SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934 (Amendment No. )
Filed by the registrant [x]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14(a)-12
MGI Properties
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) filing Proxy Statement, if other than Registrant)
Payment of filing fee (check the appropriate box):
[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i) (1) and 0-11
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
<PAGE>
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
<PAGE>
MGI PROPERTIES
One Winthrop Square
Boston, Massachusetts 02110
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
March 27, 1997
To the Shareholders of
MGI Properties:
Notice is Hereby Given that the Annual Meeting of Shareholders (the
"Annual Meeting") of MGI Properties (the "Trust") will be held at the Boston
Harbor Hotel, 70 Rowes Wharf, Boston, Massachusetts, on March 27, 1997 at
10:00 A.M. for the following purposes:
1. To elect two Trustees;
2. To ratify and approve the adoption of the Trust's 1997 Employee Stock
Option, Stock Appreciation Rights and Restricted Stock Plan; and
3. To consider and act upon such other business as may properly come
before the Annual Meeting.
Only shareholders of record at the close of business on February 12, 1997
will be entitled to vote at the Annual Meeting.
If you do not expect to attend the Annual Meeting, please sign and
promptly mail the enclosed proxy in order that your shares may be voted for
you. A return envelope is provided for your convenience.
By Order of the Trustees,
W. Pearce Coues
Chairman of the Board of Trustees
Dated: Boston, Massachusetts
February 24, 1997
MGI PROPERTIES is a Massachusetts trust and all persons dealing with the
Trust must look solely to the property of this Trust for the enforcement of
any claims against the Trust. Neither the Trustees, officers, agents nor
shareholders of this Trust assume any personal liability for obligations
entered into on its behalf.
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
MGI PROPERTIES
One Winthrop Square
Boston, Massachusetts 02110
ANNUAL MEETING OF SHAREHOLDERS
March 27, 1997
PROXY STATEMENT
This Proxy Statement is being mailed to the shareholders of MGI Properties
(the "Trust") on or about February 24, 1997, in connection with the
solicitation by the Trust's Board of Trustees (the "Board of Trustees") of
proxies for the Annual Meeting of Shareholders (the "Annual Meeting") to be
held at the Boston Harbor Hotel, 70 Rowes Wharf, Boston, Massachusetts, on
March 27, 1997. The meeting has been called for the following purposes: (1)
to elect two Trustees; (2) to ratify and approve the adoption of the Trust's
1997 Employee Stock Option, Stock Appreciation Rights and Restricted Stock
Plan (the "1997 Plan"); and (3) to consider and act upon such other business
as may properly come before the Annual Meeting.
PROXIES AND VOTING RIGHTS
The voting securities of the Trust outstanding on February 12, 1997
consisted of 13,595,454 of the Trust's Common Shares (the "Common Shares")
entitling the holders thereof to one vote per Common Share. Shareholders of
record at the close of business on February 12, 1997 are entitled to notice
of and to vote at the Annual Meeting. A majority of the outstanding Common
Shares is required to be represented to constitute a quorum for the holding
of the Annual Meeting. The affirmative vote of the holders of Common Shares
representing not less than 66-2/3% of the total votes authorized to be cast
by shares of all classes which are present in person or by proxy and entitled
to vote and voting on the election of Trustees (Proposal 1) is required for
the election of each nominee for Trustee (i.e., 66-2/3% of the votes cast).
In the event that no nominee for a particular trusteeship receives the
requisite number of votes for election to such trusteeship at the Annual
Meeting, the incumbent Trustee shall remain in office until the next annual
meeting of the Trust's shareholders and until a successor is elected and
qualified. At that annual meeting, such nominee would stand for election for
the remainder of such term, together with the nominees for the class whose
term then expires.
The affirmative vote of the holders of Common Shares representing not less
than a majority of the total votes authorized to be cast of all classes which
are present in person or by proxy and entitled to vote and voting on the
adoption of the 1997 Plan (Proposal 2) is required for the adoption of the
1997 Plan.
With regard to the election of Trustees, votes may be cast in favor or
withheld; votes that are withheld will be excluded entirely from the vote and
will have no effect. Abstentions may be specified on Proposal 2 and will be
counted as present for purposes of this item. Because the adoption of the
1997 Plan requires the approval of a majority of the Common Shares present in
person or by proxy and entitled to vote and voting, abstentions will have the
effect of a negative vote. Under the rules of the New York Stock Exchange,
brokers who hold Common Shares in street name for customers have the
authority to vote, under certain circumstances, on items when they have not
received instructions from beneficial owners. Brokers that do not receive
instructions are entitled to vote on Proposals 1 and 2.
<PAGE>
All proxies delivered pursuant to this solicitation may be revoked by the
person executing the same by notice in writing received at the office of the
Trust at any time prior to exercise. If not revoked, the Common Shares
represented thereby will be voted at the Annual Meeting. All proxies will be
voted in accordance with the instructions specified thereon.
All expenses in connection with the solicitation will be borne by the
Trust. It is expected that the solicitation will be made primarily by mail,
but regular employees or representatives of the Trust may also solicit
proxies by telephone, telecopier or in person, without additional
compensation. Beacon Hill Partners, Inc., a proxy solicitation firm, will
assist the Trust in soliciting proxies with respect to Common Shares held of
record by brokers or other nominees at a cost of $4,000, plus reasonable
out-of-pocket expenses.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information concerning ownership of the
Common Shares as of February 12, 1997 by (i) each executive officer of the
Trust, (ii) each Trustee of the Trust, (iii) all executive officers and
Trustees of the Trust as a group, and (iv) each person who, to the knowledge
of management, owned beneficially more than 5% of the Common Shares. Unless
otherwise indicated, the address of each person listed below is One Winthrop
Square, Boston, Massachusetts 02110.
<TABLE>
<CAPTION>
Common Shares Percent of
Beneficial Owner(1) Beneficially Owned Class(2)
- ------------------------------------------------- ------------------- ------------------
<S> <C> <C>
W. Pearce Coues 363,324(3) 2.6%
Phillip C. Vitali 164,961(4) 1.2%
Robert Ware 173,500(5) 1.3%
Karl W. Weller 80,404(6) *
George S. Bissell 21,000(7) *
Herbert D. Conant 20,500(8) *
Francis P. Gunning 21,000(7) *
Colin C. Hampton(9) 26,000(7) *
George M. Lovejoy, Jr. 20,300(7) *
William F. Murdoch, Jr. 21,000(7) *
Rodger P. Nordblom 21,400(7) *
Davenport & Co. of Virginia, Inc. 740,831(10) 5.5%
901 E. Cary Street Suite 1110
Richmond, Virginia 23219
All Executive Officers and Trustees as a group
(11 persons) 933,389(11) 6.5%
</TABLE>
-----------------
* Less than 1%.
(1) Except as outlined herein, the persons named in the table, to the Trust's
knowledge, have sole voting and dispositive power with respect to all
shares shown as beneficially owned by them, subject to community property
laws where applicable and the information contained in the footnotes
hereunder.
(2) Calculations assume that all options which are exercisable by such person
within 60 days after February 12, 1997 have been exercised.
2
<PAGE>
(3) Includes 278,342 presently exercisable options and excludes 25,000
options not presently exercisable, to purchase an aggregate of 303,342
Common Shares granted pursuant to the Trust's 1982 Incentive Stock
Option Plan for Key Employees (the "1982 Incentive Plan"), the Trust's
1982 Stock Option Plan for Trustees (the "1982 Trustees' Plan"), the
Trust's 1988 Stock Option and Stock Appreciation Rights Plan for Key
Employees (the "1988 Employee Plan"), the Trust's 1988 Stock Option Plan
for Trustees (the "1988 Trustees' Plan"), the Trust's 1994 Employee
Stock Option and Stock Appreciation Rights Plan (the "1994 Employee
Plan"), the Trust's 1994 Trustees Stock Option Plan (the "1994 Trustees'
Plan") and the 1997 Plan. Options granted under the 1997 Plan are
subject to shareholder approval of the 1997 Plan at the Annual Meeting.
Also includes 207 Common Shares owned by Mr. Coues' wife, as to which
Mr. Coues disclaims beneficial ownership.
(4) Includes 142,379 presently exercisable options and excludes 15,000
options not presently exercisable, to purchase an aggregate of 157,379
Common Shares granted pursuant to the 1982 Incentive Plan, the 1988
Employee Plan and the 1994 Employee Plan.
(5) Includes 142,200 presently exercisable options and excludes 15,000
options not presently exercisable, to purchase an aggregate of 157,200
Common Shares granted pursuant to the 1982 Incentive Plan, the 1988
Employee Plan and the 1994 Employee Plan.
(6) Includes 69,556 presently exercisable options and excludes 15,000
options not presently exercisable, to purchase an aggregate of 84,556
Common Shares granted pursuant to the 1988 Employee Plan and the 1994
Employee Plan.
(7) Includes presently exercisable options to purchase an aggregate of
20,000 Common Shares granted pursuant to the 1982 Trustees' Plan, the
1988 Trustees' Plan or the 1994 Trustees' Plan.
(8) Includes presently exercisable options to purchase an aggregate of
18,000 Common Shares granted pursuant to the 1982 Trustees' Plan and the
1988 Trustees' Plan.
(9) Mr. Hampton's term as a Trustee of the Trust expires at the Annual
Meeting. He will not stand for reelection because he has reached the
Trust's mandated age for retirement of Trustees.
(10) Based on a Schedule 13D dated January 14, 1997, Davenport & Co. of
Virginia, Inc., a Virginia corporation with its principal place of
business located at 901 E. Cary Street, Suite 1100, Richmond, Virginia
23219 ("Davenport"), beneficially owned 740,831 of the then outstanding
Common Shares, representing 6.41% thereof as of such date. Of such
Common Shares, Davenport had (i) sole voting and dispositive power with
respect to 101,843 of such shares and (ii) shared voting and dispositive
power with respect to 638,988 of such shares.
(11) Includes 770,447 presently exercisable options and excludes 70,000
options not presently exercisable, to purchase an aggregate of 840,447
Common Shares.
PROPOSAL NO. 1
ELECTION OF TRUSTEES
The Board of Trustees is divided into three classes. Each class is elected
by the shareholders.
Unless authority is specifically withheld, proxies will be voted for the
election of the nominees named below to serve as Trustees for the term
indicated herein and until their successors are elected and qualified. The
two nominee-Trustees have consented to serve if elected; however, should any
nominee not be a candidate at the time of the Annual Meeting (a situation
which is not now anticipated), proxies may be voted in favor of the remaining
nominees and may also be voted for a substitute nominee.
3
<PAGE>
The following table contains certain information regarding the Trustees,
including nominees for election as Trustees:
<TABLE>
<CAPTION>
Name, Age, Principal Occupation for the Past Five Years Trustee
and Current Public Directorships or Trusteeships Since
----------------------------------------------------------- ---------
<S> <C>
Trustee-Nominees:
To be elected for a term of three years, expiring on the
date of the annual meeting in 2000:
William F. Murdoch, Jr. (66) 1996
Principal since 1990, Murdoch Associates (a real estate
development and consulting firm).
