SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): AUGUST 12, 1998
MGI PROPERTIES
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(Exact name of registrant as specified in its charter)
MASSACHUSETTS 1-6833 04-6268740
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
ONE WINTHROP SQUARE, BOSTON, MASSACHUSETTS 02110
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(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (617) 422-6000
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Item 5. OTHER EVENTS.
On August 12, 1998, the Board of Trustees of MGI Properties
(NYSE: MGI) (the "Trust") approved severance agreements (the "Severance
Agreements") for W. Pearce Coues, Chairman of the Board of Trustees of the
Trust, Phillip C. Vitali, Executive Vice President and Treasurer of the Trust,
Robert Ware, Executive Vice President of the Trust, and Karl Weller, Senior Vice
President of the Trust to encourage such executives to remain employed with the
Trust as the Trust continues its strategic review of alternatives for maximizing
shareholder value, including a possible liquidation of the Trust's properties.
On August 12, 1998, the Trust publicly announced that its Board of Trustees had
approved a plan of complete liquidation and termination of the Trust (the
"Plan") and directed that the Plan be submitted to the Trust's shareholders for
approval. The Plan is to be voted on by the Trust's shareholders at a special
meeting set for October 14, 1998.
The Severance Agreements provide for, among other things, cash
severance payments upon a termination of the Trust pursuant to a plan of
complete liquidation, a termination of the executive's employment without cause
after the date the shareholders of the Trust have approved a plan of complete
liquidation or a change in control as follows: W. Pearce Coues - $860,000;
Phillip C. Vitali - $472,500; Robert Ware - $576,346; and Karl Weller -
$457,500. For additional information, reference is made to the form of Severance
Agreement which is incorporated herein by reference and attached hereto as
Exhibit 10.1.
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This Current Report on Form 8-K contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. These forward-looking
statements are dependent on a number of factors which could cause actual results
to differ materially from those expressed or implied in the forward-looking
statements. Such factors include, among other things, the risks of future action
or inaction by the Board of Trustees (and the actual results thereof) with
respect to the Plan (including the possibility of litigation pertaining
thereto), the net realizable value of the properties upon liquidation thereof,
current market conditions remaining the same or improving, maintaining the
current occupancy and rent levels at the properties, as well as those risk
factors set forth under "Forward-Looking Statements," in Management's Discussion
and Analysis of Financial Condition and Results of Operations in the Trust's
Form 10-K for the year ended November 30, 1997 and in its most recent report on
Form 10-Q and Current Reports on Form 8-K, dated June 18, 1998 and August 12,
1998.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(C) EXHIBITS
EXHIBIT NO. EXHIBIT
10.1 Form of Severance Agreement
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MGI PROPERTIES
(Registrant)
Dated: September 30, 1998 By: /s/ Phillip C. Vitali
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Name: Phillip C. Vitali
Title: Executive Vice President
and Treasurer
(Chief Financial Officer)
