SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
Commission file number: 1-12216
CROWN AMERICAN REALTY TRUST
(Exact name of registrant as specified in its charter)
Maryland
(State or other jurisdiction of incorporation or organization)
25-1713733
(IRS Employer Identification No.)
Pasquerilla Plaza, Johnstown, Pennsylvania 15901
(Address of principal executive offices)
(814) 536-4441
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Common Shares of Beneficial Interest, par value $.01 per share
11.00% Senior Preferred Shares, par value $.01 per share ($50.00 Liquidation
Preference)
(Title of Class)
As of October 16, 2000, 26,207,919 Common Shares of Beneficial Interest and
2,475,000 11.00% Senior Preferred Shares of the registrant were outstanding.
New York Stock Exchange
(Name of Exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
at least the past 90 days.
Yes X No ____
Crown American Realty Trust
Form 10-Q
For the Quarterly Period ended September 30, 2000
INDEX
Part I - Financial Information
Item 1: Financial Statements
Consolidated Balance Sheets as of September 30, 2000 and
December 31, 1999
Consolidated Statements of Operations for the three and nine
months ended September 30, 2000 and 1999
Consolidated Statement of Shareholders' Equity for the nine
months ended September 30, 2000
Consolidated Statements of Cash Flows for the nine months
ended September 30, 2000 and 1999
Notes to Consolidated Financial Statements
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations
Part II - Other Information
Item 1: Legal Proceedings
Item 2: Changes in Securities
Item 3: Defaults Upon Senior Securities
Item 4: Submission of Matters to a Vote of Security Holders
Item 5: Other Information
Item 6: Exhibits and Reports on Form 8-K
Signatures
<TABLE>
<CAPTION>
CROWN AMERICAN REALTY TRUST
Consolidated Balance Sheets
September 30, December 31,
2000 1999
(Unaudited)
(in thousands, except share
and per share data)
Assets
<S> <C> <C>
Income-producing properties:
Land $ 151,807 $ 154,341
Buildings and improvements 1,010,750 986,042
Deferred leasing and other charges 45,573 44,313
Net 1,208,130 1,184,696
Accumulated depreciation and amortization (418,884) (388,965)
Net 789,246 795,731
Minority interest in Operating Partnership 3,129 -
Other assets:
Investment in joint venture 4,542 5,055
Cash and cash equivalents, unrestricted 7,589 17,171
Restricted cash and escrow deposits 10,308 15,635
Tenant and other receivables 14,136 15,859
Deferred charges and other assets 25,241 25,757
Net $ 854,191 $ 875,208
Liabilities and Shareholders' Equity
Liabilities:
Debt on income-producing properties $ 722,817 $ 709,000
Accounts payable and other liabilities 28,829 37,630
Net 751,646 746,630
Minority interest in Operating Partnership - 2,727
Commitments and contingencies
Shareholders' equity:
Non-redeemable senior preferred shares, 11%
cumulative, $.01 par value, 2,500,000 shares
issued 25 25
Common shares, par value $.01 per share,
120,000,000 shares authorized, 27,742,317
shares issued at both September 30, 2000 and
December 31, 1999 277 277
Additional paid-in capital 317,443 316,421
Accumulated deficit (199,619) (176,220)
Net 118,126 140,503
Less common shares held in treasury at cost,
1,534,398 shares at both September 30, 2000 and
December 31, 1999 (14,652) (14,652)
Less preferred shares held in treasury, 25,000
shares and 0 shares at September 30, 2000 and
December 31, 1999, respectively (929) -
Net 102,545 125,851
Net $ 854,191 $ 875,208
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
<CAPTION>
CROWN AMERICAN REALTY TRUST
Consolidated Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Rental operations:
Revenues:
Minimum rent $ 27,139 $ 25,311 $ 80,407 $ 75,556
Percentage rent 1,502 1,382 5,336 4,083
Property operating cost recoveries 9,020 8,309 26,942 24,665
Temporary and promotional leasing 1,940 1,951 6,051 5,759
Net utility income 798 701 2,635 2,349
Miscellaneous income 386 220 872 617
Net 40,785 37,874 122,243 113,029
Property operating costs:
Recoverable operating costs 11,683 10,864 35,065 32,527
Property administrative costs 594 537 1,811 1,651
Other operating costs 585 470 1,708 1,464
Depreciation and amortization 11,732 10,933 35,496 33,259
Net 24,594 22,804 74,080 68,901
Net 16,191 15,070 48,163 44,128
Other expenses:
General and administrative 1,192 1,073 3,623 3,301
Restructuring costs - 1,212 369 2,251
Interest, net 14,454 12,901 42,532 37,632
Net 15,646 15,186 46,524 43,184
Net 545 (116) 1,639 944
Loss on sale of assets (209) - (192) -
Gain on sale of outparcel land 467 - 821 100
Income (loss) before minority
interest in Operating Partnership 803 (116) 2,268 1,044
Minority interest in income (loss)
of Operating Partnership (622) 984 875 2,566
Net income 181 868 3,143 3,610
Dividends on preferred shares (3,417) (3,438) (10,292) (10,313)
Net (loss) applicable to common
shares $ (3,236) $(2,570) $ (7,149) $ (6,703)
Per common share data:
Basic EPS:
Net (loss) $ (0.12) $ (0.10) $ (0.27) $ (0.26)
Weighted average shares outstanding 26,208 26,208 26,208 26,208
Diluted EPS:
Net (loss) $ (0.12) $ (0.10) $ (0.27) $ (0.26)
Weighted average shares outstanding 26,208 26,208 26,208 26,208
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
<CAPTION>
CROWN AMERICAN REALTY TRUST
Consolidated Statement of Shareholders' Equity
(Unaudited)
(In Thousands)
Common
Shares Senior Additional
Issued and Preferred Common Paid in
Outstanding Shares Shares Capital
<S> <C> <C> <C> <C>
Balance, December 31, 1999 26,208 $ 25 $ 277 $ 316,421
Transfer in (out) of limited
partner's interest in the
Operating Partnership - - - (96)
Capital contributions from
Crown Investments Trust:
Cash flow support - - - 1,118
Buyback of preferred shares - - - -
Net income - - - -
Dividends paid and accrued - - - -
Balance, September 30, 2000 26,208 $ 25 $ 277 $ 317,443
Common Preferred
Shares Shares
Accumulated Held in Held in
Deficit Treasury Treasury Total
Balance, December 31, 1999 $ (176,220) $ (14,652) $ - $ 125,851
Transfer in (out) of limited
partner's interest in the
Operating Partnership - - - (96)
Capital contributions from
Crown Investments Trust:
Cash flow support - - - 1,118
Buyback of preferred shares - - (929) (929)
Net income 3,143 - - 3,143
Dividends paid and accrued (26,542) - - (26,542)
Balance, September 30, 2000 $ (199,619) $ (14,652) $ (929) $ 102,545
The accompanying notes are an Integral part of these statements.
</TABLE>
<TABLE>
<CAPTION>
CROWN AMERICAN REALTY TRUST
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
September 30,
2000 1999
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,143 $ 3,610
Adjustments to reconcile net income to net cash
provided by operating activities:
Minority interest in Operating Partnership (875) (2,566)
Equity earnings in joint venture (117) (249)
Depreciation and amortization 40,281 37,371
Loss on sale of assets 192 -
Restructuring costs 369 2,251
Net changes in:
Tenant and other receivables 1,632 3,603
Deferred charges and other assets (4,351) (2,812)
Restricted cash and escrow deposits 829 1,256
Accounts payable and other liabilities (9,175) (7,939)
Net cash provided by operating activities 31,928 34,525
Cash flows from investing activities:
Investment in income-producing properties (33,200) (42,718)
Proceeds from asset sales 8,930 -
Distributions from joint venture 353 550
Net cash (used in) investing activities (23,917) (42,168)
Cash flows from financing activities:
Net proceeds from exercise of stock options and
dividend reinvestment plan - 6
Purchase of preferred shares held in treasury (929) -
Proceeds from issuance of debt, net of deposits and
issuance cost 31,539 48,214
Debt repayments (17,809) (12,122)
Dividends and distributions paid on common shares and
partnership units (22,422) (22,060)
Dividends paid on senior preferred shares (10,293) (10,313)
Cash flow support payments 2,321 2,318
Net cash (used in) provided by financing activities (17,593) 6,043
Net (decrease) in cash and cash equivalents (9,582) (1,600)
Cash and cash equivalents, beginning of period 17,171 13,512
Cash and cash equivalents, end of period $ 7,589 $ 11,912
SUPPLEMENTAL CASH FLOW DATA:
Interest paid (net of capitalized amounts) $ 40,685 $ 36,533
Interest capitalized $ 791 $ 1,205
The accompanying notes are an integral part of these statements.
</TABLE>
CROWN AMERICAN REALTY TRUST
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
Organization
Crown American Realty Trust (the "Company") was formed on May 14, 1993 as a
Maryland real estate investment trust (a "REIT") 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"). 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. The Company
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% general partnership interest in
Crown American Properties, L.P. (the "Operating Partnership"), a partnership
which was formed just prior to consummation of the offering to own and operate
the Properties. These proceeds, along with new borrowings, were used by the
Operating Partnership to retire debt related to the Properties.
Simultaneously with the public offering, Crown Associates and an affiliate
transferred the Properties and the management operations into either the
Company, 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 the Company.
The limited partnership interest in the Operating Partnership and the 1.6
million shares in the Company received for two malls transferred in 1993 are
currently held by Crown Investments Trust ("Crown Investments") and by Crown
American Investment Company (a subsidiary of Crown Investments).
As of September 30, 2000, the Properties consist of: (1) 26 wholly-owned
enclosed shopping malls (together with adjoining outparcels and undeveloped
land) located in Pennsylvania, New Jersey, Maryland, Tennessee, North Carolina,
West Virginia, Virginia and Georgia, (2) a 50% general partnership interest in
Palmer Park Mall Venture, which owns Palmer Park Mall located in Easton,
Pennsylvania, (3) Pasquerilla Plaza, an office building in Johnstown,
Pennsylvania, which serves as the headquarters of the Company and is partially
leased to other parties, and (4) a parcel of land and building improvements
located in Pennsylvania (under ground lease with a purchase option) sub-leased
to a department store chain.
As the owner of real estate, the Company 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 the Company also depends upon certain key
personnel, the Company's ability to maintain its qualification as 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 interest
rates, income tax laws, governmental regulations and legislation and population
trends.
Basis of Presentation
The accompanying consolidated financial statements of the Company include all
accounts of the Company, its wholly-owned subsidiaries, and its majority-owned
subsidiary, the Operating Partnership. The Operating Partnership directly owns
seven malls, the 50% joint venture interest in Palmer Park Mall, the Corporate
headquarters building, and the Westgate anchor pad. All remaining properties
are owned by seven partnerships and limited liability companies that are either
99.5% or 100.0% owned by the Operating Partnership. The remaining 0.5%
interests in these second-tier entities are owned by the Company through its
wholly-owned subsidiaries. The Operating Partnership also has all paid
employees and manages all properties except the Palmer Park Mall and the
Westgate anchor pad. Other than its ownership interests in its subsidiaries,
the Company owns no other assets and has no other business activities. The
Company is the sole general partner in the Operating Partnership, and at
September 30, 2000 the Company held 100% of the preferred partnership interests
and 72.47% of the common partnership interests. All significant intercompany
amounts have been eliminated.
In the opinion of management, the accompanying unaudited consolidated interim
financial statements include all adjustments of a normal recurring nature
necessary for a fair presentation of the financial position and results of
operations of the Company. These consolidated interim financial statements and
the accompanying notes should be read in conjunction with the audited
consolidated financial statements of the Company for the year ended December 31,
1999, which are included in its Annual Report on Form 10-K. The results of
operations for interim periods are not necessarily indicative of results to be
expected for the year.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Certain reclassifications have been made to prior year amounts to conform to the
current year presentation.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Minority Interest
Minority interest represents the common partnership units in the Operating
Partnership that are owned by Crown Investments and its subsidiary. At
September 30, 2000 Crown Investments and its subsidiary owned 9,956,398 common
partnership units, or 27.53% of the total common partnership units outstanding.
Crown American Realty Trust owns the remaining 72.47%. The minority interest
balance is adjusted each year for Crown Investments' and its subsidiary's
proportionate share of net income (loss) of the Operating Partnership (after
deducting preferred unit distributions), common partnership distributions, and
additional capital contributions. Primarily because the common partnership
distributions have been larger than the Operating Partnership's income (loss)
after preferred unit distributions, the minority interest account on the
consolidated balance sheet has been declining each year. The balance was
reduced to below zero in the second quarter of 2000. Under generally accepted
accounting principles, when the minority partner's share of the Operating
Partnership's net income (loss) and the minority partner's cash distributions
and capital contributions, would cause the minority interest balance to be less
than zero, such balance must be reported at zero unless there is a legal
obligation of the minority partner to reimburse the Operating Partnership for
such excess amounts. The partnership agreement does provide for such obligation
by the minority partner in the form of cash flow support payments on four of the
Company's malls that were in the lease-up phase at the time of the Company's IPO
in 1993. Accordingly, since the minority interest account is reduced to below
zero, and there is a legal obligation of the minority partner to fund a portion
of the Operating Partnership's losses, the minority interest balance at
September 30, 2000 is shown on the Consolidated Balance Sheet as an asset. This
asset balance at September 30, 2000 has been limited to $3.1 million, the
estimated amount of cash flow support to be received over the next twelve
months. As the cash flow support amounts are received in the future, 100% of
these amounts will be credited directly against the minority interest balance,
as long as the minority interest balance remains as an asset. An additional
amount of $1.3 million, representing the excess losses and distributions over
and above the cash flow support, has been absorbed by the Operating Partnership
in its share of losses for the third quarter.