Rodger P. Nordblom (69) 1984
Chairman of the Board and former President for more than
five years, Nordblom Company
(a real estate development and management firm).
Trustees Continuing in Office:
To continue in office for a term of two years, expiring on
the date of the annual meeting in 1999:
Francis P. Gunning (73) 1971
Formerly Executive Vice President and General Counsel from
1974 to 1988, Teachers Insurance and Annuity Association
of America and College Retirement Equities Fund (insurance
and annuity business).
George M. Lovejoy, Jr. (66) 1993
President since 1994 and director since 1972, Fifty
Associates (a real estate investment trust); former
Chairman of the Board from 1988 to March 1993, Meredith &
Grew Incorporated (a real estate brokerage and management
firm); currently Trustee of the following mutual funds:
Scudder Cash Investment Trust; Scudder GNMA Fund; Scudder
Municipal Trust, Scudder Investment Trust, Scudder
Portfolio Trust and Scudder Tax Free Money Fund; Director,
The Latin American Dollar Income Fund, Inc.; Director,
Scudder World Income Opportunities Fund; Shared Investment
Committee Chairman, Copley Investors Limited Partnership.
To continue in office for a term of one year, expiring on
the date of the annual meeting in 1998:
George S. Bissell (67) 1995
Chairman of the Funds Board since January 1995 and
previously Chairman of the Board and Chief Executive
Officer from 1979 to December 1994, Keystone Group, Inc.
(an investment management firm).
W. Pearce Coues (56) 1982
Chairman of the Board of Trustees and Chief Executive
Officer of the Trust since 1982.
Herbert D. Conant (72) 1988
Formerly Chairman of the Board and Chief Executive Officer
from 1985 through 1989, The Turner Corporation (a general
construction and construction management firm). In May
1995, the Securities and Exchange Commission filed a
complaint against Mr. Conant (which complaint did not
relate to the Trust) alleging that he violated Section
10(b) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and Rule 10b-5 promulgated
thereunder. Without admitting or denying such allegations,
Mr. Conant consented to the entry of a final judgment in
the U.S. District Court for the Middle District of Florida
permanently enjoining him from violating Section 10(b) of
the Exchange Act and Rule 10b-5 promulgated thereunder and
requiring payment of a total of $28,405 in gains, civil
penalties and interest.
</TABLE>
4
<PAGE>
The Board of Trustees held four meetings during the year ended November
30, 1996. There is one committee of the Board of Trustees, the
Administrative-Audit Committee (the "Administrative-Audit Committee"), which
in addition to fulfilling the functions of an audit committee, has
supervisory responsibility for Trustee nominations, executive officer
compensation, including stock options, and certain administrative matters.
The Administrative- Audit Committee, which is comprised of Messrs. Gunning,
who serves as Chairman, Conant, Hampton and Lovejoy, met four times during
the year ended November 30, 1996. The Administrative-Audit Committee may also
make recommendations to the Board of Trustees and does not have the power to
bind the Trust, except that such Committee is empowered to function as the
Compensation and Stock Option Committee in administering all of the Trust's
stock option and stock appreciation rights plans and in determining the
compensation of executive officers.
The Trust's policy, effective December 1, 1996, is to pay each Trustee
other than Mr. Coues (i) a $12,000 annual fee and (ii) $1,000 per Board of
Trustees or committee meeting attended; provided, however, that each of the
Trustees receives $500 for each committee meeting attended on the same day a
Board of Trustees' meeting is held. Trustees have been provided with the
option to receive their $12,000 annual retainer, or a portion thereof, in
advance for the sole purpose of making open market purchases of Common Shares
as legally permissible.
The following table contains certain information regarding additional
executive officers of the Trust:
<TABLE>
<CAPTION>
Executive Officer's Name Age Principal Occupation
- ------------------------- ----- ----------------------------------------------
<S> <C> <C>
Phillip C. Vitali Executive Vice President of the Trust since December
1989; Senior Vice President of the Trust from January
1987 to December 1989; Treasurer and Chief Financial
46 Officer of the Trust since March 1986.
Robert Ware Executive Vice President of the Trust since December
1989 of the Trust; Senior Vice President of the
58 Trust from April 1986 to December 1989.
Karl W. Weller Senior Vice President of the Trust since March 1993;
for more than five years prior thereto, Vice
President, Aetna Life & Casualty Company and
39 Managing Director (real estate investment group).
</TABLE>
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by or
paid to the Trust's Chief Executive Officer and each of the other most highly
compensated executive officers of the Trust whose compensation exceeded
$100,000 for the fiscal years ended November 30, 1996, 1995 and 1994 (the
"Named Executive Officers").
5
<PAGE>
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
----------------
Annual Compensation Securities
--------------------- Underlying All Other
Name and Principal Position Year Salary Bonus(2) Options/SARs(3) Compensation(4)
------------------------------- ----------------- --------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
W. Pearce Coues 1996 $269,385 $120,000 45,000 $57,500
Chairman of the Board and 1995 $262,000 $ 80,625 50,000 $57,500
Chief Executive Officer 1994 $261,414 $ 68,125 35,000 $60,137
Phillip C. Vitali
Executive Vice President, 1996 $169,385 $ 60,000 25,000 $22,500
Treasurer and Chief Financial 1995 $161,462 $ 40,313 18,000 $22,500
Officer 1994 $154,269 $ 21,800 8,000 $24,872
Robert Ware 1996 $167,230 $ 60,000 25,000 $37,500
Executive Vice President 1995 $157,231 $ 40,313 18,000 $37,500
1994 $147,188 $ 21,800 8,000 $39,994
Karl W. Weller 1996 $159,230 $ 60,000 25,000 $22,500
Senior Vice President 1995 $149,385 $ 40,313 16,000 $22,500
1994 $141,794 $ 20,438 6,000 $21,300
</TABLE>
(1) This Table covers all executive officers receiving compensation of at
least $100,000. The Table does not include columns for Other Annual
Compensation, Restricted Stock Awards and Long Term Incentive Plan
Payouts as there was no information to report with respect to these
columns.
(2) Annual bonuses in fiscal 1995 and 1994 were paid in the form of Common
Shares. Fiscal 1996 bonuses were paid in cash used to exercise
outstanding stock options (except for a portion of Mr. Vitali's 1996
bonus).
(3) Options awarded under the 1988 and 1994 Employee Plans may include a
tandem grant of stock appreciation rights ("SARs"). An SAR is exercisable
at any time the option to which it relates can be exercised, but only
upon a showing of "hardship" by the optionee and upon consent of the
Administrative-Audit Committee. In addition, an SAR may be exercised only
if prior to or simultaneously with the exercise thereof, the optionee has
exercised or exercises an equivalent number of options granted under the
Trust's stock option and stock appreciation rights plans. A Hostile
Change in Control, as defined in such plans, abrogates the hardship
requirement and the prior or simultaneous option exercise requirement.
SARs terminate when the related option is exercised. Mr. Coues was
granted, in tandem with stock options, 22,500 SARs in 1996, 25,000 SARs
in 1995 and 1,500 SARs in 1994. Messrs. Vitali and Ware were each
granted, in tandem with stock options, 12,500 SARs in 1996, 9,000 SARs in
1995 and 4,000 SARs in 1994. Mr. Weller was granted in tandem with stock
options, 12,500 SARs in 1996, 8,000 SARs in 1995 and 3,000 SARs in 1994.
(4) All Other Compensation is comprised of contributions to the respective
Simplified Employee Pension Plan ("SEPP") of each individual and amounts
accrued by or payments made by the Trust to the accounts of participants
in the Trust's Supplemental Retirement Plan ("SERP"). The SEPP
contribution for Mr. Coues was $22,500 in each of 1996 and 1995 and
$25,137 in 1994. The SERP contribution for Mr. Coues was $35,000 in each
of 1996, 1995 and 1994. All amounts listed for Mr. Vitali are SEPP
contributions. The SEPP contributions for Mr. Ware were $22,500 in each
of 1996 and 1995 and $24,994 in 1994. The SERP contribution for Mr. Ware
was $15,000 in each of 1996, 1995 and 1994. The SEPP contribution for Mr.
Weller was $22,500 in 1996 and the SERP contributions for Mr. Weller were
$22,500 in 1995 and $21,300 in 1994.
6
<PAGE>
The following table sets for the certain information regarding stock
option grants made to the Named Executive Officers during the fiscal year
ended November 30, 1996.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential
Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation
Individual Grants For Option Term(1)
------------------------------------------------------- -------------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise
Options/SARs Employees in Price Expiration
Name Granted(2) Fiscal Year Per Share Date 5% 10%
- -------------------- -------------- -------------- ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
W. Pearce Coues 45,000 31.8% $16.125 12/18/05 $456,525 $1,156,725
Phillip C. Vitali 25,000 17.7% $16.125 12/18/05 $253,625 $ 642,625
Robert Ware 25,000 17.7% $16.125 12/18/05 $253,625 $ 642,625
Karl W. Weller 25,000 17.7% $16.125 12/18/05 $253,625 $ 642,625
</TABLE>
(1) Options will have no actual value unless, and then only to the extent
that, the stock price of the Common Shares appreciates from the grant
date to the exercise date.
(2) Options awarded under the Trust's 1994 and 1988 Employee Plans may
include a tandem grant of SARs. An SAR is exercisable at any time the
option to which it relates can be exercised, but only upon a showing of
"hardship" by the optionee and upon consent of the Administrative-Audit
Committee. In addition, an SAR may be exercised only if prior to or
simultaneously with the exercise thereof, the optionee has exercised or
exercises an equivalent number of options granted pursuant to such plan.
SARs granted in tandem with 1996 stock option awards were 22,500 to Mr.
Coues, 12,500 each to Messrs. Vitali, Ware and Weller (representing
31.8%, 17.7%, 17.7% and 17.7%, respectively, of the SARs granted in
fiscal 1996).
The following table sets forth certain information regarding the stock
options exercised by the Named Executive Officers during the fiscal year
ended November 30, 1996 and held by the Named Executive Officers as of
November 30, 1996.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Value of Unexercised
Securities Underlying In-the-Money
Shares Unexercised Options/SARs Options/SARs At
Acquired On Value At Fiscal Year-End Fiscal Year-End
Name Exercise Realized($) Exercisable/Unexercisable(1) Exercisable/Unexercisable
- -------------------- ------------- ------------ ---------------------------- ---------------------------
<S> <C> <C> <C> <C>
W. Pearce Coues 3,500 $26,625 243,000/22,500 $1,713,125/$90,000
Phillip C. Vitali -- -- 119,411/12,500 $ 872,490/$50,000
Robert Ware 500 $ 5,688 119,500/12,500 $ 863,125/$50,000
Karl W. Weller -- -- 46,500/12,500 $ 240,750/$50,000
</TABLE>
(1) Outstanding SARs, all of which were granted in tandem with stock options,
aggregated at fiscal year-end 86,598 for Mr. Coues, 55,552 for Mr. Vitali,
55,597 for Mr. Ware and 29,500 for Mr. Weller.
