STOCK OPTION AND STOCK APPRECIATION RIGHTS AGREEMENT, made as of this
[ ] day of [ ] between MGI Properties (the "Trust") and [ ], an employee of the
Trust (the "Optionee").
NOW, THEREFORE, the Trust and the Optionee, by his acceptance of the
grant of these stock options intended to qualify as incentive stock options
("ISO") under the Internal Revenue Code of 1986, amended (the "Code"), and
related stock appreciation rights ("SAR"), agree as follows:
1. Grant of ISO and SAR. The Trust hereby grants to the Optionee as a
separate inducement and agreement in connection with his acting as an employee
of the Trust and not in lieu of any salary or other remuneration for services,
an ISO to purchase all or any part of an aggregate of [ ] Common Shares of the
Trust (either unissued or treasury), $1.00 par value (the "Shares"), and a
maximum of [ ] SAR in connection therewith, on the terms and subject to the
conditions hereinafter set forth and further subject to the provisions of the
Trust's 1997 Stock Option, Stock Appreciation Rights and Restricted Stock Plan
(the "1997 Plan"). The foregoing grant is subject to ratification and approval
of the 1997 Plan by shareholders of the Trust.
2. Purchase Price. The exercise price shall be $[ ] per Share, the
closing price of the Shares on the New York Stock Exchange on [ ].
3. Term of Option. Notwithstanding anything to the contrary contained
herein or in the 1997 Plan, the ISO and SAR granted
hereunder shall expire no later than 11:59 P.M. on [ ]
(the "Termination Date").
4. Vesting. (a) Option. Subject to Sections 5 and 7 hereof, the ISO and
SAR are exercisable, with respect, in each case to [50%] thereof, at any time
and from time to time from and after the date hereof, and with respect in each
case to the remaining [50%] thereof, at any time and from time to time from and
after [ ], to and including the Termination Date; provided, however, that in the
event that the Optionee shall cease to be employed by the Trust at any time
prior to [ ], the remaining [50%] of the ISO and SAR shall not vest and become
exercisable and shall thereafter be null and void; and provided further that the
exercise of the vested ISO and SAR may not be exercised as to fractional Shares,
and the aggregate fair market value (determined at the time of grant) of the
Shares with respect to which the ISO is exercisable for the first time by the
Optionee during any calendar year (under all incentive stock option plans of the
Trust or its parent or subsidiary corporations) shall not exceed $100,000. Any
right to acquire Shares under this Agreement or any other incentive stock option
agreement that is not exercisable in any year because of this Paragraph 4(a)
shall become exercisable for the first time in the first subsequent calendar
year in which the exercisability of such rights does not violate the fair market
value limitation of the previous sentence.
(b) SAR. An SAR shall be exercisable by the Optionee at any
time the Option to which it relates could be exercised, but only
-2-
upon a showing of "hardship" by the Optionee and upon consent of the
Administrative-Audit Committee; provided, however, that there shall be no
hardship requirement in the event of a Hostile Change in Control (as defined in
the 1997 Plan). The Administrative-Audit Committee shall promulgate a standard
for determining a "hardship," said standard to be applied uniformly to all
Optionees under the 1997 Plan.
Upon the exercise of an SAR and surrender of the related Option, the
Trust shall issue Shares having a fair market value equal to, but in no event in
excess of, the appreciation since the date of grant in the fair market value of
the Shares subject to the related Option (the "Differential").
Notwithstanding the foregoing, and except in the event of a Hostile
Change in Control, the SAR may be exercised only if prior to or simultaneously
with the exercise thereof the Optionee or his successor has exercised or
exercises an equivalent number of Options granted pursuant to any of the Trust's
stock option and stock appreciation rights plans (whether related or unrelated
to the SAR). After a Hostile Change in Control, an Optionee may exercise all
Options in full as an SAR, without limitation.
If a Hostile Change in Control which would otherwise result in the
abrogation of the hardship requirement and of the prior or simultaneous exercise
of Option requirement, will, in the nonreviewable judgment of the
Administrative-Audit Committee, be deemed to constitute a "golden parachute" as
defined by Section 280G of the Code ("Section 280G"), the Administrative-Audit
-3-
Committee shall reduce the number of Shares which may otherwise be issued as a
result of the exercise of the SAR to the extent necessary to avoid Section 280G
treatment as a "golden parachute." Notwithstanding such an adjustment, however,
the Trust makes no warranty as to the avoidance of Section 280G treatment.
The exercise of an SAR shall automatically result in the surrender of
the related Option by the Optionee on a share for share basis to the extent
Shares under such related Option are used to calculate the Differential. Shares
issued pursuant to the exercise of an SAR shall not thereafter be available for
granting further Options under the 1997 Plan. An SAR shall terminate and may no
longer be exercised upon the termination of the related Option, other than as a
consequence of the exercise of the SAR.
The SAR may only be exercised in accordance with rules and regulations
adopted by the Administrative-Audit Committee from time to time.
5. Termination as an Employee.
(a) The ISO and SAR shall be exercisable according to the terms hereof
while the Optionee remains an employee of the Trust and for two years after
termination of employment for any reason; provided, however, if any ISO is
exercised after the allowed periods set forth in the next sentence, or such
longer periods as may then be in effect under the Code, then the ISO shall
convert into a non-qualified option. The allowed periods under current law are
as follows: (i) if the Optionee dies, or becomes totally and permanently
disabled (as described in Section 72(m)(7) of the
-4-
Code), while an employee of the Trust or while entitled to exercise an ISO and
SAR hereunder, in the case of death, the legal representative of the Optionee or
the person who acquired the ISO and SAR by bequest or inheritance, or in the
case of total and permanent disability, the Optionee may exercise 100% of the
ISO and SAR for one year from the date of death or total and permanent
disability, and (ii) if the Optionee retires or is dismissed other than "for
cause" (as such term is defined under the 1997 Plan), the Optionee may exercise
the ISO and SAR, to the extent exercisable at the date of termination of
employment, for three (3) months after such date. In no event may the ISO and
SAR be exercised after the Termination Date.
(b) Notwithstanding the foregoing, the Optionee may exercise the ISO
and SAR granted hereunder at any time up to two years after his employment with
the Trust ceases for any reason; provided, however, if the ISO and SAR is
exercised after the periods set forth in the preceding paragraph (unless a
longer period for the valid exercise of an incentive option has been established
under the Code), such ISO shall no longer be a valid incentive option but shall
convert into a non-qualified option.
6. Non-Transferability. The ISO and SAR granted hereunder shall not be
assignable by the Optionee, except by (i) the laws of descent and distribution
or pursuant to a qualified domestic relations order as defined in the Code or
Title I of the Employee Retirement Income Security Act of 1974, as amended, or
the rules and regulations promulgated thereunder. Notwithstanding the
-5-
foregoing, no Option may be transferred pursuant to this Section 6 unless the
transferee agrees to be bound by all the provisions of this Agreement.
7. Exercise Upon Sale, Merger or Other Reorganization Transaction.
Notwithstanding any other provision hereof, in the event that the
Trust, its shareholders, or both, enter into a written agreement to dispose of
all or substantially all of the assets or stock of the Trust by means of a sale,
merger, consolidation, reorganization, liquidation or similar transaction (other
than a reorganization, merger or consolidation effected solely to change the
Trust's name or domicile), the ISO and SAR granted pursuant hereto shall become
immediately exercisable, whether or not such Options were exercisable prior to
such event, during the period of time beginning with the date on which the Trust
agrees in writing to enter into such transaction, and ending on the earlier of
the date the ISO and SAR would otherwise have expired or the date on which the
transaction is consummated. The Optionee may in writing request that, in lieu of
exercising the ISO, he may receive cash equal to the difference between the sale
price or merger consideration per share and the exercise price multiplied by the
number of Shares subject to the ISO issued hereunder; provided, however, that
such cash shall be paid not earlier than the closing date of the transaction
subject to this Paragraph 7. Upon the consummation of the transaction, any
unexercised ISO and SAR issued hereunder shall terminate and cease to be
effective. In the event that the Trust's agreement to enter into any such
transaction is
-6-
terminated, the unexercised portion of any ISO and SAR shall revert to the
status they had before the Trust agreed to enter into the transaction in
question. Any exercise of an ISO and SAR made before the agreement to enter into
the transaction was terminated shall remain effective after the termination of
the agreement, notwithstanding that the ISO and SAR may have become exercisable
solely by reason of the Trust entering into the agreement. If any ISO is
exercised pursuant to this Paragraph 7 earlier than provided for by Paragraph
4(a) hereof, then such ISO shall convert into a non-qualified option.
8. Anti-Dilution. The ISO and SAR granted pursuant to this Agreement
shall continue notwithstanding any change or exchange of the Shares subject to
the 1997 Plan and/or to the ISO and SAR whether through recapitalization, stock
split, split-up, split-off, spin-off, merger, consolidation, reorganization,
stock dividend, combination of shares or exchange of shares. In the event of
such a change or exchange, appropriate adjustments shall be made, and with
respect to other dilutive or anti-dilutive events appropriate adjustments may be
made, by the Administrative-Audit Committee as to the number of Shares subject
to the ISO and SAR and/or in their per-share exercise price as shall be
equitable to prevent dilution or enlargement of rights hereunder. Any such
adjustment shall comply with the rules of Section 424(a) of the Code, if
applicable. Adjustment of the number of Shares subject to the ISO and SAR shall
not make the ISO and SAR become exercisable as to a fractional Share. Subject to
the foregoing limitations, the terms of any such
-7-
adjustment shall be determined by the Administrative-Audit Committee, and such
determination made in good faith shall be final. In no event shall any
adjustment be made that would render the ISO other than an "incentive stock
option" for purposes of Section 422 of the Code.
9. Exercise of ISO.
(a) Eligibility. Except as provided in Paragraphs 5 and 7 hereof, the
ISO and SAR may not be exercised unless the Optionee shall have continued to be
an employee of the Trust from the date hereof to the date of the exercise of the
ISO and SAR.
(b) Investment. Upon the exercise of the ISO and SAR (and prior to the
issuance of the certificate or certificates for the Shares in respect of which
the ISO and SAR is exercised), the Optionee shall execute a warranty that he is
purchasing the Shares for investment, in the form attached hereto as Exhibit A.
It is understood, however, that the Trust has filed or will file registration
statements with the Securities and Exchange Commission registering Shares
issuable pursuant to grants made under the Plan on Form S-8. Accordingly, the
grant made hereby to the Optionee is made from the Trust's reserve of such
Shares. The Trust will use its best efforts to maintain the effectiveness of
such registration statements, but shall not be obligated to do so.
10. Method of Exercise. The ISO and SAR shall be exercisable only by
delivery of written notice to the Secretary of the Trust at the Trust's
executive offices (presently One Winthrop Square, Boston, Massachusetts 02110)
prior to the expiration of the ISO and
-8-
SAR as specified in Paragraphs 3 and 5 hereof. Such notice shall state the
election to exercise the ISO and SAR and the number of Shares in respect of
which it is being exercised, and shall be signed by the person or persons so
exercising such ISO and SAR. The date the Trust receives written notice shall be
the exercise date. In the event the ISO and SAR shall be exercised pursuant to
the provisions of Paragraph 5 hereof by a person or persons other than the
Optionee, such notice shall be accompanied by proof satisfactory to the Trust of
the right of such person or persons to exercise the ISO and SAR. Upon receipt of
notice, payment in full of the purchase price for the Shares as to which the ISO
is being exercised, and an executed warranty in the form attached hereto as
Exhibit A, the Trust shall issue and deliver a certificate or certificates
representing such number of Shares. Upon receipt of notice of exercise of SAR,
an executed warranty in the form attached hereto as Exhibit "A" and either a
showing of "hardship" satisfactory to the Administrative-Audit Committee or the
occurrence of a Hostile Change in Control, the Administrative-Audit Committee
shall, without transfer or issue tax to the Optionee or other person entitled to
exercise the SAR, deliver to the person exercising such SAR certificates for the
Trust's Common Shares which are properly issuable upon exercise of the SAR.
11. Payment. The purchase price shall be payable in United States
dollars upon the exercise of the ISO and shall be paid in cash, by certified
check or by bank draft. In lieu of cash, certified check or bank draft, the
purchase price may be satisfied
-9-
by (x) the delivery of Shares of the Trust (in proper form for transfer and
accompanied by all requisite stock transfer tax stamps or cash in lieu thereof)
owned by the Optionee for at least the holding periods required under Section
422 of the Code and having a fair market value equal to the exercise price
applicable to that portion of the ISO being exercised, the fair market value of
the Shares so delivered to be determined in accordance with Article VI of the
1997 Plan or as may be required in order to comply with or to conform to the
requirements of any applicable laws or regulations, or (y) through the written
election of the Optionee to have Shares withheld from the Shares otherwise to be
received upon the exercise of an Option and having a fair market value equal to
the cash exercise price applicable to the portion of the ISO being exercised by
the withholding of such Shares, the fair market value of the Shares so withheld
to be determined in accordance with Article VI of the 1997 Plan or as may be
required in order to comply with or to conform to the requirements of any
applicable laws or regulations.
12. Notices. Any notice to be given to the Trust shall be addressed to
the Secretary of the Trust at the Trust's office referred to in Paragraph 10
above, and any notice given to the Optionee shall be addressed to the Optionee
at the address then appearing on the personnel records of the Trust, or at such
other address as either party may hereafter designate in writing to the other.
Except for purposes of determining the exercise date, any such notice shall be
deemed to have been duly given if and when
-10-
enclosed in a properly sealed envelope, addressed as aforesaid and deposited,
first class postage prepaid, in the United States mails.
13. Miscellaneous.
(a) The Optionee acknowledges and agrees that the ISO and SAR are
subject to the terms and conditions of the 1997 Plan and the Code provisions
pursuant to which such 1997 Plan was adopted.
(b) The Trust is a Massachusetts business trust and all persons dealing
with the Trust must look solely to the property of the Trust for the enforcement
of any claims against the Trust. Neither the Trustees, officers, agents nor
shareholders of this Trust assume any personal liability in connection with its
business or assume any personal liability for obligations entered into on its
behalf.
(c) All capitalized terms shall have the meanings ascribed thereto in
the 1997 Plan, unless the context requires otherwise or such terms are otherwise
defined herein.
(d) The grant of this ISO and SAR is subject to shareholder
ratification and approval of the 1997 Plan.
IN WITNESS WHEREOF, the Trust has caused this Stock Option and Stock
Appreciation Rights Agreement to be duly executed by its officers thereunto duly
authorized.
MGI PROPERTIES
By:
---------------------------------
(Seal)
ACCEPTED:
--------------------------------
Optionee
-11-
Exhibit A
PURCHASE FOR INVESTMENT
I, [ ], in connection with exercising options to purchase _________
Shares of MGI Properties, do hereby represent and warrant that I am purchasing
the Shares for my own account for investment only and not with a view to the
resale or distribution thereof. I will not resell or distribute the Shares
acquired in connection herewith unless (1) a Registration Statement with respect
to these shares is on file with the Securities and Exchange Commission, has
become effective and is current, or (2) a specific exemption from the
registration requirements is available to me. If I sell the Shares acquired in
connection herewith under subdivision (2), I will first obtain a favorable
written opinion from counsel approved by MGI Properties that such exemption is
available to me.
Date:
----------------------------------
[ ]
-12-
