REED, SMITH, SHAW & MCCLAY
May 12, 1997
VIA EDGAR
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Crown American Realty Trust -- Registration Statement
on Form S-3 relating to Common Shares, Common Share
Warrants, Preferred Shares and Debt Securities with a
public offering price of up to $300,000,000 in the aggregate
Gentlemen and Ladies:
On behalf of Crown American Realty Trust (the "Company"), transmitted to
you herewith for filing under the Securities Act of 1933, as amended, is a
Registration Statement on Form S-3 (the "Registration Statement") of the Company
relating to the registration of Common Shares, Common Share Warrants, Preferred
Shares and Debt Securities. The registration fee of $90,909 has been paid by
wire transfer from the Company.
It is respectfully requested that the Staff inform the undersigned of its
decision whether to review the Registration Statement as promptly as practicable
after such decision is made. Comments, if any, of the Staff on the Registration
Statement, if oral, should be telephoned to the undersigned (412-288-3214) or,
in his absence, to Dara Mancini (412-288-3226) of this firm and, if written,
should be sent to the persons listed below.
Copies of all written communications with respect to the Registration
Statement should be sent to the following:
John M. Kriak
Executive Vice President and Chief Financial Officer
Crown American Realty Trust
Pasquerilla Plaza
Johnstown, PA 15901
David L. DeNinno, Esq.
Reed Smith Shaw & McClay
435 Sixth Avenue
Pittsburgh, PA 15219
Very truly yours,
REED SMITH SHAW & McCLAY
/s/ David L. DeNinno
By
David L. DeNinno
DLD/DLM:cas
Attachment
cc: Terry L. Stevens (w/o Attach)
Ronald Rusinak, Esq. (w/o Attach)
Carl Berquist (Arthur Andersen LLP) (w/o Attach)
David Doyle (Friedman Billings Ramsey) (w/o Attach)
Dara L. Mancini, Esq. (w/o Attach)
As filed with the Securities and Exchange Commission on May 12, 1997
Registration No.: 33-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
Registration Statement
Under
The Securities Act of 1933
CROWN AMERICAN REALTY TRUST
(Exact name of registrant as specified in its charter)
Maryland 25-1713733
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Pasquerilla Plaza
Johnstown, PA 15901
(814) 536-4441
(Address, including zip code,
and telephone number, including area code, of
registrant's principal executive offices)
John M. Kriak
Executive Vice President and Chief Financial Officer
Pasquerilla Plaza
Johnstown, PA 15901
(814) 536-4441
(Name, address, including zip code, and telephone number ,
including area code of agent for service of process)
Copies to:
David L. DeNinno, Esq.
Reed Smith Shaw & McClay
435 Sixth Avenue
Pittsburgh, PA 15219
(412) 288-3214
Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this Registration Statement as
determined by market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933 (the "Securities Act"), other than securities offered
only in connection with dividend or interest reinvestment plans, please check
the following box.
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering.
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box.
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Title of Proposed Proposed Amount of
Each Class of Amount to maximum maximum Registration
Securities to be offering aggrigate Fee (3)
be registered registered per unit offering price
(1) (2) (2) (3) (3)
<S> <C> <C> <C> <C>
Common Shares
(4)
Common Share
Warrants
Preferred (7) (7) $90,909 (8)
Shares (5)
Debt
Securities
(6)
</TABLE>
(1)Securities registered hereunder may be sold separately, together or as units
with other Securities registered hereunder.
(2)In U.S. Dollars or the equivalent thereof denominated in one or more foreign
currencies or units of two or more foreign currencies or composite
currencies (such as European Currency Units).
(3)Estimated solely for purposes of calculating the registration fee. No
separate consideration will be received for Common Shares or Preferred
Shares that are issued upon conversion of Debt Securities or Preferred
Shares registered hereunder, as the case may be. The aggregate maximum
public offering price of all Offered Securities issued pursuant to this
Registration Statement will not exceed $300,000,000.
(4)Such indeterminate number of shares of Common Shares as may from time to
time be issued at indeterminate prices or issuable upon conversion of Debt
Securities or Preferred Shares registered hereunder, as the case may be.
Shares of Common Shares may be issued from time to time in one or more
classes or series.
(5)Such indeterminate number of shares of Preferred Shares as may from time to
time be issued at indeterminate prices or issuable upon conversion of Debt
Securities or other class or series of Preferred Shares registered
hereunder. Shares of Preferred Shares may be issued from time to time in one
or more classes or series.
(6)Such indeterminate amount of Debt Securities as may from time to time be
issued at indeterminate prices or issuable upon conversion of other Debt
Securities or Preferred Shares registered hereunder.
(7)Omitted pursuant to General Instruction II.D of Form S-3 under the
Securities Act of 1933, as amended.
(8)Calculated pursuant to Rule 457(o) of the rules and regulations under the
Securities Act of 1933, as amended.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED WITHOUT THE DELIVERY OF A FINAL PROSPECTUS SUPPLEMENT
AND PROSPECTUS. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PRELIMINARY PROSPECTUS DATED MAY 12, 1997
SUBJECT TO COMPLETION
$300,000,000
CROWN AMERICAN REALTY TRUST
Common Shares, Common Share Warrants, Preferred Shares and Debt Securities
Crown American Realty Trust ("Crown") may from time to time offer in
one or more series (i) common shares of beneficial interest, par value $.01 per
share (the "Common Shares"), (ii) Common share warrants (the "Common Share
Warrants"), (iii) preferred shares of beneficial interest, par value $.01 per
share (the "Preferred Shares"), or (iv) debt securities (the "Debt Securities"),
with an aggregate public offering price of up to $300,000,000 in amounts, at
prices and on terms to be determined at the time of any such offering. Crown
may offer the Common Shares, Common Share Warrants, Preferred Shares and Debt
Securities (collectively, the "Securities") from time to time, separately or
together, in separate series, in amounts, at prices and on terms to be set
forth in supplements to this Prospectus (each a "Prospectus Supplement").
The specific terms of the Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, where applicable: (i) in the case of Common Shares,
the specific number of shares and issuance price per share; (ii) in the case of
Common Share Warrants, the duration, offering price, exercise price and
detachability; (iii) in the case of Preferred Shares, the specific number of
shares, designation, any dividend, liquidation, redemption, conversion, voting
and other rights, and issuance price per share; and (iv) in the case of Debt
Securities, the specific title, aggregate principal amount, form (which may be
registered or bearer, or certificated or global), authorized denominations,
maturity, rate (or manner of calculation thereof) and time of payment of
interest, terms for redemption at the option of Crown or repayment at the option
of the holder, terms for any sinking fund payments, terms for conversion into
Common Shares, Preferred Shares or Debt Securities of another series, and any
initial public offering price. In addition, such specific terms may include
limitations on direct or beneficial ownership and restrictions on transfer of
the Securities, in each case as may be appropriate to preserve the status of
Crown as a real estate investment trust for federal income tax purposes.
The applicable Prospectus Supplement will also contain information,
where applicable, about certain federal income tax considerations relating to,
and any listing on a securities exchange of, the Securities covered by such
Prospectus Supplement.
The Securities may be offered directly, through agents designated from
time to time by Crown, or to or through underwriters or dealers. If any agents
or underwriters are involved in the sale of any of the Securities, their names,
and any applicable purchase price, fee, commission or discount arrangement
between or among them, will be set forth, or will be calculable from the
information set forth, in the applicable Prospectus Supplement. See "Plan of
Distribution." No Securities may be sold without delivery of the applicable
Prospectus Supplement describing the method and terms of the offering of such
series of Securities.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This Prospectus may not be used to consummate sales of securities
unless accompanied by a Prospectus Supplement. Any statement contained in this
Prospectus will be deemed to be modified or superseded by any inconsistent
statement contained in an accompanying Prospectus Supplement.
THE DATE OF THIS PROSPECTUS IS MAY 12, 1997
AVAILABLE INFORMATION
Crown is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by Crown can be inspected and copied at
the public reference facilities of the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following Regional Offices of
the Commission: Midwest Regional Office, Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511; Northeast Regional Office, 7
World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material may be obtained from the Public Reference Section of the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. The Commission also maintains a website at http://www.sec.gov
containing reports, prospectuses and information statements and other
information regarding registrants, including Crown, that file electronically.
Similar materials and other information concerning Crown also are available for
inspection at The New York Stock Exchange, Inc., 20 Broad Street, New York, New
York 10005.
Crown has filed with the Commission a Registration Statement on Form S-
3 (together with all amendments, exhibits and schedules, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the Securities. The Prospectus and any accompanying
Prospectus Supplement do not contain all of the information included in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information with
respect to Crown and the Securities, reference is hereby made to the
Registration Statement, including the exhibits and schedules thereto. Statements
contained in this Prospectus and any accompanying Prospectus Supplement
concerning the provisions or contents of any contract, agreement or any other
document referred to herein are not necessarily complete. With respect to each
such contract, agreement or document filed as an exhibit to the Registration
Statement, reference is made to such exhibit for a more complete description of
the matters involved, and each such statement shall be deemed qualified in its
entirety by such reference to the copy of the applicable document filed with the
Commission. The Registration Statement may be inspected without charge at the
Commission's principal office at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and copies of it or any part thereof may be obtained from
such office, upon payment of the fees prescribed by the Commission. The
Registration Statement also may be retrieved from the Commission's website.
This Prospectus, including the documents incorporated herein by
reference, contains forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended (the "Securities Act"). Also,
documents subsequently filed by Crown with the Securities and Exchange
Commission and incorporated herein by reference will contain forward-looking
statements. Actual results could differ materially from those projected in the
forward-looking statements as a result of any risk factors set forth in the
Prospectus Supplement and the matters set forth or incorporated in this
Prospectus generally. Crown cautions the reader, however, that any such list of
factors may not be exhaustive, particularly with respect to the future filings.
Prospective investors should carefully consider, among other factors, any risk
factors described in the Prospectus Supplement and the matters described below
before purchasing Shares.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which have previously been filed by Crown with
the Commission are incorporated herein by reference:
(1)Crown's Annual Report on Form 10-K for the year ended December 31,
1996;
(2)Crown's Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1997;
(3)Crown's Proxy Statement with respect to its Annual Meeting of
Shareholders held on April 30, 1997.
All documents filed by Crown pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Securities made hereby shall be deemed to be
incorporated in this Prospectus by reference and to be a part hereof from the
date of filing of such documents. Any statement contained herein, or in a
document incorporated or deemed to be incorporated by reference herein, shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
Crown will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, on the written
request of any such person, a copy of any or all of the documents incorporated
herein by reference, except the exhibits to such documents (unless such exhibits
are specifically incorporated by reference in such documents). Requests for
such copies should be directed to Crown, Attention: Sharon Callihan, Investor
Relations, Crown American Realty Trust, Pasquerilla Plaza, Johnstown,
Pennsylvania 15901; telephone number 1-800-860-2011.
CROWN
Crown American Realty Trust ("Crown") was formed on May 14, 1993 as a
Maryland real estate investment trust to acquire and operate substantially all
of the enclosed shopping mall properties and two office buildings (the
"Properties") owned by Crown American Associates ("Crown Associates"), formerly
Crown American Corporation. Crown Associates is a wholly-owned subsidiary of
Crown Holding Company ("Crown Holding"), which is owned by Frank J. Pasquerilla
and members of his immediate family. Crown Associates, which was founded in
1950, was engaged principally in the development, acquisition, ownership and
management of enclosed shopping malls and, to a lesser extent, strip shopping
centers, hotels and office buildings. Crown raised approximately $405 million
in equity through an initial public offering of approximately 25.5 million
shares, which occurred on August 17, 1993, and used the proceeds to purchase an
initial 78% (currently 74.6%) general partnership interest in Crown American
Properties, L.P. (the "Operating Partnership"), a partnership which was formed
just prior to consummation of the offering to own and operate the Properties.
The proceeds were used by the Operating Partnership to retire debt related to
the Properties.
Simultaneously with the public offering, Crown Associates and an
affiliate transferred the Properties and the management operations into either
Crown, the Operating Partnership, or Crown American Financing Partnership (the
"Financing Partnership"), a partnership which is 99.5% owned by the Operating
Partnership and 0.5% owned by Crown.
The limited partnership interest in the Operating Partnership and the
1.6 million shares in Crown received for two malls transferred in 1993 are
currently held by Crown Investments Trust ("Crown Investments"), by Crown
American Investment Company (a subsidiary of Crown Investments), and by members
of the Pasquerilla family.
Simultaneously with the above transactions, the Financing Partnership
borrowed approximately $300 million of mortgage debt ( the "Mortgage Loans")
secured by its 15 enclosed shopping malls. The $300 million of mortgage debt
together with the proceeds of the equity offering were used to retire existing
debt contributed with the Properties.
Crown is a fully-integrated real estate company primarily engaged in
the ownership, operation, management, leasing, acquisition, development,
redevelopment, expansion, renovation and financing of enclosed shopping malls.
Crown's revenues are primarily derived under real estate leases with national,
regional and local department store and other retailing companies. The Mall
Properties currently consist of 25 enclosed shopping malls, including a 50%
partnership interest in Palmer Park Mall (the "Malls"). Each Mall is an
enclosed shopping mall. All of the Malls have department stores as anchor
tenants (the "Anchors"). All of the malls have numerous diversified retail
store tenants (the "Mall Stores") which are located along enclosed malls
connecting the Anchors. Additional freestanding retail stores (the
"Freestanding Stores") are located along the perimeter of the parking areas at
17 of the Malls.
The total gross leasable area ("GLA") of the 25 Malls is approximately
14.3 million square feet, including Anchors, Mall Stores and Freestanding
Stores. As used herein, GLA of a Mall includes the GLA attributable to all
Anchors, including seven anchor locations owned by their occupants or other
entities. Anchors, Mall Stores and Freestanding Stores account for
approximately 58%, 37%, and 5%, respectively, of the total GLA of the Malls.
Excluding Freestanding Stores, the Malls range in size from approximately
300,000 to 830,000 square feet of GLA with an average size of approximately
540,000 square feet of GLA. Each Mall has ample surface parking with 19 of the
Malls having parking ratios above 5.0 per 1,000 square feet of GLA.
The Malls are generally located in middle markets where there are
relatively few other enclosed shopping malls. Crown's management believes that
the Malls have strong competitive positions because 21 are the largest, of which
13 are the only, enclosed regional shopping malls in their respective trade
areas. One of Crown's principal business strategies is the ongoing expansion
and renovation of its shopping malls to maintain and improve their competitive
position and market share.
Crown also owns (i) an office building in Johnstown, Pennsylvania with
approximately 102,500 gross leasable square feet, which serves as Crown's
headquarters and is leased to Crown American's hotel division and to third
parties ("Pasquerilla Plaza"), (ii) a ground leasehold interest in one parcel of
land within a shopping center owned by a third party that is improved with a
building consisting of approximately 107,000 square feet of GLA subleased to an
anchor department store (the "Anchor Pad"), and (iii) approximately 130 acres of
land adjacent to a number of the mall properties which are held for development,
ground lease, or sale to third parties.
As the owner of real estate, Crown is subject to risks arising in
connection with the underlying real estate, including defaults under or non-
renewal of tenant leases, tenant bankruptcies, competition, inability to rent
unleased space, failure to generate sufficient income to meet operating
expenses, as well as debt service, capital expenditures and tenant improvements,
environmental matters, financing availability and changes in real estate and
zoning laws. The success of Crown also depends upon certain key personnel,
Crown's ability to maintain its qualification as a real estate investment trust
for federal income tax purposes (a "REIT"), compliance with the terms and
conditions of the Mortgage Loans and other debt instruments, and trends in the
national and local economy, including income tax laws, governmental regulations
and legislation, and population trends.
USE OF PROCEEDS
Unless otherwise indicated in the Prospectus Supplement accompanying
this Prospectus, Crown intends to use the net proceeds from the sale of the
Securities solely for investment purposes in the Operating Partnership. The
Board of Trustees may direct the use of such net proceeds for general corporate
purposes, which may include, among other things, the acquisition, development
and renovation of enclosed shopping malls as suitable opportunities arise, the
expansion and improvement of its existing Properties and the repayment of
outstanding indebtedness. Pending such uses, the net proceeds from the sale of
Securities may be invested in short-term investments.
RATIO OF EARNINGS TO FIXED CHARGES
Crown and its predecessor (prior to Crown's formation in 1993)
historically have generated positive cash flows from operating activities.
However, after deductions for real estate depreciation and amortization, the
computation of the ratios of earnings to fixed charges results in a deficiency
in certain periods. For the years ended December 31, 1994 and 1996, Crown's
ratios of earnings to fixed charges were 1.40 and 1.11 respectively. For the
year ended December 31, 1995 and the quarter ended March 31, 1997 earnings were
inadequate to cover fixed charges by approximately $29.25 million and $2.34
million, respectively.
For purposes of computing these ratios, earnings have been calculated
by adding fixed charges (excluding capitalized interest) to income (loss) before
extraordinary income and minority interest. Fixed charges consist of interest
costs, whether expensed or capitalized, and amortization of deferred debt
issuance costs.
DESCRIPTION OF SHARES
The following summary of the terms of the shares of Crown does not
purport to be complete and is subject to and qualified in its entirety by
reference to Title 8 of the Corporations and Associations Article of the
Annotated Code of Maryland ("Title 8") and to Crown's Second Amended and
Restated Declaration of Trust, dated August 6, 1993 ("Declaration of Trust") and
bylaws. See "Available Information".
General
Crown's Declaration of Trust authorizes Crown to issue up to
250,000,000 shares of beneficial interest, consisting of 120,000,000 Common
Shares of Beneficial Interest, 5,000,000 Preferred Shares of Beneficial
Interest, par value $.01 per share ("Preferred Shares") and 125,000,000 Excess
Shares of Beneficial Interest ("Excess Shares"). As of May 7, 1997, 27,678,230
Common Shares of Beneficial Interest were issued and outstanding.
The Declaration of Trust also provides that, subject to the provisions
of any class or series of the shares of beneficial interest of Crown then
outstanding and to mandatory provisions of law, the shareholders of Crown shall
be entitled to vote only on the following matters: (a) election or removal of
trustees of Crown (the "Trustees"); (b) amendment of the Declaration of Trust;
(c) termination of the existence of Crown; (d) reorganization of Crown;
(e) merger, consolidation or share exchange of Crown or the sale or disposition
of substantially all Crown's assets; and (f) termination of Crown's status as a
real estate investment trust for federal tax purposes. Except with respect to
the foregoing matters, no action taken by the shareholders of Crown at any
meeting shall in any way bind the Trustees.
Both Maryland statutory law governing real estate investment trusts
organized under the laws of that state and the Declaration of Trust provide that
no shareholder of Crown will be personally liable for any obligation of Crown.
The Declaration of Trust provides that Crown shall indemnify each shareholder
against any claim or liability to which the shareholder may become subject by
reason of his being or having been a shareholder, and that Crown shall reimburse
each shareholder for reasonable expenses incurred by him in connection with any
such claim or liability. Crown carries public liability insurance which it
considers adequate. Accordingly, any risk of personal liability to shareholders
should be limited to situations in which the law of another jurisdiction would
not respect Maryland's limitation on shareholder liability and then only to the
extent that Crown's assets plus its insurance coverage would be insufficient to
satisfy the claims against Crown and its shareholders.
Common Shares of Beneficial Interest
The following description of the Common Shares sets forth certain
general terms and provisions of the Common Shares to which any Prospectus
Supplement may relate, including a Prospectus Supplement providing that Common
Shares will be issuable upon conversion of Debt Securities or Preferred Shares
of Crown. The statements below describing the Common Shares are in all respects
subject to and qualified in their entirety by reference to the applicable
provisions of the Declaration of Trust.
Each outstanding Common Share entitles the holder to one vote on all
matters submitted to a vote of shareholders, including the election of Trustees.
There is no cumulative voting in the election of Trustees, which means that the
holders of a majority of the outstanding Common Shares can elect all of the
Trustees then standing for election. Holders of Shares are entitled to such
distributions as may be declared from time to time by the Trustees in cash or
other assets of Crown, in securities of Crown or from any other legally
available source as the Trustees shall in their discretion determine.
Holders of the Common Shares have no conversion, redemption or
preemptive rights to subscribe to any securities of Crown. All outstanding
Shares are fully paid and nonassessable by Crown. In the event of any
liquidation, dissolution or winding-up of the affairs of Crown, holders of
Common Shares will be entitled to share ratably in the assets of Crown remaining
after provision for payment of liabilities to creditors and preferential rights
of the Preferred Shares.
The Common Shares shall have equal dividend, distribution, liquidation
and other rights, and shall have no preference, appraisal, or exchange rights.
Common Share Warrants
Crown may issue Common Share Warrants for the purchase of Common
Shares. Common Share Warrants may be issued independently or together with any
other Securities offered pursuant to any Prospectus Supplement and may be
attached to or separate from such Securities. Each series of Common Share
Warrants will be issued under a separate warrant agreement (each, a "Warrant
Agreement") to be entered into between Crown and the warrant recipient or, if
the recipients are numerous, a warrant agent identified in the applicable
Prospectus Supplement (the "Warrant Agent"). The Warrant Agent, if engaged,
will act solely as an agent of Crown in connection with the Common Share
Warrants of such series and will not assume any obligations or relationship of
agency or trust for or with any holders or beneficial owners of Common Share
Warrants. Further terms of the Common Share Warrants and the applicable Warrant
Agreements will be set forth in the Prospectus Supplement.
The applicable Prospectus Supplement will describe the terms of any
Common Share Warrants in respect of which this Prospectus is being delivered,
including, where applicable, the following: (1) the title of such Common Share
Warrants; (2) the aggregate number of such Common Share Warrants; (3) the price
or prices at which such Common Share Warrants will be issued; (4) the
designation, number and terms of the shares of Common Shares purchasable upon
exercise of such Common Share Warrants; (5) the designation and terms of the
other Securities with which such Common Share Warrants are issued and the number
of such Common Share Warrants issued with such offered Securities; (6) the date,
if any, on and after which such Common Share Warrants and the related Common
Stock will be separately transferable; (7) the price at which each Common Share
purchasable upon exercise of such Common Share Warrants may be purchased; (8)
the date on which the right to exercise such Common Share Warrants shall
commence and the date on which such right shall expire; (9) the minimum or
maximum amount of such Common Share Warrants which may be exercised at any one
time; (10) information with respect to book-entry procedures, if any; (11) a
discussion of certain federal income tax considerations relevant to a holder of
such Common Share Warrants; and (12) any other terms of such Common Share
Warrants, including terms, procedures and limitations relating to the exchange
and exercise of such Common Share Warrants.
Reference is made to the section above entitled "Common Shares of
Beneficial Interest" for a general description of the Common Shares to be
acquired upon the exercise of the Common Share Warrants.
Preferred Shares
The Preferred Shares authorized by the Declaration of Trust may be
issued from time to time in one or more series in such amounts and with such
designations, preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms or
conditions of redemption as may be fixed by the Trustees. The following
description of the Preferred Shares sets forth certain anticipated general terms
and provisions of the Preferred Shares to which any Prospectus Supplement may
relate. Certain other terms of any class or series of Preferred Shares (which
terms may be different than those stated below) will be described in the
Prospectus Supplement to which such class or series relates. The statements
below describing the Preferred Shares are in all respects subject to and
qualified in their entirety by reference to the applicable provisions of the
Prospectus Supplement and Declaration of Trust (including any amendment
describing the designations, rights, and preferences of each class or series of
Preferred Shares) and bylaws.
Classification or Reclassification of Preferred Shares
The Declaration of Trust authorizes the Trustees to classify or
reclassify any unissued Preferred Shares by setting or changing the
designations, preferences, conversion or other rights, voting powers,
restrictions, limitations as to distributions, qualifications or terms or
conditions of redemption of such Preferred Shares.
Rank
Unless otherwise specified in the Prospectus Supplement, the Preferred
Shares will, with respect to dividend rights and rights upon liquidation,
dissolution or winding up of Crown, rank (i) senior to all classes or series of
Common Shares of Crown, and to all equity and debt securities which are
specifically designated as ranking junior to such Preferred Shares with respect
to dividend rights or rights upon liquidation, dissolution or winding up of
Crown; (ii) on a parity with all equity and debt securities issued by Crown the
terms of which specifically provide that such equity and debt securities rank on
a parity with the Preferred Shares with respect to dividend rights or rights
upon liquidation, dissolution or winding up of Crown; and (iii) junior to all
equity and debt securities issued by Crown the terms of which specifically
provide that such equity and debt securities rank senior to the Preferred Shares
with respect to dividend rights or rights upon liquidation, dissolution or
winding up of Crown.
Dividends
Holders of shares of the Preferred Shares of each class or series shall be
entitled to receive, when, as and if declared by the Board of Trustees (as
defined below) of Crown, out of assets of Crown legally available for payment,
cash dividends (or dividends in kind or in other property if expressly permitted
and described in the applicable Prospectus Supplement) at such rates and on
such dates as will be set forth in the applicable Prospectus Supplement. Each
such dividend shall be payable to holders of record as they appear on the
shares of beneficial interest transfer books of Crown on such record dates as
shall be fixed by the Board of Trustees of Crown.
Dividends on any class or series of the Preferred Shares may be cumulative
or non-cumulative, as provided in the applicable Prospectus Supplement.
Dividends, if cumulative, will be cumulative from and after the date set forth
in the Prospectus Supplement. If the Board of Trustees of Crown fails to
declare a dividend payable on a dividend payment date on any class or series of
the Preferred Shares for which dividends are noncumulative, then the holders of
such class or series of the Preferred Shares will have no right to receive a
dividend in respect of the dividend period ending on such dividend payment
date, and Crown will have no obligation to pay the dividend accrued for such
period, whether or not dividends on such class or series are declared payable on
any future dividend payment date.
Unless otherwise specified in the applicable Prospectus Supplement, if any
shares of the Preferred Shares of any class or series are outstanding, no full
dividends shall be declared or paid or set apart for payment on the Preferred
Shares of Crown of any other class or series ranking, as to dividends, on a
parity with or junior to the Preferred Shares of such class or series for any
period unless full dividends (which include all unpaid dividends in the case of
cumulative dividend Preferred Shares) have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for such payment on the Preferred Shares of such class or series.
When dividends are not paid in full (or a sum sufficient for such full
payment is not so set apart) upon the shares of Preferred Shares of any class
or series and the shares of any other class or series of Preferred Shares
ranking on a parity as to dividends with the Preferred Shares of such class or
series, all dividends declared upon shares of Preferred Shares of such class
or series and any other class or series of Preferred Shares ranking on a parity
as to dividends with such Preferred Shares shall be declared pro rata among
the holders of such class or series. No interest, or sum of money in lieu of
interest, shall be payable in respect of any dividend payment or payments on
Preferred Shares of such class or series which may be in arrears.
Until required dividends are paid, no dividends (other than in Common
Shares or other capital shares ranking junior to the Preferred Shares of such
class or series as to dividends and upon liquidation) shall be declared or paid
or set aside for payment, nor shall any other distribution be declared or made
upon the Common Shares or any other capital shares of Crown ranking junior to or
on a parity with the Preferred Shares of such class or series as to dividends
or upon liquidation, nor shall any Common Shares or any other capital shares of
Crown ranking junior to or on a parity with the Preferred Shares of such class
or series as to dividends or upon liquidation be redeemed, purchased or
otherwise acquired for any consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of any such shares) by Crown
(except by conversion into or exchange for other capital shares of Crown
ranking junior to the Preferred Shares of such class or series as to dividends
and upon liquidation).
Any dividend payment made on shares of a class or series of Preferred
Shares shall first be credited against the earliest accrued but unpaid dividend
due with respect to shares of Preferred Shares of such class or series which
remains payable.
Redemption
If so provided in the applicable Prospectus Supplement, the shares of
Preferred Shares will be subject to mandatory redemption or redemption at the
option of Crown, as a whole or in part, in each case upon the terms, at the
times and at the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a class or series of Preferred
Shares that is subject to mandatory redemption will specify the number of shares
of such Preferred Shares that shall be redeemed by Crown in each year
commencing after a date to be specified, at a redemption price per share to be
specified, together with an amount equal to all accrued and unpaid dividends
thereon (which shall not, if such Preferred Shares do not have a cumulative
dividend, include any accumulation in respect of unpaid dividends for prior
dividend periods) to the date of redemption. The redemption price may be
payable in cash or other property, as specified in the Prospectus Supplement.
If the redemption price for Preferred Shares of any class or series is payable
only from the net proceeds of the issuance of capital shares of Crown, the
terms of such Preferred Shares may provide that, if no such capital shares shall
have been issued or to the extent the net proceeds from any issuance are
insufficient to pay in full the aggregate redemption price then due, such
Preferred Shares shall automatically and mandatorily be converted into shares of
the applicable capital shares of Crown pursuant to conversion provisions
specified in the applicable Prospectus Supplement.
So long as any dividends on shares of any class or series of the Preferred
Shares of Crown ranking on a parity as to dividends and distributions of
assets with such class or series of the Preferred Shares are in arrears, no
shares of any such class or series of the Preferred Shares of Crown will be
redeemed (whether by mandatory or optional redemption) unless all such shares
are simultaneously redeemed, and Crown will not purchase or otherwise acquire
any such shares. However, the foregoing will not prevent the purchase or
acquisition of such shares of Preferred Shares to preserve the status of
Crown or pursuant to a purchase or exchange offer made on the same terms to
holders of all outstanding shares of Preferred Shares of such class or series
and, unless the full cumulative dividends on all outstanding shares of any
cumulative Preferred Shares of such class or series and any other shares of
Crown ranking on a parity with such class or series as to dividends and upon
liquidation shall have been paid or contemporaneously are declared and paid for
all past dividend periods, Crown shall not purchase or otherwise acquire
directly or indirectly any shares of Preferred Shares of such class or series
(except by conversion into or exchange for shares of Crown ranking junior to the
Preferred Shares of such class or series as to dividends and upon liquidation).
In addition, the foregoing will not prevent the purchase or acquisition of such
shares of Preferred Shares to preserve the status of Crown or pursuant to a
purchase or exchange offer made on the same terms to holders of all outstanding
shares of Preferred Shares of such class or series.
If fewer than all of the outstanding shares of Preferred Shares of any
class or series are to be redeemed, the number of shares to be redeemed will be
determined by Crown and such shares may be redeemed pro rata from the holders
of record of such shares in proportion to the number of such shares held by such
holders (with adjustments to avoid redemption of fractional shares) or any
other equitable method determined by Crown.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of a share of Preferred
Shares of any class or series to be redeemed at the address shown on the share
transfer books of Crown. If notice of redemption of any Preferred Shares has
been given and if the funds necessary for such redemption have been set aside by
Crown in trust for the benefit of the holders of Preferred Shares so called for
redemption, then from and after the redemption date dividends will cease to
accrue on such Preferred Shares, such Preferred Shares shall no longer be deemed
outstanding and all rights of the holders of such Preferred Shares will
terminate, except the right to receive the redemption price.
Liquidation Preference
Upon any voluntary or involuntary liquidation, dissolution or winding
up of the affairs of Crown, then, before any distribution or payment shall be
made to the holders of Common Shares, or any other class or series of capital
shares of Crown ranking junior to the Preferred Shares in the distribution of
assets upon any liquidation, dissolution or winding up of Crown, the holders
of each class or series of Preferred Shares shall be entitled to receive out of
assets of Crown legally available for distribution to shareholders liquidating
distributions in the amount of the liquidation preference per share (set forth
in the applicable Prospectus Supplement), plus an amount equal to all dividends
accrued and unpaid thereon (which shall not include any accumulation in respect
of unpaid dividends for prior dividend periods if such Preferred Shares do
not have a cumulative dividend). After payment of the full amount of the
liquidating distributions to which they are entitled, the holders of shares of
Preferred Shares will have no right or claim to any of the remaining assets of
Crown. In the event that, upon any such voluntary or involuntary liquidation,
dissolution or winding up, the legally available assets of Crown are
insufficient to pay the amount of the liquidating distributions on all
outstanding shares of Preferred Shares and the corresponding amounts payable on
all shares of other classes or series of capital shares of Crown ranking on a
parity with the Preferred Shares in the distribution of assets upon liquidation,
dissolution or winding up, then the holders of the Preferred Shares and all
other such classes or series of capital shares shall share ratably in any such
distribution of assets in proportion to the full liquidating distributions to
which they would otherwise be respectively entitled.
If liquidating distributions shall have been made in full to all holders
of shares of Preferred Shares, the remaining assets of Crown shall be
distributed among the holders of any other classes or series of capital shares
ranking junior to the Preferred Shares upon liquidation, dissolution or winding
up, according to their respective rights and preferences and in each case
according to their respective number of shares.
Voting Rights
Holders of the Preferred Shares will not have any voting rights, except as
set forth below or as otherwise from time to time required by law or as
indicated in the applicable Prospectus Supplement.
Any class or series of Preferred Shares may provide that, so long as any
shares of such class or series of Preferred Shares remain outstanding, the
holders of such class or series may vote as a separate class on certain
specified matters, which may include changes in Crown's capitalization,
amendments to the Declaration of Trust, and mergers and dispositions.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of such class or series of Preferred Shares
shall have been redeemed or called for redemption upon proper notice and
sufficient funds shall have been irrevocably deposited in trust to effect such
redemption.
The provisions of a class or series of Preferred Shares may provide for
additional rights, remedies, and privileges if dividends on such class or series
are in arrears for specified periods, which rights and privileges will be
described in the applicable Prospectus Supplement.
Under Maryland law, notwithstanding anything to the contrary set forth
above, holders of each class or series of Preferred Shares will be entitled to
vote upon a proposed amendment to the Declaration of Trust, whether or not
entitled to vote thereon by the Declaration of Trust, if the amendment would
alter the contract rights, as set forth in the Declaration of Trust, of their
shares.
Conversion Rights
The terms and conditions, if any, upon which shares of any class or series
of Preferred Shares are convertible into Common Shares will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include the
number of Common Shares into which the Preferred Shares are convertible, the
conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at the option of the holders of the
Preferred Shares or Crown, the events requiring an adjustment of the conversion
price and provisions affecting conversion in the event of the redemption of such
Preferred Shares.
Restrictions On Ownership
The Preferred Shares will be subject to certain restrictions on ownership
as described in the applicable Prospectus Supplement.
Excess Shares
The Declaration of Trust provides that no holder may own, or be deemed to
own under the applicable attribution rules of the Internal Revenue Code of 1986,
as amended (the "Code"), shares in excess of the Ownership Limits and that no
purported transfer of shares of beneficial interest may be given effect if it
results in ownership of all of the outstanding shares of beneficial interest by
fewer than 100 persons (the "Ownership Restrictions"). In the event of a
purported transfer or other event that would, if effective, result in the
ownership of shares of beneficial interest in violation of the Ownership
Restrictions, such transfer would be deemed void ab initio and such shares would
automatically be exchanged for Excess Shares authorized by the Declaration of
Trust, according to rules set forth in the Declaration of Trust, to the extent
necessary to ensure that the purported transfer or other event does not result
in the ownership of shares of beneficial interest in violation of the Ownership
Restrictions.
Holders of Excess Shares are not entitled to voting rights (except to the
extent required by law), dividends or distributions. If, after the purported
transfer or other event resulting in an exchange of shares of beneficial
interest for Excess Shares and prior to the discovery by Crown of such exchange,
dividends or distributions are paid with respect to the shares of beneficial
interest that were exchanged for Excess Shares, then such dividends or
distributions are to be repaid to Crown upon demand. While outstanding, Excess
Shares will be held in trust by Crown for the benefit of the ultimate transferee
of an interest in such trust, as described below. While Excess Shares are held
in trust, an interest in that trust may be transferred by the purported
transferee or other purported holder with respect to such Excess Shares only to
a person whose ownership of the shares of beneficial interest will not violate
the Ownership Restrictions, at which time the Excess Shares will be
automatically exchanged for shares of beneficial interest of the same type and
class as the shares of beneficial interest for which the Excess Shares were
originally exchanged. The Declaration of Trust contains provisions that are
designed to ensure that the purported transferee or other purported holder of
the Excess Shares may not receive in return for such a transfer an amount that
reflects any appreciation in the shares of beneficial interest for which such
Excess Shares were exchanged during the period that such Excess Shares were
outstanding. Any amount received by a purported transferee or other purported
holder in excess of the amount permitted to be received must be turned over to
Crown.
The Declaration of Trust provides that Crown, by notice to the holder
thereof, may purchase any or all Excess Shares that have been automatically
exchanged for outstanding Common Shares or Preferred Shares as a result of any
transfer or other event. The price at which Crown may purchase such Excess
Shares shall be equal to the lesser of (i) in the case of Excess Shares
resulting from a purported transfer for value, the price per share in the
purported transfer that caused the automatic exchange for such Excess Shares or,
in the case of Excess Shares resulting from some other event, the market price
of such Shares or Preferred Shares on the date of the automatic exchange for
Excess Shares, or (ii) the market price of such Shares or Preferred Shares on
the date that Crown accepts such Excess Shares. Any dividend or distribution
paid to a proposed transferee on Excess Shares prior to the discovery by Crown
that such shares of beneficial interest have been transferred in violation of
the provisions of the Declaration of Trust shall be repaid to Crown upon demand.
If the foregoing restrictions are determined to be void or invalid by virtue of
any legal decision, statute, rule or regulation, then the intended transferee or
holder of any Excess Shares may be deemed, at the option of Crown, to have acted
as an agent on behalf of Crown in acquiring or holding such Excess Shares and to
hold such Excess Shares on behalf of Crown.
Restrictions on Transfer
For Crown to qualify as a real estate investment trust under the Code, not
more than 50% of the value of the outstanding shares of beneficial interest may
be owned, directly or indirectly, by five or fewer individuals (as defined in
the Code to include certain entities) during the last half of a taxable year,
the shares of beneficial interest must be beneficially owned by 100 or more
persons during at least 335 days of a taxable year of 12 months or during a
proportionate part of a shorter taxable year, and certain percentages of Crown's
gross income must be derived from particular activities. See "Certainb Federal
Income Tax Considerations to Crown of its REIT Election -- Taxation of a REIT"
and "-- Requirements for Qualification".
The Declaration of Trust contains a number of provisions which restrict the
ownership and transfer of shares of beneficial interest and which are designed
to safeguard Crown against an inadvertent loss of real estate investment trust
status. In order to prevent any Crown shareholder from owning shares of
beneficial interest of Crown to be held by five or fewer individuals after the
offerings, the Declaration of Trust contains Ownership Restrictions that
restrict, with certain exceptions, common shareholders from owning, under the
applicable attribution rules of the Code, more than 7.5% of the outstanding
Common Shares and preferred shareholders from owning more than 9.8% of the
outstanding Preferred Shares.
The trustees of Crown may waive the Ownership Restrictions if evidence
satisfactory to the trustees and Crown's tax counsel is presented showing that
such waiver will not jeopardize Crown's status as a real estate investment trust
under the Code. As a condition of such waiver, the trustees of Crown may
require that an intended transferee give written notice to Crown, furnish such
opinions of counsel, affidavits, undertakings, agreements and information as may
be required by the trustees and/or an undertaking from the applicant with
respect to preserving the real estate investment trust status of Crown Any
transfer of shares or any security convertible into shares that would (i) create
a direct or indirect ownership of shares in excess of the ownership limit, (ii)
result in the shares being owned by fewer than 100 persons or (iii) result in
Crown being "closely held" within the meaning of Section 856(h) of the Code,
will be void with respect to the intended transferee and will result in Excess
Shares as described above.
The Ownership Restrictions will not be automatically removed even if the
real estate investment trust provisions of the Code are changed so as to no
longer contain any ownership concentration limitation or if the ownership
concentration limitation is increased. Except as otherwise described above, any
change in the Ownership Restrictions would require an amendment to the
Declaration of Trust. Amendments to the Declaration of Trust require the
affirmative vote of holders owning a majority of the shares then outstanding and
entitled to vote thereon, except as expressly provided in the Declaration of
Trust. In addition to preserving Crown's status as a real estate investment
trust, the Ownership Restrictions may have the effect of precluding an
acquisition of control of Crown without the approval of the Board of Trustees.
All certificates representing shares of beneficial interest will bear a
legend referring to the restrictions described above.
All persons who own, directly or by virtue of the applicable attribution
provisions of the Code, more than 7.5% of the value of any class of outstanding
shares of beneficial interest must file an affidavit with Crown containing the
information specified in the Declaration of Trust by January 1 of each year. In
addition, each shareholder shall upon demand be required to disclose to Crown in
writing such information with respect to the direct, indirect and constructive
ownership of shares of beneficial interest as the Board of Trustees deems
necessary to comply with the provisions of the Code applicable to a real estate
investment trust, to comply with the requirements of any taxing authority or
governmental agency or to determine any such compliance.
Description of Debt Securities
Crown may issue Debt Securities under one or more trust indentures (each an
"Indenture") to be executed by Crown and one or more trustees (each an
"Indenture Trustee") meeting the requirements of a trustee under the Trust
Indenture Act of 1939, as amended (the "TIA"). The Indentures will be qualified
under the TIA.
The following description sets forth certain anticipated general terms and
provisions of the Debt Securities to which any Prospectus Supplement may
relate. The particular terms of the Debt Securities offered by any Prospectus
Supplement (which terms may be different than those stated below) and the
extent, if any, to which such general provisions may apply to the Debt
Securities so offered will be described in the Prospectus Supplement relating to
such Debt Securities. Accordingly, for a description of the terms of a
particular issue of Debt Securities, reference must be made to both the
Prospectus Supplement relating thereto and the following description. Forms of
the Senior Indenture (as defined herein) and the Subordinated Indenture (as
defined herein) have been filed as exhibits to the Registration Statement of
which this Prospectus is a part.
General
The Debt Securities will be direct obligations of Crown and may be either
senior Debt Securities ("Senior Securities") or subordinated Debt Securities
("Subordinated Securities"). The indebtedness represented by Subordinated
Securities will be subordinated in right of payment to the prior payment in full
of the Senior Debt (as defined in the applicable Indenture) of Crown. Senior
Securities and Subordinated Securities will be issued pursuant to separate
indentures (respectively, a "Senior Indenture" and a "Subordinated Indenture"),
in each case between Crown and an Indenture Trustee.
Except as set forth in the applicable Indenture and described in a
Prospectus Supplement relating thereto, the Debt Securities may be issued
without limit as to aggregate principal amount, in one or more series, secured
or unsecured, in each case as established from time to time in or pursuant to
authority granted by a resolution of the Board of Trustees of Crown or as
established in the applicable Indenture. All Debt Securities of one series need
not be issued at the same time and, unless otherwise provided, a series may be
reopened, without the consent of the holders of the Debt Securities of such
series, for issuances of additional Debt Securities of such series.
The Prospectus Supplement relating to any series of Debt Securities
being offered will contain the specific terms thereof, including, without
limitation:
(1) the title of such Debt Securities and whether such Debt
Securities are Senior Securities or Subordinated Securities;
(2) the aggregate principal amount of such Debt Securities and any
limit on such aggregate principal amount;
(3) the percentage of the principal amount at which such Debt
Securities will be issued and, if other than the principal amount thereof,
the portion of the principal amount thereof payable upon declaration of
acceleration of the maturity thereof, or (if applicable) the portion of the
principal amount of such Debt Securities which is convertible into Common
Shares or Preferred Shares, or the method by which any such portion shall
be determined;
(4) if convertible, any applicable limitations on the ownership or
transferability of the Common Shares or Preferred Shares into which such
Debt Securities are convertible;
(5) the date or dates, or the method for determining such date or
dates, on which the principal of such Debt Securities will be payable;
(6) the rate or rates (which may be fixed or variable), or the
method by which such rate or rates shall be determined, at which such Debt
Securities will bear interest, if any;
(7) the date or dates, or the method for determining such date or
dates, from which any interest will accrue, the interest payment dates on
which any such interest will be payable, the regular record dates for such
interest payment dates, or the method by which any such date shall be
determined, the person to whom such interest shall be payable, and the
basis upon which interest shall be calculated if other than that of a 360-
day year of twelve 30-day months;
(8) the place or places where the principal of (and premium, if any)
and interest, if any, on such Debt Securities will be payable, such Debt
Securities may be surrendered for conversion or registration of transfer
or exchange and notices or demands to or upon Crown in respect of such Debt
Securities and the applicable Indenture may be served;
(9) the period or periods within which, the price or prices at which
and the terms and conditions upon which such Debt Securities may be
redeemed, as a whole or in part, at the option of Crown, if Crown is to
have such an option;
(10) the obligation, if any, of Crown to redeem, repay or purchase
such Debt Securities pursuant to any sinking fund or analogous provision or
at the option of a holder thereof, and the period or periods within which,
the price or prices at which and the terms and conditions upon which such
Debt Securities will be redeemed, repaid or purchased, as a whole or in
part, pursuant to such obligation;
(11) if other than U.S. dollars, the currency or currencies in which
such Debt Securities are denominated and payable, which may be a foreign
currency or units of two or more foreign currencies or a composite currency
or currencies, and the terms and conditions relating thereto;
(12) whether the amount of payments of principal of (and premium, if
any) or interest, if any, on such Debt Securities may be determined with
reference to an index, formula or other method (which index, formula or
method may, but need not be, based on a currency, currencies, currency unit
or units or composite currency or currencies) and the manner in which such
amounts shall be determined;
(13) any additions to, modifications of or deletions from the terms
of such Debt Securities with respect to the Events of Default or covenants
set forth in the applicable Indenture;
(14) any provisions for collateral security for repayment of such
Debt Securities;
(15) whether such Debt Securities will be issued in certificated
and/or book-entry form;
(16) whether such Debt Securities will be in registered or bearer
form and, if in registered form, the denominations thereof if other than
$1,000 and any integral multiple thereof and, if in bearer form the
denominations thereof and terms and conditions relating thereto;
(17) the applicability, if any, of defeasance and covenant
defeasance provisions of the applicable Indenture;
(18) the terms, if any, upon which such Debt Securities may be
convertible into Common Shares or Preferred Shares of Crown and the terms
and conditions upon which such conversion will be effected, including,
without limitation, the initial conversion price or rate and the conversion
period;
(19) whether and under what circumstances Crown will pay additional
amounts as contemplated in the Indenture on such Debt Securities in respect
of any tax, assessment or governmental charge and, if so, whether Crown
will have the option to redeem such Debt Securities in lieu of making such
payment; and
(20) any other terms of such Debt Securities not inconsistent with
the provisions of the applicable Indenture.
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities"). Special federal income tax, accounting
and other considerations applicable to Original Issue Discount Securities will
be described in the applicable Prospectus Supplement.
Except as set forth in the applicable Indenture, the applicable
Indenture will not contain any provisions that would limit the ability of Crown
to incur indebtedness or that would afford holders of Debt Securities protection
in the event of a highly leveraged or similar transaction involving Crown or in
the event of a change of control. Restrictions on ownership and transfers of
Crown's Common Shares and Preferred Shares are designed to preserve its status
as a REIT and, therefore, may act to prevent or hinder a change of control.
Reference is made to the applicable Prospectus Supplement for information with
respect to any deletions from, modifications of or additions to the Events of
Default or covenants of Crown that are described below, including any addition
of a covenant or other provision providing event risk or similar protection.
Merger, Consolidation Or Sale
It is expected that each Indenture will provide that Crown may
consolidate with, or sell, lease or convey all or substantially all of its
assets to, or merge with or into, any other corporation, provided that (a)
either Crown shall be the continuing corporation, or the successor corporation
(if other than Crown) formed by or resulting from any such consolidation or
merger or which shall have received the transfer of such assets shall expressly
assume payment of the principal of (and premium, if any), and interest on, all
of the applicable Debt Securities and the due and punctual performance and
observance of all of the covenants and conditions contained in the applicable
Indenture; (b) immediately after giving effect to such transaction and treating
any indebtedness which becomes an obligation of Crown or any subsidiary as
a result thereof as having been incurred by Crown or such subsidiary at the
time of such transaction, no Event of Default under the applicable Indenture,
and no event which, after notice or the lapse of time, or both, would become
such an Event of Default, shall have occurred and be continuing; and (c) an
officer's certificate and legal opinion covering such conditions shall be
delivered to the Trustee.
Covenants
Each Indenture will contain covenants requiring Crown to take certain
actions and prohibiting Crown from taking certain actions. The covenants with
respect to any series of Debt Securities will be described in the Prospectus
Supplement relating thereto.
Events Of Default, Notice And Waiver
Each Indenture will describe specific "Events of Defaults" with
respect to any series of Debt Securities issued thereunder. Such "Events of
Defaults" are likely to include (with grace and cure periods): (i) default in
the payment of any installment of interest on any Debt Security of such series;
(ii) default in the payment of principal of (or premium, if any, on) any Debt
Security of such series at its maturity; (iii) default in making any required
sinking fund payment for any Debt Security of such series; (iv) default in the
performance or breach of any other covenant or warranty of Crown contained in
the applicable Indenture (other than a covenant added to the Indenture solely
for the benefit of a series of Debt Securities issued thereunder other than
such series), continued for a specified period of days after written notice as
provided in the applicable Indenture; (v) default in the payment of specified
amounts of indebtedness of Crown or any mortgage, indenture or other instrument
under which such indebtedness is issued or by which such indebtedness is
secured, such default having occurred after the expiration of any applicable
grace period and having resulted in the acceleration of the maturity of such
indebtedness, but only if such indebtedness is not discharged or such
acceleration is not rescinded or annulled and (vi) certain events of bankruptcy,
insolvency or reorganization, or court appointment of a receiver, liquidator or
Trustee of Crown or any subsidiary or either of its property.
If an Event of Default under any Indenture with respect to Debt
Securities of any series at the time outstanding occurs and is continuing, then
in every such case the applicable Indenture Trustee or the holders of not less
than 25% of the principal amount of the outstanding Debt Securities of that
series will have the right to declare the principal amount (or, if the Debt
Securities of that series are Original Issue Discount Securities, such portion
of the principal amounts may be specified in the terms thereof) of all the Debt
Securities of that series to be due and payable immediately by written notice
thereof to Crown (and to the applicable Indenture Trustee if given by the
holders). However, at any time after such a declaration of acceleration with
respect to Debt Securities of such series (or of all Debt Securities then
outstanding under any Indenture, as the case may be) has been made, but before a
judgment or decree for payment of the money due has been obtained by the
applicable Indenture Trustee, the holders of not less than a majority in
principal amount of outstanding Debt Securities of such series (or of all Debt
Securities then outstanding under the applicable Indenture, as the case may be)
may rescind and annul such declaration and its consequences if (a) Crown shall
have deposited with the applicable Indenture Trustee all required payments of
the principal of (and premium, if any) and interest on the Debt Securities of
such series (or of all Debt Securities then outstanding under the applicable
Indenture, as the case may be), plus certain fees, expenses, disbursements
and advances of the applicable Indenture Trustee and (b) all events of
default, other than the non-payment of accelerated principal (or specified
portion thereof), with respect to Debt Securities of such series (or of all
Debt Securities then outstanding under the applicable Indenture, as the case
may be) have been cured or waived as provided in such Indenture. Each Indenture
also will provide that the holders of not less than a majority in principal
amount of the outstanding Debt Securities of any series (or of all Debt
Securities then outstanding under the applicable Indenture, as the case
may be) may waive any past default with respect to such series and its
consequences, except a default (x) in the payment of the principal of (or
premium, if any) or interest on any Debt Security of such series or (y) in
respect of a covenant or provision contained in the applicable Indenture that
cannot be modified or amended without the consent of the holder of each
outstanding Debt Security affected thereby.
Each Indenture Trustee will be required to give notice to the holders
of Debt Securities within 90 days of a default under the applicable Indenture
unless such default shall have been cured or waived; provided, however, that
such Indenture Trustee may withhold notice to the holders of any series of Debt
Securities of any default with respect to such series (except a default in the
payment of the principal of (or premium, if any) or interest on any Debt
Security of such series or in the payment of any sinking fund installment in
respect of any Debt Security of such series) if specified responsible officers
of such Indenture Trustee consider such withholding to be in the interest of
such holders.
Each Indenture will provide that no holders of Debt Securities of any
series may institute any proceedings, judicial or otherwise, with respect to
such Indenture or for any remedy thereunder, except in the case of failure of
the applicable Indenture Trustee, for 60 days, to act after it has received a
written request to institute proceedings in respect of a Event of Default from
the holders of not less than 25% in principal amount of the outstanding Debt
Securities of such series, as well as an offer of indemnity reasonably
satisfactory to it. This provision will not prevent, however, any holder of
Debt Securities from instituting suit for the enforcement of payment of the
principal of (and premium, if any) and interest on such Debt Securities at the
respective due dates thereof.
Subject to provisions in each Indenture relating to its duties in case
of default, no Indenture Trustee will be under any obligation to exercise any
of its rights or powers under an Indenture at the request or direction of any
holders of any series of Debt Securities then outstanding under such Indenture,
unless such holders shall have offered to the Indenture Trustee thereunder
reasonable security or indemnity. The holders of not less than a majority in
principal amount of the outstanding Debt Securities of any series (or of all
Debt Securities then outstanding under an Indenture, as the case may be)
shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the applicable Indenture Trustee, or of
exercising any trust or power conferred upon such Indenture Trustee.
However, an Indenture Trustee may refuse to follow any direction which is in
conflict with any law or the applicable Indenture, which may involve such
Indenture Trustee in personal liability or which may be unduly prejudicial to
the holders of Debt Securities of such series not joining therein.
Within 120 days after the close of each fiscal year, Crown will be
required to deliver to each Indenture Trustee a certificate, signed by one of
several specified officers, stating whether or not such officer has knowledge of
any default under the applicable Indenture and, if so, specifying each such
default and the nature and status thereof.
Modification Of The Indentures
It is anticipated that modifications and amendments of an Indenture
may be made by Crown and the Indenture Trustee, with the consent of the holders
of not less than a majority in aggregate principal amount of each series of
the outstanding Debt Securities issued under the Indenture which are affected by
the modification or amendment, provided that no such modification or amendment
may, without a consent of each holder of such Debt Securities affected thereby:
(1) change the stated maturity date of the principal of (or premium, if any) or
any installment of interest, if any, on any such Debt Security; (2) reduce
the principal amount of (or premium, if any) or the interest, if any, on any
such Debt Security or the principal amount due upon acceleration of an Original
Issue Discount Security; (3) change the place or currency of payment of
principal of (or premium, if any) or interest, if any, on any such Debt
Security; (4) impair the right to institute suit for the enforcement of any
such payment on or with respect to any such Debt Security; (5) reduce the
above-stated percentage of holders of Debt Securities necessary to modify or
amend the Indenture; or (6) modify the foregoing requirements or reduce
the percentage of outstanding Debt Securities necessary to waive compliance
with certain provisions of the Indenture or for waiver of certain defaults. A
record date may be set for any act of the holders with respect to consenting to
any amendment.
The holders of not less than a majority in principal amount of
outstanding Debt Securities of each series affected thereby will have the right
to waive compliance by Crown with certain covenants in such Indenture.
Each Indenture will contain provisions for convening meetings of the
holders of Debt Securities of a series to take permitted action.
Redemption Of Securities
Each Indenture will provide that the Debt Securities may be redeemed
at any time at the option of Crown, in whole or in part, for certain reasons
intended to protect Crown's status as a REIT. Debt Securities may also be
subject to optional or mandatory redemption on terms and conditions described in
the applicable Prospectus Supplement.
From and after notice has been given as provided in the applicable
Indenture, if funds for the redemption of any Debt Securities called for
redemption shall have been made available on such redemption date, such Debt
Securities will cease to bear interest on the date fixed for such redemption
specified in such notice, and the only right of the holders of the Debt
Securities will be to receive payment of the Redemption Price.
Conversion Of Securities
The terms and conditions, if any, upon which the Debt Securities are
convertible into Common Shares or Preferred Shares will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include
whether such Debt Securities are convertible into Common Shares or Preferred
Shares, the conversion price (or manner of calculation thereof), the conversion
period, provisions as to whether conversion will be at the option of the holders
or Crown, the events requiring an adjustment of the conversion price and
provisions affecting conversion in the event of the redemption of such Debt
Securities and any restrictions on conversion, including restrictions directed
at maintaining Crown's REIT status.
Subordination
Upon any distribution to creditors of Crown in a liquidation,
dissolution or reorganization, the payment of the principal of and interest on
any Subordinated Securities will be subordinated to the extent provided in the
applicable Indenture in right of payment to the prior payment in full of all
Senior Securities. No payment of principal or interest will be permitted to be
made on Subordinated Securities at any time if a default in Senior Securities
exists that permits the holders of such Senior Securities to accelerate their
maturity and the default is the subject of judicial proceedings or Crown
receives notice of the default. After all Senior Securities are paid in full and
until the Subordinated Securities are paid in full, holders of Subordinated
Securities will be subrogated to the right of holders of Senior Securities to
the extent that distributions otherwise payable to holders of Subordinated
Securities have been applied to the payment of Senior Securities. By reason of
such subordination, in the event of a distribution of assets upon insolvency,
certain general creditors of Crown may recover more, ratably, than holders of
Subordinated Securities. If this Prospectus is being delivered in connection
with a series of Subordinated Securities, the accompanying Prospectus Supplement
or the information incorporated herein by reference will contain the approximate
amount of Senior Securities outstanding as of the end of Crown's most recent
fiscal quarter.
CERTAIN PROVISIONS OF MARYLAND LAW AND
THE COMPANY'S DECLARATION OF TRUST AND BYLAWS
The following paragraphs summarize certain provisions of Maryland law
and Crown's Declaration of Trust and bylaws. The summary does not purport
to be complete and is subject to and qualified in its entirety by reference to
Maryland law and to Crown's Declaration of Trust and bylaws.
General
As a Maryland real estate investment trust, Crown is governed by Title
8 of the Corporations and Associations Article of the Annotated Code of Maryland
("Title 8") and certain other provisions of the Annotated Code of Maryland. The
following discussion summarizes certain provisions of Maryland law and Crown's
Declaration of Trust and bylaws. This discussion does not purport to be
complete and is subject to and qualified in its entirety by reference to Title 8
and also to the Declaration of Trust and bylaws of Crown. Copies of these
documents have been filed as exhibits to the Registration Statement of which
this Prospectus is a part.
Certain provisions of the Declaration of Trust and the bylaws
described in this Section could make more difficult the acquisition of Crown by
means of a tender offer, a proxy contest or otherwise. These provisions are
expected to discourage certain types of coercive takeover practices and
inadequate takeover bids and to encourage persons seeking to acquire control of
Crown to negotiate first with the Board of Trustees as defined below. Crown
believes that the benefits of these provisions outweigh the potential
disadvantages of discouraging such proposals because, among other things,
negotiation of such proposals might result in an improvement of their terms.
Staggered Board of Trustees
Crown's Declaration of Trust and bylaws provide that the board of
Trustees will be divided into three classes of Trustees, each class constituting
approximately one-third of the total number of Trustees and with the classes
serving staggered three-year terms (the "Board of Trustees"). The
classification of Trustees will have the effect of making it more difficult for
shareholders to change the composition of the Board of Trustees. Crown
believes, however, that the longer time required to elect a majority of a
classified Board of Trustees will help to ensure continuity and stability of
Crown's management and policies.
The classification provisions could also have the effect of
discouraging a third party from accumulating large blocks of Crown's shares of
beneficial interest or attempting to obtain control of Crown, even though such
an attempt might be beneficial to Crown and its shareholders. Accordingly,
shareholders could be deprived of certain opportunities to sell their Shares at
a higher price than might otherwise be the case.
Number of Trustees; Removal; Filling Vacancies
Crown's Declaration of Trust provides that, subject to any rights of
holders of Preferred Shares to elect additional Trustees under specified
circumstances, the number of Trustees of the Declaration of Trust will be fixed
by the Board of Trustees, but must consist of not less than three nor more than
15 Trustees. In addition, subject to any rights of holders of Preferred Shares,
and unless the Board of Trustees otherwise determines, any vacancy (including a
vacancy created by an increase in the number of Trustees) will be filled, at any
regular meeting or at any special meeting of the Trustees called for that
purpose, by the affirmative vote of a majority of the remaining Trustees, though
less than a quorum. Accordingly, the Board of Trustees could temporarily
prevent any shareholder from enlarging the Board of Trustees and filling the new
Trusteeships with such shareholder's own nominees.
Crown's Declaration of Trust provides, consistent with Title 8, that,
subject to the right of the holders of Preferred Shares to elect additional
Trustees under specified circumstances, Trustees may be removed only upon the
affirmative vote of holders of at least 66-2/3% of the voting power of all the
then outstanding shares entitled to vote generally in the election of Trustees,
voting together as a single class.
Meetings of Shareholders
An annual meeting of the shareholders for the Election of Trustees and
the transaction of any business within the powers of Crown will be held during
the second quarter of each calendar year at the time set by the Trustees.
Subject to the rights of the holders of any series of Preferred Shares
to elect additional Trustees under specified circumstances, special meetings of
the shareholders may be called only by the chairman of the Board of Trustees or
by a resolution adopted by a majority of the Trustees, assuming no vacancies.
All meetings of shareholders shall be held at the principal office of
Crown or at such other place within the United States as shall be stated in the
notice of the meeting.
No Shareholder Action by Written Consent; Special Meetings
Crown's Declaration of Trust and the bylaws provide that, subject to
the rights of any holders of Preferred Shares to elect additional Trustees under
specified circumstances, shareholder action can be taken only at an annual or
special meeting of shareholders. They also prohibit shareholder action by
written consent in lieu of a meeting, calling a special meeting or requiring
that the Board of Trustees call a special meeting of shareholders. These
provisions may have the effect of delaying consideration of a shareholder
proposal until the next annual meeting.
Advance Notice Provisions for Shareholder Nominations and Shareholder Proposals
The Bylaws establish an advance notice procedure for shareholders to
make nominations of candidates for election as Trustees or to bring other
business before an annual meeting of shareholders of Crown (the "Shareholder
Notice Procedure").
The Shareholder Notice Procedure provides that (i) only persons who
are nominated by, or at the direction of, the Board of Trustees, or by a
shareholder who has given timely written notice containing specified information
to the Secretary of Crown prior to the meeting at which Trustees are to be
elected, will be eligible for election as Trustees of Crown and (ii) at an
annual meeting only such business may be conducted as has been brought before
the meeting by, or at the direction of, the chairman or the Board of Trustees or
by a shareholder who has given timely written notice to the Secretary of Crown
of such shareholder's intention to bring such business before such meeting. In
general, for notice of shareholder nominations or business to be made at an
annual meeting to be timely, such notice must be received by Crown not less than
60 days nor more than 90 days prior to the first anniversary of the previous
year's annual meeting.
The purpose of requiring shareholders to give Crown advance notice of
nominations and other business is to afford the Board of Trustees a meaningful
opportunity to consider the qualifications of the proposed nominees or the
advisability of the other proposed business and, to the extent deemed necessary
or desirable by the Board of Trustees, to inform shareholders and make
recommendations about such qualifications or business, as well as to provide a
more orderly procedure for conducting meetings of shareholders. Although the
Bylaws do not give the Board of Trustees any power to disapprove shareholder
nominations for the election of Trustees or proposals for action, they may have
the effect of precluding a contest for the election of Trustees or the
consideration of shareholder proposals if the proper procedures are not
followed, and of discouraging or deterring a third party from conducting a
solicitation of proxies to elect its own slate of Trustees or to approve its own
proposal, without regard to whether consideration of such nominees or proposals
might be harmful or beneficial to Crown and its shareholders.
Relevant Factors to be Considered by the Board of Trustees
The Declaration of Trust provides that in determining what is in the
best interest of Crown, a Trustee of Crown shall consider the interests of the
shareholders of Crown and, in his or her discretion, may consider (a) the
interests of Crown's employees, suppliers, creditors and customers, (b) the
economy of the nation, (c) community and societal interests and (d) the long-
term as well as short-term interests of Crown and its shareholders, including
the possibility that these interests may be best served by the continued
independence of Crown. Pursuant to this provision, the Board of Trustees may
consider numerous judgmental or subjective factors affecting a proposal,
including certain nonfinancial matters, and on the basis of these considerations
may oppose a business combination or other transaction which, as an exclusively
financial matter, might be attractive to some, or a majority, of Crown's
shareholders.
Rights to Purchase Securities and Other Property
Crown's Declaration of Trust authorizes the Board of Trustees to
create and issue rights entitling the holders thereof to purchase from Crown
shares of beneficial interest or other securities or property. The times at
which and terms upon which such rights are to be issued would be determined by
the Board of Trustees and set forth in the contracts or instruments that
evidence such rights. This provision is intended to confirm the Board of
Trustees' authority to issue share purchase rights, which may have terms that
could impede a merger, tender offer or other takeover attempt, or other rights
to purchase shares or securities of Crown or any other corporation.
Special Statutory Requirements for Certain Transactions
Business Combination Statute. The Maryland General Corporation Law
("MGCL") establishes special requirements with respect to "business
combinations" between Maryland corporations and "interested shareholders" unless
exemptions are applicable. Among other things, the law prohibits for a period
of five years a merger or other specified transactions between a company and an
interested shareholder and requires a super-majority vote for such transactions
after the end of such five-year period. This statute is applicable to a
Maryland real estate investment trust formed under Title 8.
"Interested shareholders" are all persons owning beneficially,
directly or indirectly, 10% or more of the outstanding voting shares of a
Maryland corporation or real estate investment trust. "Business combinations"
include any merger or similar transaction subject to a statutory vote and
additional transactions involving transfers of assets or securities in specified
amounts to interested shareholders or their affiliates. Unless an exemption is
available, transactions of these types may not be consummated between a Maryland
corporation or real estate investment trust and an interested shareholder or its
affiliates for a period of five years after the date on which the shareholder
first became an interested shareholder and thereafter may not be consummated
unless recommended by the board of directors of the Maryland corporation or real
estate investment trust and approved by the affirmative vote of at least 80% of
the votes entitled to be cast by all holders of outstanding shares of voting
shares and 66-2/3% of the votes entitled to be cast by all holders of
outstanding shares of voting shares other than the interested shareholder. A
business combination with an interested shareholder which is approved by the
board of directors of a Maryland corporation or real estate investment trust at
any time before an interested shareholder first becomes an interested
shareholder is not subject to the 5-year moratorium or special voting
requirements. An amendment to a Maryland corporation charter (or real estate
investment trust declaration of trust) electing not to be subject to the
foregoing requirements must be approved by the affirmative vote of at least 80%
of the votes entitled to be cast by all holders of outstanding shares of voting
shares and 66-2/3% of the votes entitled to be cast by holders of outstanding
shares of voting shares who are not interested shareholders. Any such amendment
is not effective until 18 months after the vote of shareholders and does not
apply to any business combination of a corporation or real estate investment
trust with a shareholder who was an interested shareholder on the date of the
shareholder vote. Crown's Board of Trustees has adopted a resolution exempting
all business combinations between Crown and any existing or future interested
shareholders (or their affiliates) from the provisions of the Business
Combination statute to the fullest extent permitted under Maryland Law.
Control Share Acquisition Statute. The MGCL imposes limitations on
the voting rights of shares acquired in a "control share acquisition." This
statute is applicable to a Maryland real estate investment trust formed under
Title 8. The Maryland statute defines a "control share acquisition" at the 20%,
33-1/3% and 50% acquisition levels, and requires a two-thirds shareholder vote
(excluding shares owned by the acquiring person and certain members of
management) to accord voting rights to shares acquired in a control share
acquisition. The statute also requires Maryland corporations or real estate
investment trusts to hold a special meeting at the request of an actual or
proposed control share acquiror generally within 50 days after a request is made
with the submission of an "acquiring person statement," but only if the
acquiring person (a) posts a bond for the cost of the meeting and (b) submits a
definitive financing agreement to the extent that financing is not provided by
the acquiring person. In addition, unless the charter or by-laws provide
otherwise, the statute gives the Maryland corporation, within certain time
limitations, various redemption rights if there is a shareholder vote on the
issue and the grant of voting rights is not approved, or if an "acquiring person
statement is not delivered to the target within 10 days following a control
share acquisition. Moreover, unless the charter, declaration of trust or bylaws
provide otherwise, the statute provides that if, before a control share
acquisition occurs, voting rights are accorded to control shares which results
in the acquiring person having majority voting power, then minority shareholders
have appraisal rights. An acquisition of shares may be exempted from the
control share statute provided that a charter, declaration of trust or bylaw
provision is adopted for such purpose prior to the control share acquisition.
Crown's Bylaws exempt all shares of beneficial interest in Crown from this
statute to the fullest extent allowed under Maryland law.
Reference is made to the full text of the foregoing statutes for their
entire terms, and the partial summary contained in this Prospectus is not
intended to be complete.
Amendment of Declaration of Trust
Under Title 8 and the Declaration of Trust, the Trustees, by a two-
thirds vote, may at any time amend Crown's Declaration of Trust from time to
time to enable Crown to qualify as a real estate investment trust under the Code
or as a real estate investment trust under Title 8, without the approval of the
shareholders. Other amendments require the vote of a majority of the
outstanding shares.
Termination of Crown and Real Estate Investment Trust Status
Crown's Declaration of Trust permits the termination of the Trust by
the affirmative vote of the holders of not less than a majority of the
outstanding shares at a meeting of shareholders called for that purpose. In
addition, the Declaration of Trust permits the Trustees, with the approval of a
majority of Crown's shareholders, to terminate the status of the Trust as a real
estate investment trust under the Code at any time.
Limitation of Liability
Pursuant to Title 8 and the Declaration of Trust, the liability of
Trustees and officers of Crown to Crown or to any shareholder of Crown for money
damages has been eliminated except (a) for actual receipt of an improper
personal benefit in money, property or services and (b) for active and
deliberate dishonesty established by a final judgment as being material to the
cause of action.
Indemnification
Crown's bylaws require it to indemnify any Trustee, officer or
shareholder (a) against reasonable expenses incurred by him in the successful
defense (on the merits or otherwise) of any proceeding to which he is made a
party by reason of such status or (b) against any claim or liability to which he
may become subject by reason of such status unless it is established that (i)
the act or omission giving rise to the claim was committed in bad faith or was
the result of active and deliberate dishonesty, (ii) he actually received an
improper personal benefit in money, property or services or (iii) in the case of
a criminal proceeding, he had reasonable cause to believe that his act or
omission was unlawful. Crown is also required by its bylaws to pay or
reimburse, in advance of a final disposition, reasonable expenses of a Trustee,
officer or shareholder made a party to a proceeding by reason of his or her
status as such upon receipt of a written affirmation by the Trustee or officer
of his or her good faith belief that he or she has met the applicable standard
for indemnification under the bylaws and a written undertaking to repay such
expenses if it shall ultimately be determined that the applicable standard was
not met.
In addition, Crown has entered into indemnification agreements with
each of Crown's officers and Trustees. The indemnification agreements require,
among other things, that Crown indemnify its officers and Trustees to the
fullest extent permitted by law, and advance to the officers and Trustees all
related expenses, subject to reimbursement if it is subsequently determined that
indemnification is not permitted. Crown must also indemnify and advance all
expenses incurred by officers and Trustees seeking to enforce their rights under
the indemnification agreements, and cover officers and Trustees under Crown's
Trustees and officers' liability insurance. Although the form of
indemnification agreement offers substantially the same scope of coverage
afforded by provisions in the Declaration of Trust, it provides greater
assurance to Trustees and officers that indemnification will be available,
because, as a contract, it cannot be modified unilaterally in the future by the
Board of Trustees or by the shareholders to eliminate the rights it provides.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to Trustees and officers of Crown, Crown
has been advised that, although the validity and scope of the governing statute
has not been tested in court, in the opinion of the SEC, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In addition, indemnification may be limited by state securities
laws.
Inspection of Books and Records
Under Title 8 any shareholder may inspect and copy the bylaws of
Crown, minutes of proceedings of shareholders and annual statements of affairs
of Crown. In addition, any shareholder of record who owns at least five percent
of the outstanding shares of any class of beneficial interest for at least six
months will be entitled to inspect and copy Crown's books of account and share
ledger and to require Crown to prepare and deliver a verified list of the name
and address of, and the number of shares owned by, each shareholder of Crown.
Restrictions on Investment and Use
Under Title 8, a Maryland real estate investment trust must hold at
least 75% of the value of its assets in real estate assets, mortgages or
mortgage related securities, government securities, cash and cash items
(including receivables) and may not use or apply land for farming, agriculture,
horticulture or similar purposes.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
TO CROWN OF ITS REIT ELECTION
The following summary of certain federal income tax considerations to
Crown is based on current law, is for general information only, and is not tax
advice. The tax treatment of a holder of any of the Securities will vary
depending upon the terms of the specific securities acquired by such holder, as
well as his or her particular situation, and this discussion does not attempt to
address any aspects of federal income taxation relating to holders of
Securities. Certain federal income tax considerations relevant to holders of
the Securities will be provided in the applicable Prospectus Supplement relating
thereto.
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT THE APPLICABLE PROSPECTUS
SUPPLEMENT, AS WELL AS HIS OR HER OWN TAX ADVISOR REGARDING THE SPECIFIC TAX
CONSEQUENCES TO HIM OR HER OF THE PURCHASE, OWNERSHIP AND SALE OF THE OFFERED
SECURITIES, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX
CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP AND SALE AND OF POTENTIAL CHANGES IN
APPLICABLE TAX LAWS.
Taxation of a REIT
Crown has elected to be taxed as a REIT under Sections 856 through 860
of the Code, commencing with its taxable year commencing December 31, 1993.
Crown believes that it has been organized and has operated in such a manner as
to qualify for taxation as a REIT under the Code commencing with such taxable
year, and Crown intends to continue to operate in such a manner, but no
assurance can be given that it has operated or will continue to operate in such
a manner so as to qualify or remain qualified.
These sections of the Code are highly technical and complex. The
following sets forth the material aspects of the sections that govern the
federal income tax treatment of a REIT. This summary is qualified in its
entirety by the applicable Code provisions, rules and regulations promulgated
thereunder, and administrative and judicial interpretations thereof.
In the opinion of Reed Smith Shaw & McClay, counsel to Crown, Crown
has been organized in conformity with the requirements for qualification as a
REIT, and its method of operation should enable it to meet the requirements for
continued qualification and taxation as a REIT under the Code. It must be
emphasized that this opinion is based on various factual assumptions relating to
the organization and operation of Crown, the Operating Partnership and the lower
tier partnerships and is conditioned upon certain representations made by Crown
as to factual matters. In addition, this opinion is based upon the factual
representations of Crown concerning its business and properties as set forth in
this Prospectus and will assume that the actions described in this Prospectus
have been completed as described. Moreover, such qualification and taxation as a
REIT depends upon Crown's ability to meet, through actual annual operating
results, distribution levels and diversity of share ownership, the various
qualification tests imposed under the Code discussed below, the results of which
have not been and will not be reviewed by such tax counsel to Crown.
Accordingly, no assurance can be given that the actual results of Crown's
operation for any particular taxable year will satisfy such requirements.
Further, the anticipated income tax treatment described in this Prospectus may
be changed, perhaps retroactively, by legislative or administrative action at
any time.
If Crown qualifies for taxation as a REIT, it generally will not be
subject to federal corporate income taxes on its net income that is currently
distributed to shareholders. This treatment substantially eliminates the "double
taxation" (at the corporate and shareholder levels) that generally results from
investment in a corporation. However, Crown will be subject to federal income
tax as follows: First, Crown will be taxed at regular corporate rates on any
undistributed taxable income, including undistributed net capital gains.
Second, under certain circumstances, Crown may be subject to the "alternative
minimum tax" on its items of tax preference. Third, if Crown has (i) net income
from the sale or other disposition of "foreclosure property" which is held
primarily for sale to customers in the ordinary course of business or (ii)
other nonqualifying income from foreclosure property, it will be subject to
tax at the highest corporate rate on such income. Fourth, if Crown has net
income from prohibited transactions (which are, in general, certain sales or
other dispositions of property held primarily for sale to customers in the
ordinary course of business other than foreclosure property), such income will
be subject to a 100% tax. Fifth, if Crown should fail to satisfy the 75% gross
income test or the 95% gross income test (as discussed below), but has
nonetheless maintained its qualification as a REIT because certain other
requirements have been met, it will be subject to a 100% tax on an amount equal
to (a) the gross income attributable to the greater of the amount by which
Crown fails the 75% or 95% test multiplied by (b) a fraction intended to
reflect Crown's profitability. Sixth, if Crown should fail to distribute
during each calendar year at least the sum of (i) 85% of its ordinary income for
such year, (ii) 95% of its REIT capital gain net income for such year, and
(iii) any undistributed taxable income from prior periods, Crown would be
subject to a 4% excise tax on the excess of such required distribution over the
amounts actually distributed. Seventh, with respect to an asset (a "Built-In
Gain Asset") acquired by Crown from a corporation which is or has been a C
corporation (i.e., generally a corporation subject to full corporate-level
tax) in certain transactions in which the basis of the Built-In Gain Asset in
the hands of Crown is determined by reference to the basis of the asset in the
hands of the C corporation, if Crown recognizes gain on the disposition of
such asset during the ten-year period (the "Recognition Period") beginning on
the date on which such asset was acquired by Crown, then, to the extent of the
Built-In Gain (i.e., the excess of (a) the fair market value of such asset over
(b) Crown's adjusted basis in such asset, determined as of the beginning of the
Recognition Period), such gain will be subject to tax at the highest regular
corporate tax pursuant to Internal Revenue Service ("IRS") regulations that
have not yet been promulgated. The results described above with respect to the
recognition of Built-In Gain assume that Crown will make an election pursuant to
IRS Notice 88-19.
Requirements for Qualification
The Code defines a REIT as a corporation, trust or association (1)
which is managed by one or more Trustees or directors; (2) the beneficial
ownership of which is evidenced by transferable shares, or by transferable
certificates of beneficial interest; (3) which would be taxable as a domestic
corporation, but for Sections 856 through 859 of the Code; (4) which is neither
a financial institution nor an insurance company subject to certain provisions
of the Code; (5) the beneficial ownership of which is held by 100 or more
persons; (6) during the last half of each taxable year not more than 50% in
value of the outstanding shares of which is owned, directly or constructively,
by five or fewer individuals (as defined in the Code to include certain
entities); and (7) which meets certain other tests, described below, regarding
the nature of its income and assets. The Code provides that conditions (1) to
(4), inclusive, must be met during the entire taxable year and that condition
(5) must be met during at least 335 days of a taxable year of twelve months, or
during a proportionate part of a taxable year of less than twelve months.
The Declaration of Trust provides for restrictions regarding transfer of
its shares, in order to assist Crown in continuing to satisfy the share
ownership requirements described in (5) and (6) above. Such transfer
restrictions are described in "Description of Shares" -- "Restrictions on
Transfer."
Crown does not intend to have any subsidiaries that are not "qualified REIT
subsidiaries." Code Section 856 (i) provides that a corporation which is a
"qualified real estate investment trust subsidiary" shall not be treated as a
separate corporation, and all assets, liabilities, and items of income,
deduction, and credit of a "qualified real estate investment trust subsidiary"
shall be treated as assets, liabilities, and such items (as the case may be) of
the real estate investment trust. Thus, in applying the requirements described
herein, Crown's "qualified real estate investment trust subsidiaries" will be
ignored, and all assets, liabilities, and items of income, deduction, and credit
of such subsidiaries will be treated as assets, liabilities and items of Crown.
In the case of a REIT which is a partner in a partnership, IRS regulations
provide that Crown will be deemed to own its proportionate share of the
assets of the partnership and will be deemed to be entitled to the income of
the partnership attributable to such share. In addition, the character
of the assets and gross income of the partnership shall retain the same
character in the hands of Crown for purposes of Section 856 of the Code,
including satisfying the gross income tests and the asset tests. Thus, Crown's
proportionate share of the assets, liabilities and items of income of the
Operating Partnership and the Financing Partnership are treated as assets,
liabilities and items of income of Crown for purposes of applying the
requirements described herein. A summary of the rules governing the Federal
income taxation of partnerships and their partners is provided below in "Tax
Aspects of the Operating Partnership." Crown has direct control of the
Operating Partnership and has and will continue to operate it consistent with
the requirements for qualification as a REIT.
In order to maintain qualification as a REIT, Crown annually must
satisfy three gross income requirements. First, at least 75% of Crown's gross
income (excluding gross income from prohibited transactions) for each taxable
year must be derived directly or indirectly from investments relating to real
property or mortgages on real property (including "rents from real property"
and, in certain circumstances, interest) or from certain types of temporary
investments. Second, at least 95% of Crown's gross income (excluding gross
income from prohibited transactions) for each taxable year must be derived from
such real property investments, dividends, interest and gain from the sale or
disposition of shares or securities (or from any combination of the foregoing).
Third, short-term gain from the sale or other disposition of shares or
securities, gain from prohibited transactions and gain on the sale or other
disposition of real property held for less than four years (apart from
involuntary conversions and sales of foreclosure property) must represent less
than 30% of Crown's gross income (including gross income from prohibited
transactions) for each taxable year.
Rents received by Crown will qualify as "rents from real property" in
satisfying the gross income requirements for a REIT described above only if
several conditions are met. First, the amount of rent must not be based in
whole or in part on the income or profits of any person. However, an amount
received or accrued generally will not be excluded from the term "rents from
real property" solely by reason of being based on a fixed percentage or
percentages of receipts or sales. Second, the Code provides that rents
received from a tenant will not qualify as "rents from real property" in
satisfying the gross income tests if Crown, or an actual or constructive owner
of 10% or more of Crown, actually or constructively owns 10% or more of such
tenant (a "Related Party Tenant"). Third, if rent attributable to personal
property, leased in connection with a lease of real property, is greater than
15% of the total rent received under the lease, then the portion of rent
attributable to such personal property will not qualify as "rents from real
property." Finally, for rents received to qualify as "rents from real property,"
Crown generally must not operate or manage the property or furnish or render
services to the tenants of such property, other than through an independent
contractor from whom Crown derives no revenue. Crown may, however, directly
perform certain services that are "usually or customarily rendered" in
connection with the rental of space for occupancy only and are not otherwise
considered "rendered to the occupant" of the property. Crown has not and will
not (i) charge rent for any property that is based in whole or in part on the
income or profits of any person (except by reason of being based on a percentage
of receipts or sales, as described above or unless the Board of Trustees
determines in its discretion that the rent received on such property is not
material and will not jeopardize Crown's status as a REIT), (ii) rent any
property to a Related Party Tenant (unless the Board of Trustees determines in
its discretion that the rent received from such Related Party Tenant is not
material and will not jeopardize Crown's status as a REIT) or (iii) directly
perform services considered to be rendered to the occupant of property.
The Operating Partnership provides certain services with respect to
Crown's properties that may not satisfy the "independent contractor"
requirements described above. Crown has obtained a ruling from the IRS that the
provision of such services will not cause the rents received with respect to
Crown's properties to fail to qualify as "rents from real property."
The term "interest" generally does not include any amount received or
accrued (directly or indirectly) if the determination of such amount depends in
whole or in part on the income or profits of any person. However, an amount
received or accrued generally will not be excluded from the term "interest"
solely by reason of being based on a fixed percentage or percentages of receipts
or sales.
Any gross income derived from a prohibited transaction is taken into
account in applying the 30% income test necessary to qualify as a REIT (and the
net income from the transaction is subject to a 100% tax). The term "prohibited
transaction" generally includes a sale or other disposition of property (other
than foreclosure property) that is held primarily for sale to customers in the
ordinary course of a trade or business. The Operating Partnership and Crown
believe that no asset owned by the Operating Partnership, Financing Partnership
or Crown is held for sale to customers and that the sale of any such property
and associated property will not be in the ordinary course of business of the
Operating Partnership, Financing Partnership or Crown. Whether property is held
"primarily for sale to customers in the ordinary course of a trade or business"
depends, however, on the facts and circumstances in effect from time to time,
including those related to a particular property. Complete assurance cannot be
given, however, that Crown can comply with the safe-harbor provisions of the
Code or avoid owning property that may be characterized as property held
"primarily for sale to customers in the ordinary course of business" with the
result that Crown may be subject to the 100% tax described above on income or
gain, if any, from such sales.
If Crown fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it may nevertheless qualify as a REIT for such
year if it is entitled to relief under certain provisions of the Code. These
relief provisions will be generally available if Crown's failure to meet such
tests was due to reasonable cause and not due to willful neglect, Crown attaches
a schedule of the sources of its income to its federal income tax return, and
any incorrect information on the schedule was not due to fraud with intent to
evade tax. It is not possible, however, to state whether in all circumstances
Crown would be entitled to the benefit of these relief provisions. As
discussed above in "Taxation of a REIT," even if these relief provisions apply,
a tax would be imposed with respect to the excess of 75% or 95% of Crown's gross
income over Crown's qualifying income in the relevant category, whichever is
greater.
Crown, at the close of each quarter of its taxable year, must also
satisfy three tests relating to the nature of its assets. First, at least 75% of
the value of Crown's total assets (including its allocable share of the assets
held by the Operating Partnership) must be represented by real estate assets
(including (i) its allocable share of real estate assets held by partnerships
in which Crown owns an interest and (ii) shares or debt instruments held for
not more than one year purchased with the proceeds of a share offering or long-
term (at least five years) debt offering of Crown), cash, cash items and
government securities. Second, not more than 25% of Crown's total assets may
be represented by securities other than those in the 75% asset class. Third, of
the investments included in the 25% asset class, the value of any one issuer's
securities owned by Crown may not exceed 5% of the value of Crown's total
assets and Crown may not own more than 10% of any one issuer's outstanding
voting securities.
As set forth above, the ownership of more than 10% of the voting
securities of any one issuer by a real estate investment trust is prohibited by
the asset tests. However, if Crown's subsidiaries are "qualified real estate
investment trust subsidiaries" as defined in the Code, such subsidiaries will
not be treated as separate corporations for federal income tax purposes. Thus,
Crown's ownership of the shares of a "qualified real estate investment trust
subsidiary" will not cause Crown to fail the asset tests.
Crown, in order to qualify as a REIT, is required to distribute
dividends (other than capital gain dividends) to its shareholders in an amount
at least equal to (A) the sum of (i) 95% of Crown's "REIT taxable income"
(computed without regard to the dividends paid deduction and Crown's net
capital gain) and (ii) 95% of the net income (after tax), if any, from
foreclosure property, minus (B) the sum of certain items of noncash income. In
addition, if Crown disposes of any Built-In Gain Asset during its Recognition
Period, Crown will be required, pursuant to IRS regulations which have not yet
been promulgated, to distribute at least 95% of the Built-In Gain (after tax),
if any, recognized on the disposition of such asset. Such distributions
must be paid in the taxable year to which they relate, or in the following
taxable year if declared before Crown timely files its tax return for such year
and if paid on or before the first regular dividend payment after such
declaration. To the extent that Crown does not distribute all of its net
capital gain or distributes at least 95%, but less than 100%, of its "REIT
taxable income," as adjusted, it will be subject to tax thereon at regular
ordinary and capital gain corporate tax rates. Crown believes it has made and
intends to make timely distributions sufficient to satisfy these annual
distribution requirements.
It is possible that, from time to time, Crown may experience timing
differences between (i) the actual receipt of income and actual payment of
deductible expenses and (ii) the inclusion of that income and deduction of such
expenses in arriving at Crown taxable income. Further, it is possible that,
from time to time, Crown may be allocated a share of net capital gain
attributable to the sale of depreciated property which exceeds its allocable
share of cash attributable to that sale. As such, Crown may have less cash
available for distribution than is necessary to meet its annual 95% distribution
requirement or to avoid tax with respect to capital gain or the excise tax
imposed on certain undistributed income. To meet the 95% distribution
requirement necessary to qualify as a real estate investment trust or to avoid
tax with respect to capital gain or the excise tax imposed on certain
undistributed income, Crown may find it appropriate to arrange for short-term
(or possibly long-term) borrowings or to pay distributions in the form of
taxable share dividends. Any such borrowings for the purpose of making
distributions to shareholders are required to be arranged through the Operating
Partnership.
Under certain circumstances, Crown may be able to rectify a failure to
meet the distribution requirement for a year by paying "deficiency dividends" to
shareholders in a later year, which may be included in Crown's deduction for
dividends paid for the earlier year. Thus, Crown may be able to avoid being
taxed on amounts distributed as deficiency dividends; however, Crown will be
required to pay interest based upon the amount of any deduction taken for
deficiency dividends.
Crown's taxable income (before the dividends paid deduction), however,
for the years ended December 31, 1996, 1995 and 1994 was approximately $3.6
million, $2.8 million and $7.4 million, respectively. These amounts differ
significantly from net income (loss) as reported in Crown's consolidated
financial statements for the same periods. Primarily due to this difference and
to the availability in 1996 of $16.5 million excess distributions carry forward,
which arose in prior years, Crown was not required to make any distributions in
1996 in order to satisfy the dividend distribution test required to maintain its
REIT status for that year. In 1996 Crown continued to follow its practice of
paying regular quarterly dividends to its shareholders in the amount of $.20 per
share. Crown estimates it will have approximately $22.5 million in excess
dividend distribution carry forwards at December 31, 1996, which can be used to
satisfy the dividend distribution test in 1997 or subsequent years.
Pursuant to applicable Treasury Regulations, in order to be able to
elect to be taxed as a real estate investment trust, Crown must maintain certain
records and request certain information from its shareholders designed to
disclose the actual ownership of its shares. Crown intends to comply with such
requirements.
Failure To Qualify
If Crown fails to qualify for taxation as a REIT in any taxable
year, and the relief provisions do not apply, Crown will be subject to tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Distributions to shareholders in any year in which
Crown fails to qualify will not be deductible by Crown nor will they be
required to be made. As a result, Crown's failure to qualify as a REIT would
reduce the cash available for distribution by Crown to its shareholders. In
addition, if Crown fails to qualify as a REIT, all distributions to
shareholders will be taxable as ordinary income, to the extent of Crown's
current and accumulated earnings and profits, and, subject to certain
limitations of the Code, corporate distributees may be eligible for the
dividends received deduction. Unless entitled to relief under specific statutory
provisions, Crown will also be disqualified from taxation as a REIT for the
four taxable years following the year during which qualification was lost. It
is not possible to state whether in all circumstances Crown would be entitled
to such statutory relief.
Taxation of Taxable Domestic Shareholders
As long as Crown qualifies as a real estate investment trust, distributions
made to Crown's taxable U.S. shareholders out of current or accumulated earnings
and profits (and not designated as capital gain dividends) will be taken into
account by such U.S. shareholders as ordinary income and will not be eligible
for the dividends received deduction for corporations. Distributions that are
designated as capital gain dividends will be taxed as long-term capital gains
(to the extent they do not exceed Crown's actual net capital gain for the
taxable year) without regard to the period for which the shareholder has held
its shares. However, corporate shareholders may be required to treat up to 20%
of certain capital gain dividends as ordinary income. Distributions in excess
of current and accumulated earnings and profits will not be currently taxable to
a shareholder to the extent that they do not exceed the adjusted basis of the
shareholder's shares, but rather will reduce the adjusted basis of such shares.
To the extent that distributions in excess of current and accumulated earnings
and profits exceed the adjusted basis of a shareholders shares, such
distributions will be included in income as long-term capital gain (or short-
term capital gain if the shares have been held for one year or less) assuming
the shares are a capital asset in the hands of the shareholder. In addition,
any distribution declared by Crown in October, November or December of any year
payable to a shareholder of record on a specified date in any such month shall
be treated as both paid by Crown and received by the shareholder on December 31
of such year, provided that the distribution is actually paid by Crown during
January of the following calendar year. Shareholders may not include in their
individual income tax returns any net operating losses or capital losses of
Crown.
In general, any loss upon a sale or exchange of shares by a shareholder who
has held such shares for six months or less (after applying certain holding
period rules), will be treated as a long-term capital loss to the extent of
distributions from Crown required to be treated by such shareholder as long-term
capital gain.
Backup Withholding
Crown will report to its U.S. shareholders and the IRS the amount of
distributions paid during each calendar year, and the amount of tax withheld, if
any. Under the backup withholding rules, a shareholder may be subject to backup
withholding at the rate of 31% with respect to distributions paid unless such
holder (a) is a corporation or comes within certain other exempt categories and,
when required, demonstrates this fact, or (b) provides a taxpayer identification
number, certifies as to no loss of exemption from backup withholding, and
otherwise complies with applicable requirements of the backup withholding rules.
A shareholder that does not provide Crown with his correct taxpayer
identification number may also be subject to penalties imposed by the IRS. Any
amount paid as backup withholding will be creditable against the shareholder's
income tax liability. In addition, Crown may be required to withhold a portion
of capital gain distributions to any shareholders who fail to certify their
nonforeign status to Crown. See "Taxation of Foreign Shareholders."
Taxation of Tax-Exempt Shareholders
In general, a shareholder that is a tax-exempt entity not subject to
tax on its investment income will not be subject to tax on distributions from
Crown. In Revenue Ruling 66-106, 1966-1 C.B. 151, the IRS ruled that amounts
distributed as dividends by a REIT do not constitute "unrelated business taxable
income" as defined in the Code ("UBTI") when received by a qualified plan.
Based on that ruling, regardless whether Crown incurs indebtedness in connection
with the acquisition of properties, distributions paid by Crown to a shareholder
that is a tax-exempt entity will not be treated as UBTI, provided that (i) the
tax-exempt entity has not financed the acquisition of its shares with
"acquisition indebtedness" within the meaning of the Code and the shares
otherwise are not used in an unrelated trade or business of the tax-exempt
entity and (ii) Crown is not a pension-held REIT. This applies to a shareholder
that is an organization that qualifies under Code Section 401(a), an IRA or any
other tax-exempt organization that would compute UBTI, if any, in accordance
with Code Section 512(a)(1). However, if Crown is a pension-held REIT and a
qualified plan owns more than 10 percent of Crown, such shareholder will be
required to recognize as UBTI that percentage of the dividends that it receives
from Crown as is equal to the percentage of Crown's gross income that would be
UBTI to Crown if Crown were a tax-exempt entity required to recognize UBTI. A
REIT is a pension-held REIT if at least one qualified trust holds more than 25
percent of the value of Crown's shares or one or more qualified trusts, each of
whom own more than 10 percent of Crown's shares, hold more than 50 percent of
the value of Crown's shares. A tax-exempt shareholder also should be aware that
Congress currently is examining the taxation of investment income received by
tax-exempt entities including the treatment of income received by such entities
from REITs and other pass-through entities and is considering whether to treat
income derived from a REIT as UBTI to the extent that Crown has incurred debt to
acquire its assets. The Congressional committee conducting this examination has
not yet concluded its study.
For social clubs, voluntary employee benefit associations,
supplemental unemployment benefit trusts and qualified group legal services
plans exempt from Federal income taxation under Code Sections 501(c)(7), (c)(9),
(c)(17) and (c)(20), respectively, income from an investment in Crown will
constitute UBTI unless the organization is able to deduct amounts set aside or
placed in reserve for certain purposes so as to offset the UBTI generated by its
investment in Crown. Such prospective shareholders should consult their own tax
advisors concerning these "set aside" and reserve requirements.
Taxation of Foreign Shareholders
The rules governing United States federal income taxation of nonresident
alien individuals, foreign corporations, foreign partnerships and other foreign
shareholders (collectively, "Non-U.S. Shareholders") are complex and no attempt
will be made herein to provide more than a summary of such rules. Prospective
Non-U.S. Shareholders should consult with their own tax advisors to determine
the impact of federal, state and local income tax laws with regard to an
investment in shares, including any reporting requirements.
Distributions that are not attributable to gain from sales or exchanges by
Crown of United States real property interests and not designated by Crown as
capital gains dividends will be treated as dividends of ordinary income to the
extent that they are made out of current or accumulated earnings and profits of
Crown. Such distributions will ordinarily be subject to a withholding tax equal
to 30% of the gross amount of the distribution unless an applicable tax treaty
reduces or eliminates that tax. However, if income from the investment in the
shares is treated as effectively connected with the Non-U.S. Shareholder's
conduct of a United States trade or business, the Non-U.S. Shareholder generally
will be subject to a tax at graduated rates, in the same manner as U.S.
shareholders are taxed with respect to such distributions (and may also be
subject to the 30% branch profits tax in the case of a shareholder that is a
foreign corporation). Crown expects to withhold United States income tax at the
rate of 30% on the gross amount of any such distributions made to a Non-U.S.
Shareholder unless (i) a lower treaty rate applies or (ii) the Non-U.S.
Shareholder files an IRS Form 4224 with Crown claiming that the distribution is
effectively connected income. Distributions in excess of current and
accumulated earnings and profits of Crown will not be taxable to a shareholder
to the extent that such distributions do not exceed the adjusted basis of the
shareholders shares, but rather will reduce the adjusted basis of such shares.
To the extent that distributions in excess of current accumulated earnings and
profits exceed the adjusted basis of a Non-U.S. Shareholder's shares, such
distributions will give rise to tax liability if the Non-U.S. Shareholder would
otherwise be subject to tax on any gain from the sale or disposition of his
shares in Crown, as described below. If it cannot be determined at the time a
distribution is made whether or not such distribution will be in excess of
current and accumulated earnings and profit, the distributions will be subject
to withholding at the same rate as dividends. However, amounts thus withheld
are refundable if it is subsequently determined that such distribution was, in
fact, in excess of current and accumulated earnings and profits of Crown.
For any year in which Crown qualifies as a real estate investment trust,
distributions that are attributable to gain from sales or exchanges by Crown of
United States real property interests will be taxed to a Non-U.S. Shareholder
under the provisions of the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). Under FIRPTA, distributions attributable to gain from sales of
United States real property interests are taxed to a Non-U.S. Shareholder as if
such gain were effectively connected with a United States business. Non-U.S.
Shareholders would thus be taxed at the normal capital gain rates applicable to
U.S. shareholders (subject to applicable alternative minimum tax and a special
alternative minimum tax in the case of nonresident alien individuals). Also,
distributions subject to FIRPTA may be subject to a 30% branch profits tax in
the hands of a foreign corporate shareholder not entitled to treaty exemption.
Crown is required by applicable Treasury Regulations to withhold 34% of any
distribution that could be designated by Crown as a capital gains dividend.
This amount is creditable against the Non-U.S. Shareholder FIRPTA tax liability.
If Crown designates prior distributions as capital gains dividends, then
subsequent distributions up to the amount of such prior distributions will be
treated as capital gains dividends for purposes of withholding.
Gain recognized by a Non-U.S. Shareholder upon a sale of shares generally
will not be taxed under FIRPTA if Crown is a "domestically controlled real
estate investment trust," defined generally as a real estate investment trust in
which at all times during a specified testing period less than 50% in value of
the shares were held directly or indirectly by foreign persons. It is currently
anticipated that Crown will be a "domestically controlled real estate investment
trust," and therefore the sale of shares will not be subject to taxation under
FIRPTA. However, gain not subject to FIRPTA will be taxable to a Non-U.S.
Shareholder if (i) investment in the shares is effectively connected with the
Non-U.S. Shareholder's United States trade or business, in which case the Non-
U.S. Shareholder will be subject to the same treatment as U.S. shareholders with
respect to such gain, or (ii) the Non-U.S. Shareholder is a nonresident alien
individual who was present in the United States for 183 days or more during the
taxable year and has a "tax home" in the United States, in which case the
nonresident alien individual will be subject to a 30% tax on the individual's
capital gains. If the gain on the sale of shares were to be subject to taxation
under FIRPTA, the Non-U.S. Shareholder will be subject to the same treatment as
U.S. shareholders with respect to such gain (subject to applicable alternative
minimum tax and a special alternative minimum tax in the case of nonresident
alien individuals).
If the proceeds of a disposition of Shares are paid by or through a United
States office of a broker, the payment is subject to information reporting and
to backup withholding unless the disposing non-U.S. shareholder certifies as to
his name, address and non-United States status or otherwise establishes an
exemption. Generally, United States information reporting and backup
withholding will not apply to a payment of disposition proceeds if the payment
is made outside the United States through a non-United States office of a non-
United States broker. United States information reporting requirements (but not
backup withholding) will apply, however, to a payment of disposition proceeds
outside the United States if (i) the payment is made through an office outside
the United States of a broker that is either (a) a United States person, (b) a
foreign person that derives 50% or more of its gross income for certain periods
from the conduct of a trade or business in the United States or (c) a
"controlled foreign corporation" for United States federal income tax purposes,
and (ii) the broker fails to initiate documentary evidence that the shareholder
is a non-U.S. shareholder and that certain conditions are met or that the non-
U.S. shareholder otherwise is entitled to an exemption.
Other Tax Consequences
Crown and its shareholders may be subject to state or local taxation in
various state or local jurisdictions, including those in which it or they
transact business or reside. The state and local tax treatment of Crown and its
shareholders may not conform to the federal income tax consequences discussed
above. Consequently, prospective shareholders should consult their own tax
advisors regarding the effect of state and local tax laws on an investment in
Crown.
Tax Aspects of the Operating Partnership
The following discussion summarizes certain federal income tax
considerations applicable solely to Crown's investment in the Operating
Partnership and represents the view of Reed Smith Shaw & McClay. The discussion
does not cover state or local tax laws or any federal tax laws other than income
tax laws.
Classification as a Partnership
Crown is entitled to include in its income its distributive share of
the Operating Partnership's income and to deduct its distributive share of the
Operating Partnership's losses only if the Operating Partnership is classified
for federal income tax purposes as a partnership rather than as an association
taxable as a corporation.
For taxable periods prior to January 1, 1997, an organization formed
as a partnership was treated as a partnership rather than as a corporation for
federal income tax purposes only if it possessed no more than two of the four
corporate characteristics that the Treasury Regulations used to distinguish a
partnership from a corporation. These four characteristics were continuity of
life, centralization of management, limited liability, and free transferability
of interests. Although neither the Operating Partnership nor the Financing
Partnership requested a ruling from the IRS that they would be classified as
partnerships for Federal income tax purposes, rather than as associations
taxable as corporations, at the time of their organization, the partnerships
received an opinion of counsel that based on the provisions of the respective
partnership agreements of the Operating Partnership and the Financing
Partnership, and certain factual assumptions and representations as to each of
them, the Operating Partnership and the Financing Partnership would be treated
as partnerships for federal income tax purposes and not as associations taxable
as corporations. Effective January 1, 1997, newly promulgated Treasury
Regulations (the "Regulations") eliminated the four-factor test described above
and, instead, permit partnerships and other non-corporate entities to be taxed
as partnerships for federal income tax purposes without regard to the number of
corporate characteristics possessed by such entity. Under those Regulations,
both the Operating Partnership and the Financing Partnership will be classified
as partnerships for federal income tax purposes unless an affirmative election
is made by the entity to be taxed as a corporation. Crown has represented that
no such election has been made, or is anticipated to be made, on behalf of the
Operating Partnership or the Financing Partnership. Under a special
transitional rule in the Regulations, the IRS will not challenge the
classification of an existing entity such as the Operating Partnership or the
Financing Partnership for periods prior to January 1, 1997 if: (i) the entity
has a "reasonable basis" for its classification; (ii) the entity and each of its
members recognized the federal income tax consequences of any change in
classification of the entity made within the 60 months prior to January 1, 1997;
and (iii) neither the entity nor any of its members had been notified in writing
on or before May 8, 1996 that its classification was under examination by the
IRS. Neither the Operating Partnership nor the Financing Partnership changed
their classification within the 60-month period preceding May 8, 1996, nor was
either of them notified that its classification as a partnership for federal
income tax purposes was under examination by the IRS. Therefore, in reliance
upon the assumption that the Operating Partnership and the Financing Partnership
were properly classified as partnerships, the classification of the Operating
Partnership and the Financing Partnership should not be subject to challenge for
any period prior to January 1, 1997.
If for any reason the Operating Partnership or the Financing Partnership
was taxable as a corporation rather than as a partnership for federal income tax
purposes, Crown would not be able to satisfy the income and asset requirements
for real estate investment trust status. In addition, any change in the status
of the Operating Partnership or the Financing Partnership for tax purposes might
be treated as a taxable event, in which case Crown might incur a tax liability
without any related cash distribution. Further, items of income and deduction
of the Operating Partnership or the Financing Partnership would not pass through
to its partners, and its partners would be treated as shareholders for tax
purposes. The Operating Partnership or the Financing Partnership would be
required to pay income tax at corporate tax rates on its net income, and
distributions to its partners would constitute dividends that would not be
deductible in computing the Operating Partnership's taxable income.
Income Taxation of the Operating Partnership and Its Partners:
Partners, Not the Operating Partnership, Subject to Tax. A partnership is
not a taxable entity for federal income tax purposes. Rather, Crown will be
required to take into account its allocable share of the Operating Partnership's
income, gains, losses, deductions, and credits for any taxable year of the
Operating Partnership ending within or with the taxable year of Crown, without
regard to whether Crown has received or will receive any distribution from the
Operating Partnership.
Operating Partnership Allocations. Although a partnership agreement will
generally determine the allocation of income and losses among partners, such
allocations will be disregarded for tax purposes under Section 704(b) of the
Code if they do not comply with the provisions of Section 704(b) of the Code and
the Treasury Regulations promulgated thereunder.
If an allocation is not recognized for federal income tax purposes, the
item subject to the allocation will be reallocated in accordance with the
partners' interests in the partnership, which will be determined by taking into
account all of the facts and circumstances relating to the economic arrangement
of the partners with respect to such item. The Operating Partnership's
allocations of taxable income and loss are intended to comply with the
requirements of Section 704(b) of the Code and the Treasury Regulations
promulgated thereunder.
Tax Allocations With Respect to Contributed Properties. Pursuant to
Section 704(c) of the Code, income, gain, loss, and deduction attributable to
appreciated or depreciated property that is contributed to a partnership in
exchange for an interest in the partnership must be allocated for federal income
tax purposes in a manner such that the contributor is charged with, or benefits
from, the unrealized gain or unrealized loss associated with the property at the
time of the contribution. The amount of such unrealized gain or unrealized loss
is generally equal to the difference between the fair market value of the
contributed property at the time of contribution and the adjusted tax basis of
such property at the time of contribution. The Partnership Agreement requires
allocations of income, gain, loss, and deduction attributable to such
contributed property to be made in a manner that is consistent with Section
704(c) of the Code. The Treasury Department recently proposed regulations (the
"Section 704(c) Regulations") requiring partnerships to use a "reasonable
method" for allocating items affected by Section 704(c) of the Code and
outlining three reasonable allocation methods. The application of Section
704(c) to the Operating Partnership and the Financing Partnership is not
entirely clear and may be affected by Treasury Regulations which may be
promulgated in the future.
Basis in Operating Partnership Interest. Crown's adjusted tax basis in its
partnership interest in the Operating Partnership generally (i) will be equal to
the amount of cash and the basis of any other property contributed to the
Operating Partnership by Crown, (ii) will be increased by (a) its allocable
share of the Operating Partnership's income and (b) its allocable share of
indebtedness of the Operating Partnership and the Financing Partnership and
(iii) will be reduced, but not below zero, by Crown's allocable share of (a) the
Operating Partnership's loss and (b) the amount of cash distributed to Crown,
and by constructive distributions resulting from a reduction in Crown's share of
indebtedness of the Operating Partnership and the Financing Partnership.
If the allocation of Crown's distributive share of the Operating
Partnership's loss would reduce the adjusted tax basis of Crown's partnership
interest in the Operating Partnership below zero, the recognition of such loss
will be deferred until such time as the recognition of such loss would not
reduce Crown's adjusted tax basis below zero. To the extent that the Operating
Partnership's distributions, or any decrease in Crown's share of the nonrecourse
indebtedness of the Operating Partnership (such decrease being considered a
constructive cash distribution to the partners), would reduce Crown's adjusted
tax basis below zero, such distributions (including such constructive
distributions) constitute taxable income to Crown. Such distributions and
constructive distributions will normally be characterized as a capital gain, and
if Crown's partnership interest in the Operating Partnership has been held for
longer than the long-term capital gain holding period (currently one year), the
distributions and constructive distributions will constitute long-term capital
gains.
Depreciation Deductions Available to the Operating Partnership and the
Financing Partnership.
The Operating Partnership and the Financing Partnership were formed in 1993
principally by way of contributions of property interests. Crown, the Operating
Partnership and the Financing Partnership, as applicable, compute depreciation
for federal income tax purposes using the historic depreciation schedules
pursuant to which each Property (except for Oak Ridge Mall, Shenango Valley
Mall, Middletown Mall and Wyoming Valley Mall) was depreciated using various
methods of depreciation that were determined at the time each Property was
placed in service. With respect to Oak Ridge Mall, Shenango Valley Mall,
Middletown Mall and Wyoming Valley Mall, the Operating Partnership computes
depreciation for federal income tax purposes using the alternative cost recovery
system method based on useful lives of 40 years for buildings and improvements
and 7 years for equipment and fixtures, and for accounting purposes using the
straight-line method based on useful lives of 40 years for buildings and
improvements and 7 years for equipment and fixtures.
Section 704 (c) of the Code may affect allocations of depreciation and gain
or loss on all of the Properties contributed to the Operating Partnership or the
Financing Partnership.
Sale of the Operating Partnership's Property
Generally, any gain realized by the Operating Partnership or the Financing
Partnership on the sale of property held by the Operating Partnership or the
Financing Partnership for more than one year will be long-term capital gain,
except for any portion of such gain that is treated as depreciation or cost
recovery recapture. Any unrealized gain attributable to the excess of the fair
market value of the shopping center interests over their adjusted tax bases at
the time of contribution to the Operating Partnership ("Pre-Contribution Gain")
must, when recognized by the Operating Partnership, be allocated to Crown
Investments under Section 704(c) of the Code and Treasury Regulations
promulgated thereunder. As noted above, in connection with the contribution of
the interests in the Properties with respect to which there is Pre-Contribution
Gain, the Operating Partnership will allocate to Crown depreciation which is
disproportionately greater than Crown's ownership in the Operating Partnership.
As a result of the foregoing, in the event of the disposition of any of
Crown's properties which have Pre-Contribution Gain, all income attributable to
such Pre-Contribution Gain will be allocated to Crown Investments, and Crown
will be allocated only its share of capital gains attributable to appreciation,
if any, occurring after the closing of the offerings and gain in an amount no
greater than the amount in which Crown has been allocated depreciation
deductions from the Operating Partnership disproportionately greater than
Crown's percentage interest in the Operating Partnership pursuant to Section
704(c) of the Code. The decision relating to the potential sale of any such
property will be made by the independent Trustees of Crown if the sale would
result in a disproportionately higher taxable income for Crown Investments than
for Crown (after taking into account Crown Investments' use of its then
available losses or loss carry forwards).
Crown's share of any gain realized on the sale of any property held by the
Operating Partnership, the Financing Partnership or Crown as inventory or other
property held primarily for sale to customers in the ordinary course of Crown's
Operating Partnership's or the Financing Partnership's trade or business will
however, be treated as income from a prohibited transaction that is subject to a
100% penalty tax. Such prohibited transaction income will also have an adverse
effect upon Crown's ability to satisfy the income tests for real estate
investment trust status. Under existing law, whether property is held as
inventory or primarily for sale to customers in the ordinary course of Crown's,
the Operating Partnership's or the Financing Partnership's trade or business is
a question of fact that depends on all the facts and circumstances with respect
to the particular transaction. Crown, the Operating Partnership and the
Financing Partnership intend to hold their properties for investment with a view
to long-term appreciation, to engage in the business of acquiring, developing,
owning, and operating their properties (and other shopping centers) and to make
such occasional sales of properties, including peripheral land, as are
consistent with the investment objectives of Crown, the Operating Partnership
and the Financing Partnership.
PLAN OF DISTRIBUTION
Crown may sell Securities through underwriters for public offer and
sale by them, and also may sell the Securities offered hereby to investors
directly or through agents. Any such underwriter or agent involved in the offer
and sale of the Securities will be named in the applicable Prospectus
Supplement.
Underwriters may offer and sell the Securities at a fixed price or
prices, which may be changed, at prices related to the prevailing market prices
at the time of sale or at negotiated prices. Crown also may, from time to time,
authorize underwriters acting as Crown's agents to offer and sell Securities
upon terms and conditions set forth in the applicable Prospectus Supplement. In
connection with the sale of the Securities, underwriters may be deemed to have
received compensation from Crown in the form of underwriting discounts or
commissions and may also receive commissions from purchasers of the Securities
for whom they may act as agent. Underwriters may sell Securities to or through
dealers, and such dealers may receive compensation in the form of discounts,
concessions or commissions from the underwriters and/or commissions from the
purchasers for whom they may act as agent.
Any underwriters or agents in connection with an offering of the
Securities, and any discounts, concessions or commissions allowed by
underwriters to participating dealers, will be set forth in the applicable
Prospectus Supplement. Underwriters, dealers and agents participating in the
distribution of the Securities may be deemed to be underwriters, and any
discounts and commissions received by them and any profit realized by them on
resale of the Securities may be deemed to be underwriting discounts and
commissions, under the Securities Act. Underwriters, dealers and agents may be
entitled, under agreements to be entered into with Crown, to indemnification
against and contribution toward certain civil liabilities, including liabilities
under the Securities Act.
If so indicated in the applicable Prospectus Supplement, Crown will
authorize underwriters or other persons acting as Crown's agents to solicit
offers by certain institutions to purchase Securities from Crown at the public
offering price set forth in such Prospectus Supplement pursuant to delayed
delivery contracts providing for payment and delivery on the date or dates
stated in such Prospectus Supplement. Each delayed delivery contract will be
for an amount not less than, and the aggregate principal amount of Securities
sold pursuant to delayed delivery contracts shall be not less nor more than, the
respective amounts stated in the applicable Prospectus Supplement. Institutions
with whom delayed delivery contracts, when authorized, may be made include
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions, and other institutions but
will in all cases be subject to the approval of Crown. Delayed delivery
contracts will not be subject to any conditions except (i) the purchase by an
institution of the Securities covered by its delayed delivery contracts shall
not at the time of delivery be prohibited under the laws of any jurisdiction in
the United States to which such institution is subject, and (ii) if the
Securities are being sold to underwriters, Crown shall have sold to such
underwriters the total principal amount of the Securities less the principal
amount thereof covered by delayed delivery contracts.
EXPERTS
The consolidated financial statements and schedules of Crown American
Realty Trust incorporated by reference from the Annual Report on Form 10-K for
the year ended December 31, 1996, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report, with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing, in giving said reports.
LEGAL MATTERS
Certain legal matters will be passed upon for Crown by Reed Smith Shaw
& McClay, Pittsburgh, Pennsylvania.
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
TABLE OF CONTENTS
PRELIMINARY PROSPECTUS
AVAILABLE INFORMATION
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
CROWN
USE OF PROCEEDS
RATIO OF EARNINGS TO FIXED CHARGES
DESCRIPTION OF SHARES
CERTAIN PROVISIONS OF MARYLAND LAW AND CROWN'S DECLARATION OF TRUST AND
BYLAWS
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS TO CROWN OF ITS REIT ELECTION
PLAN OF DISTRIBUTION
EXPERTS
LEGAL MATTERS
CROWN AMERICAN REALTY TRUST
PROSPECTUS
MAY 12, 1997
Part II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below is an estimate of the amount of fees and expenses to be incurred
in connection with the issuance and distribution of the Securities registered
hereby:
SEC Registration Fee $90,909
NASD Filing Fee *
Printing and Mailing Costs *
Legal Fees and Expenses *
Accounting Fees and Expenses *
Blue Sky Fees and Expenses
(including Fees of Counsel) *
Transfer Agent and Registrar Fees *
Miscellaneous *
Total *
* To be completed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Crown's Declaration of Trust provides that the liability of the Trustees
and officers of Crown for money damages shall be eliminated to the maximum
extent permitted by Maryland law. Under current Maryland law respecting real
estate investment trusts, the Trustees of Crown are liable to Crown or the
shareholders for acts or omissions that constitute bad faith, willful
misfeasance, gross negligence or reckless disregard of their duties. Maryland
law permits a real estate investment trust formed in Maryland to limit, by
provision in its declaration of trust, the liability of Trustees and officers so
that no Trustee or officer of Crown shall be liable to Crown or any shareholder
for money damages except for the liability of a Trustee or officer resulting
from (i) acts or omissions involving active and deliberate dishonesty
established by a final judgment or (ii) actual receipt of an improper benefit or
profit in money, property or services. Crown's Declaration of Trust has
incorporated these statutory provisions.
Crown's Declaration of Trust requires it to indemnify (a) any Trustee,
officer or shareholder who has been successful, on the merits or otherwise, in
the defense of a proceeding to which he was made a party by reason of his
service in that capacity, against reasonable expenses incurred by him in
connection with the proceeding and (b) any present or former Trustee or officer
against any claim or liability unless it is established that (i) his act or
omission was committed in bad faith or was the result of active and deliberate
dishonesty, (ii) he actually received an improper personal benefit in money,
property or services or (iii) in the case of a criminal proceeding, he had
reasonable cause to believe that his act or omission was unlawful. In addition,
Crown's bylaws require it to pay or reimburse, in advance of final disposition
of a proceeding, reasonable expenses incurred by a present or former Trustee or
officer made a party to a proceeding by reason of his or her status as a Trustee
or officer, provided that Crown shall have received (i) a written affirmation by
the Trustee or officer of his or her good faith belief that he has met the
standard of conduct necessary for indemnification by Crown as authorized by the
bylaws and (ii) a written undertaking by or on his behalf to repay the amount
paid or reimbursed by Crown if it shall ultimately be determined that the
standard of conduct was not met. Crown's bylaws also (i) permit Crown to
provide indemnification and advance of expenses to a present or former Trustee
or officer who served a predecessor of Crown in such capacity, and to any
employee or agent of Crown or a predecessor of Crown, (ii) provide that any
indemnification or payment or reimbursement of the expenses permitted by the
Bylaws shall be furnished in accordance with the procedures provided for
indemnification and payment or reimbursement of expenses under Section 2-418 of
the Maryland General Corporation Law ("MGCL") for directors of Maryland
corporations and permit Crown to provide such other and further indemnification
or payment or reimbursement of expenses as may be permitted by the MGCL for
directors of Maryland corporations. Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to Trustees and
officers of Crown pursuant to the foregoing provisions or otherwise, Crown has
been advised that, although the validity and scope of the governing statute has
not been tested in court in the opinion of the SEC, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In addition, indemnification may be limited by state securities
laws.
ITEM 16. EXHIBITS
Item Description
1.1 Form of Underwriting Agreement for Equity Securities (1)
1.2 Form of Underwriting Agreement for Debt Securities (1)
3.1 Declaration of Trust (3)
3.2 Bylaws (3)
4.1 Form of Senior Indenture (1)
4.2 Form of Subordinated Indenture (1)
4.3 Form of Debt Security (1)
4.4 Form of Common Share Warrant Agreement (1)
4.5 Form of Articles Supplementary for the Preferred Shares (1)
4.6 Form of Preferred Share Certificate (1)
5 Opinion of Reed Smith Shaw & McClay as to validity of the
Securities (1)
8 Opinion of Reed Smith Shaw & McClay regarding tax matters (1)
12 Computation of Crown's Ratio of Earnings to Fixed Charges and
Preferred Shares Dividend (2)
23.1 Consent of Reed Smith Shaw & McClay (2)
23.2 Consent of Arthur Andersen LLP (2)
24 Powers of Attorney (included in signature page hereto) (2)
25 Statement of Eligibility of Trustee on Form T-1 (1)
(1) To be filed by amendment or incorporated by reference.
(2) Filed herewith.
(3) Filed as an Exhibit to Crown's Registration Statement on Form S-11,
effective as of August 9, 1993.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i)To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect
to the plan of distribution not previously disclosed in this
registration statement or any material change to such information in
this registration statement;
provided, however, that subparagraphs (i) and (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in the periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in this registration statement.
(2) That for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the Securities offered herein, and the
offering of such Securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the Securities being registered which remain unsold at the termination of
the offering.
The undersigned Registrant hereby further undertakes that, for the
purposes of determining any liability under the Securities Act of 1933, each
filing of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 that is incorporated by reference
in this registration statement shall be deemed to be a new registration
statement relating to the Securities offered herein, and the offering of such
Securities at that time shall be deemed to be the initial bona fide offering
thereof.
The undersigned Registrant hereby further undertakes to file an
application for the purpose of determining the eligibility of the Trustee to act
under subsection (a) of Section 310 of the Trust Indenture Act in accordance
with the rules and regulations prescribed by the Commission under Section
305(b)(2) of the Act.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions described under Item 15 of this
registration statement, or otherwise (other than insurance), the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in such Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the Securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in such Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3, and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Johnstown, Commonwealth
of Pennsylvania on May 12, 1997.
CROWN AMERICAN REALTY TRUST
By: /s/ Frank J. Pasquerilla
Frank J. Pasquerilla
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
Each person whose signature appears below hereby constitutes and appoints
John M. Kriak and Ronald R. Rusinak, and each of them, as 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 or post-effective amendments to
this Registration Statement, or any Registration Statement for the same offering
that is to be effective upon filing pursuant to Rule 462(b) under the Securities
Act of 1933, and to file the same, with exhibits thereto and other documents
in connection therewith or in connection with the registration of the
Securities under the Securities Exchange Act of 1934, as amended, 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 and agent or his substitutes may do
or cause to be done by virtue hereof.
SIGNATURE TITLE DATE
/s/ Frank J. Pasquerilla Chairman of the Board May 12, 1997
of Trustees and Chief
Frank J. Pasquerilla Executive Officer
/s/ Mark E. Pasquerilla President and Trustee May 12, 1997
Mark E. Pasquerilla
/s/ John M. Kriak Executive Vice May 12, 1997
President, Chief
John M. Kriak Financial Officer
(Principal Financial
Officer) and Trustee
/s/ Terry L. Stevens Senior Vice President- May 12, 1997
Finance and Chief
Terry L. Stevens Accounting Officer
* Trustee May 12, 1997
Clifford A. Barton
* Trustee May 12, 1997
Donald F. Mazziotti
* Trustee May 12, 1997
Margaret T. Monaco
* Trustee May 12,, 1997
Zachary L. Solomon
*By: /s/ John M. Kriak
John M. Kriak
as Attorney-in-Fact
EXHIBIT 12
CROWN AMERICAN REALTY TRUST
Ratio of Earnings to Fixed Charges
August Pro-Forma (2) -
17 Twelve
Quarter to Months ended
Ended Years Ended December December January
March 31, December 31, 31, 31, 31,
1997 1996 1995 1994 1993 1993 1993
(3) (1)
Income (loss) before
extraordinary
items and minority $(1,703) $ 8,504 $(26,645) $19,049 $ 7,203 $10,707 $ 9,457
interest
Add:
Interest on 10,511 41,480 39,307 32,991 12,478 33,736 33,284
indebtedness
Amortization of debt 849 3,857 3,616 3,249 975 2,819 3,085
issuance costs
Estimated portion of 80 303 324 377 102 389 408
rental expense
representative of
the interest factor
Undistributed income (27) (275) (24) (72) (75) (22) 66
of 50% investee
accounted for under
the equity method
Total earnings 9,710 53,869 16,578 55,594 20,683 47,629 46,300
Fixed Charges:
Interest on 10,511 41,480 39,307 32,991 12,478 33,736 33,284
indebtedness
Capitalized interest 609 2,943 2,580 2,987 753 1,673 1,100
Amortization of debt 849 3,857 3,616 3,249 975 2,819 3,085
issuance costs
Estimated portion of 80 303 324 377 102 389 408
rental expense
representative of the
interest factor
Total fixed charges 12,049 48,583 45,827 39,604 14,308 38,617 37,877
Ratio of earnings n/a 1.11 n/a 1.40 1.45 1.23 1.22
available for fixed
charges to fixed
charges
Deficiency of $ 2,339 n/a $ 29,249 n/a n/a n/a n/a
earnings
Notes:
(1) Represents the period from the Company's formation on August 17, 1993 to
December 31, 1993.
(2) Pro-forma data represents the earnings and fixed charges of the Company
as if the formation of the Company had occurred on February 1,1992 and
January 1, 1993, respectively.
(3) Due to a $35.0 million adjustment to the carrying value of a property that
was being held for sale in 1995, the Company incurred a loss before
extraordinary items and minority interest for 1995. Had this non-cash
adjustment not been recorded, the Company's ratio of earnings to fixed
charges for 1995 would have been 1.13 to 1.00.
Exhibit 23.1
Consent of Reed Smith Shaw & McClay
We consent to the filing of our opinion as an exhibit to be filed by
amendment to the registration statement on Form S-3 of Crown American Realty
Trust ("Crown") and to the use of the name of our firm therein. In giving this
consent, we do not admit that we are within the category of persons whose
consent is required by Section 7 of the Securities Act of 1933 or the Rules and
Regulations of the Securities and Exchange Commission.
REED SMITH SHAW & McCLAY
Pittsburgh, PA
May 12, 1997
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated February 18, 1997, included in the Crown American
Realty Trust 1996 Form 10-K into this registration statement on Form S-3.
Arthur Andersen LLP
Washington D.C.,
May 9, 1997
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Clifford A. Barton, Trustee of Crown
American Realty Trust (the "Company") whose signature appears below constitutes
and appoints John M. Kriak and Ronald P. Rusinak, and each of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
revocation, for him and in his name, place and stead, in any and all capacities,
to sign the Company's Registration Statement on Form S-3, and to file same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact ang agent, or his substitute or substitutes, may lawfully do
or cause to be done by virtue thereof.
May 9, 1997 /s/ Clifford A. Barton
Date (Name) Clifford A. Barton
Title: Trustee
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Donald F. Mazziotti, Trustee of Crown
American Realty Trust (the "Company") whose signature appears below constitutes
and appoints John M. Kriak and Ronald P. Rusinak, and each of them, his true
and lawful attorney-in-fact and agent, with full power of substitution and
revocation, for him and in his name, place and stead, in any and all capacities,
to sign the Company's Registration Statement on Form S-3, and to file same,
with all exhibits thereto, and other documents in connection therewith, with the
Securties and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute or substitutes, may lawfully do
or cause to be done by virtue thereof.
May 8, 1997 /s/ Donald F. Mazziotti
Date (Name) Donald F. Mazziotti
Title: Trustee
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Margaret T. Monaco, Trustee of Crown
American Realty Trust (the "Company") whose signature appears below constitutes
and appoints John M. Kriak and Ronald P. Rusinak, and each of them, her true and
lawful attorney-in-fact and agent, with full power of substitution and
revocation, for her and in her name, place and stead, in any and all capacities,
to sign the Company's Regiatration Statement on Form S-3, and to file same,
with all exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorney-in-fact
and agent full power and authority to do and perform each and every act and
thing requisite and necessary to be done, as fully to all intents and purposes
as she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agent, or her substitute and substitutes, may
lawfully do or cause to be done by virtue thereof.
May 9, 1997 /s/ Margaret T. Monaco
Date Margaret T. Monaco
Title: Trustee
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Zachary L. Solomon, Trustee of Crown
American Realty Trust (the "Company") whose signature appears below constitutes
and appoints John M. Kriak and Ronald P. Rusinak, and each of them, his true and
lawful attorney-in fact and agent, with full power of substitution and
revocation, for him and in his name, place and stead, in any and all capacities,
to sign the Company's Registration Statement on Form S-3, and to file same,
with all exhibits thereto, and other documents in connection therewith, with
the Securities and Exhcange Commission, granting unto said attorney-in-fact
and agent full power and authority to do and perform each and every act and
thing requisite and necessary to be done, as fully to all intents and purposes
as he might or could do in person, hererby ratifying and confirming all that
said attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue thereof.
May 11, 1997 /s/ Zachary L. Solomon
Date (Name) Zachary L. Solomon
Title: Trustee