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<PAGE>
EXHIBIT INDEX
10.1 Form of Severance Agreement
SEVERANCE AGREEMENT
This Severance Agreement (this "Agreement") is made and entered into
as of this 12th day of August, 1998, by and between MGI Properties, a
Massachusetts real estate investment trust (the "Trust") and
_______________________ (the "Executive").
RECITALS
WHEREAS, Executive is currently employed by the Trust as its
________________________;
WHEREAS, to encourage Executive to remain employed with the Trust,
the Trust desires to provide Executive with an opportunity for severance
compensation in the event of a Change in Control, a Liquidation or Termination
(all capitalized terms herein being defined in Section 7), of the Trust on the
terms and conditions set forth herein;
WHEREAS, the Trust and Executive each recognize and hereby
acknowledge that Executive's employment with the Trust is and shall continue to
be terminable at will, without prior notice, by either the Trust or Executive;
WHEREAS, the Trust and Executive each hereby acknowledge that this
Agreement is not intended to be, and shall not be construed as, an express or
implied contract of employment between the Trust and Executive;
WHEREAS, the parties agree that, subject to the provisions hereof,
any payments made to Executive hereunder shall supersede and be in lieu of any
rights Executive may have to receive payments or any other benefits under that
certain Plan for Severance Compensation of the Trust after Hostile Takeover
dated as of December 19, 1989 (the "Severance Plan"), which Plan shall otherwise
remain in full force and effect;
NOW, THEREFORE, for and in consideration of the mutual promises
hereinafter contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the Trust
and Executive hereby agree as follows:
<PAGE>
AGREEMENTS
1. CHANGE IN CONTROL, LIQUIDATION OR TERMINATION. Upon the
occurrence of a Change in Control, a Liquidation or Termination, the Executive
will be entitled to the benefits provided in Section 2 hereof.
2. SEVERANCE BENEFITS. (a) Following the occurrence of a Change in
Control, a Liquidation or a Termination, the Trust (or any successor entity)
will pay to the Executive the Severance Benefit in immediately available funds,
in United States Dollars, upon (simultaneous with) the Change in Control, a
Liquidation or a Termination. In the event that a Liquidating Trust is
established, 75% of the Severance Benefit shall be payable at the time of the
establishment of the Liquidating Trust and the remaining 25% shall be payable
upon Liquidation or Termination, if earlier. In addition to the Severance
Benefit, during the Severance Period, the Trust will arrange to provide the
Executive Employee Benefits as defined in Section 7(b) hereof. The Executive
will be considered to have been employed with the Trust during such Severance
Period for the purpose of determining the Employee Benefits due and payable to
the Executive under the benefit plans of the Trust applicable to the Executive,
the Executive's dependents, or the Executive's beneficiaries immediately prior
to the Change in Control, Liquidation or Termination. If and to the extent that
any benefit described in the immediately preceding sentence is not or cannot be
paid or provided under any policy, plan, program or arrangement of the Trust,
then the Trust will itself pay or provide for the payment of such Employee
Benefits to the Executive, and, if applicable, the Executive's dependents and
beneficiaries. At the Executive's written election, the Trust shall pay the
dollar equivalent of such Employee Benefits simultaneous with the payment
hereunder of the Severance Benefit payable hereunder and such payment shall be
in lieu of such Employee Benefits. Notwithstanding the foregoing, if Executive
(or his estate, heirs or personal representatives, as applicable) becomes
entitled to benefits hereunder on account of Executive?s termination of
employment by reason of death or permanent disability (as defined in Section 9)
and in connection with the adoption of a plan of complete liquidation by the
shareholders as provided in Section 6, the Board of Trustees shall have the
discretion to delay the payment of Severance Benefits until such time when such
payment would otherwise have been paid in the normal course if Executive had not
died or become permanently disabled, but in no event shall payment be made any
later than two years after the date of adoption of the plan of complete
liquidation.
(b) There will be no right of set-off or counterclaim in
respect of any claim, debt or obligation against any payment to or benefit for
the Executive provided for in this Agreement.
(c) Notwithstanding any other provision hereof, the
parties' respective rights and obligations under this Section 2 and under
Sections 4 and 5 will survive any termination or expiration of this Agreement
following a Change in Control, Liquidation or Termination.
3. NO MITIGATION OBLIGATION. Executive will not be required to
mitigate the amount of any payment provided for in this Agreement by seeking
other employment. The amount of benefits and payments due to Executive hereunder
shall not be reduced by any compensation or benefits received by Executive from
any other employment.
<PAGE>
4. REDUCTION OF BENEFITS HEREUNDER IN CERTAIN CIRCUMSTANCES.
Benefits provided hereunder shall be subject to reduction as follows:
(a) Notwithstanding any other provision of this
Agreement, and except as provided in subparagraph (b) below, the payments or
benefits to which Executive will be entitled under this Agreement will be
reduced to the extent necessary so that Executive will not be liable for the
federal excise tax levied on certain "excess parachute payments" under section
4999 of the Internal Revenue Code of 1986, as amended (the "Code"), if that
section applies to any payments or benefits to which Executive is otherwise
entitled under this agreement.
