<PAGE> 1
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 (AMENDMENT NO. )
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 pursuant to Rule 14a-11(c) or Rule 14a-12
ENTERTAINMENT PROPERTIES TRUST
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(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:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
ENTERTAINMENT PROPERTIES TRUST
1200 MAIN STREET, SUITE 3250
KANSAS CITY, MISSOURI 64105
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 12, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of the shareholders of
Entertainment Properties Trust, a Maryland real estate investment trust (the
"Company"), will be held at the AMC Mesquite 30 Theatre, 19919 IH 635, Mesquite,
Texas 75149 on Wednesday, May 12, 1999 commencing at 10:00 A.M., central time,
or as adjourned from time to time, for the following purposes:
1. To elect two trustees to hold office for a term expiring at
the 2002 Annual Meeting of the shareholders of the Company or
until their successors are duly elected and qualified or until
their earlier resignation or removal;
2. To ratify the selection of the accounting firm of Ernst &
Young LLP as the Company's independent auditors for the fiscal
year ending December 31, 1999; and
3. To transact such other business as may properly come before
the meeting and any adjournment thereof.
The Board of Trustees of the Company has fixed the close of business on
March 17, 1999 as the record date for the determination of shareholders entitled
to notice of, and to vote at, the Annual Meeting and any adjournment thereof.
All shareholders are cordially invited to attend the meeting. Whether
or not you intend to be present at the meeting, the Board of Trustees of the
Company asks that you sign, date and return the enclosed proxy card promptly. A
prepaid return envelope is provided for this purpose. You may revoke your proxy
at any time before it is exercised and your proxy will not be used if you attend
the meeting and prefer to vote in person. Your vote is important and all
shareholders are urged to be present in person or by proxy.
By Order of the Board of Trustees
Gregory K. Silvers
Secretary
March 30, 1999
Kansas City, Missouri
<PAGE> 3
ENTERTAINMENT PROPERTIES TRUST
1200 MAIN STREET, SUITE 3250
KANSAS CITY, MISSOURI 64105
------------------
PROXY STATEMENT
------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 12, 1999
------------------
INTRODUCTION
This Proxy Statement is being furnished by Entertainment Properties
Trust, a Maryland real estate investment trust ("EPR" or the "Company") to its
shareholders in connection with the solicitation of proxies by the Board of
Trustees of the Company for use at the Annual Meeting of shareholders to be held
on Wednesday, May 12, 1999, and any adjournment thereof (the "Annual Meeting").
The Annual Meeting will commence at 10:00 a.m., central time, and will be held
at the AMC Mesquite 30 Theatre (one of the Company's portfolio properties),
located at 19919 IH 635, Mesquite, Texas 75149.
This Proxy Statement and the enclosed form of proxy were first mailed
to the Company's shareholders on or about April 14, 1999.
PROXIES
You are requested to complete, date and sign the enclosed form of proxy
and return it promptly to us in the enclosed postage prepaid envelope. Shares
represented by properly executed proxies will, unless those proxies have been
previously revoked, be voted in accordance with the shareholders' instructions
indicated in the proxies. If no instructions are indicated, shares will be voted
in favor of the election of the nominees for trustee named in this Proxy
Statement, in favor of ratifying the selection of the accounting firm of Ernst &
Young LLP as the Company's independent auditors for the current year, and, as to
any other matter that properly may be brought before the Annual Meeting, in
accordance with the discretion and judgment of the appointed proxies. You may
revoke your proxy at any time before it is exercised at the Annual Meeting by
filing written notice of revocation with the Secretary of the Company, by
executing and delivering to the Secretary of the Company a proxy bearing a later
date, or by appearing at the Annual Meeting and voting in person.
VOTING AT THE MEETING
For purposes of voting on the proposals described in this Proxy
Statement, the presence in person or by proxy of shareholders holding a majority
of the Company's total outstanding common shares of beneficial interest, $0.01
par value per share ("Shares"), shall constitute a quorum at the Annual Meeting.
Holders of record of Shares as of the close of business on March 17, 1999 (the
"Record Date") are entitled to notice of, and to vote at, the Annual Meeting or
any adjournment thereof. As of the Record Date, 13,861,991 Shares were
outstanding and entitled to be voted at the Annual Meeting. Each Share is
entitled to one vote on each
<PAGE> 4
matter properly coming before the Annual Meeting. Shares represented by a proxy
which directs that the Shares be voted to abstain or to withhold a vote on any
matter will be counted in determining whether a quorum is present. Shares for
which there is a broker non-vote (when a broker holding Shares for clients in
street name is not permitted to vote on certain matters without instruction)
also will be counted for quorum purposes.
Trustees are elected by a plurality (a number greater than those cast
for any other candidates) of the votes cast, in person or by proxy, of
shareholders entitled to vote at the Annual Meeting. The affirmative vote of a
majority of the Shares, represented in person or by proxy and entitled to vote
at the Annual Meeting, is required (i) to ratify the selection of Ernst & Young
LLP as the Company's independent auditors, and (ii) to approve any other matters
that may properly come before the Annual Meeting or any adjournment thereof.
You may withhold authority to vote for either nominee for trustee. You
may also abstain from voting on other matters at the Annual Meeting. With
respect to the election of trustees, votes withheld from a nominee will be
excluded from the vote and will have no effect. Abstentions from the proposal to
ratify the selection of the Company's independent auditors or any other proposal
will be treated as votes against the proposal. Broker non-votes on any proposal
will be treated as Shares for which voting power has been withheld by the
beneficial holder and will not be voted at the Annual Meeting.
SOLICITATION OF PROXIES
This solicitation of proxies for the Annual Meeting is being made by
the Board of Trustees. EPR will bear all costs of the solicitation, including
the cost of preparing and mailing this Proxy Statement and the enclosed form of
proxy. 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 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.
A list of shareholders entitled to vote at the Annual Meeting will be
available for examination at least ten days prior to the date of the Annual
Meeting during normal business hours at the principal executive offices of the
Company located at 1200 Main Street, Suite 3250, Kansas City, Missouri. The list
also will be available at the Annual Meeting.
ITEM 1
ELECTION OF TRUSTEES
The Company's Board of Trustees currently consists of five trustees.
EPR's Declaration of Trust divides the Board of Trustees into three classes,
with trustees serving staggered terms of three years or until their successors
are duly elected and qualified or until their earlier resignation or removal.
The Class I trustee (Scott H. Ward) was originally elected to a one-year term
expiring in 1998 and was re-elected in that year to a three-year term expiring
in 2001. The Class II trustees (Robert L. Harris and Robert J. Druten) were
originally elected to a two-year term expiring at this Annual Meeting and have
been nominated for re-election at the Annual Meeting. The Class III trustees
(Peter C. Brown and Charles S. Paul) were elected to a three-year term expiring
in 2000.
One of the purposes of this Annual Meeting is to elect two trustees in
Class II to serve for a three-year term expiring at the annual meeting of
shareholders in 2002. The Board of Trustees has designated Robert
- 2 -
<PAGE> 5
L. Harris and Robert J. Druten as the nominees for election at the Annual
Meeting. Unless authority to vote for the nominees is withheld, the Shares
represented by properly executed proxies in the form enclosed will be voted for
the election of the nominees for trustee. If a nominee should become unavailable
for election, the Shares represented by the proxies will be voted for the
election of a substitute nominee designated by the Board of Trustees, unless the
authority to vote for the nominee who has ceased to be a candidate has been
withheld. The nominees have indicated their willingness to serve as trustees if
elected, and the Board of Trustees has no reason to believe that the nominees
will be unavailable for election.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF
ROBERT L. HARRIS AND ROBERT J. DRUTEN AS THE TRUSTEES IN CLASS II.
EPR's Declaration of Trust and Bylaws provide that advance notice of
shareholder nominations for the election of trustees must be given. For this
Annual Meeting, written notice of a shareholder's intent to make a nomination at
the meeting must have been received by the Company's Secretary at EPR's
principal executive offices not later than the close of business on December 31,
1998. At future meetings of shareholders, notice of nominations or other
business to be brought before the meeting must be delivered to the Company's
Secretary at EPR's principal executive offices not later than 60 days nor
earlier than 90 days prior to the first anniversary of the Shareholder mailing
for the previous year's annual meeting. If the date of the annual meeting of
shareholders is advanced by more than 30 days or delayed by more than 60 days
from the anniversary date, notice by the shareholder must be so delivered not
earlier than the close of business on the 90th day prior to the annual meeting
and not later than the close of business on the later of the 60th day prior to
the annual meeting or the tenth day following the day on which public
announcement of the date of the meeting is first made by the Company. In no
event will the public announcement of a postponement or adjournment of an annual
meeting to a later date or time commence a new time period for the giving of a
shareholder's notice as described above. However, if the number of trustees to
be elected to the Board of Trustees is increased and there is no public
announcement by the Company naming all of the nominees for trustee or specifying
the size of the increased Board at least 70 days prior to the first anniversary
of the preceding year's annual meeting, a shareholder's notice will be
considered timely (but only with respect to nominees for any new positions
created by the increase) if it is delivered to the Secretary at the principal
executive offices of EPR not later than the close of business on the tenth day
following the day on which such public announcement is first made by EPR.
A shareholder's notice of nomination must contain (i) for each person
whom the shareholder proposes to nominate for election or reelection as a
trustee all information relating to that person that is required to be disclosed
in solicitations of proxies for election of trustees in an election contest, or
is otherwise required pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
trustee if elected); (ii) for any other business that the shareholder proposes
to bring before the meeting, a brief description of that business, the reasons
for conducting that business at the meeting and any material interest in that
business of that shareholder and the beneficial owner, if any, on whose behalf
the proposal is made; and (iii) for the shareholder giving the notice and the
beneficial owner, if any, on whose behalf the nomination or proposal is made (x)
the name and address of that shareholder, as they appear on the Company's books,
and of that beneficial owner; and (y) the number of Shares of EPR which are
owned beneficially and of record by that shareholder and beneficial owner. If no
such notice has been received, the chairman of the Annual Meeting is entitled to
refuse to acknowledge the nomination of any person which is not made in
compliance with the foregoing procedure. The Board of Trustees does not know
whether anyone will attempt to nominate another candidate for trustee at this
Annual Meeting, but does not believe any such nominations will be made.
- 3 -
<PAGE> 6
THE NOMINEES AND TRUSTEES CONTINUING IN OFFICE
This table contains certain information with respect to the persons
nominated by the Board of Trustees for election as the Class II trustees at the
Annual Meeting and each trustee whose term of office will continue after the
Annual Meeting.
<TABLE>
<CAPTION>
PRESENT
POSITION
WITH THE TRUSTEE
NAME AGE COMPANY SINCE
---- --- ------- -----
<S> <C> <C> <C>
NOMINEES
CLASS II: TERM TO EXPIRE IN 2002
Robert L. Harris................. 40 President and Trustee 1997
Robert J. Druten................. 51 Trustee 1997
TRUSTEES CONTINUING IN OFFICE
CLASS I: TERM TO EXPIRE IN 2001
Scott H. Ward .................. 41 Trustee 1997
CLASS III: TERM TO EXPIRE IN 2000
Peter C. Brown ................. 40 Chairman of the Board of Trustees 1997
Charles S. Paul ................ 49 Trustee 1997
</TABLE>
Robert L. Harris has served as President and Trustee of EPR since
August 1997. From 1992 until joining EPR, he was employed by AMC Entertainment,
Inc. ("AMCE"), most recently serving as a Senior Vice President of AMCE's
subsidiary, American Multi-Cinema, Inc. ("AMC") in charge of its international
efforts. From 1980 to 1992, Mr. Harris was employed by Carlton Browne & Company,
a California-based real estate developer, serving as its President from 1985 to
1992. While at Carlton Browne, Mr. Harris was in charge of development projects
totaling in excess of three million square feet, including more than 900,000
square feet of commercial/retail development. Mr. Harris is a director of
Imperial Bank and serves on the Board of Pepperdine University's George L.
Graziadio School of Business and Management. Mr. Harris is an alumnus of the
University of Southern California. He is a member of the International Council
of Shopping Centers (ICSC) and has been a speaker at regional conferences on
Entertainment Themed Retail Centers ("ETRCs").
Robert J. Druten is currently Vice President-Administration, Chief
Financial Officer and a Corporate Officer of Hallmark Cards Incorporated. From
1991 to 1994, Mr. Druten served as Executive Vice President and Chief Financial
Officer of Crown Media, Inc., a cable communications subsidiary of Hallmark
Cards. From 1989 to 1991, Mr. Druten served as Vice President of Corporate
Development of Hallmark Cards. Mr. Druten serves on the Board of Directors of
Hallmark Cards Holdings, Ltd. and Hallmark Entertainment, Inc. Mr. Druten
received a Bachelor of Arts in economics from The University of Kansas and a
Masters in Business Administration from Rockhurst College.
- 4 -
<PAGE> 7
Peter C. Brown has served as Chairman of the Board of Trustees of EPR
since August 1997 and as a Director of AMCE and AMC since 1992. Mr. Brown was
named Co-Chairman of AMCE in 1998 and has served as its President since 1997.
Mr. Brown served as Executive Vice President of AMCE from 1994 to 1997. Mr.
Brown has served as Executive Vice President of AMC since 1994, and as Chief
Financial Officer of AMCE and AMC since 1991. He served as Senior Vice President
of AMCE and AMC from 1991 until his appointment as Executive Vice President in
August 1994. Mr. Brown served as Treasurer of AMCE and AMC from 1992 through
1994. He served as a consultant to AMCE from October 1990 to October 1991. Prior
to that time, Mr. Brown was a Vice President at DJS Inverness, Inc., an
investment banking firm located in New York City. Mr. Brown is a graduate of The
University of Kansas.
Charles S. Paul has served as Chairman and Chief Executive Officer of
Sega Gameworks, L.L.C. since 1996. Prior to that time, Mr. Paul served as
Executive Vice President and a director of MCA Inc. Before joining MCA in 1985,
he served in various positions at Atari Inc., including President of the
coin-operated game division. Mr. Paul also serves as a director of National Golf
Properties, Inc.
Scott H. Ward has served as Co-President of Russell Stover Candies,
Inc. and Whitman's Candies, Inc. since 1993 and as a Vice President of Castle
Mountain Ranch, Inc. since 1981. From March 1993 to January 1997 he served as
the Chief Financial Officer of Russell Stover Candies and Whitman's Candies.
From 1981 to 1993 he served as a Vice President of Russell Stover Candies. Mr.
Ward received a Bachelor of Science in business from The University of Kansas
and a Masters in Business Administration from The University of Texas.
ARRANGEMENTS OR UNDERSTANDINGS
There is no arrangement or understanding between any trustee and any
other person regarding his selection as a trustee.
COMPENSATION OF TRUSTEES
The Company pays an annual retainer of $18,000 to each of its trustees
who is not an officer or employee of EPR or any of its affiliates (a
"Non-Employee Trustee"). The annual retainer is paid 50% in cash and 50% in
Shares. A Non-Employee Trustee may elect to receive all of his retainer in
Shares and may also elect to defer payment of his annual retainer under EPR's
Deferred Compensation Plan for Non-Employee Trustees (the "Deferred Compensation
Plan"). Trustees also receive $1,000 for each Board meeting attended, which is
paid in cash. Non-employee chairpersons of Board committees receive $1,250 in
cash for each committee meeting attended and non-employee members of Board
committees receive $750 in cash for each committee meeting attended. Employees
of the Company or its affiliates who are trustees are not paid any trustee fees.
Trustees are reimbursed for any out-of-town travel expenses incurred in
attending Board meetings. In addition, pursuant to EPR's 1997 Share Incentive
Plan, each Non-Employee Trustee received an option to purchase 10,000 Shares on
the effective date of EPR's Registration Statement for its initial public
offering and will automatically receive an option to purchase 3,333 Shares on
the date of each annual meeting of shareholders at a price per Share equal to
the closing price on EPR's annual meeting date. The initial options awarded to
Non-Employee Trustees vest in equal increments over a three year period. Annual
options granted to Non-Employee Trustees vest after one year. These options will
expire after ten years unless terminated earlier by reason of the trustee's
termination of service as a trustee. Except in the case of disability or death,
the options terminate 90 days after termination of service. In the event of
disability or death, they will terminate after one year. Upon a change in
control of the Company, all options become vested and exercisable in full.
- 5 -
<PAGE> 8
Pursuant to the Deferred Compensation Plan, each Non-Employee Trustee
may elect to defer all or a portion of his annual retainer and meeting fees
earned as a member of the Board of Trustees. All amounts deferred under the
Deferred Compensation Plan will be credited to each participant's Share unit
account which will reflect the number of Shares a participant has elected to
defer and the amount of any cash a participant elected to defer if the cash were
converted into Shares based on the value of the Shares on the date of deferral.
Any dividends paid on the Shares during the term of the Deferred Compensation
Plan will be paid on the Share units held in a participant's Share unit account
and such dividends will be converted into additional Share units. When a
participant elects to participate in the Deferred Compensation Plan, he must
elect whether he will receive payments from the Plan after termination of his
status as a trustee in a lump sum or in substantially equal payments over a
period not to exceed 10 years. Upon a change in control of the Company, all
amounts will be paid in a lump-sum following termination. All payments made
under the Deferred Compensation Plan will be made in Shares equal to the number
of Share units allocated to a participant's Share unit account. Cash payments
will be made in lieu of fractional shares.
MEETINGS OF THE BOARD AND COMMITTEES
During 1998 the Board of Trustees held four meetings which were
attended by all the trustees. 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 EPR.
Pursuant to EPR's Bylaws, the Board of Trustees has established Audit
and Compensation Committees of the Board of Trustees. The Board of Trustees does
not have an Executive Committee or any other committees.
The Audit Committee assists the Board of Trustees in fulfilling its
responsibilities with respect to the Company's accounting and financial
reporting practices and addressing the scope and expense of audit and related
services provided by EPR's independent auditors. The Audit Committee is
responsible for recommending the appointment of the Company's independent
auditors and reviewing the terms of their engagement, reviewing EPR's policies
and procedures on internal auditing, accounting and financial controls and
reviewing the scope and results of audits and any auditor recommendations. The
current members of the Audit Committee are Robert J. Druten and Charles S. Paul.
The Audit Committee met once in 1998.
The Compensation Committee makes recommendations to the Board of
Trustees regarding the compensation and benefits of EPR's executive officers and
members of the Board of Trustees. The current members of the Compensation
Committee are Robert J. Druten and Scott H. Ward. The Compensation Committee met
once in 1998.
- 6 -
<PAGE> 9
EXECUTIVE COMPENSATION
Set forth below is information regarding the Company's executive
officers:
David M. Brain has served as Chief Financial Officer of the Company
since August 1997 and was appointed Chief Operating Officer this year. He acted
as a consultant to 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 ("GKB"), an
investment banking firm headquartered in Kansas City, Missouri. Mr. Brain's
responsibilities at GKB included client advisory assignments involving the
establishment of real estate joint ventures and the placement of debt and equity
for real estate acquisitions and developments. Before joining GKB, Mr. Brain was
in the Kansas City office of KPMG Peat Marwick LLP as Managing Director of the
Corporate Finance group, a practice unit that he organized and managed for over
12 years. He received a Bachelor of Arts degree in Economics from Tulane
University with honors as a Tulane Scholar and a membership in Phi Beta Kappa,
and a Masters in Business Administration from the A.B. Freeman Graduate Business
School at Tulane University, where he was awarded an academic fellowship. Mr.
Brain serves as a director of Capital for Entrepreneurs, Inc., a venture capital
fund, the Center for Business Innovation, Inc., a not-for-profit small business
incubator located on the campus of The University of Missouri at Kansas City,
and the Council for Entrepreneurship at The University of Missouri at Kansas
City.
Gregory K. Silvers was appointed Vice President, General Counsel and
Secretary of the Company in 1998. From 1994 to 1998, he was with the law firm of
Stinson, Mag & Fizzell, specializing in real estate law. Mr. Silvers received
his J.D. in 1994 from The University of Kansas.
Fred L. Kennon was appointed Vice-President - Treasurer and Controller
of the Company in 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.
Jon B. Weis was appointed Director of Corporate Communications in 1997.
Prior to that, he worked in the Kansas City office of KPMG Peat Marwick LLP as
an Associate with the corporate finance division. He received his Bachelor of
Arts degree from The University of Missouri at Kansas City.
The following table describes, for the fiscal year ended December 31,
1998, the compensation of the Company's President and each of its other most
highly compensated executive officers whose remuneration for 1999 will exceed
$100,000 for services to EPR in all capacities:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards
--------------------------------------- ----------------------------------
Securities
Name and Principal Position Underlying
- --------------------------- Options/
Year Salary Bonus (1) SARs(#)(2)
---- ------ --------- ----------
<S> <C> <C> <C> <C>
Robert L. Harris ....................... 1998 $225,000 $112,500 -
President and Trustee
</TABLE>
- 7 -
<PAGE> 10
<TABLE>
<S> <C> <C> <C> <C>
David M. Brain ......................... 1998 $175,000 $52,500 -
Chief Operating Officer and Chief
Financial Officer
Gregory K. Silvers...................... 1998 $120,000 - 50,000
General Counsel and Secretary
Fred L. Kennon.......................... 1998 $110,000 $22,000 30,000
Treasurer and Controller
</TABLE>
(1) The bonus payments may be paid in cash (100%), restricted shares (150%)
or incentive options (500%).
(2) The options were granted to Mr. Silvers in December 1998, and to Mr.
Kennon in September 1998. These options will vest in 20% increments at
the end of each of the first five years following the date of grant, and
will be exercisable at a price per Share equal to the closing price per
Share on the last trading day prior to the grant date.
OPTION GRANT TABLE
<TABLE>
<CAPTION>
Grant Date
Present
Value Per
Individual Grants Share(2)
- ----------------------------------------------------------------------------------------------------------
Number of % of Total
Securities Options
Underlying Granted to Exercise
Options Employees Price Expiration
Name Granted in 1998 (Per Share)(1) Date
- ---- ------- ------- ----------- ----
<S> <C> <C> <C> <C> <C>
Gregory K. Silvers 50,000 40% $18.1875 12/02/09 2.02
Fred L. Kennon 30,000 24% $14.8125 09/14/09 0.72
</TABLE>
(1) The options become exercisable once they are vested. The options vest
evenly over five years (20% increments each year).
(2) The value of the options at the date of grant was estimated using the
Black-Scholes option pricing model with the following assumptions for the year
ended December 31, 1998: (i) risk-free investment rate of 4.5% for Mr. Kennon,
and 4.7% for Mr. Silvers; (ii) dividend yields at 8%; and (iii) volatility
factors of the expected market price of the Company's common Shares of 0.17 for
Mr. Kennon and 0.28 for Mr. Silvers.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Robert L.
Harris and David M. Brain, pursuant to which Mr. Harris serves as President and
Mr. Brain serves as Chief Operating Officer and Chief Financial Officer of the
Company, each for a period of two years (extendable at the option of the
Company) at an initial annual base compensation of $225,000 and $175,000,
respectively, subject to any increases in base compensation approved by the
Compensation Committee. The agreements provide for awards under the
Entertainment Properties Trust 1997 Share Incentive Plan (the "Share Incentive
Plan") described below under "Compensation Committee Report - 1998 Compensation"
and for annual performance-based bonuses at maximum, target and threshold levels
equal to 60%, 40% and 20% of base salary for Mr. Harris and 40%, 20% and 10% of
base salary for Mr. Brain. Under the agreements, if either Mr. Harris or Mr.
Brain is terminated by the Company without cause or if either terminates his
employment as a result of a material
- 8 -
<PAGE> 11
breach of his employment agreement by EPR, he will be entitled to receive, for
the unexpired term of his employment agreement, an amount equal to his base
salary plus a target performance bonus.
COMPENSATION PROGRAMS
SUMMARY. The Company has adopted various compensation programs (the
"Compensation Programs") to attract and retain trustees, executive officers and
other key employees of the Company, to provide incentives to such persons to
maximize EPR's Funds from Operations and to enable trustees, executive officers
and other key employees of EPR to participate in the ownership of the Company.
The Annual Incentive Program provides for the award of incentive payments based
on performance. The Share Incentive Plan provides executive officers the
opportunity to purchase Shares (the "Share Purchase Program") and to receive
performance-based awards of restricted Shares or restricted Share units (the
"Restricted Share Program") and provides for the award to executive officers and
other key employees of nonqualified options and incentive options to purchase
Shares (the "Share Option Program"). The Share Incentive Plan also provides for
other awards whose value is based on Shares and which may be paid in cash or
Shares or a combination thereof. Performance-based Share and Share unit awards
under the Share Incentive Plan may be based upon the same criteria as awards
under the Annual Incentive Program. The maximum number of performance Shares
which may be awarded to an employee subject to the deductibility limitations of
Section 162(m) of the Internal Revenue Code of 1986, as amended (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 corresponding cash value of
that number of Shares). Upon the occurrence of a change in control of the
Company, all performance conditions will be deemed satisfied. No awards were
made for 1998 except in connection with payment of executive bonuses.
The Compensation Programs are administered by the Compensation
Committee, which is authorized to select from among EPR's eligible employees the
individuals to whom incentive and other Share-based awards will be granted and
to determine the number of Shares or Share-based compensation awarded and the
terms and conditions of the awards. The Compensation Committee is also
authorized to adopt, amend and rescind rules relating to the administration of
EPR's Compensation Programs. 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 payments to employees designated by the Compensation Committee. These
payments may not exceed $300,000 or 60% of the employee's base salary, whichever
is less, and are based on Funds from Operations per Share and other performance
criteria deemed relevant by the Compensation Committee. At the option of the
recipient, the incentive payments may be paid in cash, restricted Shares or
ISO's or a combination of those forms.
SHARE INCENTIVE PLAN. Pursuant to the Share Incentive Plan, employees
of the Company or any of its subsidiaries are eligible to receive options,
restricted Shares, restricted Share units, performance Shares, performance Share
units and other Share awards or awards based on the value of the Shares. In
addition, Non-Employee Trustees receive nonqualified options under the Share
Incentive Plan. The purpose of the Share Incentive Plan is to enable EPR 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 its
shareholders.
SHARE PURCHASE PROGRAM. EPR may provide participants the opportunity to
purchase Shares at the fair market value of the Shares at the time of purchase.
The Shares may be subject to transfer restrictions and other conditions
determined by the Compensation Committee at the time of the grant. Participation
in the Share Incentive Plan for more than five years by certain executive
officers is contingent upon their owning Shares with a value equal to a multiple
of their then existing base salary.
- 9 -
<PAGE> 12
RESTRICTED SHARE PROGRAM. EPR may grant restricted Shares or restricted
Share units from time to time to its employees. Restricted Shares and restricted
Share units shall be subject to such terms and conditions as the Compensation
Committee determines at the time of the grant. Restricted Shares may also be
sold to participants at various prices (or issued without monetary
consideration) and may be made subject to such restrictions as determined 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, unlike Share options, have full voting and dividend rights from the date
of issuance. All restrictions on restricted Shares lapse upon the occurrence of
a change in control of EPR, as defined in the Share Incentive Plan. Restricted
Share units may be paid in cash or Shares or a combination thereof as determined
by the Compensation Committee.
SHARE OPTION PROGRAM. EPR may grant options to purchase Shares to its
employees from time to time. Options may be either nonqualified options or
incentive options and may be issued at prices, and made subject to restrictions,
as determined by the Compensation Committee.
Nonqualified options provide the holder the right to purchase Shares at
a specified price that may be less than the fair market value of those Shares on
the grant date and usually become exercisable in installments after the grant
date. Nonqualified options may be granted for any reasonable term, not to exceed
ten years, and may be transferrable in certain limited circumstances.
Incentive options are designed to comply with the "incentive stock
option" provisions of the Code and are subject to the restrictions imposed by
the Code, including requirements that the exercise price generally equal the
fair market value of the Shares on the grant date and that the term generally
not exceed ten years.
SHARES SUBJECT TO THE SHARE INCENTIVE PLAN. A maximum of 1,500,000
Shares, subject to adjustment upon certain corporate events, are reserved for
issuance under the Share Incentive Plan. The limit on the number of Shares
subject to options granted to any one individual is 750,000 Shares so long as
the grant does not violate EPR's 9.8% ownership limit or cause EPR to fail to
qualify as a REIT for federal income tax purposes.
Prior to the consummation of its initial public offering, pursuant to
the Share Incentive Plan and the award agreements entered into thereunder, the
Company lent approximately $1.6 million to Robert L. Harris to purchase 80,000
Shares at the initial public offering price pursuant to the Share Purchase
Program. In addition, Mr. Harris was granted (i) 40,000 restricted Shares
pursuant to the Restricted Share Program and (ii) options to purchase 40,000
Shares pursuant to the Share Option Program.
The Company also lent approximately $800,000 to David M. Brain to
purchase 40,000 Shares at the initial public offering price pursuant to the
Share Purchase Program. In addition, Mr. Brain was granted (i) 20,000 restricted
Shares pursuant to the Restricted Share Program and (ii) options to purchase
20,000 Shares pursuant to the Share Option Program.
The borrowings by Mr. Harris and Mr. Brain to purchase Shares are
evidenced by full recourse notes bearing interest at 6.1% per annum. Interest
accumulates and is added to principal. The notes are payable in three annual
installments commencing on the third and ending on the fifth anniversary date of
the notes.
The Company has adopted a Loan Forgiveness Program, under which the
Compensation Committee may forgive a portion of the above-referenced
indebtedness, using proceeds from the sale of shares upon either (i) a change in
control of the Company, or (ii) termination of an employee by reason of death,
disability, normal retirement or without cause.
- 10 -
<PAGE> 13
COMPENSATION COMMITTEE REPORT
The following report was prepared by the Compensation Committee of the
Board of Trustees, which has general responsibility for the establishment,
direction and administration of all aspects of the compensation policies and
programs for the Company's executive officers. During 1998, the Compensation
Committee was composed of two independent trustees, Robert J. Druten and Scott
H. Ward, neither of whom is an officer or employee of the Company. Certain
executive officers of EPR may attend meetings of the Compensation Committee, but
are not present during discussions or deliberations regarding their own
compensation. The Compensation Committee meets at least annually or more
frequently as the Board of Trustees may request.
COMPENSATION PHILOSOPHY. EPR's executive compensation
philosophy has several key objectives:
- To create a well-balanced and competitive
compensation program that utilizes:
-- Base salary
-- Annual incentives
-- Share awards
- To reward executives for performance based on
internal measures expected to lead to increases in
shareholder value.
- To ensure that executives are focused on providing
appropriate dividend levels and increases in share
value through the use of share awards.
- To create alignment between the interests of
executives and those of EPR's shareholders by
requiring share ownership on the part of key
executives.
In determining the appropriate compensation levels for the 1998 fiscal
year, a third party consulting firm was used to compare EPR's executive
compensation to that of a group of REITs with comparable market capitalization.
Several of those REITs are also included in the performance graph contained
elsewhere in this proxy statement. EPR compensation levels were targeted at the
average for this comparison group of companies for positions with similar job
responsibilities.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. As
discussed above, the Compensation Committee has general responsibility for the
establishment, direction and administration of all aspects of the compensation
policies and programs for the Company's executive officers. During 1998, the
members of the Compensation Committee were Robert J. Druten and Scott H. Ward.
Neither member of the Compensation Committee was, during 1998 or at any previous
time, an officer or employee of the Company or any of its subsidiaries.
1998 COMPENSATION. For the 1998 fiscal year, the Compensation Committee
used the following compensation programs to meet its compensation objectives for
executive officers:
BASE SALARY. Base salaries for the General Counsel and the
Treasurer and Controller, both of whom joined EPR in 1998, were established at
levels which the Compensation Committee believes were moderately below salaries
for similar positions at other companies of substantially equivalent size. Base
- 11 -
<PAGE> 14
salaries for 1998 for EPR's President and its Chief Operating Officer and Chief
Financial Officer remained at the levels paid during the period from November
1997, when EPR conducted its initial public offering, through the remainder of
that year. Mr. Brain's 1999 base salary was increased to $192,000.
ANNUAL CASH INCENTIVE AWARDS. Annual cash bonus incentive
awards generally are designed to further shareholder interests by establishing a
performance target (the "Performance Target") which must be satisfied before any
awards are paid to executive officers. The Performance Target is based on, among
other measures, increases in Funds from Operations ("FFO") per Share. To
establish the Performance Target, the Compensation Committee sets goals for the
criteria at the beginning of each year at levels aimed at providing shareholders
with an acceptable rate of return. In addition to satisfying the Performance
Target, bonus awards are also based on personal performance measured by the
extent to which personal goals are achieved.
In January 1999, the Compensation Committee awarded
Performance Bonuses for the President and the Chief Operating Officer and Chief
Financial Officer computed at 50% of base salary ($112,500) for Mr. Harris and
30% of base salary ($52,500) for Mr. Brain. The Performance Bonuses may be paid
in cash (100%), restricted Shares (valued at 150% of the cash bonus amount), or
ISO's (valued at 500% of the cash bonus amount) or a combination of one or more
of those.
COMPENSATION FOR THE PRESIDENT. As President, Mr. Harris was
compensated during 1998 pursuant to an employment agreement entered into in
November 1997. The agreement, which extends through November 1999, with
provision for one-year extensions, provides for an annual base salary of
$225,000, a signing bonus of $40,000, and participation in the Annual Incentive
Program beginning with the 1998 fiscal year. In addition, the agreement provided
that the President would purchase 80,000 Shares and receive 40,000 Share options
which vest in 20% installments over five years plus 40,000 restricted Shares
which vest at the end of five years, unless the Compensation Committee chooses
to accelerate vesting. The President received a full-recourse loan from the
Company for the purpose of purchasing the 80,000 Shares, with a five-year term
and payments of principal and accrued interest due on the third, fourth, and
fifth anniversary of the loan. The Loan Forgiveness Program authorizes the
Compensation Committee to forgive this debt in the event of a change in control,
or the death, disability or retirement of the President. The employment
agreement also provides that the President will retain share ownership equal to
five times his base salary at the end of five years.
In 1998, Mr. Harris received a Performance Bonus of $112,500
and his 1999 base salary was increased by 10%, to $247,500.
IMPACT OF INTERNAL REVENUE CODE SECTION 162(M). Section 162(m)
of the Code generally limits deductions for federal income tax purposes by
publicly held corporations to $1 million of compensation paid to each of the
executive officers listed in the corporation's summary compensation table unless
compensation in excess of that amount is "performance based" as defined in
Section 162(m). Section 162(m) provides, however, for a transition period of up
to approximately three years after a company becomes public before the
limitations of Section 162(m) become fully applicable to the company.
Although the Compensation Committee has attempted to design
the Company's executive compensation programs so that compensation will be
deductible in the future under Section 162(m) of the Code, in certain
circumstances, it may not be possible or practicable or in the Company's best
interests to so qualify compensation programs. In any event, the Compensation
Committee anticipates that treatment under Section 162(m) of the Code will not
be an issue in the near term because generally no executive officer's
non-performance-based compensation is anticipated to exceed $1,000,000 in any
one year for the foreseeable future.
- 12 -
<PAGE> 15
COMPANY PERFORMANCE
The following performance graph for the period January 1, 1998 through
December 31, 1998 shows a comparison of cumulative total returns for the
Company, the S&P 500 index, the Russell 2000 index (in which EPR is included)
and an index of peer companies which are real estate investment trusts
("REITs"). The REITs in the peer group index are Golf Trust, National Golf,
Commercial Net Lease Realty, Tri Net, CCA Prison, and Franchise Finance
Corporation of America.
The cumulative total return on investment for the Company, the S&P 500
index, the Russell 2000 index and the index of peer companies is based on the
Share price or index at January 1, 1998. The performance graph assumes that the
value of an investment in the Company's Shares and each index was $100 at
January 1, 1998 and that all dividends were reinvested. The information
presented in the performance graph is historical in nature and is not intended
to represent or guarantee future returns.
[GRAPH]
<TABLE>
<CAPTION>
January 1, December 31,
1998 1998
---- ----
<S> <C> <C>
Entertainment Properties Trust ................... $100.00 $ 93.55
S&P 500 index .................................... $100.00 $133.00
Peer Group index ................................. $100.00 $ 98.52
Russell 2000 index ............................... $100.00 $ 99.05
</TABLE>
OWNERSHIP OF COMPANY SHARES
The following tables set forth certain information as of March 17, 1999
regarding the beneficial ownership of Shares by each person known to the Board
of Trustees to own beneficially 5% or more of the Company's Shares, by each
trustee and nominee for trustee of the Company, by each executive officer named
in the Summary Compensation Table under "Executive Compensation" and by all
trustees and officers of EPR as a group. All information with respect to
beneficial ownership has been furnished by the respective trustees, officers or
5% or more shareholders, as the case may be.
- 13 -
<PAGE> 16
5% OWNERS
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percentage of Shares
Beneficial Owners Beneficial Ownership (1) Outstanding (1)
- ------------------------- ------------------------ ----------------
<S> <C> <C>
Glickenhaus & Co. 890,700 6.43%
6 East 43rd Street
New York, NY 10017
Equitable Companies, Inc. 1,711,800 12.35%
787 Seventh Ave.
New York, NY 10019
MANAGEMENT
<CAPTION>
Amount and Nature of Percentage of Shares
Name Beneficial Ownership (1) Outstanding (1)
- -------------------- ------------------------ ---------------
<S> <C> <C>
Peter C. Brown 12,500 (4) 0.09%
Robert L. Harris 162,500 (2)(3)(4) 1.17%
David M. Brain 83,100 (2)(3) 0.60%
Charles S. Paul 10,466 (4) 0.07%
Robert J. Druten 10,932 (4) 0.07%
Scott H. Ward 60,466 (4) 0.43%
Gregory K. Silvers 50,000 (4) 0.36%
Fred L. Kennon 30,000 (4) 0.22%
All trustees and executive officers as a 429,963 (2)(3) 3.10%
group (8 persons)
</TABLE>
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission which generally attribute beneficial
ownership of securities to persons who possess sole or shared voting power
and/or investment power with respect to those securities. Unless otherwise
indicated, the persons or entities identified in this table have sole
voting and investment power with respect to all Shares shown as
beneficially owned by them. Percentage ownership calculations are based on
13,861,991 Shares outstanding.
(2) See "Executive Compensation."
(3) Of the Shares indicated, 40,000 (Mr. Harris) and 20,000 (Mr. Brain) are
restricted Shares granted pursuant to the Restricted Share Program.
(4) Includes Shares which the individual has the right to acquire under
existing options.
ITEM 2
- 14 -
<PAGE> 17
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Trustees, upon recommendation of the Board's Audit
Committee, has selected the independent certified public accounting firm of
Ernst & Young LLP as the Company's independent auditors to audit the financial
statements of the Company for the year ending December 31, 1999. Shareholders
will have an opportunity to vote at the Annual Meeting on whether to ratify the
Board's decision to appoint the auditors.
Ernst & Young LLP has served as the Company's independent auditors
since its initial public offering in November 1997. A representative of Ernst &
Young LLP is expected to be present at the Annual Meeting. The representative
will have an opportunity to make a statement if he or she desires and will be
available to respond to appropriate questions.
Submission of the selection of the independent auditors to the
shareholders for ratification will not limit the authority of the Board of
Trustees to appoint another independent certified public accounting firm to
serve as independent auditors if the present auditors resign or their engagement
otherwise is terminated. If the shareholders do not ratify the selection of
Ernst & Young LLP at the Annual Meeting, the Company intends to call a special
meeting of shareholders to be held as soon as practicable after the Annual
Meeting to ratify the selection of another independent certified public
accounting firm as independent auditors for the Company.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE
SELECTION OF ERNST & YOUNG LLP.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's trustees and
executive officers and persons who own more than 10% of EPR's outstanding Shares
to file with the Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership in the Company's Shares. Securities and
Exchange Commission regulations require trustees, executive officers and greater
than 10% shareholders to furnish EPR with copies of all Section 16(a) reports
they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the year ended December 31, 1998, all Section
16(a) filing requirements applicable to its trustees, executive officers and
greater than 10% shareholders were complied with.
OTHER BUSINESS AT THE MEETING
The Board of Trustees is not aware of, and does not intend to present,
any matter for action at the Annual Meeting other than those referred to in this
Proxy Statement. If any other matter properly comes before the Annual Meeting or
any adjournment, it is intended that the holders of the proxies solicited by the
Board of Trustees will vote on such matters in their discretion in accordance
with their best judgment.
- 15 -
<PAGE> 18
ANNUAL REPORT
The Company's Annual Report to Shareholders, containing financial
statements for the year ended December 31, 1998, is being mailed with this Proxy
Statement to all shareholders entitled to vote at the Annual Meeting. The Annual
Report is not to be regarded as proxy solicitation material.
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
It is presently anticipated that the 2000 Annual Meeting of
Shareholders will be held on or about May 10, 2000. Shareholder proposals
intended for inclusion in the proxy statement for the 2000 Annual Meeting of
Shareholders must be received at the Company's offices, located at 1200 Main
Street, Suite 3250, Kansas City, Missouri 64105, within a reasonable time before
the proxy solicitation for the meeting is made, but in no event later than the
date described under "Election of Trustees." Such proposals must also comply
with the other requirements of the proxy solicitation rules of the Securities
and Exchange Commission. Shareholder proposals should be addressed to the
attention of the Secretary of the Company.
By Order of the Board of Trustees
Gregory K. Silvers
Secretary
March 30, 1999
Kansas City, Missouri
- 16 -
<PAGE> 19
ENTERTAINMENT PROPERTIES TRUST
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS - MAY 12, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned shareholder of Entertainment Properties Trust (the
"Company"), hereby constitutes and appoints Peter C. Brown and Robert L.
Harris, and each of them, his Attorneys and Proxies (with full power of
Substitution in each), and authorizes them to represent the undersigned at the
Annual Meeting of Shareholders of the Company to be held at the AMC Mesquite 30
Theatre, 19919 IH 635, Mesquite, Texas 75149 on Wednesday, May 12, 1999 at ten
o'clock a.m., and at any adjournment thereof, and to vote the common shares of
beneficial interest of the Company held by the undersigned as designated below
on proposals 1 and 2.
This Proxy when properly executed will be voted in the manner directed by
the shareholder, but if no direction is made, this Proxy will be voted FOR
proposals 1 and 2.
<TABLE>
<CAPTION>
<S> <C>
1. Election of Trustees
[ ] FOR The Trustees listed (except as marked below) [ ] WITHHOLD AUTHORITY to vote for the Trustees
Robert L. Harris Robert J. Druten
2. Proposal to Approve and Ratify Appointment of Ernst & Young LLP, as the independent public accountants for the Company
for 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To act upon such other matters, as may properly come before the meeting.
</TABLE>
<PAGE> 20
PLEASE MARK (ON REVERSE SIDE), SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, trustee or
other representative capacity, please give full title as such. If a
corporation, please sign in full corporate name by President or other
authorized officer.
The signer hereby revokes all proxies heretofore given to vote at the meeting
or any adjournment thereof.
_____________________________
Signature of Shareholder
_____________________________
Signature of Shareholder
Dated___________________,1999