7
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the five-year cumulative total return on the
Common Shares to the total returns in the Standard & Poor's 500 Stock Index
and the National Association of Real Estate Investment Trusts ("NAREIT")
Total Return Indices for Equity REITs. The graph assumes that the value of
the investment in the Common Shares and each index was $1,000 on November 30,
1991 and that all dividends thereon were reinvested. There can be no
assurance that the Common Shares' total return will continue into the future
with the same or similar trend depicted in this graph.
[STOCK PERFORMANCE LINE CHART]
MGI S&P 500 NAREIT-EQUITY
--- ------- -------------
1991 1000 1000 1000
1992 1215 1184.26 1206.12
1993 1524 1303.59 1471.72
1994 1644.89 1317.64 1412.68
1995 1982.72 1803.89 1656.76
1996 2656.21 2304.84 2140.91
[/LINE CHART]
8
<PAGE>
REPORT OF ADMINISTRATIVE-AUDIT COMMITTEE
ON EXECUTIVE COMPENSATION
The Administrative-Audit Committee, which serves as the Trust's
Compensation and Stock Option Committee, is composed entirely of independent,
non-management Trustees. The Administrative-Audit Committee is responsible
for adopting, implementing and administering the policies that govern annual
compensation and short-term and long-term incentive programs, including stock
option plans.
The Administrative-Audit Committee annually evaluates the Trust's
operating performance and financial position, annual salary and incentive
compensation and stock option matters and compares the Trust's overall
performance within its own industry and with real estate companies in
general.
The Administrative-Audit Committee meets without the Chief Executive
Officer present for the purpose of evaluating his performance and reports
their deliberations and determinations to all of the independent Trustees of
the Board of Trustees. The Administrative-Audit Committee receives
recommendations made by the Chief Executive Officer with respect to the
remaining executive officers and such Committee reviews these recommendations
in light of the factors set forth below. The Administrative-Audit Committee's
actions (with respect to executive compensation matters) are generally
reported to and ratified by the full Board of Trustees (absent the Chief
Executive Officer, who is the sole non-independent Trustee).
In establishing fiscal 1996 compensation levels for executive officers,
including the Chief Executive Officer, the Administrative-Audit Committee
considered several factors. These factors involved both internal and external
measurements and comparisons bearing upon the overall operating performance
and financial position of the Trust. The principal performance measure
reviewed by the Administrative-Audit Committee were actual Funds from
Operations (calculated as promulgated by NAREIT). It also considered
management's leasing success relative to market occupancy levels, market
rents and the magnitude of scheduled maturities and property net operating
income versus budget and prior year levels. The Administrative-Audit
Committee also considered the management of the liability side of the Trust's
balance sheet, including the flexibility attained with respect to available
financial resources and the maintenance of the overall quality levels of
tenants and properties. It should be noted, however, that there were no
specific weightings assigned to any of the aforementioned factors, although
Funds from Operations is generally the main factor.
From time to time, the Administrative-Audit Committee also considers the
advice of an outside compensation consultant with respect to comparable real
estate investment trusts ("REITs") and non-REIT organizations and with
respect to executive compensation matters generally. In setting fiscal 1996
salaries and long-term compensation (see below regarding stock options), the
Administrative-Audit Committee considered recent executive compensation
surveys of the REIT industry, including the SNL Executive Compensation Review
for REITS, published by SNL Securities in 1995, the 1994 REIT Executive
Compensation Survey sponsored by NAREIT and certain material prepared by FPL
Associates, a strategic, management and compensation consulting organization.
In fiscal 1996, the Trust's corporate performance, measured in terms of Total
Return (i.e., increase or decrease in stock price plus dividends), was above
average. The Trust believes that, based primarily upon 1995 statistics, the
fiscal 1996 salary and short-term bonus paid to the Chief Executive Officer
was in the above-median range and the salaries and short- term bonuses paid
to the other three executive officers were also in the above-median range of
1996 REIT industry salaries and bonuses.
The Administrative-Audit Committee determined to make annual share bonus
awards to the executive officers with respect to fiscal 1996 premised upon
performance factors which it believed would serve the short-term and
long-term interests of the Trust's shareholders. Eligible recipients were
determined to be the four executive officers of the Trust and three other
officers. In December 1995, the Administrative-Audit Committee voted to
continue
9
<PAGE>
a guideline providing criteria for the award of short-term incentive share
bonuses to these officers. The Administrative-Audit Committee set two
measurement categories, shareholders' Total Return and Funds from Operations,
as the determinants for this annual stock bonus. A recipient can elect to
take this bonus in cash if utilized to exercise outstanding stock options
provided the shares so acquired will be held for two years or the recipient
may take up to 30% in cash. Funds from Operations was given a 75% weight and
the Total Return element was given a 25% weight. "Minimum," "Budget,"
"Target" and "Stretch" thresholds for each measurement category were
established.
Based upon the Trust's fiscal 1996 operating results and stock
performance, short-term share bonuses were awarded in December 1996. The
calculation of 1996 bonuses reflected 1996 results which exceeded the
"Stretch" threshold with respect to Funds from Operations (which increased by
12.9% in fiscal 1996) and also exceeded the "Stretch" threshold in respect of
Total Return (which was 33% in fiscal 1996) and resulted in formula stock
awards of 40% of 1996 salary in the case of the Chief Executive Officer and
30% of 1996 salary to the remaining executive officers. In the exercise of
its discretion as permitted under the guideline and taking into consideration
the overall positive results for fiscal 1996, the 1996 share bonus awarded to
the Chief Executive Officer was increased to approximately 45% of his 1996
salary and the share bonuses awarded to the other three executives were
increased to approximately 36% of their respective salaries. See "Summary
Compensation Table."
In December 1995, the Administrative-Audit Committee also determined the
amount of its SEPP and SERP contributions with respect to the 1996 fiscal
year (see Summary Compensation Table).
Stock options were granted by the Administrative-Audit Committee in
December 1996 to all executive officers under the Trust's 1994 Employee Plan
in furtherance of the Administrative-Audit Committee's practice and policy of
making stock option awards as a means of reinforcing management's identity of
interest with shareholders and creating long-term incentives for growing
Trust asset value. The Named Executive Officers received such options as
follows: W. Pearce Coues, 50,000; Phillip C. Vitali, 30,000; Robert Ware,
30,000 and Karl W. Weller, 30,000. All of the stock options granted in
December 1996 vest as to one-half upon grant and the balance upon the first
anniversary thereof in December 1997, provided such individual is an employee
of the Trust at such time. Options to purchase 20,172 Common Shares granted
to Mr. Coues in December 1996 under the 1997 Plan are subject to shareholder
approval of such plan. (See Proposal 2). SARs may be exercised, under certain
circumstances, as to one-half of the amount of such options.
In December 1996, the Administrative-Audit Committee also determined to
recommend the adoption of the 1997 Plan which would reserve up to 675,000
Common Shares for the grant of incentive or non-qualified options and related
stock appreciation rights, as well as the grant of restricted stock awards.
The 1997 Plan is being submitted to shareholders for approval. (See Proposal
2). The Administrative-Audit Committee determined that the 1997 Plan would
contain appropriate provisions permitting compensation payable thereunder in
the form of stock options to meet "performance goals" within the meaning of
Section 162(m) of the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder (the "Code"). Except for the terms of the
Plan, the Trust has not established a policy with regard to Section 162(m) of
the Code, since the Trust has not and does not currently anticipate paying
compensation in excess of $1 million per annum to any employee.
Francis P. Gunning, Chairman
Herbert D. Conant
Colin C. Hampton
George M. Lovejoy, Jr.
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Stock Option Plans
As of February 12, 1997, the Trust's executive officers and Trustees as a
group (11 persons) held presently exercisable options to purchase a total of
770,477 Common Shares under all of the Trust's stock option plans at exercise
prices ranging from $7.375 to $21.00 per Common Share. In addition, the members
of such group held options not presently exercisable to purchase an aggregate of
70,000 Common Shares. Of all presently exercisable outstanding options, 43,489
were granted pursuant to the 1982 Incentive Plan, 217,316 pursuant to the 1988
Employee Plan, 275,086 pursuant to the 1994 Employee Plan, 10,086 pursuant to
the 1997 Plan, 52,284 pursuant to the 1982 Trustees' Plan, 145,713 pursuant to
the 1988 Trustees' Plan and 26,503 pursuant to the 1994 Trustees' Plan. Options
granted under the 1997 Plan are subject to shareholder approval of the 1997
Plan.
Severance Compensation Plan
Effective June 11, 1987, and as amended on December 19, 1989, the Board of
Trustees adopted a severance compensation plan for officers in the event of a
"hostile takeover," which includes the following events, if not approved by
two-thirds of the members of the Board of Trustees in office immediately prior
to the occurrence of any such event: (i) the election as Trustee(s) in any year
of one or more persons not nominated by at least two-thirds of the Board of
Trustees in office prior to such election; (ii) a business combination such as a
merger; (iii) the acquisition of 15% or more of the voting power of the Trust's
securities by any person or entity; or (iv) the failure of the Trust to qualify
as a REIT for tax purposes by reason of more than 50% in value of the Trust's
voting securities outstanding being held by five or fewer individuals.
All full time officers who have completed a minimum of thirty-six months of
continuous employment with the Trust are eligible under such plan. An eligible
officer is entitled to severance benefits if (i) such individual terminates his
or her employment within two years after a hostile takeover for reasons such as
a reduction in compensation, discontinuance of employee benefit plans, change in
duties or status and certain changes in job location or (ii) if the individual
is terminated for reasons other than "just cause" as defined in such plan. The
severance payment is equal to three months compensation for each twelve months
of employment based on the highest total annual compensation rate earned prior
to the hostile change in control (up to a maximum of 24 months of compensation
payable at such rate, but 36 months in the case of Messrs. Coues, Ware and
Vitali). Fringe benefits are also continued for the number of months for which
compensation is paid.
PROPOSAL NO. 2
RATIFICATION AND APPROVAL OF 1997 EMPLOYEE STOCK OPTION,
STOCK APPRECIATION RIGHTS AND RESTRICTED STOCK PLAN
On December 18, 1996, the Administrative-Audit Committee approved and
adopted, and on December 19, 1996, the Board of Trustees ratified, the 1997 Plan
for submission to shareholders as set forth in Appendix A to this proxy
statement. This discussion is qualified in its entirety by reference to Appendix
A. The purpose of the 1997 Plan is to promote the interests of the Trust and its
shareholders by providing a means of reinforcing the identity of competent
officers, key employees and employee-Trustees of the Trust who are responsible
for the continued growth of the Trust with the Trust's shareholders and provide
to such key employees a long term incentive to further the growth, development
and financial success of the Trust. In awarding options, stock appreciation
rights and/or restricted stock awards, the governing committee will consider an
employee's length of service, responsibilities and duties and level of the
Trust's earnings.
Administration
A committee (the "Committee"), composed of at least two non-management
Trustees that are "non-employee directors" within the meaning of Rule 16b-3
promulgated under the Exchange Act and "outside directors" under Section 162(m)
of the Code will administer the granting of nonqualified stock options
("Nonqualified Options"),
11
<PAGE>
incentive stock options ("Incentive Options" and together with Nonqualified
Options, "Options") under the Code, related stock appreciation rights
("Rights") and restricted stock ("Restricted Stock") awards to key employees.
Currently, the Trust's stock option plans are administered by the
Administration-Audit Committee.
Shares Subject to the 1997 Plan
The 1997 Plan provides that Options and related Rights may be granted or
Restricted Stock may be awarded to key employees with respect to a total of
675,000 Common Shares (the "Shares"). The maximum number of Shares that may be
subject to Options and related Rights or Restricted Stock granted under the 1997
Plan to any individual in any calendar year may not exceed 75,000 and the method
of counting such Shares shall conform to any requirements applicable to
"performance-based" compensation under Section 162(m) of the Code. It is
intended that compensation realized upon the exercise of an option granted under
the 1997 Plan will thereupon be regarded as "performance-based" under Section
162(m) of the Code and that such compensation may be deductible by the Trust
without regard to the limits of Section 162(m) of the Code. See Performance
Based Compensation below. The Shares issued or to be issued under the 1997 Plan
are currently authorized but unissued Shares or Shares held in treasury. The
number of Shares available under the 1997 Plan will be subject to adjustment to
prevent dilution in the event of a stock split, combination of shares, stock
dividend or certain other events. Shares subject to unexercised options that
expire or are terminated prior to the end of the period during which options may
be granted will be restored to the number of Shares available for issuance under
the 1997 Plan.
Options to purchase 20,172 Shares previously granted under the 1997 Plan on
December 18, 1996 are subject to approval of such plan by the shareholders. The
1997 Plan will become effective upon such approval.
Term
All options under the 1997 Plan must expire within ten years from the date
of grant, except that Incentive Options thereunder granted to a holder of more
than 10% of the total combined voting power of all classes of stock of the Trust
must expire within five years from the date of grant. Each option will be
exercisable in whole or in part at such time or times within the term of such
option, subject to such limitations as the Committee may from time to time
determine. The 1997 Plan provides for earlier expiration of options of a
participant in the event of termination of his or her employment.
Exercise Price and Payment
A participant may provide for payment of the option price: (i) by delivery
of cash, certified check, bank draft or money order; or (ii) by delivery of
Shares of the Trust held by the holder for at least six months (in the case of
Shares acquired upon the exercise of Incentive Options, for the holding periods
specified under "Tax Treatment of Incentive Options" below); or (iii) through
the written election of the employee to have Shares withheld from the Shares
otherwise to be received (in the case of clauses (ii) and (iii) above, based on
the fair market value of the Shares on the date of exercise). The Committee has
not authorized any loans or extensions of credit to any option recipients and
has no present plans (but reserves the right) to do so. The option price for all
options that can be granted under the 1997 Plan is not less than 100% of the
fair market value of the Shares on the date the option is granted. No Incentive
Option shall be granted, however, to individuals owning Shares representing more
than 10% of the total combined voting power of all classes of stock of the Trust
unless the exercise price of the Incentive Option granted is at least 110% of
the fair market value of the Shares on the date of the grant. The fair market
value per Share on a particular date is the closing sale price as reported on
the New York Stock Exchange. With respect to Incentive Options, the aggregate
fair market value (determined at the time the option is granted) of the stock
with respect to which Incentive Options are exercisable for the first time by an
optionee during any calendar year under all such plans of the Trust (and of any
parent or subsidiary corporation) shall not exceed $100,000.
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<PAGE>
Rights
The 1997 Plan permits the Committee to grant Rights to key employees only
in connection with the grant of an option under the plan. The exercise of Rights
in lieu of the exercise of a related option entitles the optionee to receive
Shares having a fair market value equal to the appreciation since the date of
grant in the fair market value of the Shares subject to such related option (the
"Excess"). The Excess shall be payable only in Shares. It should be noted,
however, that Rights may be exercised only if prior to or simultaneously with
the exercise thereof, the employee-optionee or his successor has exercised or
exercises an equivalent number of options, whether Incentive or Nonqualified,
granted under any of the Trust's stock option and stock appreciation rights
plans. Furthermore, a Right shall only be exercisable upon a showing of hardship
by the optionee and upon consent of the Committee which will promulgate a
standard for determining hardship, which standard shall be applied uniformly to
all optionees. In the event of a Hostile Change in Control (as defined in the
1997 Plan), the aforesaid hardship requirement shall not apply and an option may
be exercised in full as a Right, without limitation.
Restricted Stock
The 1997 Plan permits the Committee to grant Restricted Stock awards to key
employees. A Restricted Stock award entitles the recipient to acquire, at no
cost or for a purchase price determined by the Committee, Shares subject to such
restrictions and conditions as the Committee may determine at the time of grant.
Conditions may be based on continuing employment and/or achievement of
pre-established performance goals and objectives. A person who is granted
Restricted Stock (a "Restricted Stock Recipient") will not have any rights with
respect to such Restricted Stock unless the Restricted Stock Recipient has
accepted the Restricted Stock within 60 days (or such shorter period as the
Committee may specify) following the award date by making payment to the Trust,
if required, and by executing and delivering to the Trust a written instrument
that sets forth the terms and conditions of the Restricted Stock in such form as
determined by the Committee.
Performance-Based Compensation
Section 162(m) of the Code, in general, disallows the Trust a federal
income tax deduction for total remuneration in excess of $1 million paid to the
Chief Executive Officer or to any of the four most highly compensated officers
other than the Chief Executive Officer in any one year. However, Section 162(m)
exempts "performance- based" compensation, such as stock option based
compensation, if it is awarded under a shareholder-approved plan that meets
certain requirements. In accordance with Treasury regulations issued under
Section 162(m), compensation attributable to stock options will qualify as
"performance-based" compensation, provided that (i) the option plan contains a
per-employee limitation on the number of shares for which options may be granted
during a specified period, (ii) the per-employee limitation is approved by the
shareholders, (iii) the option is granted by a compensation committee comprised
solely of "outside directors," and (iv) the exercise price of the option is no
less than the fair market value of the stock on the date of grant. Accordingly,
the 1997 Plan provides that the maximum number of shares which may be subject to
Options, Rights and Restricted Stock awards thereunder to any individual in any
calendar year shall not exceed 75,000. It is intended that compensation realized
upon the exercise of an option granted under the 1997 Plan to the Trust's Chief
Executive Officer or to any of the other four most highly compensated officers
will thereupon be regarded as "performance-based" under Section 162(m) of the
Code and that such compensation may be deductible without regard to the limits
of Section 162(m) of the Code. Grants of Options to the Trust's Chief Executive
Officer in December 1996 are conditioned upon shareholder approval of the 1997
Plan. Further, there will be no additional grants to the Trust's Chief Executive
Officer or to any of the other four most highly compensated officers under the
1997 Plan unless such plan is approved.
Transferability
The 1997 Plan permits Nonqualified Options granted thereunder to be
transferable if permitted by the Committee.
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<PAGE>
Registration of Shares
The Trust intends to file a registration statement under the Securities Act
of 1933, as amended, with respect to the Shares underlying Options and Rights
and the Restricted Stock issuable pursuant to the 1997 Plan subsequent to its
approval by the Trust's shareholders.
Tax Treatment of Incentive Options
No taxable income will be recognized by an option holder upon receipt of an
Incentive Option, and the Trust will not be entitled to a tax deduction in
respect of such grant.
In general, no taxable income for Federal income tax purposes will be
recognized by an option holder upon exercise of an Incentive Option and the
Trust will not then be entitled to any tax deduction. Assuming that the
option holder does not dispose of the option shares before the expiration of
the longer of (i) two years after the date of grant, or (ii) one year after
the exercise of the Incentive Option, upon disposition, the option holder
will recognize capital gain equal to the difference between the sale price on
disposition and the exercise price.
If, however, the option holder disposes of the Shares acquired upon the
exercise of an Incentive Option prior to the expiration of the required
holding period, he will recognize ordinary income for Federal income tax
purposes in the year of disposition equal to the lesser of (i) the difference
between the fair market value of the shares at date of exercise and the
exercise price, or (ii) the difference between the sale price upon
disposition and the exercise price. Any additional gain on such disqualifying
disposition will be treated as capital gain. In addition, if such a
disqualifying disposition is made by the option holder, the Trust will be
entitled to a deduction equal to the amount of ordinary income recognized by
the option holder, provided such amount constitutes an ordinary and
reasonable expense of the Trust.
The amount by which the fair market value of the Shares acquired upon the
exercise of an Incentive Option at the time of exercise exceeds the exercise
price of an Incentive Option will be a tax preference item for purposes of
the alternative maximum tax, which, in general, imposes a 26% tax rate on the
initial $175,000 (and a 28% rate in excess of $175,000) of the excess of (i)
an individual's taxable income plus certain tax preference items over (ii)
$33,750 ($45,000 for joint returns) reduced by $.25 for each $1.00 by which
the alternative minimum taxable income exceeds $112,500 ($150,000 for joint
returns). An individual will be liable for the alternative minimum tax only
to the extent that the amount of such tax exceeds the liability for regular
Federal income tax.
See "Tax Treatment of Nonqualified Options and Stock Appreciation Rights"
below for a discussion of the tax consequences of Rights granted in tandem
with Incentive Options.
Tax Treatment of Nonqualified Options and Stock Appreciation Rights
No taxable income will be recognized by an optionee upon receipt of a
Nonqualified Option or Right, and the Trust will not be entitled to a tax
deduction for such grant.
Participants in the 1997 Plan shall include in taxable income for Federal
income tax purposes (i) with respect to the exercise of a Nonqualified
Option, the excess in value on the date specified below of the Shares
acquired upon exercise of the Nonqualified Option over the exercise price and
(ii) with respect to the exercise of Rights, the value on the date specified
below of the Shares acquired upon exercise of the Rights. The Shares acquired
upon exercise of a Nonqualified Option or a Right by a participant whose sale
of such stock could be subject to suit under Section 16(b) of the Exchange
Act, will be valued and included in such participant's income on the first
date such Shares could be sold without being subject to such suit unless the
participant elects in accordance with Treasury regulations to value and
include such Shares in income on the date of exercise. In all other cases,
the date for valuing and including such Shares in income will be the date of
exercise of the Nonqualified Option or related Right. Upon a subsequent sale
of the Shares, the participant will incur short term or long term gain or
loss depending upon his or her holding period for the Shares and upon the
subsequent appreciation or depreciation in the value of the Shares.
14
<PAGE>
The Trust will generally be entitled to a corresponding deduction at the
same time that the participant is required to include the value of the Shares in
his income.
Tax Treatment of Restricted Stock Awards
Under present Federal income tax regulations, generally, absent an election
by the recipient, there will be no Federal income tax consequences to either the
Trust or a recipient upon the grant of a Restricted Stock award. A recipient
will recognize income, for Federal income tax purposes, at the time that the
restrictions with respect to any portion of an award are removed, in an amount
equal to the fair market value of the Shares that are unconditionally vested on
that date. That income generally will be taxable at ordinary income rates. The
Trust generally will be entitled to a Federal income tax deduction with respect
to the amount equal to the amount of ordinary income recognized by the recipient
as a result of the removal of the restrictions. The Trust may claim this
deduction in its tax year ending with or immediately after the end of the
recipient's tax year in which the recipient recognizes such income. To avoid
taxation at the time Restricted Stock becomes nonforfeitable, as described
above, a recipient of Restricted Stock may elect to recognize ordinary income
for the taxable year in which the award of Restricted Stock is made, in an
amount equal to the fair market value of all Shares of Restricted Stock awarded
to such grantee (even if the Shares are subject to forfeiture). For purposes of
this election, fair market value will be determined as of the date the award of
Restricted Stock is made.
The foregoing outline is no more than a summary of the Federal income tax
provisions relating to the grant and exercise of Options and the award of
Restricted Stock under the 1997 Plan and the sale of Shares acquired under
the 1997 Plan. Individual circumstances may vary these results. The Federal
income tax laws and regulations are constantly being amended and each
participant should rely upon his own tax counsel for advice concerning the
Federal income tax provisions applicable to the 1997 Plan.
Change of Control Provisions
Upon a Hostile Change of Control or a Change of Control (each as defined in
the 1997 Plan), (i) each outstanding Option and related Right will automatically
become fully exercisable and (ii) restrictions and conditions on all Restricted
Stock awards will automatically be deemed waived.
The Trustees recommend a vote FOR Proposal 2. Proposal 2 requires for its
adoption the affirmative vote of a majority of the outstanding Shares of the
Trust present, in person or by proxy, at the Annual Meeting.
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<PAGE>
ADDITIONAL INFORMATION REGARDING THE 1997 PLAN
New Plan Benefits
The following table discloses options granted pursuant to the 1997 Plan to
the Trust's Chief Executive Officer, each of the Trust's three other executive
officers, all current executive officers of the Trust as a group, all Trustees
of the Trust who are not current executive officers of the Trust as a group and
all employees of the Trust (except executive officers of the Trust).
<TABLE>
<CAPTION>
1997 Plan (1)(2)
---------------------------
Dollar Number of
Name and Position Value Units
----------------- ----- -----
<S> <C> <C>
W. Pearce Coues
Chairman of the Board and Chief Executive Officer $423,612 20,172
Phillip C. Vitali
Executive Vice President, Treasurer and Chief Financial Officer -- --
Robert Ware
Executive Vice President -- --
Karl W. Weller -- --
Senior Vice President
Current Executive Officers as a group(3) $423,612 20,172
Non-Executive Officer Trustees as a group(4) N/A N/A
All employees other than Executive Officers(5) -- --
</TABLE>
-----------------
(1) Number of Units represents Options and/or Rights to purchase Common
Shares. N/A means that the individual or group is not eligible to
participate in the 1997 Plan.
(2) As benefits are not determinable pursuant to Instruction 3 of Item 10
Reg. Sec. 240.14a-101 of the Exchange Act, benefits stated are the number
of shares covered by Options and/or Rights granted to each of the groups
of employees under the 1997 Plan in December 1996. The future value, if
any, is not determinable. All of such options were granted on December
18, 1996 at an exercise price of $21 per share. Options become
exercisable to the extent of 50% of the shares covered thereby upon grant
and 50% on December 18, 1997 provided such individual is an employee of
the Trust on such date.
(3) Includes all current executive officers, four persons.
(4) Includes all current Trustees who are not executive officers, seven
persons.
(5) Includes all employees, including all current officers, who are not
executive officers.
INDEPENDENT PUBLIC AUDITORS
It is expected that the accounting firm of KPMG Peat Marwick LLP will
again be selected as the independent auditors for the Trust for the current
fiscal year ending November 30, 1997. A representative of that firm, which
served as the Trust's independent auditors for the fiscal year ended November
30, 1996, is expected to be present at the Annual Meeting and, if he so
desires, will have the opportunity to make a statement, and in any event will
be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS
To the extent required by law, for a shareholder proposal to be included
in the proxy statement for next year's annual shareholders' meeting, it must
be received at the Trust's principal executive offices prior to October 27,
1997.
16
<PAGE>
OTHER MATTERS
So far as now known, there is no business other than that described above
to be presented for action by the shareholders at the Annual Meeting, but it
is intended that the proxies will be voted upon any other matters and
proposals that may legally come before the Annual Meeting or any adjournment
thereof, in accordance with the discretion of the persons named therein.
The Annual Report for the fiscal year ended November 30, 1996 is being
mailed herewith. If, for any reason, you did not receive your copy of the
report, please advise the Trust and another will be sent to you.
By Order of the Trustees,
W. Pearce Coues
Chairman of the Board
Dated: Boston, Massachusetts
February 24, 1997
The Trust will furnish, without charge, a copy of its Annual Report on
Form 10-K for the fiscal year ended November 30, 1996 (as filed with the
Securities and Exchange Commission) to shareholders as of February 12, 1997
who make written request therefor to Ms. Jean M. Harrington, Vice President,
MGI Properties, One Winthrop Square, Boston, Massachusetts 02110.
17
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<PAGE>
Appendix A
MGI PROPERTIES
1997 EMPLOYEE STOCK OPTION,
STOCK APPRECIATION RIGHTS AND RESTRICTED STOCK PLAN
I. PURPOSE
The purpose of the 1997 Employee Stock Option, Stock Appreciation Rights
and Restricted Stock Plan (the "Plan") is to promote the interests of MGI
Properties (the "Trust") and its shareholders by providing a means of
reinforcing the identity of competent officers, key employees and
employee-Trustees (hereinafter sometimes referred to as "key employees" or
"optionees") of the Trust or of any subsidiary corporation or parent corporation
of the Trust now existing or hereafter formed or acquired who are responsible
for the continued growth of the Trust, with the Trust's shareholders and provide
to such key employees a long term incentive to further the growth, development
and financial success of the Trust.
The stock options ("Options"), restricted stock ("Restricted Stock") and
stock appreciation rights ("Rights") offered pursuant to the Plan are a matter
of separate inducement and are not in lieu of any salary or other compensation
for the services of any key employee.
The Trust, by means of the Plan, seeks to retain the services of persons
now holding key positions and to secure the services of persons capable of
filling such positions.
The Options granted under the Plan are intended to be either incentive
stock options ("Incentive Options") within the meaning of Section 422 of the
Code or options that do not meet the requirements for Incentive Options
("Nonqualified Options"), but the Trust makes no warranty as to the
qualification of any Option as an Incentive Option.
The Plan is intended to satisfy the performance-based compensation
exception to the cap on the Trust's tax deduction imposed by Section 162(m) of
the Internal Revenue Code of 1986, as it may from time to time be amended (the
"Code") and to align with recent changes to Rule 16(b) of the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder (the "Exchange Act").
The Plan is intended to provide participants with stock-based incentive
compensation which is not subject to the deduction limitation rules prescribed
under Section 162(m) of the Code, and should be construed to the extent possible
as providing for remuneration which is "performance-based compensation" within
the meaning of Section 162(m) of the Code and the regulations promulgated
thereunder.
II. SHARES SUBJECT TO THE PLAN
The total number of Common Shares of the Trust, $1.00 par value per share
(the "Common Shares"), which may be (i) purchased pursuant to the exercise of
Options granted under the Plan or (ii) acquired pursuant to the exercise of
Rights granted under the Plan or pursuant to the award of Restricted Stock
granted under the Plan shall not exceed, in the aggregate, 675,000 Common Shares
as of the effective date (the "Shares"). The term "Shares" shall include any
securities, cash or other property into which Shares may be changed through
merger, consolidation, reorganization, recapitalization, stock dividend, stock
split, split-up, split-off, spin-off, combination of shares, exchange of shares,
issuance of rights to subscribe or change in capital structure. The maximum
number of Shares that may be subject to Options and related Rights or Restricted
Stock granted under the Plan to any individual in any calendar year shall not
exceed 75,000, and the method of counting such Shares shall conform to any
requirements applicable to performance-based compensation under Section 162(m)
of the Code.
A-1
<PAGE>
Shares which may be acquired under the Plan may be either authorized but
unissued Shares, Shares held in the Trust's treasury, or both, at the
discretion of the Trust. If and to the extent that (i) Options granted under
the Plan expire or terminate without having been exercised and (ii)
Restricted Stock granted under the Plan is repurchased or forfeited, Shares
subject to such expired or terminated Options and related Rights or
repurchased or forfeited Restricted Shares shall be available for new grants
of Options and related Rights and Restricted Stock under the Plan, provided
that the grant and the terms of such new Options and related Rights and
Restricted Stock shall in all respects comply with applicable legal
requirements. Notwithstanding the above, however, the expiration or
termination of Options and related Rights and repurchased or forfeited Shares
shall not increase the reserve of 675,000 Shares for grants to key employees.
Except as provided in Article XXI hereof, the Trust may, from time to time
during the period beginning March 27, 1997 (the "Effective Date") and ending on
March 26, 2007 (the "Termination Date"), grant to key employees of the Trust, or
of any subsidiary corporation or parent corporation of the Trust now existing or
hereafter formed or acquired, Options and related Rights and Restricted Stock
under the terms hereinafter set forth. Notwithstanding the foregoing, Options,
Rights and/or Restricted Stock granted or awarded hereunder prior to March 27,
1997 shall be valid and binding, subject to the approval of the Plan by the
shareholders on or before April 30, 1997.
As used in the Plan, the terms "parent corporation" and "subsidiary
coporation" shall mean, respectively, a corporation coming within the definition
of such terms contained in Sections 424(e) and 424(f) of the Code.
III. ADMINISTRATION
The Board of Trustees of the Trust (the "Board of Trustees") shall
designate a committee for the administration of matters relating to Restricted
Stock and Options to be granted to key employees (the "Committee"), whether
Incentive or Nonqualified Options or both and related Rights. The Committee
shall consist of two or more Trustees. Each member of the Committee shall be a
"non-employee director" within the meaning of Rule 16b-3, or any successor rule
or regulation, ("Rule 16b-3") promulgated under the Exchange Act and shall also
be an "outside director" under Section 162(m) of the Code. A majority of the
members of the Committee shall constitute a quorum, and the act of a majority of
the members of the Committee shall be the act of the Committee. Any member of
the Committee may be removed at any time either with or without cause by
resolution adopted by the Board of Trustees, and any vacancy on the Committee
may at any time be filled by resolution adopted by the Board of Trustees.
Subject to the express provisions of the Plan, the Committee shall have the
authority, in its discretion, to determine the key employees to whom Options,
Rights and Restricted Stock shall be granted, the number of Shares which shall
be subject to each Option, Right or Restricted Stock award, the purchase price
of each Share which shall be subject to an Option, Right or Restricted Stock,
the period(s) during which such Options or Rights shall be exercisable (whether
in whole or in part) or the terms of any Restricted Stock award, and the other
terms and provisions thereof. In determining the key employees to whom Options,
Rights or Restricted Stock shall be granted and the number of Shares for which
Options, Rights or Restricted Stock shall be granted to each such employee, the
Committee shall consider the length of service, the amount of earnings, and the
responsibilities and duties of such employee; provided, however, that no
employee shall be granted Incentive Options in any calendar year to purchase
shares of stock in the Trust or in any subsidiary corporation or parent
corporation of the Trust which exceed the maximum allotment prescribed in
Article V hereof.