(b) the limitations of subparagraph (a) will not apply
if
(i) the difference between (A) the present value of
all payments and benefits to which Executive is entitled under this Agreement,
determined without regard to subparagraph (a), and (B) the present value of all
federal, state and other income and excise taxes for which Executive is liable
as a result of such payments exceeds
(ii) the difference between (A) the present value of
all payments and benefits to which Executive is entitled under this Agreement
calculated as if the limitation of subparagraph (a) applies and (B) the present
value of all federal, state and other income and excise taxes as a result of
such reduced payments.
Present values will be determined using the interest rate specified in section
280G of the Code and will be the present values as of the date of the payment of
the Severance Benefit.
(c) Whether payments to Executive are to be reduced
pursuant to subparagraph (a), and the extent to which they are to be so reduced,
will be determined by a nationally recognized accounting firm selected by the
Trust in its sole discretion (which may be its independent auditors), and the
Trust or such accounting firm will notify Executive in writing of the
determination. Any such notice shall describe in reasonable detail the basis of
the determination. The decision of such accounting firm concerning the extent of
any required reduction in such payments and benefits shall be final and binding
on both Executive and the Trust.
5. LEGAL FEES AND EXPENSES. It is the intent of the Trust that the
Executive not be required to incur legal fees and the related expenses
associated with the enforcement or defense of the Executive's rights to
compensation upon a Change in Control, Liquidation or Termination by litigation
or otherwise because the cost and expense thereof would substantially detract
from the benefits intended to be extended to the Executive hereunder.
Accordingly, if it should appear to the Executive that the Trust has failed to
comply with any of its obligations under this Agreement or in the event that the
Trust or any other person takes or threatens to take any action to declare the
agreement to pay Executive compensation upon a Change in Control, Liquidation or
Termination void or unenforceable, or institutes any litigation or other action
or proceeding designed to deny, or to recover from, the Executive the benefits
provided or intended to be provided to the Executive hereunder, the Trust
irrevocably authorizes the Executive from time to time to retain counsel of the
Executive's choice, at the expense of the Trust as hereinafter provided, to
advise and represent the Executive in connection with any such enforcement or
defense, including without limitation the initiation or defense of any
litigation or other legal action, whether by or against the Trust or any
Trustee, or other person affiliated with the Trust, in any jurisdiction.
Notwithstanding any existing or prior attorney-client relationship between the
Trust and such counsel, the Trust irrevocably consents to the Executive's
entering into an attorney-client relationship with such counsel, and in that
connection the Trust and the Executive agree that a confidential relationship
will exist between the Executive and such counsel. Without regard to whether the
Executive prevails, in whole or in part, in connection with any of the
foregoing, the Trust will pay and be solely financially responsible for any and
all attorneys' and related fees and expenses incurred by the Executive in
connection with any of the foregoing. The Trust will pay up to $5,000 of legal
fees on behalf of the Executive and all other similarly situated Executives, in
the aggregate, in connection with the negotiation of this Agreement.
<PAGE>
6. NO EMPLOYMENT RIGHTS; TERMINATION PRIOR TO CHANGE IN CONTROL,
LIQUIDATION OR TERMINATION. Nothing expressed or implied in this Agreement will
create any right or duty on the part of the Trust or the Executive to have the
Executive remain in the employ of the Trust prior to or following any Change in
Control, Liquidation or Termination, or as a limitation of the right of the
Company to discharge the Executive with or without Cause; the Executive may,
subject to the terms and conditions of this Agreement, have the right to receive
upon termination of his employment by the Trust, the payments and benefits
provided in this Agreement and shall not be deemed to have waived any rights he
may have either at law or in equity in respect of such discharge. Any
termination of the employment by the Trust of the Executive or the removal by
the Trust of the Executive from any office or position in the Trust, including
by reason of death or permanent disability (as defined in Section 9), following
the commencement of any discussion with a third person that results in a Change
in Control within 180 calendar days after such termination or removal will be
deemed to be a termination or removal of the Executive after a Change in Control
for purposes of this Agreement, entitling Executive (or his estate, heirs or
personal representatives as applicable) to receive all benefits he would have
received under this Agreement had he been an employee of the Trust on the date
of the Change in Control. If Executive?s employment terminates by reason of
death or disability (as defined in Section 9), and within 180 days thereafter, a
Change in Control of the Trust occurs, such termination will be deemed to be a
termination or removal of the Executive after a Change in Control, and Executive
shall be entitled to receive all benefits he would have received under this
Agreement had he been an employee of the Trust on the date of the Change in
Control. If Executive?s employment terminates by reason of death or permanent
disability (as defined in Section 9), and within 180 days thereafter, a plan of
complete liquidation is adopted by the shareholders, such termination will be
deemed to be a Termination, and Executive (or his estate, heirs or personal
representatives, as applicable) shall be entitled to receive all benefits he
would have received under this Agreement had he incurred a Termination, so long
as the plan of complete liquidation is not subsequently abandoned by the
Trustees (a majority of whom then consist of those in office on the date
hereof).
<PAGE>
7. CERTAIN DEFINED TERMS. In addition to terms defined elsewhere
herein, the following terms have the following meanings when used herein with
initial capital letters:
(a) "Change in Control" means the occurrence during the
term of this Agreement of any of the following events provided such Change in
Control has been authorized and approved in advance by a majority of the whole
Board of Trustees in office prior to the occurrence of any such event.
(i) the Trust is merged, consolidated, or
reorganized into or with another corporation or other legal entity and the Trust
is not the Surviving Entity (as hereinafter defined);
(ii) the Trust files a report or proxy statement
with the Securities and Exchange Commission pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act") disclosing in response to Form 8-K
or Schedule 14A (or any successor schedule, form or report or item therein) that
a change in control of the Trust has occurred or will occur in the future
pursuant to any then-existing contract or transaction; provided, however, a
Change in Control shall be deemed to occur only when the transaction described
in the Form 8-K or Schedule 14A (or any successor schedule, form or report or
item therein) is consummated; or (iii) if, during any period of 12 months,
individuals who at the beginning of any such period constitute the Board of
Trustees of the Trust cease for any reason to constitute at least a majority
thereof;
Notwithstanding the foregoing provisions of Section 7(a), a "Change in Control"
will not be deemed to have occurred for purposes of Section 7(a) solely because
(A) an entity in which the Trust, directly or indirectly, beneficially owns 50%
or more of the voting securities (a "Subsidiary"), or (B) any employee share
ownership plan or any other employee benefit plan of the Trust or any Subsidiary
either files or becomes obligated to file a report or a proxy statement under or
in response to Schedule 13D, Schedule 14D-1, Form 8-K, or Schedule 14A (or any
successor schedule, form, or report or item therein) under the Exchange Act
disclosing beneficial ownership by it of shares of Voting Shares, whether in
excess of 33% or otherwise, or because the Trust reports that a change in
control of the Trust has occurred or will occur in the future by reason of such
beneficial ownership.
<PAGE>
The determination as to which party to a merger, consolidation or reorganization
is the "Surviving Entity" within the meaning of Section 7(a) shall be made on
the basis of the relative equity interests of the shareholders in the entity
existing after the merger, consolidation or reorganization, as follows: if
following any merger, consolidation or reorganization the holders of outstanding
Voting Shares of the Trust immediately prior to the merger, consolidation or
reorganization own equity securities possessing more than 50% of the voting
power of the entity existing following the merger, consolidation or
reorganization, the Trust shall be the Surviving Entity. In all other cases, the
Trust shall not be the Surviving Entity. In making the determination of
ownership of equity securities by the shareholders of an entity immediately
after the merger, consolidation or reorganization pursuant to this paragraph,
equity securities which the shareholders owned immediately before the merger,
consolidation or reorganization as shareholders of another party to the
transaction shall be disregarded. Further, for purposes of this paragraph only,
outstanding voting securities of an entity shall be calculated by assuming the
conversion of all equity securities convertible (immediately or at some future
time) into shares entitled to vote.
(b) "Employee Benefits" means the benefits under any and
all employee health, medical/hospital and dental plans and/or insurance (whether
funded by actual insurance or self-insured by the Trust), policies, plans,
programs or arrangements that may now exist or any equivalent successor
policies, plans, programs or arrangements that may be adopted hereafter by the
Trust, providing such health, medical and dental benefits at least as great in
the aggregate as are payable thereunder prior to a Liquidation, Change in
Control or Termination. Executive acknowledges that life insurance and
disability insurance are not Employee Benefits hereunder and will, together with
other employee perquisites, terminate upon any termination of his employment;
provided, however, that any future benefit accruals under any Simplified
Employee Pension Plan or Supplemental Employee Retirement Plan shall terminate
on or after the adoption of a plan of liquidation, or occurrence of a Change in
Control or Termination, at such time as may be determined by the Board of
Trustees (or any successor Board) in their sole and absolute discretion.
(c) "Liquidating Trust" shall mean the liquidating trust
established pursuant to a plan of complete liquidation to which any remaining
assets and liabilities of the Trust are transferred prior to the Trust's
termination.
(d) "Liquidation" means the date of the termination of
the Trust pursuant to a plan of complete liquidation, and, in the event that a
Liquidating Trust is established, the date of the final distribution from the
Liquidating Trust.
(e) "Severance Benefit" means $____________.
(f) "Severance Period" means the period of time
commencing on the date of an occurrence of a Change in Control, Liquidation or
Termination, whichever is applicable, and continuing until the expiration of ___
months thereafter.
<PAGE>
(g) "Termination" shall mean a termination by the Trust
of the Executive's employment by the Trust without "Cause," including for reason
of death or permanent disability (as defined in Section 9) at any time after the
shareholders of the Trust have approved a plan of complete liquidation,
(provided such plan has not theretofore been abandoned by the Trustees (a
majority of whom then consist of those in office on the date hereof). "Cause"
means only (i) the conviction of the Executive of a felony or a crime involving
moral turpitude or a theft, embezzlement, misappropriation of funds or the
commission of any other material act of dishonesty in the course of his
employment by the Trust or (ii) the willful and repeated failure of Employee to
perform his material duties or his gross negligence in the performance of such
duties, which failures (if curable) are not cured within 20 days after written
notice thereof has been given to him by the Trust.
8. TERM. The term of this Agreement shall be deemed to commence and
be effective as of the date of this Agreement and shall continue for a period
ending on December 31, 2001, unless earlier terminated in accordance with the
provisions hereof.
9. TERMINATION OF THIS AGREEMENT. Except with respect to the
provisions of this Agreement that provide for Severance Benefit, Employee
Benefit payments and legal fees and expenses to be made to Executive after
termination of employment as set forth in Sections 2, 5 and 6, this Agreement
shall terminate automatically without further action by either of the parties
hereto upon the death or permanent disability of Executive or the termination of
Executive's employment with the Trust for any reason or no reason. As used
herein, the term "permanent disability" means physical or mental disability or
both, that is determined by the Trust, in its reasonable discretion, to
substantially impair the ability of Executive to perform the day-to-day
functions normally performed by Executive if the disability is suffered (or is
reasonably expected to be suffered) by Executive for a period of not less than
six consecutive calendar months.
10. REPRESENTATION BY EXECUTIVE. Executive hereby represents and
warrants to the Trust that there are no agreements or understandings that would
make unlawful his execution or delivery of this Agreement.
11. NOTICES. All notices, renewals and other communications required
or permitted under this Agreement must be in writing and shall be deemed to have
been given if delivered or mailed, by certified mail, first class postage
prepaid, to the parties at the addresses set forth in this Agreement, as the
same may be changed in writing by the parties from time to time.
<PAGE>
12. ENTIRE AGREEMENT. The parties expressly agree that this
Agreement is contractual in nature and not a mere recital, and that it contains
all the terms and conditions of the agreement between the parties with respect
to the matters set forth herein. All prior negotiations, agreements,
arrangements, understandings and statements between the parties relating to the
matters set forth herein that have occurred at any time or contemporaneously
with the execution of this Agreement are superseded and merged into this
completely integrated Agreement. Upon the expiration of the term of this
Agreement and in the event the Executive has not theretofore been entitled under
the provisions hereof to the Severance Benefit and the Employee Benefits
hereunder or to the benefits under the Severance Plan in the event of its
applicability, he shall nevertheless remain entitled to the benefits under the
Severance Plan, if otherwise applicable to him as a participant thereunder,
which Severance Plan shall remain in full force and effect, in accordance with
its terms.
13. GOVERNING LAW. This Agreement was negotiated and is performable
in Boston, Massachusetts and shall be governed by the laws of the Commonwealth
of Massachusetts without giving effect to principles of conflicts of law.
14. SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future law, such
provisions shall be fully severable, and this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, the remaining provisions of this Agreement shall remain
in full force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance herefrom, and in lieu of such
provision, there shall be added automatically as a part of this Agreement, a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible, and the Trust and
Executive hereby request the court to whom disputes relating to this Agreement
are submitted to reform the otherwise unenforceable covenant in accordance with
the proceeding provision.
15. COUNTERPARTS. This Agreement may be executed in multiple
identical counterparts, each of which shall be deemed an original, and all of
which taken together shall constitute but one and the same instrument. In making
proof of this Agreement, it shall not be necessary to produce or account for
more than one counterpart executed by the party sought to be charged with
performance hereunder.
<PAGE>
16. ASSIGNMENT AND DELEGATION. (a) All rights, covenants and
agreements of the Trust set forth in this Agreement shall, unless otherwise
provided herein, be binding upon and inure to the benefit of the Trust's
respective successors and assigns. All rights, covenants and agreements of
Executive set forth in this Agreement shall, unless otherwise provided herein,
not be assignable by Executive, and shall be considered personal to Executive
for all purposes; provided, however, that this provision shall not preclude
Executive from designating one or more beneficiaries to receive any amount that
may be payable after his death and shall not preclude the legal representative
of his estate from assigning any right hereunder to the person or persons
entitled thereto under his will or, in the case of intestacy, to the person or
persons entitled thereto under the laws of intestacy applicable to his estate.
The term "beneficiaries" as used in this Agreement shall mean a beneficiary or
beneficiaries so designated to receive any such amount, or if no beneficiary has
been so designated, the legal representative of the Executive's estate.
(b) No right, benefit, or interest hereunder, shall be
subject to anticipation, alienation, sale, assignment, encumbrance, charge,
pledge, hypothecation, or set-off in respect of any claim, debt, or obligation,
or to execution, attachment, levy, or similar process, or assignment by
operation of law. Any attempt, voluntary or involuntary, to effect any action
specified in the immediately preceding sentence shall, to the full extent
permitted by law, be null, void and of no effect.
17. WAIVER OF BREACH. Failure by either party to demand strict
compliance with any of the terms, covenants or provisions hereof shall not be
deemed a waiver of the term, covenant or provision, nor any waiver or
relinquishment by the Trust of any power at any other time or times.
18. WITHHOLDING OF TAXES. The Trust shall withhold taxes (and
payroll deductions) from amounts paid pursuant to this Agreement as required by
law, and, to the extent deemed necessary by the Trust, in good faith.
19. AMENDMENT. No amendment, change or modification of this
Agreement may be made except in writing, signed by both parties.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement as of the date first set forth above.
MGI PROPERTIES
By:
--------------------------------
Name:
Title:
Notice Address:
One Winthrop Square
Boston, MA 02210
EXECUTIVE:
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Notice Address:
