SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant |X|
Filed by a party other than the registrant |_|
Check the appropriate box:
|_| 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 under Rule 14a-12.
ENTERTAINMENT PROPERTIES TRUST
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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)
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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|_| Fee paid previously with preliminary materials.
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|_| 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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ENTERTAINMENT PROPERTIES TRUST
30 W. PERSHING ROAD, UNION STATION, SUITE 201
KANSAS CITY, MISSOURI 64108
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 12, 2004
To our shareholders:
The 2004 annual meeting of shareholders of Entertainment Properties Trust will
be held at the Leawood Town Centre Theatre, Leawood, Kansas, on May 12, 2004 at
10:00 a.m. (local time). At the meeting, our shareholders will vote upon
Item 1: The election of one Class I trustee for a term of three
years
Item 2: The amendment of our 1997 Share Incentive Plan to (a)
increase the number of common shares issuable under the
Plan, (b) eliminate the limitation on the total number of
options which may be awarded to an individual under the
Plan, (c) increase the number of options granted each year
to non-employee trustees under the Plan, and (d) amend the
definition of "non-employee trustee" to include the
Company's Chairman
Item 3: The ratification of the appointment of KPMG LLP as our
Company's independent auditors for 2004
and transact any other business that may properly come before the meeting.
All holders of record of our common shares at the close of business on March 5,
2004 are entitled to vote at the meeting or any postponement or adjournment of
the meeting.
You are cordially invited to attend the meeting. Whether or not you intend to be
present at the meeting, our Board of Trustees asks that you sign, date and
return the enclosed proxy card promptly. A prepaid return envelope is provided
for your convenience. Your vote is important and all shareholders are encouraged
to attend in person or vote by proxy.
Thank you for your support and continued interest in our Company.
BY ORDER OF THE BOARD OF TRUSTEES
/s/ Gregory K. Silvers
--------------------------------------------------
Gregory K. Silvers
Vice President, General Counsel, Chief Development
Officer and Secretary
Kansas City, Missouri
April 9, 2004
ENTERTAINMENT PROPERTIES TRUST
30 W. PERSHING ROAD, UNION STATION, SUITE 201
KANSAS CITY, MISSOURI 64108
---------------------
PROXY STATEMENT
---------------------
This proxy statement provides information regarding the annual meeting of
shareholders of Entertainment Properties Trust to be held at the Leawood Town
Centre Theatre, Leawood, Kansas, on May 12, 2004, beginning at 10:00 a.m., and
at any postponement or adjournment of the meeting.
This proxy statement and the enclosed proxy card were first mailed to
shareholders on or about April 12, 2004.
ABOUT THE MEETING
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At the annual meeting, shareholders will vote on the election of one trustee,
the amendment of our 1997 Share Incentive Plan and the ratification of the
appointment of KPMG LLP as our independent auditors for 2004. EPR's management
will report on the performance of the Company during 2003 and respond to
questions from shareholders.
WHO IS ENTITLED TO VOTE AT THE MEETING?
Holders of record of our common shares at the close of business on March 5,
2004, are entitled to receive notice of the annual meeting and to vote their
common shares held on that date at the meeting. Each shareholder is entitled to
one vote per common share.
WHAT CONSTITUTES A QUORUM?
The presence at the meeting, in person or by proxy, of the holders of a
majority of our common shares outstanding on the record date will constitute a
quorum, permitting the meeting to proceed. On the record date, 19,076,253 common
shares of the Company were outstanding. Proxies received but marked as
abstentions and broker non-votes will be included in the calculation of the
number of common shares present at the meeting for the purpose of establishing a
quorum.
HOW DO I VOTE?
If you complete and properly sign the enclosed proxy card and return it to
us before the meeting, your common shares will be voted as you direct. If you
are a registered shareholder and attend the meeting in person, you may deliver
your completed proxy card at the meeting. You are also invited to vote in person
at the meeting. "Street name" shareholders who wish to vote at the meeting must
obtain a proxy form from the institution that holds their shares.
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. Even after you have submitted your proxy, you may change your vote at
any time before the meeting by sending a written notice of revocation or a duly
executed proxy with a later date to the Secretary of the Company. Your proxy
will also be revoked if you attend the meeting and vote in person. If you merely
attend the meeting but do not vote in person, your previously granted proxy will
not be revoked.
WHAT ARE THE BOARD'S RECOMMENDATIONS?
Unless you give other instructions on your proxy card, the persons named as
proxy holders on the proxy card will vote your common shares in accordance with
the recommendations of the Board of Trustees. The Board recommends you vote:
o FOR the election of the person nominated as Class I trustee
o FOR the amendment of our 1997 Share Incentive Plan
o FOR the ratification of the appointment of KPMG LLP as the Company's
independent auditors for 2004
If any other matter properly comes before the meeting, the proxy holders
will vote as recommended by the Board of Trustees or, if no recommendation is
given, in their own discretion.
HOW MANY VOTES ARE NEEDED TO APPROVE EACH ITEM?
The affirmative vote of a plurality of the common shares voted at the
meeting is required for the election of the Class I trustee. This means the
nominee in Class I receiving the greatest number of votes will be elected.
Broker non-votes with respect to the election of trustee will not be counted.
Proxy cards marked "WITHHOLD AUTHORITY" will be counted against the nominee.
The affirmative vote of a majority of the common shares voted at the
meeting is required to approve the amendment of the 1997 Share Incentive Plan.
Broker non-votes and proxy cards marked "ABSTAIN" with respect to the amendment
will not be counted.
The affirmative vote of a majority of the common shares voted at the
meeting is required to ratify the appointment of our independent auditors.
Broker non-votes and proxy cards marked "ABSTAIN" with respect to the
appointment of our independent auditors will not be counted.
ITEM I
ELECTION OF TRUSTEE
The Board of Trustees consists of five members and is divided into three
classes having three-year terms that expire in successive years. Scott H. Ward,
whose term of office expires on the date of the annual meeting, is not running
for re-election at the annual meeting. The nominating/corporate governance
committee of the Board of Trustees has nominated Barrett Brady to serve as the
Class I trustee for a term expiring at the 2007 annual meeting. Mr. Brady has
been nominated upon the recommendation of the independent trustees of the
Company. The nominee for Class I trustee has been nominated for a term of three
years and until his successor is duly elected and qualified. Unless you withhold
authority to vote for the nominee or you mark through the nominee's name on your
proxy card, the common shares represented by your properly executed proxy will
be voted for the election of the nominee for trustee.
Here is some information about the person nominated for election as trustee
and each trustee whose term of office will continue after the annual meeting.
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CLASS I TRUSTEE (NOMINATED FOR A TERM EXPIRING AT THE 2007 ANNUAL MEETING)
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BARRETT BRADY Barrett Brady is Senior Vice President of Highwoods
NOMINEE Properties, Inc., a NYSE-listed REIT. Mr. Brady served as
President and Chief Executive Officer of J.C. Nichols
Company until that company was acquired by Highwoods in
1998. Before joining J.C. Nichols Company in 1995, Mr. Brady
was President and CEO of Dunn Industries, Inc., a large
construction contractor. Mr. Brady received a BSBA from
Southern Methodist University and an MA from The University
of Missouri. Mr. Brady serves on the Boards of Directors of
the Greater Kansas City YMCA, Midwest Research Institute,
North American Savings Bank and Dunn Industries, Inc. and
the Board of Trustees of The University of Missouri at
Kansas City.
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CLASS II TRUSTEES (SERVING FOR A TERM EXPIRING AT THE 2005 ANNUAL MEETING)
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DAVID M. BRAIN David M. Brain, 48, has served as President and Chief
TRUSTEE SINCE 1999 Executive Officer and a trustee of EPR since October 1999.
He served as Chief Financial Officer of the Company from
1997 to 1999 and as Chief Operating Officer from 1998 to
1999. He acted as a consultant to AMC Entertainment, Inc.
("AMCE") in the formation of the Company during July 1997.
From 1996 until that time he was a Senior Vice President in
the investment banking and corporate finance department of
George K. Baum & Company, an investment banking firm
headquartered in Kansas City, Missouri. Before joining
George K. Baum & Company, Mr. Brain was Managing Director of
the Corporate Finance Group of KPMG LLP, a practice unit he
organized and managed for over 12 years. He received a
Bachelor of Arts in Economics from Tulane University, where
he was awarded an academic fellowship.
------------------- ------------------------------------------------------------
ROBERT J. DRUTEN Robert J. Druten, 56, is Chairman of the Board of EPR. Mr.
TRUSTEE SINCE 1997 Druten is Executive Vice President and Chief Financial
Officer and a Corporate Officer of Hallmark Cards
Incorporated. Mr. Druten serves on the Boards of Directors
of Hallmark Cards Holdings, Ltd., Hallmark Entertainment,
Inc., and Crown Media Holdings, Inc., a NASDAQ-listed
company that owns and operates cable television channels
dedicated to entertainment programming. Mr. Druten received
a Bachelor of Science in Accounting from The University of
Kansas and a Masters in Business Administration from
Rockhurst University.
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CLASS III TRUSTEES (SERVING FOR A TERM EXPIRING AT THE 2006 ANNUAL MEETING)
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MORGAN G. Morgan G. ("Jerry") Earnest II, 48, is an Executive Vice
EARNEST II President of GMAC Commercial Mortgage Corporation where he
TRUSTEE SINCE 2003 serves as head of the Specialty Lending Group, which
consists of the Healthcare Financing Group, the Hospitality
Industry Division and the Golf Finance Group. He also
directly manages both the Hospitality Industry Division and
the Golf Finance Group. Mr. Earnest joined GMAC Commercial
Mortgage Corporation in March 1996. From 1992 through 1996,
Mr. Earnest was a principal of Lexington Mortgage Company, a
commercial mortgage banking firm active in the
securitization of commercial real estate mortgage loans.
Lexington Mortgage Company was acquired by GMAC Commercial
Mortgage Corporation in March 1996. From 1984 through 1991,
Mr. Earnest was a principal with Concord Properties and The
Earnest Corporation, which were involved in land development
and homebuilding. From 1980 through 1984, Mr. Earnest was an
Assistant Vice President in the Real Estate Department of
Continental Illinois National Bank and Trust Company. Mr.
Earnest is a member of the Industry Real Estate Financing
Advisory Council (IREFAC) of the American Hotel & Lodging
Association and a member of the Urban Land Institute. He is
an active speaker at lodging industry conferences and is
frequently quoted in industry publications. Mr. Earnest has
an MBA from the Colgate Darden Graduate School of Business
Administration of The University of Virginia and is a
graduate of Tulane University.
------------------- ------------------------------------------------------------
JAMES A. OLSON James A. Olson, 61, is a principal and the Chief Financial
TRUSTEE SINCE 2003 Officer of Plaza Belmont Management Group, LLC, manager of
the private equity fund Plaza Belmont LLC, which acquires
and operates companies in the food manufacturing industry.
Prior to joining Plaza Belmont in 1999, Mr. Olson was a
partner with Ernst & Young LLP. During his 32 years with
Ernst & Young, including six years in Europe, Mr. Olson
served as managing director of two of their offices and
worked with a number of multinational and domestic clients
in a variety of industries. In addition to providing his
client companies with the traditional audit services of
Ernst & Young, Mr. Olson advised them on their securities
offerings, mergers and acquisitions and corporate tax
strategies. He is the past president of the Missouri State
Board of Accountancy and a member of the American Institute
of Certified Public Accountants. Mr. Olson received his BS
and MS degrees from St. Louis University. Mr. Olson serves
on the Board of Directors and is Chairman of the audit
committee of SCS Transportation, Inc., a NASDAQ-listed
transportation company.
------------------- ------------------------------------------------------------
Mr. Brady has consented to serve on the Board of Trustees for his term. If Mr.
Brady should become unavailable to serve as a trustee (which is not expected),
the nominating/corporate governance committee may designate a substitute
nominee. In that case, the persons named as proxies will vote for the substitute
nominee designated by the nominating/corporate governance committee.
HOW ARE TRUSTEES COMPENSATED?
The Board of Trustees, upon the recommendation of our compensation
committee, adopted a new compensation program for non-employee trustees in March
2003. The new compensation program was designed in part to provide adequate
compensation to non-employee trustees for the substantial additional
responsibilities assumed by them under the Sarbanes-Oxley Act of 2002 (the
"Sarbanes-Oxley Act") and
related rules of the Securities and Exchange Commission ("SEC"). Under the new
compensation program, each non-employee trustee receives:
o An annual retainer of $25,000. Fifty percent of the retainer must be
taken in common shares, valued at the latest closing price. Trustees
may elect to receive the remaining portion of their retainer in any
combination of cash and/or common shares
o $1,500 in cash for each Board meeting they attend
o $1,000 in cash for each committee meeting they attend
o Reimbursement for any out-of-town travel expenses incurred in
attending Board or committee meetings and other expenses incurred on
behalf of the Company
The Chairman of the Board receives an additional retainer of $5,000 per
year, which may be taken in any combination of cash and/or common shares.
Committee Chairmen receive an additional retainer of $3,000 per year, which
may be taken in any combination of cash and/or common shares.
Employees of the Company or its affiliates who are trustees are not paid
any additional compensation for their service on the Board.
Non-employee trustees may defer some or all of their compensation into a
deferred compensation plan for non-employee members of the Board. Amounts
deferred under the plan are credited to a participant's account based on the
number of common shares he has elected to defer and the amount of any cash he
has elected to defer as if the cash were converted into shares at their fair
market value on the date of deferral. All payments made under the plan are made
in shares equal to the number of shares allocated to the participant's account.
If a participant is terminated as a trustee upon a change in control of the
Company, all amounts in his account will be paid in a single payment.
Pursuant to EPR's Share Incentive Plan, Scott H. Ward (who is not running
for re-election at the meeting) and Robert J. Druten each received options to
purchase 10,000 common shares on the effective date of the Company's initial
public offering in 1997. Pursuant to the 1997 Share Incentive Plan, options to
purchase 3,333 common shares have been granted to each non-employee trustee on
the date of each annual meeting since 1998, with an exercise price per share
equal to the closing price of EPR's common shares on the annual meeting date.
These options vest after one year and expire after ten years unless terminated
earlier because of a trustee's termination from the Board. If Proposal II is
adopted, the number of options granted each year to non-employee trustees will
be increased to 5,000. See Item II - "Amendment of Share Incentive Plan."
HOW OFTEN DID THE BOARD MEET DURING 2003?
The Board of Trustees met seven times in 2003. No trustee attended less
than 90% of the meetings of the Board and committees on which he served. The
Company's trustees discharge their responsibilities throughout the year, not
only at Board of Trustee and committee meetings, but also through personal
meetings, actions by unanimous written consent and communications with members
of management and others regarding matters of interest and concern to the
Company.
WHAT IS OUR POLICY REGARDING TRUSTEE ATTENDANCE AT ANNUAL MEETINGS?
Our trustees are required to attend each annual meeting of shareholders.
All of the Company's current trustees attended the 2003 annual meeting.
WHO ARE OUR INDEPENDENT TRUSTEES AND HOW WAS THAT DETERMINED?
The Board of Trustees has affirmatively determined that Robert J. Druten,
Morgan G. Earnest II, Scott H. Ward and James A. Olson are "independent." The
Board of Trustees has also determined that Mr. Brady is independent.
The terms "independent" and "independence" have the meanings described in
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the rules
and regulations adopted by the SEC under the Exchange Act, the listing standards
of the New York Stock Exchange ("NYSE") and EPR's Corporate Governance
Guidelines and Independence Standards for Trustees. In accordance with these,
the Board of Trustees has adopted the following independence standards for
independent trustees:
o A majority of the trustees must be independent in accordance with
these standards.
o No person shall be considered independent unless the Board
affirmatively determines that he or she has no material relationship
with EPR (either directly or as a partner, shareholder or officer of
an organization that has a relationship with EPR). Material
relationships can include commercial, industrial, banking, consulting,
legal, accounting, charitable or familial.
o A person who is an executive officer of an entity or an affiliate of
an entity that provides non-advisory financial services such as
lending, check clearing, maintaining customer accounts, stock
brokerage services or custodial and cash management services to EPR or
its affiliates may be determined by the Board to be independent if the
following conditions are satisfied:
* the entity does not provide any advisory services to EPR
* the annual interest and/or fees payable to the entity by EPR do
not exceed the numerical limitation described below
* any loan provided by the entity is made in the ordinary course of
business of EPR and the lender and does not represent EPR's
principal source of credit or liquidity
* the trustee has no involvement in presenting, negotiating,
underwriting, documenting or closing any such non-advisory
financial services and is not compensated by EPR, the entity or
any of its affiliates in connection with those services
* the Board affirmatively determines that the terms of the
non-advisory financial services are fair and reasonable and
advantageous to the Company and no more favorable to the provider
than generally available from other providers
* the provider is a recognized financial institution, non-bank
commercial lender or securities broker
* the trustee abstains from voting as a trustee to approve the
transaction
* all material facts related to the transaction and the
relationship of the person to the provider are disclosed by EPR
in its Exchange Act reports and proxy statements
o No employee of EPR, and no person whose immediate family member (as
defined in NYSE rules) is an executive officer of EPR, shall be
considered independent until three years after the end of the
employment relationship. Employment as an interim Chairman or CEO is
not a bar to independence.
o A person who receives, or whose immediate family member receives, more
than $100,000 per year in direct compensation from EPR (other than
Board and committee fees paid in the ordinary course and certain
deferred compensation permitted under NYSE rules) will not be
considered independent until three years after he or she ceases to
receive more than $100,000 in such compensation.
o A person who is affiliated with or employed by, or whose immediate
family member is employed in a professional capacity by, a present or
former internal or external auditor of EPR will not be considered
independent until three years after the end of the affiliation or the
employment or auditing relationship.
o A person who is employed, or whose immediate family member is
employed, as an executive officer of another company where any of
EPR's executives serve on that company's compensation committee will
not be considered independent until three years after the end of that
service or the employment relationship.
o A person who is an executive officer or employee, or whose immediate
family member is an executive officer, of a company that makes
payments to, or receives payments from, EPR for property or services
in an amount which, in any single fiscal year, exceeds the greater of
$1 million or 2% of the other company's consolidated gross revenues,
will not be considered independent until three years after falling
below that threshold. Charitable organizations will not be considered
"companies" for purposes of this standard, so long as EPR discloses in
its proxy statement any contributions made to any charitable
organization of which a trustee serves as an executive officer if,
within the preceding three years, those contributions in any single
year exceeded the greater of $1 million or 2% of the organization's
consolidated gross revenues.
o No person who serves, or whose immediate family member serves, as a
partner, member, executive officer or comparable position of any firm
providing accounting, consulting, legal, investment banking or
financial advisory services to EPR, or as a securities analyst
covering EPR, shall be considered independent until after the end of
that relationship.
o In light of the critical importance of EPR's real property leases to
its business, no person shall be considered independent if he or she,
or any member of his or her immediate family, is an officer, director,
more than 5% shareholder, partner, member, attorney, consultant or
affiliate of any tenant of the Company or any affiliate of such tenant
until three years after the end of the tenancy or such relationship.
o The Board may adopt other standards to assist in making determinations
of independence. Any such standards shall be disclosed on EPR's
website or its annual proxy statement.
o To promote alignment between the interests of trustees and the
interests of shareholders, share ownership by trustees is encouraged
and is not a disqualification from independence.
The Board may consider whether ownership of a substantial percentage
of EPR's common shares or preferred shares adversely affects the
independence of a person in a particular instance.
o No independent trustee, nor any organization by which he or she is
employed or with which he or she is affiliated, may receive, directly
or indirectly, any consulting, advisory or compensatory fee from EPR,
or any other party on behalf of EPR, other than the fees regularly
paid by EPR for Board and committee service. Board and committee fees
may be in cash, shares, options and/or in kind. The Board considers
additional compensation for committee service to be appropriate.
Morgan G. Earnest II is an Executive Vice President of GMAC Commercial
Mortgage Corporation ("GMACCM"), an affiliate of GMAC Commercial Mortgage of
Canada, Limited ("GMAC Canada"). On March 1, 2004, EPR acquired four properties
in Canada with approximately US $97 million in mortgage financing provided by
GMAC Canada (the "GMAC Canada Loan"). Mr. Earnest is not an officer, director or
employee of GMAC Canada and did not participate, either as an officer of GMACCM,
a trustee of EPR, or on behalf of GMAC Canada, in the presentation, negotiation,
underwriting, documentation or closing of the GMAC Canada Loan. Mr. Earnest has
not received, and will not receive, any direct or indirect compensation from
GMACCM, GMAC Canada or EPR in connection with the GMAC Canada Loan. Mr. Earnest
abstained from voting as a trustee to approve the GMAC Canada Loan. Mr. Earnest
made full written disclosure of these facts to the Board of Trustees in advance
of the Board's consideration of the GMAC Canada Loan. The GMAC Canada Loan was
approved by all of the independent trustees other than Mr. Earnest. The
independent trustees other than Mr. Earnest have determined, after considering
all relevant facts and circumstances and the value of Mr. Earnest's contribution
as a member of the Board, that the GMAC Canada Loan does not constitute a
material relationship between Mr. Earnest and the Company and that Mr. Earnest
is thus independent and qualified to serve as an independent trustee and a
member of the nominating/corporate governance, audit and compensation
committees.
DO THE INDEPENDENT TRUSTEES HOLD REGULAR EXECUTIVE SESSIONS?
The independent trustees meet regularly in separate executive sessions
without management. Mr. Druten serves as Chairman of those meetings.
HOW CAN SHAREHOLDERS COMMUNICATE DIRECTLY WITH THE BOARD?
Any shareholder is welcome to send a written communication to the Board
about any topic related to the Company. Shareholders may send those
communications to the Company's address listed on page 1 of this proxy
statement. Shareholder communications received at this address will be forwarded
directly to the Board and will not be screened by management. Shareholders may
make proposals and nominate candidates for trustee for consideration at any
annual meeting in accordance with the procedures described in "Submission of
Shareholder Proposals and Nominations" below. Shareholders may also make a
confidential anonymous submission to the Board by clicking on "Corporate
Governance" then "Procedures for Confidential Anonymous Submissions" at our
website at WWW.EPRKC.COM.
WHAT COMMITTEES HAS THE BOARD ESTABLISHED?
In accordance with SEC and NYSE rules, the Board of Trustees has
established a nominating/corporate governance committee, an audit committee and
a compensation committee. All of our non-employee trustees serve on all three
committees. The Board believes that all members of all
committees are independent in accordance with NYSE rules, and that the members
of the audit committee meet the additional independence standards prescribed by
NYSE rules and SEC Rule 10A-3. Each committee has adopted an amended and
restated charter that is attached to this proxy statement as Appendix A, B and
C, respectively. A copy of each committee's charter is also available at our
website at WWW.EPRKC.COM.
NOMINATING/CORPORATE GOVERNANCE COMMITTEE. The nominating/corporate
governance committee evaluates and nominates candidates for election to the
Board of Trustees and assists in meeting the Board's corporate governance
responsibilities. Candidates for nomination to the Board are evaluated and
recommended on the basis of the value they would add to the Board in light of
their experience, training and judgment, their financial literacy and
sophistication and knowledge of corporate and real estate finance, their
knowledge of the real estate and/or entertainment industry, their independence
from Company management and other factors. The committee will consider
nominations made by shareholders in compliance with the procedures described in
"Submission of Shareholder Proposals and Nominations" below. The committee will
use the same criteria to evaluate nominees recommended in good faith by
shareholders as it uses to evaluate its own nominees. Mr. Druten is the Chairman
of the nominating/corporate governance committee. The committee met two times in
2003.
AUDIT COMMITTEE. The audit committee oversees the accounting, auditing and
financial reporting policies and practices of the Company. The Board of Trustees
has determined that Messrs. Olson, Druten and Earnest are "audit committee
financial experts" as defined by SEC rules, by virtue of their experience and
positions held as described in their biographies listed above. Mr. Olson is the
Chairman of the audit committee. The committee met five times in 2003.
COMPENSATION COMMITTEE. The compensation committee approves corporate goals
and objectives relevant to our CEO's compensation, evaluates our CEO's
performance in light of those goals and objectives, determines and approves our
CEO's compensation, makes recommendations to the Board regarding non-CEO
compensation, incentive compensation awards and equity-based compensation
awards, and recommends to the Board the form and amount of trustee compensation
each year. Mr. Ward has served as Chairman of the compensation committee. The
committee met two times in 2003.
OFFICERS
These are the Company's executive officers other than David M. Brain, whose
background is described on page 3.
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FRED L. KENNON, age 48, was appointed Chief Financial Officer of EPR in
1999 and has served as Vice President and Treasurer since 1998. From 1984 to
1998 he was with Payless Cashways, Inc., most recently serving as Vice President
- Treasurer. Mr. Kennon graduated from Pittsburg State University in 1978 and
holds a Masters in Business Administration from The University of Missouri at
Kansas City.
--------------------------------------------------------------------------------
GREGORY K. SILVERS, age 40, was appointed Vice President, General Counsel
and Secretary of the Company in 1998 and Chief Development Officer in 2001. From
1994 to 1998, he practiced with the law firm of Stinson, Morrison Hecker, L.L.P.
specializing in real estate law. Mr. Silvers received his J.D. in 1994 from The
University of Kansas.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table contains information on the compensation earned by our
CEO and each of the other most highly compensated executive officers of the
Company whose compensation exceeded $100,000 in 2003.
------------------------------ ---------- ------------------------------ --------------------------------------------
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------ --------------------------------------------
AWARDS
--------------------------------------------
RESTRICTED SECURITIES UNDERLYING
SHARE OPTIONS
SALARY BONUS AWARDS (#)
NAME AND PRINCIPAL POSITION YEAR ($) ($)(1) (F) (2) (G)
(A) (B) (C) (D) (3)
------------------------------ ---------- -------------- --------------- -------------- -----------------------------
DAVID M. BRAIN President 2003 $376,646 $447,174 15,449 42,913
and Chief Executive Officer
------------------------------ ---------- -------------- --------------- -------------- -----------------------------
2002 $358,313 $322,481 13,693 169,661
------------------------------ ---------- -------------- --------------- -------------- -----------------------------
2001 $341,250 $307,125 12,350 68,334
------------------------------ ---------- -------------- --------------- -------------- -----------------------------
FRED L. KENNON Vice 2003 $235,053 $211,548 6,312 17,533
President, Chief Financial
Officer and Treasurer
------------------------------ ---------- -------------- --------------- -------------- -----------------------------
2002 $226,013 $135,608 5,455 67,590
------------------------------ ---------- -------------- --------------- -------------- -----------------------------
2001 $215,250 $129,150 5,083 28,125
------------------------------ ---------- -------------- --------------- -------------- -----------------------------
GREGORY K. SILVERS Vice 2003 $210,210 $191,008 5,699 15,831
President, General Counsel,
Chief Development Officer
and Secretary
------------------------------ ---------- -------------- --------------- -------------- -----------------------------
2002 $202,125 $121,275 4,879 60,446
------------------------------ ---------- -------------- --------------- -------------- -----------------------------
2001 $183,750 $110,250 5,422 30,000
------------------------------ ---------- -------------- --------------- -------------- -----------------------------
(1) Performance bonuses are payable in cash, restricted common shares (valued
at 125% of the cash bonus amount) or options (valued at 500% of the cash
bonus amount) or a combination of these, at the election of the executive.
Prior to 2003, bonuses paid in restricted shares were valued at 150% of the
cash bonus amount.
(2) The restricted common share awards vest at the rate of 20% per year during
a five year period. The dollar value of the shares vested under each
officer's restricted share award will be based on the closing price of the
Company's common shares on the NYSE on the applicable vesting date. The
officers receive dividends on the restricted shares from the date of
issuance at the same rate paid to our other common shareholders.
(3) The aggregate number of restricted common shares held by each named
executive officer on December 31, 2003 and the value of those shares (based
on the closing price of $34.71 for the Company's common shares on the NYSE
on that date) were as follows:
--------------------- ------------------ -------------------
OFFICER NO. OF SHARES 12/31/03 VALUE
--------------------- ------------------ -------------------
David M. Brain 78,123 $2,711,649
--------------------- ------------------ -------------------
Fred L. Kennon 23,227 $ 806,209
--------------------- ------------------ -------------------
Gregory K. Silvers 21,671 $ 752,200
--------------------- ------------------ -------------------
The shares are registered with the SEC under the Securities Act of 1933,
but are restricted against transfer for a period of one year after the
issue date under our Share Incentive Plan.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information about options awarded to the named
executive officers in 2003.
------------------------------------------------------------------------------------------------ ---------------------
INDIVIDUAL GRANTS
------------------------------------------------------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES EXERCISE
GRANTED IN FISCAL PRICE EXPIRATION GRANT DATE VALUE
NAME (#) YEAR ($/SH) DATE ($/SH)
(A) (B) (C) (D)(1) (E) (F) (2)
----------------------- ------------------ ----------------- ------------------- --------------- ---------------------
DAVID M. BRAIN 169,661 54% 24.86 3/2013 $2.08
----------------------- ------------------ ----------------- ------------------- --------------- ---------------------
FRED L. KENNON 67,590 22% 24.86 3/2013 $2.08
----------------------- ------------------ ----------------- ------------------- --------------- ---------------------
GREGORY K. SILVERS 60,446 19% 24.86 3/2013 $2.08
----------------------- ------------------ ----------------- ------------------- --------------- ---------------------
(1) The options vest at the rate of 20% per year for five years and are
exercisable during a 10-year period.
(2) Based on the Black-Scholes Valuation Model. Black-Scholes, Binominal and
Minimum Value calculations performed in accordance with the requirements of
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" and using the following assumptions: expected
volatility using 52 weekly share prices commencing on 1/1/03 (0.1335),
expected life (eight years), share price on grant date ($24.86), exercise
price ($24.86), expected dividend yield (6.8%), risk free rate of return
(4.0%).
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTIONS
VALUES
The following table provides information on the number of shares received on
exercise of options by the named executive officers in 2003 and the number of
shares under option to the named executive officers as of December 31, 2003.
------------------------ ---------------------- --------------------- ---------------------- ----------------------
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY OPTIONS
UNEXERCISED OPTIONS AT FISCAL YEAR END
AT FISCAL YEAR END ($)
(#)
SHARES ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
NAME (#) ($)
(A) (B) (C) (D) (E)
------------------------ ---------------------- --------------------- ---------------------- ----------------------
DAVID M. BRAIN -- -- 158,782/337,001 $2,963,505/$4,534,755
------------------------ ---------------------- --------------------- ---------------------- ----------------------
FRED L. KENNON -- -- 86,625/136,590 $1,684,391/$1,845,377
------------------------ ---------------------- --------------------- ---------------------- ----------------------
GREGORY K. SILVERS 15,400 $80,889 61,587/114,571 $1,109,976/$1,422,896
------------------------ ---------------------- --------------------- ---------------------- ----------------------
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information with respect to compensation plans
(including individual compensation arrangements) under which common shares of
the Company were authorized for issuance to officers, employees and trustees as
of December 31, 2003.
------------------------------- ------------------------ ------------------------- -----------------------------------
NUMBER OF SHARES TO BE WEIGHTED-AVERAGE NUMBER OF SHARES REMAINING
ISSUED UPON EXERCISE EXERCISE PRICE OF AVAILABLE FOR FUTURE ISSUANCE
PLAN CATEGORY OF OUTSTANDING OUTSTANDING OPTIONS, UNDER EQUITY COMPENSATION PLANS
OPTIONS, WARRANTS AND WARRANTS AND RIGHTS (EXCLUDING SHARES REFLECTED IN
RIGHTS COLUMN (A)) (2)
------------------------------- ------------------------ ------------------------- -----------------------------------
(A) (B) (C)
------------------------------- ------------------------ ------------------------- -----------------------------------
EQUITY COMPENSATION PLANS 1,162,563 19.67 337,437
APPROVED BY SHAREHOLDERS(1)
------------------------------- ------------------------ ------------------------- -----------------------------------
EQUITY COMPENSATION PLANS NOT
APPROVED BY SHAREHOLDERS --- --- ---
------------------------------- ------------------------ ------------------------- -----------------------------------
TOTAL 1,162,563 19.67 337,437
------------------------------- ------------------------ ------------------------- -----------------------------------
(1) All options have been issued under the Share Incentive Plan.
(2) Restricted common shares as well as options may be awarded under the Share
Incentive Plan. The Share Incentive Plan does not separately quantify the
number of options or number of restricted shares which may be awarded under
the Plan.
EMPLOYMENT AGREEMENTS
In 2000, EPR entered into employment agreements with David M. Brain, Fred
L. Kennon and Gregory K. Silvers, each for a term of three years, with automatic
one-year extensions on each anniversary date. The employment agreements
generally provide for:
o an original annual base salary of $325,000 for Mr. Brain, $205,000 for
Mr. Kennon and $175,000 for Mr. Silvers, subject to any increases
awarded by the compensation committee. The 2003 base salary amounts
for Messrs. Brain, Kennon and Silvers are listed in the Summary
Compensation Table.
o an annual incentive bonus in an amount established by the compensation
committee if performance criteria adopted by the compensation
committee are attained
o a loan to Mr. Brain of $1,407,645 for the purchase of 80,000 shares
and loans of $281,250 to each of Mr. Kennon and Mr. Silvers for the
purchase of 20,000 shares each under the Share Purchase Program. The
loans, which were made by the Company prior to passage of the
Sarbanes-Oxley Act, are evidenced by ten-year recourse promissory
notes, with principal and accrued interest payable at maturity. A
portion of each officer's share purchase loan will be forgiven upon
his death or permanent disability, or if he is terminated without
cause or terminates his employment for good reason, as defined in the
employment agreement. The entire amount of each executive's loan will
be forgiven if he is terminated without cause following a hostile
change in control of the Company. The officers are entitled to
reimbursement for taxes on income resulting from loan forgiveness.
o a rolling three-year term, subject to termination by the Company with
or without cause
o salary and bonus continuation following an officer's death, disability
or termination without cause
Mr. Brain is entitled to severance compensation equal to his base salary
and bonus for the remainder of any three-year employment period if he resigns
following a change in control of the Company or upon his death, termination by
the Company without cause or termination by Mr. Brain for good reason. Messrs.
Kennon and Silvers are entitled to similar severance compensation upon their
death, termination by the Company without cause or termination by the executive
for good reason.
HOW ARE THE COMPANY'S EXECUTIVE OFFICERS COMPENSATED?
EPR has adopted various compensation programs to attract and retain
executive officers, to provide incentives to maximize EPR's Funds from
Operations, and to provide executive officers with an interest in the Company
parallel to that of our shareholders.
Our executive compensation programs are administered by the compensation
committee, which is authorized to select from among EPR's eligible employees the
individuals to whom awards will be granted and to establish the terms and
conditions of those awards. No member of the compensation committee is eligible
to participate in any compensation program other than as a non-employee trustee
of the Company.
ANNUAL INCENTIVE PROGRAM. The Annual Incentive Program provides for
incentive bonuses to officers designated by the compensation committee if
selected performance criteria are met. The performance criteria and the amount
of the bonuses are established each year by the compensation committee.
SHARE INCENTIVE PLAN. EPR encourages its executive officers to own shares
in the Company. To assist officers with this goal, EPR provides officers the
opportunity to acquire shares through various programs:
o SHARE PURCHASE PROGRAM. Allows officers to purchase shares from EPR at
fair market value. The shares may be subject to transfer restrictions
and other conditions imposed by the compensation committee. Pursuant
to the Sarbanes-Oxley Act, and notwithstanding the provisions of the
Share Incentive Plan, no additional loans may be made by the Company
to or arranged by the Company for executive officers for the purchase
of shares.
o RESTRICTED SHARE PROGRAM. EPR may award restricted shares to officers
subject to conditions adopted by the compensation committee. In
general, restricted shares may not be sold until the restrictions
expire or are removed by the compensation committee. Restricted shares
have full voting and dividend rights from the date of issuance. All
restrictions on restricted shares lapse upon a change in control of
the Company.
o SHARE OPTION PROGRAM. EPR may grant options to its officers and
employees to purchase shares subject to conditions adopted by the
compensation committee.
Under the Share Incentive Plan, a maximum of 1,500,000 shares, subject to
adjustment upon significant corporate events, are reserved for issuance under
the Plan. The Plan also provides that an individual may receive options to
purchase up to a maximum aggregate of 750,000 shares, so long as the options do
not result in share ownership in excess of EPR's 9.8% ownership limit or cause
the Company to fail to qualify as a REIT for federal income tax purposes. The
maximum number of shares or options which may be awarded to an employee subject
to the deductibility limitation of Section 162(m) of the Internal Revenue Code
(the "Code") is 250,000 for each twelve-month performance period (or, to the
extent the award is paid in cash, the maximum dollar amount equal to the cash
value of that number of shares).
COMPENSATION COMMITTEE REPORT
WHAT IS THE COMPANY'S EXECUTIVE COMPENSATION PHILOSOPHY?
EPR's compensation philosophy has several key objectives:
o create a well-balanced and competitive compensation program that
utilizes the following three elements:
-> base salary
-> annual incentives
-> share awards and share options
o reward executives for performance on measures designed to increase
shareholder value
o use share awards and share options to ensure that executives are
focused on providing appropriate dividend levels and building
shareholder value
o create alignment between our executives and our shareholders by
encouraging key executives to purchase shares.
For 2003, the compensation committee used these compensation programs to
meet its compensation objectives for executive officers:
BASE SALARY. The compensation committee established base salaries of
$372,646 for Mr. Brain, $235,053 for Mr. Kennon and $210,210 for Mr. Silvers.
The salary levels were intended to provide a level of compensation competitive
with those of other executives performing similar functions at comparable
companies and to reward EPR's executives for their efforts on behalf of the
Company and the Company's performance and increase in share price during 2003.
ANNUAL CASH INCENTIVE AWARDS. Under the Annual Incentive Plan, the
compensation committee established specific annual "performance targets" for
each covered executive. The performance targets were based on increases in Funds
from Operations per share and other factors aimed at providing shareholders with
an acceptable rate of return. Performance bonuses are payable in cash,
restricted common shares (valued at 125% of the cash bonus amount), share
options (valued at 500% of the cash bonus amount) or a combination of two or
more of those. The compensation committee awarded bonuses of $447,174 to Mr.
Brain, $211,548 to Mr. Kennon and $191,008 to Mr. Silvers for 2003.
LONG-TERM COMPENSATION AWARDS. The compensation committee made long term
compensation awards to the covered executives consisting of the restricted
shares and options disclosed in columns (f) and (g) of the Summary Compensation
Table.
HOW WAS THE COMPANY'S PRESIDENT AND CEO COMPENSATED?
EPR's President and CEO, David M. Brain, was compensated in 2003 pursuant
to an employment agreement entered into in 2000. In establishing Mr. Brain's
compensation, the compensation committee took into account the compensation of
similar officers of REITs with comparable market capitalizations, Mr. Brain's
contributions to the Company's performance, increase in share price and
achievement of its
financing strategies, and his success in meeting the performance criteria
established by the compensation committee.
Mr. Brain received a base salary of $372,646 in 2003 and a bonus of
$447,174 for 2003. The incentive award paid to Mr. Brain was based on the
Company's achievement of target financial results and shareholder return, as
well as a subjective determination of Mr. Brain's performance in 2003.
HOW WILL 2004 INCENTIVE COMPENSATION BE DETERMINED?
The committee may rely on any of the following factors in determining
incentive compensation levels for executives of the Company for 2004: Funds from
Operations, Cash Available for Distribution, return on equity, return on assets,
return on acquisitions, net operating income, total shareholder return, dividend
growth, financial statement management and/or acquisition targets. In looking at
Company performance, the committee may consider performance against Company
historical performance, budgeted performance, peer organization performance,
REIT indices performance, broad market indices performance and/or other factors.
HOW IS EPR ADDRESSING INTERNAL REVENUE CODE LIMITS ON DEDUCTIBILITY OF
COMPENSATION?
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for compensation in excess of $1,000,000 paid for
any fiscal year to the company's chief executive officer and the four other most
highly compensated executive officers. The statute exempts qualifying
performance-based compensation from the deduction limit if stated requirements
are met. Section 162(m) provides for a transition period of up to approximately
three years after a company goes public before the limitations fully apply.
Although the compensation committee has designed the Company's executive
compensation program so that compensation will be deductible under Section
162(m), at some future time it may not be possible or practicable or in the
Company's best interests to qualify an executive officer's compensation under
Section 162(m). Accordingly, the compensation committee and the Board of
Trustees reserve the authority to award non-deductible compensation in
circumstances they consider appropriate.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the compensation committee is or has been an officer or
employee of the Company or any of its subsidiaries. No member of the
Compensation Committee had any contractual or other relationship with the
Company during 2003.
By the compensation committee:
Robert J. Druten
Scott H. Ward
James A. Olson
Morgan G. Earnest II
THIS COMPENSATION COMMITTEE REPORT IS NOT DEEMED "SOLICITING MATERIAL" AND IS
NOT DEEMED FILED WITH THE SEC OR SUBJECT TO REGULATION 14A OR THE LIABILITIES
UNDER SECTION 18 OF THE EXCHANGE ACT.
TRANSACTIONS BETWEEN THE COMPANY AND
TRUSTEES, OFFICERS OR THEIR AFFILIATES
Pursuant to their 2000 employment agreements, Messrs. Brain, Kennon and
Silvers are indebted to the Company in the principal amounts of $1,407,645,
$281,250 and $281,250, respectively, for the purchase of 80,000, 20,000 and
20,000 common shares, respectively. Each loan is represented by a 10-year
recourse note with principal and interest at 6.24% per annum payable at
maturity.
For a discussion of the Board's determination of Mr. Earnest's independence
as a Board and audit committee member in light of the GMAC Canada Loan, see Item
I - Election of Trustee - "Who are our independent trustees and how was that
determined?"
COMPANY PERFORMANCE
The following performance graph shows a comparison of cumulative total
returns for EPR, the Morgan Stanley REIT Index (in which EPR is included) and
the Russell 2000 Index (in which EPR is included) for the five fiscal year
period beginning December 31, 1998 and ending December 31, 2003.
The graph assumes that $100 was invested on December 31, 1998 in each of
the Company's common shares, the Morgan Stanley REIT Index and the Russell 2000
Index, and that all dividends were reinvested. The information presented in the
performance graph is historical and is not intended to represent or guarantee
future returns.
We have included a comparison of cumulative total returns for EPR with the
Standard & Poor's 500 Index in prior years' proxy statements, but have omitted a
comparison to that Index in this proxy statement because we are not included in
that Index.
TOTAL RETURN TO SHAREHOLDERS
(Assumes $100 investment on 12-31-98)
$400 |
|
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$350 |
| #
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$300 |
|
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$250 |
|
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| #
$200 |
| *
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| #
$150 |
| * * @
|
| @ @ @
| *
$100 | #*@
| #* @
| #
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$50 |
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$0 |
--------------------------------------------------------------------------
| | | | | |
12/31/1998 12/31/1999 12/31/2000 12/31/2001 12/31/2002 12/31/2003
# Entertainment Properties Trust
* Morgan Stanley REIT Index
@ Russell 2000 Index
-----------------------------------------------------------------------------------------------------------
Total Return Analysis
-----------------------------------------------------------------------------------------------------------
12/31/1998 12/31/1999 12/31/2000 12/31/2001 12/31/2002 12/31/2003
-----------------------------------------------------------------------------------------------------------
Entertainment Properties Trust $ 100.00 $ 86.37 $ 83.18 $ 162.49 $ 214.20 $ 337.93
-----------------------------------------------------------------------------------------------------------
Morgan Stanley REIT Index $ 100.00 $ 95.45 $ 121.04 $ 136.57 $ 141.55 $ 193.56
-----------------------------------------------------------------------------------------------------------
Russell 2000 Index $ 100.00 $ 119.62 $ 114.59 $ 115.77 $ 90.79 $ 131.98
-----------------------------------------------------------------------------------------------------------
THIS COMPANY PERFORMANCE INFORMATION IS NOT DEEMED "SOLICITING MATERIAL" AND IS
NOT DEEMED FILED WITH THE SEC OR SUBJECT TO REGULATION 14A OR THE LIABILITIES
UNDER SECTION 18 OF THE EXCHANGE ACT.
AUDIT COMMITTEE REPORT
Our Board of Trustees has appointed an audit committee consisting of all
the non-employee trustees. All of the members of the committee are "independent"
as defined in the rules of the NYSE and SEC Rule 10A-3. See Item I - "Election
of Trustee - Who are our independent trustees and how are they determined?" Our
Board of Trustees believes all current members of the audit committee are "audit
committee financial experts," as defined by SEC rules.
The primary responsibility of the audit committee is to oversee the
Company's financial reporting process on behalf of the Board of Trustees.
Management has the primary responsibility for the financial statements and the
reporting process, including EPR's system of internal controls. The independent
auditors are responsible for auditing the Company's annual financial statements
and expressing an opinion on the conformity of those audited financial
statements with generally accepted accounting principles.
The Board of Trustees adopted a written charter for the audit committee in
2001. In 2003, the Board of Trustees adopted a second amended and restated
charter, which reflects the additional responsibilities assumed by the audit
committee under the Sarbanes-Oxley Act, related SEC rules and the rules of the
NYSE and is attached to this proxy statement as Appendix A.
The audit committee has sole authority to engage the independent auditors
to perform audit services (subject to shareholder ratification), audit-related
services, tax services and permitted non-audit services and the fees therefor.
The independent auditors report directly to the audit committee and are
accountable to the audit committee.
The audit committee has adopted policies and procedures for the
pre-approval of the auditors' performance of audit services, audit-related
services, tax services and permitted non-audit services and the fees therefor.
Those policies generally provide that:
o the performance by the auditors of any audit services, audit-related
services, tax services and permitted non-audit services, and the fees
therefor, must be specifically pre-approved by the committee or, in
the absence of one or more of the committee members, a designated
member of the committee
o pre-approvals must take into consideration, and be conducted in a
manner that promotes, the auditors' effectiveness and independence
o each particular service to be approved must be described in detail and
be supported by detailed back-up documentation
In fulfilling its oversight responsibilities, the audit committee reviewed
the Company's 2003 audited financial statements with management and the
auditors. The committee discussed with the auditors the matters required to be
discussed by Statement of Auditing Standards No. 61. This included a discussion
of the auditors' judgments regarding the quality, not just the acceptability, of
the Company's accounting principles and the other matters required to be
discussed with the committee under generally accepted auditing standards. In
addition, the committee received from the auditors the written disclosures and
letter required by Independence Standards Board Standard No. 1 and a written
report from the auditors covering the items prescribed by SEC and NYSE rules.
The committee also discussed with the auditors their independence from
management and the Company, including the matters covered by the written
disclosures and letter provided by the auditors.
The committee also discussed with management and the auditors the overall
scope and plans for the audit of the financial statements. The committee meets
periodically with management and the auditors to discuss the results of their
examinations, their evaluations of the Company, the Company's disclosure
controls and procedures and internal controls, and the overall quality of the
Company's financial reporting. The committee held five meetings during 2003.
The audit committee discussed with management and the auditors the critical
accounting policies of the Company, the impact of those policies on the 2003
financial statements, the impact of known trends, uncertainties, commitments and
contingencies on the application of those policies, and the probable impact on
the 2003 financial statements if different accounting policies had been applied.
Based on the reviews and discussions referred to above, the audit committee
recommended to the Board of Trustees, and the Board approved, that the audited
financial statements be included in the Company's annual report on Form 10-K for
the year ended December 31, 2003 for filing with the SEC.
The audit committee has engaged KPMG as the Company's independent auditors
to audit the 2004 financial statements, subject to shareholder ratification, and
has engaged KPMG to perform specific tax services during 2004. See Item III,
"Ratification of Appointment of Independent Auditors."
The audit committee does not itself prepare financial statements or perform
audits, and its members are not auditors or certifiers of the Company's
financial statements. The members of the audit committee are not professionally
engaged in the practice of accounting and, notwithstanding the designation of
the audit committee members as "audit committee financial experts" pursuant to
SEC rules, are not experts in the field of accounting or auditing, including
auditor independence. Members of the audit committee rely without independent
verification on the information provided to them and the representations made to
them by management and the auditors and look to management to provide full and
timely disclosure of all material facts affecting the Company. Accordingly, the
audit committee's oversight does not provide an independent basis to determine
that management has maintained appropriate accounting and financial reporting
policies, appropriate internal controls and procedures to ensure compliance with
accounting standards and applicable laws and regulations, appropriate disclosure
controls and procedures or appropriate internal control over financial
reporting, or that the Company's reports and information provided under the
Exchange Act are accurate and complete. Furthermore, the audit committee's
considerations and discussions referred to above and in its charter do not
assure that the audit of the Company's financial statements has been carried out
in accordance with generally accepted auditing standards, that the financial
statements are presented in accordance with generally accepted accounting
principles, that the Company's auditors are in fact "independent," or that the
matters required to be certified by the Company's Chief Executive Officer and
Chief Financial Officer in the Company's annual reports on Form 10-K and
quarterly reports on Form 10-Q under the Sarbanes-Oxley Act and related SEC
rules have been properly and accurately certified.
By the audit committee:
James A. Olson
Robert J. Druten
Scott H. Ward
Morgan G. Earnest II
THIS AUDIT COMMITTEE REPORT IS NOT DEEMED "SOLICITING MATERIAL" AND IS NOT
DEEMED FILED WITH THE SEC OR SUBJECT TO REGULATION 14A OR THE LIABILITIES UNDER
SECTION 18 OF THE EXCHANGE ACT.
ITEM II
AMENDMENT OF SHARE INCENTIVE PLAN
The Board of Trustees has proposed a series of amendments to the Share
Incentive Plan (the "Plan Amendment"). The Plan Amendment will:
o increase the number of common shares available for issuance under the
Plan from 1,500,000 common shares to 3,000,000 common shares
o eliminate the limitation on the total number of options which may be
awarded to an individual under the Plan
o increase from 3,333 to 5,000 the number of options automatically
granted each year to non-employee trustees under the Plan
o amend the definition of "non-employee trustee" to include the
Company's Chairman, to the extent he or she is not otherwise employed
by the Company
INCREASE IN NUMBER OF SHARES ISSUABLE UNDER THE PLAN. As originally
adopted, a total of 1,500,000 common shares were reserved for issuance under the
Plan to officers, trustees and employees (see "Election of Trustee - How are
Trustees Compensated?" and "Executive Compensation" in Item I). An aggregate of
1,162,563 common shares have been issued or reserved for issuance upon exercise
of options under the Share Incentive Plan. A total of only 337,437 shares remain
available for future issuance under the Plan.
The Board of Trustees believes the remaining number of shares available for
issuance under the Plan is not sufficient to enable the Company to continue
providing equity-based compensation to officers, trustees and employees in
future years consistent with the level of equity-based compensation awarded in
prior years. The Board of Trustees believes the ability to continue providing
equity-based compensation at levels consistent with or potentially higher than
prior years is essential to enable the Company to meet the following objectives:
o align the interests of officers, trustees and employees with the
interests of shareholders
o attract and retain officers, trustees and employees of exceptional
quality
o provide adequate compensation to officers, trustees and employees for
the additional demands and responsibilities assumed by them under the
Sarbanes-Oxley Act and related SEC rules
o reward officers, trustees and employees for Company performance and
increases in shareholder value
If Proposal II is adopted, the Company will have a total of 1,837,437
common shares available for future issuance to officers, trustees and employees
under the Plan.
ELIMINATION OF LIMIT ON TOTAL NUMBER OF OPTIONS THAT MAY BE AWARDED TO AN
INDIVIDUAL UNDER THE PLAN. Currently, the Plan prohibits any individual officer,
trustee or employee from receiving more than an aggregate of 750,000 total
shares and/or options under the Plan. This restriction on the total number of
shares and options under the Plan is in addition to the provisions of Section
162(m) of the
Code, which limits to 250,000 the number of options which may be awarded each
year to any employee subject to the deductibility limitation of Section 162(m).
Messrs. David M. Brain, Fred L. Kennon and Gregory K. Silvers, the current
executive officers of the Company, have been issued an aggregate of 495,783,
223,215 and 176,158 options under the Plan, respectively. Unless the 750,000
total share limit is eliminated from the Plan, the Company will not be able to
continue awarding options to those officers in future years consistent with the
level of options awarded to them in prior years. The Board of Trustees believes
the Company's ability to continue providing such equity-based compensation is
essential in meeting the objectives described above. The Company will continue
to be subject to the 250,000 annual share limit under Section 162(m) of the
Code.
INCREASE IN NUMBER OF OPTIONS GRANTED TO NON-EMPLOYEE TRUSTEES UNDER THE
PLAN. Upon recommendation of the compensation committee, the Board of Trustees
has proposed amending the Share Incentive Plan to increase from 3,333 to 5,000
the number of options granted each year to non-employee trustees under the Plan.
The increase in the number of options granted annually to non-employee trustees
is part of the new compensation program for non-employee trustees described in
"How are Trustees Compensated" in Item I. The Board of Trustees believes the
additional compensation is justified by the additional demands and
responsibilities assumed by the trustees and the members and chairmen of Board
committees under the Sarbanes-Oxley Act and applicable SEC rules.
DESIGNATION OF CHAIRMAN AS NON-EMPLOYEE TRUSTEE. The current Plan defines
"non-employee trustee" as any trustee who is not an employee of the Company or
the Chairman of the Board of Trustees. When the Plan was originally adopted,
Peter C. Brown, the Chairman of AMC Entertainment, Inc., the Company's largest
tenant, was also Chairman of the Company. In light of that relationship, the
Plan as originally written excluded the Chairman from participating in the
compensation awarded to other non-employee trustees. Mr. Brown's term as trustee
and Chairman expired at the 2003 annual meeting. The Company's current Chairman,
Robert J. Druten, has no relationship with any tenant of the Company and is
otherwise independent within the meaning of SEC and NYSE rules. The Board of
Trustees believes the Chairman should be entitled to the same number of annual
options and other Board compensation received by other non-employee trustees,
and is thus proposing an amendment to the definition of "non-employee trustee"
in the Plan to eliminate the exclusion of the Chairman from that definition.
The only amendments to the Share Incentive Plan are those described above.
All other terms and provisions of the Plan will remain the same. Except as
described above, there will be no benefits available under the amended Plan that
are not currently available under the existing Plan. For a brief description of
the material features of the Plan, see "Executive Compensation - Share Incentive
Plan" in Item I. Officers, trustees and employees are eligible for benefits
under the Plan in the manner described in "Election of Trustee - How Are
Trustees Compensated" and "Executive Compensation" in Item I.
Our compensation committee has not yet determined specifically how the
additional common shares or options available for issuance under the amended
Plan would be allocated to the Company's officers and employees receiving future
benefits under the Plan. Trustees will receive the annual options described in
"Election of Trustee - How are Trustees Compensated?" in Item I. The
compensation committee's policies for making grants and awards to officers and
employees under the Share Incentive Plan and the benefits available under the
Share Incentive Plan are described in "Executive Compensation" and "Compensation
Committee Report" in Item I. The Company anticipates the future grants and
awards to officers and employees under the amended Share Incentive Plan will be
generally consistent with past grants and awards under the Plan.
The following table describes as of March 31, 2004 the options granted to
each executive officer of the Company, the three executive officers as a group,
the current non-officer trustees as a group, the
nominee for election as trustee at the annual meeting, and all non-executive
employees of the Company as a group.
----------------------------------------------------------------------------------------- ------------------
NAME AND POSITION OPTIONS
----------------------------------------------------------------------------------------- ------------------
David M. Brain, President and Chief Executive Officer 538,696
----------------------------------------------------------------------------------------- ------------------
Fred L. Kennon, Vice President and Chief Financial Officer 240,748
----------------------------------------------------------------------------------------- ------------------
Gregory K. Silvers, Vice President, General Counsel,
Chief Development Officer and Secretary 191,989
----------------------------------------------------------------------------------------- ------------------
Executive Group 971,433
----------------------------------------------------------------------------------------- ------------------
Non-Executive Trustee Group 39,997
----------------------------------------------------------------------------------------- ------------------
Barrett Brady, nominee 0
----------------------------------------------------------------------------------------- ------------------
Non-Executive Employee Group 80,110
----------------------------------------------------------------------------------------- ------------------
The current market value of the common shares underlying options granted or
which may in the future be granted under the Plan, based upon the closing price
for the Company's common shares on the NYSE on April 5, 2004, is $38.93 per
share.
The existing shares available for issuance under the Plan have been
registered with the SEC under the Securities Act of 1933 (the "Securities Act").
The additional shares being added to the Share Incentive Plan pursuant to the
Plan Amendment will also be registered with the SEC under the Securities Act.
A copy of the amended and Restated Share Incentive Plan is attached as
Appendix D to this proxy statement.
FEDERAL INCOME TAX CONSEQUENCES OF ISSUANCE AND EXERCISE OF OPTIONS UNDER THE
SHARE INCENTIVE PLAN
The federal income tax consequences of the issuance and exercise of options
under the Share Incentive Plan to the participants in the Plan and the Company
are summarized below. This summary is based upon the federal income tax laws in
effect as of the date of this proxy statement. The tax consequences could be
affected by future changes in the federal income tax laws and regulations. This
summary is not intended to constitute tax advice, and does not address all of
the tax consequences relating to the issuance and exercise of options under the
Share Incentive Plan.
The grant of an incentive share option (an "ISO") will have no immediate
tax consequences to the participant or the Company. The exercise of an ISO will
result in no compensation income to the participant, but an amount equal to the
difference between the fair market value of the shares on the date of exercise
and the exercise price for the shares is included in the alternative minimum
taxable income of the participant for alternative minimum tax purposes. The
exercise of an ISO will result in no tax deduction for the Company. If the
participant disposes of the shares acquired upon exercise of an ISO within two
years of the grant date of the ISO, or within one year of the transfer of shares
to the participant in the exercise of the ISO, then the participant will have
compensation income equal to the difference
between the fair market value of the shares on the date of exercise and the
exercise price for the shares. The Company will have a tax deduction in an equal
amount.
The grant of a nonqualified share option (an "NQO") will have no immediate
tax consequences to the participant or the Company. The exercise of an NQO will
result in compensation income to the participant equal to the difference between
the fair market value of the shares on the date of exercise and the exercise
price for the shares. The Company will have a tax deduction in an equal amount.
A participant who pays the exercise price under an ISO or NQO in shares
will not recognize gain or loss on the transfer of such shares in payment of the
exercise price. The participant's basis in the number of shares acquired upon
exercise of the ISO or NQO equal to the number of shares transferred in the
exercise of the ISO or NQO is equal to the participant's basis in the
transferred shares. The participant's basis in any additional shares acquired
upon exercise of the ISO is zero, and in the exercise of an NQO is equal to the
amount of compensation income the participant recognizes upon the exercise of
the NQO.
The Company may not deduct for tax purposes compensation in excess of
$1,000,000 paid in any taxable year to the Company's chief executive officer and
four other most highly compensated executive officers. However, the Company may
deduct for tax purposes certain performance-based compensation in excess of
$1,000,000. The Share Incentive Plan, the ISOs and NQOs are designed to qualify
as performance-based compensation, so that the Company may take the tax
deductions described above, even in excess of the $1,000,000 limitation. The
Board of Trustees and the compensation committee have reserved the authority to
issue ISOs and NQOs which do not qualify as performance-based compensation in
circumstances they consider appropriate.
ITEM III
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The audit committee has engaged, subject to shareholder ratification, the
independent certified public accounting firm of KPMG LLP as EPR's independent
accountants to audit the financial statements of the Company for the year ending
December 31, 2004. KPMG audited our financial statements for the years ended
December 31, 2003 and 2002.
Representatives of KPMG are expected to be present at the annual meeting
and will be available to respond to appropriate questions about their services.
AUDIT FEES
KPMG billed the Company an aggregate of $82,850 in fees in 2002 and
$129,150 in fees in 2003 for professional services rendered in the audit of our
annual financial statements for the years ended December 31, 2002 and 2003,
respectively, their provision of comfort letters in the Company's securities
offerings conducted during those years, and their reviews of the quarterly
financial statements included in our Form 10-Q reports filed with the SEC during
2002 and 2003.
AUDIT-RELATED FEES
KPMG did not bill the Company for audit-related services during 2002 or
2003.
TAX FEES
KPMG billed the Company an aggregate of $58,115 in fees in 2002 and
$106,404 in fees in 2003 for professional services rendered by the auditors for
tax compliance, tax advice and tax planning, including REIT compliance, U.S. and
Canadian tax compliance and the determination of the portion of dividends
representing a return of capital. The fees for 2003 also include $21,134 in
charges incurred in connection with a tax protest in the State of Florida.
The audit and tax services provided in 2003 were pre-approved by the audit
committee in accordance with the policies described in the audit committee
report included in this proxy statement.
The audit committee considered whether KPMG's provision of tax services was
compatible with maintaining their independence from management and our Company,
and determined that the provision of those services was compatible with its
independence.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our trustees, executive officers
and holders of more than 10% of our common shares to file reports with the SEC
regarding their ownership and changes in ownership of our shares.
EPR believes that, during 2003, our trustees and executive officers
complied with all Section 16(a) filing requirements. In making this statement,
we have relied upon an examination of the copies of Forms 3, 4 and 5 provided to
us and the written representations of our trustees and executive officers.
SHARE OWNERSHIP
WHO ARE THE LARGEST OWNERS OF OUR SHARES?
Except as stated below, we know of no single person or group that is the
beneficial owner of more than 5% of our common shares.
------------------------------------------- ----------------------------------- --------------------------------------
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF SHARES
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OUTSTANDING
------------------------------------------- ----------------------------------- --------------------------------------
Barclays Global
Investors, N.A. 1,401,898 (1) 7.13%
45 Fremont Street, 17th Floor
San Francisco, CA 94105
------------------------------------------- ----------------------------------- --------------------------------------
BRT Realty Trust (2)
60 Cutter Mill Road 1,254,137 (3)(4) 6.38%
Suite 303
Great Neck, NY 11021
------------------------------------------- ----------------------------------- --------------------------------------
(1) Based solely on disclosures made by Barclays Global Investors, N.A.
and its affiliates in a report on Schedule 13G filed with the
Securities and Exchange Commission. Includes shares held by affiliates
of Barclays Global Investors, N.A. Certain affiliates of Barclays
Global Investors, N.A. have shared voting or investment power over
some of the shares.
(2) Based solely on disclosures made by BRT and its affiliates in reports
on Schedule 13D filed with the Securities and Exchange Commission.
(3) Reporting as a group (within the meaning of Section 13(d)(3) of the
Exchange Act) with other persons and entities.
(4) Various members of the group have shared voting or investment power
over some or all of the shares.
HOW MANY SHARES DO OUR TRUSTEES AND EXECUTIVE OFFICERS OWN?
This table shows as of December 31, 2003, the number of our common shares
beneficially owned by our trustees, the nominee for trustee and our executive
officers, and by all of the trustees and executive officers as a group. All
information regarding beneficial ownership was furnished by the trustees,
nominee and officers listed below.
------------------------------------------- -------------------------------------- ---------------------------
AMOUNT AND NATURE OF PERCENT OF SHARES
NAME OF BENEFICIAL OWNERS BENEFICIAL OWNERSHIP (1) OUTSTANDING (1)
------------------------------------------- -------------------------------------- ---------------------------
David M. Brain 948,376 4.71%
------------------------------------------- -------------------------------------- ---------------------------
Robert J. Druten 34,465 *
------------------------------------------- -------------------------------------- ---------------------------
Scott H. Ward 131,810 *
------------------------------------------- -------------------------------------- ---------------------------
Morgan G. Earnest II 3,799 *
------------------------------------------- -------------------------------------- ---------------------------
James A. Olson 3,799 *
------------------------------------------- -------------------------------------- ---------------------------
Barrett Brady, nominee 0 0%
------------------------------------------- -------------------------------------- ---------------------------
Fred L. Kennon 351,998 1.75%
------------------------------------------- -------------------------------------- ---------------------------
Gregory K. Silvers 301,993 1.50%
------------------------------------------- -------------------------------------- ---------------------------
All trustees and executive 1,776,240 8.82%
officers as a group (7 persons)
------------------------------------------- -------------------------------------- ---------------------------
* Less than 1 percent.
(1) Includes the following common shares which the named individuals have
the right to acquire within 60 days under existing options: David M.
Brain (253,939), Fred L. Kennon (125,268), Gregory K. Silvers
(90,819), Robert J. Druten (29,998), Scott H. Ward (3,333), James A.
Olson (3,333) and Morgan G. Earnest II (3,333).
The above table reports beneficial ownership in accordance with Rule 13d-3
under the Exchange Act and includes shares underlying options that are
exercisable within 60 days after December 31, 2003. This means all shares over
which trustees, nominees and executive officers directly or indirectly have or
share voting or investment power are listed as beneficially owned. The persons
identified in the table have sole voting and investment power over all shares
described as beneficially owned by them
SUBMISSION OF SHAREHOLDER PROPOSALS AND NOMINATIONS
DO I HAVE A RIGHT TO NOMINATE TRUSTEES OR MAKE PROPOSALS FOR CONSIDERATION BY
THE SHAREHOLDERS?
Yes. Our Declaration of Trust and Bylaws establish procedures which you
must follow if you wish to nominate trustees or make other proposals for
consideration at an annual shareholders meeting.
HOW DO I MAKE A NOMINATION?
If you are a shareholder of record and wish to nominate someone to the
Board of Trustees, you must give written notice to the Company's Secretary. Your
notice must be given not less than 60 days and not more than 90 days prior to
the first anniversary of the date of last year's meeting. A nomination received
less than 60 days prior to the first anniversary date of last year's meeting
will be deemed untimely and will not be considered. Your notice must include:
o for each person you intend to nominate for election as a trustee, all
information related to that person that is required to be disclosed in
solicitations of proxies for the election of trustees in an election
contest, or is otherwise required, pursuant to Regulation 14A under
the Exchange Act (including the person's written consent to being
named in the proxy statement as a nominee and to serve as a trustee if
elected)
o your name and address and the name and address of any person on whose
behalf you made the nomination, as they appear on the Company's books
o the number of shares owned beneficially and of record by you and any
person on whose behalf you made the nomination
HOW DO I MAKE A PROPOSAL?
If you are a shareholder of record and wish to make a proposal to the
shareholders, you must give written notice to the Company's Secretary. Pursuant
to Rule 14a-8 of the SEC, your notice must be received at the Company's
executive offices not less than 120 calendar days before the date of the
Company's proxy statement released to shareholders in connection with last
year's meeting. Any proposal received less than 120 days before that date will
be deemed untimely and will not be considered. Your notice must include:
o a brief description of your proposal and your reasons for making the
proposal
o your name and address and the name and address of any person on whose
behalf you made the proposal, as they appear on the Company's books
o any material interest you or any person on whose behalf you made the
proposal have in the proposal
o the number of shares owned beneficially and of record by you and any
person on whose behalf you made the proposal
ARE THERE ANY EXCEPTIONS TO THE DEADLINE FOR MAKING A NOMINATION OR PROPOSAL?
Yes. If the date of the annual meeting is scheduled more than 30 days prior
to or more than 60 days after the anniversary date of last year's meeting, your
notice must be delivered:
o not earlier than 90 days prior to the meeting; and
o not later than (a) 60 days before the meeting or (b) the 10th day
after the date we make our first public announcement of the meeting
date, whichever is earlier
If the Board increases the number of trustees to be elected but we do not
make a public announcement of the increased Board or the identity of the
additional nominees within 70 days prior to the first anniversary of last year's
meeting, your notice will be considered timely (but only with respect to
nominees for the new positions created by the increase) if it is delivered to
the Company's Secretary not later than the close of business on the 10th day
following the date of our public announcement.
MUST THE BOARD OF TRUSTEES APPROVE MY PROPOSAL?
Our Declaration of Trust provides that the submission of any action to the
shareholders for their consideration must first be approved by the Board of
Trustees.
OTHER MATTERS
As of the date of this proxy statement, we have not been presented with any
other business for consideration at the annual meeting. If any other matter is
properly brought before the meeting for action by the shareholders, your proxy
(unless revoked) will be voted in accordance with the recommendation of the
Board of Trustees or the judgment of the proxy holders if no recommendation is
made.
MISCELLANEOUS
PROXY SOLICITATION
The enclosed proxy is being solicited by the Board of Trustees. The Company
will bear all costs of the solicitation, including the cost of preparing and
mailing this proxy statement and the enclosed proxy card. After the initial
mailing of this proxy statement, proxies may be solicited by mail, telephone,
telegram, facsimile, e-mail or personally by trustees, officers, employees or
agents of the Company. Brokerage houses and other custodians, nominees and
fiduciaries will be requested to forward soliciting materials to the beneficial
owners of shares held of record by them, and their reasonable out-of-pocket
expenses, together with those of EPR's transfer agent, will be paid by EPR.
ANNUAL REPORT
EPR's Annual Report to Shareholders, containing financial statements for
the year ended December 31, 2003, is being mailed with this proxy statement to
all shareholders entitled to vote at the annual meeting. You must not regard the
Annual Report as additional proxy solicitation material.
THE COMPANY WILL PROVIDE WITHOUT CHARGE, UPON WRITTEN REQUEST TO THE
SECRETARY OF THE COMPANY AT THE ADDRESS LISTED ON THE COVER PAGE OF THIS PROXY
STATEMENT, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K, INCLUDING THE
FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE, FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION FOR THE YEAR ENDED DECEMBER 31, 2003.
HOUSEHOLDING
A single copy of our 2003 Annual Report and this proxy statement are being
delivered to any multiple shareholders sharing the same address pursuant to SEC
Rule 14a-3(e)(1), unless we or our transfer agent have received contrary
instructions from one or more of those shareholders. We agree to deliver
promptly upon written or oral request a separate copy of our Annual Report and
proxy statement to any shareholder at a shared address to which a single copy of
those documents has been delivered. You may notify us that you wish to receive a
separate copy of the Annual Report and proxy statement for the 2004 or any
future annual meeting by contacting us at 30 W. Pershing Road, Union Station,
Suite 201, Kansas City, Missouri 64108, (816) 472-1700, Attention: Secretary.
Shareholders who are members of a single household receiving multiple copies of
those documents and who wish to receive a single copy may contact us at the same
address or telephone number.
SHAREHOLDER PROPOSALS FOR THE 2005 ANNUAL MEETING
At this time, we anticipate that the 2005 annual meeting of shareholders
will be held on May 11, 2005. Shareholder proposals intended for inclusion in
the proxy statement for the 2005 annual meeting must be received by the
Company's Secretary at 30 W. Pershing Road, Union Station, Suite 201, Kansas
City, Missouri 64108, within the time limits described in "Submission of
Shareholder Proposals and Nominations." Shareholder proposals and nominations
must also comply with the proxy solicitation rules of the SEC.
By the order of the Board of Trustees
Gregory K. Silvers
VICE PRESIDENT, GENERAL COUNSEL, CHIEF DEVELOPMENT
OFFICER AND SECRETARY
April 9, 2004
APPENDIX A
ENTERTAINMENT PROPERTIES TRUST
SECOND AMENDED AND RESTATED CHARTER OF THE
AUDIT COMMITTEE OF THE BOARD OF TRUSTEES
JANUARY 2004
The Audit Committee is appointed by the Board to assist in meeting the
Board's responsibilities regarding the quality and integrity of the Company's
financial statements and financial reporting and the independence of the
Company's auditors.
MEMBERSHIP
The Committee shall consist of no fewer than three members who meet the
independence requirements of the New York Stock Exchange and SEC Rule 10A-3 and
who are free from any relationship that, in the opinion of the Board, would
interfere with the exercise of their independent judgment as members of the
Committee. No Audit Committee member shall be an "affiliated person" of EPR or
any subsidiary, as defined in SEC Rule 10A-3. No Audit Committee member shall
receive, directly or indirectly, other than in his or her capacity as a member
of the Audit Committee, the Board or another Board committee, any consulting,
advisory or other compensatory fee from EPR or its subsidiaries, other than
ordinary course Board and committee fees. No payment shall be made by EPR to any
firm of which an Audit Committee member is a partner, member, executive officer
or comparable position which provides accounting, consulting, legal, investment
banking or financial advisory services to EPR or any subsidiary. Non-advisory
financial services such as lending, check clearing, maintaining customer
accounts, stock brokerage services and custodial and cash management services
shall not be prohibited if the Board of Trustees affirmatively determines, in
accordance with EPR's Independence Standards for Trustees, that the performance
of those services does not adversely affect the independence of the Audit
Committee member.
All members of the Committee shall be "financially literate" and have a
working familiarity with basic finance and accounting practices. At least one
member of the Committee shall be an "audit committee financial expert" as
defined by Item 401(h) of SEC Regulation S-K.
The members of the Committee shall be appointed and may be replaced by the
Board. Unless elected by the full Board, the members of the Committee may
designate a Chairman.
The Committee does not itself prepare financial statements or perform
audits, and its members are not auditors or certifiers of the Company's
financial statements. The members of the Committee are not professionally
engaged in the practice of accounting and are not experts in the field of
accounting or auditing, including auditor independence. Members of the Committee
rely without independent verification on the information provided to them and
the representations made to them by management and the auditors. Accordingly,
the Committee's oversight does not provide an independent basis to determine
that management has maintained appropriate accounting and financial reporting
policies, appropriate internal controls and procedures to ensure compliance with
accounting standards and applicable laws and regulations, appropriate disclosure
controls and procedures or appropriate internal control over financial
reporting. Furthermore, the Committee's considerations and discussions referred
to in this charter do not assure that the audit of EPR's financial statements
has been carried out in
accordance with generally accepted auditing standards, that the financial
statements are presented in accordance with generally accepting accounting
principles, or that the auditors are in fact "independent."
PURPOSE AND RESPONSIBILITIES
The Committee shall be directly responsible for:
1. Assisting Board oversight of the integrity of EPR's financial statements,
EPR's compliance with legal and regulatory requirements, the qualifications
and independence of the auditors, and the performance of EPR's internal
audit function and the auditors
2. The appointment, compensation, retention and oversight of the auditors, who
shall report directly to the Committee
3. Pre-approving the auditors' performance of audit services (including review
and attest services), audit-related services, tax services and any other
permitted services approved by the Committee, and the fees therefor, in
accordance with applicable SEC rules and the policies and procedures
adopted by the Committee for this purpose
4. Resolving any disagreements between management and the auditors over
financial reporting
5. Establishing procedures for the receipt, retention and treatment of
complaints regarding accounting, internal accounting controls or auditing
matters, and the confidential anonymous submission by employees of concerns
regarding questionable accounting or auditing matters
6. At least annually, prior to filing the audit report with the SEC, obtaining
and reviewing a report by the auditors describing:
o The auditors' internal quality control procedures
o Any material issues raised by the auditors' most recent internal
quality control review or peer review, or by any inquiry or
investigation by governmental or professional authorities within the
preceding five years regarding one or more independent audits carried
out by the firm, and any steps taken to deal with those issues
o All relationships between the auditors and the Company
o All critical accounting policies and practices of the Company
o All alternative treatments within GAAP for policies and practices
related to material items that have been discussed with management,
including ramifications of the use of such alternative methods and
treatments and the treatment preferred by the auditors
o Other material written communication between the auditors and
management, such as management letters, "internal control" letters or
schedules of unadjusted audit differences
o The auditors' responsibilities under Generally Accepted Auditing
Standards
o Methods used to account for significant or unusual transactions
o Effects of significant accounting policies in controversial or
emerging areas for which there is a lack of authoritative guidance or
consensus
o The process used by management in formulating particularly sensitive
accounting estimates and the basis for the auditors' conclusions
regarding the reasonableness of those estimates
o The auditors' judgments about the quality of management's accounting
principles
o The auditors' responsibility for other information in documents
containing audited financial statements
o The auditors' views about significant matters that were the subject of
consultation with management
o Major issues discussed with management prior to retention
o Any difficulties with management encountered in performing the audit
o Any disagreements with management over the application of accounting
principles, the basis for management's accounting estimates, or the
disclosures in the financial statements
o Any restrictions on the scope of the auditors' activities or access to
requested information
o Any accounting adjustments that were noted or proposed by the auditors
but were "passed" by management (as immaterial or otherwise)
o Any communications between the audit team and the auditors' national
office regarding auditing or accounting issues presented by the
engagement
o The responsibilities, budget and staffing of EPR's internal audit
function
7. Discussing EPR's annual audited financial statements, quarterly financial
statements, and the disclosures in "Management's Discussion and Analysis"
with management and the auditors
8. Reviewing on a general basis the type of information provided in EPR's
earnings releases and management's policies regarding the presentation of
financial information (including non-GAAP financial information) and the
provision of earnings guidance to analysts and rating agencies
9. Discussing on a general basis management's risk assessment and risk
management policies, including EPR's major financial risk exposures and the
steps management has taken to monitor and control those exposures, and
management's guidelines and policies governing the process by which risk
assessment and risk management are undertaken
10. Establishing clear hiring policies for employees or former employees of the
auditors
11. Reporting regularly to the Board on:
o The quality and integrity of EPR's financials
o EPR's compliance with legal and regulatory requirements
o The performance and independence of the auditors
o The performance of EPR's internal audit function
12. Reviewing on a periodic basis:
o Major issues regarding accounting principles and financial statement
presentation, including any significant changes in the selection or
application of accounting principles, any major issues regarding the
adequacy of internal controls, and any specific steps adopted by
management and/or the auditors in light of material control
deficiencies
o Analyses prepared by management and/or the auditors regarding specific
financial reporting issues and judgments made in preparing the
financials, including analyses of the effects of alternative GAAP
methods on the financials
o The effect of regulatory and accounting initiatives on the financials
13. Reviewing the auditors' proposed audit scope, approach and independence,
including an annual review of:
o The auditors' qualifications, performance and independence
o The performance of the lead audit partner
o The industry knowledge and experience of key audit partners and
managers
o The ability and willingness of key audit partners and managers to
consult with other experts in their firm on matters of importance to
the Company
o The auditors' quality control procedures
14. Conducting a post-audit review of the financial statements and audit
findings, including any significant suggestions for improvements provided
to management by the auditors
15. Reviewing and discussing with the auditors their written statement
concerning any relationships between the auditors and the Company, or any
other relationships, that may adversely affect the independence of the
auditors and based on that report, assessing the independence of the
auditors
16. Periodically consulting with the auditors out of the presence of management
about internal controls and the completeness and accuracy of EPR's
financial statements
17. Discussing with the auditors the matters required to be discussed by
Statement on Auditing Standards 61
18. In consultation with the auditors and management, evaluating the quality
and integrity of EPR's financial reporting processes, both internal and
external
19. Evaluating the auditors' judgments about the quality and appropriateness of
the Company's accounting policies as applied in its financial reporting
20. Recommending to the Board whether the audited financial statements should
be included in EPR's annual report on Form 10-K
21. Reviewing and discussing with management, the Board and the auditors any
material financial or non-financial off-balance sheet arrangements, the
risks created by those arrangements, and the quality and adequacy of the
Company's reporting with regard to the same
22. Reviewing and discussing with management, the Board and the auditors all
transactions and courses of dealing between the Company or its affiliates
and existing or former officers, trustees, more than 5% shareholders, their
affiliates, family members or other related parties ("related parties"),
whether and the extent to which those transactions involve terms that
differ from those that would likely be negotiated with independent third
parties, the impact of those transactions and arrangements on EPR's
financial condition and performance, and the quality and adequacy of EPR's
reporting with regard to the same
23. Preparing the Audit Committee Report for inclusion in the annual proxy
statement
24. Establishing regular and separate systems of reporting to the Committee by
management and the auditors regarding any significant judgments made in
management's preparation of the financial statements and the view of each
as to the appropriateness of those judgments
25. Reviewing management's monitoring of compliance with the Company's Code of
Business Conduct and Ethics
The Committee shall have authority at EPR's expense to engage independent
counsel and other advisers as the Committee deems necessary to carry out its
duties. The Committee shall have appropriate funding from the Company, as
determined by the Committee, for payment of compensation to the auditors for
issuing their audit report and performing other audit services, audit-related
services, tax services and any other services for which auditors are engaged by
the Committee, the compensation of advisors engaged by the Committee, and
administrative expenses necessary and appropriate for carrying out the
Committee's duties.
Subject to shareholder ratification, the Committee has sole authority to
engage the auditors to perform audit services, audit-related services, tax
services and any other permitted services, and to approve the fees therefor. The
Committee shall adopt policies and procedures for the pre-approval of those
services and fees.
Other than the regular rotation of audit partners required by SEC rules,
the Committee does not believe a regular rotation of auditing firms is necessary
to preserve the auditors' independence. The Committee may consider whether
auditing firm rotation is desirable for this purpose at any future time.
The Committee shall meet at least four times annually, or more frequently
as circumstances dictate. As part of its mission to foster open communication,
the Committee shall meet periodically with management, the persons performing
EPR's internal audit function, the trustees and the auditors in separate
executive sessions to discuss any matter the Committee or each of these groups
believes should be discussed.
The Committee shall keep minutes and other records of its meetings and
proceedings.
The Committee shall review and reassess the adequacy of this charter
annually and recommend any changes to the Board for approval.
The Committee shall perform an annual self-evaluation.
APPENDIX B
ENTERTAINMENT PROPERTIES TRUST
FIRST AMENDED AND RESTATED
CHARTER OF THE NOMINATING/CORPORATE
GOVERNANCE COMMITTEE OF THE BOARD OF TRUSTEES
JANUARY 2004
The Nominating/Corporate Governance Committee is appointed by the Board to
assist in meeting the Board's responsibilities for corporate governance and the
nomination of trustees.
MEMBERSHIP
The Committee shall consist of no fewer than two members who meet the
independence requirements of the New York Stock Exchange.
The members of the Committee shall be appointed and may be replaced by the
Board. Unless elected by the full Board, the members of the Committee may
designate a Chairman.
PURPOSE AND RESPONSIBILITIES
The Committee shall be directly responsible for:
1. Identifying individuals qualified to become Board members, consistent
with criteria approved by the Board.
2. Selecting, or recommending that the Board select, the trustee nominees
for each annual shareholders meeting.
3. Developing and recommending to the Board the Corporate Governance
Guidelines of the Company.
4. Overseeing the evaluation of the Board and management of the Company.
The Committee will consider trustee candidates recommended by shareholders
who comply with EPR's regular procedures for making shareholder proposals. The
Committee will evaluate nominees recommended in good faith by shareholders in
the same manner and under the same criteria in which it evaluates its own
nominees, but may give greater weight to nominees recommended by holders of more
than 5% of EPR's outstanding common shares. In evaluating candidates for
nomination to the Board, the Committee will review their backgrounds and areas
of expertise, and may obtain the views of management, investment bankers and
others in EPR's and other industries. The Committee may engage third parties to
assist in identifying and evaluating candidates. The Committee shall not be
required to disclose the reason for accepting or rejecting any nominee.
At a minimum, candidates for independent trustee, whether recommended by
the Committee, shareholders or others, must meet the Company's Independence
Standards for Trustees, be of high integrity and have sufficient business,
industry, financial and/or professional qualifications, skills and experience to
make a meaningful contribution to the Board. The Committee will endeavor to
nominate
candidates whose backgrounds and skills complement those of the other trustees
and management and who have expertise, experience and/or relationships in one or
more areas important to EPR's business.
At least one member of the Audit Committee must be an "audit committee
financial expert," as defined by SEC rules, and that at least one member of the
Board should have experience in real estate and real estate finance. The
Committee does not believe it should otherwise establish specific minimum
standards that must be met by any nominee.
The Committee shall have sole authority to retain and terminate any search
firm used to identify trustee candidates and to approve that firm's fees and
other retention terms. The Committee shall also have authority to obtain advice
and assistance from internal or external legal, accounting or other advisors at
the expense of the Company.
The Committee shall make regular reports to the Board.
The Committee shall review and reassess the adequacy of the Corporate
Governance Guidelines and this charter annually and recommend any changes to the
Board for approval.
The Committee shall perform an annual self-evaluation.
Nothing in this charter shall affect the terms of any contract to which EPR
is a party or the terms of any securities issued by EPR which provide for the
selection or nomination of trustees, including but not limited to the rights of
holders of preferred shares to elect trustees upon certain dividend defaults.
APPENDIX C
ENTERTAINMENT PROPERTIES TRUST
FIRST AMENDED AND RESTATED CHARTER OF THE
COMPENSATION COMMITTEE OF THE BOARD OF TRUSTEES
JANUARY 2004
The Compensation Committee is appointed by the Board to assist in meeting
the Board's responsibilities regarding the compensation of EPR's trustees and
executive officers.
MEMBERSHIP
The Committee shall consist of no fewer than two members who meet the
independence requirements of the New York Stock Exchange.
The members of the Committee shall be appointed and may be replaced by the
Board. Unless elected by the full Board, the members of the Committee may
designate a Chairman.
PURPOSE AND RESPONSIBILITIES
The Committee shall be directly responsible for:
1. Reviewing and approving corporate goals and objectives relevant to CEO
compensation, evaluating the CEO's performance in light of those goals and
objectives, and, either as a committee or together with the other independent
trustees (as determined by the Board) determining and approving the CEO's
compensation based on that evaluation.
2. Making recommendations to the Board regarding non-CEO compensation,
incentive compensation awards and equity-based compensation plans and awards.
3. Preparing the Compensation Committee Report for inclusion in the annual
proxy statement.
In determining the long-term incentive component of the CEO's compensation,
the Committee shall consider EPR's performance and relative shareholder return,
the value of similar incentive awards to CEOs at comparable companies, the
awards given to the CEO in past years, and such other factors as the Committee
deems relevant. Nothing in this charter shall preclude discussion of CEO
compensation among the entire Board.
The Committee may approve awards required to comply with applicable tax
laws, including but not limited to Section 162(m) of the Internal Revenue Code.
The Committee shall have sole authority to retain and terminate any
compensation consultant used in evaluating and recommending trustee, CEO or
senior executive compensation and shall have sole authority to approve the
consultant's fees and other retention terms. The Committee shall have authority
to obtain advice and assistance from internal or external legal, accounting or
other advisors.
The Committee shall perform an annual review of trustee compensation and
make recommendations on trustee compensation to the Board.
The Committee shall make regular reports to the Board.
The Committee shall review and reassess the adequacy of this charter
annually and recommend any changes to the Board for approval.
The Committee shall perform an annual self-evaluation.
APPENDIX D
FIRST AMENDED AND RESTATED
1997 SHARE INCENTIVE PLAN
1. PURPOSE. The purpose of the Entertainment Properties Trust First Amended
and Restated 1997 Share Incentive Plan (the "Plan") is to enhance the ability of
Entertainment Properties Trust (the "Company") and its Subsidiaries to attract
and retain employees and trustees of outstanding ability and to provide
employees and trustees with an interest in the Company parallel to that of the
Company's shareholders.
2. DEFINITIONS.
(a) "Award" shall mean an award determined in accordance with the
terms of the Plan.
(b) "Board" shall mean the Board of Trustees of the Company.
(c) "Change in Control" shall mean the occurrence of any one of the
following events:
(i) individuals who, on the Effective Date, constitute the Board
(the "Incumbent Trustees") cease for any reason to constitute at least
a majority of the Board, provided that any person becoming a trustee
subsequent to the Effective Date, whose election or nomination for
election was approved by a vote of at least two-thirds of the
Incumbent Trustees then on the Board (either by a specific vote or by
approval of the proxy statement of the Company in which such person is
named as a nominee for trustee, without written objection to such
nomination) shall be an Incumbent Trustee; PROVIDED, HOWEVER, that no
individual initially elected or nominated as a trustee of the Company
as a result of an actual or threatened election contest with respect
to trustees or as a result of any other actual or threatened
solicitation of proxies or consents by or on behalf of any person
other than the Board shall be deemed to be an Incumbent Trustee;
(ii) any "person" (as such term is defined in Section 3(a)(9) of
the Securities Exchange Act of 1934 (the "Exchange Act") and as used
in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 25%
or more of the combined voting power of the Company's then outstanding
securities eligible to vote for the election of the Board (the
"Company Voting Securities"); PROVIDED, HOWEVER, that the event
described in this paragraph (ii) shall not be deemed to be a Change in
Control by virtue of any of the following acquisitions: (A) by the
Company or any Subsidiary, (B) by an employee benefit plan (or related
trust) sponsored or maintained by the Company or any Subsidiary, (C)
by an underwriter temporarily holding securities pursuant to an
offering of such securities, (D) pursuant to a Non-Qualifying
Transaction (as defined in paragraph (iii)); or (E) a transaction
(other than one described in (iii) below) in which Company Voting
Securities are acquired from the Company, if a majority of the
Incumbent Trustees approve a resolution providing expressly that the
acquisition pursuant to this clause (E) does not constitute a Change
in Control under this paragraph (ii);
(iii)the shareholders of the Company approve a merger,
consolidation, statutory share exchange or similar form of corporate
transaction involving the Company or any of its Subsidiaries that
requires the approval of the Company's shareholders, whether for such
transaction or the issuance of securities in the transaction (a
"Business Combination"), unless immediately following such Business
Combination: (A) more than 50% of the total voting power of (x) the
corporation resulting from such Business Combination (the "Surviving
Corporation"), or (y) if applicable, the ultimate parent corporation
that directly or indirectly has beneficial ownership of 100% of the
voting securities eligible to elect directors of the Surviving
Corporation (the "Parent Corporation"), is represented by Company
Voting Securities that were outstanding immediately prior to such
Business Combination (or, if applicable, is represented by shares into
which such Company Voting Securities were converted pursuant to such
Business Combination), and such voting power among the holders thereof
is in substantially the same proportion as the voting power of such
Company Voting Securities among the holders thereof immediately prior
to the Business Combination, (B) no person (other than any employee
benefit plan (or related trust) sponsored or maintained by the
Surviving Corporation or the Parent Corporation or any person which
beneficially owned, immediately prior to such Business Combination,
directly or indirectly, 25% or more of the Company Voting Securities
(a "Company 25% Shareholder")) would become the beneficial owner,
directly or indirectly, of 25% or more of the total voting power of
the outstanding voting securities eligible to elect directors of the
Parent Corporation (or, if there is no Parent Corporation, the
Surviving Corporation) and no Company 25% Shareholder would increase
its percentage of such total voting power and (C) at least a majority
of the members of the board of directors of the Parent Corporation
(or, if there is no Parent Corporation, the Surviving Corporation
following the consummation of the Business Combination) were Incumbent
Trustees at the time of the Board's approval of the execution of the
initial agreement providing for such Business Combination (any
Business Combination which satisfies all of the criteria specified in
(A), (B) and (C) above shall be deemed to be a "Non-Qualifying
Transaction"); or
(iv) The shareholders of the Company approve a plan of complete
liquidation or dissolution of the Company or a sale of all or
substantially all of the Company's assets.
Notwithstanding the foregoing, a Change in Control of the Company shall not
be deemed to occur solely because any person acquires beneficial ownership of
more than 25% of the Company Voting Securities as a result of the acquisition of
Company Voting Securities by the Company which reduces the number of Company
Voting Securities outstanding; PROVIDED, THAT if after such acquisition by the
Company such person becomes the beneficial owner of additional Company Voting
Securities that increases the percentage of outstanding Company Voting
Securities beneficially owned by such person, a Change in Control of the Company
shall then occur.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(e) "Committee" shall mean a committee of at least two members of the
Board appointed by the Board to administer the Plan and to perform the
functions set forth herein and who are "non-employee directors" within the
meaning of Rule 16b-3 as promulgated under Section 16 of the Exchange Act
and who are also "outside directors" within the meaning of Section 162(m)
of the Code.
(f) "Common Share" shall mean the common shares of beneficial
interest, $0.01 par value per share, of the Company.
(g) "Covered Employee" shall have the meaning set forth in Section
162(m) (3) of the Code.
(h) "Fair Market Value" per share as of a particular date shall mean
the last reported sale price (on the day immediately preceding such date)
of the Common Shares on the New York Stock Exchange (or any other exchange
or national market system upon which price quotations for the Company's
Common Shares are regularly available); PROVIDED, HOWEVER, that prior to
the Initial Public Offering, Fair Market Value shall mean the price per
share in the Initial Public Offering.
(i) "Immediate Family Member" shall mean, except as otherwise
determined by the Committee, a Participant's children, stepchildren,
grandchildren, parents, stepparents, grandparents, spouse, siblings,
in-laws and persons related by reason of legal adoption.
(j) "Initial Public Offering" shall mean the Company's initial public
offering of Common Shares pursuant to its registration statement filed with
the Securities and Exchange Commission.
(k) "Incentive Stock Option" shall mean a stock option which is
intended to meet the requirements of Section 422 of the Code.
(l) "Non-Employee Trustee" shall mean a member of the Board who is not
an employee of the Company or any Subsidiary.
(m) "Ownership Limit" shall have the same meaning as provided in the
Company's declaration of trust.
(n) "Nonqualified Stock Option" shall mean a stock option which is not
intended to be an Incentive Stock Option.
(o) "Option" shall mean either an Incentive Stock Option or a
Nonqualified Stock Option.
(p) "Participant" shall mean an employee or trustee of the Company or
its Subsidiaries who is selected to participate in the Plan in accordance
with Section 5.
(q) "Subsidiary" shall mean any subsidiary of the Company that is a
corporation and which at the time qualifies as a "subsidiary corporation"
within the meaning of Section 424(f) of the Code.
3. SHARES SUBJECT TO THE PLAN. Subject to adjustment in accordance with
Section 19, the total of the number of Common Shares which shall be available
for the grant of Awards under the Plan shall not exceed 3,000,000 shares;
PROVIDED, THAT, for purposes of this limitation, any Common Shares subject to an
option which is canceled or expires without exercise shall again become
available for Awards under the Plan. Upon forfeiture of Awards in accordance
with the provisions of the Plan, and the terms and conditions of the Award, such
shares shall no longer be counted in any determination of the number of shares
available under the Plan and shall be available for subsequent Awards. No
Participant shall be granted an Award (or be permitted to exercise an Award) if
upon grant (or exercise) the ownership limit for that individual would be
exceeded. Common Shares available for issue or distribution under the Plan shall
be authorized and unissued shares or shares reacquired by the Company in any
manner.
4. Administration.
(a) The Plan shall be administered by the Board, unless and until the
Board shall appoint a Committee to administer the Plan. All references to
the Committee hereinafter shall mean the Board if no such Committee has
been appointed.
(b) The Committee shall (i) approve the selection of Participants,
(ii) determine the type of Awards to be made to Participants, (iii)
determine the number of Common Shares subject to Awards, (iv) determine the
terms and conditions of any Award granted hereunder (including, but not
limited to, any restriction and forfeiture conditions on such Award) and
(v) have the authority to interpret the Plan, to establish, amend, and
rescind any rules and regulations relating to the Plan, to determine the
terms and provisions of any agreements entered into hereunder, and to make
all other determinations necessary or advisable for the administration of
the Plan. The Committee may correct any defect, supply any omission or
reconcile any inconsistency in the Plan or in any Award in the manner and
to the extent it shall deem desirable to carry it into effect.
(c) Any action of the Committee shall be final, conclusive and binding
on all persons, including the Company and its Subsidiaries and
shareholders, Participants and persons claiming rights from or through a
Participant.
(d) The Committee may delegate to officers or employees of the Company
or any Subsidiary, and to service providers, the authority, subject to such
terms as the Committee shall determine, to perform administrative functions
with respect to the Plan and Award agreements.
(e) Members of the Committee and any officer or employee of the
Company or any Subsidiary acting at the direction of, or on behalf of, the
Committee shall not be personally liable for any action or determination
taken or made in good faith with respect to the Plan, and shall, to the
extent permitted by law, be fully indemnified by the Company with respect
to any such action or determination.
5. ELIGIBILITY. Individuals eligible to receive Awards under the Plan shall
be the officers and other key employees of the Company and its Subsidiaries
selected by the Committee. In addition, all Non-Employee Trustees shall be
eligible to receive Options as provided in Section 12 hereof.
6. AWARDS. Awards under the Plan may consist of options, restricted common
shares, restricted common share units, performance shares, performance share
units, purchases, share awards or other awards based on the value of the Common
Shares. Awards shall be subject to the terms and conditions of the Plan and
shall be evidenced by an Agreement containing such additional terms and
conditions, not inconsistent with the provisions of the Plan, as the Committee
shall deem desirable.
7. OPTIONS. Options may be granted under the Plan in such form as the
Committee may from time to time approve pursuant to terms set forth in an Option
Agreement. The Committee may alter or waive, at any time, any term or condition
of an Option that is not mandatory under the Plan.
(a) TYPES OF CONDITIONS. Each Option Agreement shall state whether or
not the Option will be treated as an Incentive Stock Option or Nonqualified
Stock Option.
(b) OPTION PRICE. The purchase price per share of the Common Shares
purchasable under an Option shall be determined by the Committee; PROVIDED,
HOWEVER, the Option price for Incentive Stock Options will be not less than
100% of the Fair Market Value of the Common Shares on the date of the grant
of the Option and in the case of Incentive Stock Options granted to an
employee owning shares possessing more than 10% of the total combined
voting power of all classes of shares of the Company and its Subsidiaries
(a "10% Shareholder") the price per share
specified in the Agreement relating to such Option shall not be less than
110% of the Fair Market Value per share of the Common Shares on the date of
grant.
(c) OPTION PERIOD. The term of each Option shall be fixed by the
Committee, but no Option shall be exercisable after the expiration of 10
years from the date the Option is granted, PROVIDED, HOWEVER, that in the
case of Incentive Stock Options granted to 10% Shareholders, the term of
such Option shall not exceed 5 years from the date of grant.
(d) EXERCISABILITY. Each Option shall vest and become exercisable at a
rate determined by the Committee at or subsequent to grant; PROVIDED,
HOWEVER, that no Option granted under this Section 7 shall become
exercisable earlier than the time that the Plan is approved by the
shareholders of the Company in accordance with Section 24; PROVIDED,
FURTHER, that upon the occurrence of a Change in Control before such
shareholder approval, all Incentive Stock Options granted hereunder shall
automatically become Nonqualified Stock Options and all Options shall vest
and become immediately exercisable in accordance with Section 13.
(e) METHOD OF EXERCISE. Options may be exercised, in whole or in part,
by giving written notice of exercise to the Company specifying the number
of Common Shares to be purchased. Such notice shall be accompanied by the
payment in full of the Option purchase price. Such payment shall be made:
(a) in cash, or (b) to the extent authorized by the Committee, by surrender
of Common Shares otherwise receivable upon exercise of the Option, or (c)
through additional methods prescribed by the Committee in compliance with
the Sarbanes-Oxley Act of 2002, or (d) by a combination of any such
methods.
8. RESTRICTED COMMON SHARES. The Committee may from time to time award
restricted Common Shares under the Plan to eligible employees. Restricted Common
Shares may not be sold, assigned, transferred or otherwise disposed of, or
pledged or hypothecated as collateral for a loan or as security for the
performance of any obligation or for any other purpose, for such period (the
"restricted period") as the Committee shall determine. The Committee may define
the restricted period in terms of the passage of time or in any other manner it
deems appropriate. The Committee may alter or waive at any time any term or
condition of restricted Common Shares that is not mandatory under the Plan.
Unless otherwise determined by the Committee, upon termination of a
Participant's employment for any reason prior to the end of the Restricted
Period, the restricted Common Shares shall be forfeited and the Participant
shall have no right with respect to the Award.
Except as restricted under the terms of the Plan and any Award Agreement,
any employee awarded restricted Common Shares shall have all the rights of a
shareholder including, without limitation, the right to vote restricted Common
Shares.
If a share certificate is issued in respect of restricted Common Shares,
the certificate shall be registered in the name of the employee but shall be
held by the Company for the account of the employee until the end of the
Restricted Period.
The Committee may also award restricted Common Shares in the form of
restricted Common Share units having a value equal to an identical number of
Common Shares. Payment of restricted Common Share units shall be made in Common
Shares or in cash or in a combination thereof (based upon the Fair Market Value
of Common Shares on the day the Restricted Period expires), all as determined by
the Committee in its sole discretion.
9. PERFORMANCE SHARES. Performance shares may be granted in the form of
actual Common Shares or Common Share units having a value equal to an identical
number of Common Shares. In the event that a share certificate is issued in
respect of performance shares, such certificate shall be registered
in the name of the employee but shall be held by the Company until the time the
performance shares are earned. The performance conditions and the length of the
performance period shall be determined by the Committee but in no event may a
performance period be less than twelve months. The Committee shall determine in
its sole discretion whether performance shares granted in the form of Common
Share units shall be paid in cash, Common Shares, or a combination of cash and
Common Shares.
Awards of performance shares to a Covered Employee shall be subject to
performance goals. Performance goals may be expressed in terms of one or more of
the following: revenue, revenue growth, earnings before interest, taxes,
depreciation and amortization (`EBITDA"), EBITDA growth, funds from operations,
funds from operations per share and per share growth, cash available for
distribution, cash available for distribution per share and per share growth,
net earnings, earnings per share and per share growth, return on equity, return
on assets, share price performance on an absolute basis and relative to an
index, attainment of expense levels, and implementing or completion of critical
projects. The Committee shall establish the relevant performance conditions
within 90 days after the commencement of the performance period (or such later
date as may be required or permitted by Section 162(m) of the Code). The
Committee may, in its discretion, reduce or eliminate the amount of payment with
respect to an Award of performance shares to a Covered Employee, notwithstanding
the achievement of a specified performance condition. The maximum number of
performance shares subject to any Award to a Covered Employee is 250,000 for
each 12 months during the performance period (or, to the extent the Award is
paid in cash, the maximum dollar amount of any such Award is the equivalent cash
value of such number of Common Shares at the closing price on the last trading
day of the performance period). An Award of performance shares to a Participant
who is a Covered Employee shall (unless the Committee determines otherwise)
provide that in the event of the employee's termination of employment prior to
the end of the performance period for any reason, such Award will be payable
only (A) if the applicable performance conditions are achieved and (B) to the
extent, if any, as the Committee shall determine.
10. SHARE PURCHASES. The Committee may authorize eligible individuals to
purchase Common Shares in the Company at a price equal to the fair market value
of the Common Shares at the time of grant. Any such offer may be subject to the
conditions and terms the Committee may impose. To the extent permitted by law,
the Company may make loans available to eligible employees in connection with
the purchase of Common Shares, as the Committee, in its discretion, may
determine. The terms and conditions of any such loans shall be determined by the
Committee, in its sole discretion.
11. SHARE AWARDS. Subject to such performance and employment conditions as
the Committee may determine, Awards of Common Shares or Awards based on the
value of the Common Shares may be granted either alone or in addition to other
Awards granted under the Plan. Any Awards under this Section 11 and any Common
Shares covered by any such Award may be forfeited to the extent so provided in
the Award Agreement, as determined by the Committee. Payment of Common Share
Awards made under this Section which are based on the value of Common Shares may
be made in Common Shares or in cash or a combination thereof (based upon the
fair market value of Common Shares on the date of payment), all as determined by
the Committee in its sole discretion.
12. NON-EMPLOYEE TRUSTEE STOCK OPTIONS.
(a) INITIAL GRANT. Nonqualified Stock Options to purchase 10,000
Common Shares shall be granted automatically to each Non-Employee Trustee
who is a Non-Employee Trustee as of the date of the Initial Public
Offering. With respect to each person who becomes a Non-Employee Trustee
after such date, Nonqualified Stock Options to purchase 10,000 Common
Shares shall be granted automatically to each such Non-Employee Trustee on
the day he or she first becomes a Non-Employee Trustee.
(b) SUBSEQUENT OPTIONS. In addition to the Nonqualified Stock Options
granted to Non-Employee Trustees under Section 12(a), Nonqualified Stock
Options to purchase 5,000 Common Shares shall be granted automatically to
each Non-Employee Trustee on the day after the annual meeting of
shareholders for 2004 and each annual meeting thereafter; PROVIDED,
HOWEVER, he or she continues to serve as a Non-Employee Trustee on such
date.
(c) OPTION PRICE. The purchase price for each Option granted under
this Section 12 to a Non-Employee Trustee shall be the Fair Market Value of
the Common Shares on the date of grant of the Option.
(d) EXERCISABILITY. Each initial Option granted under Section 12(a)
shall become exercisable and vest at a rate of 33-1/3% on each of the
first, second and third anniversaries of the date of grant of such Option;
PROVIDED, HOWEVER, that no Option shall become exercisable earlier than the
time that the Plan is approved by the shareholders of the Company in
accordance with Section 24; PROVIDED, FURTHER, that upon the occurrence of
a Change in Control before such shareholder approval, all Options shall
vest and become immediately exercisable in accordance with Section 13.
Subsequent Options granted under Section 12(b) shall become exercisable and
vest one year from the date of the grant thereof.
(e) METHOD OF EXERCISE. Each Option granted under this Section 12 may
be exercised in the same manner as provided in Section 7(e).
(f) OPTION PERIOD. Each Option granted under this Section 12 shall
terminate 10 years from the date of grant unless sooner terminated by
reason of termination of service as a trustee of the Company and its
Subsidiaries.
(g) TERMINATION OF TRUSTEE STATUS.
(i) In the event of termination of service as a trustee of the
Company and its Subsidiaries for any reason other than death or
permanent disability (as determined by the Committee), an Option
granted under this Section 12 (to the extent exercisable as of the
date of termination) shall be exercisable for 90 days following such
termination (but in no event beyond the term of the Option), and shall
thereafter terminate.
(ii) In the event of the death of a Non-Employee Trustee while a
trustee of the Company or any Subsidiaries, the Option (to the extent
exercisable as of the date of death), shall be exercisable by any
prior transferee or by the Non-Employee Trustee's designated
beneficiary, or if none, the person(s) to whom such Non-Employee
Trustee's rights under the Option are transferred by will or the laws
of descent and distribution for one year following the date of death
(but in no event beyond the term of the Option), and shall thereafter
terminate.
(iii) In the event of the termination of service as a trustee of
the Company and its Subsidiaries due to permanent disability (as
determined by the Committee), the Option (to the extent exercisable as
of the date of termination), shall be exercisable for one year
following such termination of service (but in no event beyond the term
of the Option), and shall thereafter terminate.
(h) Except as expressLy provided in this Section 12, any Option
granted to a Non-Employee Trustee hereunder shall be subject to the terms
and conditions of the Plan.
13. CHANGE IN CONTROL. Upon the occurrence of a Change in Control, all
Options shall automatically become vested and excercisable in full and all
restrictions or performance conditions, if
any, on any Common Share Awards, restricted Common Shares, restricted Common
Share units or performance shares granted hereunder shall automatically lapse.
The Committee may, in its discretion, include such further provisions and
limitations in any agreement documenting such Awards as it may deem equitable
and in the best interests of the Company.
14. FORFEITURE. Notwithstanding anything in the Plan to the contrary, the
Committee may provide in any Award Agreement that in the event of a serious
breach of conduct by an employee, former employee, trustee, or former trustee
(including, without limitation, any conduct prejudicial to or in conflict with
the Company or its Subsidiaries), or any activity of any employee or former
employee in competition with any of the businesses of the Company or any
Subsidiary, the Committee may (a) cancel any outstanding Award granted to such
employee, former employee, trustee, or former trustee, in whole or in part,
whether or not vested, and/or (b) if such conduct or activity occurs within one
year following the exercise or payment of an Award, require such employee,
former employee, trustee, or former trustee to repay to the Company any gain
realized or payment received upon the exercise or payment of such Award (with
such gain or payment valued as of the date of exercise or payment). Such
cancellation or repayment obligation shall be effective as of the date specified
by the Committee. Any repayment obligation may be satisfied in Common Shares or
cash or a combination thereof (based upon the fair market value of Common Shares
on the day prior to the date of payment), and the Committee may provide for an
offset to any future payments owed by the Company or any Subsidiary to the
employee, former employee, trustee, or former trustee if necessary to satisfy
the repayment obligation. The determination of whether an employee, former
employee, trustee, or former trustee has engaged in a serious breach of conduct
or any activity in competition with any of the businesses of the Company or any
Subsidiary shall be determined by the Committee in good faith and in its sole
discretion. This Section 14 shall have no application following a Change in
Control.
15. WITHHOLDING. The Company shall have the right to deduct from any
payment to be made pursuant to the Plan the amount of any taxes required by law
to be withheld therefrom, or to require a Participant to pay to the Company in
cash such amount required to be withheld prior to the issuance or delivery of
any Common Shares or the payment of cash under the Plan. To the extent
authorized by the Committee, such taxes may be paid by (a) delivering previously
owned Common Shares or (b) having the Company retain Common Shares which would
otherwise be delivered upon exercise or payment of Awards or (c) any combination
of a cash payment or the methods set forth in (a) and (b) above. For purposes of
(a) and (b) above, Common Shares shall be valued at fair market value determined
as of the day immediately prior to exercise or payment. If and to the extent
authorized by the Committee, the Company may, upon election by a Participant,
withhold from any distribution of Common Shares hereunder, Common Shares with a
fair market value in excess of the Participant's required withholding
obligation.
16. NONTRANSFERABILITY, BENEFICIARIES. Unless otherwise determined by the
Committee with respect to the transferability of Nonqualified Stock Options by a
Participant to his immediate family members (or to trusts or partnerships or
limited liability companies established for such family members), no Award shall
be assignable or transferable by the Participant, otherwise than by will or the
laws of descent and distribution or pursuant to a beneficiary designation, and
Options shall be exercisable, during the Participant's lifetime, only by the
Participant (or by the Participant's legal representatives in the event of the
Participant's incapacity). Each Participant may designate a beneficiary to
exercise any Option held by the Participant at the time of the Participant's
death or to be assigned any other Award outstanding at the time of the
Participant's death. If no beneficiary has been named by a deceased Participant,
any Award held by the Participant at the time of death shall be transferred as
provided in his will or by the laws of descent and distribution. Except in the
case of the holder's incapacity, an Option may only be exercised by the holder
thereof.
17. NO RIGHT TO EMPLOYMENT. Nothing contained in the Plan or in any Award
under the Plan shall confer upon any employee any right with respect to the
continuation of employment with the
Company or any of its Subsidiaries, or interfere in any way with the right of
the Company to terminate his or her employment at any time. Nothing contained in
the Plan shall confer upon any employee or other person any claim or right to
any Award under the Plan.
18. GOVERNMENTAL COMPLIANCE. Each Award under the Plan shall be subject to
the requirement that if at any time the Committee shall determine that the
listing, registration or qualification of any shares issuable or deliverable
thereunder upon any securities exchange or under any federal or state law, or
the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition thereof, or in connection therewith, no such grant or
Award may be exercised or shares issued or delivered unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Committee.
19. ADJUSTMENTS. In the event of any change in the outstanding Common
Shares by reason of any share dividend or split, recapitalization, merger,
consolidation, spinoff, combination or exchange of shares or other corporate
change, or any distribution to holders of Common Shares other than regular cash
dividends, the number or kind of shares available for Options and Awards under
the Plan may be adjusted by the Committee as it shall in its sole discretion
deem equitable and the number and kind of shares subject to any outstanding
Awards granted under the Plan and the purchase price thereof may be adjusted by
the Committee as it shall in its sole discretion deem equitable to preserve the
value of such Awards.
20. AWARD AGREEMENT. Each Award under the Plan shall be evidenced by an
Agreement setting forth the terms and conditions, as determined by the
Committee, which shall apply to such Award, in addition to the terms and
conditions specified in the Plan.
21. AMENDMENT. The Board may amend, suspend or terminate the Plan or any
portion thereof at any time, provided that (a) no amendment shall be made
without shareholder approval if such approval is necessary to comply with any
applicable law, regulation or stock exchange rule and (b) except as provided in
Section 19, no amendment shall be made that would adversely affect the rights of
a Participant under an Award theretofore granted, without such Participant's
written consent.
22. GENERAL PROVISIONS.
(a) The Committee may require each Participant purchasing or acquiring
shares pursuant to an Award under the Plan to represent to and agree with
the Company in writing that such Participant is acquiring the shares for
investment and without a view to distribution thereof.
(b) All certificates for Common Shares delivered under the Plan
pursuant to any Award shall be subject to such stock-transfer orders and
other restrictions as the Committee may deem advisable under the rules,
regulations, and other requirements of the Securities and Exchange
Commission, any stock exchange upon which the Common Shares are then
listed, and any applicable federal or state securities law, and the
Committee may cause a legend or legends to be put on any such certificates
to make appropriate reference to such restrictions. If the Committee
determines that the issuance of Common Shares hereunder is not in
compliance with, or subject to an exemption from, any applicable federal or
state securities laws, such shares shall not be issued until such time as
the Committee determines that the issuance is permissible.
(c) It is the intent of the Company that the Plan satisfy, and be
interpreted in a manner that satisfies, the applicable requirements of Rule
16b-3 as promulgated under Section 16 of the Exchange Act so that
Participants will be entitled to the benefit of Rule 16b-3, or any other
rule promulgated under Section 16 of the Exchange Act, and will not be
subject to short-swing liability under Section 16. Accordingly, if the
operation of any provision of the Plan would conflict with the intent
expressed in this Section 22(c), such provision to the extent possible
shall be interpreted and/or deemed amended so as to avoid such conflict.
(d) Except as otherwise provided by the Committee in the applicable
grant or Award Agreement, a Participant shall have no rights as a
shareholder with respect to any Common Shares subject to an Award until a
certificate or certificates evidencing Common Shares shall have been issued
to the Participant and, subject to Section 19, no adjustment shall be made
for dividends or distributions or other rights in respect to any share for
which the record date is prior to the date on which the Participant shall
become the holder of record thereof.
(e) The law of the state of Missouri shall apply to all Awards and
interpretations under the Plan regardless of the effect of such state's
conflict of laws principles.
(f) Where the context requires, words in any gender shall include any
other gender.
23. TERM OF PLAN. Subject to earlier termination pursuant to Section 21,
the Plan shall have a term of 10 years from its Effective Date.
24. EFFECTIVE DATE; APPROVAL OF SHAREHOLDERS. The Plan is effective as of
November 20, 1997. The Plan is conditioned upon the approval of the shareholders
of the Company prior to the Initial Public Offering, and failure to receive
their approval shall render the Plan and all outstanding Awards issued
thereunder void and of no effect; PROVIDED, HOWEVER, that this limitation shall
have no effect upon the occurrence of a Change in Control before such
shareholder approval, and all Awards shall be exercisable in accordance with
their terms.
ENTERTAINMENT PROPERTIES TRUST
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS MAY 12, 2004
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES
As a shareholder of Entertainment Properties Trust (the "Company"), I
appoint Fred L. Kennon and Gregory K. Silvers as my attorneys-in-fact and
proxies (with full power of substitution), and authorize each of them to
represent me at the Annual Meeting of Shareholders of the Company to be held at
the Leawood Town Centre Theatre, 11701 Nall, Leawood, Kansas, on Wednesday, May
12, 2004 at ten o'clock a.m., and at any adjournment of the meeting, and to vote
the common shares of beneficial interest in the Company held by me as designated
below on proposals 1, 2 and 3.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
Proposal #1. Election of Trustee: Barrett Brady
|_| FOR the nominee listed above |_| WITHHOLD AUTHORITY to vote for the nominee listed above.
(If you do not check this box, your shares will be voted in
favor of the nominee)
Proposal #2: Proposal to amend the 1997 Share Incentive Plan
|_| FOR |_| AGAINST |_| ABSTAIN
Proposal #3. Proposal to ratify the appointment of KPMG, LLP as the Company's independent auditors for 2004
|_| FOR |_| AGAINST |_| ABSTAIN
To act upon any other matters that may properly come before the meeting
IF NO CHOICE IS INDICATED ON THE PROXY, THE PERSONS NAMED AS PROXIES
INTEND TO VOTE FOR ALL PROPOSALS.
Please sign exactly as your name appears on this proxy. When shares are held by
joint tenants, both should sign. When signing as attorney, executor, trustee or
other representative capacity, please give your full title. If a corporation,
please sign in full corporate name by President or other authorized officer.
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Signature of Shareholder
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Signature of Shareholder
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Dated