this Annual Report Form 10-K for the year ended
December 31, 2000.
Ernst & Young, LLP
New York, New York
March 21, 2001