Net Income (Loss) Per Share
During 1997 the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 128, Earnings Per Share. Under SFAS No. 128, basic income (loss)
per common share is computed by dividing net income (loss) applicable to common
shares, as shown in the Consolidated Statements of Operations, by the weighted
average number of common shares outstanding for the year. Diluted income (loss)
per share is computed the same way except that the weighted average number of
common shares outstanding is increased, using the treasury stock method, for the
assumed exercise of options under the Company's share incentive plans, which are
the Company's only dilutive securities. Because no anti-dilution is permitted
under SFAS No. 128, diluted and basic EPS for the nine months ended September
30, 2000 and 1999 are identical.
The calculation of diluted earnings per share for the nine months ended
September 30, 2000 and 1999 would have included 18,000 shares and 0 shares
respectively, for the assumed exercise of options under the Company's share
incentive plans, except that no anti-dilution is permitted under SFAS No. 128.
NOTE 3 - DEBT ON INCOME-PRODUCING PROPERTIES
Debt on income-producing properties consisted of the following (in thousands):
September 30, 2000 December 31, 1999
Mortgage loans $ 465,000 $ 465,000
Permanent loans 119,321 131,429
Construction loans 23,929 15,625
Secured lines of credit 114,567 96,946
$ 722,817 $ 709,000
Mortgage Loans
Concurrently with the offering of shares of the Company in 1993, the Financing
Partnership borrowed an aggregate $300 million in mortgage debt through Kidder
Peabody Mortgage Capital Corporation (collectively, the "Kidder Mortgage
Loans"). In connection with obtaining a construction loan for rebuilding and
expanding Logan Valley Mall, in December 1995 the Company repaid $19.4 million
of the Kidder Mortgage Loans in order to release the Logan Valley Mall from the
Kidder Mortgage Loans and Financing Partnership. No prepayment penalty was
incurred. On August 28, 1998, the Company closed a $465 million 10-year
mortgage with General Electric Capital Corporation ("GECC"). The gross proceeds
from the new loan (the "GECC Mortgage Loan") were used to refinance the $280.6
million Kidder Mortgage Loans, the $110.0 million interim mortgage loan, and the
$30.0 million secured term loan. The remaining proceeds were used largely to
establish escrows to fund the remaining expansion and redevelopment costs of
Patrick Henry Mall and Nittany Mall, and to fund closing costs, initial loan
reserves and prepayment penalties with respect to $200.0 million of the Kidder
Mortgage Loans and the $30.0 million secured term loan that were pre-paid prior
to their maturity dates. The prepayment penalties for the Kidder Mortgage Loans
and the $30 million term loan were approximately $16.6 million. In addition,
approximately $5.9 million of unamortized deferred financing costs related to
the Kidder Mortgage Loans and the $110.0 million interim mortgage loan were
written off in the third quarter of 1998. Both of these items were accounted
for as an extraordinary loss on early extinguishment of debt. The GECC Mortgage
Loan has a fixed stated interest rate of 7.43% and is secured by cross-
collateralized mortgages on 15 of the malls. The loan provides for payment of
interest only during the first two years and interest and principal
amortization, based on 25 year amortization, during the last eight years. Crown
Investments has guaranteed $250 million of the GECC Mortgage Loan. In
connection with the GECC Mortgage Loan, in November 1997, the Company made a
$6.0 million interest-bearing good-faith deposit with GECC, and in July and
August 1998, the Company made $12.2 million in non-interest bearing rate lock
deposits with GECC. These deposits were refunded at closing.
Permanent Loans
At September 30, 2000, permanent loans consisted of eight loans secured by six
properties held by the Operating Partnership. Included in permanent loans is a
$2.4 million interest free Urban Development Action Grant loan with the City of
Johnstown, Pennsylvania, secured by an office building and due October 2006. A
$1.0 million loan related to Carlisle Plaza Mall is an Industrial Development
Bond secured with a $1.0 million letter of credit, which expires in January,
2008. Crown Holding has guaranteed one of the permanent loans with a current
outstanding balance of $10.1 million.
Construction Loans
In September 1998 the Company entered into a $26.8 million construction and
three-year permanent loan with a bank lender to finance a renovation/expansion
program at Washington Crown Center. The loan has an interest rate of LIBOR plus
1.90%. The construction loan term is for two years followed by a three-year
permanent term loan.
Secured Lines of Credit
In September 2000 the Company executed a three-year extension and other
modifications to its secured revolving credit facility with GE Capital Real
Estate. The maturity date on the modified line was extended from November 17,
2001 to November 17, 2004. The interest rate on the loan was reduced to LIBOR
plus 2.25%. The total availability under the line will be increased from the
current limit of $150 million to $175 million contingent upon adding a sixth
mall to the collateral base in the fourth quarter. Availability under the
line is based on the level of operating income generated at the properties; at
September 30, 2000, total borrowing capacity was approximately $132 million.
The revolving credit facility is currently secured by cross-collateralized
mortgages on five of the Company's enclosed malls. The modified facility also
includes pre-defined release provisions should the Company sell certain of the
malls to third parties. The modified facility is locked out to prepayment for
two years, other than for property releases, and is prepayable thereafter with
no prepayment penalty. Borrowings under this credit facility totaled $108.6
million at September 30, 2000.
In addition to the above facility, the Company has a $6.0 million line with a
bank secured by a mortgage on the Company's headquarters office building bearing
interest at LIBOR plus 2.25%. This line is renewable annually on April 30 and
has been renewed through April 30, 2002. $6.0 million was outstanding under
this line as of September 30, 2000.
Covenants and Restrictions
Various of the above loans and lines of credit contain certain financial
covenants and other restrictions, including limitations on the ratios, as
defined, of total Company debt to EBITDA, EBITDA to fixed charges, and floating
rate debt to total debt. The Company was in compliance with all such loan
covenants as of and during the period ended September 30, 2000. Twenty of the
Company's malls are mortgaged under the GECC Mortgage Loan and the GECC lines of
credit. Seventeen of these malls are owned by special purpose subsidiaries of
the Company. The sole business purpose of the seventeen special purpose
subsidiaries, as an ongoing covenant under the related loan agreements, is the
ownership and operation of the properties. The mortgaged malls and related
assets owned by these subsidiary entities are restricted under the loan
agreements for the payment of the related mortgage loans and are not available
to pay other debts of the consolidated Company. However, so long as the loans
are not under an event of default, as defined in the loan agreements, the cash
flows from these properties, after debt service and reserve payments are made,
are available for the general use of the consolidated Company.
Interest Rates
The Mortgage Loans on the Financing Partnership properties and nine of the
permanent loans with an aggregate principal balance of $584.3 million at
September 30, 2000 have fixed interest rates ranging from 4.25% to 9.11%. The
weighted average interest rate on this fixed-rate debt at and for the three
months ended September 30, 2000 and 1999 was 7.63%. All of the remaining loans
with an aggregate principal balance of $138.5 million at September 30, 2000 have
variable interest rates based on spreads ranging from 1.90% to 2.25% above 30
day LIBOR. The weighted average interest rates on the variable rate debt at
September 30, 2000 and 1999 were 8.81% and 8.23%, respectively. The weighted
average interest rates on the variable rate debt during the three months ended
September 30, 2000 and 1999 were 9.40% and 7.59%, respectively.
Debt Maturities
As of September 30, 2000, the scheduled principal payments on all debt,
including extensions available at the Company's option provided the debt is not
in default at the extension dates, are as follows (in thousands):
Period or Year Ending
December 31,
2000 (three months) $ 2,654
2001 (year) 11,141
2002 (year) 40,200
2003 (year) 32,959
2004 (year) 185,947
Thereafter 449,916
Net $ 722,817
NOTE 4 - NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities ("SFAS No. 133"). The Statement establishes accounting
and reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
FASB has approved Statement No. 137, Accounting for Derivative Instruments and
Hedging Activities - Deferral of the effective date of FASB Statement No. 133,
which amends Statement 133 to be effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000. Had the Company applied this standard
currently, the effect on the Company's financial position and results of
operations for the nine months ended September 30, 2000 would be immaterial.
In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin No. 101, "Revenue Recognition ("SAB No. 101"), to provide
guidance on the recognition, presentation and disclosure of revenue in financial
statements. Specifically, SAB No. 101 provides guidance on lessors' accounting
for contingent rent. SAB No. 101 explains the SEC staff's general framework for
revenue recognition. SAB No. 101 does not change existing literature on revenue
recognition, but rather clarifies the SEC's position on preexisting literature.
SAB No. 101 did not require the Company to change existing revenue recognition
policies and therefore had no impact on the Company's financial position or
results of operations at September 30, 2000.
NOTE 5 - MALL EXPANSIONS
The Company has substantially completed construction of an expansion and
redevelopment of Washington Crown Center and an expansion at Valley Mall. The
total costs of the two projects, including capitalized construction overhead,
interest, and tenant allowances, are estimated at $33 million and $33 million,
respectively, of which $30 million and $31 million, respectively, had been
incurred as of September 30, 2000. In addition to amounts incurred at September
30, 2000, the Company is committed for future payments under various
construction purchase orders and certain leases. The Company has secured
through a bank lender a $26.8 million construction and three-year permanent loan
for the Washington Crown Center expansion and redevelopment; the loan bears
interest at LIBOR plus 1.90%, and $23.9 million was borrowed and outstanding at
September 30, 2000. The Valley Mall expansion has been largely financed under
the line of credit with GECC as described in Note 3.
NOTE 6 - PROPERTY SALES AND DISPOSALS
In late June 2000 the Company sold Greater Lewistown Plaza, a non-enclosed
shopping center located in Lewistown, Pennsylvania, to a third party at a price
of $5.0 million. After selling expenses and commissions and after paying off
the related first mortgage, this sale generated approximately $1.2 million in
net cash proceeds for the Company. The impact of the sale on the Company's
revenues and net income for the remainder of 2000 will approximate $0.6 million
and $0.2 million, respectively. The sale did not result in a material gain.
In early July 2000 the Company sold a 115,000 square foot anchor store building
and related parking aggregating approximately 15.4 acres, located at Oak Ridge
Mall in Oak Ridge, Tennessee, to Wal-Mart to accommodate a 95,700 square foot
expansion of this store into a Wal-Mart Supercenter. This anchor store had been
occupied by Wal-Mart under an operating lease. The sales proceeds of $4.25
million were applied by the Company to reduce the outstanding principal balance
on the existing mortgage loan on Oak Ridge Mall. The sale resulted in a loss of
$0.2 million.
With respect to Middletown Mall, a property acquired by the Company on February
1, 1995 from Crown Associates, additional contingent consideration, in the form
of 437,888 common Partnership Units, was paid to Crown Investments Trust
effective as of January 1, 1998, as consideration for the contribution of
Middletown Mall to the Operating Partnership. The 437,888 units represented
approximately 1.2% of the total common Partnership Units outstanding prior to
the issuance of the new units. In July 1998 the Company sold Middletown Mall,
together with approximately 60 acres of undeveloped outparcels and vacant land,
to an unrelated third party. The aggregate purchase price was $12.2 million.
The Company received $8.5 million in cash, net of closing costs, and received a
$3.5 million one-year 9.5% mortgage from the purchaser, secured by a first
mortgage on all the undeveloped land and outparcels and by a second mortgage on
the mall. The note was paid in full in December 1999 at which time the deferred
gain of $1.3 million was recognized.
With regard to the Company's disposition strategy, the Company will dispose of
any of the Properties, if, based upon management's periodic review of the
Company's portfolio, the Board of Trustees determines that such action would be
in the best interests of the Company. The Company is currently exploring
dispositions of a few properties in order to recycle capital for future
investment opportunities or to enhance cash flows and liquidity. It is possible
that the net sales proceeds for some properties, if sold in the future, could be
lower than their current net book value, which would result in a loss upon
future sale.
NOTE 7 - RESTRUCTURING COSTS
During the first quarter of 2000, the Company recorded a restructuring charge of
$0.4 million related to severance and related costs for employees affected by an
8% reduction in the corporate office staff together with reductions in other
corporate expenses. The restructuring involved approximately twelve home office
employees who were terminated and who represented a cross-section of management,
clerical, and secretarial employees.
