EMPLOYMENT AGREEMENT
This Employment Agreement is entered into as of ____________, 1997 by and
between ENTERTAINMENT PROPERTIES TRUST, a Maryland real estate investment trust
(the "Company") and XXXXXX X. "CHIP" XXXXXX (the "Employee"). In consideration
of the mutual promises and covenants continued herein, the parties hereto agree
as follows:
1. DUTIES. During the Term (as defined in Section 2) of his employment
by the Company under this Agreement, Employee may continue to maintain his home
in the Los Angeles, California area but shall devote his full time and attention
to the business of the Company as president and chief development officer (in
each capacity, the "President" and "Chief Development Officer", respectively),
as directed by the Company's Chairman of the Board or the Board of Trustees (the
"Board"). The Company's headquarters shall be located in the Kansas City,
Missouri area.
2. TERM. The term of this Agreement shall commence as of November __,
1997, and shall terminate on November __, 1999, or sooner as provided in Section
5 below (such period, as it may be extended, the "Term"). On each November __
hereafter, commencing in 1998, one year shall be added to the Term of Employee's
employment with the Company under this Agreement, unless the Company has given
written notice to the Employee that the Term will not be extended.
3. COMPENSATION.
(a) BASE SALARY. During the Term of his employment by the Company
under this Agreement, Employee shall receive an annual salary of $225,000 ("Base
Salary") (less withholding for applicable taxes), payable in accordance with the
Company's payroll procedures for its salaried employees, subject to such
increases as may be approved by the Compensation Committee of the Board (the
"Compensation Committee").
(b) SIGNING BONUS. Employee shall receive a one-time signing bonus
of Forty Thousand Dollars ($40,000) payable in a lump sum as soon as
administratively feasible following the Formation Transactions, as described in
the Company's Registration Statement (File No. 333-35281).
(c) ANNUAL INCENTIVE PROGRAM. In addition to Base Salary, for each
year commencing 1998 Employee shall be eligible to receive a performance based
bonus under the Company's Annual Incentive Program ("Performance Bonus") if
certain pre-established performance objectives are obtained ("Performance
Goals"). The Compensation Committee shall establish a range of Performance
Goals by March 31 of each year. The Compensation Committee shall determine
annually within 60 days after completion of the Company's year end audit
whether the Performance Goals for the preceding year have been achieved. If the
Performance Goals for the preceding year have
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been achieved, the Compensation Committee shall certify such fact to the
Company, and the Company shall pay such Performance Bonus to Employee as soon
as administratively feasible following such certification. The Compensation
Committee shall establish a maximum Performance Bonus of 60% of Base Salary,
a target Performance Bonus of 40% of Base Salary, and a threshold Performance
Bonus of 20% of Base Salary which shall be paid to Employee based upon
certification that the Performance Goals have been achieved. No Performance
Bonus shall be paid for any year in which the threshold Performance Goal has
not been achieved. No Performance Bonus may exceed $300,000. The
Compensation Committee shall have the sole authority to administer and make
determinations with respect to the Performance Bonus and Performance Goals.
(d) SHARE INCENTIVE PLAN; SHARE PURCHASE PROGRAM; RESTRICTED SHARE
PROGRAM; SHARE OPTION PROGRAM.
(i) Employee acknowledges that after five (5) years from the
date hereof, future participation in any Company share incentive plan is
contingent upon Employee's ownership of common shares of beneficial
interest, $0.01 par value per share ("Shares"), of the Company with a fair
market value equal to at least five (5) times his then current Base
Salary.
(ii) Prior to or concurrent with the public offering of the
Company contemplated in Registration Statement No. 333-35281 (the
"Offering"), Employee will be provided the opportunity to purchase eighty
thousand (80,000) Shares of the Company (the "Program Shares") at a price
per share equal to the public Offering price per Share in the Offering as
shown on the cover page of the final prospectus for the Offering. To
finance such purchase by Employee, the Company agrees to make a five-year
recourse loan to Employee equal to his aggregate purchase price for the
Shares.
The Program Shares will be issued to Employee concurrently with closing of
the Offering in exchange for Employee's promissory note (the "Note") in the form
attached hereto, except that if the Offering closes after November, 1997, the
Note will bear interest at the applicable federal rate in effect on the date
the Offering closes.
In the event of a Change in Control, as defined in the Company's 1997 Share
Incentive Plan, death, Disability (as defined below), retirement at age 65 or
termination by the Company without Cause (as defined below), the Compensation
Committee may, in its sole discretion, forgive in whole or in part any balance
of the Note remaining after application of the proceeds from sale of the Program
Shares to payment of the Note.
The Program Shares will be issued to Employee without restriction by the
Company, except that for a period of two years after their date of issue, the
Program Shares may not be sold, transferred, or otherwise disposed of by
Employee, voluntarily or involuntarily, without the written consent of the
Company, except following a Change in Control of the
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Company, as defined in the Company's 1997 Share Incentive Plan, or Employee's
termination by reason of death, Disability or retirement at age 65. Any sale
of the Program Shares must comply with the Securities Act of 1933 and the
rules promulgated thereunder. The Program Shares will bear a legend to such
effect.
(iii) Employee shall be entitled to receive as incentive
compensation the following share incentive awards:
(A) If the Employee purchases Program Shares pursuant to
Section 3(d)(ii) hereof, then prior to or concurrent with the closing
of the Offering, Employee shall be granted ten-year options
("Options") to purchase fifty percent (50%) of the number of Program
Shares he purchased pursuant to Section 3(d)(ii) for an exercise price
equal to the public offering price per share in the Offering as shown
on the cover page of the final prospectus for the Offering. All
Options granted pursuant to the foregoing shall be "incentive stock
options" ("ISOs") as defined under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code") to the extent permitted under
Section 422 of the Code. The Company shall use its best efforts to
obtain all necessary shareholder approvals to ensure the Options
qualify as ISOs. Twenty percent (20%) of such Options shall vest and
become exercisable on each of the first, second, third, fourth and
fifth anniversaries following the date of grant, provided that
Employee remains an employee of the Company following such respective
dates, provided further, all unvested Options shall immediately vest
and become exercisable upon any of (1) Employee's (a) death, (b)
separation from service due to a Disability, (c) termination of
employment by the Company without Cause, (d) termination of employment
by the Employee following a Material Breach (as defined below), or (e)
resignation following appointment of a Chief Executive Officer from
outside the Company, or (2) a Change in Control of the Company, as
defined in the Company's 1997 Share Incentive Plan. Notwithstanding
the foregoing, Employee agrees that all unvested Options shall be
forfeited if he sells or otherwise disposes of the Program Shares
purchased pursuant to Section 3(d)(ii) within five years of such
purchase without the written consent of the Board or the Compensation
Committee. Such Options shall otherwise be upon such terms and
conditions as are consistent with the Company's 1997 Share Incentive
Plan.
(B) If the Employee purchases Program Shares of the Company
pursuant to Section 3(d)(ii) hereof, then prior to or concurrent with
the closing of the Offering, Employee shall be granted restricted
Shares (the "Restricted Shares") equal in number to fifty percent
(50%) of the number of Program Shares he purchased pursuant to Section
3(d)(ii) hereof.
Except as hereinafter provided, the Restricted Shares will be forfeited by
Employee in the
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event of any sale, assignment, transfer, hypothecation, pledge or other
alienation of such Restricted Shares, made or attempted, whether voluntary or
involuntary, and if involuntary whether by process of law in any civil or
criminal suit, action or proceeding, whether in the nature of an insolvency
or bankruptcy proceeding or otherwise, without the written consent of the
Board or the Compensation Committee. In addition, the Restricted Shares will
be forfeited if Employee sells or otherwise disposes of the Program Shares
purchased pursuant to Section 3(d)(ii) hereof prior to the fifth anniversary
of the date of their purchase without the written consent of the Board or the
Compensation Committee.
The foregoing restrictions will lapse with respect to one hundred percent
(100%) of the Restricted Shares and such Restricted Shares will become
nonforfeitable on the fifth anniversary of the date of grant, provided the
Employee is serving as President and/or Chief Development Officer on that
date. All restrictions will lapse with respect to 100% of the Restricted Shares
upon any of (1) Employee's (a) death, (b) separation from service due to a
Disability, (c) termination of employment by the Company without Cause, (d)
termination of employment by the Employee following a Material Breach, or (e)
resignation following appointment of a Chief Executive Officer from outside the
Company, or (2) a Change in Control of the Company as defined in the Company's
1997 Share Incentive Plan. In addition, the Board or the Compensation Committee
may accelerate the vesting of any or all Restricted Shares in its discretion.
Except for these restrictions, the Employee as owner of the Restricted Shares
shall have all the rights of a shareholder including, but not limited to, the
right to receive all dividends paid on the Restricted Shares and the right to
vote such Shares. Such Restricted Shares will otherwise be upon such terms and
conditions as are consistent with the Company's 1997 Share Incentive Plan.
Each certificate issued in respect of the Restricted Shares shall be
registered in Employee's name and deposited by him, together with a Share power
endorsed in blank, with the Company and shall bear the following (or a similar)
legend:
"The transferability of this certificate and the common
shares represented hereby are subject to the terms and
conditions (including forfeiture) contained in the Agreement
dated as of __________, 1997 entered into between the
registered owner and Entertainment Properties Trust."
At the expiration of the restrictions, the Company shall redeliver to
Employee (or his legal representative, beneficiary or heir) Share certificates
for the Restricted Shares deposited with it without any legend.
(e) BENEFITS. During the Term of his employment by the Company under
this Agreement, Employee also shall be eligible for the benefits offered by the
Company from time to time to the Company's other executive officers (such as
group insurance, pension plans, thrift plans, stock purchase plans and the
like), as determined by the Compensation Committee. Nothing herein shall be
construed so as to prevent the Company from modifying or terminating any
employee benefit plans or programs it may adopt from time
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to time.
(f) AUTOMOBILE. During the Term of Employee's employment, the
Company shall provide Employee with an automobile allowance.
(g) COMPENSATION DURING DISABILITY. During any disability of
Employee during the Term of his employment by the Company under this Agreement,
Base Salary payable to Employee pursuant to the terms of this Agreement shall be
reduced by any and all disability payments Employee may receive pursuant to any
insurance contract provided by Company for the benefit of its employees.
Notwithstanding any termination of this Agreement as provided in Section 5,
Employee shall thereafter be entitled to the full benefits of all disability
payments to which he may be entitled pursuant to such insurance contracts.
(h) FULL PAYMENT. The compensation to be paid to Employee under this
Agreement shall be in full payment for (i) all services rendered by Employee in
any capacity to the Company or any affiliate of the Company, and (ii) all other
obligations of Employee under this Agreement.
4. EXPENSE REIMBURSEMENTS. During the Term of Employee's employment by
the Company under this Agreement, the Company shall reimburse Employee for
business travel and entertainment expenses reasonably incurred by the Employee
on behalf of the Company in accordance with the Company's procedures, as such
may exist from time to time.
5. TERMINATION. Employee's service as President and Chief Development
Officer hereunder shall be terminated upon the earliest of:
(a) EXPIRATION. The expiration of the Term.
(b) DEATH. The death of Employee.
(c) DISABILITY. If, as a result of Employee's incapacity due to
physical or mental illness, Employee shall not have been regularly performing
his duties and obligations hereunder for a period of six consecutive months (a
"Disability") , and within thirty (30) days after written notice of termination
is given by the Chairman of the Board or the Board (which may occur before or
after the end of such six month period) Employee shall not have returned to the
performance of his duties and obligations hereunder on a regular basis.
(d) CAUSE. The Chairman of the Board or the Board terminates
Employee for Cause. For purposes of this Agreement, the Chairman of the Board
or the Board shall have "Cause" to terminate Employee upon (i) the willful and
continued failure by Employee to perform substantially his duties with the
Company (other than any such
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failure resulting from his incapacity due to physical or mental illness)
after a written demand for substantial performance is delivered to Employee
by the Chairman of the Board or the Board which specifically identifies the
manner in which the Chairman of the Board or the Board believes that
Employee has not substantially performed his duties, or (ii) the willful
engaging by Employee in misconduct which is materially and demonstrably
injurious to the Company. For purposes of this Agreement, no act, or failure
to act, on the part of Employee shall be considered "willful" unless done, or
omitted to be done, in bad faith and without reasonable belief that
Employee's act or omission was in the best interests of the Company.
Notwithstanding the foregoing, Employee shall not be deemed to have been
terminated for Cause without (1) reasonable notice to Employee setting forth
the reason for the Chairman of the Board's or the Board 's intention to
terminate for Cause, (2) an opportunity for Employee, together with his
counsel, to be heard before the Chairman of the Board or the Board, and (3)
delivery to Employee of a Notice of Termination, as defined below, from the
Chairman of the Board or the Board finding that in the good faith opinion of
the Chairman of the Board or the Board , Employee was guilty of conduct set
forth above, and specifying the particulars thereof in detail.
(e) MATERIAL BREACH. Employee terminates his service hereunder for a
material breach of this Agreement by the Company. For purposes of this
Agreement, a "material breach" shall be deemed to occur upon (i) a failure by
the Company to comply with any material provisions of this Agreement which has
not been cured within thirty (30) days after written notice of such
noncompliance has been given by Employee to the Chairman of the Board or the
Board, or (ii) any purported termination of Employee which is not effected
pursuant to a Notice of Termination, as defined below (and for purposes of this
Agreement no such purported termination shall be effective).
(f) NOTICE. The date specified in written notice given by the
Company or Employee at least thirty (30) days in advance.
Any termination of Employee by the Company or by Employee (other than
termination pursuant to Section 5(a) or (b) hereof) shall be communicated by
written Notice of Termination to the other party hereto in accordance with
Section 11. For purposes of this Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Employee under the
provisions so indicated, unless such termination is pursuant to paragraph (f)
hereof.
"Date of Termination" shall mean (i) if Employee's service is terminated by
the expiration of this Agreement, the date of expiration, (ii) if Employee's
service is terminated by his death, the date of his death, (iii) if Employee's
service is terminated pursuant to Section 5(c) hereof, thirty (30) days after
Notice of Termination is given (provided that Employee shall not have again
become available for service as the President and/or Chief Development Officer
on a regular basis during such thirty (30) day period), (iv) if Employee's
service is terminated for Cause, the date specified in the Notice of
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Termination, (v) if Employee's service is terminated pursuant to Section 5(f)
hereof, the expiration of the thirty (30) day notice period, and (vi) if
Employee's service is terminated for any other reason, the date on which a
Notice of Termination is given.
6. AMOUNTS DUE UPON TERMINATION OR DURING DISABILITY.
(a) During any period that Employee fails to perform his duties
hereunder as a result of incapacity due to physical or mental illness
("disability period"), Employee shall continue to receive his Base Salary at the
rate then in effect for such period until his service is terminated pursuant to
Section 5(c) hereof, provided that payments so made to Employee during the first
180 days of the disability period shall be reduced by the sum of the amounts, if
any, paid to the Employee at or prior to the time of any such payment under
disability benefit plans of the Company or under the Social Security disability
insurance program, and which amounts were not previously applied to reduce any
such payment.
(b) If Employee's service should be terminated by the Chairman of the
Board or the Board for Cause, by Employee's death or by Employee absent a
Material Breach, the Company shall pay Employee his accrued, but unpaid Base
Salary through the Date of Termination at the rate in effect at the time Notice
of Termination is given, and the Company shall have no further obligations to
Employee under this Agreement.
(c) If Employee's service is terminated by the Chairman of the Board
or the Board without Cause or by the Employee following a Material Breach,
Employee shall be entitled to receive, in addition to all other amounts, one of
the two alternative compensation payments described in (i) or (ii) below.
(i) INSTALLMENT PAYMENTS. An amount equal to Base Salary of
Employee in effect at the time of termination plus his target performance
bonus of 40% of Base Salary (total payment equal to 140% of Base Salary)
(less withholdings or applicable taxes), payable over the unexpired Term of
this Agreement remaining at the Date of Termination of Employee's
employment under this Agreement, payable in advance at the beginning of
each month in equal monthly installments over such unexpired Term; or
(ii) LUMP-SUM PAYMENT. An amount equal to the net present value
of the payments described in Section 6(c)(i) above, payable within 30 days
after the Date of Termination of Employee's employment under this
Agreement. The discount of such payments to their net present value shall
utilize a discount rate equal to the prime rate of interest published in
THE WALL STREET JOURNAL on the Date of Termination (such prime rate
currently defined in THE WALL STREET JOURNAL as the base rate on corporate
loans posted by at least 75% of the nation's 30 largest banks) or if such
rate is not available, then the prime rate of interest of NationsBank, N.A.
in effect on the Date of Termination.
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The Company shall have the right to elect the severance compensation
described in either clause (i) or clause (ii) above, at its sole discretion.
7. CONFIDENTIALITY. Employee acknowledges that he knows and in the
future will know information relating to the Company and its affiliated
companies and their respective operations that is confidential or a trade
secret. Such information includes information, whether obtained in writing, in
conversation or otherwise, concerning corporate strategy, intent and plans,
business operations, pricing, costs, budgets, equipment, the status, scope and
terms of pending acquisitions, negotiations and transactions, the terms of
existing or proposed business arrangements, contracts and obligations, and
corporate and financial reports. Such confidential or trade secret information
shall not, however, include information in the public domain unless Employee
has, without authority, made it public.
Employee shall (a) not disclose such information to anyone except in
confidence and as is necessary to the performance of his duties for the Company;
(b) keep such information confidential; (c) take appropriate precautions to
maintain the confidentiality of such information; and (d) not use such
information for personal benefit or the benefit of any competitor or any other
person.
Upon termination of his employment, Employee shall return all materials in
his possession or under his control that were prepared by or relate to the
Company or its affiliates, including, but not limited to, materials containing
confidential information, files, memorandums, price lists, reports, budgets and
handbooks.
Except as otherwise required by law, Company and Employee agree that all
provisions of this Agreement and all other elements of Employee's terms of
employment, compensation, and separation from employment (when such may occur)
shall remain confidential and shall not be disclosed to any party other than the
Employee and the members of the Board.
8. NONCOMPETITION. During the Term of Employee's employment by the
Company under any arrangement or nature whatsoever, and for a period equal to
(i) the period during or with respect to which the Employee receives a
continuation of his Base Salary under Section 6(c) or (ii) if the Employee's
termination is for Cause or the Employee quits absent a Material Breach, then
for the remainder of the Term as the Term would have been determined under
Section 2 of this Agreement on the date prior to the Employee's separation from
employment, Employee shall not, directly or indirectly, either individually or
jointly or on behalf of or in concert with any other person or entity, as a
proprietor, partner, shareholder, director, officer, employee, agent, consultant
or in any other capacity or manner whatsoever engage in any business activity
competitive with the business of the Company or its affiliates as constituted
during the Term of Employee's employment by the Company and on the Date of the
Termination of such employment.
9. NONSOLICITATION. Employee agrees that during the Term of Employee's
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employment by the Company under any arrangement or nature whatsoever, and for
a period of two years after the termination of such employment, Employee will
not (a) solicit, entice or otherwise induce any professional or executive
employee of the Company or its affiliates to leave the employ of the
Company or its affiliates for any reason whatsoever; (b) directly or
indirectly aid, assist or abet any other person or entity into soliciting,
enticing or inducing any employee of the Company or its affiliates to leave
their employ or in hiring any employee of the Company or its affiliates; or
(c) interfere with any contractual or other business relationship or
expectancy between the Company or its affiliates and their employees.
10. EQUITABLE REMEDIES. The parties acknowledge that irreparable damage
will result to the Company from any violation of Sections 7, 8 or 9 by
Employee. The parties expressly agree that, in addition to any and all
remedies available to the Company for any such violation, the Company shall
have the remedy of restraining order and injunction and any such equitable
relief as may be declared or issued by a court to enforce the provisions of
Sections 7, 8 and 9 and Employee agrees not to claim in any such equitable
proceeding that a remedy at law is available to the Company. Notwithstanding
anything contained herein to the contrary and if, and only if, any provision
of the type contained in Sections 7, 8 or 9, as the case may be, is
enforceable in the jurisdiction in question, if any one or more of the
provisions contained in such Section shall for any reason be held to be
excessively broad as to duration, geographical scope, activity or subject,
such provision shall be construed by limiting and reducing it so as to be
enforceable to the extent compatible with the applicable law in such
jurisdiction as it shall then appear.
11. NOTICES. All notices, requests, demands or other communications under
this Agreement shall be in writing addressed as follows:
(a) If to the Company, to:
Entertainment Properties Trust
One Kansas City Place
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxx
(b) If to Employee, to:
Xxxxxx X. "Chip" Xxxxxx
Entertainment Properties Trust
One Kansas City Place
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, Xxxxxxxx 00000
Any such notice, request, demand or other communication shall be effective
as of the date
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of actual delivery thereof. Either party may change such notice address by
written notice as provided herein.
12. OTHER PROVISIONS. This Agreement shall be binding upon, inure to
the benefit of and be enforceable by the parties hereto and their respective
heirs, personal representatives, successors and permitted assigns. This
Agreement shall be governed by the laws of the State of Missouri. This
Agreement represents the entire agreement of the parties hereto and shall not
be amended except by a written agreement signed by all the parties hereto.
This Agreement supersedes any prior oral or written agreements or
understandings between the Company or any affiliate of the Company and
Employee. This Agreement shall not be assignable by one party without the
prior written consent of the other party. In the event one or more of the
provisions contained in this Agreement or any application thereof shall be
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions of this Agreement or any other
application thereof shall not in any way be affected or impaired thereby.
Section headings herein have no legal significance.
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IN WITNESS WHEREOF, the parties have executed this Employment Agreement as
of the day and year first above written.
ENTERTAINMENT PROPERTIES TRUST
By
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Name
-------------------------------------
Title
------------------------------------
"EMPLOYEE"
-----------------------------------------
XXXXXX X. "CHIP" XXXXXX
