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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 27, 1997
REGISTRATION NO.: 333-26967
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CROWN AMERICAN REALTY TRUST
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MARYLAND 25-1713733
(State or other jurisdiction (I.R.S. Employer
of Identification No.)
incorporation or organization)
</TABLE>
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.
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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.
[X]
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. [ ]
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.
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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 JUNE 27, 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.
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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.
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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.
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THE DATE OF THIS PROSPECTUS IS JUNE , 1997
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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
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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.
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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% (74.6% as of May 31, 1997) general partnership interest in Crown American
Properties, L.P. (the "Operating Partnership"), a partnership which was formed
just prior to consummation of the initial public 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 initial 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 $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 initial public 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
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.
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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") and (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").
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 31, 1997, 27,688,511 Common
Shares of Beneficial Interest were issued and outstanding.
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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.
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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
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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 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
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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 as a REIT 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 as a REIT 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 Preferred Shares and
the corresponding amounts payable on all shares of other classes or series of
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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
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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 "closely held rule"), 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,
certain percentages of Crown's gross income must be derived from particular
activities, and Crown must satisfy certain asset ownership and income
distribution tests. See "Certain 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 help prevent more than 50% of the beneficial interests of
Crown from being 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.
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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.
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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
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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.
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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
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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
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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
CROWN'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
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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.
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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 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
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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 Maryland General Corporation law
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
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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
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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 ending 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 dealing with REITs and their shareholders 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. No ruling will be sought from the Internal Revenue
Service ("IRS") with respect to any matter described herein.
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 will 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, diversity of share ownership and the various
qualification tests imposed under the Code discussed below, the results of which
will not be reviewed by such 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.
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If Crown continues to qualify 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 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,
assets and distributions. 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
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"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 (corresponding
to its capital interest in such partnership) 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, gain from the
sale or other disposition of shares or securities held for less than one year,
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."
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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
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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 $1.9 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.
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.
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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 shareholder's
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 ruling 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 (and would otherwise be treated as being
closely-held without looking through the pension funds to their beneficiaries).
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. Crown does not anticipate being a pension-held REIT.
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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 (and the holder provides IRS
Form 1001) 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 shareholder's 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 distributions 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 35% 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
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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
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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
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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 and the Shenango 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")
31
<PAGE> 33
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.
32
<PAGE> 34
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 reports, 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.
33
<PAGE> 35
======================================================
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
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................ 2
Incorporation of Certain Documents by
Reference.......................... 2
Crown................................ 4
Use of Proceeds...................... 5
Ratio of Earnings to Fixed Charges... 5
Description of Shares................ 5
Certain Provisions of Maryland Law
and Crown's Declaration of Trust
and Bylaws......................... 17
Certain Federal Income Tax
Considerations to Crown of its REIT
Election........................... 22
Plan of Distribution................. 32
Experts.............................. 33
Legal Matters........................ 33
</TABLE>
======================================================
======================================================
CROWN AMERICAN
REALTY TRUST
PROSPECTUS
JUNE , 1997
======================================================
<PAGE> 36
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:
<TABLE>
<S> <C>
SEC Registration Fee...................................................... $ 90,909
New York Stock Exchange Listing Fee....................................... 200,000
NASD Filing Fee........................................................... 12,000
Printing and Mailing Costs................................................ 75,000
Legal Fees and Expenses................................................... 100,000
Accounting Fees and Expenses.............................................. 50,000
Blue Sky Fees and Expenses (including Fees of Counsel).................... 15,000
Transfer Agent and Registrar Fees......................................... 15,000
Miscellaneous............................................................. 17,091
--------
Total..................................................................... $575,000
========
</TABLE>
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
II-1
<PAGE> 37
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
<TABLE>
<CAPTION>
ITEM DESCRIPTION
----- ------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement (1)
3.1 Declaration of Trust (2)
3.2 Bylaws (2)
4.1 Form of Indenture (3)
4.2 Form of Debt Security (3)
4.3 Form of Common Share Warrant Agreement (3)
4.4 Form of Articles Supplementary for the Preferred Shares (1)
4.5 Form of Preferred Share Certificate (3)
5 Opinion of Reed Smith Shaw & McClay as to validity of the Securities (3)
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 (3)
23.1 Consent of Reed Smith Shaw & McClay (included in Exhibit 5 above) (3)
23.2 Consent of Arthur Andersen LLP (1)
24 Powers of Attorney (1)
25 Statement of Eligibility of Trustee on Form T-1 (3)
</TABLE>
- ---------
(1) Filed herewith.
(2) Filed as an Exhibit to Crown's Registration Statement on Form S-11,
effective as of August 9, 1993.
(3) Previously filed.
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;
II-2
<PAGE> 38
(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.
II-3
<PAGE> 39
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 Amendment
No. 2 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Johnstown, Commonwealth
of Pennsylvania on June 27, 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 Amendment
No. 2 to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------------------- -------------------------------------- --------------
<S> <C> <C>
/s/ FRANK J. PASQUERILLA Chairman of the Board of Trustees and June 12, 1997
- -------------------------------------- Chief Executive Officer
Frank J. Pasquerilla
/s/ MARK E. PASQUERILLA President and Trustee June 12, 1997
- --------------------------------------
Mark E. Pasquerilla
/s/ JOHN M. KRIAK Executive Vice President, Chief June 12, 1997
- -------------------------------------- Financial Officer (Principal Financial
John M. Kriak Officer) and Trustee
/s/ TERRY L. STEVENS Senior Vice President-Finance and June 12, 1997
- -------------------------------------- Chief Accounting Officer
Terry L. Stevens
* Trustee June 12, 1997
- --------------------------------------
Clifford A. Barton
* Trustee June 12, 1997
- --------------------------------------
Donald F. Mazziotti
* Trustee June 12, 1997
- --------------------------------------
Margaret T. Monaco
* Trustee June 12, 1997
- --------------------------------------
Zachary L. Solomon
</TABLE>
*By: /s/ JOHN M. KRIAK
----------------------------
John M. Kriak
Attorney-in-fact
II-4
<PAGE> 40
EXHIBITS INDEX
<TABLE>
<CAPTION>
ITEM DESCRIPTION
----- ------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement (1)
3.1 Declaration of Trust (2)
3.2 Bylaws (2)
4.1 Form of Indenture (3)
4.2 Form of Debt Security (3)
4.3 Form of Common Share Warrant Agreement (3)
4.4 Form of Articles Supplementary for the Preferred Shares (1)
4.5 Form of Preferred Share Certificate (3)
5 Opinion of Reed Smith Shaw & McClay as to validity of the Securities (3)
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 (3)
23.1 Consent of Reed Smith Shaw & McClay (included in Exhibit 5 above) (3)
23.2 Consent of Arthur Andersen LLP (1)
24 Powers of Attorney (1)
25 Statement of Eligibility of Trustee on Form T-1 (3)
</TABLE>
- ---------
(1) Filed herewith.
(2) Filed as an Exhibit to Crown's Registration Statement on Form S-11,
effective as of August 9, 1993.
(3) Previously filed.
<PAGE> 1
EXHIBIT 1.1
CROWN AMERICAN REALTY TRUST
(A MARYLAND REAL ESTATE INVESTMENT TRUST)
__% SENIOR PREFERRED SHARES
($50.00 LIQUIDATION PREFERENCE)
UNDERWRITING AGREEMENT
___________, 1997
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
Potomac Tower
1001 19th Street North
Arlington, Virginia 22209-1710
Dear Sirs:
Crown American Realty Trust, a Maryland real estate investment trust
(the "Company"), Crown American Properties, L.P., a Delaware limited
partnership (the "Operating Partnership") and Crown American Financing
Partnership, a Delaware general partnership (the "Financing Partnership") each
confirms its agreement with Friedman, Billings, Ramsey & Co., Inc. (the
"Underwriter"), with respect to (i) the sale by the Company and the purchase by
the Underwriter of [2,500,000] ___% Senior Preferred Shares of Beneficial
Interest, par value $0.01 per share, of the Company ("Preferred Shares") and
(ii) the grant by the Company to the Underwriter of the option described in
Section 1(b) hereof to purchase all or any part of [375,000] additional shares
of Preferred Shares to cover over-allotments, if any. The [2,500,000] shares of
Preferred Shares (the "Initial Shares") to be purchased by the Underwriter and
all or any part of the [375,000] shares of Preferred Shares subject to the
option described in Section 1(b) hereof (the "Option Shares") are hereinafter
called, collectively, the "Shares".
The Company and the Operating Partnership understand that the
Underwriter proposes to make a public offering of the Shares as soon as the
Underwriter deems advisable after this Agreement has been executed and
delivered.
The Company has filed with the Securities and Exchange Commission (the
"Commission"), a registration statement on Form S-3 (No. 333-26967) for the
registration of the Shares under the Securities Act of 1933, as amended (the
"Securities Act"), and the offering thereof from time to time in accordance
with Rule 430 A and 415 of the rules and regulations thereunder (the
"Securities Act Regulations") and the Company has filed such amendments thereto
as has been necessary to provide for the sale of the Shares pursuant to this
Agreement. The registration statement (as amended) has been declared effective
under the Securities Act by
-1-
<PAGE> 2
the Commission. Such registration statement and the prospectus constituting a
part thereof (including all information deemed to be a part of the registration
statement at the time it became effective pursuant to Rule 430A(b) of the
Securities Act Regulations and each prospectus supplement relating to the
offering of the Shares pursuant to Rule 430A or 415 of the Securities Act
Regulations (a "Prospectus Supplement"), including all documents incorporated
therein by reference as from time to time amended or supplemented pursuant to
the Securities Act, the Securities Exchange Act of 1934, as amended (the
"Exchange Act") or otherwise is hereinafter called the "Registration Statement"
and the "Prospectus", respectively; provided, that if any revised Prospectus
shall be provided to you by the Company for use in connection with the offering
of Shares which differs from the Prospectus on file at the Commission at the
time the Registration Statement became effective whether or not such revised
prospectus is required to be filed by the Company pursuant to Rule 424(b) of
the Securities Act Regulations), the term "Prospectus" shall refer to each such
revised prospectus from and after the time it is first provided to you for such
use; provided, further, that a Prospectus Supplement shall be deemed to have
supplemented the Prospectus only with respect to the offering of Shares. Any
registration statement (including any supplement thereto or information which
is deemed part thereof) filed by the Company under Rule 462(b) of the
Securities Act Regulations (a "Rule 462(b) Registration Statement") shall be
deemed to be part of the Registration Statement. Any prospectus (including any
amendment or supplement thereto or information which is deemed part thereof)
included in the Rule 462(b) Registration Statement and any term sheet as
contemplated by Rule 434 of the Securities Act Regulations (a "Term Sheet")
shall be deemed to be part of the Prospectus. All references in this agreement
to financial statements and schedules and other information which is
"contained," "included," "set forth," "contemplated" or stated" in the
Registration Statement or the Prospectus (and all other references of like
import) shall be deemed to mean and include all such financial statements and
schedules and other information which is or is deemed to be incorporated by
reference in the Registration Statement or the Prospectus, as the case may be;
and all references in this Agreement to amendments or supplements to the
Registration Statement or the Prospectus shall be deemed to mean and include
the filing of any document under the Exchange Act which is or is deemed to be
incorporated by reference in the Registration Statement or the Prospectus, as
the case may be. For purposes of this Agreement, all references to the
Registration Statement, any preliminary prospectus, preliminary prospectus
supplement, Prospectus or Prospectus Supplement or any Term Sheet or any
amendment or supplement to the foregoing shall be deemed to include the copy
filed with the Commission pursuant to its Electronic Data Gathering, Analysis
and Retrieval system ("EDGAR"). The Commission has not issued any order
preventing or suspending the use of any Preliminary Prospectus.
The Company, the Operating Partnership and the Underwriter agree as
follows:
1. Sale and Purchase:
a. Initial Shares. Upon the basis of the warranties and
representations and other terms and conditions herein set forth, the Company
agrees to sell to the Underwriter and the Underwriter agrees to purchase from
the Company the Initial Shares at the purchase price per share of $________.
-2-
<PAGE> 3
b. Option Shares. In addition, upon the basis of the
warranties and representations and other terms and conditions herein set forth,
the Company hereby grants an option to the Underwriter to purchase from the
Company an amount up to the amount of the Option Shares at the purchase price
per share set forth in paragraph (a) above. The option hereby granted will
expire 30 days after the date hereof and may be exercised in whole or in part
from time to time only for the purpose of covering over-allotments which may be
made in connection with the offering and distribution of the Initial Shares
upon notice by the Underwriter to the Company setting forth the number of
Option Shares as to which the Underwriter is then exercising the option and the
time and date of payment and delivery for such Option Shares. Any such time and
date of delivery (a "Date of Delivery") shall be determined by the Underwriter,
but shall not be later than seven full business days after the exercise of said
option, nor in any event prior to the Closing Time, as hereinafter defined. If
the option is exercised as to all or any portion of the Option Shares, the
Underwriter will purchase the number of Option Shares then being purchased.