During the first and third quarters of 1999, the Company recorded restructuring
charges of $1.0 million and $1.2 million, respectively, related to severance and
related costs for employees affected by two reductions in the number of
corporate office staff together with reductions in other corporate office-
related expenses. The restructurings involved approximately thirty-five home
office employees who were terminated and who represented a cross-section of
management, clerical, and secretarial employees.
The restructuring costs are shown as a separate line item in the Consolidated
Statements of Operations. The amount remaining to be paid at September 30, 2000
was approximately $0.3 million, and is included in "Accounts payable and other
liabilities" in the Consolidated Balance Sheet. It is expected that most of the
remaining liability that exists at September 30, 2000 will be paid out in 2000
and 2001.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain of the following comments contain forward looking statements that
involve risk and uncertainties. Factors that could cause actual results to
differ materially include: overall economic conditions, local economic
conditions in the market areas surrounding each property, consumer buying
trends, expansion and development plans of retailers and other current and
potential tenants, the impact of competition, weather patterns and related
impact on consumer spending, changing interest rates and financing conditions,
and other risk factors listed from time to time in the Company's SEC reports,
including this report on Form 10-Q for the quarter ended September 30, 2000.
Selected Financial Data
The table on the following page sets forth selected financial data for the
Company for the three and nine months ended September 30, 2000 and 1999.
Management's discussion and analysis of financial condition and results of
operations should be read in conjunction with this table and the interim
consolidated financial statements on pages 3 to 12.
Performance Measurement
Management believes that there are several important factors that contribute to
the ability of the Company to increase rent and improve profitability of its
enclosed shopping malls and other income properties, including aggregate anchor
tenant and mall shop tenant sales volume, mall shop retail tenant sales per
square foot and occupancy levels. Each of these factors has a significant
effect on Funds from Operations and EBITDA.
Funds from Operations (FFO) is a recognized industry performance measure for
real estate investment trusts (REIT's) and as defined by the National
Association of Real Estate Investment Trusts (NAREIT) generally represents net
income or loss (computed in accordance with generally accepted accounting
principles) before minority interest, real estate depreciation and amortization
(as defined) and extraordinary and unusual non-recurring items, and additionally
includes earned cash flow support (see Note 8 to the financial statements
included in the Company's 1999 Form 10-K). Funds from Operations is used in the
real estate industry as a measure of operating performance because reductions
for real estate depreciation and amortization charges are not meaningful in
evaluating the operating results of real estate, which have historically been
appreciating assets. Gain on sales of outparcel land have been included in
Funds from Operations. Gain on sales of properties and anchor store locations,
adjustments to carrying values of assets to be disposed of, and extraordinary
items are excluded from FFO because such transactions are uncommon and not a
part of ongoing operations.
In 1999, the National Association of Real Estate Investment Trusts (NAREIT)
adopted changes to the definition of Funds from Operations that became effective
in 2000, at which time prior years' reported FFO has been restated to conform to
the new changes. The primary impact on the Company is that "unusual non-
recurring" items previously excluded from FFO are now being included. As a
result, restructuring costs (see Note 7 of the interim consolidated financial
statements) in the amounts of $0.4 million and $2.2 million are being deducted
from FFO, for the first nine months of 2000 and 1999, respectively.
EBITDA is defined as revenues and gain on sale of outparcel land, less operating
costs, including general and administrative expenses, before interest, and all
depreciation and amortization; EBITDA also excludes gain on sales of properties
and anchor store locations, adjustments to carrying values of assets to be
disposed of, and extraordinary items because such items are uncommon and not a
part of ongoing operations. Management believes EBITDA, as defined, provides
the clearest indicator of operating performance for the following reasons: (i)
it is industry practice to evaluate the performance of real estate properties
based on net operating income (or NOI), which is generally equivalent to EBITDA;
and (ii) both NOI and EBITDA are unaffected by the debt and equity structure of
the property owner.
Funds from Operations and EBITDA (i) do not represent cash flow from operations
as defined by generally accepted accounting principles, (ii) are not
necessarily indicative of cash available to fund all cash flow needs and (iii)
should not be considered as an alternative to net income for purposes of
evaluating the Company's operating performance.
The following discussion and analysis of the financial condition and results of
operations should be read in conjunction with the Selected Financial Data and
the accompanying consolidated interim financial statements and notes thereto.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
Selected Financial Data:
<S> <C> <C> <C> <C>
EBITDA (1 & 3) $ 28,462 $ 26,004 $ 84,286 $ 77,465
Funds from Operations (FFO)
(2 & 3):
Net Income $ 181 $ 868 $ 3,143 $ 3,610
Adjustments:
Minority interest in Operating
Partnership 622 (984) (875) (2,566)
Depreciation and amortization -
real estate 12,134 11,309 36,676 34,451
Operating covenant amortization 657 658 1,972 1,973
Cash flow support 786 746 2,321 2,317
Loss on asset sales 209 - 192 -
Funds from Operations, before
allocations to minority
interests and preferred shares 14,589 12,597 43,429 39,785
Less:
Amount allocable to preferred
shares 3,417 3,438 10,292 10,313
Amount allocable to minority
interest 3,076 2,521 9,123 8,114
Funds from Operations applicable
to common shares $ 8,096 $ 6,638 $ 24,014 $ 21,358
Average common shares outstanding
(000) 26,251 26,208 26,226 26,208
Cash Flows:
Net cash provided by operating
activities $ 10,058 $ 11,614 $ 31,928 $ 34,525
Net cash (used in) investing
activities $ (5,288) $ (17,639) $(23,917) $ (42,168)
Net cash (used in) provided
by financing activities $ (6,731) $ (8,143) $(17,593) $ 6,043
(1) EBITDA represents revenues and gain on sale of outparcel land, less
operating costs, including general and administrative expenses,
before interest, and all depreciation and amortization; EBITDA also
excludes gain on sale of properties and anchor store locations,
adjustments to carrying values of assets to be disposed of, and
extraordinary items because such items are uncommon and not a
part of ongoing operations.
(2) Funds from Operations represents net income before minority interest and
before depreciation and amortization plus earned cash flow support and
adjustment for certain unusual items.
(3) EBITDA and Funds from Operations (i) do not represent cash flow from
operations as defined by generally accepted accounting principles,
(ii) are not necessarily indicative of cash available to fund all
cash flow needs and (iii) should not be considered as an
alternative to net income for purposes of evaluating the Company's
operating performance.
</TABLE>
Comparison of the Three and Nine Months Ended September 30, 2000 to the
corresponding periods in 1999
- Revenues:
Total revenues for the third quarter of 2000 were $40.8 million, up $2.9
million, or 7.7 percent, from $37.9 million for the same period in 1999.
The primary composition of this $2.9 million increase was as follows: a) a $1.8
million increase in mall shop and anchor-base minimum rents as a result of
higher occupancy and higher average rental rates; b) a $0.1 million increase in
percentage (overage) rents due to higher mall shop sales; c) higher recovery
income in the amount of $0.7 million due to higher operating costs and due to a
higher recovery rate; and d) higher net utility income and miscellaneous income
of $0.3 million.
Total revenues for the first nine months of 2000 were $122.2 million compared to
$113.0 million for the same period in 1999, an increase of $9.2 million, or 8.1
percent.
- Property Operating Costs:
Total recoverable and non-recoverable mall operating costs for the third quarter
of 2000 were $12.9 million, an increase of $1.0 million compared to the
corresponding period in 1999. For the first nine months of 2000, recoverable
and non-recoverable mall operating costs were $38.6 million, an increase of $2.9
million over the first nine months of 1999.
Depreciation and amortization expense for the third quarter of 2000 was $11.7
million, an increase of $0.8 million over the third quarter of 1999.
Depreciation and amortization expense for the first nine months of 2000 totals
$35.5 million, up $2.2 million over the first nine months of 1999.
- General, Administrative and Interest Expenses:
For the third quarter of 2000, general and administrative expenses were $1.2
million, an increase of $0.1 million compared to the third quarter of 1999. For
the first nine months of 2000, general and administrative costs were $3.6
million, an increase of $0.3 million compared to the first nine months of 1999.
During the first quarter of 2000, the Company recorded a restructuring charge of
$0.4 million related to severance and related costs for employees affected by an
8% reduction in the corporate office staff together with reductions in other
corporate expenses. The restructuring involved approximately twelve home office
employees who were terminated and who represented a cross-section of management,
clerical, and secretarial employees.
During the first and third quarters of 1999, the Company recorded restructuring
charges of $1.0 million and $1.2 million, respectively, related to severance and
related costs for employees affected by two reductions in the number of
corporate office staff together with reductions in other corporate office-
related expenses. The restructurings involved approximately thirty-five home
office employees who were terminated and who represented a cross-section of
management, clerical, and secretarial employees.
Interest expense increased by $1.6 million in the third quarter of 2000 versus
the third quarter of 1999, primarily due to higher average borrowings
outstanding and due to higher interest rates. For the first nine months of
2000, interest expense was $42.5 million, an increase of $4.9 million over the
comparable period of 1999.
- Gain on Property Sales and Disposals:
Gain on land sales during the third quarter of 2000 was $0.5 million. There
were no land sales in the third quarter of 1999. Year to date, gain on land
sales for the first nine months of 2000 is $0.8 million, compared to $0.1
million for the first nine months of 1999.
- Net Income (loss):
The net income for the third quarter of 2000 was $0.2 million compared to net
income of $0.9 million for the third quarter of 1999. After deducting preferred
dividends, there was a net loss of $3.2 million applicable to common shares,
compared to a net loss of $2.6 million for the third quarter of 1999.
The Company's net income for the first nine months of 2000 was $3.1 million
compared to net income of $3.6 million for the comparable period of 1999. After
deducting preferred dividends, there was a net loss in the first nine months of
2000 applicable to common shares of $7.1 million; this compares to a net loss of
$6.7 million applicable to common shares for the first nine months of 1999.
The Company's loss for both the third quarter of 2000 and the nine months ended
September 30, 2000 was impacted by the negative minority interest balance, as
discussed in Note 2 of the interim consolidated financial statements.
- Funds from Operations:
For the quarter ended September 30, 2000, Funds from Operations ("FFO") before
allocations to minority interest and to preferred dividends was $14.6 million,
up from $12.6 million in the same quarter of 1999. FFO including land sales
allocable to common shares (after minority interest and preferred dividends) was
$8.1 million, compared to $6.6 million in the same quarter of 1999. The net
increase in total FFO during the third quarter was largely comprised of the
following: a) a $1.7 million increase in mall shop and anchor base and
percentage rents from the existing properties reflecting higher occupancy and
higher average rents; b) $0.5 million in higher lease buyout income; c) $0.1
million in higher net utility and ancillary income; d) $0.5 million in higher
gain on land sales; and e) $1.2 million in lower restructuring costs. These
positive variances in FFO were partially offset by; f) $1.6 million in higher
net interest expense; g) $0.2 million in higher operating costs, net of
recoveries; and h) $0.2 million in lower straight-line rents.
For the first nine months of 2000, FFO before allocations to minority interest
and to preferred dividends was $43.4 million compared to $39.8 million for the
same period in 1999. FFO allocable to common shares (after minority interest
and preferred dividends) was $24.0 million for the first nine months of 2000,
compared to $21.4 million for the first nine months of 1999. The $3.6 million
increase in total FFO for the first nine months of 2000 compared to 1999 was
largely comprised of : a) a $6.2 million increase in mall shop and anchor base
and percentage rents as a result of higher occupancy and higher average rents;
b) $0.3 million in higher temporary and seasonal income; c) $0.3 million in
higher net utility and ancillary income; d) $0.7 million in higher gain on land
sales; and e) lower restructuring costs, net of other G & A increases, of $1.4
million. These positive variances were partially offset by; f) $4.9 million in
higher interest costs due to higher average balances outstanding and higher
rates; and g) $0.5 million in higher property operating costs, net of
recoveries.
EBITDA - Earnings before Interest, Taxes, Depreciation and Amortization
The computation of EBITDA is shown below for the nine months ended September 30,
2000 and 1999 (000's):
Nine Months Ended
September 30,
2000 1999
Total revenues $ 122,243 $ 113,029
Add back operating covenant
amortization deducted in minimum rent 1,972 1,973
Net 124,215 115,002
Less recoverable costs and expense (35,065) (32,527)
Less non-recoverable costs and expense (1,708) (1,464)
Less property general and
administrative costs (1,811) (1,651)
Less corporate general and
administrative costs (3,623) (3,301)
Add back depreciation/amortization
in above expense lines and joint
venture depreciation 1,457 1,306
Gain on outparcel land sales 821 100
EBITDA, as reported $ 84,286 $ 77,465
For the nine months ended September 30, 2000, EBITDA was $84.3 million compared
to $77.5 million in the first nine months of 1999, an increase of 8.8 percent.
EBITDA was largely impacted by the same factors as FFO above, except for
interest costs, preferred stock dividends and restructuring costs, which are not
included in EBITDA.
Liquidity and Capital Resources
The Company has significant ongoing capital requirements. The Company believes
that its cash generated from property operations and funds obtained from
property financings and general corporate borrowings will provide the necessary
funds on a short-term and long-term basis for its operating expenses, interest
expense on outstanding indebtedness and recurring capital expenditures and
tenant allowances, and all dividends to the shareholders necessary to satisfy
the REIT dividend distribution requirements under the Internal Revenue Code.
The Company intends to pay regular quarterly dividends to its shareholders.
However, the Company's ability to pay dividends is affected by several factors,
including cash flow from operations, capital expenditures, and its ability to
refinance its maturing debt as described below. Dividends by the Company will
be at the discretion of the Board of Trustees and will depend on the cash
available to the Company, its financial condition, capital and other
requirements, and such other factors as the Trustees may consider.
Sources of capital for non-recurring capital expenditures, such as major
building renovations and expansions, as well as for scheduled principal
payments, including balloon payments on the outstanding indebtedness, are
expected to be obtained from additional Company or property financings and
refinancings, sale of non-strategic assets, additional equity raised in the
public or private markets, and from retained internally generated cash flows, or
from combinations thereof. The Company has substantially completed construction
of an expansion and redevelopment of Washington Crown Center and an expansion at
Valley Mall. The total cost of the two projects, including capitalized
construction overhead, interest, and tenant allowances, are estimated at $33
million and $33 million respectively, of which $30 million and $31 million,
respectively, had been incurred as of September 30, 2000. In addition to
amounts incurred at September 30, 2000, the Company is committed for future
payments under various construction purchase orders and certain leases. The
Company has secured through a bank lender a $26.8 million construction and three
year permanent loan for the Washington Crown Center expansion and redevelopment;
the loan bears interest at LIBOR plus 1.90%, and $23.9 million was borrowed and
outstanding at September 30, 2000. The Valley Mall expansion has been largely
financed under the line of credit with GECC, as described in Note 3 to the
interim financial statements.
As further described in Note 3 to the Consolidated Financial Statements, in
September 2000 the Company executed a three-year extension and other
modifications to its secured revolving credit facility with GE Capital Real
Estate. The maturity date on the modified line was extended from November 17,
2001 to November 17, 2004. The interest rate on the loan was reduced from LIBOR
plus 2.95% to LIBOR plus 2.25%. The total availability under the line will be
increased from the current limit of $150 million to $175 million contingent upon
adding a sixth mall to the collateral base in the fourth quarter.
As of September 30, 2000 the scheduled principal payments on all debt are $2.7
million, $11.1 million, $40.2 million, $33.0 million, and $185.9 million for the
three-month period ending December 31, 2000 and the years ending December 31,
2001 through 2004, respectively, and $449.9 million thereafter. The Company
expects to refinance or extend the majority of the maturities over the next five
years through additional Company financings and from refinancing the maturing
loans. The Company's ability to refinance or extend these loans on or before
their due dates depends on the level of income generated by the properties,
prevailing interest rates, credit market trends, and other factors that may be
in effect at the time of such refinancings or extensions and there is no
assurance that such refinancings or extensions will be executed. The ratios of
the Company's EBITDA to interest paid on total indebtedness (exclusive of
capitalized interest and interest income) for the years ended December 31, 1999,
1998, and 1997 were 2.06 to 1, 2.14 to 1, and 2.04 to 1, respectively.
As further described in Note 2 to the Consolidated Financial Statements, the
minority interest balance has been reduced below zero and, consequently, is now
shown as an asset of the Company, reflecting the legal obligation of the
minority partner to fund this deficit through future cash flow support payments.
This asset balance at September 30, 2000 has been limited to $3.1 million, the
estimated amount of cash flow support to be received over the next twelve
months. As the cash flow support amounts are received in the future, 100% of
these amounts will be credited directly against the minority interest balance,
as long as the minority interest balance remains as an asset. An additional
amount of $1.3 million, representing the excess losses and distributions over
and above the cash flow support, has been absorbed by the Operating Partnership
in its share of losses for the third quarter.
Net loss applicable to common shareholders (after minority interest and
preferred dividends) as reported herein differs slightly from amounts
preliminarily reported in the Company's October 26, 2000 Press Release and
Supplement. Final net loss applicable to common shares for the third quarter
and nine months ended September 30, 2000 was $3.2 million and $7.1 million,
respectively, as reflected in the Consolidated Financial Statements contained
in this Form 10-Q. The difference from previously reported results relates
solely to minority interest as used to determine net loss applicable to common
shareholders for the quarter. Funds from Operation ("FFO") was not affected and
is correct as reported.
Part II - Other Information
Item 1: Legal Proceedings
The Company from time to time is involved in litigation incidental to its
business. Except as described below, neither the Company nor any of the
Partnerships are currently involved in any material litigation and, to the best
of the Company's knowledge, there is no material litigation currently threatened
against the Company or the Partnerships, other than routine litigation arising
in the ordinary course of business, most of which is expected to be covered by
liability insurance or established reserves.
Shareholder litigation
On August 10, 1995, August 17, 1995, and September 8, 1995 complaints were filed
by various individuals on behalf of themselves and also purportedly on behalf of
other similarly situated persons against the Company and certain of its
executive officers in United States District Court for the Western District of
Pennsylvania to recover unspecified damages under the federal securities laws
resulting from a decline in the market price for the Company's common shares of
beneficial interest which are listed and traded on the New York Stock Exchange.
The decline in the Company's share price followed the announcement on August 8,
1995 of various operational and capital resource initiatives by the Company,
including the reduction of the Company's quarterly dividend to increase its
levels of retained internal cash flow and the planned sale of certain assets
that at the time did not fit the Company's growth strategy. The complaints in
these three cases were consolidated by the Court and a consolidated amended
complaint was filed on July 30, 1996. The consolidated amended complaint
asserts a class period extending from March 1, 1995 to August 8, 1995,
inclusive.
A fourth Complaint was filed the week of December 15, 1995 by an individual on
behalf of himself and also purportedly on behalf of other similarly situated
persons against the Company and certain of its current and former executive
officers in the United States District Court for the Eastern District of
Pennsylvania (the Warden action). This action was subsequently transferred to
the Western District of Pennsylvania. While this Complaint is substantially
similar to the previous Complaints, it alleged a class period extending from
August 17, 1993 (the IPO date) to August 8, 1995.
The Company filed a motion seeking to dismiss the consolidated action and
negotiated a stay of the Warden action pending resolution of the motion to
dismiss the consolidated actions. On September 15, 1997 the Court issued an
opinion dismissing the consolidated amended complaint. In its ruling, the Court
dismissed certain allegations with prejudice and others with an opportunity to
amend. On October 10, 1997 the Plaintiffs filed a second amended complaint in
the consolidated action. On December 2, 1997 the court entered an order
consolidating the cases for pretrial purposes. On December 16, 1997 the
Plaintiff in the Warden action filed a second amended complaint, which changed
the end of the putative class period to February 28, 1995. On January 16, 1998
the Company filed motions seeking dismissal of both the consolidated action and
the Warden action. On October 15, 1998 the Court in the Warden action granted
the Company's motion to dismiss and permitted the plaintiffs to file a third
amended complaint.
On November 2, 1998, the Court granted in part and denied in part the Company's
motion to dismiss the second amended complaint in the consolidated action. In
its ruling, the Court dismissed the Company as a defendant and dismissed all of
the plaintiff's claims with prejudice, except for a narrow set of allegations
relating to projections of the 1995 dividend at a March 1995 REIT conference and
in the 1994 annual report. On November 30, 1998, the plaintiffs in the Warden
action and the consolidated action each filed third amended complaints. In the
consolidated action, plaintiffs sought to renew certain claims against the
Company notwithstanding the Court's prior rulings. On December 21, 1998, the
Company filed a motion seeking dismissal of the third amended complaint in the
Warden action. On February 5, 1999, the Company filed a motion to dismiss the
third amended complaint in the consolidated action.
On July 6, 1999, the Court granted the Company's motion to dismiss the third
amended complaint in the Warden action in its entirety with prejudice. On
August 5, 1999, the plaintiffs filed an appeal to the U.S. Court of Appeals for
the Third Circuit. On July 20, 1999, the Court granted in part and denied in
part the Company's motion to dismiss the third amended complaint in the
consolidated action. In its ruling, the Court dismissed the Company as a
defendant and otherwise ruled consistent with its November 2, 1998, decision,
dismissing all of the claims, except for the narrow set of allegations
referenced above. On May 17, 2000, the individual defendants filed a motion for
summary judgment in the consolidated action. This motion is awaiting decision.
On July 12, 2000, the Court of Appeals affirmed in all respects the dismissal of
the Warden action. On July 25, 2000, Plaintiffs in the Warden action filed a
petition requesting a rehearing of their appeal. On August 24, 2000, the Court
of Appeals denied Plaintiffs' petition and the Warden action has now been
finally concluded in favor of the Company and its officers.
The Company believes, based on the advice of legal counsel, that it and the
named officers have substantial defenses to the plaintiffs' claims, and the
Company intends to vigorously defend the action. The Company's current and
former officers that are named in this litigation are covered under a liability
insurance policy paid for by the Company. The Company's officers also have
indemnification agreements with the Company. While the final resolution of this
litigation cannot be presently determined, management does not believe that it
will have a material adverse effect on the Company's consolidated results of
operations or financial condition.
Item 2: Changes in Securities
None
Item 3: Defaults Upon Senior Securities
None
Item 4: Submission of Matters to a Vote of Security Holders
None
Item 5: Other Information
None
Item 6: Exhibits and Reports on Form 8-K
On September 11, 2000, the Company furnished the Securities and Exchange
Commission with a report on Form 8-K the text and commentary for a presentation
made on September 11, 2000, at the Friedman Billings Ramsey Investor Conference
in Washington, DC.
The following exhibits are being filed as part of this Form 10-Q:
Exhibit 10.10 (a) Fourth Amendment to Credit Agreement with General
Electric Capital Corporation, dated September 29, 2000
Exhibit 10.20 Amended and Restated Exchange Agreement, dated as of
August 29, 2000, among NBOC Bank, Crown American Realty
Trust, Crown American Properties, L.P., Crown
Investments Trust, and Crown American Investment Company
Exhibit 10.21 Second Amended and Restated Registration Rights
Agreement, dated as of August 29, 2000, by and between
Crown American Realty Trust and NBOC Bank
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 7, 2000 CROWN AMERICAN REALTY TRUST
/s/ Mark E. Pasquerilla
Mark E. Pasquerilla
Chairman of the Board of Trustees,
Chief Executive Officer and President
(Authorized Officer of the Registrant
and Principal Executive and Operating Officer)
Date: November 7, 2000 CROWN AMERICAN REALTY TRUST
/s/ Terry L. Stevens
Terry L. Stevens
Executive Vice President and
Chief Financial Officer
(Authorized Officer of the Registrant
and Principal Financial Officer)
Date: November 7, 2000 CROWN AMERICAN REALTY TRUST
/s/ John A. Washko
John A. Washko
Vice President and
Chief Accounting Officer
(Authorized Officer of the Registrant
and Principal Accounting Officer)
EXHIBIT 10.10 (a)
FOURTH AMENDMENT TO CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (this "Fourth Amendment") is
made as of September 29, 2000, among CROWN AMERICAN REALTY TRUST, a real estate
investment trust organized and existing under the laws of the State of Maryland
(in its capacity as a Borrower and as Guarantor) (the "REIT"), CROWN AMERICAN
PROPERTIES, L.P., a Delaware limited partnership Maryland (in its capacity as a
Borrower and as Guarantor) (the "Operating Partnership"), and the following
affiliates of the REIT and the Operating Partnership: CROWN AMERICAN
ACQUISITION ASSOCIATES I, L.P., a Pennsylvania limited partnership, CROWN
AMERICAN ACQUISITION ASSOCIATES II, L.P., a Pennsylvania limited partnership,
CROWN AMERICAN ACQUISITION ASSOCIATES III, L.P., a Pennsylvania limited
partnership, CROWN AMERICAN ACQUISITION ASSOCIATES IV, L.P., a Pennsylvania
limited partnership, CROWN AMERICAN ACQUISITION ASSOCIATES V, L.P., a
Pennsylvania limited partnership, CROWN AMERICAN ACQUISITION ASSOCIATES VI,
L.P., a Pennsylvania limited partnership, CROWN AMERICAN ACQUISITION ASSOCIATES
VII, L.P., a Pennsylvania limited partnership, CROWN AMERICAN ACQUISITION
ASSOCIATES VIII, L.P., a Pennsylvania limited partnership, CROWN AMERICAN
ACQUISITION ASSOCIATES IX, L.P., a Pennsylvania limited partnership, CROWN
AMERICAN ACQUISITION ASSOCIATES X, L.P., a Pennsylvania limited partnership (the
REIT, the Operating partnership and such affiliates being herein collectively
called the "Borrowers"), and GENERAL ELECTRIC CAPITAL CORPORATION, a New York
corporation ("Lender").
WITNESSETH:
WHEREAS, Borrowers and Lender entered into that certain Credit
Agreement dated as of November 17, 1997, as amended by that certain First
Amendment to Credit Agreement dated December 12, 1997, between Borrowers and
Lender, as further amended by that certain Second Amendment to Credit Agreement
dated May 13, 1998, between Borrowers and Lender, and as further amended and
restated by the Amended and Restated Credit Agreement dated September 8, 1999
(as so amended and restated, the "Credit Agreement"), pursuant to which Lender
agreed to lend and Borrowers agreed to borrow a revolving credit loan in the
amount of up to One Hundred Fifty Million and No/100 Dollars ($150,000,000.00)
(such revolving credit loan, as existing prior to the modifications effected by
this Amendment, being herein sometimes called the "Existing Secured Credit
Line"), all pursuant to and in accordance with the terms of the Credit Agreement
(capitalized terms used herein and not defined herein to have the meanings set
forth in the Credit Agreement);
WHEREAS, the Borrowers and Lender are executing this Amendment (a) to
reduce the interest rate on the Loan, and (b) to extend the termination date of
the Loan to November 17, 2004, and (c) to make certain additional modifications
and amendments, as further described herein; and
WHEREAS, Borrowers and Lender wish to modify and amend the Credit
Agreement to reflect the terms of the Fourth Modification Commitment (as
hereinafter defined), to be effective as of the date of this Amendment.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Borrowers and Lender, intending to be legally
bound, hereby agree as follows:
1. The foregoing recitals are incorporated into this Amendment by
this reference.
2. The following definitions are hereby added to Section 1.1 of the Credit
Agreement:
"Extension Fee" means the extension fee payable to the
Lender for the Three Year Extension in the amount of
$612,500, payable as provided in Section 2.5(d) of this
Agreement.
"Fourth Modification": collectively, the modifications
and amendments to the Existing Secured Credit Line made
pursuant to the Fourth Amendment to Credit Agreement dated
the Fourth Modification Date between the Borrowers and the
Lender, a copy of which is attached hereto.
"Fourth Modification Commitment": Lender's commitment
letter dated September 29, 2000 to the Borrowers in
connection with the Fourth Modification.
"Fourth Modification Date": September 29, 2000.
3. The definition of "Applicable Margin" in Section 1.1 of the
Credit Agreement is hereby amended to read as follows:
"Applicable Margin": a rate per annum equal to 2.25%."
4. The definition of "Lockout Period" in Section 1.1 of the Credit
Agreement is hereby amended to read as follows (the amended portions
thereof being underlined):
"Lockout Period": the twenty-four (24) month period
beginning on the Fourth Modification Date and ending on the
second anniversary thereafter except as otherwise set forth
in the Fourth Modification Commitment.
5. The definition of "Termination Date" in Section 1.1 of the Credit
Agreement is hereby modified and amended to read as follows (the amended
portions thereof being underlined):
"Termination Date": November 17, 2004.
6. Section 2.5 (Servicing Fee, Commitment Fee, Extension Fee, Exit
Fee) of the Credit Agreement is hereby amended by adding the following new
paragraph (d):
(d) The Borrowers agree to pay to the Lender the
Extension Fee on the Fourth Modification Date.
7. In order for this Amendment to be effective, no later than the
Fourth Modification Date:
(a) the Lender shall be provided with an endorsement to each of the
Lender's mortgagee title insurance policies previously issued in connection
with the Loan to reflect the modification of the Loan by the Fourth
Modification (provided, however, that Lender agrees to accept a commitment
to issue such endorsement with respect to any Secured Line Property located
in Pennsylvania, so long as (i) the endorsement shall be issued upon the
earlier to occur of (A) the closing of the Comprehensive Fourth Modifi-
cation (as defined in paragraph 14 below), (B) the termination of this
Amendment pursuant to paragraph 14, or (C) the occurrence of an Event of
Default, and (ii) the premium for such endorsement shall be payable by
Borrowers);
(b) the Borrowers shall have paid (A) the expense deposit payable
pursuant to the Fourth Modification Commitment, (B) the Extension Fee
required by paragraph 6 above, and (C) any third-party costs incurred by
Lender in connection with the Fourth Modification and payable by Borrower
pursuant to the Fourth Modification Commitment to the extent such costs
exceed the expense deposit; and
(c) Lender shall have received legal
opinions issued by counsel for each Borrower, opining as to the due
authorization, execution, delivery, enforceability and validity of this
Amendment.
8. The Borrowers hereby reaffirm all of the representations and
warranties set forth in the Loan Documents, and further represent and warrant
that (a) the Borrowers are the sole legal and beneficial owners of the
Secured Line Properties (except for the Shenango Valley Mall, as to which
the respective Borrower is the lessee under the Ground Lease); (b) the
execution and delivery of this Amendment do not contravene, resulting in a
breach of, or constitute a default under, any deed of trust, loan agreement,
indenture or other contract or agreement to which any Borrower is a party or by
which any Borrower or any of its properties may be bound (nor would such
execution and delivery constitute such a default with the passage of time or
the giving of notice or both), and do not violate or contravene any law,
order, decree, rule, regulation or restriction to which any Borrower or
any Secured Line Property is subject; (c) this Amendment constitutes the
legal, valid and binding obligations of each Borrower enforceable in
accordance with its terms; (d) the execution and delivery of, and per-
formance under, this Amendment are within each Borrower's power and authority
without the joinder or consent of any other party, have been duly authorized
by all requisite action, and are not in contravention of any law, or of any
Borrower's organizational documents or of any indenture, agreement or
undertaking to which any Borrower is a party or by which it is bound;
(e) there exists no default under the Note or any other Loan Document;
(f) there are no offsets, claims or defenses with respect to the Obligations.
Each Borrower further represents and warrants that, except as disclosed in
writing to the Lender, there is no suit, judicial or administrative action,
claim investigation, inquiry, proceeding or demand pending (or, to the
Borrower's knowledge, threatened) against (i) the Borrower, or against any other
person liable directly or indirectly for the Obligations, or (ii) which affects
any Secured Line Property or any Borrower's title to any Secured Line Property,
or (iii) which affects the validity, enforceability or priority of any of the
Loan Documents. The Borrowers jointly and severally agree to indemnify and hold
the Lender harmless against any loss, claim, damage, liability or expense
(including, without limitation, attorneys' fees) incurred as a result of any
representation or warranty made by the Borrowers herein which proves to be
untrue or inaccurate in any respect when made, and any such occurrence shall
constitute a default under the Loan Documents.
9. The Borrowers hereby renew the Obligations and jointly and
severally promise to pay and perform all Obligations as modified by this
Amendment. The Liens of the Security Documents are hereby ratified and con-
firmed as valid, subsisting and continuing to secure the Obligations, as
modified hereby. Nothing herein shall in any manner diminish, impair, waive or
extinguish the Note, the Obligations or the Liens. The execution and delivery
of this Amendment shall not constitute a novation of the debt evidenced by the
Note and secured by the Loan Documents.
10. The Borrower shall pay all reasonable costs and expenses actually
incurred and reimburse the Lender for any and all expenditures of every
character incurred or expended from time to time, regardless of whether a
default shall have occurred, in connection with the Fourth Modification in
accordance with the terms of the Fourth Modification Commitment (including,
without limitation, all "GECC Expenses", as defined in the Fourth Modification
Commitment). The REIT and the Operating Partnership acknowledge that they have
dealt with L.J. Melody & Company in connection with the Secured Credit Line and
agree that they are responsible for all fees and charges due, and/or to become
due, to L.J. Melody & Company in connection with the Loan, other than the
servicing fee to be paid by Lender to CB Servicing, Inc. pursuant to the Amended
and Restated Sub-Servicing Agreement between Lender and CB Servicing, Inc. dated
September 24, 1998, as amended September 8, 1999.
11. Each Guarantor, by signature below as such, for a valuable
consideration, the receipt and adequacy of which are hereby acknowledged, hereby
consents to and joins in this Amendment and hereby declares to and agrees with
the Lender that each Guaranty Agreement is and shall continue in full force and
effect for the benefit of the Lender with respect to the Obligations, as amended
by this Amendment, that there are no offsets, claims, counterclaims, crossclaims
or defenses of the Guarantor with respect to such Guaranty Agreement nor, to the
Guarantor's knowledge, with respect to the Obligations, that such Guaranty
Agreement is not released, diminished or impaired in any way by this Amendment
or the transactions contemplated hereby, and that each such Guaranty Agreement
is hereby ratified and confirmed in all respects. The Guarantor hereby
reaffirms all of the representations and warranties set forth in each Guaranty
Agreement. Each Guarantor acknowledges that without this consent and
reaffirmation, Lender would not execute this Amendment or otherwise consent to
its terms.
12. Borrowers and Lender may issue press releases, advertisements
and other promotional materials describing in general terms or in detail
Lender's participation in the Loan provided that all references to Lender or the
Loan in any press release, advertisement or promotional material (not
including references in any disclosure by Lender with respect to sale of any
portion of the Loan, any participation or other interests therein, or the
sale of any participations or other interest in any other portion of a loan
originated by Lender to Borrowers or any affiliate thereof) must be approved in
advance by the other party.
13. Except as specifically amended by this Fourth Modification, all
terms, covenants and provisions of the Credit Agreement shall remain in full
force and effect as first written. In addition, it is intended that the Fourth
Modification Commitment survive the execution and delivery of this Amendment.
In the event of any conflict between the terms and provisions of this Amendment
and the terms and provisions of the Credit Agreement or the Fourth Modification
Commitment, the terms and provisions of this Amendment shall control. In all
other respects, however, the terms and provisions of the Credit Agreement and
the Fourth Modification Commitment shall survive the execution and delivery of
this Amendment.
14. It is intended that this Amendment be superseded no later than
December 1, 2000 (or such later date as may be approved in writing by Lender)
(the "Expiration Date") by a comprehensive amendment and restatement to the
Credit Agreement (the "Comprehensive Fourth Modification"), incorporating all
terms and provisions set forth in the Fourth Modification Commitment including
the terms and provisions set forth in this Amendment. Accordingly, (a) Borrow-
ers agree to cooperate with Lender to document, execute and deliver the
Comprehensive Fourth Modification, and all other documentation required in
connection therewith, including amendments to Security Documents, title updates
and endorsements, and, if the Washington Crown Center property (as referenced in
the Fourth Modification Commitment) is approved by Lender as an Additional
Secured Line Property, all documentation necessary to add as a Borrower under
the Credit Agreement and the other Loan Documents the entity that owns the
Washington Crown Center Property, and to add such Washington Crown Center
Property as an Additional Secured Line Property, no later than the Expiration
Date (provided, however, that the addition of the Washington Crown Center
property shall not be a condition to closing the Comprehensive Fourth Modifi-
cation), and (b) this Amendment automatically will terminate without notice and
without any action taken on the part of Lender or any other party, on the
Expiration Date.
In addition, Borrowers specifically acknowledge that the Lender may sell
the Loan (or a portion thereof) in connection with a structured finance or may
divide the Loan into senior and junior priorities and/or syndicate the Loan to
one or more participating lenders (a "Structured Finance Transaction")
simultaneously with or after the execution and delivery of the Comprehensive
Fourth Modification. Borrowers acknowledge that the Comprehensive Fourth
Modification shall contain such terms and provisions that are not inconsistent
with the terms of the Fourth Modification Commitment as Lender may reasonably
require to effectuate a Structured Finance Transaction, and agree to cooperate
with the Lender in documenting the Fourth Comprehensive Modification (including
such reasonable amendments to the other Loan Documents as may be necessary) to
accommodate any such Structured Finance Transaction, and to cooperate with the
Lender in effectuating any such Structured Finance Transaction, as provided in
the Fourth Modification Commitment.
15. This Fourth Modification may be executed by one or more of the
parties hereto on any number of separate counterparts, each of which shall
be an original and all of which taken together shall constitute one and the
same instrument.
16. This Fourth Modification shall inure to the benefit of and be
binding upon the Borrowers and Lender, and their respective successors and
assigns.
17. (a) THIS AMENDMENT WAS NEGOTIATED IN THE STATE OF NEW YORK, AND
MADE BY THE LENDER AND ACCEPTED BY THE BORROWERS IN THE STATE OF NEW YORK, AND
THE PROCEEDS OF THE NOTE DELIVERED PURSUANT HERETO WERE DISBURSED FROM THE STATE
OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE
PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS,
INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AMENDMENT AND THE OBLIGATIONS
ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH
STATE (WITHOUT REGARD TO PRINCIPLES OF CONFLICT LAWS) AND ANY APPLICABLE LAW OF
THE UNITED STATES OF AMERICA, EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE
CREATION, PERFECTION, AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS
CREATED PURSUANT HERETO AND PURSUANT TO THE OTHER LOAN DOCUMENTS SHALL BE
GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH THE
APPLICABLE SECURED LINE PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE
FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF NEW
YORK SHALL GOVERN THE CONSTRUCTION, VALIDITY AND ENFORCEABILITY OF ALL LOAN
DOCUMENTS AND ALL OF THE OBLIGATIONS ARISING HEREUNDER OR THEREUNDER. TO THE
FULLEST EXTENT PERMITTED BY LAW, BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY
WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS
AMENDMENT AND THE NOTE, AND THIS AMENDMENT AND THE NOTE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK PURSUANT TO
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST THE LENDER OR THE
BORROWERS ARISING OUT OF OR RELATING TO THIS AMENDMENT MAY AT THE LENDER'S
OPTION BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK,
COUNTY OF NEW YORK PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL
OBLIGATIONS LAW, AND THE BORROWERS WAIVE ANY OBJECTIONS WHICH THEY MAY NOW OR
HEREAFTER HAVE BASED ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT,
ACTION OR PROCEEDING, AND THE BORROWERS HEREBY IRREVOCABLY SUBMIT TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. THE BORROWERS
DO HEREBY DESIGNATE AND APPOINT CT CORPORATION SYSTEM, HAVING AN ADDRESS AT 1633
BROADWAY, NEW YORK, NEW YORK 10019, AS THEIR AUTHORIZED AGENT TO ACCEPT AND
ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN
ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK,
NEW YORK, AND AGREE THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND
WRITTEN NOTICE OF SAID SERVICE MAILED OR DELIVERED TO THE BORROWERS IN THE
MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF
PROCESS UPON THE BORROWERS, IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE
OF NEW YORK. THE BORROWERS (I) SHALL GIVE PROMPT NOTICE TO THE LENDER OF ANY
CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY TIME AND FROM
TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK,
NEW YORK (WHICH SUBSTITUTE AGENT AND OFFICE SHALL BE DESIGNATED AS THE PERSON
AND ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL PROMPTLY DESIGNATE SUCH A
SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN NEW YORK, NEW
YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.
18. Each Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution
and delivery of this Amendment and the Fourth Modification Commitment;
(b) the Lender has no fiduciary relationship with or duty to the
Borrowers arising out of or in connection with this Amendment or any of the
other Loan Documents, and the relationship between the Borrowers and the
Lender, in connection herewith or therewith is solely that of debtor and
creditor; and
(c) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby among
the Borrowers and the Lender.
19. THE BORROWERS AND THE LENDER HEREBY IRREVOCABLY AND UNCONDITION-
ALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS
AMENDMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. THIS
WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY THE
BORROWERS AND THE LENDER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH
INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHER-
WISE ACCRUE. THE BORROWERS AND THE LENDER ARE EACH HEREBY AUTHORIZED TO FILE
A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS
WAIVER BY THE OTHER PARTY.
20. This Fourth Modification may not be modified, amended, waived,
changed or terminated orally, but only by an agreement in writing signed by the
party against whom the enforcement of the modification, amendment, waiver,
change or termination is sought.
[NO FURTHER TEXT ON THIS PAGE]
IN WITNESS WHEREOF, Borrowers and Lender have executed this Fourth
Modification as of the date first above written.
CROWN AMERICAN REALTY TRUST, a Maryland real
estate investment trust, in its capacity as
Borrower and as Guarantor
By: /s/ Terry L. Stevens
Name: Terry L. Stevens
Title: Exec. Vice President & CFO
CROWN AMERICAN PROPERTIES, L.P., a Delaware
limited partnership, in its capacity as
Borrower and as Guarantor
By: Crown American Realty Trust, a Maryland real
estate investment trust, its sole general
partner
By: /s/ Terry L. Stevens
Name: Terry L. Stevens
Title: Exec. Vice President & CFO
(signature page to Fourth Amendment continued)
CROWN AMERICAN ACQUISITION ASSOCIATES I, L.P., a
Pennsylvania limited partnership
By: Crown American Acquisition Associates I, a
Delaware business trust, its sole general
partner
By: /s/ Terry L. Stevens
Name: Terry L. Stevens
Title: Exec. Vice President & CFO
CROWN AMERICAN ACQUISITION ASSOCIATES II, L.P., a
Pennsylvania limited partnership
By: Crown American Acquisition Associates II, a
Delaware business trust, its sole general
partner
By: /s/ Terry L. Stevens
Name: Terry L. Stevens
Title: Exec. Vice President & CFO
CROWN AMERICAN ACQUISITION
ASSOCIATES III, L.P., a Pennsylvania limited
partnership
By: Crown American Acquisition Associates III, a
Delaware business trust, its sole general
partner
By: /s/ Terry L. Stevens
Name: Terry L. Stevens
Title: Exec. Vice President & CFO
(signature page to Fourth Amendment continued)
CROWN AMERICAN ACQUISITION
ASSOCIATES IV, L.P., a Pennsylvania limited
partnership
By: Crown American Acquisition Associates IV, a
Delaware business trust, its sole general
partner
By: /s/ Terry L. Stevens
Name: Terry L. Stevens
Title: Exec. Vice President & CFO
CROWN AMERICAN ACQUISITION
ASSOCIATES V, L.P., a Pennsylvania limited
partnership
By: Crown American Acquisition Associates V, a
Delaware business trust, its sole general
partner
By: /s/ Terry L. Stevens
Name: Terry L. Stevens
Title: Exec. Vice President & CFO
(signature page to Fourth Amendment continued)
CROWN AMERICAN ACQUISITION
ASSOCIATES VI, L.P., a Pennsylvania limited
partnership
By: Crown American Acquisition Associates VI, a
Delaware business trust, its sole general
partner
By: /s/ Terry L. Stevens
Name: Terry L. Stevens
Title: Exec. Vice President & CFO
CROWN AMERICAN ACQUISITION
ASSOCIATES VII, L.P., a Pennsylvania limited
partnership
By: Crown American Acquisition Associates VII, a
Delaware business trust, its sole general
partner
By: /s/ Terry L. Stevens
Name: Terry L. Stevens
Title: Exec. Vice President & CFO
(signature page to Fourth Amendment continued)
CROWN AMERICAN ACQUISITION
ASSOCIATES VIII, L.P., a Pennsylvania limited
partnership
By: Crown American Acquisition Associates VIII, a
Delaware business trust, its sole general
partner
By: /s/ Terry L. Stevens
Name: Terry L. Stevens
Title: Exec. Vice President & CFO
CROWN AMERICAN ACQUISITION
ASSOCIATES IX, L.P., a Pennsylvania limited
partnership
By: Crown American Acquisition Associates IX, a
Delaware business trust, its sole general
partner
By: /s/ Terry L. Stevens
Name: Terry L. Stevens
Title: Exec. Vice President & CFO
(signature page to Fourth Amendment continued)
CROWN AMERICAN ACQUISITION
ASSOCIATES X, L.P., a Pennsylvania limited
partnership
By: Crown American Acquisition Associates X, a
Delaware business trust, its sole general
partner
By: /s/ Terry L. Stevens
Name: Terry L. Stevens
Title: Exec. Vice President & CFO
GENERAL ELECTRIC CAPITAL
CORPORATION, a New York corporation
By: /s/ Anthony Juliano
Name: Anthony Juliano
Title: Vice President
EXHIBIT 10.20
AMENDED AND RESTATED EXCHANGE AGREEMENT
This Amended and Restated Exchange Agreement (this "Agreement") is
entered into as of August 29, 2000, among NBOC Bank, a division of First
Commonwealth Bank, successor in interest to National Bank of the Commonwealth,
in its capacity as Lender pursuant to the Credit Agreement referred to herein
(the "Lender"), Crown American Realty Trust, a Maryland real estate investment
trust (the "REIT"), Crown American Properties, L.P., a Delaware limited
partnership (the "Partnership"), Crown Investments Trust, a Delaware business
trust ("Borrower" or "CIT") and Crown American Investment Company, a Delaware
corporation ("CAIC").
W I T N E S S E T H:
WHEREAS, CIT and the Lender have entered into a Revolving Credit
Agreement dated as of March 10, 1995 (the "Revolving Credit Agreement"), as
amended from time to time thereafter, and concurrently herewith are entering
into a Fourth Amendment to Revolving Credit Agreement (the "Fourth Amendment";
such Revolving Credit Agreement, as previously amended and as further amended by
such Fourth Amendment, being referred to herein as the "Credit Agreement");
WHEREAS, the obligations of CIT to the Lender under the Credit
Agreement are secured pursuant to that certain First Amendment to Assignment and
Security Agreement dated as of even date herewith (such First Amendment to
Assignment and Security Agreement, as previously amended, being referred to
herein as the "Security Agreement") whereby CAIC has pledged to NBOC 432,398
partnership units in Crown American Properties, L.P., a Delaware limited
partnership (the "Partnership Units"), which represents a reduction of 942,449
Partnership Units from the 1,374,847 pledged in connection with the third
amendment to the Revolving Credit Agreement; and
WHEREAS, it is a condition precedent to the Lender's willingness to
enter into the Fourth Amendment that the Lender has the right after an Exchange
Event (as defined in Section 2(g) below), to exchange the Partnership Units for
shares of beneficial interest in the REIT ("REIT Shares") so long as such
exchange (together with all other REIT Shares then pledged to the Lender to
secure the obligations of the Borrower under the Credit Agreement, including the
2,850,671 shares cumulatively pledged pursuant to the terms of that certain
Security and Pledge Agreement dated as of March 10, 1995, as amended) does not
cause the REIT to be "closely held" within the meaning of Section 856(h) of the
Internal Revenue Code of 1986, as amended (the "REIT Regulation") and subject to
the other restrictions described below.
NOW, THEREFORE, in consideration of the foregoing and the respective
covenants and agreements set forth in this Agreement, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows.
1. Incorporation of Recitals. The foregoing recitals are
incorporated by this reference as if fully set forth herein.
2. Exchange of Units. Following the occurrence of an Exchange Event
(as defined below), the Lender shall have the right in its sole and absolute
discretion, on such number of occasions as it shall elect, to exchange the
Partnership Units (or any portion thereof) for REIT Shares on the following
terms:
(a) The Lender shall initiate each such exchange by delivering to the
REIT with a copy to the Borrower a written notice (i) stating that an Exchange
Event has occurred, (ii) requesting that the REIT issue and deliver to the
Lender or its designee REIT Shares in the denominations designated by the Lender
in exchange for a specified number of Partnership Units (the "Tendered Units");
and (iii) specifying the name in which such REIT Shares shall be registered as
specified by the Lender in its sole and absolute discretion (the "Exchange
Notice").
(b) On the applicable Exchange Date (as defined below), the REIT shall
deliver to the Lender a number of REIT Shares (and any associated rights) equal
to the product obtained by multiplying the number of Tendered Units by the
Conversion Factor (as defined in the Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of August 17, 1993, as modified,
supplemented or amended from time to time (the "Partnership Agreement")), which
REIT Shares shall be in the denominations and registered in the name specified
in the Exchange Notice; provided, however, that the REIT shall not deliver REIT
Shares to the Lender in exchange for Partnership Units pursuant to this Exchange
Agreement on any particular date to the extent that such exchange and delivery
would result in a violation of the REIT Regulation.
(c) Upon the REIT's issuance and the Lender's receipt of REIT Shares
(and any associated rights) in exchange for the Tendered Units in accordance
with this Agreement, the REIT shall be deemed for all purposes to be the owner
of the Tendered Units and shall cause the Partnership's books to be adjusted to
reflect such change in ownership.
(d) The obligation of the REIT to issue REIT Shares in exchange for
the Tendered Units in accordance with the terms hereof shall be absolute and
unconditional and shall not be subject to any defense by reason of the actual or
alleged invalidity, illegality or unenforceability of the Exchange Notice, the
Credit Agreement, the Security Agreement, or any of the other documents
evidencing, securing or otherwise pertaining to the Credit Agreement, the actual
or alleged nonoccurrence of an Exchange Event, or otherwise. The Borrower
irrevocably agrees and acknowledges that the delivery of an Exchange Notice
shall be conclusive evidence that an Exchange Event has occurred for purposes of
this Agreement, and the Borrower waives all claims, damages, costs, losses,
demands or actions against the Lender arising out or as a result of a
declaration by the Lender that an Exchange Event has occurred or the exchange of
Partnership Units for REIT Shares pursuant to the terms hereof, other than any
such claim, damage, cost, loss, demand or action resulting from any such
declaration or exchange made by the Lender in bad faith.
(e) If an Exchange Notice is delivered to the REIT at or prior to
11:30 a.m. (Eastern Time) on a Business Day (as defined below), the REIT Shares
(and any associated rights) to be issued and delivered by the REIT hereunder
shall be delivered to the Lender not later than 3:30 p.m. (Eastern Time) on the
third Business Day following delivery of such Exchange Notice, and if any
Exchange Notice is delivered by the REIT after 11:30 a.m. on a Business Day,
then such REIT Shares shall be issued and delivered not later than 11:30 a.m.
(Eastern Time) on the fourth Business Day following delivery of such Exchange
Notice (the "Exchange Date"). REIT Shares delivered pursuant to this Agreement
shall be duly and validly issued, fully paid and nonassessable and shall be
evidenced by certificates therefor.
(f) Notwithstanding anything to the contrary herein, the Lender
covenants and agrees that any violation or attempted violation of the REIT
Regulation by the Lender or its designee will result, to the extent necessary,
in the exchange of REIT Shares held by the Lender for Excess Shares (as defined
in the Second Amended and Restated Declaration of Trust of the REIT, dated
August 6, 1993 (the "Trust Declaration")) in accordance with Section 6.6 of the
Trust Declaration.
(g) For purposes of this Agreement (i) an "Exchange Event" shall mean
the occurrence and continuance beyond any applicable grace period provided
therefor of an Event of Default under and as defined in the Credit Agreement,
and (ii) a "Business Day" shall mean any day excluding Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
Commonwealth of Pennsylvania are authorized or permitted by law or other
government actions to be closed.
3. Not a Redemption. Any exchange of Partnership Units for REIT
Shares pursuant to this Agreement will not constitute a redemption of
Partnership Units by the Partnership under Section 11.1 or any other provision
of the Partnership Agreement. Accordingly, the parties agree that nothing in the
Partnership Agreement, including, without limitation, the provisions of Section
11.1 thereof, shall impose a time limitation upon the exercise of the Lender's
right of exchange under Section 2 of this Agreement.
4. Foreclosure on Units. If the Lender shall fail to receive REIT
Shares in exchange for Partnership Units in accordance with this Agreement for
any reason whatsoever, the Lender may foreclose or otherwise realize upon such
Tendered Units in accordance with the terms of the Security Agreement and
exercise any and all other rights and remedies with respect to such Tendered
Units as the Lender may have under such Security Agreement in its sole and
absolute discretion, and in connection therewith any purchaser or transferee of
all or any portion of the Tendered Units (including, without limitation, the
Lender) shall have the right, at its election, to become either an assignee of
the Initial Limited Partner or a Limited Partner (as such terms are defined in
the Partnership Agreement) with respect to such Tendered Units.
5. Obligations of the REIT. The REIT shall be entitled and obligated
to rely without inquiry on the written statement of the Lender that an Exchange
Event has occurred. The only obligations of the REIT under this Agreement shall
be to register and deliver REIT Shares (and any associated rights) in exchange
for Tendered Units in accordance with the terms of Section 2 hereof. The REIT
acknowledges and agrees that it waives any right of setoff that it may have in
respect of the REIT Shares to be issued and delivered pursuant to this
Agreement.
6. Notices. All notices, approvals, demands, requests, consents and
other communications provided for hereunder shall be in writing, shall refer to
this Agreement, and shall be delivered by hand or by facsimile transmission or
sent by registered or certified mail, return receipt requested, or by overnight
courier service to the recipient at the address set forth below:
If to the REIT:
Crown American Realty Trust
Pasquerilla Plaza
Johnstown, Pennsylvania 15907
Attention: Mr. Mark E. Pasquerilla, CEO and President
Telephone: (814) 535-9328
Facsimile: (814) 535-9486
If to the Borrower:
Crown Investments Trust
Pasquerilla Plaza
Johnstown, Pennsylvania 15907
Attention: Mr. Mark E. Pasquerilla,
President
Telephone: (814) 535-9328
Facsimile:(814) 535-9486
with a copy to:
Reed Smith Shaw & McClay
Mellon Square
435 Sixth Avenue
Pittsburgh, Pennsylvania 15219
Attention: Patrick Sweeney, Esq.
Telephone: (412) 288-7276
Facsimile: (412) 288-3063
If to the Lender:
NBOC Bank
Philadelphia and Sixth Streets
Indiana, Pennsylvania 15701
Attention: Mr. Joseph E. Dell, Jr.
Telephone: (724) 463-5604
Facsimile: (724) 465-5702
with a copy to:
Tucker, Arensberg, P.C.
1500 One PPG Plaza
Pittsburgh, PA 15222
Attention: Linda Acheson, Esq.
Telephone: (412) 566-1212
Facsimile: (412) 594-5619
or, at such other address or facsimile number as shall be designated by a party
in a written notice to the other party. All such notices and other
communications shall be deemed given and effective: (a) when sent by mail, on
the second Business Day after the date deposited in the United States mail, (b)
when sent by overnight courier, on the next Business Day after delivery to the
courier service, and (c) when delivered by hand or transmitted by facsimile, on
the date of delivery or transmission, as the case may be.
7. Severability. If any provision of this Agreement is held invalid,
such invalidity will not affect any other provision of this Agreement that can
be given effect without the invalid provision, and to this end, the provisions
of this Agreement are severable.
8. Assignment. Neither the REIT, the Borrower nor CAIC may assign
any of their rights or obligations hereunder. The Lender, Borrower and CAIC may
assign their respective rights and obligations hereunder to the extent permitted
pursuant to the Credit Agreement. This Agreement is binding upon and shall inure
to the benefit of each of the parties hereto and its respective successors and
permitted assigns.
9. Amendment. This Agreement may be modified only by a written
instrument duly executed by all the parties hereto, and compliance with any
provision or condition contained in this Agreement, or the obtaining of any
consent provided for in this Agreement, may be waived only by written instrument
duly executed by the party to be bound by such waiver.
10. Governing Law. The rights of the parties arising under this
Agreement shall be construed and enforced under the laws of the Commonwealth of
Pennsylvania.
11. Captions. The captions in this Agreement are for convenience
only, do not form a part of it, and do not in any way modify, interpret or
construe the intentions of the parties to it.
12. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
13. Specific Performance. The REIT recognizes and agrees that the
Lender's remedy at law for any breach by the REIT of any of the provisions of
this Agreement would be inadequate and that the Lender would be irreparably
injured by any such breach, and the REIT agrees to the fullest extent permitted
by law that for breach or threatened breach of any of such provisions, the
Lender shall, in addition to such other remedies as may be available to it at
law or in equity or as provided in this Agreement, be entitled (without posting
a bond) to injunctive relief (preliminary, mandatory, temporary and permanent)
and to enforce its rights by an action for specific performance. The REIT
agrees to and hereby does waive the defense in any action for specific
performance that a remedy at law would be inadequate.
IN WITNESS WHEREOF, each of the undersigned has executed, or caused
its duly authorized representative to execute, this Agreement as of the date set
forth in the first paragraph of this Agreement.
NBOC BANK, a division of
First Commonwealth Bank
By: /s/Jeffrey W. Alabran
Title: Vice President
CROWN AMERICAN REALTY TRUST
By: /s/Ronald P. Rusinak
Title: Vice President
CROWN AMERICAN PROPERTIES, L.P.
By: Its General Partner,
CROWN AMERICAN REALTY TRUST
By: /s/Ronald P. Rusinak
Title: Vice President
CROWN INVESTMENTS TRUST
By: /s/Ronald J. Hamilton
Title: Vice President
CROWN AMERICAN INVESTMENT COMPANY
By: /s/Ronald J. Hamilton
Title: Vice President
EXHIBIT 10.21
SECOND AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
THIS SECOND AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT is made as
of the 29th day of August, 2000 (this "Agreement"), by and between CROWN
AMERICAN REALTY TRUST, a Maryland real estate investment trust (the "Company"),
and NBOC BANK, a division of First Commonwealth Bank, successor in interest to
National Bank of the Commonwealth (the "Bank").
W I T N E S S E T H:
WHEREAS, Crown Investments Trust, a Delaware business trust ("CIT"),
and the Bank have entered into a Revolving Credit Agreement, dated as of March
10, 1995 (the "Revolving Credit Agreement"), as amended from time to time
thereafter, and concurrently herewith are entering into a Fourth Amendment to
Revolving Credit Agreement (such Revolving Credit Agreement, as previously
amended and as further amended by such Fourth Amendment, being referred to
herein as the "Credit Agreement");
WHEREAS, the obligations of CIT to the Bank under the Credit Agreement
are secured by the pledge of 1,450,000 Common Shares of Beneficial Interest of
the Company pursuant to that certain Security and Pledge Agreement dated as of
March 10, 1995, as amended from time to time thereafter (as so amended, the
"Original Pledge Agreement");
WHEREAS, in exchange for increasing the maximum amount payable under
the Credit Agreement and in order to further secure the obligations of CIT to
Bank under the Credit Agreement, CIT has agreed to pledge to Bank an additional
1,400,671 Common Shares of Beneficial Interest of the Company, bringing the
total so pledged to 2,850,671 ("Shares");
WHEREAS, as further security for the obligations of CIT under the
Credit Agreement and increasing the maximum amount available under the Credit
Agreement, Crown American Investment Company, a Delaware corporation ("CAIC"),
has agreed to pledge to the Bank 432,398 common partnership units (the
"Partnership Units") of Crown American Properties, L.P., a Delaware limited
partnership ("CAP"), which represents a reduction of 942,449 Partnership Units
from the 1,374,847 pledged in connection with the third amendment to the
Revolving Credit Agreement;
WHEREAS, concurrently herewith, CIT, CAIC, and the Bank are entering
into a Fourth Amendment to Security and Pledge Agreement (the Original Pledge
Agreement, as amended by such Fourth Amendment, being referred to herein as the
"Pledge Agreement"); and
WHEREAS, the Company, CAP, CIT, CAIC, and the Bank are entering into
an Amended and Restated Exchange Agreement dated as of the date hereof (the
"Exchange Agreement") pursuant to which the Company has agreed, on the terms and
conditions set forth therein, to exchange the Partnership Units for additional
Common Shares of Beneficial Interest.
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and subject to and
on the terms and conditions herein set forth, the parties hereto agree as
follows:
1. Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Business Day" means any day on which the New York Stock Exchange is
open for trading.
"Eligible Shares" means all but not less than all of the Shares
pledged to the Bank under the Pledge Agreement, including any shares issued by
the Company to the Bank pursuant to the Exchange Agreement. As to any proposed
offer or sale of Eligible Shares, such securities shall cease to be Eligible
Shares when a registration statement with respect to the sale of such securities
shall have become effective under the Securities Act and such securities shall
have been disposed of in accordance with such registration statement.
"Event of Default" has the meaning given to such term in the Credit
Agreement.
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with the registration requirements set forth in
this Agreement but shall not include underwriting discounts or commissions
attributable to Eligible Shares, transfer taxes applicable to Eligible Shares or
fees and expenses of counsel to the Bank.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder, all as the same shall be in effect
at the relevant time.
"Pledge Agreement" has the meaning set forth in the recitals to this
Agreement.
2. Registration Rights.
2.01 Demand Registration Rights. At any time after the occurrence
and continuance of an Event of Default beyond any applicable grace period
provided therefor, the Bank shall have the right, on one occasion chosen by the
Bank in its discretion, to require the Company to register all, but not less
than all, of the Eligible Shares held by it (the "Demand Registration Right").
As promptly as practicable, and in no event later than 60 days after the Company
receives a Demand Registration Request (as defined herein) from the Bank, the
Company shall file and use its reasonable best efforts to cause to be declared
effective a registration statement with the SEC providing for the registration
of all Shares which the Bank has directed in the Demand Registration Request. A
"Demand Registration Request" means a written notice from the Bank directing the
Company to register the Bank's Eligible Shares pursuant to this Section 2.01 and
specifying the intended method or methods of disposition of such Eligible
Shares.
2.02 Payment of Registration Expenses. With respect to any
registration directed pursuant to this Agreement, the Company shall pay all
Registration Expenses.
3. Registration Procedures.
3.01 Registration and Qualification. In connection with the
Company's obligations with respect to the registration of Eligible Shares
pursuant to this Agreement and in accordance with the intended method or methods
of distribution thereof, the Company shall, as soon as reasonably practicable
(and, in any event, subject to the terms of this Agreement, at or before the
time required by applicable laws and regulations) take such action as may
reasonably and customarily be required in order to effect the registration and
sale of the Eligible Shares under the Securities Act, including:
(a) prepare and file with the SEC a registration statement on any
appropriate form under the Securities Act, which form shall be available for the
sale of the respective Eligible Shares in accordance with the intended method or
methods of distribution thereof, and use its reasonable best efforts to cause
such registration statements to become effective as soon as possible after the
filing thereof;
(b) prepare and file with the SEC such amendments and post-effective
amendments to such registration statement and supplements to the related
prospectus used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all Eligible Shares until the
earlier of such time as all of such Eligible Shares have been disposed of in
accordance with the intended methods of disposition by the Bank set forth in
such registration statement or the expiration of 90 days after such registration
statement becomes effective;
(c) notify the Bank, the sales or placement agent or agents, if any,
for the Eligible Shares and the managing underwriter or underwriters, if any,
thereof, after becoming aware thereof, (i) when any registration statement or a
prospectus included therein or any prospectus amendment or supplement or
post-effective amendment has been filed, and, with respect to the registration
statement or any post-effective amendment, when the same has become effective,
(ii) of any request by the SEC for amendments or supplements to the registration
statement or related prospectus or for additional information, (iii) of the
issuance by the SEC of any stop order suspending the effectiveness of any
registration statement or the initiation of any proceedings for that purpose,
(iv) of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Eligible Shares for sale in any
jurisdiction or the initiation of any proceeding for such purpose, or (v) the
happening of any event which makes any statement in the relevant registration
statement or any post-effective amendment thereto, prospectus or any amendment
or supplement thereto, or any document incorporated therein by reference untrue
in any material respect or which requires the making of any changes in such
registration statement or post-effective amendment thereto or prospectus or
amendment or supplement thereto so that they will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein (in the case of any
prospectus, in the light of the circumstances under which they were made) not
misleading;
(d) register or qualify all Eligible Shares covered by such
registration statement under such other securities or blue sky laws of such
jurisdictions as the Bank or any underwriter of such Eligible Shares shall
reasonably request, and do any and all other acts and things which may be
reasonably requested by the Bank or any underwriter to consummate the
disposition of the Eligible Shares in such jurisdictions covered by such
registration statement; provided, however, the Company shall not be required to
(i) qualify generally to do business in any jurisdiction wherein it is not so
qualified, (ii) subject itself to taxation in any jurisdiction where it is not
then subject to taxation, (iii) consent to general service of process in any
jurisdiction where it is not then subject to service of process, provided that
the Company shall execute consents to service of process in the forms
customarily requested in connection with registration or qualification of
securities under state securities or blue sky laws, or (iv) make any changes to
its declaration of trust or bylaws or enter into any undertakings with respect
to its corporate affairs other than undertakings customarily given in connection
with qualifications of securities for sale which do not restrict the conduct of
its business;
(e) use its best efforts to list the Eligible Shares on each national
securities exchange on which the Company's Common Shares of Beneficial Interest
are then listed, if the listing of such securities is then permitted under the
rules of such exchange;
(f) upon written notice from the Bank that it intends to offer and
sell the Eligible Shares, enter into such agreements (including, if the offering
is an underwritten offering, an underwriting agreement) as are customary in
transactions of that type and take such other actions that are reasonably
required in connection therewith in order to expedite or facilitate the
disposition of such Eligible Shares; and
(g) comply with all applicable rules and regulations of the SEC.
3.02 Information Provided to Company by Bank. The Bank shall furnish
to the Company in writing such information regarding the Bank and its intended
method of distribution of the Eligible Shares as the Company may from time to
time reasonably request in writing, but only to the extent that such information
is required in order for the Company to comply with its obligations under all
applicable securities and other laws and to ensure that the prospectus relating
to such Eligible Shares conforms to the applicable requirements of the
Securities Act and the rules and regulations thereunder. The Bank shall notify
the Company as promptly as practicable of any inaccuracy or change in
information previously furnished by the Bank to the Company or of the occurrence
of any event, in either case as a result of which any prospectus relating to the
Eligible Shares contains or would contain an untrue statement of a material fact
regarding the Bank or its intended method of distribution of such Eligible
Shares or omits to state any material fact regarding the Bank or its intended
method of distribution of such Eligible Shares 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, and promptly furnish to the Company
any additional information required to correct and update any previously
furnished information or required so that such prospectus shall not contain,
with respect to the Bank or the distribution of the Eligible Shares, 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.
4. Indemnification and Contribution.
4.01 Indemnification by the Company. The Company shall, and it hereby
agrees to, indemnify and hold harmless the Bank, and each person who
participates as a placement or sales agent or as an underwriter in any offering
or sale of the Eligible Shares, against any losses, claims, damages or
liabilities to which the Bank or such agent or underwriter may become subject,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in any
registration statement under which such Eligible Shares were registered under
the Securities Act, or any preliminary or final prospectus contained therein, or
any amendment or supplement thereto, or any document incorporated by reference
therein, or arise out of or are based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and the Company shall, and it hereby
agrees to, reimburse the Bank or any such agent or underwriter for any legal or
other direct, out-of-pocket expenses reasonably incurred by them in connection
with investigating or defending any such action, proceeding or claim; provided,
however, that the Company shall not be liable to any such person in any such
case to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of, or is based upon, an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, or preliminary or final prospectus, or
amendment or supplement thereto, in reliance upon and in conformity with written
information furnished to the Company by the Bank or any agent, underwriter or
representative of the Bank expressly for use therein, or by the Bank's failure
to furnish the Company, upon request, with the information with respect to the
Bank, or any agent, underwriter or representative of the Bank, or the Bank's
intended method of distribution, that is the subject of the untrue statement or
omission or if the Company shall sustain the burden of proving that the Bank or
such agent or underwriter sold securities to the person alleging such loss,
claim, damage or liability without sending or giving, at or prior to the written
confirmation of such sale, a copy of the applicable prospectus (excluding any
documents incorporated by reference therein) or of the applicable prospectus, as
then amended or supplemented (excluding any documents incorporated by reference
therein) if the Company had previously furnished copies thereof to the Bank or
such agent or underwriter, and such prospectus corrected such true statement or
alleged untrue statement or omission or alleged omission made in such
registration statement.
4.02 Indemnification by the Bank. The Bank, by virtue of exercising
its registration rights under this Agreement, agrees and undertakes to enter
into, at the request of the Company, the customary indemnification arrangement
to indemnify and hold harmless (in the same manner and to the same extent as set
forth in Section 4.01), the Company, each director of the Company, each officer
of the Company who shall sign such registration statement, each Person who
participates as an underwriter in the offering or sale of such Securities, each
Person if any, who controls the Company or any such underwriter within the
meaning of the securities Act, with respect to any statement in or omission from
such registration statement, any preliminary prospectus or final prospectus
included therein, or any amendment or supplement thereto, but only to the extent
that such statement or omission was made in reliance upon and in conformity with
written information furnished by the Bank to the Company expressly for use in
the registration statement. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Company or
any such director, officer or controlling Person and shall survive the transfer
of the registered securities by the Bank and the expiration of this Agreement.
4.03 Additional Indemnification by Company and Bank. Indemnification
and contribution similar to that specified in Sections 4.01 and 4.02 (with
appropriate modifications) shall be given by the Company and the Bank with
respect to any required registration or other qualification of such Eligible
Shares under any federal or state law or regulation of governmental authority
other than the Securities Act.
4.04 Notice of Claims. Promptly after receipt by an indemnified
party under Sections 4.01, 4.02 or 4.03 of written notice of the commencement of
any action or proceeding, such indemnified party shall, without regard to
whether a claim in respect thereof is to be made against an indemnifying party
pursuant to the indemnification provisions of, or as contemplated by this
Paragraph 4, notify such indemnifying party in writing of the commencement of
such action or proceeding; but the omission so to notify the indemnifying party
shall not relieve it from any liability which it may have to any indemnified
party in respect of such action or proceeding on account of the indemnification
provisions of or contemplated by Sections 4.01, 4.02 or 4.03 unless the
indemnifying party was prejudiced by such failure of the indemnified party to
give such notice, and in no event shall such omission relieve the indemnifying
party from any other liability it may have to such indemnified party. In case
any such action or proceeding shall be brought against any indemnified party and
it shall notify an indemnifying party of the commencement thereof, such
indemnifying party shall be entitled to participate therein and, to the extent
that it shall determine, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, such
indemnifying party shall not be liable to such indemnified party for any legal
or any other expenses, in each case subsequently incurred by such indemnified
party, in connection with the defense thereof other than reasonable costs of
investigation (unless such indemnified party reasonably objects to such
assumption on the grounds that there may be defenses to it which are different
from or in addition to such indemnifying party in which event the indemnified
party shall be reimbursed by the indemnifying party for the expenses incurred in
connection with retaining one and only one separate counsel). If the
indemnifying party is not entitled to, or elects not to, assume the defense of a
claim, it will not be obligated to pay the fees and expenses of more than one
counsel for each indemnified party with respect to such claim. The indemnifying
party will not be subject to any liability for any settlement made without its
consent, which consent shall not be unreasonably withheld. No indemnifying
party will consent to entry of any judgment or enter into any settlement
agreement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect of such claim or litigation.
4.05 Contribution. Each party hereto agrees that if, for any reason,
the indemnification provisions contemplated by Sections 4.01, 4.02 or 4.03
hereof are unavailable or insufficient to hold harmless an indemnified party in
respect of any losses, claims, damages or liabilities (or actions or proceedings
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) in such proportion as is appropriate to reflect the relative
fault of, and benefits derived by, the indemnifying party and the indemnified
party, as well as any other relevant equitable considerations. The relative
fault of such indemnifying party and indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact
relates to information supplied by such indemnifying party or by such
indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The relative benefit derived by the parties shall be determined by reference to
the fact that the Company entered into this Agreement to induce the Bank to
engage in the transaction in which the Eligible Shares were acquired. The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 4.05 were determined (i) by pro rata allocation (even
if the Bank or any agents for, or underwriters of, the Eligible Shares, or all
of them, were treated as one entity for such purpose); or (ii) by giving any
weight to the fact that the Company did not receive any of the proceeds of the
sale of the Eligible Shares; or (iii) by any other method of allocation which
does not take account of the equitable considerations referred to in this
section 4.05. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) referred to above shall be deemed to include (subject to the
limitation set forth in Section 4.04) any legal or other fees or expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action, proceeding or claim. 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.
4.06 Scope of Indemnification. The obligations of the Company under
this Paragraph 4 shall be in addition to any liability that it may otherwise
have and shall extend, upon the same terms and conditions, to each officer,
director and partner of the Bank and each agent and underwriter of the Eligible
Shares and each person, if any, who controls the Bank and any such agent or
underwriter within the meaning of the Securities Act; and the obligations of the
Bank and any agents or underwriters contemplated by this Paragraph 4 shall be in
addition to any liability that the Bank or its respective agent or underwriter
may otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Company (including any person who, with his consent,
is named in any registration statement as about to become a director of the
Company) and to each person, if any, who controls the Company within the meaning
of the Securities Act.
5. Selection of Underwriters. If any of the Eligible Shares are to
be sold pursuant to an underwritten offering, the investment banker or bankers
and the managing underwriter or underwriters thereof shall be selected by the
Company.
6. Miscellaneous.
6.01 Remedies. In the event of a breach by the Company of its
obligations under this Agreement, the Bank, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. The
Company agrees that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach of any of the provisions of this Agreement
and hereby agrees to and hereby does waive the defense in any action for
specific performance that a remedy at law would be adequate.
6.02 Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal, or unenforceable in any respect or for any reason, the
validity, legality and unenforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any way
impaired thereby, it being intended that all of the rights and privileges of the
Bank shall be enforceable to the fullest extent permitted by law.
6.03 Attorneys' Fees. In any action or proceeding brought to enforce
any provision of this Agreement, or where any provision hereof is validly
asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys' fees in addition to any other available remedy.
6.04 Notices. All notices, requests, claims, demands, waivers and
other communications hereunder shall be in writing and shall be deemed to have
been duly given when delivered by hand, if delivered personally or by courier,
or three days after being deposited in the mail (registered or certified mail,
postage prepaid, return receipt requested) as follows: if to the Company, to
Crown American Realty Trust, Pasquerilla Plaza, Johnstown, Pennsylvania 15907,
attention: Mark E. Pasquerilla, fax number (814) 535-9486, and if to the Bank,
to NBOC Bank, Philadelphia & Sixth Streets, Indiana, Pennsylvania 15701,
Attention: Mr. Joseph E. Dell, Jr., or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notices of change of address shall be effective only upon receipt.
6.05 Parties in Interest. All of the terms and provisions of this
Agreement shall be binding upon, shall inure to the benefit of and shall be
enforceable by the respective successors and permitted assigns of the parties
hereto; provided that neither the Company nor Bank may assign its rights or
obligations hereunder to any other person or entity without the prior written
consent of the other party.
6.06 Survival. The respective indemnities, agreements,
representations, warranties and each other provision set forth in this Agreement
or made pursuant hereto shall remain in full force and effect regardless of any
investigation (or statement as to the results thereof) made by or on behalf of
the Bank, any director or officer of the Bank, any agent or underwriter, or any
director, officer or partner thereof, or any controlling person of any of the
foregoing.
6.07 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania.
6.08 Headings. The descriptive headings of the several sections and
paragraphs of this Agreement are inserted for convenience only, do not
constitute a part of this Agreement and shall not affect in any way the meaning
or interpretation of this Agreement.
6.09 Entire Agreement: Amendments. This Agreement and the other
writings referred to herein or delivered pursuant hereto which form a part
hereof contain the entire understanding of the parties with respect to its
subject matter. This Agreement supersedes all prior agreements and
understandings between the parties with respect to its subject matter. This
Agreement may be amended and the observance of any term of this Agreement may
be waived (either generally or in a particular instance and either retroactively
or prospectively) only by a written instrument duly executed by the Company and
the Bank, which shall be binding on all parties.
6.10 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed as of the date first written above.
CROWN AMERICAN REALTY TRUST
By: /s/Ronald P. Rusinak
Title: Vice President
NBOC BANK, a division of First
Commonwealth Bank
By: /s/Jeffrey W. Alabran
Title: Vice President