Subject to the express provisions of the Plan, the Committee also shall
have the authority to construe the Plan and Options, Rights and Restricted Stock
granted or awarded hereunder, to amend the Plan and Options, Rights and
Restricted Stock granted or awarded hereunder, to prescribe, amend and rescind
rules and regulations relating to the Plan, to determine the terms and
provisions of the respective Options (which need not be identical), Rights
(which need not be identical) and Restricted Stock (which need not be identical)
and to make all other determinations necessary or advisable for administering
the Plan.
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The Committee also shall have the authority to require, in its discretion,
that the key employee agree, at the time of the grant of an Option and of a
related Right not to sell or otherwise dispose of Shares acquired pursuant to
the exercise of an Option or Right, as the case may be, granted under the Plan
for a period of six (6) months following the date of grant.
The determination of the Committee on matters referred to in this Article
III shall be conclusive.
Any or all powers and functions of the Committee may at any time and from
time to time be exercised by (i) the full Board of Trustees (execpt in the case
of the grant of Incentive Options) or (ii) a committee composed solely of two or
more persons that, at the time of such exercise, are "non-employee directors"
within the meaning of Rule 16b-3 and also are "outside directors" under Section
162(m) of the Code.
The Committee may employ such legal counsel, consultants and agents as it
may deem desirable for the administration of the Plan and may rely upon any
opinion received from any such counsel or consultant and any computation
received from any such consultant or agent. Expenses incurred by the Board of
Trustees or by the Committee in the engagement of such counsel, consultant or
agent shall be paid by the Trust. No member or former member of the Committee or
of the Board of Trustees shall be liable for any action or determination made in
good faith with respect to the Plan or any Option granted hereunder.
IV. ELIGIBILITY
Incentive Options and related Rights may be granted only to salaried key
employees of the Trust or of any subsidiary corporation or parent corporation of
the Trust, except members of the Committee and except as hereinafter provided,
and shall not be granted to any officer or Trustee who is not also a salaried
key employee.
Nonqualified Options, related Rights and Restricted Stock may be granted or
awarded only to salaried key employees of the Trust or of any subsidiary
corporation or parent corporation of the Trust, except members of the Committee
and except as hereinafter provided.
Any person who shall have retired from active employment by the Trust,
although such person shall have entered into a consulting contract with the
Trust, shall not be eligible to receive a grant of an Incentive Option or
related Right or a Nonqualified Option or related Right.
An Incentive Option shall not be granted to any person who, at the time
such Incentive Option is granted, owns Shares of the Trust or any subsidiary
corporation or parent corporation of the Trust which possess more than ten
percent (10%) of the total combined voting power of all classes of shares of the
Trust or of any subsidiary corporation or parent corporation of the Trust,
unless (i) the exercise price per share is not less than one hundred ten percent
(110%) of the fair market value per share on the date such Option is granted and
(ii) such Option by its terms is not exercisable after the expiration of five
(5) years from the date such Option is granted. In determining share ownership
of any such person, the rules of Section 424(d) of the Code shall be applied and
the Committee may rely on representations of fact made to it by the key employee
and believed by it to be true.
V. MAXIMUM ALLOTMENT OF INCENTIVE OPTIONS
The aggregate fair market value (determined at the time the Incentive
Option is granted) of the stock with respect to which Incentive Options are
exercisable for the first time by such optionee during any calendar year (under
all such plans of the optionee's employer corporation and its parent and
subsidiary corporations) shall not exceed $100,000.
VI. OPTION PRICE AND PAYMENT
The price for each Share purchasable under any Option granted hereunder
shall be such amount as the Committee shall, in its best judgment, determine;
provided, however, that, subject to Article IV hereof, the price of any Option
shall not be less than one hundred percent (100%) of the fair market value per
Share on the date the Option is granted.
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If the Shares are listed on a national securities exchange in the United
States on the date any Option is granted, the fair market value per Share shall
be deemed to be the closing sale price at which the Shares are sold on such
national securities exchange on the date such Option is granted. If the Shares
are listed on a national securities exchange in the United States on such date
but the Shares are not traded on such date, or such national securities exchange
is not open for business on such date, the fair market value per Share shall be
determined as of the closest preceding date on which such exchange shall have
been open for business and the Shares were traded. If the Shares are listed on
more than one national securities exchange in the United States on the date any
such Option is granted, the Committee shall determine which national securities
exchange shall be used for the purpose of determining the fair market value per
Share.
If at the date any Option is granted a public market exists for the Shares
but the Shares are not listed on a national securities exchange in the United
States, the fair market value per Share shall be deemed to be the mean between
the closing bid and asked quotations in the over-the-counter market for the
Shares in the United States on the date such Option is granted. If there are no
bid and asked quotations for the Shares on such date, the fair market value per
Share shall be deemed to be the mean between the closing bid and asked
quotations in the over-the-counter market in the United States for the Shares
on the closest date, preceding the date such Option is granted, for which such
quotations are available.
The Trust shall cause such stock certificates to be issued only when it
shall have received the full purchase price for the Shares in cash, certified
check, bank draft or money order; provided, however, that in lieu of cash,
certified check, bank draft or money order, the holder of an Option may exercise
his Option, in whole or in part, (i) by delivering to the Trust, Shares of the
Trust (in proper form for transfer and accompanied by all requisite stock
transfer tax stamps or cash in lieu thereof) owned by such holder for at least
six months (and, in the case of Shares acquired upon the exercise of Incentive
Options, for the holding periods required under Section 424 of the Code) and
having a fair market value equal to the cash exercise price applicable to that
portion of the Option being exercised by the delivery of such Shares, the fair
market value of the Shares so delivered to be determined in accordance with this
Article VI or as may be required in order to comply with or to conform to the
requirements of any applicable laws or regulations; or (ii) through the written
election of the optionee to have Shares withheld from the Shares otherwise to be
received upon the exercise of an Option and having a fair market value equal to
the cash exercise price applicable to the portion of the Option being exercised
by the withholding of such Shares, the fair market value of the Shares so
withheld to be determined in accordance with this Article VI or as may be
required in order to comply with or to conform to the requirements of any
applicable laws or regulations.
Notwithstanding the foregoing, subject to the provisions of Part 207 of
Title 12, Code of Federal Regulations, as from time to time in effect (herein
called "Regulation G"), the Committee, in its sole and absolute discretion, (i)
may, generally or in specific instances, authorize the extension and maintenance
of credit by the Trust, or (ii) may arrange for the extension or maintenance of
credit by any person upon the same terms and conditions as those upon which the
Trust (under the provisions of Regulation G) may extend or maintain such credit
to participants under the Plan for the purpose of financing the exercise of
Options granted to such participants under the Plan. Interest shall be charged
on any such extension of credit at a rate not less than that promulgated under
the applicable Federal rate (as defined in Section 1274(d) of the Code) for the
month in which such credit is extended.
VII. USE OF PROCEEDS
The cash proceeds from the sale of Shares subject to the Options granted
hereunder are to be added to the general funds of the Trust and used for its
general purposes as the Board of Trustees shall determine.
VIII. TERM OF OPTIONS AND LIMITATIONS ON THE RIGHT OF EXERCISE
Except as otherwise provided below, a holder of an Option may exercise such
Option with respect to one hundred percent (100%) of the aggregate number of
Shares, or any portion thereof, subject to the Option.
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Subject to the provisions of Articles IV and V, any Option granted
hereunder shall be exercisable during a period of not more than ten (10) years
from the date of grant of such Option.
To the extent that an Option is not exercised within the period of
exercisability specified therein, it shall expire as to the then unexercised
part. If any Option granted hereunder shall terminate prior to the Termination
Date, the Committee shall have the right to use the Shares as to which such
Option shall not have been exercised to grant one or more additional Options to
any eligible employee (in which case, such new Option may be either Incentive or
Nonqualified, as determined by the Committee) or Restricted Stock, but any such
grant of an additional Option or Restricted Stock shall be made prior to the
close of business on the Termination Date.
In no event shall an Option granted hereunder be exercised for a fraction
of a share.
IX. EXERCISE OF OPTIONS
Options granted under the Plan shall be exercised by the optionee as to all
or part of the Shares covered thereby by the giving of written notice of the
exercise thereof to the Secretary of the Trust at the principal business office
of the Trust, specifying the number of Shares to be purchased and accompanied by
payment of the purchase price.
Such payments may consist, in whole or in part, of the proceeds of loans
made or guaranteed by the Trust to finance the acquisition of the Shares
pursuant to Article VI hereof.
X. STOCK APPRECIATION RIGHTS; RESTRICTED STOCK AWARDS
A. Stock Appreciation Rights
Rights may be granted to key employees in connection with the grant of
Options upon such terms and conditions as the Committee may prescribe. Rights
may be granted only in connection with the grant of an Option under the Plan and
only with respect to fifty percent of the Shares related to Options. Each Right
shall contain a provision that it shall become non-exercisable and shall be
forfeited to the extent that the related Option is exercised or terminates for
any reason other than the exercise of the Right. The exercise of Rights in lieu
of the exercise of related Options shall entitle the optionee to receive Common
Shares having a fair market value equal to, but in no event in excess of, the
appreciation since the date of grant in the fair market value of the Common
Shares subject to such related Option (the "Differential"). The Differential
shall be payable only in Common Shares.
Rights shall be exercisable and be payable in the following manner:
1. A Right shall be exercisable by the optionee at any time the Option to
which it relates could be exercised, but only upon a showing of "hardship" by
the optionee and upon consent of the Committee; provided, however, that there
shall be no hardship requirement in the event of a Hostile Change in Control (as
hereinafter defined). The Committee shall promulgate a standard for determining
a "hardship," said standard to be applied uniformly to all optionees under the
Plan. An optionee wishing to exercise shall give written notice of such exercise
to the Trust addressed to the Trust's Secretary. Upon the exercise of a Right,
the optionee shall only be entitled to receive Common Shares of the Trust. The
Committee, upon receipt of such notice, shall, without transfer or issue tax to
the optionee or other person entitled to exercise the Right, deliver to the
person exercising such Right a certificate or certificates for the Trust's
Common Shares which are issuable upon exercise of the Right. The date the Trust
receives the written notice of exercise hereunder is referred to herein as the
exercise date. If there is any adjustment to an Option pursuant to Section XIII,
that adjustment shall be reflected in the tandem Right. Notwithstanding the
foregoing, and except in the event of a Hostile Change in Control, Rights may be
exercised only if prior to the exercise thereof, or, simultaneously with the
exercise thereof, the optionee or his successor, has exercised or exercises an
equivalent number of Options granted pursuant to this Plan, the Trust's 1994
Employee Stock Option and Stock Appreciation Rights Plan or the Trust's 1988
Stock Option and Stock Appreciation Rights Plan for Key
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Employees (whether related or unrelated to the Right). After a Hostile Change
of Control, an optionee may exercise all Options in full as Rights, without
limitation.
