DEFC14A: Definitive proxy statement, contested solicitations
Published on April 2, 2001
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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(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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Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
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(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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ENTERTAINMENT PROPERTIES TRUST
30 PERSHING ROAD, SUITE 201
KANSAS CITY, MISSOURI 64108
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 9, 2001
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To our shareholders:
The 2001 annual meeting of shareholders of Entertainment Properties Trust
will be held at the Leawood Town Center Theatre, Leawood, Kansas, on Wednesday,
May 9, 2001, beginning at 10:00 a.m. local time. At the meeting, our
shareholders will vote upon:
Item 1: The election of one trustee for a term of three years
Item 2: The ratification of the appointment of Ernst & Young LLP as our
company's independent accountants for 2001
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 26, 2001 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 BLUE 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 the order of our Board of Trustees
Gregory K. Silvers
General Counsel and Secretary
April 2, 2001
Kansas City, Missouri
ENTERTAINMENT PROPERTIES TRUST
30 PERSHING ROAD, SUITE 201
KANSAS CITY, MISSOURI 64108
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PROXY STATEMENT
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This proxy statement provides information regarding the annual meeting of
shareholders of Entertainment Properties Trust to be held at the Leawood Town
Center Theatre, Leawood, Kansas, on May 9, 2001, beginning at 10:00 a.m., and at
any postponement or adjournment of the meeting.
This proxy statement and the enclosed BLUE proxy card were first mailed by
us to our shareholders on or about April 2, 2001.
ABOUT THE MEETING
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At the annual meeting, shareholders will vote on the election of one
trustee and the ratification of the appointment of our independent accountants.
Our management will report on the performance of our company during 2000 and
respond to questions from shareholders.
WHO IS ENTITLED TO VOTE AT THE MEETING?
Shareholders of record at the close of business on March 26, 2001, are
entitled to receive notice of the annual meeting and vote their shares held on
that date at the meeting. Each shareholder is entitled to one vote per share.
WHAT CONSTITUTES A QUORUM?
The presence at the meeting, in person or by proxy, of the holders of a
majority of our shares outstanding on the record date will constitute a quorum,
permitting the meeting to proceed. On the record date, 14,723,726 shares of
beneficial interest were outstanding. Proxies received but marked as abstentions
and broker non-votes will be included in the calculation of the number of shares
present at the meeting for the purpose of establishing a quorum.
HOW DO I VOTE?
If you complete and properly sign the enclosed BLUE proxy card and return
it to us before the meeting, your shares will be voted as you direct. If you are
a registered shareholder and attend the meeting in person, you may deliver your
completed blue 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 our 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.
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WHAT ARE OUR BOARD'S RECOMMENDATIONS?
Unless you give other instructions on your proxy card, the persons named as
proxy holders on the BLUE proxy card will vote your shares in accordance with
the recommendations of our Board of Trustees. Our Board recommends you vote:
- for the election of Scott H. Ward, the person nominated by our Board as
trustee
- for the ratification of the appointment of Ernst & Young LLP as our
company's independent accountants for 2001
If any other matter properly comes before the meeting, the proxy holders
will vote as recommended by our 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 shares voted at the meeting is
required for the election of the 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 the trustee will not be counted. Proxy cards marked
"WITHHOLD AUTHORITY" will be included in the calculation of the number of shares
present at the meeting for the purpose of establishing a quorum, but will not be
counted for the nominee.
The affirmative vote of a majority of the shares voted at the meeting is
required to ratify the appointment of the independent accountants. Broker
non-votes and proxy cards marked "ABSTAIN" with respect to the appointment of
the independent accountants will not be counted.
WHAT DO I DO WITH WHITE PROXY CARDS SOLICITED BY BRT REALTY TRUST?
You may ignore these cards and throw them away. They are not being
solicited by us and do not reflect the recommendation of our Board of Trustees.
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ITEM 1
ELECTION OF TRUSTEE
Our Board of Trustees consists of five members and is divided into three
classes having three-year terms that expire in successive years. The term of
office of the trustee in Class I expires at the 2001 annual meeting. The
Nominating Committee of our Board of Trustees has nominated Scott H. Ward to
serve as the Class I trustee for a term of three years and until his successor
is duly elected and qualified. Unless you withhold authority to vote for the
nominee, the shares represented by your properly executed BLUE proxy will be
voted for the election of our 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.
CLASS I TRUSTEE (SERVING FOR A TERM EXPIRING AT THE 2001 ANNUAL MEETING)
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SCOTT H. WARD Trustee since 1997
Scott H. Ward, 44, has served as Co-President of Russell Stover Candies, Inc.
and Whitman's Candies, Inc. since 1993 and was Chief Financial Officer of
Russell Stover and Whitman's from 1993 to 1997. Russell Stover and Whitman's are
leading candy manufacturers, distributors and retail store operators, with
extensive real estate holdings. Mr. Ward has served as Vice President of Castle
Mountain Ranch, Inc. since 1981. 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.
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CLASS II TRUSTEES (SERVING FOR A TERM EXPIRING AT THE 2002 ANNUAL MEETING)
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DAVID M. BRAIN Trustee since 1999
David M. Brain, 44, has served as our President and Chief Executive Officer and
a trustee 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
our 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, Mr. Brain was Managing Director of the
Corporate Finance Group of KPMG Peat Marwick LLP, a practice unit he organized
in Kansas City and managed for over 12 years. He received a Bachelor of Arts in
Economics from 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 affiliated with The University of Missouri at Kansas City,
and the Council for Entrepreneurship at The University of Missouri at Kansas
City.
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ROBERT J. DRUTEN Trustee since 1997
Robert J. Druten, 54, 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., Crown Media Holdings, Inc.
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 University.
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CLASS III TRUSTEES (SERVING FOR A TERM EXPIRING AT THE 2003 ANNUAL MEETING)
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PETER C. BROWN Trustee since 1997
Peter C. Brown, 42, has served as Chairman of our Board of Trustees since August
1997. Mr. Brown is Chairman of the Board, Chief Executive Officer and President
of AMCE, the parent corporation of American Multi-Cinema, Inc. ("AMC"). He
served as Co-Chairman of the Board of AMCE from May 1998 to July 1999, as
Executive Vice President from August 1994 to January 1997 and as Chief Financial
Officer from November 1991 to January 2000. He has served on the board of
directors of AMCE since November 1992. AMCE is headquartered in Kansas City,
Missouri and is one of the nation's leading motion picture exhibition companies.
Mr. Brown also serves on the board of directors of LabOne, Inc., which provides
risk appraisal laboratory services for the insurance industry, clinical testing
services for the healthcare industry and substance abuse testing services for
employers. Mr. Brown also serves on the board of directors of the Greater Kansas
City Chamber of Commerce, the board of advisors of The University of Kansas
School of Business and the board of trustees of Rockhurst High School. Mr. Brown
is also a member of the Civic Council of Greater Kansas City. Mr. Brown is a
graduate of The University of Kansas.
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DANLEY K. SHELDON Trustee since 2000
Danley K. Sheldon, 42, is a private investor. From 1994 to 1996 he served as
Chief Financial Officer and from 1996 to 2000 he was President and Chief
Executive Officer of Ferrellgas, a New York Stock Exchange listed master limited
partnership and the nation's largest retail propane marketer. Before joining
Ferrellgas, Mr. Sheldon was a tax manager with Arthur Andersen & Co. He received
a Bachelor in Business Administration from Iowa State University. Mr. Sheldon
serves on the board of directors of the Greater Kansas City Community
Foundation.
Mr. Ward has consented to serve on our Board of Trustees for his respective term
and being named in this proxy statement. If Mr. Ward should become unavailable
to serve as a trustee (which is not expected), the Nominating Committee may
designate a substitute nominee. In that case, the persons named as proxies will
vote for the substitute nominee designated by the Nominating Committee.
HOW ARE TRUSTEES COMPENSATED?
Each non-employee trustee receives:
- An annual retainer of $18,000, which is paid 50% in cash and 50% in
shares, valued at the latest closing price. Trustees may elect to receive
all or a portion of their retainer in shares.
- $1,000 in cash for each Board meeting they attend.
- $1,250 in cash for each committee meeting they chair, or $750 in cash for
each committee meeting they attend.
- Market value options to purchase 3,333 shares on the date of each annual
shareholders meeting.
- Reimbursement for out-of-town travel expenses incurred in attending Board
meetings.
Employees of our company or its affiliates who are trustees are not paid
any additional compensation for their service on our Board.
Non-employee trustees may defer some or all of their compensation into a
deferred compensation plan for non-employee members of our Board. Amounts
deferred under the plan are credited to a participant's account based on the
number of 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 our
company, all amounts in his account will be paid in a single payment.
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Pursuant to our 1997 Share Incentive Plan, Scott H. Ward and Robert J.
Druten each received options to purchase 10,000 shares on the effective date of
our initial public offering. Options to purchase 3,333 shares are granted to
each trustee on the date of each annual meeting, with an exercise price per
share equal to the closing price of our 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 our Board.
HOW OFTEN DID THE BOARD MEET DURING 2000?
Our Board of Trustees met seven times in 2000. No trustee attended less
than 75% of the meetings of our Board and committees on which he served. Our
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 our company.
WHAT COMMITTEES HAS OUR BOARD ESTABLISHED?
Our Board of Trustees has established a Nominating Committee, an Audit
Committee and a Compensation Committee.
NOMINATING COMMITTEE. The Nominating Committee consists of Danley K.
Sheldon and Robert J. Druten. The Nominating Committee:
- solicits and determines proper nominees for candidates for the Board of
Trustees
- considers candidates nominated by shareholders and others
- develops and reviews background information regarding such candidates
- selects the nominees for the Board of Trustees of the company
- advises the Board of Trustees on matters related to such selections and
nominations
The Nominating Committee will accept recommendations for nominations made by
shareholders in accordance with the Bylaws of our company. 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 finance,
their knowledge of the real estate and/or entertainment industry, their
independence from company management and other factors. The Nominating Committee
considers nominations recommended by shareholders if they comply with the
procedures described in "Submission of Shareholder Proposals and Nominations."
The Nominating Committee considered Mr. Ward's past experience and contributions
to the Board, and considered the candidate nominated by BRT Realty Trust in the
same manner, and nominated Mr. Ward for re-election as a trustee at the 2001
annual meeting. The Nominating Committee considered the background of the
candidates, the significant contribution made by Mr. Ward to the Board and the
prior contacts between Mr. Gould and our company and our trustees. Given that
information, they determined that a specific interview was not necessary.
AUDIT COMMITTEE. The Audit Committee consists of Robert J. Druten, Scott H.
Ward and Danley K. Sheldon. The members of the Audit Committee are "independent"
in accordance with the requirements of Section 303.02(D) of the New York Stock
Exchange listing standards. The Audit Committee met five times in 2000. The
Audit Committee assists the Board in fulfilling its responsibility for the
company's accounting and financial reporting practices and its annual audited
financial statements. As part of these duties, the Audit Committee:
- recommends the independent accounting firm to be retained each year
- reviews the audit and non-audit activities of the independent accountants
and our internal accounting staff
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- reviews the scope and results of the quarterly unaudited financial
statements and the audit of our annual financial statements and any
auditor recommendations with respect to the quarterly and annual
financial statements and our accounting practices
- evaluates the independence of the accountants from our company and our
management
COMPENSATION COMMITTEE. The Compensation Committee consists of Robert J.
Druten and Scott H. Ward. The Compensation Committee met once in 2000. The
Compensation Committee:
- establishes the compensation for our executive officers
- makes recommendations to our Board of Trustees regarding the compensation
and benefits of non-employee trustees
- approves and administers our compensation programs
SOLICITATION IN OPPOSITION
Unfortunately, despite our company's strong financial performance during
the last year, the increase in our dividend rate and share price this year and
our nomination of a candidate with significant real estate and finance
experience who has no relationship with our company's largest tenant, a
shareholder of our company, BRT Realty Trust, is attempting to elect its own
candidate, Fredric H. Gould, to replace our nominee to the Board of Trustees.
Our Board believes the election of Mr. Gould is not in the best interest of
our company and our shareholders and strongly opposes his election.
FREDRIC H. GOULD IS A DIRECTOR OF A COMPETITOR AND A REIT THAT PAYS NO
DIVIDENDS. Mr. Gould is a director and the chief executive officer of One
Liberty Properties, Inc., a company that is a competitor of our company for the
acquisition of movie theater and retail real estate properties according to
public disclosures it has made and discussions with our tenants. Mr. Gould is
also a director and the chief executive officer of BRT Realty Trust, a real
estate investment trust that has not paid any dividends to its shareholders in
over ten years.
FREDRIC H. GOULD HAS SOUGHT TO ADVANCE BRT REALTY TRUST'S INTERESTS OVER
THE LAST YEAR. Our Board has considered and rejected proposals made by Mr. Gould
for our company to enter into transactions with BRT Realty Trust.
- Mr. Gould has requested that our Board waive the ownership limitation in
our charter to enable BRT Realty Trust to acquire an undisclosed number
of our shares and thereby increase its percentage ownership of our
company. Our Board has considered these requests and rejected taking any
action that it believed would benefit Mr. Gould but would provide little
or no benefit to our company and our shareholders.
- Mr. Gould offered to purchase shares at $15.00 per share, which
represented a 16% cost of capital to our company based on our funds from
operations per share during the quarters prior to the proposal, at a time
when we were required under our loan agreement to use the proceeds to
repay debt with a 9% cost of capital to our company. Therefore, our Board
determined that such a transaction was not in the best interests of our
company and our shareholders.
- Mr. Gould has offered to sell BRT Realty Trust to our company on an
exploratory basis. Our Board determined not to pursue such a transaction
since it did not believe that BRT Realty's assets were compatible with
our company's business.
Our Board and our nominee are committed to taking actions that will benefit
our company and all our shareholders, not actions that will benefit only BRT
Realty Trust. We are committed to and focused on maximizing the financial
performance and operations of our business and maximizing value for all our
shareholders.
You may express your support for our Board and our nominee by returning the
BLUE proxy card and discarding any materials provided to you by Mr. Gould or BRT
Realty Trust.
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OFFICERS
These are our executive officers other than David M. Brain, whose
background is described on page 3.
FRED L. KENNON, 45, was appointed our Chief Financial Officer 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 Pittsburgh State University in 1978 and holds a
Masters in Business Administration from The University of Missouri at Kansas
City.
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GREGORY K. SILVERS, 37, was appointed our Vice President, General Counsel and
Secretary in 1998. From 1994 to 1998, he practiced with the law firm of Stinson,
Mag & Fizzell, P.C. specializing in real estate law. Mr. Silvers received his
J.D. in 1994 from The University of Kansas.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table contains information on the compensation earned by our
Chief Executive Officer and each of the other most highly compensated executive
officers whose compensation exceeded $100,000 in 2000.
(1) Mr. Brain was named our President and Chief Executive Officer in October
1999.
(2) Bonuses for 2000 have not yet been established. Each officer elected to
receive his 1999 bonus in shares valued at 150% of the cash bonus amount.
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OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information about options awarded to the named
executive officers in 2000.
(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 1/1/00 (0.352),
expected life (8 years), share price on grant date ($14.125), exercise price
($14.125), expecting dividend yield (8.00%), risk free rate of return
(5.00%).
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTIONS
VALUES
The following table provides information on the number of shares under
option to the named executive officers as of December 31, 2000.
EMPLOYMENT AGREEMENTS
We have 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:
- an 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
- an annual incentive bonus in an amount established by the Compensation
Committee if performance criteria adopted by the Compensation Committee
are attained
- a loan to Mr. Brain of $562,500 for the purchase of 40,000 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 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
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good reason, as defined in the employment agreement. The entire amount of
Mr. Brain's loan will be forgiven if he is terminated without cause
following a hostile change in control of our company. The officers are
entitled to reimbursement for taxes on income resulting from loan
forgiveness.
- a rolling three year term, subject to termination by us with or without
cause
- 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 the three year employment period if he resigns
following a change in control of our company and upon his death, termination by
us without cause or termination by Mr. Brain for good reason. Mr. Kennon and Mr.
Silvers are entitled to similar severance compensation upon their death,
termination by us without cause or termination by the executive for good reason.
HOW ARE OUR EXECUTIVE OFFICERS COMPENSATED?
We have adopted various compensation programs to attract and retain
executive officers, to provide incentives to maximize our funds from operations,
and to provide executive officers with an interest in our company parallel to
that of our shareholders.
Our compensation programs are administered by the Compensation Committee,
which is authorized to select from among our 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 our 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. We encourage our executive officers to own shares in
our company. To assist officers with this goal, we provide officers the
opportunity to acquire shares through various programs:
- SHARE PURCHASE PROGRAM. Allows officers to purchase shares from us at
fair market value. The shares may be subject to transfer restrictions and
other conditions imposed by the Compensation Committee. We may provide
financing for the purchase of shares by officers.
- RESTRICTED SHARE PROGRAM. We 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 our company.
- SHARE OPTION PROGRAM. We may grant options to our officers and employees
to purchase shares subject to conditions adopted by the Compensation
Committee.
A maximum of 1,500,000 shares, subject to adjustment upon significant
corporate events, are reserved for issuance under the Share Incentive Program.
An individual may receive options to purchase up to 750,000 shares, so long as
the options do not result in share ownership in excess of our 9.8% ownership
limit or cause us to fail to qualify as a REIT for federal income tax purposes.
The maximum number of shares which may be awarded to an employee subject to
the deductibility limitation of Section 162(m) of the Internal Revenue 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).
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COMPENSATION COMMITTEE REPORT
WHAT IS OUR EXECUTIVE COMPENSATION PHILOSOPHY?
Our compensation philosophy has several key objectives:
- create a well-balanced and competitive compensation program that utilizes
the following three elements:
-- base salary
-- annual incentives
-- share purchases, share awards and share options
- reward executives for performance on measures designed to increase
shareholder value
- use share awards and share options to ensure that executives are focused
on providing appropriate dividend levels and building shareholder value
- create alignment between our executives and our shareholders by
encouraging key executives to purchase shares.
In determining the appropriate compensation levels for 2000, a third party
consulting firm was used to compare our executive compensation to a group of
real estate investment trusts, or REITs, with comparable market capitalization.
Several of those REITs are also included in the performance graph on page 12 of
this proxy statement. Our compensation levels were targeted at the average for
this comparison group for positions with similar job size and responsibilities.
For 2000, the Compensation Committee used these compensation programs to
meet its compensation objectives for executive officers:
BASE SALARY. The Compensation Committee established base salaries of
$325,000 for Mr. Brain, $205,000 for Mr. Kennon and $175,000 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 our executives for their efforts on behalf of our
company. Salary levels for 2001 have not yet been established since the
Compensation Committee has not yet received the report of the consulting firm
for this year.
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. Bonus awards were also based on the achievement of
personal performance goals. Performance bonuses were payable in cash, restricted
shares (valued at 150% 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 has not yet awarded bonuses to our executive officers for
2000 since the Compensation Committee has not yet received the report of the
consulting firm for this year.
HOW WAS OUR PRESIDENT AND CHIEF EXECUTIVE OFFICER COMPENSATED?
Our President and Chief Executive Officer, David M. Brain, was compensated
in 2000 pursuant to an employment agreement entered into in January 2000. In
establishing Mr. Brain's compensation, the Compensation Committee took into
account the compensation of similar officers of REITs with comparable market
capitalizations, the contribution of Mr. Brain to our company's performance and
the achievement of our financing strategies, and his success in realizing the
performance targets discussed above.
Mr. Brain received a base salary of $325,000 in 2000. His performance bonus
for 2000 has not yet been established.
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HOW ARE WE 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 our 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 our best interests to
qualify an executive officer's compensation under Section 162(m). Accordingly,
the Compensation Committee and our 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 our company or any of our subsidiaries. No member of the
Compensation Committee had any contractual or other relationship with our
company during 2000.
By the Compensation Committee:
Robert J. Druten
Scott H. Ward
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
Peter C. Brown, the Chairman of our Board of Trustees, is Chairman of the
Board, Chief Executive Officer and President of AMCE. Seventeen of our company's
properties were acquired from AMCE or its affiliates and all of those properties
are leased to AMC. Each property was acquired at a price equal to AMCE's
development and construction cost. AMC paid an aggregate of $39,267,214 in rent
to our company in 2000. Rental amounts for the properties were determined by the
management of AMCE and our company and were not negotiated on an arm's length
basis. We believe the rental payments reflect the fair market value of the
properties based on rates for comparable properties. Mr. Brown did not
participate in negotiations over the acquisition or leasing of those properties.
In 1997, we loaned David M. Brain approximately $800,000 to purchase 40,000
common shares of the company. The loan was evidenced by a full recourse five
year note bearing interest at 6.1% per annum and payable in three annual
installments of principal and interest on the third, fourth and fifth
anniversary dates of the note. In connection with Mr. Brain's 2000 employment
agreement, this note was replaced by a new 10 year note in the amount of
$1,470,645, representing the $908,145 principal and accrued interest balance of
the old note plus the $562,500 purchase price for 40,000 additional shares.
Principal and interest at 6.24% per annum are payable at maturity.
Pursuant to their employment agreements, Mr. Kennon and Mr. Silvers each
received a loan of $281,250 to purchase 20,000 shares. Each loan is represented
by a 10 year recourse note with principal and interest at 6.24% per annum
payable at maturity.
COMPANY PERFORMANCE
The following performance graph shows a comparison of cumulative total
returns for our shares, the Standard & Poor's 500 Index, the Russell 2000 index
(in which we are included) and an index of peer
11
companies which are real estate investment trusts, for three fiscal years
beginning January 1, 1998 plus the period from the date of the our initial
public offering until December 31, 1997. The peer group index currently consists
of Golf Trust of America, Inc., National Golf Properties, Inc., Commercial Net
Lease Realty and Corrections Corporation of America.
The graph assumes that $100 was invested on November 17, 1997 in each of
our common shares, the Standard & Poor's 500 Index, the Russell 2000 index and
the peer group 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.
[PERFORMANCE GRAPH]
Source: Carl Thompson Associates (800) 959-9677, Data from BRIDGE Information
Systems, Inc. 2000
NOTE: TriNet Corporate Realty Trust, Inc. was acquired by Starwood Financial
Trust (now Istar Financial, Inc.) in November 1999, and is no longer a
member of the peer group.
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 three
trustees. All of the members of the Audit Committee are "independent" as defined
in the rules of the New York Stock Exchange.
12
The primary responsibility of the Audit Committee is to oversee our
company's financial reporting process on behalf of our Board of Trustees. Our
management has the primary responsibility for the financial statements and the
reporting process, including our systems of internal controls. Our independent
accountants are responsible for auditing our financial statements and expressing
an opinion on the conformity of those audited financial statements with
generally accepted accounting principles.
Our Board of Trustees has adopted a written charter for the Audit Committee
which is attached to this proxy statement as Appendix A.
In fulfilling its oversight responsibilities, the Audit Committee reviewed
our audited financial statements with management and our independent
accountants. The Audit Committee discussed with the independent accountants the
matters required to be discussed by Statement of Auditing Standards No. 61. This
included a discussion of the accountants' judgments regarding the quality, not
just the acceptability, of our company's accounting principles and the other
matters required to be discussed with the Audit Committee under generally
accepted auditing standards. In addition, the Audit Committee received from the
independent accountants the written disclosures and letter required by
Independence Standards Board Standard No. 1. The Audit Committee also discussed
with the independent accountants their independence from management and our
company, including the matters covered by the written disclosures and letter
provided by the independent accountants.
The Audit Committee also discussed with our company's financial management
and independent accountants the overall scope and plans for the audit. The Audit
Committee meets periodically with our financial management and the independent
accountants to discuss the results of their examinations, their evaluations of
our company, our internal controls, and the overall quality of our financial
reporting. The Audit Committee held five meetings during 2000.
The members of the Audit Committee are not professionally engaged in the
practice of auditing or accounting and are not experts in the fields of
accounting or auditing, including in respect of auditor independence. Members of
the Committee rely without independent verification on the information provided
to them and on the representations made by management and the independent
accountants. Accordingly, the Audit Committee's oversight does not provide an
independent basis to determine that management has maintained appropriate
accounting and financial reporting principles or appropriate internal control
and procedures designed to assure compliance with accounting standards and
applicable laws and regulations. Furthermore, the Audit Committee's
considerations and discussions referred to above 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 or that
the company's auditors are in fact "independent".
Based on the reviews and discussions referred to above, the Audit Committee
recommended to our Board of Trustees, and our Board approved, that the audited
financial statements be included in our Annual Report on Form 10-K for the year
ended December 31, 2000 for filing with the Securities and Exchange Commission.
The Audit Committee and our Board have also recommended the selection of our
company's independent accountants for shareholder approval. See "Ratification of
Appointment of Independent Accountants."
By the Audit Committee:
Robert J. Druten
Scott H. Ward
Danley K. Sheldon
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.
13
ITEM 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Our Board of Trustees, upon recommendation of our Audit Committee, has
appointed the independent certified public accounting firm of Ernst & Young LLP
as our independent accountants to audit the financial statements of our company
for the year ending December 31, 2001. Ernst & Young LLP has served as our
independent accountants since our initial public offering in November 1997. A
representative of Ernst & Young LLP will attend the annual meeting to respond to
questions.
AUDIT FEES
In 2000, our independent accountants billed us an aggregate of $98,552 in
fees for professional services rendered for the audit of our annual financial
statements for the year ended December 31, 1999 and for their reviews of the
financial statements included in our Form 10-Q reports filed with the SEC during
the year ended December 31, 2000.
ALL OTHER FEES
In 2000, our independent accountants billed us an aggregate of $238,911 in
fees for all other services (including tax-related services and the performance
of a segregation study for depreciation allocation and the determination of the
portion of dividends representing a return of capital) rendered during that
year.
The Audit Committee considered whether the independent accountants'
provision of the services described above was compatible with maintaining the
accountants' independence from management and our company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our trustees,
executive officers and holders of more than 10% of our common shares to file
reports with the Securities and Exchange Commission regarding their ownership
and changes in ownership of our shares.
In February 2001, Robert J. Druten filed a late report on Form 5 to
disclose two exempt transactions in 1998, a late report on Form 5 to disclose
two exempt transactions in 1999, and a late report on Form 5 to disclose two
exempt transactions in 2000.
In February 2001, Scott H. Ward filed a late report on Form 5 to disclose
two exempt transactions in 1998, a late report on Form 5 to disclose two exempt
transactions in 1999, and a late report on Form 5 to disclose two exempt
transactions in 2000.
In February 2001, Gregory K. Silvers filed a late report on Form 5 to
disclose his beneficial ownership of our securities at the time he became an
executive officer in 1998, which should have been reported earlier on Form 3,
and one exempt transaction in 1998.
In February 2001, Danley K. Sheldon filed a report on Form 5 to disclose
his beneficial ownership of our securities at the time he became a trustee of
our company in 2000, which should have been reported earlier on Form 3.
Except as disclosed above, we believe that, during 2000, our trustees and
executive officers complied with all Section 16(a) filing requirements. In
making this statement, we have relied upon examination of the copies of Forms 3,
4 and 5 provided to us and the written representations of our trustees and
executive officers.
14
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.
(1) Based solely on disclosures made by BRT Realty Trust and its affiliates in
its preliminary proxy statement on Schedule 14A filed with the Securities
and Exchange Commission.
(2) Reporting as a group (within the meaning of Section 13(d)(3) of the Exchange
Act) with other persons and entities.
(3) 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 March 26, 2001, the number of our common shares
beneficially owned by our trustees, nominees and executive officers, and by all
of our trustees and executive officers as a group. All information regarding
beneficial ownership was furnished by the trustees, nominees and officers listed
below.
* Less than 1 percent.
(1) Includes the following shares which the named individuals have the right to
acquire within 60 days under existing options: David M. Brain (12,000),
Robert J. Druten (6,666), Scott H. Ward (6,666), Fred L. Kennon (6,000),
Gregory K. Silvers (10,000).
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 March 26, 2001. 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.
15
HOW DO I MAKE A NOMINATION?
If you are a shareholder of record and wish to nominate someone to our
Board of Trustees, you must give written notice to our 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:
- 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)
- your name and address and the name and address of any person on whose
behalf you made the nomination, as they appear on our books
- 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 our Secretary. Pursuant to Rule
14a-8 of the SEC, your notice must be received at our executive offices not less
than 120 calendar days before the date of our 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:
- a brief description of your proposal and your reasons for making the
proposal
- your name and address and the name and address of any person on whose
behalf you made the proposal, as they appear on our books
- any material interest you or any person on whose behalf you made the
proposal have in the proposal
- 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:
- not earlier than 90 days prior to the meeting; and
- 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 our 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 our 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 our Board of
Trustees.
16
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 our
Board of Trustees or the judgment of the proxy holders if no recommendation is
made.
MISCELLANEOUS
ANNUAL REPORT
Our Annual Report to Shareholders, containing financial statements for the
year ended December 31, 2000, will be 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.
WE WILL PROVIDE WITHOUT CHARGE, UPON WRITTEN REQUEST TO THE SECRETARY OF
OUR COMPANY AT THE ADDRESS LISTED ON THE COVER PAGE OF THIS PROXY STATEMENT, A
COPY OF OUR ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES, TO BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000.
SHAREHOLDER PROPOSALS FOR THE 2002 ANNUAL MEETING
Shareholder proposals intended for inclusion in the proxy statement for the
2002 annual meeting must be received by our Secretary at 30 Pershing Road, 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 Securities
and Exchange Commission.
PARTICIPANTS IN THE SOLICITATION
Under applicable regulations of the Securities and Exchange Commission,
each member of our Board of Trustees, certain of our executive officers, and
certain other officers and employees may be deemed to be a "participant" in our
solicitation of proxies from shareholders to be voted at the 2001 Annual Meeting
of Shareholders, in favor of our trustee nominee, and ratifying the selection of
Ernst & Young LLP as independent auditors for the fiscal year ending December
31, 2001. Set forth below with respect to each participant are his or her name,
principal occupation or employment, business address, the amount of our
securities beneficially owned or held of record, and additional information
concerning transactions in our common shares during the past two years.
TRUSTEES
The principal occupation or employment of, and the number of our common
shares beneficially owned by, each trustee is set forth in our Proxy Statement
on pages 3 through 4 and page 18. Additional information concerning the business
address and transactions in our common shares during the past two years of our
17
trustees is included below. Unless otherwise indicated, the business address of
all our trustees is 30 Pershing Road, Suite 201, Kansas City, Missouri, 64108.
EXECUTIVE OFFICERS
The principal occupations or employment of, and the number of shares of our
common shares beneficially owned by each of our named executive officers is set
forth herein on pages 3, 7 and 18. The business address for all our executive
officers is 30 Pershing Road, Suite 201, Kansas City, Missouri, 64108.
Information regarding transactions in our common shares in the last two years by
our executive officers is set forth below:
18
OTHER OFFICERS AND EMPLOYEES
The name and principal occupations of, and the number of our common shares
owned by, our other officers and employees who may be deemed participants in the
solicitation are set forth below. The principal business address of each such
person is 30 Pershing Road, Suite 201, Kansas City, Missouri, 64108. There were
no transactions in our common shares by such persons in the last two years.
To the best of our knowledge, none of the foregoing persons owns of record
any securities of our company which are not also beneficially owned by them.
Except for the information disclosed herein, to the best of our knowledge, no
part of the purchase price or market value of any of the shares owned
beneficially, directly or indirectly, by any of the participants in this
solicitation is represented by funds borrowed or otherwise obtained for the
purpose of acquiring or holding such securities. Except for the information
disclosed herein, to the best of our knowledge, none of the foregoing persons
nor any associate of such persons is or has been, within the past year, a party
to any contract, arrangement or understanding with any person with respect to
any securities of the company, including, but not limited to joint ventures,
loan or option arrangements, puts or calls, guarantees against loss or
guarantees of profit, division of losses or profits, or the giving or
withholding of proxies. Except for the information disclosed herein, to the best
knowledge of the company, none of the foregoing persons nor any associate of
such persons has any agreement or understanding with any person with respect to
any future employment by the company or its affiliates or any future
transactions to which the company or any of its affiliates will or may be a
party. Furthermore, except as described herein, none of the foregoing persons,
nor any associates of such persons is either a party to any transaction or
series of transactions since January 1, 1999, or has knowledge of any currently
proposed transaction or series of transactions, (i) to which we or any of our
affiliates was or is to be a party (ii) in which the amount involved exceeds
$60,000 and (iii) in which any participant affiliate had, or will have, a direct
or indirect material interest.
METHOD AND COST OF PROXY SOLICITATION
Proxies may be solicited, without additional compensation, by trustees,
officers and employees of us by mail, e-mail, the Internet, telephone,
facsimile, telegram or in person. We will bear the cost of the solicitation of
proxies, including the preparation, printing and mailing of the proxy materials.
In addition, we will request banks, brokers and other custodians, nominees and
fiduciaries to forward proxy material to the beneficial owners of our common
shares and obtain their voting instructions. We will reimburse those firms for
their expenses in accordance with the rules of the SEC and the New York Stock
Exchange. In addition, we have retained MacKenzie Partners, Inc. to assist in
the solicitation of proxies for a fee not to exceed $75,000 plus out-of-pocket
expenses. It is anticipated that approximately 75 employees of MacKenzie may
solicit proxies from our shareholders. We estimate that total expenditures for
the solicitation will be approximately $200,000, approximately $20,000 of which
has been spent to date.
19
FORWARD LOOKING STATEMENTS
Certain statements in this supplement may constitute forward-looking
statements. They are based on management's current expectations and could be
affected by numerous factors and are subject to various risks and uncertainties.
Certain of those risks and uncertainties are discussed in our filings with the
SEC, including our annual report on Form 10-K and quarterly reports on Form
10-Q. Do not rely on any forward-looking statement, as we cannot predict or
control many of the factors that ultimately may affect its ability to achieve
the results estimated. We make no promise to update any forward-looking
statement, whether as a result of changes in underlying factors, new
information, future events or otherwise.
By the order of our Board of Trustees
Gregory K. Silvers
General Counsel and Secretary
April 2, 2001
20
APPENDIX A
AUDIT COMMITTEE CHARTER
ENTERTAINMENT PROPERTIES TRUST
CHARTER OF THE
AUDIT COMMITTEE OF THE BOARD OF TRUSTEES
I. PURPOSE
The primary function of the Audit Committee is to assist the Board of
Trustees in fulfilling its oversight responsibilities by reviewing (a) the
financial reports and other financial information provided by the Company to the
Securities and Exchange Commission, the New York Stock Exchange and the public;
(b) the Company's systems of internal controls regarding finance, accounting,
legal compliance and ethics that management and the Board have established; and
(c) the Company's auditing, accounting and financial reporting processes
generally. In discharging its oversight role, the Audit Committee is empowered
to investigate any matter brought to its attention with full access to all
books, records, facilities and personnel of the Company and the power to retain
outside counsel, or other experts for this purpose. Consistent with this
function, the Audit Committee should encourage continuous improvement of, and
should foster adherence to, the Company's policies, procedures and practices at
all levels. The Audit Committee's primary duties and responsibilities are to:
- Serve as an independent and objective party to monitor the Company's
financial reporting process and internal control system
- Review and appraise the efforts of the Company's outside auditors and
financial officers
- Provide an open avenue of communication among the outside auditors,
financial and senior management and the Board of Trustees.
The Audit Committee will primarily fulfill these responsibilities by
carrying out the activities enumerated in Section V of this Charter.
II. COMPOSITION
The Audit Committee shall be comprised of at least three trustees selected
by the Board, each of whom shall be an independent trustee, and free from any
relationship that, in the opinion of the Board, would interfere with the
exercise of his or her independent judgment as a member of the Committee. All
members of the Committee shall be "financially literate" and have a working
familiarity with basic finance and accounting practices, and at least one member
of the Committee shall have accounting or related financial management
expertise. Committee members may enhance their familiarity with finance and
accounting by participating in educational programs conducted by the Company or
its outside auditors.
The members of the Committee shall be elected by the Board at each annual
meeting of the Board. Unless a Chair is elected by the full Board, the members
of the Committee may designate a Chair by majority vote of the full Committee
membership.
III. RESPONSIBILITIES OF THE OUTSIDE AUDITORS
In addition to their role in auditing the Company's annual financial
statements and the other functions addressed in this Charter, the outside
auditors:
1. Are ultimately accountable to the Board of Trustees and Audit Committee,
and the Board and Audit Committee have the ultimate authority to select,
evaluate and, where appropriate, replace the outside auditors.
2. Shall submit to the Audit Committee on a periodic basis (not less often
than annually) a written statement delineating all relationships between
the outside auditors and the Company, and the Audit
A-1
Committee is responsible for actively engaging in a dialogue with the
outside auditors with respect to any disclosed relationships or services
that may impact their objectivity and independence and for recommending
that the Board of Trustees take appropriate action in response to the
outside auditors' report to satisfy itself of the outside auditors'
independence.
IV. MEETINGS
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 should meet at least annually with management, the trustees and
the outside auditors in separate executive sessions to discuss any matter the
Committee or each of these groups believes should be discussed privately. In
addition, the Committee or at least its Chair should meet with the outside
auditors and management on a quarterly basis to review the Company's financials
consistent with V.4. below.
V. RESPONSIBILITIES AND DUTIES
The Committee in carrying out its responsibilities believes its policies
and procedures should remain flexible, in order to best react to changing
conditions and circumstances. The Committee should take the appropriate actions
to set the overall corporate "tone" for quality financial reporting, sound
business risk practices and ethical behavior. To fulfill its responsibilities
and duties the Audit Committee shall:
Documents/Reports Review
1. Review and update this Charter periodically, but at least annually, as
conditions dictate.
2. Review the Company's annual financial statements and any reports or other
financial information submitted to the Securities and Exchange Commission,
the New York Stock Exchange or the public, including any certification,
report, opinion or review rendered by the outside auditors.
3. Review the regular internal reports to management prepared by the outside
auditors and management's response.
4. Review with the financial officers and the outside auditors the Form 10-Q
prior to its filing or prior to the release of earnings. The Chair of the
Committee may represent the entire Committee for purposes of this review.
Outside Auditors
5. Recommend to the Board of Trustees the selection of the outside auditors,
considering their independence and effectiveness, and approve the fees and
other compensation to be paid to them. On an annual basis, the Committee
shall review and discuss with the auditors all significant relationships the
auditors have with the Company to determine their independence.
6. Review the performance of the outside auditors and approve any proposed
discharge of the outside auditors when circumstances warrant.
7. Periodically consult with the outside auditors out of the presence of
management about internal controls and the completeness and accuracy of the
Company's financial statements.
8. Discuss with the outside auditors the matters required to be discussed by
Statement on Auditing Standards 61.
9. Discuss with the outside auditors their independence and the written
disclosures and letter required to be provided by them under Independence
Standards Board No. 1.
Financial Reporting Processes
10. In consultation with the outside auditors and financial management, review
the integrity of the Company's financial reporting processes, both internal
and external.
A-2
11. Consider the outside auditors' judgments about the quality and
appropriateness of the Company's accounting principles as applied in its
financial reporting.
12. Consider and approve, if appropriate, significant changes to the Company's
auditing and accounting principles and practices as suggested by the outside
auditors or management.
13. Based on the matters discussed under "Outside Auditors," recommend to the
Board whether the audited financial statements should be included in the
Company's Annual Report on Form 10-K.
Process Improvement
14. Establish regular and separate systems of reporting to the Audit Committee
by management and the outside auditors regarding any significant judgments
made in management's preparation of the financial statements and the view of
each as to the appropriateness of such judgments.
15. Following completion of the annual audit, review separately with each of
management and the outside auditors any significant difficulties encountered
during the course of the audit, including any restrictions on the scope of
work or access to required information.
16. Review any significant disagreement between management and the outside
auditors in connection with the preparation of the financial statements.
17. Review with the outside auditors and management the extent to which changes
or improvements in financial or accounting practices, as approved by the
Audit Committee, have been implemented.
Ethical and Legal Compliance
18. Establish, review and update periodically a Code of Ethical Conduct and
ensure that management has established a system to enforce this Code.
19. Review management's monitoring of compliance with the Company's Ethical
Code, and verify that management has the proper review system in place to
ensure that the Company's financial statements, reports and other financial
information disseminated to the SEC, the NYSE and the public satisfy legal
requirements.
20. Review activities, organizational structure and qualifications of the
Company's financial management.
21. Review with the Company's counsel legal and/or executive management
compliance matters, including securities trading policies, litigation and
significant tax matters.
22. Review with the Company's counsel and/or executive management any legal
matter that could have a significant impact on the Company's financial
statements.
23. Perform any other activities consistent with this Charter, the Company's
Declaration of Trust and By-laws and governing law, as the Committee or the
Board deems necessary or appropriate.
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BLUE PROXY CARD
ENTERTAINMENT PROPERTIES TRUST
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS - MAY 9, 2001
THIS BLUE PROXY IS SOLICITED BY THE BOARD OF TRUSTEES
As a shareholder of Entertainment Properties Trust (the "Company"), I
appoint David M. Brain 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 Center Theatre, Leawood, Kansas, on Wednesday, May 9, 2001 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 and 2.
THIS BLUE PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED BY YOU, BUT IF NO DIRECTION IS MADE, THIS BLUE PROXY WILL BE VOTED FOR
PROPOSALS 1 AND 2.