UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<S> <C>
For the Quarterly Period Ended: May 31, 1998 Commission File Number: 1-6833
------------ ------
</TABLE>
MGI PROPERTIES
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MASSACHUSETTS 04-6268740
- --------------------------------------------- ------------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
</TABLE>
One Winthrop Square, Boston, Massachusetts 02110
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 422-6000
---------------------------
N/A
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Common shares outstanding as of July 15, 1998: 13,761,307
Page 1 of 14 pages
Exhibit Index appears on Page 13
<PAGE>
MGI PROPERTIES
INDEX
PART I: FINANCIAL INFORMATION Page No.
--------
Item 1: Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Earnings 4
Consolidated Statements of Cash Flow 5
Consolidated Statements of Changes in Shareholders' Equity 6
Notes to Consolidated Financial Statements 7
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Exhibit 11: Computation of Earnings Per Share 12
PART II: OTHER INFORMATION
Items 1 - 6 13
Signatures 14
- 2 -
<PAGE>
MGI PROPERTIES
PART I -- FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
May 31, 1998 November 30, 1997
(unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Real estate
Land $ 83,976,000 $ 82,989,000
Buildings and improvements 320,366,000 288,095,000
Tenant improvements 12,831,000 10,859,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total real estate, at cost 417,173,000 381,943,000
Accumulated depreciation and amortization (46,539,000) (47,158,000)
- ------------------------------------------------------------------------------------------------------------------------------------
Net investments in real estate 370,634,000 334,785,000
Cash and cash equivalents 7,624,000 13,964,000
Accounts receivable 3,798,000 3,654,000
Other assets 9,416,000 9,641,000
- ------------------------------------------------------------------------------------------------------------------------------------
$391,472,000 $362,044,000
====================================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage and loans payable $131,983,000 $113,171,000
Other liabilities 5,927,000 6,488,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 137,910,000 119,659,000
Shareholders' equity:
Common shares -- $1 par value; 17,500,000 shares authorized;
13,758,281 issued (13,625,489 at November 30, 1997) 13,758,000 13,625,000
Additional paid-in capital 208,132,000 207,031,000
Undistributed net income 31,672,000 21,729,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 253,562,000 242,385,000
- ------------------------------------------------------------------------------------------------------------------------------------
$391,472,000 $362,044,000
====================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
- 3 -
<PAGE>
MGI PROPERTIES
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Three Months Ended
------------------
May 31, 1998 May 31, 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCOME
Rental $17,447,000 $15,376,000
Interest 137,000 198,000
- -----------------------------------------------------------------------------------------------------------
Total income 17,584,000 15,574,000
- -----------------------------------------------------------------------------------------------------------
EXPENSES
Property operating expenses 4,000,000 3,807,000
Real estate taxes 2,054,000 1,853,000
Depreciation and amortization 2,902,000 2,587,000
Interest 2,644,000 2,273,000
General and administrative 859,000 790,000
- -----------------------------------------------------------------------------------------------------------
Total expenses 12,459,000 11,310,000
- -----------------------------------------------------------------------------------------------------------
Income before net gains 5,125,000 4,264,000
Net gains 1,950,000 --
- -----------------------------------------------------------------------------------------------------------
Income before extraordinary item 7,075,000 4,264,000
Extraordinary item - prepayment of debt -- --
===========================================================================================================
Net income $7,075,000 $4,264,000
PER SHARE DATA
Basic earnings per share $0.51 $0.31
===========================================================================================================
Diluted earnings per share $0.50 $0.31
===========================================================================================================
Weighted average shares outstanding 13,756,217 13,598,472
===========================================================================================================
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Six Months Ended
----------------
May 31, 1998 May 31, 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCOME
Rental $33,725,000 $30,258,000
Interest 347,000 404,000
- ---------------------------------------------------------------------------------------------------------
Total income 34,072,000 30,662,000
- ---------------------------------------------------------------------------------------------------------
EXPENSES
Property operating expenses 7,926,000 7,471,000
Real estate taxes 3,992,000 3,672,000
Depreciation and amortization 5,568,000 5,139,000
Interest 4,993,000 4,896,000
General and administrative 1,715,000 1,565,000
- ---------------------------------------------------------------------------------------------------------
Total expenses 24,194,000 22,743,000
- ---------------------------------------------------------------------------------------------------------
Income before net gains 9,878,000 7,919,000
Net gains 8,025,000 600,000
- ---------------------------------------------------------------------------------------------------------
Income before extraordinary item 17,903,000 8,519,000
Extraordinary item - prepayment of debt -- (306,000)
=========================================================================================================
Net income $17,903,000 $8,213,000
PER SHARE DATA
Basic earnings per share $1.31 $0.63
=========================================================================================================
Diluted earnings per share $1.28 $0.62
=========================================================================================================
Weighted average shares outstanding 13,711,816 12,964,645
=========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
- 4 -
<PAGE>
MGI PROPERTIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Six Months Ended
----------------------------------------------
May 31, 1998 May 31, 1997
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $17,903,000 $ 8,213,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 5,568,000 5,139,000
Net gains (8,025,000) (600,000)
Extraordinary item -- 306,000
Other (1,083,000) 956,000
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 14,363,000 14,014,000
- ------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of real estate (57,127,000) (25,664,000)
Additions to real estate (3,957,000) (3,016,000)
Deferred tenant charges (1,118,000) (901,000)
Net proceeds from sales of real estate interests 17,979,000 704,000
Other 877,000 376,000
- ------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (43,346,000) (28,501,000)
- ------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Additions to mortgage and loans payable, net 46,550,000 15,500,000
Repayment of mortgage and loans payable (16,932,000) (41,711,000)
Mortgage prepayment penalty -- (306,000)
Cash distributions (7,960,000) (6,801,000)
Proceeds from issuance of common shares 985,000 41,266,000
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 22,643,000 7,948,000
- ------------------------------------------------------------------------------------------------------------------
Net decrease in cash and short-term investments (6,340,000) (6,539,000)
- ------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS
Beginning of period 13,964,000 15,140,000
- ------------------------------------------------------------------------------------------------------------------
End of period $ 7,624,000 $ 8,601,000
==================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
- 5 -
<PAGE>
MGI PROPERTIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Additional
Common Paid-In Undistributed
Shares Capital Net Income
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at November 30, 1997 $13,625,000 $207,031,000 $21,729,000
Net income -- -- 17,903,000
Distributions -- -- (7,960,000)
Options exercised and other 133,000 1,101,000 --
- --------------------------------------------------------------------------------------------------------------
Balance at May 31, 1998 $13,758,000 $208,132,000 $31,672,000
==============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
- 6 -
<PAGE>
MGI PROPERTIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1: The results of the interim period are not necessarily indicative of
results to be expected for the entire fiscal year. The figures
contained in this interim report are unaudited and may be subject to
year-end adjustments. Certain prior year amounts have been reclassified
to conform with the current year presentation. In the opinion of
management, all adjustments necessary for a fair presentation of
financial position and results of operations have been included and
such adjustments include only the normal accruals.
Note 2: On June 18, 1998, the Board of Trustees declared a cash dividend of
$.31 per common share payable on July 10, 1998 to shareholders of
record on July 1, 1998. This dividend payment will aggregate $4.3
million.
Note 3: Cash paid for interest amounted to $2.6 million and $2.3 million for
the three-month periods ended May 31, 1998 and May 31, 1997,
respectively.
Note 4: At May 31, 1998, the Trust had entered into signed agreements for the
sale of two properties having a net carrying value of $2.2 million. In
addition, the Trust has initiated a marketing program for the sale of a
Somerset, New Jersey office building with a net carrying value of $14.1
million at May 31, 1998. Although the sales are subject to the
satisfactory completion of certain terms and conditions, including due
diligence by the potential purchasers, the Trust had deemed these three
properties held for sale at May 31, 1998 and had ceased depreciating
these properties. Subsequent to the end of the quarter, the Trust
completed the sale of one of the properties deemed held for sale, a
North Carolina office property for $.9 million. In light of the
uncertainties inherent in real estate transactions, there can be no
assurance that the sale of the remaining two properties deemed held for
sale will be successfully completed.
Note 5: At May 31, 1998, options to purchase an aggregate of 1,070,225 common
shares at exercise prices ranging from $7.375 to $24.75 per share were
outstanding under MGI's stock option plans for key employees and
trustees. All options outstanding at May 31, 1998 expire by April 2008.
Note 6: Diluted earnings per share amounts are computed based on the weighted
average number of shares actually outstanding plus the shares that
would be outstanding assuming the exercise of dilutive stock options,
all of which are considered to be common stock equivalents. The number
of shares that would be issued from the exercise of stock options has
been reduced by the number of shares that could have been purchased
from the proceeds at the average market price of the company's stock.
Refer to Part I - Exhibit 11 - Computation of Earnings Per Share (page
12).
Note 7: MGI intends to quality for the year ended November 30, 1998 as a real
estate investment trust ("REIT") under the provisions of Sections
856-860 of the Internal Revenue Code of 1986, as amended. Accordingly,
no provision has been made for Federal income taxes.
- 7 -
<PAGE>
MGI PROPERTIES
PART I, ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
- --------
MGI is a self-administered equity REIT that owns and operates a
diversified portfolio of income producing real estate consisting of 67
commercial properties and three multi-family residential properties. The
commercial portfolio consists of 5.7 million square feet, 88% of which is
comprised of office, office/r&d and industrial properties. The multi-family
properties consist of three residential communities aggregating 959 units. At
May 31, 1998, the commercial and residential properties were 96.9% and 94.0%
leased, respectively. Since 1992, the Trust has focused on the commercial
segment of the real estate market, specifically industrial and office properties
located in New England. At May 31, 1998, 66%, based upon cost, of MGI's real
estate assets were located in New England. During fiscal 1997, the Trust began
the internalization of the property management function for its New England
properties. As of May 31, 1998, the Trust had 3.7 million square feet of space
under management.
On June 18, 1998, the Trust announced that the Board of Trustees would
undertake a review of strategic alternatives available to the Trust to maximize
shareholder value, including a possible liquidation of the Trust's properties.
There can be no assurance with respect to the results that may or may not be
accomplished by the Board's strategic review. In the event of a liquidation of
the Trust's properties, there can be no assurance of the net realizable value
thereof.
Liquidity and Capital Resources
- -------------------------------
Shareholders' equity at May 31, 1998 was $253.6 million, compared to
$242.4 million at November 30, 1997. The increase primarily reflects the excess
of net income over distributions paid. At May 31, 1998, financial liquidity was
provided by $7.6 million in cash and cash equivalents and by an unused line of
credit aggregating $40.0 million.
Through the first two quarters of fiscal 1998, the Trust has acquired
12 properties totaling 740,000 square feet for an aggregate price of $57.1
million. The properties were 99% leased as of May 31, 1998. All of the
properties are located in New England and include seven office properties
totaling 458,300 square feet, four office/research and development properties
totaling 242,700 and an industrial building of 39,000 square feet. Additionally,
the Trust sold five properties for an aggregate sales price of $28.8 million, of
which $10.8 million was provided in the form of the assumption of mortgage loans
secured by two of the sold properties. Proceeds from these five sales have been
reinvested in property acquisitions through tax-deferred like kind exchanges.
After the close of the quarter, the Trust completed the sale of a 16,300
square-foot North Carolina office property for $.9 million.
Mortgage and other loans payable totaled $132.0 million at May 31,
1998, a net increase of $18.8 million, when compared to the $113.2 million
outstanding at November 30, 1997. During the second quarter of fiscal 1998, MGI
entered into a $75 million unsecured credit facility which replaced two secured
lines of credit that totaled $45 million. The Trust currently has $35.0 million
outstanding under the line of credit whereas at November 30, 1997, there was
$15.5 million outstanding under the then existing lines. In addition, the Trust
closed on an $11.6 million mortgage loan secured by a Michigan apartment complex
and loans totaling $10.8 million were assumed by the purchaser in conjunction
with the sale of properties. The balance of the change represents scheduled
principal payments. Scheduled loan
- 8 -
<PAGE>
MGI PROPERTIES
PART I, ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
principal payments due within 12 months of May 31, 1998 total $3.0 million. MGI
believes it will continue to be able to extend or refinance maturing mortgage
loans upon satisfactory terms.
Cash requirements during the balance of fiscal 1998 include
distributions to shareholders, capital and tenant improvements and other leasing
expenditures required to maintain MGI's occupancy levels and other investment
undertakings. Principal sources of funds in the future are expected to be from
property operations, lines of credit, mortgaging or refinancing of existing
mortgages on properties and MGI's portfolio of investment securities. Other
potential sources of funds include the proceeds of public or private offerings
of additional equity or debt securities of the Trust of the sale of real estate
investments. The cost of new borrowings or issuances of the Trust's equity
securities will be measured against the anticipated returns of investments to be
acquired with such funds.
The Trust presently anticipates that primarily cash, short-term
investments and debt will finance the purchase of additional properties. MGI
believes the combination of available cash and short-term investment securities,
the value of MGI's unencumbered properties and other resources available to it
are sufficient to meet its short and long-term liquidity requirements.
Results of Operations
- ---------------------
Net income for the fiscal quarter ended May 31, 1998, was $7.1 million,
or $.51 per share (basic), as compared to $4.3 million, or $.31 per share
(basic), in the corresponding quarter of 1997. Included in the 1998 second
quarter net income was $2.0 million of gain recognized from the sale of an
industrial building located in South Carolina. Income before net gain and
extraordinary item was $5.1 million and $4.3 million for the quarters ended May
31, 1998 and May 31, 1997, respectively.
Net income for the six months ended May 31, 1998, was $17.9 million, or
$1.31 per share (basic), as compared to $8.2 million, or $.63 per share (basic),
a year ago. Income before net gain and extraordinary item was $9.9 million and
$7.9 million for the six months ended May 31, 1998 and May 31, 1997,
respectively. Included in 1998 year-to-date net income were net gains of $8.0
million from the sale of five properties. Included in the 1997 year-to-date net
income was a net gain of $.6 million which was partially offset by an
extraordinary loss of $0.3 million incurred in connection with a loan
refinancing prepayment fee.
Funds from operations ("FFO") totaled $8.0 million in the second
quarter of fiscal 1998, compared to $6.8 million in the corresponding quarter of
1997. Funds from operations for the six months ended May 31, 1998 and 1997 were
$15.3 million and $13.0 million, respectively. MGI calculates FFO in conformity
with the NAREIT definition which is net income (computed in accordance with
generally accepted accounting principles), excluding gains (or losses) from debt
restructuring and sales of property, plus depreciation and amortization, and
after adjustments for unconsolidated partnerships and joint ventures. MGI
believes FFO is an appropriate supplemental measure of operating performance.
- 9 -
<PAGE>
MGI PROPERTIES
PART I, ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
The following is a reconciliation of net income to FFO:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
May 31, 1998 May 31, 1997 May 31, 1998 May 31, 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Income $7,075,000 $4,264,000 $17,903,000 $ 8,213,000
Less net gain and extraordinary item (1,950,000) -- (8,025,000) (294,000)
Plus building depreciation 2,249,000 2,051,000 4,285,000 4,092,000
Plus tenant improvement and commission
amortization 612,000 506,000 1,200,000 1,003,000
---------- ---------- ----------- -----------
FFO $7,986,000 $6,821,000 $15,363,000 $13,014,000
========== ========== =========== ===========
</TABLE>
The change in FFO, compared to the corresponding periods in 1997, is
attributable to the same factors that affected income before net gain and
extraordinary item in such periods, with the exception of depreciation and
amortization expense.
In comparing the second quarter of fiscal 1998 to that of the previous
year, the approximate $.9 million increase in net income before net gain and
extraordinary item resulted principally from a $1.7 million increase in property
operating income which was offset by increases in interest expense and
depreciation and amortization of $0.4 million and $0.3 million, respectively.
The increase in interest expense is due to the higher average balance of debt
outstanding in 1998. Property operating income is defined as rental and other
income less property operating expenses and real estate taxes. The change in
property operating income reflects the additional income of $2.0 million from
the acquisition of properties, a 10.4%, or $0.9 million, increase in income from
"same store" properties owned throughout the second quarters of both fiscal 1998
and 1997, offset, in part, by the income effect of $1.2 million due to the sale
of properties. With respect to the comparable properties, the increase in
property operating income is primarily due to increased revenues, particularly
in the office and office/research & development properties, reflecting the
adjustment to market rents as leases rollover.
<TABLE>
<CAPTION>
Change in Property Operating Income for Quarter Ended May 31, 1998 versus May 31, 1997
- --------------------------------------------------------------------------------------
Properties Held 1998 and 1997 1998 and 1997
Both Fiscal Years Acquisitions Sales Net Change
----------------- ------------ ----- ----------
<S> <C> <C> <C> <C>
Industrial $100,000 $ 879,000 $ (540,000) $ 439,000
Office 400,000 766,000 (169,000) 997,000
Office R&D 276,000 340,000 -- 616,000
Apartment 24,000 -- (336,000) (312,000)
Retail 20,000 -- (124,000) (104,000)
Land and Partnership 40,000 -- -- 40,000
-------- ---------- ------------ -----------
$860,000 $1,985,000 $(1,169,000) $1,676,000
======== ========== ============ ===========
</TABLE>
- 10 -
<PAGE>
MGI PROPERTIES
PART I, ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
For the six months ended May 31, 1998 property operating income from
properties held in both fiscal years had increased by $1.3 million,
approximately 8.1%, when compared to the comparable 1997 period. While the
increase in income was mostly driven by increased rental revenue, the office
properties experienced a 5.5% drop in operating expenses due to both lower
utility expense and lower management costs on those properties managed by the
Trust. Base rents on commercial leases renewed or released in the first two
quarters of 1998 are expected to increase approximately 28%, which should
generate an estimated $0.4 million of additional rental income during the second
half of fiscal 1998 as such new leases become effective.
Scheduled lease expirations and completed leasing (in square feet) for
the portfolio as a whole are as follows at May 31, 1998:
<TABLE>
<CAPTION>
Scheduled Expirations
------------------------------------
Property Percentage 1998 Remaining Scheduled
Type Leased Leasing 1998 1999
---- ------ ------- --------- ---------
<S> <C> <C> <C> <C>
Industrial 96.9% 240,100 58,600 284,100
Office 96.6% 163,400 75,500 163,200
Office/R&D 97.8% 124,300 93,100 130,500
Retail 95.9% 104,100 3,000 21,300
----- ------- ------- -------
Total 96.9% 631,900 230,200 599,100
===== ======= ======= =======
</TABLE>
The remaining fiscal 1998 scheduled lease expirations represent 4% of
MGI's total commercial portfolio. Scheduled expirations for New England
properties total 188,100 and 529,600 square feet, including 129,400 and 507,300
square feet for Massachusetts properties for the balance of 1998 and in 1999,
respectively. At this time, the Trust's scheduled expirations for the year 2000
total 1,062,066 square feet, with 956,938 square feet related to New England
properties. Existing rent levels relative to most New England space coming up
for renewal appear to be generally below prevailing market rents.
Forward Looking Statements
- --------------------------
Statements made or incorporated in this Report may contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934,
as amended. 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 Trustees
relative to a possible liquidation of the Trust's properties (including the
possibility of litigation pertaining thereto), maintaining or improving the
current occupancy and rent levels at the acquisition and other properties, as
well as those set forth in Risk Factors (Item 1) and Management's Discussion and
Analysis of Financial Condition and Results of Operations in MGI's Form 10-K for
the year ended November 30, 1997.
- 11 -
<PAGE>
MGI PROPERTIES
PART I - EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Three Months Ended May 31,
--------------------------
1998 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
PRIMARY
Net income $ 7,075,000 $ 4,264,000
===========================================================================================================
Weighted average number of shares outstanding during the period 13,756,217 13,598,472
===========================================================================================================
Primary earnings per share $0.51 $0.31
===========================================================================================================
ASSUMING FULL DILUTION
Net income $ 7,075,000 $ 4,264,000
===========================================================================================================
Weighted average number of shares outstanding during the period 14,059,877 13,883,488
===========================================================================================================
Earnings per share assuming full dilution $0.50 $0.31
===========================================================================================================
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Six Months Ended May 31,
------------------------
1998 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
PRIMARY
Net income $17,903,000 $ 8,213,000
=========================================================================================================
Weighted average number of shares outstanding during the period 13,711,816 12,964,645
=========================================================================================================
Primary earnings per share $1.31 $0.63
=========================================================================================================
ASSUMING FULL DILUTION
Net income $17,903,000 $ 8,213,000
=========================================================================================================
Weighted average number of shares outstanding during the period 14,019,953 13,258,738
=========================================================================================================
Earnings per share assuming full dilution $1.28 $0.62
=========================================================================================================
</TABLE>
- 12 -
<PAGE>
MGI PROPERTIES
PART II - OTHER INFORMATION
Item 1: Legal Proceedings: Not applicable.
Item 2: Changes in Securities and Use of Proceeds: Not applicable.
Item 3: Defaults upon Senior Securities: Not applicable.
Item 4: Submission of Matters to a Vote of Security Holders:
The following was submitted to a vote of shareholders at the
March 26, 1998 Annual Meeting of Shareholders:
(a) The election of three Trustees to serve for a term of
three years expiring on the date of the Trust's Annual
Meeting of Shareholders in 2001. The vote on this was
George S. Bissell - 12,239,382 affirmative and 93,822
withheld; W. Pearce Coues - 12,249,239 affirmative and
83,965 withheld; and, Robert M. Melzer - 12,237,990
affirmative and 95,214 withheld.
Item 5: Other Information: Not applicable.
Item 6: Exhibits and Reports on Form 8-K:
a) Exhibits:
Part I - Exhibit 11 -- Computation of Earnings Per
Share (see page 12).
Exhibit 99 -- Form of Indemnity Agreement
b) Reports on Form 8-K: Dated June 18, 1998.
- 13 -
<PAGE>
MGI PROPERTIES
SIGNATURES
Pursuant to the requirements to the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: July 15, 1998 /s/ Phillip C. Vitali
------------- ---------------------
Phillip C. Vitali
Executive Vice President and Treasurer
(Chief Financial Officer)
Date: July 15, 1998 /s/ David P. Morency
------------- --------------------
David P. Morency
Controller
(Principal Accounting Officer)
-14-
INDEMNITY AGREEMENT
AGREEMENT, as of June 18, 1998 (the "Agreement"), between MGI
Properties, a Massachusetts trust (the "Trust") and __________ (the
"Indemnitee").
WHEREAS, it is essential to the Trust to retain and attract as trustees
and executive officers the most capable persons available;
WHEREAS, Indemnitee has agreed to serve as a trustee or executive
officer of the Trust;
WHEREAS, both the Trust and Indemnitee recognize the increased risk of
litigation and other claims being asserted against trustees and executive
officers of public companies in today's environment;
WHEREAS, the Bylaws (the "Bylaws") and Declaration of Trust (the
"Declaration of Trust") of the Trust require the Trust to indemnify and advance
expenses to its trustees and certain executive officers to the fullest extent
provided by law, and the Indemnitee has agreed to serve (or continue to serve)
as a trustee (or executive officer) of the Trust in part in reliance on such
provisions in the Bylaws and Declaration of Trust; and
WHEREAS, in recognition of Indemnitee's need for substantial protection
against personal liability in order to enhance Indemnitee's continued service to
the Trust in an effective manner and Indemnitee's reliance on the foregoing
provisions in the Bylaws and Declaration of Trust, and in part to provide
Indemnitee with specific contractual assurance that the protection promised by
such provisions in the Bylaws and Declaration of Trust will be available to
Indemnitee (regardless of, among other things, any amendment to or revocation of
such provisions in the Bylaws or Declaration of Trust or any change in the
composition of the Trust's Board of Trustees or acquisition transaction relating
to the Trust), the Trust wishes to provide in this Agreement for the
indemnification of and the advancing of expenses to Indemnitee to the fullest
extent permitted by law and as set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and of Indemnitee
agreeing to serve as a trustee or executive officer of the Trust and intending
to be legally bound hereby, the parties hereto agree as follows:
<PAGE>
1. Certain Definitions:
(a) Change in Control: shall be deemed to have occurred
upon any of the following events:
(i) The acquisition in one or more transactions by
any "Person" (as the term person is used for purposes
of Section 13(d) or 14(d) of the Securities Exchange
Act of 1934, as amended (the "1934 Act")) of
"Beneficial Ownership" (within the meaning of Rule
13d-3 promulgated under the 1934 Act) of twenty
percent (20%) or more of the combined voting power of
the Trust's then outstanding voting securities (the
"Voting Securities.), provided, however, that for
purposes of this Section l(a)(i), the Voting
Securities acquired directly from the Trust by any
Person shall be excluded from the determination of
such Person's Beneficial Ownership of voting
securities (but such Voting Securities shall be
included in the calculation of the total number of
Voting Securities then outstanding); or
(ii) The individuals who, as of June 18, 1998, are
members of the Board (the "Incumbent Board"), cease
for any reason to constitute at least two-thirds of
the Board; provided, however, that if the election,
or nomination for election by the Trust's
shareholders, of any new trustee was approved by a
vote of at least two-thirds of the Incumbent Board,
such new trustee shall, for purposes of this
Agreement, be considered as a member of the Incumbent
Board; or
(iii) Approval by shareholders of the Trust of (A) a
merger or consolidation involving the Trust if the
shareholders of the Trust immediately before such
merger or consolidation do not own, directly or
indirectly immediately following such merger or
consolidation, more than seventy-five percent (75%)
of the combined voting power of the outstanding
voting securities of the entity resulting from such
merger or consolidation in substantially the same
proportion as their ownership of the Voting
Securities immediately before such merger or
consolidation or (B) a complete liquidation or
dissolution of the Trust or an agreement for the sale
or other disposition of all or substantially all of
the assets of the Trust.
-2-
<PAGE>
(iv) Notwithstanding the foregoing, a Change in
Control shall not be deemed to occur solely because
twenty percent (20%) or more of the then outstanding
Voting Securities is acquired by (i) a trustee or
other fiduciary holding securities under one or more
employee benefit plans maintained by the Trust or any
of its subsidiaries or (ii) any entity which,
immediately prior to such acquisition, is owned
directly or indirectly by the shareholders of the
Trust in the same proportion as their ownership of
stock in the Trust immediately prior to such
acquisition. Nor shall a Change in Control be deemed
to occur solely because any Person (the "Subject
Person") acquired Beneficial Ownership of more than
the permitted amount of the outstanding Voting
Securities as a result of the subsequent acquisition
of Voting Securities by the Trust which, by reducing
the number of Voting Securities outstanding,
increases the proportional number of shares
Beneficially Owned by the Subject Person, provided
that if a Change in Control would occur (but for the
operation of this sentence) as a result of the
acquisition of Voting Securities by the Trust, and
after such share acquisition by the Trust, the
Subject Person becomes the Beneficial of an),
additional Voting Securities which increases the
percentage of the then outstanding Voting Securities
Beneficially Owned by the Subject Person, then a
Change in Control shall occur.
(b) Claim: any threatened, pending or completed action,
suit or proceeding, or any inquiry or investigation,
whether commenced or conducted by the Trust or any
other party, that Indemnitee in good faith believes
might lead to the institution of any such action,
suit or proceeding, whether civil, criminal,
administrative, investigative or other.
(c) Expenses: consist of attorneys' fees and all other
costs, charges and expenses paid or incurred in
connection with investigating, defending, settling,
being a witness in or participating in (including on
appeal), or preparing to defend, be a witness in or
participate in any Claim relating to any
Indemnifiable Event.
-3-
<PAGE>
(d) Indemnifiable Event: any event or occurrence related
to the fact that Indemnitee is, was or has agreed to
become a trustee, officer, employee, agent or
fiduciary of the Trust, or is or was serving or has
agreed to serve in any capacity, at the request of
the Trust, in any other corporation, partnership,
joint venture, employee benefit plan, trust or other
enterprise, or by reason of anything done or not done
by Indemnitee in any such capacity.
(e) Potential Change in Control: shall be deemed to have
occurred if (i) the Trust enters into an agreement or
arrangement, the consummation of which would result
in the occurrence of a Change in Control; (ii) any
person (including the Trust) publicly announces an
intention to take or to begins taking actions which
if completed would constitute a Change in Control; or
(iii) the Board adopts a resolution to the effect
that, for purposes of this Agreement, a Potential
Change in Control has occurred.
(f) Voting Securities: any securities of the Trust which
vote generally in the election of trustees.
2. Indemnification: Expenses: Procedure:
(a) Basic Indemnification Agreement. In the event
Indemnitee was, is or becomes a party to or witness
or other participant in, or is threatened to be made
a party to or witness or other participant in, a
Claim by reason of (or arising in part out of) an
Indemnifiable Event, the Trust shall indemnify
Indemnitee who has acted in good faith (without
regard to the negligence or other fault of the
Indemnitee) to the fullest extent permitted by
applicable law, as soon as practicable but in no
event later than thirty days after written demand is
presented to the Trust, against any and all Expenses,
judgments, fines, penalties, excise taxes and amounts
paid or to be paid in settlement (if such settlement
is approved in advance by the Trust, which approval
shall not be unreasonably withheld) (including all
interest, assessments and other charges paid or
payable in connection with or in respect of such
Expenses, judgments, fines, penalties, excise taxes
or amounts paid or to be paid in settlement) of such
Claim. If Indemnitee makes a request to be
-4-
<PAGE>
indemnified under this Agreement, the Board of
Trustees (acting by a quorum consisting of trustees
who are not parties to the Claim with respect to the
Indemnifiable Event or, if such a quorum is not
obtainable, acting upon an opinion in writing of
independent legal counsel ("Board Action")) shall, as
soon as practicable but in no event later than thirty
days after such request, authorize such
indemnification. Notwithstanding anything in the
Bylaws or this Agreement to the contrary, following a
Change in Control, Indemnitee shall, unless
prohibited by law, be entitled to indemnification
pursuant to this Agreement in connection with any
Claim made hereunder.
(b) Advancement of Expenses. Notwithstanding anything in
the Bylaws or this Agreement to the contrary, if so
requested by Indemnitee, the Trust shall advance
(within two business days of such request) any and
all Expenses relating to a Claim to Indemnitee (an
"Expense Advance"), upon the receipt of a written
undertaking by or on behalf of Indemnitee to repay
such Expense Advance if a judgment or other final
adjudication adverse to Indemnitee establishes that
Indemnitee, with respect to such Claim, is not
eligible for indemnification.
(c) Notice/Cooperation by Indemnitee. Indemnitee shall,
as a condition precedent to his right to be
indemnified under this Agreement, give the Trust
notice in writing as soon as practicable of any Claim
made against Indemnitee for which indemnification
will or could be sought under this Agreement. Such
notice shall contain the written affirmation of the
Indemnitee that the standard of conduct necessary for
indemnification hereunder has been satisfied. Notice
to the Trust shall be directed to the Secretary of
the Trust in the manner provided in Section 18
hereof. Indemnitee shall give the Trust such
information and cooperation as it may reasonably
require and as shall be within Indemnitee's power. A
delay in giving notice under this Section 2(c) shall
not invalidate the Indemnitee's right to indemnity
under this Agreement unless such delay prejudices the
defense of the claim or the availability to the Trust
of insurance coverage for such claim.
-5-
<PAGE>
(d) Selection of Counsel. In the event the Trust shall be
obligated under Section 2(b) hereof to pay the
Expenses of any proceeding against Indemnitee, the
Trust, unless the Indemnitee determines that a
conflict of interest exists between the Indemnitee
and the Trust with respect to a particular Claim,
shall be entitled to assume the defense of such
proceeding, with counsel approved by Indemnitee,
which approval shall not be unreasonably withheld,
upon the delivery to Indemnitee of written notice of
its election to do so. After delivery of such notice,
approval of such counsel by Indemnitee and the
retention of such counsel by the Trust, the Trust
will be not be liable to Indemnitee under this
Agreement for any fees of counsel subsequently
incurred by Indemnitee with respect to the same
proceeding, provided that (i) Indemnitee shall have
the right to employ his own separate counsel in any
such proceeding in addition to or in place of any
counsel retained by the Trust on behalf of Indemnitee
at Indemnitee's expense; and (ii) if (A) the
employment of counsel by Indemnitee has been
previously authorized by the Trust, (B) Indemnitee
shall have concluded that there may be a conflict of
interest between the Trust and Indemnitee in the
conduct of any such defense or (C) the Trust shall
not, in fact, have employed counsel to assume the
defense of such proceeding, then the fees and
expenses of Indemnitee's counsel shall be at the
expense of the Trust.
(e) Litigation Concerning Right to Indemnification. If
there has been no Board Action or Arbitration (as
defined in Section 3), or if Board Action determines
that Indemnitee would not be permitted to be
indemnified, in any respect, in whole or in part, in
accordance with Section 2(a) of this Agreement,
Indemnitee shall have the right to commence
litigation in the court which is hearing the action
or proceeding relating to the Claim for which
indemnification is sought or in any court in the
Commonwealth of Massachusetts having subject matter
jurisdiction thereof and in which venue is proper
seeking an initial determination by the court or
challenging any Board Action or any aspect thereof,
and the Trust hereby consents to service of process
and to appear in any such proceeding. Notwithstanding
anything in the Declaration of Trust, the Bylaws or
this Agreement
-6-
<PAGE>
to the contrary, if Indemnitee has commenced legal
proceedings in a court of competent jurisdiction or
Arbitration to secure a determination that Indemnitee
should be indemnified under this Agreement, the
Declaration of Trust, the Bylaws or applicable law,
any Board Action that Indemnitee would not be
permitted to be indemnified in accordance with
Section 2(a) of this Agreement shall not be binding
in the event that such legal proceedings are finally
adjudicated. Any Board Action not followed by such
litigation or Arbitration shall be conclusive and
binding on the Trust and Indemnitee.
3. Change in Control. The Trust agrees that if there is a Change in
Control, Indemnitee, by giving written notice to the Trust and the American
Arbitration Association (the "Notice"), may require that any controversy or
claim arising out of or relating to this Agreement, or the breach thereof, shall
be settled by arbitration (the "Arbitration") in Boston, Massachusetts in
accordance with the Rules of the American Arbitration Association (the "Rules")
Arbitration shall be conducted by a panel of three arbitrators selected in
accordance with the Rules within thirty days of delivery of the Notice. The
decision of the panel shall be made as soon as practicable after the panel has
been selected, and the parties agree to use their reasonable efforts to cause
the panel to deliver its decision within ninety days of its selection. The Trust
shall pay all fees and expenses of the Arbitration. The Arbitration shall be
conclusive and binding on the Trust and Indemnitee and the Trust or Indemnitee
may cause judgment upon award rendered by the arbitrators to be entered in any
court having jurisdiction thereof.
4. Establishment of Trust. In the event of a Potential Change in
Control or a Change in Control, the Trust shall, promptly upon written request
by Indemnitee, create a trust (the "Trust Fund") for the benefit of Indemnitee
and from time to time, upon written request of Indemnitee to the Trust, shall
fund such Trust Fund in an amount, as set forth in such request, sufficient to
satisfy any and all Expenses reasonably anticipated at the time of each such
request to be incurred in connection with investigating, preparing for and
defending any Claim relating to an Indemnifiable Event, and any and all
judgments, fines, penalties and settlement amounts of any and all Claims
relating to an Indemnifiable Event from time to time actually paid or claimed,
reasonably anticipated or proposed to be paid. The terms of the Trust Fund shall
provide that upon a Change in Control (i) the Trust Fund shall not be revoked or
the principal thereof invaded, without the written consent of Indemnitee; (ii)
the trustee of the
-7-
<PAGE>
Trust Fund shall advance, within two business days of a request by Indemnitee,
any and all Expenses to Indemnitee, not advanced directly by the Trust to
Indemnitee (and Indemnitee hereby agrees to reimburse the Trust under the
circumstances under which Indemnitee would be required to reimburse the Trust
under Section 2 (b) of this Agreement) (iii) the Trust Fund shall continue to be
funded by the Trust in accordance with the funding obligation set forth above:
(iv) the trustee of the Trust Fund shall promptly pay to Indemnitee all amounts
for which Indemnitee shall be entitled to indemnification pursuant to this
Agreement or otherwise; and (v) all unexpended funds in such Trust Fund shall
revert to the Trust upon a final determination by Board Action or Arbitration or
a court of competent jurisdiction, as the case may be, that Indemnitee has been
fully indemnified under the terms of this Agreement. The trustee of the Trust
Fund shall be an independent third party chosen by Indemnitee. Nothing in this
Section 4 shall relieve the Trust of any of its obligations under this
Agreement.
5. Indemnification for Additional Expenses. The Trust shall indemnify
Indemnitee against any and all expenses (including attorneys' fees, subject to
Section 19 hereof) and, if requested by Indemnitee, shall (within two business
days of such request) advance such expenses to Indemnitee, which are incurred by
Indemnitee in connection with any claim asserted by or action brought by or
against Indemnitee for (i) indemnification or advance payment of Expenses by the
Trust under law, this Agreement, or any other agreement or Bylaw of the Trust
now or hereafter in effect relating to Claims for Indemnifiable Events and/or
(ii) recovery under any trustees' and officers' liability insurance policies
maintained by the Trust, regardless of whether Indemnitee ultimately is
determined to be entitled to such indemnification, advance expense payment or
insurance recovery, as the case may be.
6. Partial Indemnity, Etc. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Trust for some or a
portion of the Expenses, judgments, fines, penalties, excise taxes and amounts
paid or to be paid in settlement of a Claim but not, however, for all of the
total amount thereof, the Trust shall nevertheless indemnify Indemnitee for the
portion thereof to which Indemnitee is entitled. Moreover, notwithstanding any
other provision of this Agreement, to the extent that Indemnitee has been
successful on the merits or otherwise in defense of any or all Claims relating
in whole or in part to an Indemnifiable Event or in defense of any issue or
matter therein, including, without limitation, dismissal without prejudice,
Indemnitee shall be presumed to be entitled to indemnification against any and
all Expenses, judgments, fines, penalties, excise taxes and amounts paid or to
be paid in
-8-
<PAGE>
settlement of such Claim in connection with any determination by Board Action,
Arbitration or a court of competent jurisdiction that Indemnitee is not entitled
to be indemnified hereunder and the burden of proof shall be on the Trust to
establish that Indemnitee is not so entitled.
7. No Presumption. For purposes of this Agreement, the termination of
any claim, action, suit or proceeding, by judgment, order, settlement (whether
with or without court approval) or conviction, or upon a plea of nolo
contendere, or its equivalent, shall not create a presumption that Indemnitee
did not meet any particular standard of conduct or have any particular belief or
that a court has determined that indemnification is not permitted by applicable
law or this Agreement.
8. Contribution. In the event that the indemnification provided for in
this Agreement is unavailable to Indemnitee for any reason whatsoever, the
Trust, in lieu of indemnifying Indemnitee, shall contribute to the amount
incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes,
amounts paid or to be paid in settlement and/or for Expenses, in connection with
any Claim relating to an Indemnifiable Event, in such proportion as is deemed
fair and reasonable in light of all of the circumstances of such action by Board
Action or Arbitration or by the court before which such action was brought in
order to reflect (i) the relative benefits received by the Trust and Indemnitee
as a result of the event (s) and/or transaction (s) giving cause to such action;
and/or (ii) the relative fault of the Trust (and its other trustees, officers,
employees and agents) and Indemnitee in connection with such event(s) and/or
transaction(s). Indemnitee's right to contribution under this Section 8 shall be
determined in accordance with, pursuant to and in the same manner as, the
provisions in Sections 2 and 3 hereof relating to Indemnitee's right to
indemnification under this Agreement.
9. Notice to the Trust by Indemnitee. Indemnitee agrees to promptly
notify the Trust in writing upon being served with or having actual knowledge of
any citation summons, compliant, indictment or any other similar document
relating to any action which may result in a claim of indemnification or
contribution hereunder.
10. Non-exclusivity, Etc. The rights of the Indemnitee hereunder shall
be in addition to any other rights Indemnitee may have under the Declaration of
Trust or Bylaws or applicable law, and nothing herein shall be deemed to
diminish or otherwise restrict Indemnitee's right to indemnification under any
such other provision. To the extent applicable law or the Declaration of Trust
or the Bylaws of the Trust, as in effect on the date hereof or at any time in
the future, permit greater
-9-
<PAGE>
indemnification than as provided for in this Agreement, the parties hereto agree
that Indemnitee shall enjoy by this Agreement the greater benefits so afforded
by such law or provision of the Declaration of Trust or Bylaws and this
Agreement shall be deemed amended without any further action by the Trust or
Indemnitee to grant such greater benefits. Indemnitee may elect to have
Indemnitee's rights hereunder interpreted on the basis of applicable law in
affect at the time of execution of this Agreement, at the time of the occurrence
of the Indemnifiable Event giving rise to a claim or at the time indemnification
is sought.
11. Period of Limitations. No legal action shall be brought and no
cause of action shall be asserted by or on behalf of the Trust or any affiliate
of the Trust against Indemnitee, Indemnitee's spouse, heirs, executors or
personal or legal representatives after the expiration of two years from the
date of accrual of such cause of action, and any claim or cause of action of the
Trust or its affiliate shall be extinguished and deemed released unless asserted
by the timely filing of a legal action within such two-year period; provided,
however, that if any shorter period of limitations is otherwise applicable to
any such cause of action such shorter period shall govern.
12. Amendments, Etc. Except as provided in Section 10 hereof, no
supplement, modification or amendment of this Agreement shall be binding unless
executed in writing by both of the panics hereto. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provisions hereof (whether or not similar) nor shall such waiver
constitute a continuing waiver.
13. Subrogation. In the event of payment under this Agreement, the
Trust shall be subrogated to the extent of such payment to all of the rights of
recovery with respect to such payment of Indemnitee, who shall execute all
papers required and shall do everything that may be necessary to secure such
rights, including the execution of such documents necessary to enable the Trust
effectively to bring suit to enforce such rights.
14. No Duplication of Payments. The Trust shall not be liable under
this Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, Bylaw or otherwise) of the amounts otherwise
indemnifiable hereunder.
15. Binding Effect, Etc. This Agreement shall be binding upon and inure
to the benefit of and be enforceable against and by the parties hereto and their
respective successors, assigns
-10-
<PAGE>
(including any direct or indirect successor by purchase, merger, consolidation
or otherwise to all or substantially all of the business and/or assets of the
Trust), spouses, heirs and personal and legal representatives. The Trust shall
require and cause any successor (whether direct or indirect by purchase, merger,
consolidation or otherwise) to all, substantially all, or a substantial part, of
the business and/or assets of the Trust, by written agreement in form and
substance satisfactory to Indemnitee, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Trust would be
required to perform if no such succession had taken place. This Agreement shall
continue in effect regardless of whether Indemnitee continues to serve as a
trustee and/or officer of the Trust or of any other enterprise at the Trust's
request.
16. Severability. The provisions of this Agreement shall be severable
in the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
17. Exceptions. Any other provision herein to the contrary
notwithstanding, the Trust shall not be obligated pursuant to the terms of this
Agreement to indemnify the Indemnitee in the following circumstances:
(a) Excluded Acts. The Trust shall not be obligated to
indemnify any Indemnitee who is a trustee for any acts or omissions or
transactions of such person in such capacity from which a trustee may
not be relieved of liability under the laws of the state in which the
Trust is organized; or
(b) Claims. The Trust shall not be obligated to indemnify
Indemnitee for expenses or liabilities of any type whatsoever
(including, but not limited to, judgments, fines, ERISA excise taxes or
penalties and amounts paid in settlement) to the extent that Indemnitee
has otherwise actually received payment, or payments have been made on
behalf of Indemnitee, with respect to such expense or liability (under
any insurance policy, provision of the Trust's Declaration of Trust or
Bylaws, or otherwise) of amounts otherwise indemnifiable hereunder; or
(c) Claims Under Section 16(b). The Trust shall not be
obligated to indemnify Indemnitee for expenses and the payment of
profits arising from the purchase and sale by Indemnitee of securities
in violation of Section 16(b) of the 1934 Act, or any similar successor
statute.
-11-
<PAGE>
18. Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered by hand or when mailed by certified registered
mail, return receipt requested, with postage prepaid:
A. If to Indemnitee, to:
-------------------------
-------------------------
-------------------------
or to such other person or address which Indemnitee shall furnish to the Trust
in writing pursuant to the above.
B. If to the Trust, to:
MGI Properties
One Winthrop Square
Boston, Massachusetts, 02110
or to such person or address as the Trust shall furnish to Indemnitee in writing
pursuant to the above.
19. Attorneys' Fees. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, a court of competent jurisdiction determines
that each of the material assertions made by Indemnitee as a basis for such
action were not made in good faith or were frivolous. In the event of an action
instituted by or in the name of the Trust under this Agreement or to enforce or
interpret any of the terms of this Agreement, Indemnitee shall be entitled to be
paid all court costs and expenses, including attorneys' fees, incurred by
Indemnitee in defense of such action (including with respect to Indemnitee's
counterclaims and cross-claims made in such action), unless as a part of such
action the court determines that each of Indemnitee's material defenses to such
action were made in bad faith or were frivolous.
20. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the state in which the Trust is
organized, which laws are applicable to
-12-
<PAGE>
contracts made and to be performed in such state without giving to the
principles of conflicts of laws.
21. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original and all of which
together shall constitute a single agreement.
-13-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of June 18, 1998.
MGI PROPERTIES
By:
-----------------------------------
Name:
Title:
INDEMNITEE
---------------------------------------
BY:
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-END> MAY-31-1998
<CASH> 7,624
<SECURITIES> 000
<RECEIVABLES> 3,798
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 9,416
<PP&E> 417,173
<DEPRECIATION> (46,539)
<TOTAL-ASSETS> 391,472
<CURRENT-LIABILITIES> 5,927
<BONDS> 131,983
<COMMON> 13,758
000
000
<OTHER-SE> 239,804
<TOTAL-LIABILITY-AND-EQUITY> 391,472
<SALES> 17,447
<TOTAL-REVENUES> 17,584
<CGS> 000
<TOTAL-COSTS> 9,815
<OTHER-EXPENSES> 000
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 2,644
<INCOME-PRETAX> 5,125
<INCOME-TAX> 000
<INCOME-CONTINUING> 5,125
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> 7,075
<EPS-PRIMARY> .51
<EPS-DILUTED> .50
</TABLE>