Example:
To illustrate the impact of the grant and exercise of Rights by optionees,
it is assumed that:
(a) An optionee was granted an Option under the Plan to purchase 100
Shares at an exercise price of $30 per share;
(b) The optionee was granted Rights in tandem with the Option giving the
optionee the right to exercise up to 50 Rights (one-half of the 100 Shares
subject to the Option) in the event of hardship;
(c) The optionee has not received any other Options;
(d) The Shares have appreciated in value to $50 per Share; and
(e) The optionee qualifies under the hardship requirements and wishes to
acquire the maximum number of Shares upon the exercise of his Rights.
Under the Plan, the optionee must first partially exercise an Option
granted under the Plan, the Trust's 1994 Employee Stock Option and Stock
Appreciation Rights Plan or the Trust's 1988 Stock Option and Stock
Appreciation Rights Plan for Key Employees, and purchase 50 Shares for the
specified exercise price. (For purposes of this example, it is assumed that
the optionee will first exercise 50 of the 100 Options granted at $30 per
share for an out-of-pocket cost of $1,500.)
After his or her exercise, the optionee may surrender his Option to
purchase an additional 50 Shares and may exercise Rights. Upon exercise of
Rights, the optionee will be entitled to receive Shares having a value equal
to $1,000, i.e., the excess of the aggregate fair market value of 50 Shares
(50 Shares X $50 = $2,500) over the aggregate exercise price (50 Shares X $30
= $1,500). Since the fair market value of the Shares is $50, 20 Shares would
be issued to the optionee upon the exercise of his Rights ($1,000 divided by
$50 = 20 Shares).
In summary, if the optionee wishes to exercise the maximum number of
Rights, the optionee will be required to purchase 50 Shares at an aggregate
cost of $1,500 and surrender the balance of his Option to purchase 50 Shares.
In such circumstances, the optionee will receive 20 Shares upon exercise of
his Rights.
2. The exercise of a Right shall automatically result in the surrender of
the related Option by the optionee on a share for share basis to the extent
Shares under such related Option are used to calculate the Differential. Shares
issued pursuant to the exercise of a Right shall not be available for granting
further Options under the Plan.
3. The Committee may impose any other conditions it prescribes upon the
exercise of a Right, which conditions may include a condition that the Right may
only be exercised in accordance with rules and regulations adopted by the
Committee from time to time.
4. Upon the exercise of a Right and surrender of the related Option right,
the Trust shall issue to the person surrendering the related Option right an
amount equivalent to the Differential, in the Trust's Common Shares as
determined in accordance with this Article X. The shares to be issued upon the
exercise of a Right may consist either in whole or in part of shares of the
Trust's authorized but unissued Common Shares or the Trust's authorized and
issued Common Shares held in its treasury. No fractional Common Shares shall be
issued and the Committee shall determine whether cash shall be given in lieu of
such fractional share or whether such fractional share shall be eliminated.
Each Right and all rights and obligations thereunder shall expire on a date
no later than the date of expiration of the underlying Option.
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A Right shall terminate and may no longer be exercised upon the
termination of the related Option.
B. Restricted Stock Awards
A Restricted Stock award entitles the recipient to acquire, at no cost or
for a purchase price determined by the Committee, Shares subject to such
restrictions and conditions as the Committee may determine at the time of
grant. Conditions may be based on continuing employment and/or achievement of
pre-established performance goals and objectives.
Any person who is granted Restricted Stock (a "Restricted Stock
Recipient") shall have no rights with respect to such Restricted Stock unless
the Restricted Stock Recipient shall have accepted the Restricted Stock
within 60 days (or such shorter period as the Committee may specify)
following the award date by making payment to the Trust, if required, by
certified or bank check or other instrument or form of payment acceptable to
the Committee in an amount equal to the specified purchase price, if any, of
the Shares covered by the Restricted Stock and by executing and delivering to
the Trust a written instrument that sets forth the terms and conditions of
the Restricted Stock in such form as the Committee shall determine.
Upon complying with the paragraph above, a Restricted Stock Recipient
shall have the rights of a shareholder with respect to the voting of the
Restricted Stock, subject to such other conditions contained in the written
instrument evidencing the Restricted Stock. Unless the Committee shall
otherwise determine, certificates evidencing the Restricted Stock shall
remain in the possession of the Trust until such Restricted Stock is vested
as provided in such written agreement.
Restricted Stock may not be sold, assigned, transferred, pledged or
otherwise encumbered or disposed of except as specifically provided herein.
Upon the termination of employment of any key employee with the Trust, any
subsidiary corporation and any parent corporation of the Trust for any
reason, the Trust shall have the right, at the discretion of the Committee,
to repurchase such Restricted Stock at its purchase price, or to require
forfeiture of such Restricted Stock to the Trust if acquired at no cost, from
the Restricted Stock Recipient or the Restricted Stock Recipient's legal
representative. The Trust must exercise such right of repurchase or
forfeiture not later than the 90th day following such termination of
employment (unless otherwise specified in the written instrument evidencing
the Restricted Stock).
The Committee at the time of grant shall specify the date or dates and/or
the attainment of pre-established performance goals, objectives and other
conditions on which the non-transferability of the Restricted Stock and the
Trust's right of repurchase or forfeiture shall lapse. Subsequent to such
date or dates and/or the attainment of such pre-established performance
goals, objectives and other conditions, the Shares on which all restrictions
have lapsed shall no longer be Restricted Stock and shall be deemed "vested."
The written instrument evidencing Restricted Stock may require or permit
the immediate payment, waiver, deferral or investment of dividends paid on
the Restricted Stock.
XI. NONTRANSFERABILITY OF OPTIONS AND STOCK APPRECIATION RIGHTS
Neither an Incentive Option nor a related Right granted hereunder shall be
transferable otherwise than by will, the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined by the Code or
Title I of the Employee Retirement Income Security Act of 1986, as amended,
or the rules and regulations promulgated thereunder. Any Incentive Option or
related Right granted hereunder shall be exercisable, during the lifetime of
the holder, only by such holder or by such holder's guardian or legal
representative. Nonqualified Options may be transferable only to the extent
authorized by the Committee in respect of a particular grant.
XII. TERMINATION OF EMPLOYMENT
Upon termination of employment of any key employee with the Trust and all
subsidiary corporations and any parent corporation of the Trust, any Option
or Right previously granted to the key employee shall to the extent not
theretofore exercised, terminate and become null and void, except that:
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(a) If the key employee shall die, or become totally and permanently
disabled (as defined in Section 72(m)(7) of the Code), while in the employ
of such corporation or Trust or at a time when such employee was entitled
to exercise an Option or related Right as herein provided, in case of
death, the legal representative of such employee, or such person who
acquired such Option and/or related Right by bequest or inheritance or by
reason of death of the key employee or in the case of total and permanent
disability, the key employee may, not later than one (1) year from the
date of death or total and permanent disability, exercise such Option or
such related Right in respect of any or all of the total number of Shares
as shall have been subject to such Option or Right; and
(b) if the employment of any key employee to whom such Option or such
related Right shall have been granted shall terminate by reason of such
employee's retirement (at such age or upon such conditions as shall be
specified by the Committee) or dismissal by the Trust other than for cause
(as defined below), and while such employee is entitled to exercise such
Option or such related Right as herein provided, such employee shall have
the right to exercise such Option or Right so granted, to the extent of
the number of Shares subject to such Option or Right which were
purchasable by him at the date of termination of his employment, at any
time up to and including three (3) months after the date of such
termination of employment.
Notwithstanding the foregoing, the optionee may exercise options granted
hereunder at any time up to two years after his employment with the Trust
ceases for any reason; however, if any option is exercised after the periods
set forth in the preceding paragraph, or such longer periods for the valid
exercise of an Incentive Option after termination as may be established under
the Code, such option shall no longer be an Incentive Option but shall
convert into a Non-qualified Option.
In no event, however, shall any person be entitled to exercise any Option
after the expiration of the period of exercisability of such Option as
specified therein.
If an Option or related Right granted hereunder shall be exercised by the
legal representative of a deceased employee or former employee, or by a
person who acquired an Option or Right hereunder by bequest or inheritance or
by reason of the death of any employee or former employee, written notice of
such exercise shall be accompanied by a certified copy of letters
testamentary or by equivalent proof of the right of such legal representative
or other person to exercise such Option or Right.
For the purposes of the Plan, an employment relationship shall be deemed
to exist between an individual and the Trust (or any parent or subsidiary
corporation) if, at the time of the determination, the individual was an
"employee" of the Trust (or any parent or subsidiary corporation) for
purposes of Section 422(a) of the Code. If an individual is on leave of
absence taken with the consent of the corporation by which such individual
was employed, or is on active military service, and is determined to be an
"employee" for purposes of the exercise of an Option or Right, such
individual shall not be entitled to exercise such Option or Right during such
period and while the employment relationship is treated as continuing intact
unless such individual shall have obtained the prior written consent of such
corporation, which consent shall be signed by the Chairman of the Board, the
President, an executive vice-president or other duly authorized officer of
such corporation.
A termination of employment shall not be deemed to occur by reason of (i)
the transfer of a key employee from employment by the Trust to employment by
a subsidiary corporation or a parent corporation of the Trust or (ii) the
transfer of a key employee from employment by a subsidiary corporation or a
parent corporation of the Trust to employment by the Trust or by another
subsidiary or parent corporation of the Trust.
XIII. ADJUSTMENT OF SHARES; EFFECT OF CERTAIN TRANSACTIONS
Notwithstanding any other provision contained herein, in the event of any
change in the Shares subject to the Plan or to any Option or Right granted
under the Plan (through merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, split-up, split-off, spin-off,
combination of shares, or exchange of shares) and
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with respect to other dilutive or anti-dilutive events appropriate
adjustments shall be made by the Committee as to the maximum number of Shares
subject to the Plan available for, Options, Rights or Restricted Stock, the
maximum number of Shares for which Options, Rights or Restricted Stock may be
granted to any one employee, and the number of Shares and price per Share
subject to outstanding Options or Rights as shall be equitable to prevent
dilution or enlargement of rights under the Options, Rights or Restricted
Stock, and the determination of the Committee as to these matters shall be
conclusive; provided, however, that (i) any such adjustment with respect to
an Incentive Option and any related Right shall comply with the rules of
Section 424(a) of the Code, and (ii) in no event shall any adjustment be made
which would render any Incentive Option granted hereunder other than an
Incentive Option for purposes of Section 422 of the Code.
XIV. RIGHT TO TERMINATE EMPLOYMENT OR TRUSTEESHIP
The Plan shall not impose any obligation on the Trust or on any subsidiary
corporation or parent corporation thereof to continue the employment or
trusteeship or directorship of any holder of any Option, Right or Restricted
Stock; nor shall it impose any obligation on the part of any holder of
Options, Rights or Restricted Stock to remain in the employ, or to remain a
trustee or director, of the Trust or of any subsidiary corporation or parent
corporation thereof.
XV. PURCHASE FOR INVESTMENT; SECURITIES ACT REGISTRATION
Except as hereafter provided, the holder of Options, Rights or Restricted
Stock granted or awarded hereunder shall, upon any exercise hereof, execute
and deliver to the Trust a written statement, in form satisfactory to the
Trust, in which such holder represents and warrants that such holder is
purchasing or acquiring the Shares issued or awarded hereunder for such
holder's own account, for investment only and not with a view to the resale
or distribution thereof, and agrees that any subsequent resale or
distribution of any of such Shares shall be made only pursuant to either (a)
a Registration Statement on an appropriate form under the Securities Act of
1933, as amended (the "Securities Act"), which Registration Statement has
become effective and is current with regard to the Shares being sold, or (b)
a specific exemption from the registration requirements of the Securities
Act, but in claiming such exemption the holder shall, prior to any offer of
sale or sale of such Shares, obtain a prior favorable written opinion, in
form and substance satisfactory to the Trust, from counsel for or approved by
the Trust, as to the application of such exemption thereto. The foregoing
restriction shall not apply to (i) issuance by the Trust so long as the
Shares being issued are registered under the Securities Act and a prospectus
in respect thereof is current or (ii) reofferings of Shares by affiliates of
the Trust (as defined in Rule 405 or any successor rule or regulation
promulgated under the Securities Act) if the Shares being reoffered are
registered under the Securities Act and a prospectus in respect thereof is
current.
XVI. ISSUANCE OF CERTIFICATES; LEGENDS; PAYMENT OF EXPENSES
Upon any exercise of an Option or related Right which may be granted
hereunder or upon the vesting of Restricted Stock which may be awarded
hereunder and, in the case of an Option, payment of the purchase price in
accordance with Article VI hereof, a certificate or certificates for the
Shares as to which the Option or related Right has been exercised or for the
Shares as to which the Restricted Stock has vested shall be issued by the
Trust in the name of the person exercising the Option or related Right or
possessing the vested Restricted Stock and shall be delivered to or upon the
order of such person or persons.
The Trust may endorse such legend or legends upon the certificates of
Shares issued upon exercise of an Option or Right or the vesting of Restricted
Stock granted hereunder, and the Committee may issue such "stop transfer"
instructions to its transfer agent in respect of such Shares, as such Committee,
in its discretion, determines to be necessary or appropriate to (i) prevent a
violation of, or to perfect an exemption from, the registration requirements of
the Securities Act, (ii) implement the provisions of any agreement between the
Trust and the optionee or grantee with respect to such Shares, or (iii) permit
the Trust to determine the occurrence of a disqualifying disposition, as
described in Section 421(b) of the Code, of Shares transferred upon exercise of
an Incentive Option granted under the Plan.
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The Trust shall pay all issue or transfer taxes with respect to the
issuance or transfer of Shares, as well as all fees and expenses necessarily
incurred by the Trust in connection with such issuance or transfer, except
fees and expenses which may be necessitated by the filing or amending of a
Registration Statement under the Securities Act, which fees and expenses
shall be borne by the recipient of the Shares unless such Registration
Statement has been filed by the Trust for its own corporate purposes (and the
Trust so states) in which event the recipient of the Shares shall bear only
such fees and expenses as are attributable solely to the inclusion of such
Shares in the Registration Statement.
All Shares issued as provided herein shall be fully paid and
non-assessable to the extent permitted by law.
XVII. WITHHOLDING TAXES
The Trust may require a key employee exercising a Nonqualified Option or a
related Right granted hereunder to reimburse the Trust which employs such
employee for any taxes required by any government to be withheld or otherwise
deducted and paid by such Trust or corporation in respect of the issuance of
Shares. In lieu thereof, the Trust or corporation which employs such employee
shall have the right to withhold the amount of such taxes from any other sums
due or to become due from such Trust or corporation to the employee upon such
terms and conditions as the Committee shall prescribe.
XVIII. CHANGE OF CONTROL
Upon the occurrence of a Hostile Change of Control or a Change of Control
as defined in this section:
(i) each outstanding Option and related Rights shall automatically become
fully exercisable notwithstanding any provision to the contrary herein; and
(ii) restrictions and conditions on all Restricted Stock awards shall
automatically be deemed waived, and the recipients of such Restricted
Stock awards shall become entitled to receipt of the certificates
evidencing the Restricted Stock, unless the Committee (provided the
Committee is composed of the persons who were members thereof prior to a
Hostile Change of Control) shall otherwise expressly provide.
A "Hostile Change in Control" means a transaction, event or election
constituting a "Change in Control" (as hereinafter defined) which was not
approved by, or in, an election in which the Trustees participating in such
election were nominated or elected by at least two-thirds of the members of
the Board of Trustees of the Trust in office immediately prior to the Change
in Control.
A "Change in Control" of the Trust means and includes each and all of the
following occurrences:
(i) Any business combination, including but not limited to a merger of
the Trust, which has been approved by the requisite vote of the
shareholders;
(ii) The acquisition by any person or "group" of persons (as defined
under Section 13(d) of the Exchange Act), directly or indirectly, of
twenty-five percent (25%) or more of the combined voting power of the
outstanding shares of the Trust entitled to vote generally in the election
of Trustees;
(iii) Individuals who at the beginning of any period of three (3)
consecutive years constitute the entire Board of Trustees of the Trust
shall for any reason during such period cease to constitute a majority
thereof;
(iv) A change in control that would be required to be reported as such
under the Exchange Act and/or the exercise by a person or group of
"control" of the Trust within the meaning of Section 2(9) of the
Investment Company Act of 1940, as amended; or
(v) The Trust fails to qualify as a "REIT" under Sections 856 et seq. of
the Code, by reason of five or fewer individuals owning more than 50% in
value of the outstanding shares.
A-10
<PAGE>
If a Hostile Change in Control which would otherwise result in the
abrogation of the hardship requirement and of the prior or simultaneous
exercise of the Options requirement, will, in the nonreviewable judgment of
the Committee, be deemed to constitute a "golden parachute" as same is
defined under Section 280G of the Code ("Section 280G"), the Committee shall
reduce the number of Shares which may otherwise be issued as a result of the
exercise of the Right, to the extent necessary to avoid Section 280G
treatment as a "golden parachute." Notwithstanding such an adjustment,
however, the Trust makes no warranty as to the avoidance of Section 280G
treatment.
XIX. LISTING OF SHARES AND RELATED MATTERS
If at any time the Board of Trustees shall determine in its discretion
that the listing, registration or qualification of the Shares covered by the
Plan upon any national securities exchange or under any state or federal law,
or the consent or approval of any governmental or regulatory body, is
necessary or desirable as a condition of, or in connection with, the sale or
purchase of Shares under the Plan, no Shares shall be delivered unless and
until such listing, registration, qualification, consent or approval shall
have been effected or obtained, or otherwise provided for, free of any
conditions not acceptable to the Board of Trustees.
XX. AMENDMENT OF THE PLAN
The Board of Trustees or the Committee may, from time to time, amend the
Plan; provided, however, that no amendment shall be made, without the
approval of the shareholders of the Trust (a) if such approval is required by
the Code in respect of Incentive Options or under Rule 16b-3 with respect to
any Options granted pursuant to this Plan. Notwithstanding the foregoing,
amendments by the Trustees or the Committee, to conform to or comply with
changes in the Code or Rule 16b-3 may be adopted without shareholder approval
(unless such approval is required by the Code). The rights and obligations
under any Option or Right granted before amendment of the Plan or any
unexercised portion of such Option or Right shall not be adversely affected
by amendment of the Plan or the Option or Right without the consent of the
holder of the Option or Right.
XXI. TERMINATION OR SUSPENSION OF THE PLAN
The Board of Trustees may at any time suspend or terminate the Plan. The
Plan, unless sooner terminated by action of the Board of Trustees, shall
terminate at the close of business on the Termination Date. An Option, Right
or Restricted Stock award may not be granted while the Plan is suspended or
after it is terminated. Rights and obligations under any Option, Right or
Restricted Stock award granted while the Plan is in effect shall not be
altered or impaired by suspension or termination of the Plan, except upon the
consent of the person to whom the Option or Right was granted. The power of
the Committee to construe and administer any Options, Rights or Restricted
Stock award granted prior to the termination or suspension of the Plan under
Article III shall nevertheless continue after such termination or during such
suspension.
XXII. GOVERNING LAW
The Plan, such Options, Rights and Restricted Stock awards as may be
granted hereunder and all related matters shall be governed by, and construed
and enforced in accordance with, the laws of the Commonwealth of
Massachusetts, from time to time obtaining.
XXIII. EFFECTIVE DATE
The Plan shall become effective at 5:00 P.M., Eastern time, on the Effective
Date, the date on which the Plan is adopted and approved by the shareholders
of the Trust.
XXIV. EXCULPATION
MGI Properties is a Massachusetts trust and all persons dealing with the
Trust must look solely to the property of this Trust for the enforcement of
any claims against the Trust. Neither the Trustees, officers, agents nor
shareholders of this Trust assume any personal liability for obligations
entered into on its behalf.
A-11
<PAGE>
DETACH HERE MGI
P R O X Y
MGI PROPERTIES
Proxy solicited on behalf of the Board of
Trustees for Annual Meeting on March 27, 1997
The undersigned hereby appoints W. PEARCE COUES and PHILLIP C. VITALI, and
each of them with power in each to vote in the absence of the other, as the
Proxy Agents of the undersigned, with full power of substitution and with all
the powers the undersigned would possess if personally present to vote all the
Common Shares of the undersigned in MGI PROPERTIES at the Annual Meeting of the
Shareholders scheduled to be held on March 27, 1997 and at all adjournments
thereof.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
| SEE REVERSE |
| SIDE |
<PAGE>
MGI Properties
February 24, 1997
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders to be
held at 10:00 a.m. on Thursday, March 27, 1997, at the Boston Harbor Hotel, 70
Rowes Wharf, Boston, Massachusetts. Detailed information as to the business to
be transacted at the meeting is contained in the accompanying Notice of Annual
Meeting and Proxy Statement.
Regardless of whether you plan to attend the meeting, it is important that your
shares be voted. Accordingly, we ask that you sign and return your proxy as soon
as possible in the envelope provided.
Sincerely,
W. Pearce Coues
Chairman of the Board and
Chief Executive Officer
DETACH HERE MGI
| X | Please mark
votes as in
this example.
1. Election of two Trustees as recommended in Management's Proxy
Statement
Nominees: Rodger P. Nordblom
and William F. Murdoch, Jr.
FOR WITHHELD
[ ] [ ]
[ ]
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE(S), PRINT NAME(S) ABOVE
2. Ratification and approval of the adoption of MGI Properties'
1997 Employee Stock Option, Stock Appreciation Rights and
Restricted Stock Plan:
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. In their discretion, upon such other business as may properly
come before the meeting.
MARK HERE
FOR ADDRESS [ ]
CHANGE AND
NOTE AT LEFT
Please insert date and sign exactly as name appears hereon. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such Corporations are requested to sign their name by their President or
other authorized officer. All joint owners should sign.
Proxies will be voted for the election of Trustees and approval of the Plan
as recommended in the Proxy Statement unless contrary instructions are
hereinabove indicated. Discretionary authority is granted the Proxy Agents
as to other matters that may come before the meeting. Management knows of no
such other matters. Receipt of the MGI PROPERTIES Proxy Statement is hereby
acknowledged. All proxies heretofore signed by the undersigned are hereby
revoked.
Signature: Date: Signature: Date:
