THIS EMPLOYMENT
AGREEMENT (the “Agreement”) is entered into as of
May 14, 2009, by ENTERTAINMENT PROPERTIES TRUST, a Maryland
real estate investment trust (the “Company”) and Morgan
G. Earnest II (“Employee”). In consideration of the
mutual covenants contained herein, the parties agree as
follows:
1. DEFINITIONS.
For purposes of this Agreement, the following terms shall have the
following meanings.
“ANNUAL
INCENTIVE PROGRAM” shall mean the annual incentive program of
the Company, as amended from time to time, or any successor
incentive program adopted by the Board or the Compensation
Committee, pursuant to which annual Performance Bonuses and
Incentive Bonuses may be awarded to Employee. Pursuant to the
Annual Incentive Program, the Compensation Committee may make
recommendations to the Board, and the Board may adopt, an annual
bonus for the Employee which will be based primarily on the
Employee’s performance, as measured by the Board, for the
most recently completed fiscal year.
“BOARD”
shall mean the Board of Trustees of the Company. Notwithstanding
anything herein to the contrary, the Board may authorize the
Compensation Committee to take any action required to be taken by
the Board pursuant to this Agreement.
“CAUSE”
shall mean and be limited to an affirmative determination by the
Board that any of the following has occurred:
(a) Employee’s willful and continued failure or refusal
to perform his duties with the Company (other than as a result of
his Disability or incapacity due to mental or physical illness)
which is not remedied in the reasonable good faith determination of
the Board within 30 days after Employee’s receipt of
written notice from the Board specifying the nature of such failure
or refusal, or (b) the willful engagement by Employee in
misconduct which is materially and demonstrably injurious to the
Company. For purposes of this Agreement, no act or failure to act
shall be considered “willful” unless done or omitted in
bad faith and without reasonable belief that the act or omission
was in the best interests of the Company. A failure or refusal to
perform duties materially and adversely inconsistent with
Employee’s position, as contemplated in paragraph (a) of
the definition of “Good Reason,” shall not be
considered willful or in bad faith.
“CHANGE
IN CONTROL” shall mean the occurrence of any of the following
events:
(a) Incumbent
Trustees cease for any reason to constitute at least a majority of
the Board.
(b) Any
“person” (as defined in Section 3(a)(9) of the
Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of
the Exchange Act) or “group” (within the contemplation
of Section 13(d)(3) of the Exchange Act and Rule 13d-5
thereunder) is or becomes a “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act) or controls the
voting power, directly or indirectly, of shares of the Company
representing 25% or more of the Company Voting Securities, other
than (i) an acquisition of Company Voting Securities by
an
underwriter
pursuant to an offering of shares by the Company, (ii) a
Non-Qualifying Transaction, or (iii) an acquisition of Company
Voting Securities directly from the Company which is approved by a
majority of the Incumbent Trustees.
(c) The
shareholders of the Company approve a Business Combination, other
than a Non-Qualifying Transaction.
(d) The
shareholders of the Company approve a plan of complete liquidation
or dissolution of the Company.
(e) The
acquisition of direct or indirect Control of the Company by any
“person” or “group.”
(f) Any
transaction or series of transactions which results in the Company
being “closely held” within the meaning of the REIT
provisions of the Code, after any applicable grace period, and with
respect to which the Board has either waived or failed to enforce
the “Excess Share” provisions of the Company’s
Amended and Restated Declaration of Trust.
(g) For
purposes of this definition:
(A) “Company
Voting Securities” shall mean the outstanding shares of the
Company eligible to vote in the election of trustees of the
Company.
(B) “Company
25% Shareholder” shall mean any “person” or
“group” which beneficially owns or has voting control
of 25% or more of the Company Voting Securities.
(C) “Business
Combination” shall mean a merger, consolidation, acquisition,
sale of all or substantially all of the Company’s assets or
properties, statutory share exchange or similar transaction
involving the Company or any of its subsidiaries that requires the
approval of the Company’s shareholders, whether for the
transaction itself or the issuance or exchange of securities in the
transaction.
(D) “Incumbent
Trustees” shall mean (1) the trustees of the Company as
of the date of this Agreement or (2) any trustee elected
subsequent to the date of this Agreement whose election or
nomination was approved by a vote of at least two-thirds of the
Incumbent Trustees then on the Board (either by specific vote or
approval of a proxy statement of the Company in which such person
is named as a nominee for trustee).
(E) “Parent
Corporation” shall mean the ultimate parent entity that
directly or indirectly has beneficial ownership or voting control
of a majority of the outstanding voting securities eligible to
elect directors of a Surviving Corporation.
(F) “Surviving
Corporation” shall mean the entity resulting from a Business
Combination.
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(G) “Non-Qualifying
Transaction” shall mean a Business Combination in which all
of the following criteria are met: (1) more than 50% of the
total voting power of the Surviving Corporation or, if applicable,
the Parent Corporation, is represented by Company Voting Securities
that were outstanding immediately prior to the Business Combination
(or, if applicable, is represented by shares into which the Company
Voting Securities were converted pursuant to the Business
Combination and held in substantially the same proportion as the
Company Voting Securities were held immediately prior to the
Business Combination), (2) no “person” or
“group” (other than a Company 25% Shareholder or any
Employee Benefit Plan (or related trust) sponsored or maintained by
the Surviving Corporation or the Parent Corporation) would become
the beneficial owner, directly or indirectly, of 25% or more of the
total voting power of the outstanding voting securities eligible to
elect directors of the Parent Corporation (or, if there is no
Parent Corporation, the Surviving Corporation) and no Company 25%
Shareholder would increase its percentage of such total voting
power as a result of the transaction, and (3) at least a
majority of the members of the board of directors or similar
governing body of the Parent Corporation (or, if there is no Parent
Corporation, the Surviving Corporation) following the consummation
of the Business Combination were Incumbent Trustees at the time of
the Board’s approval of the Business Combination.
(h) Notwithstanding
the foregoing, a Change in Control shall not be deemed to occur
solely because any “person” or “group”
acquires beneficial ownership or voting control of more than 25% of
the Company Voting Securities as a result of any acquisition of
Company Voting Securities by the Company, but if after that
acquisition by the Company the “person” or
“group” becomes the beneficial owner or obtains voting
control of any additional Company Voting Securities, a Change in
Control shall be deemed to occur unless otherwise exempted as set
forth above.
“CODE”
shall mean the Internal Revenue Code of 1986, as
amended.
“COMPENSATION
COMMITTEE” shall mean the compensation committee appointed by
the Board.
“CONTROL”
shall mean the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of the
Company, whether through the ownership of Company Voting
Securities, by contract, or otherwise.
“DISABILITY”
shall mean (a) the adjudication of incompetence of Employee or
(b) the failure of Employee to perform his duties with the
Company on a full-time basis for a period of time until the
Company’s Long-Term Disability Plan commences payment of
benefits as a result of incapacity due to mental or physical
illness which is determined to be permanent by a physician selected
by the Company or its insurers and acceptable to Employee or his
legal representative, which acceptance shall not be unreasonably
withheld.
“EMPLOYEE
BENEFIT PLANS” shall mean any and all 401(k) plans, profit
sharing plans, retirement plans, savings plans, investment plans,
Health Plans, group life insurance, disability insurance, salary
continuation plans, accidental death and travel accident insurance
plans, long-term care plans, fringe benefits and all other benefit
plans, programs and
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policies of the
Company adopted for peer management employees of the Company or
agreed to by Employee and the Company during the Employment
Period.
“EMPLOYMENT
PERIOD” shall mean the period from the date of this Agreement
until the third anniversary of the date hereof, as extended
automatically by adding one additional one year period on the third
anniversary of the date hereof and on each anniversary
thereafter.
“EXCESS
PARACHUTE PAYMENT” shall have the meaning given by such term
in Section 280G of the Code.
“EXCHANGE
ACT” shall mean the Securities Exchange Act of 1934, as
amended.
“EXCISE
TAX” shall mean any tax imposed by Section 4999 or 280G
of the Code.
“GOOD
REASON” shall mean any of the following which is not remedied
in the reasonable good faith determination of Employee within
30 days after the Company’s receipt of written notice
specifying the event claimed to constitute Good Reason:
(a) The assignment
to Employee of duties materially and adversely inconsistent with
Employee’s position as described in Section 2 or other
position to which Employee may have been promoted prior to that
time, or any material reduction in Employee’s office, status,
position, title(s) or responsibilities which is not agreed to by
Employee;
(b) Any material
reduction in Employee’s base compensation or eligibility
under the Annual Incentive Program, eligibility for Long-Term
Incentive Awards under the Long-Term Incentive Plan, or eligibility
under Employee Benefit Plans which is not agreed to by Employee,
or, after the occurrence of a Change in Control, a diminution of
the Employee’s target opportunity under the Annual Incentive
Plan, Long-Term Incentive Plan or any successor plan, or a failure
to evaluate Employee’s performance relative to the target
opportunity based upon the same metrics as peer management at the
surviving or acquiring company;
(c) A material
breach of this Agreement by the Company, its successors or assigns,
including any failure to pay Employee on a timely basis any amounts
to which he is entitled under this Agreement; or
(d) Any
requirement that Employee be based at any office outside of a
35-mile radius of Employee’s principal residence as of the
date hereof (as set forth in Section 16 hereof).
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“GROSS-UP
PAYMENT” shall mean a payment to Employee in an amount equal
to all Excise Tax imposed on Employee as a result of any of the
events described in Section 6(d), plus an amount equal to all
federal, state or local income or other tax imposed on Employee as
a result of any payment of such Excise Tax amount.
“HEALTH
PLANS” shall mean any and all individual and family health
and hospitalization insurance and/or self-insurance plans, medical
reimbursement plans, prescription drug plans, dental plans and
other health and/or wellness plans.
“INCENTIVE
BONUS” shall mean any portion of bonus awarded to Employee
under the Annual Incentive Program in which the Employee elects to
take restricted shares of the Company or other equity based
compensation.
“LONG-TERM
INCENTIVE AWARDS” shall mean all grants of equity-based
compensation awarded to Employee under the Company’s
Long-Term Incentive Plan, other than Incentive Bonuses, together
with amounts under the Long-Term Incentive Plan that Employee
elects to contribute to the Section 79 insurance plan of the
Company, or any successor plan.
‘LONG-TERM
INCENTIVE PLAN” means the 1997 Share Equity Plan and any
successor, renewal or additional equity plan of the
Company.
“NOTICE
OF TERMINATION” shall mean a written instrument delivered by
Employee or the Board, as the case may be, which (a) gives
notice of the termination of this Agreement and Employee’s
employment hereunder, (b) indicates the provision of this
Agreement under which the termination is made, (c) unless the
termination is pursuant to Section 5(a), (d), (f) or (g),
describes in reasonable detail the facts and circumstances claimed
to provide a basis for termination, and (d) specifies the
Termination Date (which shall be not more than 30 days after
the date of the Notice). The failure by Employee or the Company to
describe in a Notice of Termination any fact or circumstance which
contributes to a showing of Disability, Good Reason or Cause (as
applicable) shall not waive any right to assert such fact or
circumstance in enforcing Employee’s or the Company’s
rights hereunder.
“PERFORMANCE
BONUS” shall mean any portion of the bonus awarded to
Employee under the Annual Incentive Program in which the Employee
elects to take in the form of cash.
“RESIGNATION”
shall mean Employee’s resignation from the Company other than
pursuant to Section 5(e) or (g). “Resign” shall
have the correlative meaning.
“SEVERANCE
MULTIPLE” shall mean the number three (3).
“TERMINATION
DATE” shall mean: (a) if Employee is terminated pursuant
to Section 5(b) or (c) or terminates pursuant to
Section 5(e) or (g), the date of receipt of the Notice of
Termination or any later date specified in the Notice, (b) if
Employee is terminated by reason of death, the date of his death,
or (c) if Employee is terminated pursuant to Section 5(d)
or Resigns, 30 days after the date of receipt of the Notice of
Termination.
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“YEAR”
shall mean a calendar year including, for purposes of
Section 4, all of calendar year 2009.
2. DUTIES.
The Company employs Employee as its Chief Investment Officer and
Vice President. During the Employment Period:
(a) Employee
shall perform, to the best of his ability, the duties commensurate
with Employee’s position as Chief Investment Officer and Vice
President, or such other position as Employee may be promoted in
the future, as the Company shall assign from time to
time.
(b) Employee
shall devote his full time and attention to the business of the
Company and shall not engage in any other business activity for
gain or profit, other than (i) Employee’s service as a
consultant to Capmark Financial Group, Inc. and (ii) personal
investments or service on corporate, civic or charitable boards or
committees, in the case of both clause (i) and (ii), so long as
such activities do not significantly interfere with the performance
of his responsibilities under this Agreement.
Employee
accepts his employment and agrees to faithfully observe and enforce
the policies and decisions of the Company in effect from time to
time, including but not limited to the Company’s Code of
Business Conduct and Ethics and Insider Trading and
Regulation FD Compliance Policy.
3. TERM. This
Agreement and Employee’s employment shall remain in effect
during the Employment Period, unless
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