2. Payment and Delivery:
a. Initial Shares. Payment of the purchase price for the
Initial Shares shall be made to the Company by wire transfer or certified or
official bank check payable in federal (same-day) funds at the office of
Friedman, Billings, Ramsey & Co., Inc., Potomac Tower, 1001 Nineteenth Street
North, Arlington, Virginia 22209-1710 (unless another place shall be agreed
upon by the Underwriter and the Company) against delivery of the certificates
for the Initial Shares to the Underwriter. Such payment and delivery shall be
made at 10:00 a.m., Washington, D.C. time, on the third (fourth, if pricing
occurs after 4:30 p.m. (Washington, D.C. time) business day after the date
hereof (unless another time, not later than ten business days after such date,
shall be agreed to by the Underwriter and the Company). The time at which such
payment and delivery are made is hereinafter called the "Closing Time".
Certificates for the Initial Shares shall be delivered to the Underwriter in
definitive form registered in such names and in such denominations as the
Underwriter shall specify. For the purpose of expediting the checking of the
certificates for the Initial Shares by the Underwriter, the Company agrees to
make such certificates available to the Underwriter for such purpose at least
one full business day preceding the Closing Time.
b. Option Shares. In addition, payment of the purchase price
for the Option Shares shall be made to the Company by wire transfer or
certified or official bank check payable in federal (same-day) funds at the
office of Friedman, Billings, Ramsey & Co., Inc., Potomac Tower, 1001
Nineteenth Street North, Arlington, Virginia 22209-1710 (unless another place
shall be agreed upon by the Underwriter and the Company), against delivery of
the certificates for the Option Shares to the Underwriter. Such payment and
delivery shall be made at 10:00 a.m., Washington, D.C. time, on each Date of
Delivery. Certificates for the Option Shares shall be delivered to the
Underwriter in definitive form registered in such names and in such
denominations as the Underwriter shall specify. For the purpose of expediting
the checking of the certificates for the Option Shares by the Underwriter, the
Company agrees to make such certificates available to the Underwriter for such
purpose at least one full business day preceding the relevant Date of Delivery.
3. Representations and Warranties of the Company: The Company,
the Operating Partnership and the Financing Partnership, jointly and severally,
represent and warrant to the Underwriter that:
-3-
<PAGE> 4
a. the Company has been duly organized and is validly
existing as a real estate investment trust in good standing under the laws of
the State of Maryland, with requisite power and authority to own its
properties, conduct its business as described in the Prospectus and to enter
into and perform its obligations under this Agreement; the Company has been
duly qualified or licensed for the transaction of business and is in good
standing under the laws of each other jurisdiction in which such qualification
or license is required, whether by reason of the ownership, leasing, or
management of any properties or the conduct of any other business, except where
the failure to be so licensed or qualified would not have a material adverse
effect on the condition, financial or otherwise, or the earnings, assets or
business affairs of the Company, the Operating Partnership and the Significant
Subsidiaries, considered as a single enterprise;
b. the Operating Partnership, the Financing Partnership and
each other partnership which directly owns the Company's interests in the
Properties (each such partnership individually, other than the Operating
Partnership and the Financing Partnership, a "Property Partnership" and
collectively, the "Property Partnerships") has been duly organized and is
validly existing as a partnership in good standing (to the extent applicable)
under the laws of its jurisdiction of organization, with partnership power and
authority to own its properties, conduct its business as described in the
Prospectus and, with respect to the Operating Partnership and the Financing
Partnership, enter into and perform their obligations under this Agreement;
each of the Operating Partnership, the Financing Partnership and each Property
Partnership has been duly qualified or licensed for the transaction of business
and is in good standing (to the extent applicable) under the laws of each
jurisdiction in which such qualification or license is required, whether by
reason of the ownership, leasing, or management of any properties (including
the Properties) or the conduct of any other business, except where the failure
to be so licensed or qualified would not have a material adverse effect on the
condition, financial or otherwise, or the earnings, assets or business affairs
of the Company, the Operating Partnership, the Financing Partnership and the
Significant Subsidiaries, considered as a single enterprise; all of the
partnership interests in each Property Partnership have been duly and validly
authorized and issued, are fully paid, and (except as described in the
Prospectus) are owned directly or indirectly by the Company, the Operating
Partnership, or the Financing Partnership free and clear of all liens,
encumbrances, equities or claims;
c. the Company has an authorized capitalization as set forth
in the Prospectus under the caption "Description of Shares"; the outstanding
shares of beneficial interest of the Company have been duly and validly
authorized and issued and are fully paid and non-assessable, and conform in all
material respects to all statements relating thereto contained in the
Prospectus; the Shares have been duly authorized for issuance and sale to the
Underwriter pursuant to this Agreement and, when issued and delivered as
provided herein and when Articles Supplementary setting the terms of the Shares
are duly executed and filed for record with the Maryland State Department of
Assessments and Taxation ("SDAT"), the Shares will be validly issued, fully
paid and non-assessable; except as described in the Prospectus (or incorporated
by reference), there are no outstanding securities convertible into or
exchangeable for the Shares or any shares of beneficial interest of the Company
and no outstanding options, rights (preemptive or otherwise) or warrants to
purchase or to subscribe for such shares or any other securities of the
Company;
d. each Significant Subsidiary within the meaning of Rule
1-02 of Regulation S-X (the "Significant Subsidiary") has been duly formed and
is validly existing and in good standing
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<PAGE> 5
under the laws of the jurisdiction of its formation; each Significant
Subsidiary has the power and authority to own, lease and operate its properties
and to conduct the business in which it is engaged, and is duly qualified as a
foreign corporation or partnership and is in good standing in each other
jurisdiction where such qualification is required; all of the issued and
outstanding shares of capital stock, LLC interests and partnership interests,
as applicable, of each Significant Subsidiary have been duly authorized and
validly issued, are fully paid and are owned free and clear of security
interest, mortgage, pledge, lien, encumbrance, claim or equity other than as
set forth in the Registration Statement or Prospectus; the ownership of the
shares of capital stock, LLC interests and partnership interests, as
applicable, of each Significant Subsidiary is as described in the Registration
Statement or Prospectus;
e. the Company, the Operating Partnership, the Financing
Partnership and each Significant Subsidiary are in compliance in all respects
with all applicable laws, orders, rules, regulations and directives, including
those relating to transactions with affiliates, except for non-compliance
which would not have a material adverse effect on the assets, operations,
business or condition (financial or otherwise), of the Company, the Operating
Partnership, the Financing Partnership and the Significant Subsidiaries taken
as a whole;
f. neither the Company, the Operating Partnership nor any
Significant Subsidiary is in breach of or in default under (nor has any event
occurred which with notice, lapse of time, or both would constitute a breach of
or default under), its respective declaration of trust, articles of
incorporation, charter, by-laws, certificate of limited partnership,
partnership agreement, or other organizational document, as applicable, or in
the performance or observance of any obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust, loan or credit
agreement or other agreement or instrument to which the Company, the Operating
Partnership, the Financing Partnership or any Significant Subsidiary is a party
or by which any of them is bound, except for such breaches or defaults which
would not have a material adverse effect on the assets, operations, business or
condition (financial or otherwise) of the Company, the Operating Partnership,
the Financing Partnership and the Significant Subsidiaries taken as a whole,
and the execution, delivery and performance of this Agreement, and consummation
of the transactions contemplated hereby will not conflict with, or result in
any breach of or constitute a default under (nor constitute any event which
with notice, lapse of time, or both would constitute a breach of or default
under), (i) any provision of the declaration of trust, articles of
incorporation, charter, by-laws, certificate of limited partnership,
partnership agreement, or other organizational document, as applicable, of the
Company, the Operating Partnership, the Financing Partnership or any
Significant Subsidiary, (ii) any provision of any license, indenture, mortgage,
deed of trust, loan or credit agreement or other agreement or instrument to
which the Company, the Operating Partnership, the Financing Partnership or any
Significant Subsidiary is a party or by which any of them or their respective
properties may be bound or affected, or (iii) any federal, state, local or
foreign law, regulation or rule or any decree, judgment or order applicable to
the Company, the Operating Partnership, the Financing Partnership or any
Significant Subsidiary, except in the case of clause (ii) for such breaches or
defaults which would not have a material adverse effect on the assets,
operations, business or condition (financial or otherwise) of the Company, the
Operating Partnership, the Financing Partnership and the Significant
Subsidiaries taken as a whole;
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<PAGE> 6
g. this Agreement has been duly authorized, executed and
delivered by the Company, the Operating Partnership and the Financing
Partnership and is a legal, valid and binding agreement of the Company, the
Operating Partnership, and the Financing Partnership enforceable against the
Company, the Operating Partnership and the Financing Partnership in accordance
with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, and by general principles of equity, and except to the extent that
the indemnification provisions of Section 8 hereof may be limited by federal or
state securities laws or public policy considerations in respect thereof;
h. no approval, authorization, consent or order of or filing
with any federal, state or local governmental or regulatory commission, board,
body, authority or agency is required in connection with the sale and delivery
of the Shares by the Company as contemplated hereby and the performance by the
Company, the Operating Partnership, the Financing Partnership and the
Significant Subsidiaries of their obligations under this Agreement other than
(A) such as have been obtained, or will have been obtained at the Closing Time
or the relevant Date of Delivery, as the case may be, under the Securities Act,
(B) such approvals as have been obtained in connection with the approval of the
quotation of the Shares on the New York Stock Exchange and (C) any necessary
qualification under the securities or blue sky laws of the various
jurisdictions in which the Shares are being offered by the Underwriter;
i. each of the Company, the Operating Partnership, the
Financing Partnership and each Significant Subsidiary has all necessary
licenses, authorizations, consents and approvals and has made all necessary
filings required under any federal, state or local law, regulation or rule, and
has obtained all necessary authorizations, consents and approvals from other
persons, required in order to conduct their respective businesses, except to
the extent that any failure to have any such licenses, authorizations, consents
or approvals, to make any such filings or to obtain any such authorizations,
consents or approvals would not, individually or in the aggregate, have a
material adverse effect on the assets, operations, business or condition
(financial or otherwise) of the Company, the Operating Partnership, the
Financing Partnership and the Significant Subsidiaries taken as a whole;
neither the Company, the Operating Partnership, the Financing Partnership nor
any of the Significant Subsidiaries is in violation of or in default under, any
such license, authorization, consent or approval or any federal, state, local
or foreign law, regulation or rule or any decree, order or judgment applicable
to the Company, the Operating Partnership, the Financing Partnership or any of
the Significant Subsidiaries the effect of which could be material and adverse
to the assets, operations, business or condition (financial or otherwise) of
the Company, the Operating Partnership, the Financing Partnership and the
Significant Subsidiaries taken as a whole;
j. each of the Registration Statement and any Rule 462(b)
Registration Statement has become effective under the Securities Act and no
stop order suspending the effectiveness of the Registration Statement or any
Rule 462(b) Registration Statement has been issued under the Securities Act and
no proceedings for that purpose have been instituted or are pending or, to the
knowledge of the Company, the Operating Partnership or the Financing
Partnership, are contemplated by the Commission, and any request on the part of
the Commission or by the state securities authority of any jurisdiction for
additional information has been complied with;
k. the Registration Statement complies and the Prospectus and
any further amendments or supplements thereto will, when they become effective
or are filed with the
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<PAGE> 7
Commission, as the case may be, comply in all material respects with the
requirements of the Securities Act and the Securities Act Regulations; the
Registration Statement did not, and any amendment thereto will not, in each
case as of the applicable effective date, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and the Prospectus and any amendment or
supplement thereto will not, as of the applicable filing date and at the
Closing Time and on each Date of Delivery (if any), contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however;
that the Company makes no warranty or representation with respect to any
statement contained in the Registration Statement or the Prospectus in reliance
upon and in conformity with information concerning the Underwriter and
furnished in writing by or on behalf of the Underwriter to the Company
expressly for use in the Registration Statement or the Prospectus; if the
Company elects to rely upon Rule 434 of the Securities Act Regulations, the
Company will comply with Rule 434; if a Rule 462(b) Registration Statement is
required in connection with the offering and sale of the Shares, the Company
has complied or will comply with the requirements of Rule 111 of the Securities
Act Regulations relating to the payment of filing fees therefor;
l. the Prospectus delivered to the Underwriter for use in
connection with this offering was identical to the electronically transmitted
copies thereof filed with the Commission pursuant to EDGAR, except to the
extent permitted by Regulation S-T;
m. all legal or governmental proceedings, contracts or
documents of a character required to be filed as exhibits to the Registration
Statement or to be summarized or described in the Prospectus or to be filed as
exhibits to the Registration Statement have been so filed, summarized or
described as required;
n. except as disclosed (or incorporated by reference) in the
Registration Statement or the Prospectus, there are no actions, suits or
proceedings pending or, to the Company's, the Operating Partnership's or the
Financing Partnership's knowledge, threatened against the Company, the
Operating Partnership, the Financing Partnership or any of the Significant
Subsidiaries or any of their respective properties, at law or in equity, or
before or by any federal, state, local or foreign governmental or regulatory
commission, board, body, authority or agency which could result in a judgment,
decree or order having a material adverse effect on the assets, operations,
business or condition (financial or otherwise) of the Company, the Operating
Partnership, the Financing Partnership and the Significant Subsidiaries taken
as a whole;
o. the financial statements, including the notes thereto,
included in or incorporated by reference into the Registration Statement and
the Prospectus present fairly the consolidated financial position of the
Company, the Operating Partnership, the Financing Partnership and the
Significant Subsidiaries as of the dates indicated and the consolidated results
of operations and changes in financial position and cash flows of the Company,
the Operating Partnership, the Financing Partnership and the Significant
Subsidiaries for the periods specified, such financial statements have been
prepared in conformity with generally accepted accounting principles applied on
a consistent basis during the periods involved (except as indicated in the
notes thereto); the financial statement schedules included in or incorporated
by reference into the Registration Statement present fairly the information
required to be stated therein; the financial
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<PAGE> 8
information and data included in or incorporated by reference into the
Registration Statement and the Prospectus present fairly the information
included therein and have been prepared on a basis consistent with that of the
financial statements included in or incorporated by reference into the
Registration Statement and the Prospectus and the books and records of the
respective entities presented therein; other than the historical or pro forma
financial statements (and schedules) included or incorporated by reference
therein, no other historical or pro forma financial statements (or schedules)
are required by the Securities Act or the Securities Act Regulations to be
included in or incorporated by reference into the Registration Statement;
except as reflected or disclosed in the financial statements included in or
incorporated by reference into the Registration Statement or otherwise set
forth in the Prospectus, none of the Company, the Operating Partnership, the
Financing Partnership or the Significant Subsidiaries are subject to any
material indebtedness, obligation, or liability, contingent or otherwise, known
to the Company;
p. Arthur Andersen LLP, who have certified the financial
statements and financial statement schedules included in or incorporated by
reference into the Registration Statement and Prospectus, are independent
public accountants as required by the Securities Act and the Securities Act
Regulations;
q. subsequent to the effective date of the Registration
Statement and the date of the Prospectus, and except as may be otherwise stated
in the Registration Statement or Prospectus, there has not been (A) any
material and unfavorable change, in the assets, operations, business or
condition (financial or otherwise), present or prospective, of the Company, the
Operating Partnership, the Financing Partnership and the Significant
Subsidiaries taken as a whole, (B) any transaction, which is material to the
Company, the Operating Partnership, the Financing Partnership and the
Significant Subsidiaries taken as a whole, entered into, or the terms of which
have been definitely agreed to, by the Company, the Operating Partnership, the
Financing Partnership or any of the Significant Subsidiaries or (C) other than
immaterial financing and refinancing activities in the ordinary course of
business, any obligation, contingent or otherwise, directly or indirectly
incurred by the Company, the Operating Partnership, the Financing Partnership
or any of the Significant Subsidiaries, which is material to the Company, the
Operating Partnership, the Financing Partnership and the Significant
Subsidiaries taken as a whole, (D) any dividend or distribution of any kind
declared, paid, or made by the Company on any class of its shares of beneficial
interest or by the Operating Partnership or the Financing Partnership with
respect to their partnership interests, other than regular quarterly dividend
payments, (E) any change in the shares of beneficial interest of the Company or
the partnership interests of the Operating Partnership, the Financing
Partnership or any Significant Subsidiary, other than issuances of common
shares pursuant to the Company's dividend reinvestment plan (F) any increase in
the indebtedness of the Company, the Operating Partnership, the Financing
Partnership or any Significant Subsidiary that is material to such entities,
taken as a whole, and (G) a material casualty loss or material condemnation or
other material adverse event with respect to the Properties (as the same is
defined in the Prospectus);
r. neither the Company, the Operating Partnership, the
Financing Partnership nor any of the Significant Subsidiaries is, and upon the
issuance and sale of the Shares as herein contemplated and the application of
the net proceeds therefrom as described in the Prospectus will not be (i) an
"investment company" or a company "controlled" by an "investment company"
-8-
<PAGE> 9
within the meaning of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), or (ii) a "holding company" or a "subsidiary
company" of a "registered holding company," as defined in the Public Utility
Holding Company Act of 1935, as amended;
s. the Shares being sold pursuant to this Agreement will
conform in all material respects to the description thereof contained in the
Registration Statement and Prospectus and will be in substantially the form
filed or incorporated by reference, as the case may be, as an exhibit to the
Registration Statement;
t. there are no persons with registration or other similar
rights to have any securities registered pursuant to the Registration Statement
or otherwise registered by the Company under the Securities Act;
u. the Company has and will at the Closing Time and on each
Date of Delivery have good and marketable title to the Shares to be sold on
such date by the Company hereunder, free and clear of any security interest,
mortgage, pledge, lien, charge, claim, equity or encumbrance of any kind, other
than pursuant to this Agreement and upon delivery of such Shares and payment of
the purchase price therefor as herein contemplated, assuming the Underwriter
has no notice of any adverse claim (as such term is defined in the Uniform
Commercial Code as in effect in the State of New York), the Underwriter will
receive good and marketable title to the Shares purchased by it on such date
from the Company, free and clear of any security interest, mortgage, pledge,
lien, charge, claim, equity or encumbrance of any kind;
v. the Company, the Operating Partnership, the Financing
Partnership and the Significant Subsidiaries have good and marketable title in
fee simple to all real property and good and marketable title to all personal
property owned by them, as described in the Prospectus, in each case free and
clear of all liens, encumbrances and defects except such as are described in
the Prospectus or such as do not materially adversely affect the value of such
property and do not materially adversely interfere with the use made and
proposed to be made of such property by the Company, the Operating Partnership,
the Financing Partnership and the Significant Subsidiaries; and any real
property and buildings described in the Prospectus as being held under lease by
the Company, the Operating Partnership, the Financing Partnership or any
Significant Subsidiary are held by it under valid, subsisting and enforceable
leases with such exceptions as are not material and do not materially adversely
interfere with the use made and proposed to be made of such property and
buildings by the Company, the Operating Partnership, the Financing Partnership
and the Significant Subsidiaries;
w. neither the Company nor the Operating Partnership, nor the
Financing Partnership, nor any of their trustees, directors, officers or
controlling persons has taken and will take, directly or indirectly, any action
which is designed to or which has constituted or which might reasonably be
expected to cause or result in stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale of the Shares;
x. neither the Company nor any of its officers directly, or
indirectly through one or more intermediaries, controls or has any other
association with (within the meaning of Article 1 of the By-Laws of the
National Association of Securities Dealers, Inc. (the "NASD")), any member firm
of the NASD;
y. the Company has not relied upon the Underwriter or legal
counsel for the Underwriter for any legal, tax or accounting advice in
connection with the offering and sale of the Shares;
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<PAGE> 10
z. the Company is organized in conformity with the
requirements for qualification as a real estate investment trust under the
Internal Revenue Code of 1986, as amended (the "Code"), the Company's method of
operation has enabled it to meet the requirements for qualification and
taxation as a real estate investment trust under the Code, and its method of
operation enables it to continue to meet the requirements for taxation as a
real estate investment trust under the Code;
aa. each of the Operating Partnership, the Finance
Partnership, and any other partnership in which the Company has a direct or
indirect interest is organized and operated to qualify as a partnership for
Federal income tax purposes, and not as an association or publicly traded
partnership taxable as a corporation; and neither the Company nor any of such
partnerships has received any communication from the Internal Revenue Service
regarding the status of any such partnership as a partnership for Federal
income tax purposes;
bb. with respect to each corporation in which the Company
owns more than 10% of the voting securities or whose securities account for
more than 5% of the fair market value of the Company's assets, the Company has
at all times owned 100% of all the equity interests in such corporation since
the corporation was formed;
cc. the documents incorporated or deemed to be incorporated
by reference in the Prospectus, at the time they were or hereafter are filed
with the Commission, complied and will comply in all material respects with the
requirements of the Exchange Act and the rules and regulations of the
Commission thereunder (the "Exchange Act Regulations") and, when read together
with the other information in the Prospectus, at the time the Registration
Statement became effective did not and will not include an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading;
dd. other than this Agreement, the Company is not a party to
any contract, agreement or understanding with any person that would give rise
to a valid claim against the Company for a brokerage commission, finder's fee
or like payment in connection with the sale of the Shares;
ee. no statement, representation, warranty or covenant made
by the Company or the Operating Partnership in any certificate or document
required by this Agreement to be delivered to the Underwriter was or will be,
when made, inaccurate, untrue or incorrect in any material respect; and
ff. any certificate signed by any authorized officer of the
Company, the Operating Partnership or any Significant Subsidiary delivered to
the Underwriter or to counsel for the Underwriter pursuant to or in connection
with this Agreement shall be deemed a representation and warranty by the
Company to the Underwriter as to the matters covered thereby.
4. Certain Covenants of the Company: The Company, the Operating
Partnership and the Financing Partnership hereby agree with the Underwriter:
a. to furnish such information as may be required and
otherwise to cooperate in qualifying the Shares for offering and sale under the
securities or blue sky laws of such states as the Underwriter may designate and
to maintain such qualifications in effect as long as required for the
distribution of the Shares, provided that the Company shall not be required to
qualify as a foreign corporation or to consent to the service of process under
the laws of any such state (except service of process with respect to the
offering and sale of the Shares);
b. to prepare the Prospectus and Prospectus Supplement in a
form approved by the Underwriter and file such Prospectus and Prospectus
Supplement with the Commission pursuant
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<PAGE> 11
to Rule 424(b) of the Securities Act Regulations not later than 10:00 a.m.
(Washington, D.C. time), on the day following the execution and delivery of
this Agreement and to furnish promptly (and with respect to the initial
delivery of such Prospectus and Prospectus Supplement, not later than 10:00
a.m. (Washington, D.C. time) on the day following the execution and delivery
of this Agreement) to the Underwriter as many copies of the Prospectus and the
Prospectus Supplement (or of the Prospectus as amended or supplemented if the
Company shall have made any amendments or supplements thereto after the
effective date of the Registration Statement) as the Underwriter may reasonably
request for the purposes contemplated by the Securities Act Regulations, which
Prospectus and Prospectus Supplement and any amendments or supplements thereto
furnished to the Underwriter will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR, except
to the extent permitted by Regulation S-T;
c. to advise the Underwriter promptly and (if requested by
the Underwriter) to confirm such advice in writing, when the Registration
Statement has become effective and when any post-effective amendment thereto
becomes effective under the Securities Act Regulations;
d. to advise the Underwriter promptly, confirming such advice
in writing, of (i) any request by the Commission for amendments or supplements
to the Registration Statement or Prospectus or for additional information with
respect thereto, or (ii) the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of any Preliminary Prospectus, the Prospectus,
the Prospectus Supplement or of the suspension of the qualification of the
Shares for offering or sale in any jurisdiction, or of the initiation or
threatening of any proceedings for any of such purposes and, if the Commission
or any other government agency or authority should issue any such order, to
make every reasonable effort to obtain the lifting or removal of such order as
soon as possible; to advise the Underwriter promptly of any proposal to amend
or supplement the Registration Statement or Prospectus and to file no such
amendment or supplement to which the Underwriter shall reasonably object in
writing;
e. to furnish to the Underwriter for a period of five years
from the date of this Agreement (i) as soon as available, copies of all annual,
quarterly and current reports or other communications supplied to holders of
Preferred Shares, (ii) as soon as practicable after the filing thereof; copies
of all reports filed by the Company with the Commission, the NASD or any
securities exchange, and (iii) such other information as the Underwriter may
reasonably request regarding the Company, the Operating Partnership, the
Financing Partnership and the Significant Subsidiaries;
f. to advise the Underwriter promptly of the happening of any
event known to the Company, the Operating Partnership, or the Financing
Partnership within the time during which a Prospectus relating to the Shares is
required to be delivered under the Securities Act Regulations which, in the
judgment of the Company, would require the making of any change in the
Prospectus then being used so that the Prospectus would not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and, during such
time, to prepare and furnish, at the Company's expense, to the Underwriter
promptly such amendments or supplements to such Prospectus as may be necessary
to reflect any
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<PAGE> 12
such change and to furnish to the Underwriter a copy of such proposed amendment
or supplement before filing any such amendment or supplement with the
Commission;
g. to furnish promptly to the Underwriter a signed copy of
the Registration Statement, as initially filed with the Commission, and of all
amendments thereto (including all exhibits thereto) and such number of
conformed copies of the foregoing as the Underwriter may reasonably request;
h. to furnish to the Underwriter, not less than two business
days before filing with the Commission subsequent to the effective date of the
Prospectus and during the period referred to in paragraph (f) above, a copy of
any document proposed to be filed with the Commission pursuant to Section 13,
14, or 15(d) of the Exchange Act;
i. the Company will apply the net proceeds of the sale of the
Shares in accordance with its statements under the caption "Use of Proceeds" in
the Prospectus;
j. to make generally available to its security holders as
soon as practicable an earning statement (in form, at the option of the
Company, complying with the provisions of Rule 158 of the Securities Act
Regulations) of the Company and its Significant Subsidiaries covering a period
of 12 months beginning after the effective date of the Registration Statement;
k. to use its best efforts to effect and maintain the
quotation of the Shares on the New York Stock Exchange and to file with the New
York Stock Exchange all documents and notices required by the New York Stock
Exchange of companies that have securities that are traded in the New York
Stock Exchange and quotations for which are reported by the New York Stock
Exchange;
l. to refrain during a period of 180 days from the date of
the Prospectus, without the prior written consent of the Underwriter, from (i)
offering, pledging, selling, contracting to sell, selling any option or
contract to purchase, purchasing any option or contract to sell, granting any
option for the sale of or otherwise disposing of or transferring, directly or
indirectly, any Shares or any securities convertible into or exercisable or
exchangeable for Shares, or filing any registration statement under the
Securities Act with respect to any of the foregoing or (ii) entering into any
swap or any other agreement or any transaction that transfers, in whole or in
part, directly or indirectly, the economic consequence of ownership of the
Shares, whether any such swap or transaction described in clause (i) or (ii)
above is to be settled by delivery of the Shares or such other securities, in
cash or otherwise. The foregoing sentence shall not apply to the Shares to be
sold hereunder;
m. the Company will use its best efforts to meet the
requirements to continue to qualify as a "real estate investment trust" under
the Code;
n. the Company and the Operating Partnership will not invest,
reinvest or otherwise use the proceeds received by the Company or the Operating
Partnership from the sale of the Shares in such a manner, or take any action or
omit to take any action, that would cause the Company, the Operating
Partnership, or the Financing Partnership to become an "investment company" as
that term is defined in the investment Company Act;
o. neither the Company nor the Operating Partnership nor the
Financing Partnership will (A) take, directly or indirectly, any action
designed to cause or to result in, or that might reasonably be expected to
constitute, the stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Shares, (B) sell, bid for
or purchase the Shares or pay any person any compensation for soliciting
purchase of the Shares, or (C) pay or
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<PAGE> 13
agree to pay to any person any compensation for soliciting another to purchase
any other securities of the Company; and
p. on or prior to the Closing Time, the Company will cause
Articles Supplementary relating to the Preferred Shares to be filed for record
with the SDAT in accordance with the laws of the State of Maryland.
5. Payment of Expenses:
a. The Company agrees to pay all costs and expenses incident
to the performance of its obligations under this Agreement, whether or not the
transactions contemplated hereunder are consummated or this Agreement is
terminated, including expenses, fees and taxes in connection with (i) the
preparation and filing of the Registration Statement, each Preliminary
Prospectus, the Prospectus, and any amendments or supplements thereto, and the
printing and furnishing of copies of each thereof to the Underwriter and to
dealers (including costs of mailing and shipment), (ii) the preparation,
issuance and delivery of the certificates for the Shares to the Underwriter,
including any stock or other transfer taxes or duties payable upon the sale of
the Shares to the Underwriter, (iii) the printing of this Agreement and any
dealer agreements, and the reproduction and/or printing and furnishing of
copies of each thereof to the Underwriter and to dealers (including costs of
mailing and shipment), (iv) the qualification of the Shares for offering and
sale under state laws that the Company and the Underwriter have mutually agreed
are appropriate and the determination of their eligibility for investment under
state law as aforesaid assuming that the Shares are approved for quotation on
the New York Stock Exchange and the printing and furnishing of copies of any
blue sky surveys or legal investment surveys to the Underwriter and to dealers,
(v) reasonable legal fees, filing fees and other charges of counsel for the
Underwriter in connection with this Agreement and the offering and sale of the
Shares consistent with the terms of the engagement letter between the Company
and the Underwriter, (vi) filing for review of the public offering of the
Shares by the NASD, (vii) the fees and expenses of any transfer agent or
registrar for the Shares, (viii) the fees and expenses incurred in connection
with the inclusion of the Shares in the New York Stock Exchange, (ix) making
road show presentations with respect to the offering of the Shares, (x)
preparing and distributing a reasonable number of bound volumes of transaction
documents for the Underwriter and its legal counsel and (xi) the performance of
the Company's other obligations hereunder. Upon the Underwriter's request, the
Company will provide funds in advance for filing fees.
b. The Company agrees to reimburse the Underwriter for its
reasonable and documented out-of-pocket expenses in connection with the
performance of its activities under this Agreement, whether or not the
transactions contemplated hereunder are consummated or this Agreement is
terminated, including, but not limited to, costs such as reasonable printing,
facsimile, courier service, direct computer expenses, accommodations, travel
and the reasonable fees and expenses of the Underwriter's outside legal counsel
consistent with the terms of the engagement letter between the Company and the
Underwriter;
6. Conditions of the Underwriter's Obligations: The obligations
of the Underwriter hereunder are subject to the accuracy of the representations
and warranties on the part of the Company on the date hereof and at the Closing
Time and on each Date of Delivery, the performance by the Company of its
obligations hereunder and to the following conditions:
a. the Registration Statement shall have become effective
under the Securities Act and no stop order suspending the effectiveness of the
Registration Statement or any part thereof
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<PAGE> 14
shall have been issued and no proceeding for that purpose shall have been
initiated or threatened by the Commission; and all requests for additional
information on the part of the Commission shall have been complied with to the
Underwriter's and its counsel's reasonable satisfaction. A prospectus
containing information relating to the description of the Shares, the specific
method of distribution and similar matters shall have been filed within the
prescribed time period, and prior to the Closing Time with the Commission in
accordance with Rule 424(b) (or any required post-effective amendment providing
such information shall have been filed and declared effective in accordance
with the requirements of Rule 430A), or, if the Company has elected to rely
upon Rule 434 of the Securities Act Regulations, a Term Sheet including the
Rule 434 information shall have been filed with the Commission in accordance
with Rule 424(b)(7). The rating assigned by any nationally recognized
statistical rating organization to the Shares as of the date of this Agreement
shall not have been lowered since such date nor shall any such rating
organization have publicly announced that it has placed the Shares on what is
commonly termed a "watch list" for possible downgrading. There shall not have
come to the Underwriter's attention any facts that would cause the Underwriter
to believe that the Prospectus, together with the Prospectus Supplement, at the
time it was required to be delivered to purchasers of the Shares, included an
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in light of the
circumstances existing at such time, not misleading.
b. the Company shall furnish to the Underwriter at the
Closing Time and on each Date of Delivery an opinion of Reed Smith Shaw &
McClay, counsel for the Company, addressed to the Underwriter and dated the
Closing Time and each Date of Delivery and in form satisfactory to Winston &
Strawn, counsel for the Underwriter, stating that:
i. the Company has been duly organized and is validly
existing as a real estate investment trust in good standing under the laws of
the State of Maryland, with requisite power and authority to own its properties
and conduct its business as described in the Prospectus;
ii. the Company has an authorized capitalization as set
forth in the Prospectus under the caption "Description of Shares"; the
outstanding shares of beneficial interest of the Company have been duly and
validly authorized and issued and are fully paid and nonassessable; the terms
of the Shares conform in all material respects to all statements and
descriptions related thereto contained in the Prospectus;
iii. each of the Operating Partnership, the Financing
Partnership and each Significant Subsidiary has been duly organized and is
validly existing as a partnership or corporation, as the case may be, in good
standing (to the extent applicable) under the laws of its jurisdiction of
organization; the partnership agreement of the Operating Partnership has been
duly authorized, executed and delivered by the Company and the Operating
Partnership and, assuming the due authorization, execution and delivery where
applicable by each of the parties thereto other than the Company and the
Operating Partnership, constitutes valid and legally binding obligations of the
Company and the Operating Partnership, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, and similar laws of general applicability relating to or affecting
creditors' rights and to the effect of general principles of equity; and the
partnership agreement of the Financing Partnership and each Significant
Subsidiary that is a partnership has been duly authorized, executed and
delivered by the parties thereto and, assuming the due authorization, execution
and delivery where applicable by each of
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<PAGE> 15
the parties thereto other than the Company, the Operating Partnership, the
Financing Partnership and any Significant Subsidiary constitutes valid and
legally binding obligations of the Company, the Operating Partnership, and the
Significant Subsidiaries, as applicable, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, and similar laws of general applicability relating to or affecting
creditors' rights and to the effect of general principles of equity (such
counsel being entitled to rely in respect of the opinion in this clause in
respect of matters of fact upon certificates of officers of the Company, the
Operating Partnership, the Financing Partnership or the Significant
Subsidiaries, provided that such counsel shall state that they believe that
both the Underwriter and they are justified in relying upon such certificates);
iv. each of the Company, the Operating Partnership, the
Financing Partnership and the Significant Subsidiaries has been duly qualified
or licensed as a foreign corporation, limited partnership, or otherwise, as
appropriate, for the transaction of business and is in good standing (to the
extent applicable) under the laws of each other jurisdiction in which such
qualification or license is required, whether by reason of the ownership,
leasing or management of any properties or the conduct of any other business,
except where the failure to be so qualified or licensed would not have a
material adverse effect on the assets, operations, business or condition
(financial or otherwise) of the Company, the Operating Partnership, the
Financing Partnership and the Significant Subsidiaries taken as a whole, (such
counsel being entitled to rely in respect of the opinion in this clause in
respect of matters of fact upon certificates of officers of the Company and
governmental authorities, provided that such counsel shall state that they
believe that both the Underwriter and they are justified in relying upon such
certificates);
v. to such counsel's knowledge and other than as set
forth in the Registration Statement or Prospectus or incorporated by reference
therein, there are no legal or governmental proceedings pending to which the
Company, the Operating Partnership, the Financing Partnership or any
Significant Subsidiary is a party or of which any property of the Company, the
Operating Partnership, the Financing Partnership or any Significant Subsidiary
is the subject which would individually or in the aggregate, be reasonably
expected to have a material adverse effect on the assets, operations, business
or condition (financial or otherwise) of the Company, the Operating
Partnership, the Financing Partnership and the Significant Subsidiaries taken
as a whole; and, to such counsel's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened by others;
vi. this Agreement has been duly authorized, executed,
and delivered by the Company, the Operating Partnership, the Financing
Partnership; the Shares have been duly and validly authorized by all necessary
corporate/trust action on the part of the Company, and when executed,
authenticated and delivered in accordance with this Agreement will be validly
issued, fully paid and non-assessable and will be valid and legally binding
obligations of the Company, enforceable against the Company in accordance with
their terms; the issuance of the Shares is not subject to any statutory
preemptive rights or, to counsel's knowledge, any contractual rights to
subscribe for more shares;
vii. to such counsel's knowledge, the Company, the
Operating Partnership, the Financing Partnership and the Significant
Subsidiaries are in compliance in all respects with all applicable laws,
orders, rules, regulations and directives, except for non-compliance which
would not have a material adverse effect on the assets, operations, business or
condition (financial or
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<PAGE> 16
otherwise) of the Company, the Operating Partnership, the Financing Partnership
and the Significant Subsidiaries taken as a whole;
viii. to such counsel's knowledge, neither the Company,
the Operating Partnership, the Financing Partnership nor any of the Significant
Subsidiaries is in breach of or in default under (nor has any event occurred
which with notice, lapse of time, or both would constitute a breach of or
default under), any license, indenture, mortgage, deed of trust, loan or credit
agreement or any other agreement or instrument to which the Company, the
Operating Partnership, the Financing Partnership or any of the Significant
Subsidiaries is a party or by which any of them or their respective properties
may be bound or affected or under any law, regulation or rule or any decree,
judgment or order applicable to the Company, the Operating Partnership, the
Financing Partnership or any of the Significant Subsidiaries, except such
breaches or defaults which would not have a material adverse effect on the
assets, operations, business or condition (financial or otherwise) of the
Company, the Operating Partnership, the Financing Partnership and the
Significant Subsidiaries taken as a whole.
ix. the execution, delivery and performance of this
Agreement by the Company, the Operating Partnership and, the Financing
Partnership and the consummation by the Company, the Operating Partnership and
the Financing of the transactions contemplated hereby do not and will not
conflict with, or result in any breach of or constitute a default under (nor
constitute any event which with notice, lapse of time, or both would constitute
a breach of or default under), (i) any provisions of the declaration of trust,
the articles of incorporation, charter, by-laws, certificate of limited
partnership, partnership agreement or other organizational documents, as the
case may be, of the Company, the Operating Partnership, the Financing
Partnership or any Significant Subsidiary, (ii) to the knowledge of such
counsel, any provision of any license, indenture, mortgage, deed of trust, loan
or credit agreement or other agreement or instrument to which the Company, the
Operating Partnership, the Financing Partnership or any Subsidiary is a party
or by which any of them or their respective properties may be bound or
affected, or (iii) any law or regulation or any decree, judgment or order
applicable to the Company, the Operating Partnership, the Financing Partnership
or any Significant Subsidiary, except in the case of clause (ii) for such
conflicts, breaches or defaults which individually or in the aggregate would
not have a material adverse effect on the assets, operations, business or
condition (financial or otherwise) of the Company, the Operating Partnership,
the Financing Partnership and the Significant Subsidiaries taken as a whole;
x. no approval, authorization, consent or order of or
filing with any federal, state or local governmental or regulatory commission,
board, body, authority or agency is required in connection with the sale and
delivery of the Shares by the Company as contemplated hereby other than such as
have been obtained or made under the Securities Act and except that such
counsel need express no opinion as to any necessary qualification under the
state securities or blue sky laws of the various jurisdictions in which the
Shares are being offered by the Underwriter;
xi. to such counsel's knowledge, each of the Company,
the Operating Partnership, the Financing Partnership and the Significant
Subsidiaries has all necessary licenses, authorizations, consents and approvals
and has made all necessary filings required under any federal, state or local
law, regulation or rule, and has obtained all necessary authorizations,
consents and approvals from other persons, required in order to conduct their
respective businesses, except to
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<PAGE> 17
the extent that any failure to have any such licenses, authorizations, consents
or approvals, to make any such filings or to obtain any such authorizations,
consents or approvals would not, individually or in the aggregate, have a
material adverse effect on the assets, operations, business or condition
(financial or otherwise) of the Company, the Operating Partnership, the
Financing Partnership and the Significant Subsidiaries taken as a whole; to
such counsel's knowledge, neither the Company, the Operating Partnership, the
Financing Partnership nor any of the Significant Subsidiaries is in violation
of or in default under, any such license, authorization, consent or approval or
any federal, state, local or foreign law, regulation or rule or any decree,
order or judgment applicable to the Company, the Operating Partnership, the
Financing Partnership or any of the Significant Subsidiaries the effect of
which could be material and adverse to the assets, operations, business or
condition (financial or otherwise) of the Company, the Operating Partnership,
the Financing Partnership and the Significant Subsidiaries taken as a whole;
xii. the Company is not an "investment company" or an
entity "controlled" by an "investment company," as such terms are defined in
the Investment Company Act;
xiii. the sale of the Shares by the Company is not
subject to preemptive or other similar rights arising by operation of law,
under the declaration of trust or by-laws of the Company, to such counsel's
knowledge under any agreement to which the Company, the Operating Partnership,
the Financing Partnership or any of the Significant Subsidiaries is a party or,
to such counsel's knowledge, otherwise;
xiv. the Company has and will at the Closing Time and
on each Date of Delivery have good and marketable title to the Shares to be
sold on such date by the Company hereunder, free and clear of any security
interest, mortgage, pledge, lien, charge, claim, equity or encumbrance of any
kind, other than pursuant to this Agreement; and upon delivery of such Shares
and payment of the purchase price therefor as herein contemplated, assuming the
Underwriter has no notice of any adverse claim (as such term is defined in the
Uniform Commercial Code as in effect in the State of New York), each
Underwriter will receive good and marketable title to the Shares purchased by
it on such date from the Company, free and clear of any security interest,
mortgage, pledge, lien, charge, claim, equity or encumbrance of any kind;
xv. to such counsel's knowledge, there are no persons
with registration or other similar rights to have any securities registered
pursuant to the Registration Statement or otherwise registered by the Company
under the Securities Act;
xvi. the form of certificate used to evidence the
Shares complies in all material respects with all applicable statutory
requirements, with any applicable requirements of the declaration of trust and
by-laws of the Company and the requirements of the New York Stock Exchange;
xvii. the Shares conform in all material respects to
the descriptions thereof contained in the Registration Statement and Prospectus
and have been duly authorized by the Company and are validly issued, fully paid
and nonassessable;
xviii. the Registration Statement has become effective
under the Securities Act and no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings with respect thereto
have been commenced or threatened;
xix. the statements under the captions "Description of
Shares", "Certain Provisions of Maryland Law and Crown's Declaration of Trust
and Bylaws" and "Certain Federal Income Tax
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<PAGE> 18
Considerations to Crown of its REIT Election" in the Registration Statement and
the Prospectus and the statements under the caption "Certain Federal Income Tax
Consequences" in the Prospectus Supplement, insofar as such statements
constitute matters of law or legal conclusions or constitute summaries of
documents described therein, fairly and accurately describe such legal matters
or documents and fairly and accurately summarize the matters referred to
therein;
xx. there are no actions, suits or proceedings pending
or, to such counsel's knowledge, threatened against the Company, the Operating
Partnership, the Financing Partnership or any of the Significant Subsidiaries
or any of their respective properties, at law or in equity, or before or by any
federal, state, local or foreign governmental or regulatory commission, board,
body, authority or agency which are required to be described in the Prospectus
but are not so described or incorporated by reference;
xxi. to such counsel's knowledge, there are no
contracts or documents of a character which are required to be filed as
exhibits to the Registration Statement or to be summarized or described in the
Prospectus which have not been so filed, summarized, described, or incorporated
therein by reference;
xxii. the Company is organized in conformity with the
requirements for qualification as a real estate investment trust under the
Code, the Company's method of operation has enabled it to meet the requirements
for qualification and taxation as a real estate investment trust under the
Code, and its method of operation enables it to continue to meet the
requirements for taxation as a real estate investment trust under the Code;
xxiii. at the time the Registration Statement became
effective, the Registration Statement and Prospectus (except for financial
statements and schedules and related notes included therein, and the other
financial, statistical, and accounting data included in the Registration
Statement or Prospectus as to which such counsel need not express any opinion),
excluding the documents incorporated by reference therein complied as to form
in all material respects with the requirements of the Securities Act and the
Securities Act Regulations;
xxiv. each document heretofore filed pursuant to the
Exchange Act and incorporated or deemed to be incorporated by reference in the
prospectus (except for financial statements and schedules and other financial
information included or incorporated by reference therein, as to which such
counsel need not express any opinion) complied as to form in all material
respects with the requirements of the Exchange Act and the applicable Exchange
Act Regulations in effect at the date of their respective filings; and
xxv. the Articles Supplementary relating to the Shares
have been filed for record with the SDAT pursuant to the laws of the State of
Maryland and the number of Shares and the title, par value, liquidation
preference, ranking, dividend rate or rates (or method of calculation),
dividend payment dates, redemption or sinking fund requirements, conversion
provisions and other terms of the Shares have been set forth therein.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company and
independent public accountants of the Company at which the contents of the
Registration Statement and Prospectus were discussed and, although such counsel
is not passing upon and does not assume responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or Prospectus (except as and to the extent stated in subparagraphs
(xvii), (xix) and (xxi) above), on the basis of the foregoing, nothing has come
to the attention of such counsel that causes them to believe that
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<PAGE> 19
the Registration Statement, the Preliminary Prospectus or the Prospectus, as of
their respective effective or issue dates and as of the date of such counsel's
opinion, contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading (it being understood that, in each case, such counsel need express
no view with respect to the financial statements and other financial and
statistical data included in the Registration Statement, Preliminary Prospectus
or Prospectus).
a. (i) At the time of the execution of this Agreement, Arthur
Andersen LLP shall have furnished to the Underwriter a letter or letters, dated
such date, in form and substance satisfactory to the Underwriter, to the effect
set forth in Annex I hereto and (ii) at Closing Time, the Underwriter shall
have received from Arthur Andersen LLP a letter, dated as of the Closing Time,
to the effect that they reaffirm the statements made in the letter furnished
pursuant to subsection (c)(i) of this Section 6, and, if the Company has
elected to rely upon Rule 430A of the Securities Act Regulations, to the
further effect that they have carried out procedures specified in paragraph (v)
of Annex I with respect to certain amounts, percentages, and financial
information specified by and deemed to be part of the Registration Statement
pursuant to Rule 430A(b) and have found such amounts, percentages and financial
information to be in agreement with the records specified in such paragraph
(v).
b. The Underwriter shall have received at the Closing Time
and on each Date of Delivery the favorable opinion of Winston & Strawn, counsel
for the Underwriter, dated the Closing Time or such Date of Delivery, in form
and substance satisfactory to the Underwriter.
c. No amendment or supplement to the Registration Statement
or Prospectus shall have been filed to which the Underwriter shall have
objected in writing.
d. Prior to the Closing Time and each Date of Delivery (i) no
stop order suspending the effectiveness of the Registration Statement or any
order preventing or suspending the use of any Preliminary Prospectus or
Prospectus has been issued by the Commission, and no suspension of the
qualification of the Shares for offering or sale in any jurisdiction, or of the
initiation or threatening of any proceedings for any of such purposes, has
occurred and (ii) the Registration Statement and the Prospectus shall not
contain an untrue statement of material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
e. Between the time of execution of this Agreement and the
Closing Time or the relevant Date of Delivery (i) no material and unfavorable
change (other than as disclosed in the Registration Statement and Prospectus),
in the assets, operations, business or condition (financial or otherwise) of
the Company, the Operating Partnership and the Significant Subsidiaries taken
as a whole shall occur or become known and (ii) no transaction which is
material and unfavorable to the Company shall have been entered into by the
Company, the Operating Partnership or any of the Significant Subsidiaries.
f. At the Closing Time, the Shares shall have been approved
for inclusion in the New York Stock Exchange.
g. The NASD shall not have raised any objection with respect
to the fairness and reasonableness of the underwriting terms and arrangements.
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<PAGE> 20
h. The Company will, at the Closing Time and on each Date of
Delivery, deliver to the Underwriter a certificate of its two principal
executive officers, Frank J. Pasquerilla and Mark E. Pasquerilla, to the effect
that, to each of such officer's knowledge, the representations and warranties
of the Company set forth in this Agreement and the conditions set forth in
paragraphs (f), (g) and (h) have been met and are true and correct as of such
date.
i. The Company shall have furnished to the Underwriter such
other documents and certificates as to the accuracy and completeness of any
statement in the Registration Statement and the Prospectus as of the Closing
Time or any Date of Delivery as the Underwriter may reasonably request.
j. The Company, the Operating Partnership and the Financing
Partnership shall perform such of their obligations under this Agreement as are
to be performed by the terms hereof at or before the Closing Time or the
relevant Date of Delivery.
2. Termination: The obligations of the Underwriter hereunder
shall be subject to termination in the absolute discretion of the Underwriter,
at any time prior to the Closing Time or any Date of Delivery, if trading in
securities in the New York Stock Exchange shall have been suspended or minimum
prices shall have been established on the New York Stock Exchange, or if a
banking moratorium shall have been declared either by the United States or New
York State authorities, or if the United States shall have declared war in
accordance with its constitutional processes or there shall have occurred any
material outbreak or escalation of hostilities or other national or
international calamity or crisis of such magnitude in its effect on the
financial markets of the United States as, in the judgment of the Underwriter,
to make it impracticable to market the Shares.
If the Underwriter elects to terminate this Agreement as provided in
this Section 7, the Company and the Underwriter shall be notified promptly by
letter or facsimile.
If the sale to the Underwriter of the Shares, as contemplated by this
Agreement, is not carried out by the Underwriter for any reason permitted under
this Agreement or if such sale is not carried out because the Company, the
Operating Partnership and the Financing Partnership shall be unable to comply
with any of the terms of this Agreement, the Company, the Operating Partnership
and the Financing Partnership shall not be under any obligation or liability
under this Agreement (except to the extent provided in Sections 5 and 8 hereof)
and the Underwriter shall be under no obligation or liability to the Company,
the Operating Partnership or the Financing Partnership under this Agreement
(except to the extent provided in Section 8 hereof) or to one another
hereunder.
1. Indemnity and Contribution by the Company and the
Underwriter:
a. The Company, the Operating Partnership and the Financing
Partnership, jointly and severally, agree to indemnify, defend and hold
harmless the Underwriter and any person who controls the Underwriter within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
from and against any loss, expense, liability or claim (including the
reasonable cost of investigation) which, jointly or severally, the Underwriter
or controlling person may incur under the Securities Act, the Exchange Act or
otherwise, insofar as such loss, expense, liability or claim arises out of or
is based upon any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement (or in the Registration Statement
as
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<PAGE> 21
amended by any post-effective amendment thereof by the Company) or in a
Prospectus (the term Prospectus for the purpose of this Section 8 being deemed
to include any Preliminary Prospectus, the Prospectus and the Prospectus as
amended or supplemented by the Company), or arises out of or is based upon any
omission or alleged omission to state a material fact required to be stated in
either such Registration Statement or Prospectus or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading, except insofar as any such loss, expense, liability or
claim arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission of a material fact contained in and
in conformity with information furnished in writing by the Underwriter to the
Company expressly for use in such Registration Statement or such Prospectus,
provided, however; that the indemnity agreement contained in this subsection
(a) with respect to any Preliminary Prospectus shall not inure to the benefit
of the Underwriter (or to the benefit of any person controlling the
Underwriter) with respect to any person asserting any such loss, expense,
liability or claim which is the subject thereof if the Prospectus corrected any
such alleged untrue statement or omission and if the Underwriter failed to send
or give a copy of the Prospectus to such person at or prior to the written
confirmation of the sale of Shares to such person, unless such failure resulted
from noncompliance by the Company with Section 4(b). The statements set forth
in the last paragraph on the cover page and under the caption "Underwriting" in
the Preliminary Prospectus and the Prospectus (to the extent such statements
relate to the Underwriter) constitute the only information furnished by or on
behalf of the Underwriter to the Company for purposes of Sections 2(b) and this
Section 8(a).
If any action is brought against the Underwriter or controlling person
in respect of which indemnity may be sought against the Company, the Operating
Partnership or the Financing Partnership pursuant to the preceding paragraph,
the Underwriter shall promptly notify the Company in writing of the institution
of such action and the Company shall assume the defense of such action,
including the employment of counsel and payment of expenses. The Underwriter or
controlling person shall have the right to employ its or their own counsel in
any such case, but the fees and expenses of such counsel shall be at the
expense of the Underwriter or such controlling person unless the employment of
such counsel shall have been authorized in writing by the Company in connection
with the defense of such action or the Company shall not have employed counsel
to have charge of the defense of such action within a reasonable time or such
indemnified party or parties shall have reasonably concluded (based on the
advice of counsel) that there may be defenses available to it or them which are
different from or additional to those available to the Company (in which case
the Company shall not have the right to direct the defense of such action on
behalf of the indemnified party or parties), in any of which events such fees
and expenses shall be borne by the Company and paid as incurred (it being
understood, however, that the Company shall not be liable for the expenses of
more than one separate counsel for the Underwriter or controlling persons in
any one action or series of related actions in the same jurisdiction
representing the indemnified parties who are parties to such action). Anything
in this paragraph to the contrary notwithstanding, the Company, the Operating
Partnership and the Financing Partnership shall not be liable for any
settlement of any such claim or action effected without its written consent.
a. The Underwriter agrees to indemnify, defend and hold
harmless the Company, the
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<PAGE> 22
Operating Partnership and the Financing Partnership and each of the Company's
directors and each of the Company's officers that signed the Registration
Statement and any person who controls the Company within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act from and against any
loss, expense, liability or claim (including the reasonable cost of
investigation) which, jointly or severally, the Company, the Operating
Partnership and the Financing Partnership or each such other person may incur
under the Securities Act, the Exchange Act or otherwise, insofar as such loss,
expense, liability or claim arises out of or is based upon any untrue statement
or alleged untrue statement of a material fact contained in and in conformity
with information furnished in writing by the Underwriter through the
Underwriter to the Company expressly for use in the Registration Statement (or
in the Registration Statement as amended by any post-effective amendment
thereof by the Company) or in a Prospectus, or arises out of or is based upon
any omission or alleged omission to state a material fact in connection with
such information required to be stated either in such Registration Statement or
Prospectus or necessary to make such information, in light of the circumstances
under which made, not misleading.
If any action is brought against the Company, the Operating
Partnership or any such other person in respect of which indemnity may be
sought against the Underwriter pursuant to the foregoing paragraph, the
Company, the Operating Partnership, the Financing Partnership or such person
shall promptly notify the Underwriter in writing of the institution of such
action and the Underwriter shall assume the defense of such action, including
the employment of counsel and payment of expenses. The Company, the Operating
Partnership, the Financing Partnership or such person shall have the right to
employ its own counsel in any such case, but the fees and expenses of such
counsel shall be at the expense of the Company, the Operating Partnership, the
Financing Partnership or such person unless the employment of such counsel
shall have been authorized in writing by the Underwriter in connection with the
defense of such action or the Underwriter shall not have employed counsel to
have charge of the defense of such action within a reasonable time or such
indemnified party or parties shall have reasonably concluded (based on the
advice of counsel) that there may be defenses available to it or them which are
different from or additional to those available to the Underwriter (in which
case the Underwriter shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such fees and expenses shall be borne by the Underwriter and paid as incurred
(it being understood, however, that the Underwriter shall not be liable for the
expenses of more than one separate counsel in any one action or series of
related actions in the same jurisdiction representing the indemnified parties
who are parties to such action). Anything in this paragraph to the contrary
notwithstanding, the Underwriter shall not be liable for any settlement of any
such claim or action effected without the written consent of the Underwriter.
a. If the indemnification provided for in this Section 8 is
unavailable to an indemnified party under subsections (a) and (b) of this
Section 8 in respect of any losses, expenses, liabilities or claims referred to
therein, then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, expenses, liabilities or claims
(i) in such proportion as is appropriate to reflect the relative benefits
received by the Company, the Operating Partnership and the Financing
Partnership on the one hand and the Underwriter on the other hand
-22-
<PAGE> 23
from the offering of the Shares or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company, the Operating Partnership and
the Financing Partnership on the one hand and of the Underwriter on the other
in connection with the statements or omissions which resulted in such losses,
expenses, liabilities or claims, as well as any other relevant equitable
considerations. The relative benefits received by the Company, the Operating
Partnership and the Financing Partnership on the one hand and the Underwriter
on the other shall be deemed to be in the same proportion as the total proceeds
from the offering (net of underwriting discounts and commissions but before
deducting expenses) received by the Company or the Operating Partnership bear
to the underwriting discounts and commissions received by the Underwriter. The
relative fault of the Company, the Operating Partnership and the Financing
Partnership on the one hand and of the Underwriter on the other shall be
determined by reference to, among other things, whether the untrue statement or
alleged untrue statement of a material fact or omission or alleged omission
relates to information supplied by the Company, the Operating Partnership, or
the Financing Partnership or by the Underwriter and the parties, relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The amount paid or payable by a party as a result
of the losses, claims, damages and liabilities referred to above shall be
deemed to include any legal or other fees or expenses reasonably incurred by
such party in connection with investigating or defending any claim or action.
b. The Company, the Operating Partnership, the Financing
Partnership and the Underwriter agree that it would not be just and equitable
if contribution pursuant to this Section 8 were determined by pro rata
allocation by any other method of allocation which does not take account of the
equitable considerations referred to in subsection (c) above. Notwithstanding
the provisions of this Section 8, (i) the Underwriter shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Shares underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which the Underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission and (ii) the Company, the Operating Partnership
and the Financing Partnership shall not be required to contribute any amount in
excess of the amount by which the proceeds received in connection herewith
exceed the amount of any damages which the Company has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
c. The indemnity and contribution agreements contained in
this Section 8 and the covenants, warranties and representations of the
Company, the Operating Partnership and the Financing Partnership contained in
this Agreement shall remain in full force and effect regardless of any
investigation made by or on behalf of the Underwriter, or any person who
controls the Underwriter within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act, or by or on behalf of the Company the
Operating Partnership or the Financing Partnership or the Company's directors
and officers or any person who controls the Company within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, and shall
survive any termination of this Agreement or the sale and delivery of the
Shares. The
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<PAGE> 24
Company, the Operating Partnership, the Financing Partnership and the
Underwriter agree promptly to notify the others of the commencement of any
litigation or proceeding against it and, in the case of the Company, against
any of the Company's officers and directors, in connection with the sale and
delivery of the Shares, or in connection with the Registration Statement or
Prospectus.
2. Notices: Except as otherwise herein provided, all statements,
requests, notices and agreements shall be in writing or by telegram and, if to
the Underwriter, shall be sufficient in all respects if delivered or sent to
Friedman, Billings, Ramsey & Co., Inc., 1001 19th Street North, Arlington,
Virginia 22209, Attention: Compliance Department; if to the Company, shall be
sufficient in all respects if delivered to the Company at the offices of the
Company at Pasquerilla Plaza, Johnstown, Pennsylvania 15901, Attention: General
Counsel.
3. Governing Law; Headings: THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF MARYLAND WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES. The section headings in this Agreement
have been inserted as a matter of convenience of reference and are not a part
of this Agreement.
4. Parties at Interest: The Agreement herein set forth has been
and is made solely for the benefit of the Underwriter, the Company, the
Operating Partnership, the Financing Partnership and the controlling persons,
directors and officers referred to in Section 8 hereof; and their respective
successors, assigns, executors and administrators. No other person,
partnership, association or corporation (including a purchaser, as such
purchaser, from the Underwriter) shall acquire or have any right under or by
virtue of this Agreement.
5. Counterparts: This Agreement may be signed by the parties in
counterparts which together shall constitute one and the same agreement among
the parties.
[signature page follows]
-24-
<PAGE> 25
If the foregoing correctly sets forth the understanding among the
Company, the Operating Partnership, the Financing Partnership and the
Underwriter, please so indicate in the space provided below for the
purpose, whereupon this Agreement shall constitute a binding agreement
among the Company, the Operating Partnership and the Underwriter.
Very truly yours,
CROWN AMERICAN REALTY TRUST
By:
Name:
Title:
CROWN AMERICAN PROPERTIES, L.P.
By: CROWN AMERICAN REALTY TRUST
By:
Name:
Title:
CROWN AMERICAN FINANCING PARTNERSHIP
By: CROWN AMERICAN FINANCING CORPORATION
By:
Name:
Title:
Accepted and agreed to as
of the date first above written:
FRIEDMAN, BILLINGS, RAMSEY &
CO., INC.
By:
Name:
Title:
-25-
<PAGE> 26
ANNEX I
Pursuant to Section 6(c) of the Underwriting Agreement, the
accountants shall furnish letters to the Underwriter to the effect that:
(i) They are independent certified public accountants with respect
to the Company and its subsidiaries within the meaning of the
Securities Act and the applicable rules and regulations thereunder;
(i) In their opinion, the financial statements and any supplemental
financial information and schedules audited (and, if applicable,
and/or pro forma financial information examined) by them and included
in the Prospectus or the Registration Statement comply as to form in
all material respects with the applicable accounting requirements of
the Securities Act and the related published rules and regulations
thereunder; and, if applicable, they have made a review in accordance
with standards established by the American Institute of Certified
Public Accountants of the unaudited consolidated interim financial
statements as indicated in their reports thereon, copies of which have
been furnished to the Underwriter;
(i) The unaudited selected financial information with respect to the
consolidated results of operations and financial position of the
Company for the five recent fiscal years included in the Prospectus
agrees with the corresponding amounts (after restatements where
applicable) in the audited consolidated financial statements for such
five fiscal years for such fiscal years;
(i) On the basis of limited procedures, not constituting an audit in
accordance with generally accepted auditing standards, consisting of a
reading of the unaudited financial statements and other information
referred to below, a reading of the latest available interim financial
statements of the Company and its subsidiaries, inspection of the
minute books of the Company and its subsidiaries since the date of the
latest audited financial statements included in the Prospectus,
inquiries of officials of the Company and its subsidiaries responsible
for financial and accounting matters and such other inquiries and
procedures as may be specified in such letter, nothing came to their
attention that caused them to believe that:
A) the unaudited consolidated statements of income,
consolidated balance sheets and consolidated statements of cash
flows included in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of
the Securities Act and the related published rules and
regulations thereunder, or are not in conformity with generally
accepted accounting principles applied on a basis substantially
consistent with the basis for the audited consolidated
statements of income, consolidated statements of income,
consolidated balance sheets and consolidated statements of cash
flows included in the Prospectus;
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<PAGE> 27
A) Any other unaudited income statement data and balance sheet
items included in the Prospectus do not agree with the
corresponding items in the unaudited consolidated financial
statements from which such data and items were derived, and any
such unaudited data and items were not determined on a basis
substantially consistent with the basis for the corresponding
amounts in the audited consolidated financial statements
included in the Prospectus;
A) the unaudited financial statements which were not included
in the Prospectus but from which were derived any unaudited
condensed financial statements referred to in Clause (A) and any
unaudited income statement data and balance sheet items included
in the Prospectus and referred to in Clause (B) were not
determined on a basis substantially consistent with the basis
for the audited consolidated financial statements included in
the Prospectus;
A) as of a specified date not more than five days prior to the
date of such letter, there have been any changes in the
consolidated capital shares (other than issuances of capital
shares upon exercise of options and share appreciation rights,
upon earn-outs of performance shares and upon conversions of
convertible securities, in each case which were outstanding on
the date of the latest financial statements included in the
Prospectus) or any increase in the consolidated long-term debt
of the Company and its subsidiaries, or any decreases in
consolidated net current assets or other items specified by the
Underwriter or any increases in any items specified by the
Underwriter, in each case as compared with amounts shown in the
latest balance sheet included in the Prospectus, except in each
case for changes, increases or decreases which the Prospectus
discloses have occurred or may occur or which are described in
such letter; and
A) for the period from the date of the latest financial
statements included in the Prospectus to the specified date
referred to in Clause (D) there were any decreases in
consolidated net revenues or operating profit or the total or
per share amounts of consolidated net income or other items
specified by the Underwriter, or any increases in any items
specified by the Underwriter, in each case as compared with the
comparable period of the preceding year and with any other
period of corresponding length specified by the Underwriter,
except in each case for decreases or increases which the
Prospectus discloses have occurred or may occur or which are
described in such letter.
(I) in addition to the audit referred to in their report(s) included
in the Prospectus and the limited procedures, inspection of minute books,
inquiries and other procedures referred to in paragraphs (iii) and (iv) above,
they have carried out certain specified procedures, not constituting an audit
in accordance with generally accepted auditing standards, with respect to
certain amounts, percentages and financial information specified by the
Underwriter, which are derived from the general accounting records of the
Company and its subsidiaries, which appear in
-27-
<PAGE> 28
the Prospectus, or in exhibits and schedules to the Registration Statement
specified by the Underwriter, and have compared certain of such amounts,
percentages and financial information with the accounting records of the
Company and its subsidiaries and have found them to be in agreement.
-28-
<PAGE> 29
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
UNDERWRITING AGREEMENT .................................................. 1
1. Sale and Purchase ................................................... 2
2. Payment and Delivery ................................................ 3
3. Representations and Warranties of the Company ....................... 4
4. Certain Covenants of the Company .................................... 11
5. Payment of Expenses ................................................. 13
6. Conditions of the Underwriter's Obligations ......................... 14
7. Termination ......................................................... 21
8. Indemnity and Contribution by the Company and the Underwriter ....... 22
9. Notices ............................................................. 25
10. Governing Law; Headings ............................................. 25
11. Parties at Interest ................................................. 25
12. Counterparts ........................................................ 25
Annex I ................................................................. 27
</TABLE>
-29-
<PAGE> 1
EXHIBIT 4.4
____% Senior Preferred Shares
(Liquidation Preference $50.00 Per Share)
ARTICLES SUPPLEMENTARY
CROWN AMERICAN REALTY TRUST
---------------------------
Articles Supplementary Classifying and Designating a
Series of Preferred Shares as
____% Senior Preferred Shares
and Fixing Distribution and
Other Preferences and Rights of Such Series
---------------------------
Dated as of ___, 1997
CROWN AMERICAN REALTY TRUST
-----------
Articles Supplementary Classifying and Designating a
Series of Preferred Shares as
_____% Senior Preferred Shares
and Fixing Distribution and
Other Preferences and Rights of Such Series
-----------
Crown American Realty Trust, a Maryland real estate
investment trust, having its principal office in the Commonwealth of
Pennsylvania in the City of Johnstown ("Crown"), hereby certifies to the State
Department of Assessments and Taxation of Maryland that:
FIRST: Pursuant to authority conferred upon the Board of
Trustees by the Second Amended and Restated Declaration of Trust (the
"Declaration") and Bylaws of Crown, the board of trustees of Crown (the "Board
of Trustees") adopted resolutions authorizing the creation and issuance of up
to 2,875,000 shares, with a liquidation preference of $50.00 per share, of %
Senior Preferred Shares (the "Senior Preferred Shares") and adopted resolutions
granting the Board of Trustees with full power and authority, subject to the
foregoing resolution, to determine the preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of the shares of such
series. Such preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption, number of shares and dividend rate, as determined by
such duly authorized committee are as follows:
<PAGE> 2
Section 1 Number of Shares and Designation.
This series of preferred shares shall be designated as _____%
Senior Preferred Shares (the "Senior Preferred Shares") and the number of
shares which shall constitute such series shall not be more than 2,875,000
shares, par value $.01 per share, which number may be decreased (but not below
the number thereof then outstanding) from time to time by the Board of
Trustees.
Section 2 Dividend Rights.
(a) Holders of the Senior Preferred Shares shall be entitled
to receive, when, as and if declared by the Board of Trustees, out of
funds legally available for the payment of dividends, cumulative,
preferential cash dividends in an amount per Senior Preferred Share
equal to $ per annum. Each such dividend shall be payable to holders
of record as they appear on the share transfer books of Crown on such
record dates as provided below.
(b) Dividends with respect to the Senior Preferred Shares
will be cumulative and will be payable quarterly in arrears in March,
June, September and December (on the same dates as dividends on Common
Shares, par value $.01 per share (the "Common Shares"), beginning with
the dividend payment for September 1997 (each, a "Preferred Dividend
Payment Date"). Any dividend payable on the Senior Preferred Shares
for any partial dividend period after the initial dividend period will
be computed on the basis of a 360-day year consisting of twelve 30-day
months. Dividends payable on the Senior Preferred Shares for each full
dividend period will be computed by dividing the annual dividend rate
by four. The initial dividend payable on the Senior Preferred Shares
in September 1997 will accrue from the date of issuance of the Senior
Preferred Shares up to but excluding the initial Preferred Dividend
Payment Date. Dividends will be payable to holders of record as they
appear in the share records of Crown at the close of business on the
applicable record date, which will be the first day of the calendar
month in which the applicable Preferred Dividend Payment Date falls or
such other date designated by the Board of Trustees for the payment of
dividends that is no more than thirty (30) nor less than ten (10) days
prior to such Preferred Dividend Payment Date (each, a "Preferred
Dividend Record Date").
(c) No dividends on the Senior Preferred Shares will be
declared by the Board of Trustees or paid or set apart for payment by
Crown at such time as, and to the extent that, the terms and
provisions of any agreement of Crown, including any agreement relating
to its indebtedness, or any provisions of the Declaration relating to
any series of preferred shares ranking senior to the Senior Preferred
Shares as to dividends, prohibit such declaration, payment or setting
apart for payment or provide that such declaration, payment or setting
apart for payment would constitute a breach thereof or a default
thereunder, or if such declaration or payment will be prohibited by
law. Notwithstanding
-2-
<PAGE> 3
the foregoing, dividends on the Senior Preferred Shares will accrue
whether or not Crown has earnings, whether or not there are funds
legally available for the payment of such dividends and whether or not
such dividends are declared. Holders of the Senior Preferred Shares
will not be entitled to any dividends in excess of full cumulative
dividends as described above.
(d) If any Senior Preferred Shares are outstanding, no full
dividends will be declared or paid or set apart for payment on the
capital shares of Crown of any other series ranking, as to dividends,
on a parity with or junior to the Senior Preferred Shares for any
period unless full cumulative dividends 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 Senior Preferred Shares for
all past dividend periods and the then current dividend period. When
dividends are not paid in full (or a sum sufficient for such full
payment is not so set apart) upon the Senior Preferred Shares and any
series of preferred shares ranking on a parity as to dividends with
the Senior Preferred Shares, all dividends declared upon the Senior
Preferred Shares and any series of preferred share ranking on a parity
as to dividends with the Senior Preferred Shares will be declared pro
rata so that the amount of dividends declared per Senior Preferred
Share and such other series of preferred shares will in all cases bear
to each other the same ratio that accrued and unpaid dividends per
Senior Preferred Share and such other series of preferred shares bear
to each other. No interest, or sum of money in lieu of interest, will
be payable in respect of any dividend payment or payments on the
Senior Preferred Shares which may be in arrears.
(e) Except as provided in the immediately preceding
paragraph, unless full cumulative dividends on the Senior Preferred
Shares have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for
payment for all past dividend periods and the then current dividend
period, no dividends (other than distributions payable on Common
Shares or other capital shares ranking junior to the Senior Preferred
Shares as to dividends and upon liquidation, dissolution or winding up
of Crown) will be declared or paid or set aside for payment, and no
other distribution will be declared or made, upon the Common Shares or
any other capital shares of Crown ranking junior to or on a parity
with the Senior Preferred Shares as to dividends, nor will any Common
Shares or any other capital shares of Crown ranking junior to or on a
parity with the Senior Preferred Shares as to dividends or upon
liquidation, dissolution or winding up of Crown 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 Senior Preferred Shares
as to dividends and upon liquidation, dissolution and winding up).
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<PAGE> 4
(f) Any dividend payment made on Senior Preferred Shares
shall first be credited against the earliest accrued but unpaid
dividend due with respect to the Senior Preferred Shares which remains
payable.
Section 3 Distribution Upon Liquidation, Dissolution or
Winding Up.
(a) In the event of any liquidation, dissolution or winding
up of Crown, subject to the prior rights of any series of capital
shares ranking senior to the Senior Preferred Shares, the holders of
Senior Preferred Shares will be entitled to be paid out of the assets
of Crown legally available for distribution to its shareholders a
liquidation preference equal to the sum of $50.00 per Senior Preferred
Share plus an amount equal to any accrued and unpaid dividends thereon
(whether or not earned or declared) to the date of payment (the
"Preferred Liquidation Preference Amount"), before any distribution of
assets is made to holders of Common Shares or any other capital shares
that ranks junior to the Senior Preferred Shares as to liquidation
rights. After payment of the full amount of the liquidating
distributions to which they are entitled, the holders of the Senior
Preferred Shares will have no right or claim to any of the remaining
assets of Crown.
(b) In the event that, upon any such voluntary or involuntary
liquidation, dissolution or winding up of Crown, the legally available
assets of Crown are insufficient to pay the Preferred Liquidation
Preference Amount on all outstanding Senior 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 Senior
Preferred Shares in the distribution of assets upon liquidation,
dissolution or winding up of Crown, then the holders of the Senior
Preferred Shares and all other such classes or series of capital
shares will share ratably in any such distribution of assets in
proportion to the full liquidating distributions to which they would
otherwise be respectively entitled.
(c) If liquidating distributions have been made in full to
all holders of Senior Preferred Shares, the remaining assets of Crown
will be distributed among the holders of any other classes or series
of capital shares ranking junior to Senior Preferred Shares upon
liquidation, dissolution or winding up of Crown, according to their
respective rights and preferences and in each case according to their
respective number of shares.
(d) The consolidation or merger of Crown with or into any
other corporation, or the sale, lease, transfer or conveyance of all
or substantially all of the property or business of Crown, will not be
deemed to constitute a liquidation, dissolution or winding up of Crown
for these purposes.
-4-
<PAGE> 5
Section 4 Redemption by Crown.
(a) The Senior Preferred Shares will not be redeemable prior
to , 2002, except under certain limited circumstances to
preserve Crown's status as a REIT. See "Restrictions on Transfer." On
and after , 2002, Crown, at its option (to the extent Crown has
funds legally available therefor) upon not less than 30 nor more than
60 days written notice, may redeem the Senior Preferred Shares, in
whole or in part, at any time or from time to time, for cash at the
redemption price per share of $ , plus all accrued and unpaid
dividends, if any, thereon (whether or not earned or declared) to the
date fixed for redemption (the "Redemption Date").
(b) Notwithstanding the foregoing, unless full cumulative
dividends on all Senior Preferred Shares have been or
contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for all past
dividend periods and the then current dividend period, no Senior
Preferred Shares will be redeemed unless all outstanding Senior
Preferred Shares are simultaneously redeemed; provided, however, that
the foregoing will not prevent the purchase or acquisition of Senior
Preferred Shares pursuant to a purchase or exchange offer made on the
same terms to holders of all outstanding Senior Preferred Shares, and
unless full cumulative dividends on all outstanding Senior Preferred
Shares have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for
payment for all past dividend periods and the then current dividend
period, Crown will not purchase or otherwise acquire directly or
indirectly through a subsidiary or otherwise, any Senior Preferred
Shares.
(c) If fewer than all of the outstanding Senior Preferred
Shares 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 (as nearly as may be practicable without
creating fractional Senior Preferred Shares) or any other equitable
method determined by Crown.
(d) Notice of redemption will be given by publication in a
newspaper of general circulation in the City of New York, such
publication to be made once a week for two successive weeks commencing
not less than 30 nor more than 60 days prior to the Redemption Date. A
similar notice will be mailed by Crown, postage prepaid, not less than
30 nor more than 60 days prior to the Redemption Date, addressed to
the respective holders of record of the Senior Preferred Shares to be
redeemed at their respective addresses as they appear on the share
transfer records of Crown. No failure to give such notice or any
defect therein or in the mailing thereof will affect the validity of
the proceeding for the redemption of any Senior Preferred Shares
except as to the holder to whom notice was defective or not given.
Each notice will
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<PAGE> 6
state: (i) the Redemption Date; (ii) the redemption price; (iii) the
aggregate number of Senior Preferred Shares to be redeemed and, if
less than all Senior Preferred Shares held by the shareholder are to
be redeemed, the number of Senior Preferred Shares to be redeemed;
(iv) the place or places where the Senior Preferred Shares are to be
surrendered for payment of the redemption price; and (v) that
dividends on the Senior Preferred Shares to be redeemed will cease to
accrue on such Redemption Date. If fewer than all the Senior Preferred
Shares held by any holder are to be redeemed, the notice mailed to
such holder will also specify the number of Senior Preferred Shares to
be redeemed from such holder. If notice of redemption of any Senior
Preferred Shares has been properly given and if funds necessary for
such redemption have been irrevocably set aside by Crown in trust for
the benefit of the holders of any of the Senior Preferred Shares so
called for redemption, then from and after the Redemption Date
dividends will cease to accrue on such Senior Preferred Shares, such
Senior Preferred Shares will no longer be deemed to be outstanding and
all rights of the holders of such Senior Preferred Shares will
terminate except for the right to receive the applicable redemption
price and other amounts payable in respect of such Senior Preferred
Shares.
(e) The holders of the Senior Preferred Shares at the close
of business on a Preferred Dividend Record Date will be entitled to
receive the dividend payable with respect to such Senior Preferred
Shares on the corresponding Preferred Dividend Payment Date
notwithstanding the redemption thereof between such Preferred Dividend
Record Date and the corresponding Preferred Dividend Payment Date or
Crown's default in the payment of the dividend due. Except as provided
above, Crown will make no payment or allowance for unpaid dividends,
whether or not in arrears, on Senior Preferred Shares called for
redemption.
(f) All Senior Preferred Shares redeemed shall be retired and
shall be restored to the status of authorized and unissued preferred
shares, without designation as to series, and subject to the
applicable limitations set forth herein may thereafter be reissued as
any series of preferred shares.
(g) The Senior Preferred Shares have no stated maturity and
will not be subject to any sinking fund.
Section 5 Voting Rights.
(a) Holders of the Senior Preferred Senior Preferred Shares
will not have any voting rights, except as set forth below or as
otherwise from time to time required by law. Subject to the provisions
in the Declaration regarding Excess Shares (as defined in the
Declaration), in any matter in which the Senior Preferred Shares may
vote, including any action by written consent, each Senior Preferred
Share will be entitled to one vote. The holders
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<PAGE> 7
of each Senior Preferred Share may separately designate a proxy for
the vote to which that Senior Preferred Share is entitled.
(b) Whenever dividends on any Senior Preferred Shares have
been in arrears for six or more quarterly periods (regardless of
whether such periods are consecutive), the holders of such Senior
Preferred Shares (voting separately as a class with all other series
of preferred shares upon which rights to vote on such matter with
Senior Preferred Shares have been conferred and are then exercisable)
will be entitled to vote for the election of two additional trustees
of Crown at a special meeting called by the holders of record of at
least 10% of the Senior Preferred Shares and such other preferred
shares, if any (unless such request is received less than 90 days
before the date fixed for the next annual or special meeting of the
shareholders), or at the next annual meeting of shareholders, and at
each subsequent annual meeting until all dividends accumulated on such
Senior Preferred Shares for the past dividend periods and the then
current dividend period have been fully paid or declared and a sum
sufficient for the payment thereof set aside for payment. In such
event, the entire Board of Trustees will be increased by two trustees.
Each of such two trustees will be elected to serve until the earlier
of (i) the election and qualification of such trustee's successor or
(ii) payment of the dividend arrearage for the Senior Preferred
Shares.
(c) If any trustee so elected by the holders of the Senior
Preferred Shares shall cease to serve as a trustee before such
trustee's term shall expire, the holders of the Senior Preferred
Shares (and any other series of preferred shares, if any, entitled to
vote on such matter, as described above) then outstanding may, at a
special meeting of the holders called as provided above, elect a
successor to hold office for the unexpired term of the trustee whose
place shall be vacant.
(d) So long as any Senior Preferred Shares remain
outstanding, Crown will not (i) without the affirmative vote or
consent of the holders of at least a majority of the Senior Preferred
Shares outstanding at the time, given in person or by proxy, either in
writing or at a meeting (such series voting separately as a class),
authorize, create or issue, or increase the authorized or issued
amount of, any class or series of capital shares ranking senior to the
Senior Preferred Shares with respect to payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up, or
create, authorize or issue any obligation or security convertible into
or evidencing the right to purchase any such shares; or (ii) without
the affirmative vote or consent of the holders of at least two-thirds
of the Senior Preferred Shares outstanding at the time, given in
person or by proxy, either in writing or at a meeting (such series
voting separately as a class), amend, alter or repeal the provisions
of the Declaration, whether by merger, consolidation or otherwise, so
as to materially and adversely affect any right, preference, privilege
or voting power of the Senior Preferred
-7-
<PAGE> 8
Shares or the holders thereof; provided, however, that any increase in
the amount of the authorized preferred shares, or the creation or
issuance of any other series of preferred shares, or any increase in
the amount of authorized shares of preferred shares or any other
series of preferred shares, in each case ranking on a parity with or
junior to the Senior Preferred Shares with respect to payment of
dividends or the distribution of assets upon liquidation, dissolution
or winding up of Crown, will not be deemed to materially and adversely
affect such rights, preferences, privileges or voting powers.
(e) The foregoing voting provisions will not apply if, at or
prior to the time when the act with respect to which such vote would
otherwise be required is effected, all outstanding Senior Preferred
Shares have been redeemed or called for redemption upon proper notice
and sufficient funds have been deposited in trust to effect such
redemption.
Section 6 Ranking.
The Senior 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, and
to all equity and debt securities which are specifically designated as
ranking junior to the Senior 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 Senior 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 Senior
Preferred Shares with respect to dividend rights or rights upon
liquidation, dissolution or winding up of Crown.
Section 7 Restrictions on Transfer.
The Senior Preferred Shares shall be subject to the
limitations on ownership and transfer set forth in the Declaration.
SECOND: The Senior Preferred Shares have been classified and
designated by the Board of Trustees under the authority contained in the
Declaration.
THIRD: These Articles Supplementary have been approved by the
Board of Trustees in the manner and by the vote required by law.
FOURTH: The undersigned Chairman of the Board of Trustees and
Chief Executive Officer acknowledges these Articles Supplementary to be the
trust act of Crown and, as to all matters or facts required to be verified
under oath, the undersigned acknowledges that to the best of his knowledge,
information and belief,
-8-
<PAGE> 9
these matters and facts are true in all material respects and that this
statement is made under the penalties of perjury.
IN WITNESS WHEREOF, Crown has caused these Articles
Supplementary to be signed in its name and on its behalf by its Chairman of the
Board of Trustees and Chief Executive Officer and attested to by its Secretary
on this ______ day of , 1997 and its said Chairman of the Board of
Trustees and Chief Executive Officer acknowledges under the penalties of perjury
that these Articles Supplementary are the corporate act of Crown and that to the
best of his knowledge, information and belief, the matters and facts set forth
herein are true in all material respects.
CROWN AMERICAN REALTY TRUST
By: _____________________________
Name: Frank J. Pasquerilla
Title: Chairman of the Board of Trustees
and Chief Executive Officer
Attest:
By: __________________________
Name: ____________________
Title: Secretary
-9-
<PAGE> 1
EXHIBIT 8
REED SMITH SHAW & MCCLAY
2500 ONE LIBERTY PLACE
1650 MARKET STREET
PHILADELPHIA, PENNSYLVANIA 19103-7301 HARRISBURG, PA
McLEAN, VA
215-851-8100 NEW YORK, NY
WRITER'S DIRECT NUMBERS: NEWARK, NJ
PHONE 215-851-8208 FAX 215-851-1420 PITTSBURGH, PA
FAX 215-851-1420 PRINCETON, NJ
INTERNET [email protected] WASHINGTON, DC
June __, 1997
Crown American Realty Trust
Pasquerilla Plaza
Johnstown, Pennsylvania 15901-0879
Re: FEDERAL INCOME TAX CONSEQUENCES
-------------------------------
Ladies and Gentlemen:
We have acted as counsel to Crown American Realty Trust, a
Maryland real estate investment trust (the "Company"), in connection with its
issuance of preferred shares of beneficial interest of the Company pursuant to
a registration statement on Form S-3 under the Securities Act of 1933, as
amended, filed with the Securities and Exchange Commission on May 12, 1997 as
amended as of the date it became effective (the "Registration Statement").
You have requested our opinion concerning certain of the
federal income tax consequences to the Company and the purchasers of the
securities described above in connection with the issuance described above.
This opinion is based on various facts and assumptions, including the facts set
forth in the Registration Statement concerning the business, properties and
governing documents of the Company and Crown American Properties, L.P. (the
"Operating Partnership") and Crown American Financing Partnership (the
"Financing Partnerships" and collectively the "Partnerships"). We have also
been furnished with, and with your consent have relied upon, certain
representations made by the Company and the Partnerships with respect to
certain factual matters through a certificate of an officer of the Company (the
"Officer's Certificate").
In our capacity as counsel to the Company, we have made such
legal and factual examinations and inquiries, including an examination of
originals or copies certified or otherwise identified to our satisfaction of
such documents, corporate records and other instruments as we have deemed
necessary or appropriate for purposes of this opinion. In our examination, we
have assumed the authenticity of all documents submitted to us as originals,
the genuineness of all signatures thereon, the legal capacity of natural
persons executing such documents and the conformity to authentic original
documents of all documents submitted to us as copies.
We are opining herein as to the effect on the subject
transaction only of the federal income tax laws of the United States and we
express no opinion with respect to the applicability thereto, or the effect
thereon, of other federal laws, the laws of any state or other jurisdiction or
as to any matters of municipal law or the laws of any other local agencies
within any state.
Based on such facts, assumptions and representations, it is
our opinion that:
<PAGE> 2
REED SMITH SHAW & McCLAY
Crown American Realty Trust
June __, 1997
Page 2
1. Commencing with the Company's taxable year ending December
31, 1993, the Company has been organized in conformity with the requirements
for qualification as a "real estate investment trust," and its proposed method
of operation, as described in the Prospectus, will enable the Company to
satisfy the requirements for qualification and taxation as a "real estate
investment trust" under the Internal Revenue Code of 1986 (the "Code").
2. The statements in the Registration Statement set forth
under the captions "Certain Federal Income Tax Considerations to Crown of its
REIT Election" and "Federal Income Tax Consequences" to the extent such
information constitutes matters of law, summaries of legal matters, or legal
conclusions, have been reviewed by us and are accurate in all material
respects.
No opinion is expressed as to any matter not discussed
herein.
This opinion is based on various statutory provisions,
regulations promulgated thereunder and interpretations thereof by the Internal
Revenue Service and the courts having jurisdiction over such matters, all of
which are subject to change either prospectively or retroactively. Also, any
variation or difference in the facts from those set forth in the Registration
Statement or the Officer's Certificate may affect the conclusions stated
herein. Moreover, the Company's qualification and taxation as a real estate
investment trust depends upon the Company's ability to satisfy, through actual
annual operating results, distribution levels and diversity of stock ownership,
the various qualification tests imposed under the Code, the results of which
have not been and will not be reviewed by us. Accordingly, no assurance can be
given that the actual results of the Company's operation for any one taxable
year will satisfy such requirements.
This opinion is rendered only to you, and is solely for your
use in connection with the issuance of preferred stock by the Company pursuant
to the Registration Statement. This opinion may not be relied upon by you for
any other purpose, or furnished to, quoted to, or relied upon by any other
person, firm or corporation, for any purpose, without our prior written
consent. We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the caption "Legal
Matters" in the Registration Statement.
Very truly yours,
REED SMITH SHAW & McCLAY
WLK:fgy
<PAGE> 1
Exhibit 23.2
ARTHUR ANDERSEN LLP
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.
/s/ ARTHUR ANDERSEN LLP
-----------------------
ARTHUR ANDERSEN LLP
Washington, D.C.,
June 27, 1997
<PAGE> 1
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 any or all amendments or post-effective amendments thereto 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 and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue thereof.
June 12, 1997 /s/ Clifford A. Barton
- --------------- ----------------------
Date (Name) Clifford A. Barton
Title: Trustee
<PAGE> 2
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 any or all amendments or post-effective amendments thereto 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 and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue thereof.
June 12, 1997 /s/ Zachary L. Solomon
- --------------- -------------------------
Date (Name) Zachary L. Solomon
Title: Trustee
