EXHIBIT 10(H)
WASHINGTON REAL ESTATE INVESTMENT TRUST
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DIVIDEND EQUIVALENT PLAN
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This Dividend Equivalent Plan is established this 17th day of December, 1999 by
Washington Real Estate Investment Trust, a real estate investment trust
organized under the laws of the state of Maryland (the "Trust").
1. Purpose
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The purpose of this Plan is to provide the Trustees of the Trust and key
employees of the Trust with an executive rank of Vice President or higher
("Covered Individuals") with the right to receive dividend equivalent units
("Units") in connection with options granted to such individuals under the
Washington Real Estate Investment Trust Stock Option Plan ("Stock Option Plan")
based upon dividends which are declared by the Trust in respect of its shares of
beneficial interest ("Shares").
2. Grant of Units
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The Trust will enter into a dividend equivalent agreement ("Agreement")
with each Covered Individual identifying the particular options in respect of
which Units will accrue under this Plan. To the extent that an option is
identified in an Agreement, a Unit will accrue with respect to each Share of the
Trust covered under such option as of the declaration date of each dividend paid
by the Trust with respect to its outstanding Shares.
The methodology for the determination of the value of a Unit shall consist
of the following steps:
(1) The yield implicit in the then-current dividend on outstanding Shares
shall be expressed on an annualized basis.
(2) The then-current annual S & P 500 Yield shall be identified.
(3) The excess of the yield determined under (1), above, over the yield
determined under (2), above, shall be computed and designated as the "Excess
Yield."
(4) The Excess Yield shall be divided by the yield determined under (1),
above and the resulting percentage shall be designated as the "Excess Yield
Percentage".
(5) The actual per Share dividend payable by the Trust with respect to its
outstanding Shares shall be multiplied by the Excess Yield Percentage and the
resulting dollar amount shall constitute the value of each Unit.
A calculation example of the above is attached as Exhibit A.
When the dividend is actually paid by the Trust with respect to its
outstanding Shares, the ledger account established on behalf of the Covered
Individual under this Plan with respect to each covered option will be credited
with a number of Shares from the Trust's treasury Shares with a then-current
value equal to the value of a Unit multiplied by the sum of (i) the number of
Shares covered by the identified option plus (ii) the number of treasury Shares
which had been previously credited to such ledger account and which had not been
distributed from such ledger account as of the date of the current dividend
distribution. The Trust need not have such treasury Shares in its possession at
such time in order for the ledger account to be credited.
3. Vesting of Units
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Units attributable to Covered Individuals who are Trustees will be fully
vested at all times.
Units attributable to Covered Individuals who are key employees will vest
at the rate of 20% per year as of each anniversary of the date of the grant of
the option to which such Unit pertains. In addition, all Units will fully vest
in respect of a key employee upon (i) the later of the key employee's attainment
of age 65, or the tenth (10th) anniversary of the key employee's initial date of
hire, (ii) the incurrence of a total and permanent disability (meaning a
disability which prevents the key employee from undertaking the principal duties
of his job on a continuing basis which is determined by the Trust to last more
than six months), (iii) a layoff of the key employee in connection with a
reduction in work force by the Trust, (iv) the key employee's death, or (v) in
the case of any key employee covered under a separate agreement which provides
for benefits in the event of a change in control of the Trust, an involuntary
termination of
employment of the key employee after such a change in control, as described in
such separate agreement.
4. Distribution of Units
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All treasury Shares which have been issued as Units and which have become
vested shall be distributed to the applicable Covered Individual, subject, in
the case of distributions to key employees, to applicable income tax
withholding, on the earlier of (i) the exercise of the option to which the Units
relate or (ii) the expiration of the option to which the Units relate (other
than an expiration due to a termination of employment).
If a Covered Individual exercises an option before the Units applicable to
the option have been vested, such Units shall not be distributed to the Covered
Individual until such time as such Units have become vested. No further Units
will accrue with respect to the Shares which relate to an option on and after
the date such option is exercised or expires, except that further Units will
continue to accrue on any unvested Units previously issued with respect to such
Shares until their distribution to the Covered Individual.
5. Administration
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All matters regarding the interpretation and administration of this Plan
shall be undertaken by the Board of Trustees of the Trust in its sole
discretion. In addition, the Board of Trustees reserves the right to amend or
terminate this Plan at any time subject to the provision that no such amendment
will adversely affect any Unit which has accrued prior to the date of such
amendment or termination.