<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<S> <C>
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
</TABLE>
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CROWN AMERICAN REALTY TRUST
------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (check the appropriate box):
<TABLE>
<S> <C> <C>
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction
applies:
------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how
it was determined):
------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
1) Amount Previously Paid:
------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------
</TABLE>
<PAGE> 2
CROWN AMERICAN REALTY TRUST
PASQUERILLA PLAZA
JOHNSTOWN, PENNSYLVANIA 15901
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS--APRIL 26, 2000
TO THE SHAREHOLDERS:
The Annual Meeting of Shareholders of Crown American Realty Trust (the
"Company") will be held at the Johnstown Holiday Inn, 250 Market Street,
Johnstown, Pennsylvania on Wednesday, April 26, 2000 at 10:00 a.m. (local time),
for the purpose of considering and acting upon the following:
(1) The election of two persons to serve as Trustees for a three-year
term expiring at the Annual Meeting of Shareholders in 2003;
(2) To consider and vote upon a proposal to amend the 1993 Crown
American Realty Option Plan to increase the number of limited partnership
units which are available for the issuance of options to officers and key
employees from 1,200,000 to 2,200,000; and
(3) Such other business as may properly come before the Annual Meeting
or any adjournment thereof.
The Board of Trustees has fixed the close of business on March 15, 2000 as
the record date for the determination of the holders of the Company's Common
Shares of Beneficial Interest entitled to receive notice of and to vote at the
meeting, or any adjournments thereof, and only shareholders of record on such
date are entitled to receive notice of and to vote at said meeting.
You will find enclosed a proxy card which must be completed and returned in
order to vote all Common Shares of Beneficial Interest which you hold. The
Company's 1999 Annual Report to Shareholders is also enclosed.
By Order of the Board of Trustees,
Ronald P. Rusinak
Vice President, General
Counsel and Secretary
Johnstown, Pennsylvania
March 31, 2000
YOUR VOTE IS IMPORTANT
YOU ARE URGED TO DATE, SIGN AND PROMPTLY RETURN YOUR PROXY SO THAT YOUR SHARES
MAY BE VOTED IN ACCORDANCE WITH YOUR WISHES AND IN ORDER THAT THE PRESENCE OF A
QUORUM MAY BE ASSURED AT THE ANNUAL MEETING. YOU ARE CORDIALLY INVITED TO ATTEND
THE MEETING IN PERSON. THE GIVING OF YOUR PROXY DOES NOT AFFECT YOUR RIGHT TO
VOTE IN PERSON IN THE EVENT YOU ATTEND THE MEETING.
<PAGE> 3
CROWN AMERICAN REALTY TRUST
PASQUERILLA PLAZA
JOHNSTOWN, PENNSYLVANIA 15901
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
April 26, 2000
GENERAL
This Proxy Statement is furnished to shareholders in connection with the
solicitation by the Board of Trustees of Crown American Realty Trust (the
"Company") of proxies in the accompanying form for use at the Annual Meeting of
Shareholders of the Company (the "Annual Meeting") to be held at 10:00 a.m.
(local time) on Wednesday, April 26, 2000 at the Johnstown Holiday Inn, 250
Market Street, Johnstown, Pennsylvania or at any adjournment thereof. If a proxy
in the accompanying form is duly executed and returned to the Company, the
shares represented will be voted at the Annual Meeting and, where a choice is
specified, will be voted in accordance with the specification made. Any
shareholder who gives a proxy has the power to revoke it at any time before it
is exercised by notice to the Secretary. A later-dated proxy will revoke an
earlier proxy, and shareholders who attend the Annual Meeting may, if they wish,
vote in person even though they have submitted a proxy, in which event the proxy
will be deemed to have been revoked.
As of the close of business on March 15, 2000, the Company had outstanding
26,207,919 Common Shares of Beneficial Interest ("Common Shares"). This proxy
statement and the proxy in the accompanying form are being mailed on or about
March 31, 2000 to holders of record of the Common Shares as of the close of
business on March 15, 2000. The Company has senior preferred shares of
beneficial interest outstanding which do not currently have voting rights.
The Annual Report to Shareholders for the fiscal year ended December 31,
1999, which includes consolidated financial statements, is enclosed with this
Proxy Statement.
VOTING
Shareholders of record as of the close of business on March 15, 2000 (the
"Record Date") have the right to receive notice of and to vote at the Annual
Meeting. The presence in person or by proxy of shareholders entitled to cast a
majority of all the votes entitled to be cast at such meeting shall constitute a
quorum. Each share may be voted for as many individuals as there are Trustees to
be elected and for whose election the share is entitled to be voted. A plurality
of all the votes cast shall be sufficient to elect a Trustee. The affirmative
vote of a majority of the shares present in person or by proxy shall be
sufficient to approve the proposed amendment to the 1993 Crown American Realty
Option Plan. A majority of the votes cast shall be sufficient to approve any
other matter which may come before the meeting unless more than a majority of
the votes cast is required by statute or by the Company's Second Amended and
Restated Declaration of Trust.
BENEFICIAL OWNERSHIP OF CAPITAL STOCK
Under the proxy rules of the Securities and Exchange Commission (the
"SEC"), a person who directly or indirectly has or shares voting power and/or
investment power with respect to a security is considered a beneficial owner of
the security. Voting power includes the power to vote or direct the voting of
shares, and investment power includes the power to dispose of or direct the
disposition of shares. Shares as to which voting power and/or investment power
may be acquired within 60 days are also considered as beneficially owned under
the proxy rules.
1
<PAGE> 4
MANAGEMENT
The Company conducts all of its business activities through subsidiaries,
principally Crown American Properties, L.P., a Delaware limited partnership (the
"Operating Partnership"), and Crown American Financing Partnership, L.P., a
Delaware limited partnership (the "Financing Partnership"). The Company does not
have any employees other than its officers. For purposes of this Proxy
Statement, employees and officers of the Operating Partnership are treated as
employees of the Company.
The Trustees, chief executive officer, four other most highly compensated
executive officers who were serving as executive officers as of December 31,
1999, and all Trustees and executive officers of the Company as a group
beneficially owned as of February 29, 2000 the number of Common Shares set forth
in the table below. The information on beneficial ownership in the table and
related footnotes is based upon data furnished to the Company by, or on behalf
of, the persons referred to in the table. Unless otherwise indicated in the
footnotes to the table, each Trustee and executive officer has sole voting power
and sole dispositive power with respect to the shares shown.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
NAME OWNERSHIP OF CLASS (1)
---- ----------------- ------------
<S> <C> <C>
Mark E. Pasquerilla 4,321,166(2) 15.7%
Clifford A. Barton 45,333(3) *
Donald F. Mazziotti 16,183(4) *
Zachary L. Solomon 316,000(3) 1.1%
Peter J. Siris 104,500(5) *
Terry L. Stevens 57,012(6) *
Donato B. Zucco 61,734(7) *
George M. Sakakeeny 79,048(8) *
Thomas Stephenson 92,075(9) *
Nicholas O. Antonazzo 102,154(10) *
All Trustees and executive officers as a group (10
persons) 5,195,205(11) 18.7%
</TABLE>
- ---------
* Less than 1%
(1) The percentage of class was determined by dividing the number of shares
beneficially owned by the number of Common Shares outstanding, in each case
treating the shares which may be acquired upon exercise of outstanding
options as outstanding that are exercisable within 60 days of the Record
Date as required by Rule 13d-3(d)(1) under the Securities Exchange Act of
1934, as amended. For purposes of inclusion in the table and percentage of
class, options represent the right to acquire common Partnership Units,
which may be converted into Common Shares of the Company.
(2) Includes 26,908 Common Shares held of record by Mark E. Pasquerilla
individually and 137,496 Common Shares held of record by Marenrico
Partnership, a general partnership consisting of Mark E. Pasquerilla and
Leah Pasquerilla, his sister, as to which Common Shares he shares voting
and dispositive power. Includes 40,890 Common Shares allocated to the
executive in connection with the Crown American Properties, L.P. Key
Executive Capital Incentive Plan (the "Executive Incentive Plan"). Also
includes 4,115,872 Common Shares reported as beneficially owned by Crown
Investments Trust ("Crown Investments"), a Delaware business trust the
entire beneficial interest of which is owned by Crown Delaware Holding
Corporation, a Delaware corporation ("Crown Delaware"). All the outstanding
capital stock of Crown Delaware is owned by Crown Holding Company, a
Pennsylvania corporation ("Crown Holding"). All of the voting common stock
of Crown Holding is owned by Mark E. Pasquerilla, the Frank J. Pasquerilla
Revocable Trust and the Estate of Sylvia Pasquerilla.
(3) Includes 16,000 shares which may be acquired upon the exercise of
outstanding options.
(4) Includes 15,000 shares which may be acquired upon the exercise of
outstanding options.
2
<PAGE> 5
(5) Includes 4,000 Common Shares held in trust for his son and daughter, with
respect to which Mr. Siris is the trustee, beneficial ownership of which
shares is disclaimed. Also includes 51,500 Common Shares held in an
investment fund over which Mr. Siris has voting and dispositive power and
includes 15,000 shares which may be acquired upon the exercise of
outstanding options.
(6) Includes 1,539 Common Shares held in trust for his daughters, with respect
to which Mr. Stevens is the trustee, beneficial ownership of which shares
is disclaimed. Also includes 13,105 Common Shares allocated to the
executive in connection with the Executive Incentive Plan and 36,000 shares
which may be acquired upon the exercise of outstanding options.
(7) Includes 9,342 Common Shares allocated to the executive in connection with
the Executive Incentive Plan and 36,000 shares which may be acquired upon
the exercise of outstanding options.
(8) Includes 12,253 Common Shares allocated to the executive in connection with
the Executive Incentive Plan and 36,000 shares which may be acquired upon
the exercise of outstanding options.
(9) Includes 15,565 Common Shares allocated to the executive in connection with
the Executive Incentive Plan and 72,000 shares which may be acquired upon
the exercise of outstanding options.
(10) Includes 4,953 Common Shares held jointly by Mr. Antonazzo and his wife,
with whom he shares voting and dispositive power. Also includes 25,201
Common Shares allocated to the executive in connection with the Executive
Incentive Plan. Includes 72,000 shares which may be acquired upon the
exercise of outstanding options.
(11) Includes 4,115,872 Common Shares reported as beneficially owned by Crown
Investments which are included in the reported holdings of Mark E.
Pasquerilla. Also includes the shares which may be acquired upon the
exercise of outstanding share options as described above.
OTHER BENEFICIAL OWNERS
The following table sets forth information with respect to each shareholder
known to the Company to be the beneficial owner of more than 5% of the
outstanding Common Shares as of the Record Date:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- ------------------- ----------------- --------
<S> <C> <C>
Crown Investments Trust 4,115,872(1) 15.0%
Pasquerilla Plaza
Johnstown, PA 15901
The Prudential Insurance Company of America 2,285,100(2) 8.3%
Prudential Plaza
Newark, NJ 07102-3777
</TABLE>
- ---------
(1) Includes 2,822,061 Common Shares (or 10.77% of the outstanding shares)
currently held by Crown Investments and 1,293,811 Common Shares that Crown
Investments has the right to acquire. Crown Investments presently owns
9,956,398 common partnership units in the Operating Partnership
("Partnership Units"). Pursuant to the Operating Partnership's partnership
agreement, Crown Investments has the right to require the Operating
Partnership to redeem part or all of Crown Investments' common Partnership
Units for a price equal to the equivalent value of the Common Shares (on a
one-for-one basis). The obligation to redeem Crown Investments' common
Partnership Units may be assumed by the Company and such redemption can then
be made for, at the Company's election, either Common Shares (on a
one-for-one basis) or the cash equivalent thereof, provided that the Company
may not pay for such redemption with Common Shares to the extent that it
would result in Crown Investments beneficially or constructively owning more
than 16.0% of the outstanding Common Shares. Conversely, Crown Investments
may require the Company to assume the obligation to pay for such redemption
with Common Shares to the extent that Crown Investments owns less than 16.0%
of the outstanding Common Shares. The redemption right may be exercised by
Crown Investments from time to time (although only once during any calendar
year), in whole or in part, subject to the limitation that in any calendar
year the
3
<PAGE> 6
redemption right may be exercised only with respect to 20% of (a) the common
Partnership Units held by Crown Investments immediately after the initial
public offering of the Common Shares plus (b) the common Partnership Units,
if any, issued to Crown Investments in connection with the acquisition of
certain properties from Crown Investments. For purposes of the 16.0%
ownership limitation, Crown Investments is deemed to own Common Shares held
by certain affiliates and related parties; as of December 31, 1999, Crown
Investments believes it would be deemed to own 284,404 additional Common
Shares for these purposes. Crown Investments has sole voting power and sole
investment power over all Common Shares owned by it. The percent of class
was determined by dividing the number of Common Shares beneficially owned by
the number of Common Shares outstanding, treating the Common Shares which
may be acquired by Crown Investments as outstanding.
(2) According to Schedule 13G dated January 31, 2000, The Prudential Insurance
Company of America ("Prudential") holds such Common Shares for the benefit
of its clients by its separate accounts, externally managed accounts,
registered investment companies, subsidiaries and/or other affiliates. As
such, Prudential may have direct or indirect voting and/or investment
discretion over the shares.
PROPOSAL NO. 1
ELECTION OF TRUSTEES
NOMINEES
Two trustees will be elected at the Annual Meeting to serve until the
annual meeting of shareholders in 2003 and until their successors are duly
elected and qualified. The Board of Trustees has approved the nominations of
Donato B. Zucco and Zachary L. Solomon and recommends a vote for their election.
Each of the nominees has consented to be named as a nominee and to serve if
elected.
Unless authority to so vote is withheld, it is intended that the proxies
solicited by the Board of Trustees will be voted FOR the election of the two
nominees. In the event that at the date of the Annual Meeting any of the
nominees should for any reason not be available for election, the proxies
solicited by the Board will be voted for the election of the other nominees and
such substitute nominee as shall be designated by the Board.
The Board of Trustees established a Nominating Committee in September 1993
consisting of Frank J. Pasquerilla, Mark E. Pasquerilla and Donald F. Mazziotti.
In 1999, the Nominating Committee consisted of Mark E. Pasquerilla and Donald F.
Mazziotti. Such committee met once in 1999 to elect Donato B. Zucco as a Trustee
to fill the vacancy created by the death of Frank J. Pasquerilla. The entire
Board of Trustees voted to approve the nominations of Messrs. Zucco and Solomon.
The Company's Bylaws provide that nominations for the election of Trustees
at a meeting of shareholders may be made only by the Board or a shareholder of
record entitled to vote in the election of the Trustees to be elected; provided,
however, that a nomination may only be made by a shareholder of record at a
meeting of shareholders if written notice that the nomination is to be made is
received by the Secretary of the Company prior to the meeting. Generally, in the
case of an annual meeting, the written notice must be received not less than 60
days nor more than 90 days prior to the anniversary date of the immediately
preceding annual meeting and must contain certain information with respect to
the nominee as set forth in the Bylaws. Information with respect to the
nominating procedure may be obtained by a shareholder from the Secretary of the
Company. No written notice that a nomination would be made by a shareholder at
the Annual Meeting was received by the Company.
4
<PAGE> 7
Information about the nominees, each of whom is presently a member of the
Board of Trustees, and about the other Trustees whose terms of office will
continue after the Annual Meeting is set forth in the table below.
<TABLE>
<CAPTION>
TRUSTEE PRINCIPAL OCCUPATION OR
NAME SINCE EMPLOYMENT, DIRECTORSHIPS, AGE
---- ------- ------------------------------
<S> <C> <C>
Nominees for a term expiring in 2003:
Donato B. Zucco 1999 Senior Vice President and Chief Administrative
Officer of the Company since 1993, and its
predecessor since 1991; Mayor of Johnstown,
Pennsylvania since January 1998; Trustee of St.
Francis College since November, 1990; Age 59
Zachary L. Solomon 1993 Chief Executive Officer of Baby Togs Inc. since
February 2000; President of Finity Apparel Group
(women's sportswear) from November 1999 to January
2000; President and Chief Executive Officer of
Adrienne Vittadini (clothing design company) from
February 1998 to September 1999; President and
Chief Executive Officer of Associated Merchandising
Corporation (private label developer and sourcer)
since prior to 1992 until 1997; Vice-Chairman of
Brooklyn College Foundation from 1987 to 1997;
Chairman of Brooklyn College Foundation since July
1997; Trustee of Baruch Graduate School of Business
since April 1997; Trustee of American Armenian Bank
since March 2000; Trustee of Close Out Now.com
since September 1999; Age 65
Continuing Trustees with a term expiring in 2002:
Mark E. Pasquerilla 1993 Chairman of the Board of Trustees, Chief Executive
Officer since April 1999; President of the Company
since 1993; Vice Chairman of the Company from
September 1998 to April 1999; President of the
Company and its various subsidiaries and affiliates
since 1993; President or Vice-Chairman of Crown
Holding Company and its various subsidiaries and
affiliates since 1993. President of Crown American
Corporation and its various subsidiaries (bank
holding company); Director of USBANCORP, Inc.;
Director of Concurrent Technologies Corporation;
Age 40
Clifford A. Barton 1993 Retired since January 1994; Chairman, President and
Chief Executive Officer of USBANCORP, Inc. from
prior to 1992 to January 1994; Director of
USBANCORP, Inc., U.S. Bank, Three Rivers Bank &
Trust Co., USBANCORP Trust Co., United Bancorp Life
Insurance Company, UBAN Associates, Inc., UBAN
Mortgage Company, TRB Financial Services Inc. and
Standard Mortgage Corporation of Georgia; Age 71
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
TRUSTEE PRINCIPAL OCCUPATION OR
NAME SINCE EMPLOYMENT, DIRECTORSHIPS, AGE
---- ------- ------------------------------
<S> <C> <C>
Peter J. Siris 1998 Director of E-Save Network since November 1999;
Director of Santa Fe Gaming since May 1999;
Managing Director of Guerrilla Capital Management
LLC since 1998; Managing Director at UBS Securities
from 1990 to 1995; Senior Vice President of
ABN-Amro-Chicago, Corp. from February 1997 to March
1997; Senior Vice President of WARNACO, Inc. from
1995 to 1996 and President of various investment
banking companies and venture capital companies
worldwide; Director of Crown American Corporation,
the predecessor to the Company, from 1992 to 1993;
Age 45
Continuing Trustees with a term expiring in 2001:
Donald F. Mazziotti 1993 Chief Information Officer, State of Oregon since
January 1998; Chairman of Delta Development Group,
Inc. (government relations, economic planning and
management consulting) from 1995 to 1997; President
of Delta Development Group, Inc. from 1990 to 1994;
Director of Delta Development Group, Inc. from 1988
to 1998; Age 54
Terry L. Stevens 1999 Executive Vice President and Chief Financial
Officer of the Company since May 1999; Senior Vice
President and Chief Financial Officer of the
Company from September 1998 to May 1999; Senior
Vice President and Chief Accounting Officer of the
Company from May 1995 to September 1998; Vice
President and Chief Accounting Officer of the
Company from May 1994 to May 1995; Director of
Corporate Audit and Director of Financial Systems
at AlliedSignal, Inc. from 1990 to 1994; Audit
Partner with Price Waterhouse from 1983 to 1990 and
various other positions from 1972 to 1983;
Certified Public Accountant; Age 51
</TABLE>
VOTE REQUIRED
Only affirmative votes are counted in the election of Trustees. The two
nominees for election as Trustees at the Annual Meeting who receive the highest
number of votes cast for the election of Trustees by the holders of the
Company's Common Shares present in person or voting by proxy, a quorum being
present, will be elected as Trustees.
COMMITTEES OF BOARD OF TRUSTEES
The principal committees of the Board of Trustees (in addition to the
Nominating Committee) are the Executive Committee, the Audit Committee and the
Compensation Committee.
The members of the Executive Committee are Mark E. Pasquerilla and Terry L.
Stevens. The Executive Committee is authorized to exercise all the powers of the
Board of Trustees in the conduct of the business of the Company during the time
when the Board of Trustees is not in session, except that the Executive
Committee cannot declare dividends or other distributions, elect Trustees, issue
shares of the Company, recommend action to the shareholders, amend the Bylaws or
approve any merger or share exchange which does not require shareholder
approval. The Executive Committee did not meet in 1999 because such committee
and management of the Company favor participation by all Trustees whenever
possible.
6
<PAGE> 9
The Audit Committee consists of Messrs. Barton, Siris, Mazziotti and
Solomon. The responsibilities of the Audit Committee include, but are not
limited to, making recommendations concerning the engagement of independent
public accountants, reviewing with the independent public accountants the plans
and results of the audit engagement, approving professional services provided by
the independent public accountants, reviewing the independence of the
independent public accountants, considering the range of audit and non-audit
fees and reviewing the adequacy of the Company's internal accounting controls.
The Audit Committee held two meetings in 1999.
The Compensation Committee currently consists of Messrs. Barton, Siris,
Mazziotti and Solomon. The Compensation Committee consists only of non-employee
Trustees and its responsibilities include determining compensation of the
Company's executive officers and administering the Company's option plans, the
Executive Incentive Plan, the Retirement Savings Plan and the Savings
Restoration Plan. The Compensation Committee held four meetings in 1999.
The Board of Trustees held four regular meetings and three special meetings
in 1999. All of the Trustees attended at least 75% of the aggregate of all
meetings of the Board of Trustees and the committees on which they served during
1999.
COMPENSATION OF TRUSTEES
Trustees who are employees of the Company do not receive a retainer or fees
for attending meetings of the Board of Trustees or meetings of Committees of the
Board. Trustees who are not employees of the Company receive an annual fee of
$18,000, a meeting fee of $1,000 for each Board or Committee meeting attended
and reimbursement of expenses incurred in attending meetings. Generally,
Trustees do not receive compensation for meetings by means of conference
telephone or similar communications equipment.
Prior to the initial public offering of the Common Shares of the Company
(the "Public Offering"), the shareholders of the Company approved the 1993
Trustees' Option Plan (the "Trustees' Option Plan"). The Trustees Option Plan
was amended and restated effective as of December 30, 1997. As amended, options
to purchase a total of 125,000 Common Shares of the Company are available to
non-employee Trustees. Each non-employee Trustee automatically is granted on
December 31 of each year an option to purchase 5,000 Common Shares having an
exercise price equal to 100% of the fair market value of the shares on the date
of grant. On December 31, 1999, each of the four non-employee Trustees was
granted options to purchase 5,000 Common Shares at an exercise price of $5.50.
The amended Trustees' Option Plan also provides for an automatic grant of 5,000
options to purchase Common Shares with an exercise price equal to 100% of the
fair market value of the shares on the date of grant upon the appointment or
election of each new non-employee Trustee to the Board. As of December 31, 1999,
there were 62,000 options to purchase Common Shares held by the Trustees. To
date, all options granted to the Trustees under the Trustees' Option Plan have
been exercisable immediately upon grant, of which 1,000 and 6,000 options have
been exercised by Donald Mazziotti and a former trustee, respectively.
The terms of each option are contained in an Option Agreement, signed by
the optionee, that includes such terms and conditions, consistent with the
Trustees' Option Plan, as amended, and Rule 16b-3 ("Rule 16b-3") under Section
16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
the Compensation Committee determines to be necessary or advisable. Currently,
the Option Agreements provide that options are fully exercisable as of the date
of the grant and terminate five years thereafter.
The Board of Trustees may amend, suspend or terminate the Trustees' Option
Plan at any time, in its sole discretion; provided, however, that the Board of
Trustees may not amend the Trustees' Option Plan without approval of the
shareholders of the Company if such approval is required by Rule 16b-3.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's Trustees,
executive officers and persons who own more than ten percent of a registered
class of the Company's equity securities to file with the SEC initial reports of
ownership and reports of changes in ownership of Common Shares and other equity
securities of the
7
<PAGE> 10
Company. Officers, Trustees and greater than ten percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms which they file. The Company believes that all such filing
requirements applicable to its officers and Trustees were complied with in 1999.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to the Company for 1997,
1998 and 1999 of the Chief Executive Officer of the Company and those persons
who were, as of December 31, 1999, the other four most highly compensated
executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM ALL OTHER
ANNUAL COMPENSATION COMPENSATION COMPENSATION
------------------- ------------ ------------
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) OPTIONS(2) OTHER(3)
--------------------------- ---- ------ -------- ---------- --------
<S> <C> <C> <C> <C> <C>
MARK E. PASQUERILLA 1999 $278,285 $216,000 0 $ 7,310
Chairman of the Board of Trustees, 1998 258,180 23,236 0 8,860
Chief Executive Officer and
President 1997 250,661 24,815 0 8,412
GEORGE M. SAKAKEENY 1999 184,554 62,160 0 21,176(4)
Senior Vice President - 1998 156,000 23,400 0 7,020
Portfolio Management and
Acquisitions 1997 118,285 10,807 0 5,323
THOMAS STEPHENSON 1999 184,373 66,261 0 10,400
Executive Vice President 1998 204,509 30,676 0 11,068
of Asset Management 1997 198,533 17,870 0 10,478
TERRY L. STEVENS 1999 169,448 66,600 60,000 10,400
Executive Vice President and 1998 151,314 23,250 0 8,457
Chief Financial Officer 1997 117,858 11,676 0 5,401
NICHOLAS O. ANTONAZZO 1999 180,051 54,000 0 9,170
Executive Vice President 1998 202,145 15,160 0 11,032
of Development 1997 234,181 16,053 0 10,473
</TABLE>
- ---------
(1) Bonuses under the Executive Incentive Plan for 1999 and 1998 were earned
based on corporate and individual performances achieved in those years. For
1999, fourteen executives received a bonus based upon the Company achieving
a predetermined corporate goal and a review of their individual performance.
Seven executives, including Mark E. Pasquerilla and the other named
executives, elected to defer 100% of their bonus in the form of Company
Common Shares, which entitled them under the Executive Incentive Plan to
receive an additional 20% bonus in Common Shares. The other seven executives
elected to defer 50% of their bonus and to receive 50% in cash. The
aggregate of the bonuses earned that relate to 1999 performance was
$665,912. For 1998, Mark E. Pasquerilla elected to defer 75% of his bonus
and receive 25% in cash, two of the named executives elected to defer 50% of
their respective bonuses and to receive 50% in cash, and the remaining two
named executives elected to defer 100% of their respective bonuses. Bonuses
under the Executive Incentive Plan were not earned for 1997 because the
criteria used to determine whether bonuses would be granted was not met.
However, special bonuses were approved by the Compensation Committee based
on individual performances achieved in 1997. All such bonuses approved for
1997 were deferred 100% by the named executives. After the end of each plan
year the Company pays the non-deferred bonuses in cash to the executives and
also deposits cash equal to the aggregate amount of the deferred bonuses
into a trust account with a bank. Amounts held in the trust are allocated to
each executive and are invested in Common Shares of the Company and in other
investments as determined by the Trustee; gains, losses and earnings on the
assets are allocated to each executive's account. Upon retirement, each
executive will be entitled to receive the value of his allocated account in
the trust in a lump sum or over a period of years as elected by the
executive.
8
<PAGE> 11
(2) Options represent the right to acquire common Partnership Units, which may
be converted into Common Shares of the Company. Mark E. Pasquerilla,
Chairman, Chief Executive Officer, and President, currently does not
participate in the 1993 Crown American Realty Option Plan.
(3) The amount shown represents the Company's contribution to its Retirement
Savings Plan on behalf of the named executive.
(4) The amount shown includes a $13,976 bonus paid to Mr. Sakakeeny in
connection with his performance on a special project of the Company. This
bonus was not made under the Retirement Savings Plan.
OPTION GRANTS
In 1999, Terry L. Stevens received an option grant of 60,000 common
Partnership Units under the 1993 Crown American Realty Option Plan (the
"Employee Option Plan").
OPTION EXERCISES IN 1999 AND 1999 YEAR-END VALUES
The following table sets forth as to four of the persons named in the
Summary Compensation Table information with respect to (i) the options exercised
during 1999, (ii) the net value realized upon such exercises, (iii) the number
of common Partnership Units covered by unexercised options held at December 31,
1999 and (iv) the value of such unexercised options at December 31, 1999. Mark
E. Pasquerilla, Chairman and Chief Executive Officer, currently does not
participate in the Employee Option Plan. Common Partnership Units obtained under
the Employee Option Plan may be converted into Common Shares of the Company.
AGGREGATED OPTION EXERCISES IN 1999 AND DECEMBER 31, 1999 OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
PARTNERSHIP DECEMBER 31, 1999 DECEMBER 31, 1999(1)
UNITS ----------------- --------------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME AND PRINCIPAL POSITION EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
--------------------------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C>
GEORGE M. SAKAKEENY 0 $0 24,000/36,000 $0/$0
Senior Vice President -
Portfolio Management and
Acquisitions
THOMAS STEPHENSON 0 $0 48,000/72,000 $0/$0
Executive Vice President of
Asset Management
TERRY L. STEVENS 0 $0 24,000/96,000 $0/$0
Executive Vice President and
Chief Financial Officer
NICHOLAS O. ANTONAZZO 0 $0 48,000/72,000 $0/$0
Executive Vice President of
Development
</TABLE>
- ---------
(1) The value of unexercised in-the-money options has been determined under the
assumption that the value of an option for a common Partnership Unit in
Crown American Properties, L.P. is equivalent to that of an option for a
Common Share of Beneficial Interest in the Company.
9
<PAGE> 12
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement in whole or in part, the following report and the
Stock Performance Graph on Page 12 shall not be incorporated by reference into
any such filings.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF TRUSTEES
The Compensation Committee of the Board of Trustees of the Company is
responsible for setting and administering the Company's executive compensation
programs. The philosophy of the Company is to ensure that executive compensation
is designed to provide competitive levels of compensation that are consistent
with the Company's annual and long term business performance goals. The
Compensation Committee has based its compensation policy for its executive
officers on a variety of factors, including job responsibility, salaries paid to
executive officers of other REITs similar to the Company and job experience and
performance of such officers.
The Company's compensation program is designed to enhance the Company's
ability to attract and retain highly qualified individuals while providing
financial motivation necessary to achieve targeted Company performance.
BASE SALARY
The Base Salary program is designed to provide salary opportunities which
are competitive with a community of competitor companies, as well as to reward
individual contributions through performance driven salary growth. In the first
quarter of 1999, the Committee reviewed the base salary amounts for the
Company's top executive group. The salaries were evaluated using the 1999
Shopping Center Compensation Survey and related industry executive compensation
data. According to the survey data, base salaries of the Company's top
executives are competitive compared to the median survey base salary figures for
the Company's industry.
For salary planning purposes, a merit percentage guideline is established
by the Company annually. The merit percentage guideline is applied toward each
exempt employee's base salary in consideration of the individual's performance,
job responsibility, company internal equity and career considerations. A survey
of comparable companies reported a projected merit increase range for 1999 to be
3% to 6%. For 1999, the Compensation Committee approved a merit pool increase
for employees of the Company consisting of 3% of the aggregate base salaries of
participating employees and distributed on the basis of individual annual
performance reviews.
EXECUTIVE INCENTIVE PLAN
Fourteen of the Company's executives are eligible for an annual incentive
award under the Executive Incentive Plan which was adopted in 1993. The
Executive Incentive Plan is self-funded through the earnings in excess of the
Company's targeted Funds from Operations ("FFO"). Under the Executive Incentive
Plan, individual awards are 90% driven by participants meeting or exceeding
predetermined corporate and individual performance goals.
The Compensation Committee approved an amendment in 1997 to the Executive
Incentive Plan to provide that an executive may elect to receive his incentive
award in the form of Common Shares which will be held by a trust established
under the Executive Incentive Plan (the "Rabbi Trust"). In which case, each
executive who defers 100% of his incentive award through the utilization of the
Rabbi Trust will receive additional Common Shares equivalent to 20% of his
incentive award. The trustee of the Rabbi Trust will manage and invest the
assets of the trust as it deems appropriate. Upon the executive's retirement,
the Rabbi Trust will distribute to the executive the Common Shares allocated to
such executive plus any dividends and earnings accumulated with respect thereto.
Fourteen executives received a bonus based upon the Company achieving a
predetermined corporate goal and a review of their individual performance. The
aggregate of the bonuses distributed in early 2000 related to
10
<PAGE> 13
the 1999 performance was $665,912. Mark E. Pasquerilla, Chairman and Chief
Executive Officer, received $216,000, 100% of which he elected to defer.
EMPLOYEE OPTION PLAN
The Company adopted the Crown American Realty Option Plan (the "Employee
Option Plan") on August 17, 1993. The objective of the Employee Option Plan is
to provide capital accumulation opportunities to a select group of Company
executives by allowing them to acquire an equity interest in the Company, thus
increasing the executives' incentives to make continued major contributions to
the Company. Additionally, the Company hopes to maintain continuity of the
management team with the provision of options.
As of December 31, 1999, twenty-one Company executives were participating
in the Employee Option Plan. Chairman and Chief Executive Officer, Mark E.
Pasquerilla, is not currently participating in the Employee Option Plan.
RETIREMENT SAVINGS PLAN
The Company instituted the Retirement Savings Plan (the "Savings Plan") in
1993 pursuant to Section 401(k) of the Internal Revenue Code. The Savings Plan
covers employees of the Company who have completed one year of service, working
1,000 hours per year, and have attained the age of 21. Executives of the Company
are able to participate on the same terms as non-executive employees, subject to
any legal limitations on amounts which may be contributed or the benefits which
may be payable under the Savings Plan.
The Company is contributing a percentage, which varies from 2% to 5%
depending upon the age of the employee, of each eligible employee's base salary
to the Savings Plan as a supplemental employer contribution subject to
applicable limitations under the Internal Revenue Code. Participants also may
elect to contribute, within certain percentage limitations, on a pre-tax basis.
Employee contributions are matched by the Company up to 50% of the first 3% of
the participant's salary.
Receipt of benefits attributable to the Company's matching contribution and
the supplemental employer contribution is subject to the vesting and forfeiture
provisions of the Savings Plan. Other amounts are fully vested at all times.
For 1999, the Company contributed an aggregate amount of $45,165 under the
Savings Plan on behalf of the most highly compensated executive officers of the
Company participating in such Plan. This includes both the supplemental employer
contribution and the Company's matching contribution. The Company contributed
$7,310 under the Savings Plan on behalf of Chairman and Chief Executive Officer,
Mark E. Pasquerilla.
SAVINGS RESTORATION PLAN
The Company implemented the Savings Restoration Plan (the "Restoration
Plan") in 1997. Fifteen of the Company's executives are eligible for
participation. The Restoration Plan allows participants to defer current
compensation which cannot be deferred under the Savings Plan due to limitations
imposed thereon, including the maximum amount of contributions which may be
made. At present, six employees are participating in the Restoration Plan.
Respectfully submitted,
/s/ Clifford A. Barton
/s/ Zachary T. Solomon
/s/ Peter J. Siris
/s/ Donald Mazziotti
11
<PAGE> 14
SHAREHOLDER RETURN PERFORMANCE GRAPH
The following line graph compares the cumulative total shareholder return
among the Company's Common Shares, the Standard & Poor's 500 Stock Index and a
peer group of real estate investment trust companies selected by the Company.
The Company believes that the business and operations of the peer group members
closely resemble those of the Company. The graph assumes a $100 investment as of
December 31, 1994 in the Company's Common Shares, the Index and the peer group.
<TABLE>
<CAPTION>
CROWN AMERICAN REALTY CROWN AMERICAN REALTY PEER
TRUST INDEX S&P 500 INDEX
--------------------- -------------------------- -------------
<S> <C> <C> <C>
12/31/94 $100.00 $100.00 $100.00
12/31/95 64.83 104.73 137.58
12/31/96 68.24 148.35 169.03
12/31/97 92.94 169.01 225.44
12/31/98 84.63 168.59 289.79
12/31/99 67.46 143.67 350.50
</TABLE>
The peer group consists of the following publicly traded real estate
investment trusts engaged in similar lines of business of the Company: CBL &
Associates Properties Inc., Simon Property Group, General Growth Properties
Inc., Macerich Company, Taubman Centers Inc. and Urban Shopping Centers Inc.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MANAGEMENT AGREEMENTS
The Company has agreed to manage certain properties retained by Crown
American Enterprises, Inc. ("Crown Enterprises") and other affiliated companies
controlled by the Pasquerilla family pursuant to various management agreements
(the "Management Agreements"). For its services, the Company receives a
management fee, payable monthly in arrears, equal to 5% of revenues (excluding
certain items) actually collected and $5.50 per square foot for new leases
signed and $3.50 per square foot for renewal leases. Each Management Agreement's
initial term ended January 31, 1996 and has been continued on a month-to-month
basis. Total management and leasing fees paid by Crown Enterprises to the
Company for 1999 were approximately $40,000.
12
<PAGE> 15
SUPPORT AGREEMENT
In connection with the formation of the Company and consummation of the
Public Offering, Crown Investments entered into a cash flow support agreement,
which was subsequently amended (as amended, the "Support Agreement"), with the
Operating Partnership and the Financing Partnership with respect to four malls,
all of which were opened in 1991 and were in various stages of initial lease-up
at the time of the Public Offering, with mall store occupancy rates below 75%.
The Support Agreement provides that Crown Investments will guarantee, on a
quarterly basis, up to a maximum of $1 million per quarter, that each of these
four malls will generate a stipulated aggregate amount of base rents (the
"Quarterly Guaranteed Support") for each quarter, which Quarterly Guaranteed
Support will be derived on the basis of the difference between the aggregate
amount of base rents earned (as defined) in the quarter at each mall and the
stipulated aggregate amount of base rents. Crown Investments was also obligated
to fund any tenant improvement and leasing costs associated with any lease of
shortfall space (as defined in the Support Agreement). The obligations of Crown
Investments under the Support Agreement will terminate as to a particular mall
if the aggregate base rents at such mall meets the Quarterly Guaranteed Support
over four consecutive quarters (as determined by the independent trustees of the
Company). In December 1997, the Support Agreement was amended further such that
the amount of the Quarterly Guaranteed Support will be reduced by an amount
equal to two and one-half percent (2.5%) of the gross sales price upon the
future sale of any outparcel, peripheral land or such other real estate
("Outparcel") situate at one of the malls ("Quarterly Support Amount
Reduction"). Total cash flow support earned by the Company for 1999 was $3.0
million. At December 31, 1999, approximately $0.7 million of cash flow support
was accrued, but not yet funded by Crown Investments.
CROWN AMERICAN ASSOCIATES LEASE AT PASQUERILLA PLAZA
Approximately 14,600 square feet of Pasquerilla Plaza, the Company's
headquarters building, is leased to Crown American Associates ("Crown
Associates") and one of its affiliates for an annual base rent of approximately
$272,000. The rent was determined based on rental rates being paid by existing
third party tenants, the fact that Crown Associates' lease includes certain
furnishings and equipment and the fact that Crown Associates is permitted to use
facilities in the building that are not available to other third party tenants.
The lease with Crown Associates ends July 31, 2003 and includes a five-year
renewal option at then market rents. The lease with the affiliate ends March 31,
2009 and provides such affiliate with the right to cancel the lease on March 31,
2004. Total rent earned thereunder by the Company in 1999 was $0.3 million.
CROWN RIGHTS
Pursuant to the Operating Partnership Agreement, Crown Investments and its
affiliates received certain rights (the "Crown Rights") which enable them to
require the Operating Partnership to redeem part or all of their Partnership
Units for a price equal to the equivalent value of the shares of the Company (on
a one-for-one basis). Crown Investments currently owns 8,169,939 common
Partnership Units, Crown American Investment Company, an affiliate of Crown
Investments, owns 1,786,459 common Partnership Units. The obligation to redeem
Crown Investments' common Partnership Units may be assumed by the Company in
exchange for, at the Company's election, either shares (on a one-for-one basis)
or the cash equivalent thereof, provided that the Company may not pay for such
redemption with Common Shares to the extent that it would result in Crown
Investments and its affiliates beneficially or constructively owning more than
16.0% of the outstanding Common Shares. Crown Investments and its affiliates may
require the Company to assume the obligation to pay for such redemption with
Common Shares to the extent that Crown Investments and its affiliates own less
than 16.0% of the outstanding Common Shares. Crown Investments and its
subsidiary have pledged substantially all their common Partnership Units (the
"Pledged Units") as collateral for a loan made by an unrelated third party. In
June 1995 the Company filed a Registration Statement on Form S-3 with the SEC
relating to the Pledged Units. If at the time of any such permitted exchange the
Shelf Registration is not effective, the Company is obligated to purchase a
specified portion of the Pledged Units. The Company also has the right to
purchase the Pledged Units in lieu of effecting an exchange.
13
<PAGE> 16
ADMINISTRATIVE SERVICES AND AMOUNTS DUE TO CROWN ASSOCIATES AND CROWN
INVESTMENTS
The Operating Partnership allocates a portion of the cost of its
administration, communications, MIS, legal and risk management departments to
Crown Associates and Crown Investments based on estimated usage, which
aggregated $0.6 million in 1999 and which amount is expected to increase to
approximately $0.8 million in 2000. Conversely, Crown Associates and its
affiliates charge the Company for use of their corporate aircraft, hotel and
dining services; such costs totaled $0.4 million for 1999. As a result of these
current and prior year transactions, the Company had a net receivable from Crown
Associates and Crown Holding at December 31, 1999 of $0.1 million.
PROPOSAL NO. 2
TO AMEND THE 1993 CROWN AMERICAN REALTY OPTION PLAN
As of December 31, 1999, options to purchase 968,095 Units, constituting
81.2% of the total number of Units available for issuance of options to officers
and key employees of the Company under the Employee Option Plan, were
outstanding. The Compensation Committee of the Board of Trustees is currently
reviewing the stock option award levels offered under the existing Employee
Option Plan in comparison to those levels offered under similar plans by
companies in the Company's peer group. The Company intends to utilize periodic
stock option grants to drive performance and establish significant ownership
levels among the Company's top management. Such grants could, therefor, result
in the outstanding number of options exceeding the currently authorized level of
1,200,000 Units. Accordingly, on March 9, 2000 the Board of Trustees adopted,
subject to the approval of the shareholders of the Company, an amendment to the
Employee Option Plan whereby the number of Units available for the issuance of
options under the Employee Option Plan is increased to an aggregate of 2,200,000
Units from the current aggregate of 1,200,000 Units. It is estimated that the
additional shares will facilitate potential grants for the next two years.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR THE APPROVAL OF SUCH AMENDMENT.
Unless authority to so vote is withheld, it is intended that the proxies
solicited by the Board of Trustees will be voted to approve the amendment.
SUMMARY OF EMPLOYEE OPTION PLAN
Prior to the Company's Public Offering, the shareholders of the Company
approved the Employee Option Plan for the purpose of attracting, retaining and
motivating its officers and key employees. The summary of the Employee Option
Plan set forth below is qualified in its entirety by reference to the text of
the Employee Option Plan, which will be provided to any shareholder upon request
in writing to the Secretary of the Company, Pasquerilla Plaza, Johnstown,
Pennsylvania 15901.
Under the Employee Option Plan as initially adopted, options to purchase a
total of 875,000 Units of the Operating Partnership were available for grant. In
May 1995, the Employee Option Plan was amended to increase the total of Units
available to 1,200,000. In certain circumstances, Unit holders may redeem the
Units for cash or Shares (at the option of the Company). The Company currently
has outstanding options held by 22 executive officers and senior management to
purchase 1,004,095 Units pursuant to the Employee Option Plan. The average
exercise price for such options is $8.0313 per Unit and ranges from $5.625 to
$9.25 per Unit. The allocation of the options outstanding on February 29, 2000
is set forth in the following table. The closing market price of Common Shares
on The New York Stock Exchange on March 1, 2000, was $5.8125.
14
<PAGE> 17
Mark E. Pasquerilla, the Chairman, Chief Executive Officer and President of the
Company does not currently participate in the Employee Option Plan.
<TABLE>
<CAPTION>
AVERAGE EXERCISE
NAME AND PRINCIPAL POSITION NUMBER OF UNITS PRICE PER UNIT
- --------------------------- --------------- ----------------
<S> <C> <C>
George M. Sakakeeny 60,000 $ 8.00
Senior Vice President -- Portfolio Management
and Acquisitions
Thomas Stephenson 120,000 $ 8.00
Executive Vice President of Asset Management
Terry L. Stevens 120,000 $7.6875
Executive Vice President and Chief Financial
Officer
Nicholas O. Antonazzo 120,000 $ 8.00
Executive Vice President of Development
Non-Executive Officer Employee Group 584,095 $8.1180
(18 persons)
</TABLE>
The Compensation Committee administers the Employee Option Plan and has the
authority to determine the terms of options granted under the Employee Option
Plan, including, among other things, the individuals who will receive options,
the times when they will receive them, the number of Units to be subject to each
option and the date or dates each option will become exercisable. The
Compensation Committee will also fix the exercise price of the options;
provided, however, that the exercise price must be at least equal to the fair
market value of the Units on the date of grant. There is no limit on the number
of options that may be granted to any one individual; provided that the grant of
options may not cause the Company to fail to qualify as a real estate investment
trust for federal income tax purposes. An optionee may, with the consent of the
Compensation Committee, elect to pay for the Units to be received upon exercise
of his options in cash, Units or any combination thereof.
The terms of each option are contained in an Option Agreement, signed by
the optionee, that includes such terms and conditions, as the Compensation
Committee determines necessary or advisable. Currently, all the Option
Agreements provide that an option may only be exercised after the optionee has
completed two years of employment with the Operating Partnership after the date
of the grant of the option. Under such Option Agreements, an option first
becomes exercisable to the extent of 20% of the total number of Units subject to
the option on each of the second, third, fourth, fifth and sixth anniversaries
of the date of the grant of the option. If an optionee's employment is
terminated before such optionee's option has partially or fully vested, the
right to exercise the option is forfeited. If an optionee's employment is
terminated after such optionee's option has partially or fully vested, the
option may be exercised to the extent it was exercisable at the time of
termination of employment. There are certain limitations on the timing of
exercise of an option after termination of employment. Currently, all the Option
Agreements provide that options expire five years after the date they first
become exercisable.
The Employee Option Plan provides that options vest in full upon the
dissolution or liquidation of the Operating Partnership, upon a reorganization,
merger or consolidation of the Operating Partnership as a result of which the
Units are changed into or exchanged for cash or property or securities not
issued by the Operating Partnership, or upon a sale of substantially all of the
property of the Operating Partnership to or the acquisition of Units
representing more than eighty percent (80%) of the voting interests of the
Operating Partnership by any entity other than the Company or an affiliate of
the Company.
The Board of Trustees may amend, suspend or terminate the Employee Option
Plan at any time, in its sole discretion; provided, however, that the Board of
Trustees may not amend the Employee Option Plan without approval of the
shareholders of the Company if such approval is required by law.
15
<PAGE> 18
CERTAIN FEDERAL TAX CONSEQUENCES OF THE EMPLOYEE OPTION PLAN
The following is a brief summary of the probable federal income tax
consequences of the grant and exercise of options under the Employee Option Plan
under present law, assuming that the tax consequences of the options are similar
to those that apply to "nonstatutory stock options" under the Internal Revenue
Code of 1986, as amended. An optionee will not recognize any taxable income for
federal income tax purposes upon receipt of an option. Upon the exercise of an
option, the amount by which the fair market value of the Units received,
determined as of the date of exercise, exceeds the option price is generally
treated as compensation received by the optionee in the year of exercise. If the
option price of an option is paid in whole or in part in Units, no income, gain
or loss is recognized on the receipt of Units equal in value on the date of
exercise to the Units delivered in payment of the option price. The fair market
value of the remainder of the Units received upon exercise of the option,
determined as of the date of exercise, less the amount of cash, if any paid upon
exercise, is treated as compensation received on the date of exercise of the
option. Special rules will apply on the exercise of an option in certain limited
circumstances by an optionee who is subject to Section 16(b) of the 1934 Act.
The Operating Partnership generally may be entitled to a deduction for
compensation paid in the same amount treated as compensation received by the
optionee. To the extent that the Company is a partner of the limited
partnership, its share of net income will be reduced by its allocable shares of
expenses. The Operating Partnership may also recognize gain or loss on the grant
of Units to the optionee. To the extent that the Company is a partner of the
Operating Partnership, it will also recognize its allocable portion of the gain
or loss recognized by the Operating Partnership.
AUDITORS
The Board of Trustees engaged Arthur Andersen LLP, independent public
accountants, to audit the books and records of the Company for the year ended
December 31, 1999. Representatives of Arthur Andersen LLP are expected to be
present at the Annual Meeting and, while they are not expected to make a
statement, they will have the opportunity to do so if they desire. They will
also be available to respond to appropriate questions. The Board of Trustees has
also engaged Arthur Andersen LLP to audit the Company's books and records for
the current year.
OTHER MATTERS
No business other than that set forth above is expected to come before the
Annual Meeting or any adjournment thereof. Should other business properly come
before the Meeting or any adjournment thereof, the proxy holders will vote upon
the same according to their discretion and best judgment.
EXPENSES OF SOLICITATION
The cost of solicitation of proxies for the Annual Meeting will be paid by
the Company. In addition to the solicitation of proxies by mail, the officers
and regular employees of the Company may, without additional compensation
therefor, solicit proxies in person or by telephone or telegraph. Brokerage
houses and other nominees, custodians or fiduciaries will be requested by the
Company to forward proxy soliciting material and the Company's Annual Report to
Shareholders to the beneficial owners of the shares of the Company's Common
Shares held of record by them, and the Company will reimburse these record
holders for their reasonable out-of-pocket expenses incurred in doing so.
16
<PAGE> 19
SHAREHOLDER PROPOSALS
The Board of Trustees does not know of any other business that may be
presented for consideration at the Annual Meeting. If any other business should
properly come before the Annual Meeting, it is the intention of those named in
the Proxies solicited hereby to vote the shares represented by such Proxies in
accordance with their judgment in such matters.
A proposal submitted by a shareholder for the regular annual meeting of
shareholders to be held in 2001 must be received by the Secretary, Crown
American Realty Trust, Pasquerilla Plaza, Johnstown, Pennsylvania 15901 on or
prior to November 30, 2000 in order to be eligible for inclusion in the
Company's Proxy Statement for that annual meeting. In connection with 2001
annual meeting of shareholders, if the Company does not receive notice of a
matter or proposal to be considered on or before February 3, 2000 then the
persons appointed by the Board of Trustees to vote the proxies for said annual
meeting will be allowed to use their discretionary voting authority with respect
to any such matter or proposal at such annual meeting, if such matter or
proposal is raised at such annual meeting.
By Order of the Board of Trustees,
/s/ Ronald P. Rusinak
Ronald P. Rusinak
Vice President, General
Counsel and Secretary
17
<PAGE> 20
CROWN AMERICAN REALTY TRUST
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS
SOLICITED BY THE BOARD OF TRUSTEES
Johnstown Holiday Inn, 250 Market Street, Johnstown, Pennsylvania
WEDNESDAY, APRIL 26, 2000 - 10:00 A.M. (LOCAL TIME)
The undersigned shareholder of CROWN AMERICAN REALTY TRUST (the "Company") does
hereby appoint MARK E. PASQUERILLA and TERRY L. STEVENS, and each of them acting
individually, with full power of substitution, as proxies of the undersigned to
vote at the Annual Meeting of Shareholders of the Company, to be held April 26,
2000 (the "Annual Meeting"), and at all adjournments thereof, all the Common
Shares of Beneficial Interest of the Company which the undersigned may be
entitled to vote, on the matters set out on the reverse side of this card and
described in the Proxy Statement and, in their discretion, on any other business
which may properly come before the Annual Meeting.
The undersigned shareholder hereby also revokes all previous proxies for the
Annual Meeting, acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement both dated March 31, 2000, and of the Annual
Report to Shareholders for 1999.
You are urged to promptly return this proxy in the enclosed envelope whether or
not you expect to attend the Annual Meeting in person so that your shares may be
voted in accordance with your wishes and in order that the presence of a quorum
may be assured at the Meeting.
The shares represented by this Proxy will be voted as directed by the
shareholder. If this proxy is executed but no direction is given, such shares
will be voted "FOR" Item 1 and Item 2.
(Continued and to be signed on the reverse side)
[X] PLEASE MARK
YOUR VOTES
AS THIS
FOR all WITHHOLD
Nominees Authority to Vote
(except as shown below) for all nominees
ITEM (1) - The election [ ] [ ]
of the following
two Trustees
for a term expiring
in 2003:
NOMINEES: Donato B. Zucco
Zachary L. Solomon
A vote FOR includes discretionary authority to vote for a substituted nominee if
any of the nominees listed becomes unable to serve or for good cause will not
serve.
(To withhold authority to vote for one or more nominees, print such nominee's or
nominees' name(s) on the line below.)
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
ITEM (2) - Amend the 1993 Crown [ ] [ ] [ ]
American Realty
Option Plan to
increase the number
of limited
partnership units
available for
issuance under the
plan to 2,200,000:
Please date and sign exactly as your name appears hereon and
return in the enclosed envelope. If acting as attorney,
executor, administrator, guardian or trustee, please so
indicate with your full title when signing. If a
corporation, please sign in full corporate name, by duly
authorized officer. If shares are held jointly, each
shareholder named should sign.
SIGNATURE(S) DATE
--------------------------------------------- --------------
NOTE: Please sign as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
