SCHEDULE 14A INFORMATION
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Check the appropriate box:
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COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Washington Real Estate Investment Trust
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(Name of Registrant as Specified In Its Charter)
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Notes:
WASHINGTON REAL ESTATE INVESTMENT TRUST
6110 Executive Boulevard, Suite 800
Rockville, Maryland 20852
March 29, 2001
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Washington Real Estate Investment Trust to be held on Tuesday, May 22, 2001.
The formal Notice of the meeting and a Proxy Statement describing the
proposals to be voted upon are enclosed.
Please read the Proxy Statement, then complete, sign and return your proxy
card in the enclosed envelope. Note that you may vote via telephone or the
Internet should you prefer. To do so, just follow the instructions on the
enclosed card.
Regardless of the number of shares you own, your vote is important.
Sincerely,
/s/ Edmund B. Cronin, Jr.
Edmund B. Cronin, Jr.
Chairman of the Board
WASHINGTON REAL ESTATE INVESTMENT TRUST
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of the Shareholders (the "Annual Meeting") of the Wash-
ington Real Estate Investment Trust (the "Trust" or "WRIT") will be held at
the Hyatt Regency Hotel, One Bethesda Metro Center, Bethesda, Maryland on
Tuesday, May 22, 2001 at 11:00 a.m., for the following purposes:
1. To elect three Trustees;
2. To vote upon a proposal to approve the Trust's 2001 Stock Option Plan;
and
3. To transact such other business as may properly come before the meeting.
The Trustees have fixed the close of business on March 15, 2001 as the
record date for shares entitled to vote at the Annual Meeting.
The Annual Report of the Trust, Proxy Statement and a Proxy Card are
enclosed with this Notice.
You are requested, if you cannot be present at the Annual Meeting, to sign
and promptly return the Proxy Card in the enclosed business reply envelope.
Alternatively, you may vote by telephone or the Internet, if you prefer. To do
so, you should follow the instructions on the Proxy Card. Parking at the
Annual Meeting will be validated. Please bring your parking card in to the
Annual Meeting for validation.
Sincerely,
/s/ Laura M. Franklin
Laura M. Franklin
Corporate Secretary
March 29, 2001
WASHINGTON REAL ESTATE INVESTMENT TRUST
6110 Executive Boulevard, Suite 800
Rockville, Maryland 20852
PROXY STATEMENT
This Proxy Statement is furnished by the Trust's Board of Trustees (the
"Board") in connection with its solicitation of proxies for use at the Annual
Meeting of Shareholders on May 22, 2001 and at any and all adjournments
thereof. Mailing of this Proxy Statement will commence on or about March 30,
2001 to shareholders of record as of March 15, 2001. All proxies will be voted
in accordance with the instructions contained therein, and if no instructions
are specified, the proxies will be voted in accordance with the
recommendations of the Board. Therefore, if no instructions are specified, the
proxies will be voted FOR the election of the three Trustee nominees listed,
and FOR Proposal Two, approval of the new stock option plan. Abstentions and
broker non-votes (proxies that indicate that brokers or nominees have not
received instructions from the beneficial owner of shares) are counted for
purposes of determining the presence or absence of a quorum for the
transaction of business. Abstentions are counted in tabulating the total
number of votes cast on proposals presented to shareholders, whereas broker
non-votes are not counted for purposes of determining the total number of
votes cast. A Proxy on the enclosed form may be revoked by the shareholder at
any time prior to its exercise at the Annual Meeting by submitting, to the
Secretary of the Trust, a duly executed Proxy bearing a later date or by
attending the Annual Meeting and orally withdrawing the Proxy.
The voting securities of the Trust consist of shares of beneficial
interest, $0.01 par value ("Shares"), of which 35,780,869 Shares were issued
and outstanding at the close of business on March 15, 2001. So far as is known
to the Trust, no person holds of record or beneficially as much as 5% of the
outstanding Shares. The Trust has no other class of voting security. Each
Share outstanding on March 15, 2001 will be entitled to one vote. Shareholders
do not have cumulative voting rights.
THE BOARD OF TRUSTEES AND MANAGEMENT
The Board of Trustees
The Board consists of seven Trustees divided into two classes of two
Trustees each and one class of three Trustees. The terms of the Trustees
continue until the Annual Meetings to be held in 2001, 2002 and 2003,
respectively, and until their respective successors are elected and qualified.
At each Annual Meeting, two or three Trustees are elected, subject to the
limitations described below, for a term of three years to succeed those
Trustees whose terms expire at such Annual Meeting. The Trust's By-Laws
provide that no Trustee shall be nominated or elected as a Trustee after such
person's 72nd birthday. The By-Laws further provide that any Trustee who is
first elected a Trustee after December 19, 1995 shall tender his resignation
as a Trustee on his 72nd birthday.
The Board held six meetings in 2000. During 2000, each incumbent Trustee
attended more than 75% of the total number of Board and committee meetings he
or she was eligible to attend except Ms. Williams.
The Nominating Committee held one meeting in 2000. The nominating committee
makes recommendations to the Board for nominations of trustees. The Committee
will consider recommendations received from shareholders for nominations for
Trustees to be elected at the 2002 Annual Meeting. Such recommendations must
be submitted in writing before December 21, 2001 accompanied by a written
statement setting forth the reasons the Trust would benefit from the election
of such nominee. Committee members are Messrs. Cronin, Derrick, Osnos and Ms.
Williams.
The Audit Committee met nine times in 2000. The Audit Committee represents
and assists the Board in discharging its responsibility of oversight, but the
existence of the Committee does not alter the responsibilities of the Trust's
management and the independent accountant with respect to the accounting and
control functions and financial statement presentation. For a more detailed
description of the Audit Committee's duties and
responsibilities see the Audit Committee Report on page 10 of this Proxy
Statement and the Audit Committee Charter included as Appendix A to this Proxy
Statement. Committee members are Messrs. Derrick, Kendall, McDaniel, Osnos and
Nason.
The Compensation Committee met twice during 2000. The Committee is
responsible for making recommendations to the Board with respect to
compensation decisions. Committee members are Messrs. Kendall, McDaniel, Nason
and Ms. Williams. See "Report on Executive Compensation" below.
The six non-officer Trustees of the Trust receive an annual retainer of
$15,000 plus a $1,000 per meeting fee for attending Board and committee
meetings. In addition, each non-officer Trustee receives an annual grant of
2,000 Share options and 400 unrestricted Shares.
During 2000, the Trust utilized the legal services of the law firm of Arent
Fox Kintner Plotkin & Kahn PLLC, of which Trustee David M. Osnos is a senior
member. The amount of fees paid to Arent Fox did not exceed 5% of that firm's
2000 gross revenues or 5% of the Trust's 2000 gross revenues.
The following table sets forth the names and certain biographical
information concerning each of the current Trustees.
Served as Term
Name Principal Occupation Trustee Since Age Expires
---- --------------------------- ------------- --- -------
Edmund B. Cronin, Jr. Chairman, President and
Chief Executive Officer,
WRIT 1994 64 2001
John P. McDaniel Chief Executive Officer --
Medstar Health 1998 58 2001
David M. Osnos Senior member, Arent Fox
Kintner Plotkin & Kahn,
PLLC 1987 69 2001
Director, Affiliated
Clifford M. Kendall Computer Service, Inc. 1999 69 2002
Susan J. Williams Founding Partner and
President, Bracy Williams &
Company 1999 60 2002
John M. Derrick, Jr. Chairman and CEO -- Potomac
Electric Power Company 1997 61 2003
Charles T. Nason Chairman & Chief Executive
Officer of Acacia Life
Insurance Company 2000 55 2003
Mr. Edmund B. Cronin, Jr. was Chairman, President and CEO of H.G. Smithy
and its subsidiaries providing a full range of corporate and institutional
real estate services from 1976 to 1994. From 1976 until joining the Trust in
June 1994, Mr. Cronin was Chief Executive Officer of H.G. Smithy Company, a
real estate management and advisory service holding company. Mr. Cronin is
also a director of the Potomac Electric Power Company (PEPCO), Federal City
Council, and Vice Chairman of the Board of Georgetown University Hospital.
Mr. John P. McDaniel has served as Chief Executive Officer of Medstar
Health, a multi-institutional, not-for-profit healthcare organization serving
Washington D.C., Maryland, Virginia and the mid-Atlantic region since its
inception in 1982. Mr. McDaniel is a past Chair of the Executive Committee of
the Greater Washington Board of Trade, a member of the Executive Committee of
the Federal City Council, the Board of Directors of Lutheran Brotherhood, the
Maryland State Racing Commission, the Board of the Greater Baltimore
Committee, a Fellow of the American College of Healthcare Executives, chairs
the Washington-area Business Coalition, and serves as a Trustee of Georgetown
University.
Mr. David M. Osnos has been an attorney with Arent Fox Kintner Plotkin &
Kahn, PLLC (legal counsel to the Trust) since 1956. His principal areas of
practice include real estate, tax, securities, corporate, estate planning and
sports law. He is a director or trustee of numerous organizations including
EastGroup Properties (real estate investment trust), VSE Corporation
(engineering), and Washington Wizards Basketball Club.
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Mr. Clifford M. Kendall is a director of Affiliated Computer Services, Inc.
(ACS) and a director of VSE Corporation. Before the merger with ACS, Mr.
Kendall served as Chairman and CEO of Computer Data Systems, Inc. (CDSI) from
1971 to 1991 and as Chairman from 1991 to 1997. Mr. Kendall is a past Chairman
and continues to serve on the Board and Executive Committee of the High
Technology Council of Maryland. He is a director of the Montgomery County
Community Foundation and The Lighthouse. Mr. Kendall also serves on the Board
of Trustees of George Washington University and is a member of the Board of
Regents for the University System of Maryland. He is past Chairman of the
Greater Washington Board of Trade, and has served as Chairman of the
Montgomery/Prince Georges County CEO Roundtable.
Ms. Susan J. Williams is Founding Partner and has served as President of
Bracy Williams & Company, government and public affairs consultants, since
1982. Ms. Williams' career includes public service most recently as Assistant
Secretary of Transportation. She also played a founding role in Project Head
Start. Ms. Williams is a past Chair of The Greater Washington Board of Trade.
She serves on the Board of Directors of the Henry L. Stimson Center, the
American Institute for Public Service, the Historical Society of Washington,
D.C., the National Aquarium in Baltimore, and the D.C. Agenda Project. She is
also a member of the Board that is preparing the Washington-Baltimore region's
bid to host the 2012 Olympic Games, the Economic Club of Washington, the
Federal City Council, Leadership Washington and the Advisory Board for George
Mason University.
Mr. John M. Derrick Jr. is Chairman and CEO of Potomac Electric Power
Company (PEPCO). He joined PEPCO in 1961 and served as President/CEO from 1997
until his election to his present position in 1999. From 1992 until 1997, he
served as President/COO. Mr. Derrick is a member of the Institute of
Electrical and Electronic Engineers, the National Society of Professional
Engineers, the Washington Society of Engineers and the Edison Electric
Institute. He is chairman of the Greater Washington Board of Trade, a trustee
of the Federal City Council and a director of the Economic Club of Washington
and is a past Chairman of the Maryland Chamber of Commerce.
Mr. Charles T. Nason currently serves as Chairman and Chief Executive
Officer of Acacia Life Insurance Company, (Acacia) a Washington D.C.-based
financial services organization with assets under management of $7.5 billion.
Mr. Nason assumed the role of President and CEO of Acacia June 1, 1988 and was
elected Chairman of the Board of Directors July 1, 1989. Mr. Nason is a member
of the Board of Directors of the Insurance Marketplace Standards Association,
The Greater Washington Boys and Girls Clubs, The Greater Washington Research
Center, The Greater Washington Board of Trade, and The Federal City Council.
He also is a member of The Economic Club of Washington. In addition, he is
past Chairman of The Greater Washington Board of Trade, past Director of The
American Council of Life Insurance, and past Trustee of Washington and
Jefferson College.
The following table contains information regarding other executive officers
of the Trust. Such officers are elected annually by the Board and serve at the
Board's discretion.
Name Age Position
---- --- ---------------------------------------------------------------
Larry E. Finger......... 48 Senior Vice President -- Chief Financial Officer
George F. McKenzie...... 45 Senior Vice President -- Real Estate
Brian J. Fitzgerald..... 39 Vice President -- Leasing
Laura M. Franklin....... 40 Vice President -- Chief Accounting Officer, Corporate Secretary
Kenneth C. Reed......... 48 Vice President -- Property Management
Thomas L. Regnell....... 44 Vice President -- Acquisition
Mr. Larry E. Finger joined the Trust in December 1993 and was elected
Senior Vice President--Chief Financial Officer in June 1995. From 1978 to
1991, Mr. Finger served with Savage/Fogarty Companies, Inc., a real estate
investment, management and development company based in Alexandria, Virginia,
most recently as Chief Operating Officer. Mr. Finger is an attorney and CPA.
Mr. George F. McKenzie joined the Trust in September 1996 and was elected
Senior Vice President--Real Estate in December 1997. From 1985 to 1996, Mr.
McKenzie served with the Prudential Realty Group, a
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subsidiary of Prudential Insurance Company of America, most recently as Vice
President, Investment & Sales. Prior assignments included real estate finance
originations and asset management in the Mid-Atlantic region.
Mr. Brian J. Fitzgerald joined the Trust in January 1996 as Vice
President--Leasing. From 1984 to 1993, Mr. Fitzgerald served as a commercial
leasing broker with Smithy Braedon Company. In 1993, he became a Vice
President of H. G. Smithy Company, with responsibilities for managing all
agency leasing activities. From the date of the merger of H. G. Smithy
Commercial Management Group with Cushman & Wakefield of Washington, D.C., Inc.
in June 1994 until joining the Trust, Mr. Fitzgerald managed institutional
agency leasing activities at Cushman & Wakefield, Inc. of Washington, D.C.
Ms. Laura M. Franklin, CPA, joined the Trust in August 1993 as Assistant
Vice President--Finance, and is currently Vice President--Chief Accounting
Officer and Corporate Secretary to the Trust. From 1984 to 1993, Ms. Franklin
served with the public accounting firm of Reznick, Fedder and Silverman, P.C.
specializing in audit and tax services for real estate clients.
Mr. Kenneth C. Reed joined the Trust as Vice President--Property Management
in June 1995. Mr. Reed served as President of CSN Management Corp. from 1988
to 1998. CSN managed WRIT's properties until its assets were purchased by WRIT
in 1998.
Mr. Thomas L. Regnell joined the Trust as Vice President --Acquisitions in
January 1995. From 1992 through 1994, Mr. Regnell served as an Investment
(Acquisitions) Officer with Federal Realty Investment Trust. Previously, Mr.
Regnell was a Vice President with Spaulding & Slye Company, a real estate
development, brokerage and management company.
There are no family relationships between any Trustee and/or executive
officer.
Ownership of Shares by Trustees and Executive Officers
The following table sets forth certain information concerning all Shares
beneficially owned as of March 15, 2001 by each Trustee, by the nominees for
Trustee, by each of the "Named Officers" (as defined in "Executive
Compensation" below) and by all Trustees and Executive Officers as a group.
Unless otherwise indicated, the voting and investment powers for the Shares
listed are held solely by the named holder and/or the holder's spouse.
Shares Percentage
Name Owned(1) of Total
- ---- --------- ----------
Edmund B. Cronin, Jr..................................... 318,355 0.89%
John M. Derrick, Jr...................................... 11,200 0.03%
Larry E. Finger.......................................... 193,021 0.54%
Clifford M. Kendall...................................... 11,800 0.03%
John P. McDaniel......................................... 10,840 0.03%
George F. McKenzie....................................... 114,889 0.32%
Charles T. Nason......................................... 9,796 0.03%
David M. Osnos........................................... 10,100 0.03%
Kenneth C. Reed.......................................... 102,543 0.29%
Thomas L. Regnell........................................ 99,960 0.28%
Susan J. Williams........................................ 4,800 0.01%
All Trustees and Executive Officers as a group (13
persons)................................................ 1,039,594 2.91%
- --------
(1) Includes Shares subject to options exercisable within 60 days, as follows:
Mr. Cronin, 273,496; Mr. Derrick, 6,000; Mr. Finger, 178,195; Mr. Kendall,
4,000; Mr. McDaniel, 6,000; Mr. McKenzie; 103,892; Mr. Nason, 2,000; Mr.
Osnos, 6,000; Mr. Reed, 96,172; Mr. Regnell, 93,964; Ms. Williams, 4,000;
and all Trustees and Executive Officers as a group, 915,364.
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EXECUTIVE COMPENSATION
Summary Compensation Table
The Summary Compensation Table shows the compensation awarded, earned or
paid during the past three years to the Trust's Chief Executive Officer and
each of the Trust's four other most highly compensated executive officers (the
"Named Officers") whose compensation exceeded $100,000 for the period(s)
indicated.
SUMMARY COMPENSATION TABLE
Annual Cash Long-Term
Compensation Compensation
----------------- --------------------- Other
Name and Principal Annual
Position Year Salary Bonus Granted(1) Granted(2) Compensation(3)
------------------ ---- -------- -------- ---------- ---------- ---------------
Edmund B. Cronin, Jr.,
Trustee,
President and Chief
Executive Officer..... 2000 $415,000 $431,507 9,133 100,000 $ 8,100
1999 $405,000 $337,500 4,492 100,000 $ 4,800
1998 $395,000 $309,408 3,368 100,000 $ 4,800
Larry E. Finger, Senior
Vice President and
Chief Financial
Officer................ 2000 $241,000 $250,586 7,135 55,953 $107,607
1999 $235,000 $195,837 2,027 99,206 $ 4,800
1998 $225,000 $176,245 1,492 75,140 $ 4,800
George F. McKenzie,
Senior Vice
President--Real
Estate................ 2000 $225,000 $233,949 6,205 52,283 $ 86,155
1999 $200,000 $166,670 1,726 84,431 $ 4,800
1998 $150,000 $117,497 995 50,094 $ 4,500
Thomas L. Regnell,
Vice President--
Acquisitions.......... 2000 $169,600 $176,346 3,352 31,641 $ 48,896
1999 $156,000 $130,003 481 52,290 $ 4,680
1998 $146,000 $114,364 346 39,180 $ 4,380
Kenneth C. Reed, Vice
President--Property
Management............ 2000 $153,700 $159,813 3,031 28,675 $ 74,198
1999 $141,000 $117,502 434 47,831 $ 4,230
1998 $138,000 $108,097 327 37,033 $ 4,059
- --------
(1) Represents Share grants awarded on December 15, 2000, December 17, 1999
and December 15, 1998 in accordance with the Incentive Compensation Plan
approved by the Trustees in 1997. Share grants vest 20% per year on the
anniversary of the grant date.
(2) All options reflected in the table were granted under the Washington Real
Estate Investment Trust 1991 Stock Option Plan, as amended (the "Stock
Option Plan") in accordance with the Incentive Compensation Plan approved
by the Trustees in 1997. Options granted under the Stock Option Plan vest
50% per year on the anniversary of the grant date.
(3) Represents amounts contributed on the officers' behalf by the Trust to its
401(k) plan, Split Dollar Life Insurance Plan and auto allowance. The
dollar value of the benefit of premiums paid for split dollar life
insurance policies projected on an actuarial basis are $99,507 for Mr.
Finger, $73,255 for Mr. McKenzie, $38,996 for Mr. Regnell and $65,558 for
Mr. Reed.
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Option Grants Table
The following table shows the specified information with respect to options
granted to the Named Officers in 2000.
2000 OPTION GRANTS TABLE
Potential Realizable
Value at Assumed
Annual Rates of Share
Number of Percentage Price Appreciation
Shares of Total (Full 10-Year Option
Underlying Options Term)
Options Granted to Exercise Expiration ---------------------
Name Granted(1) Employees Price Date 5% 10%
- ---- ---------- ---------- -------- ---------- ---------- ----------
Edmund B. Cronin, Jr. .. 100,000 27.5% $21.344 12/15/2010 $1,342,313 $3,401,684
Larry E. Finger......... 55,953 15.4% $21.344 12/15/2010 $ 751,064 $1,903,344
George F. McKenzie...... 52,238 14.3% $21.344 12/15/2010 $ 701,197 $1,776,972
Thomas L. Regnell....... 31,641 8.7% $21.344 12/15/2010 $ 424,721 $1,076,327
Kenneth C. Reed......... 28,675 7.9% $21.344 12/15/2010 $ 384,908 $ 975,433
- --------
(1) Options become exercisable 50% after one year and 100% after two years.
95,315 of Mr. Cronin's options, 51,268 of Mr. Finger's options, 47,553 of
Mr. McKenzie's options, 26,956 of Mr. Regnell's options and 23,990 of Mr.
Reed's options were granted as non-qualified stock options. See Report on
Executive Compensation.
The dollar amounts under the 5% and 10% columns in the table above are the
result of calculations required by the rules of the Securities and Exchange
Commission ("SEC") and therefore are not intended to forecast possible future
appreciation in the price of the Shares, which would benefit all shareholders.
For example, in order for the Named Officers to realize the potential values
set forth in the 5% and 10% columns in the table above, the price per Share of
the Shares would have to be approximately $34.77 and $55.36, respectively, as
of the expiration date of the option. Actual gains, if any, on option
exercises and Share holdings are dependent on the future performance of the
Shares and overall stock market conditions.
Aggregated Option Exercises and Option Value Table
The following table shows information concerning the exercise of options
during 2000 by each of the Named Officers and the year-end value of
unexercised options.
AGGREGATED OPTION EXERCISES IN 2000 AND YEAR-END OPTION VALUES
Number of Value of Unexercised in
Unexercised Options the Money Options at
at December 31, 2000 December 31, 2000
------------------------- -------------------------
Shares
Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
Edmund B. Cronin, Jr.... -- -- 273,496 150,000 $1,993,534 $685,910
Larry E. Finger......... -- -- 178,195 105,556 $1,323,776 $581,804
George F. McKenzie...... -- -- 103,892 94,454 $ 775,541 $505,688
Thomas L. Regnell....... -- -- 93,964 57,786 $ 700,174 $311,562
Kenneth C. Reed......... -- -- 96,172 52,591 $ 722,363 $284,383
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
The Board determined executive compensation for 2001. The Compensation
Committee, composed of Messrs. Kendall, McDaniel, Nason and Ms. Williams, was
responsible for making recommendations to the Board with respect to 2001
compensation decisions.
6
REPORT ON EXECUTIVE COMPENSATION
Executive Compensation Principles
The Trust's Executive Compensation Program is based on guiding principles
designed to align executive compensation and management incentives with Trust
values and objectives, business strategy and business financial performance.
In applying these principles, the Compensation Committee, based upon the
recommendations contained in the 1997 Board of Trustees and Executive
Compensation Review prepared by an independent consultant, has established a
program designed to:
. Attract and retain key executives critical to the long-term success of
the Trust.
. Reward executives for long-term strategic management and the enhancement
of shareholder value.
. Support a performance-oriented environment that rewards performance based
upon exceeding Trust operating performance goals.
Executive Compensation Program
For 2000, the Board, upon recommendation of the Compensation Committee,
adopted an Incentive Compensation Plan (the "Plan") based upon the
recommendations contained in the 1997 Board of Trustees and Executive
Compensation Review prepared by an independent consultant to align executive
compensation with Shareholder interests through salaries, cash bonuses, Share
grants and option grants tied to pre-set objective performance goals.
Under the Plan, salaries for the Trust's executive officers were set based
upon (i) a review of the compensation paid to similarly situated executive
officers employed by companies comprising the Morgan Stanley REIT Index; and
(ii) a subjective evaluation of each executive officer's performance
throughout the year. See "Executive Compensation -- Performance Graph" for
additional discussion regarding the Morgan Stanley REIT Index.
Cash bonuses would be paid only if the Trust's Funds From Operations
("FFO") per share grew by at least 5%. If this minimum threshold was achieved,
a bonus pool would be created as follows: 10% of the first 7% of the growth in
FFO per share times the average shares outstanding for the year, plus 20% of
the growth in FFO per share in excess of 7% times the average shares
outstanding for the year, would go into the bonus pool. Executive officers of
the Trust and selected senior and middle management share the bonus pool pro-
rata based on their salaries.
Long-term incentives are provided through the Stock Option Plan and Share
Grant Plan. Vice Presidents receive option grants with a value equal to 22.5%
(36% for the Chief Executive Officer and 28% for the Senior Vice Presidents)
of their annual salary plus annual bonus ("Cash Compensation"). The option
value is based upon a Black Scholes model calculation. This value is divided
into 22.5% of the individual's Cash Compensation (36% for the Chief Executive
Officer and 28% for the Senior Vice Presidents), and the resulting number is
the number of Shares subject to the grant of an option for such year.
Notwithstanding the forgoing, the number of Share options, which may be
granted to any individual, is limited to 100,000 in any one year. Certain
members of middle management are also eligible to receive Share Options under
the Stock Option Plan. Executive officers are also eligible to receive Share
grants through the Share Grant Plan. Under the Share Grant Plan, Vice
Presidents receive an award of Shares with a market value of 2.5% of the
individual's Cash Compensation (9% for the Chief Executive Officer and 7% for
Senior Vice Presidents) at the date of the award. Shares granted under the
Share Grant Plan vest 20% per year over five years and are restricted from
transfer for five years from the date of grant.
The Trust has approved a split dollar life insurance plan for senior
officers other than the Chief Executive Officer. The purpose of the plan is to
provide these officers with financial security in exchange for a career
commitment. It is intended that the Trust will recover its costs from the life
insurance policies at either death
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prior to retirement, termination prior to retirement, or at retirement age 65.
It is intended that the executive can use the cash values of the policy in
excess of the Trust's interest. The Trust has a security interest in the cash
value and death benefit of each policy to the extent of the sum of premium
payments made by the Trust.
The Trust has approved a non-qualified deferred compensation plan for the
Chief Executive Officer. The plan will allow Mr. Cronin to defer a percentage
of his annual cash compensation (salary and bonus). Compensation deferred will
be credited with interest equal to the Trust's current cost of funds. As an
incentive, if Mr. Cronin should remain employed by the Trust until age 70, his
deferred compensation will be credited with an additional 2.5%. In the event
of Mr. Cronin's death or retirement prior to age 70, the compensation plus
interest can be paid in either a lump sum or in equal installments at interest
at the discretion of the plan participant. The plan is unfunded and payments
are to be made from general assets of the Trust.
The Board believes that compensation paid to the Trust's executive officers
is comparable to that paid by the companies comprising the Morgan Stanley REIT
Index.
Chief Executive Officer Compensation
Mr. Cronin's 2000 compensation consisted of his salary, bonus, Share grants
and options based upon the Executive Compensation Program described above. Mr.
Cronin's salary was recommended by the Compensation Committee based upon (i) a
review of the compensation paid to chief executive officers employed by
companies comprising the Morgan Stanley REIT Index and (ii) a subjective
evaluation of Mr. Cronin's performance throughout the year. As described above
under the Plan, specific performance goals were not established for Mr. Cronin
during 2000 as relates to salary but, as described above, were established for
bonus and related Share grant and Share option purposes. In general, the
Morgan Stanley REIT Index comparison and the subjective evaluation were
weighted equally by the Board when making the decision to set Mr. Cronin's
2000 salary at $415,000. The Board believes that the compensation paid to Mr.
Cronin is comparable to compensation paid to the chief executive officers of
the companies comprising the Morgan Stanley REIT Index.
OTHER MATTERS
Under Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), a publicly held company such as the Trust will not be allowed a
federal income tax deduction for compensation paid to the chief executive
officer or one of the other four most highly compensated officers to the
extent that compensation (including certain stock-based compensation) paid to
such officer exceeds $1 million in any fiscal year, unless such compensation
satisfies certain exceptions set forth in the Code. The Board intends to
evaluate elements of compensation in light of Section 162(m) but may enter
into arrangements that do not satisfy such exceptions from Section 162(m), as
the Board determines to be appropriate.
THE COMPENSATION COMMITTEE
John P. McDaniel, Compensation Committee
Chairman
Clifford M. Kendall, Compensation Committee
Member
Charles T. Nason, Compensation Committee
Member
Susan J. Williams, Compensation Committee
Member
8
Performance Graph
Set forth below is a graph comparing the cumulative total shareholder return
on the Shares with the cumulative total return of companies making up the
Standard & Poor's 500 Stock Index as provided by Standard & Poor's Corporation
and The Morgan Stanley REIT Index. The Morgan Stanley REIT Index is a total-
return index comprised during the period of 115 of the most actively traded
real estate investment trusts.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
[LINE GRAPH APPEARS HERE]
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
WRIT.............................................. $100 $117 $119 $140 $121 $201
Morgan Stanley REIT Index......................... $100 $162 $128 $134 $161 $136
S&P............................................... $100 $123 $163 $210 $253 $230
9
AUDIT COMMITTEE REPORT
The Board maintains an Audit Committee comprised of five of the Trust's
outside Trustees. The Board and the Audit Committee believe that the Audit
Committee's current member composition satisfies Section 303 of the New York
Stock Exchange's (NYSE) listed company manual. In appointing Mr. Osnos to the
Audit Committee, the Board considered his relationship with the Trust's legal
counsel and determined in its business judgment that the relationship does not
interfere with his exercise of independent judgment. The committee held nine
meetings during 2000.
The Board has adopted a written Charter of the Audit Committee, a copy of
which is attached as an Appendix A hereto. The Audit Committee oversees the
Trust's financial process on behalf of the Board. Management has the primary
responsibility for the financial statements and the reporting process
including the systems of internal controls. In fulfilling its oversight
responsibilities, the Audit Committee reviewed the audited financial
statements in the Annual Report with management including a discussion of the
quality, and not just the acceptability, of the accounting principles, the
reasonableness of significant judgments and the clarity of disclosures in the
financial statements.
The Audit Committee discussed with the Trust's independent auditors the
overall scope and plans for their audit. The committee meets with the
independent auditors, with and without management present, to discuss the
results of their examination, their evaluation of the Trust's internal
controls and the overall quality of the Trust's financial reporting.
The Audit Committee reviewed with the independent auditors, who are
responsible for expressing an opinion on the conformity of those audited
financial statements with generally accepted accounting principles, their
judgments as to the quality, and not just the acceptability, of the Trust's
accounting principles and such other matters as are required to be discussed
with the committee under generally accepted auditing standards, including
Statement on Auditing Standards No. 61, "Communication with Audit Committees."
In addition, the Committee has discussed with the independent auditors the
auditors' independence from management and the Trust including the matters in
the written disclosures and the letter from the independent auditors required
by the Independence Standards Board, Standard No. 1, "Independence Discussions
with Audit Committees."
In reliance on the reviews and discussions referred to above, the committee
recommended to the Board (and the Board has approved) that the audited
financial statements be included in the Trust's Annual Report on form 10-K for
the year ended December 31, 2000 for filing with the Securities and Exchange
Commission. The committee and the Board have also recommended, subject to
shareholder approval, the selection of the Trust's independent auditors.
THE AUDIT COMMITTEE
Clifford M. Kendall, Audit Committee
Chairman
John M. Derrick, Jr., Audit
Committee Member
John P. McDaniel, Audit Committee
Member
Charles T. Nason, Audit Committee
Member
David M. Osnos, Audit Committee
Member
Principal Accounting Firm Fees
The following table sets forth the aggregate fees billed to the Trust for
the year ended December 31, 2000 by the Trust's principal accounting firm,
Arthur Andersen, LLP. The Audit Committee has considered whether the provision
of these services is compatible with maintaining the principal accountant's
independence.
Audit Fees....................................................... $148,750
Financial Information Systems Design and Implementation Fees..... -- 0 --
All Other Fees................................................... 198,518(a)
--------
$347,268
- --------
(a) Includes fees for tax services, E-Business consulting, SEC filings, and
other non-audit services.
10
PROPOSAL 1: ELECTION OF TRUSTEES
Messrs. Edmund B. Cronin, Jr., John P. McDaniel, and David M. Osnos stand
for election as Trustees at the Annual Meeting, to serve for three years. It
is intended that the proxies given to the persons named in the accompanying
Proxy (unless otherwise indicated on such Proxy) will be voted for the
election of Messrs. Cronin, McDaniel, and Osnos. Messrs. Cronin, McDaniel, and
Osnos currently serve as Trustees.
If a nominee becomes unable or unwilling to stand for election for any
reason not presently known or contemplated, the persons named in the enclosed
Proxy will have discretionary authority to vote pursuant to the Proxy for a
substitute nominee nominated by the Board. The election of Trustees requires
the affirmative vote of the holders of a majority of the shares voting at the
Annual Meeting either in person or by proxy.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE IN FAVOR OF THE ELECTION
OF MESSRS. EDMUND B. CRONIN, JR., JOHN P. McDANIEL, AND DAVID M. OSNOS.
PROPOSAL 2:
APPROVAL OF THE 2001 STOCK OPTION PLAN
The Trust currently maintains the Washington Real Estate Investment Trust
1991 Stock Option Plan (the "Stock Option Plan"), which expires on June 25,
2001. As discussed above in the Report on Executive Compensation, Share
options are an important part of the Trust's compensation program, providing a
basis for long-term incentive compensation and helping to tie together the
interests of the Trust's shareholders and the Trust's officers and employees.
In order that the Trust be able to continue to grant Share options without
interruption, it is necessary that the Trust have in place a new stock option
plan no later than the expiration of the Stock Option Plan. Accordingly, the
Board has adopted the Washington Real Estate Investment Trust 2001 Stock
Option Plan (the "New Stock Option Plan") and in accordance with the rules of
the New York Stock Exchange and the requirements of the Code is seeking the
approval of the shareholders of the adoption of the New Stock Option Plan.
The New Stock Option Plan provides for the grant to officers and employees
of the Trust of options to purchase up to an aggregate of 1,750,000 Shares. If
an option granted under the New Stock Option Plan expires without being
exercised, the Shares covered by that option again become available for
issuance under new options. In addition, there are currently 1,620,984 options
outstanding under the Stock Option Plan, which will not be affected by the
expiration of the Stock Option Plan. However, if an option granted under the
existing Stock Option Plan expires without being exercised, the shares covered
by that option will not be available for issuance under new options.
Following the expiration of the Stock Option Plan, no further Share options
may be granted under that plan. The Trust anticipates that upon approval of
the New Stock Option Plan, subsequent Share options would be granted under the
New Stock Option Plan and no further grants would be made under the Stock
Option Plan.
DESCRIPTION OF THE NEW STOCK OPTION PLAN
The terms of the New Stock Option Plan are substantially the same as the
terms of the Stock Option Plan.
The New Stock Option Plan provides that it may be administered by the Board
or a committee of the Board composed of at least three Trustees (the
"Committee"). The Board (or the Committee) has authority, subject to the
limits of the New Stock Option Plan, to designate persons to whom options are
granted, to determine the number of Shares covered by each option and to
determine the terms and provisions of each option. The Board (or the
Committee) also is authorized to designate whether the option is an incentive
stock option ("ISO") or a non-qualified stock option ("NQO") for tax purposes.
Options may be granted only to an employee of the Trust, including any
Trustee or officer who is an employee. Currently, approximately 20 employees
are eligible to receive option grants under the New Stock Option Plan. As
described in "Report on Executive Compensation," the New Stock Option Plan
requires the
11
grant of options to the Chief Executive Officer, Senior Vice Presidents and
Vice Presidents. Vice Presidents receive option grants with a value equal to
22.5% (36% for the Chief Executive Officer and 28% for the Senior Vice
Presidents) of their Cash Compensation. The option value is based upon a Black
Scholes model calculation. This value is divided into 22.5% of the
individual's Cash Compensation (36% for the Chief Executive Officer and 28%
for the Senior Vice Presidents), and the resulting number is the number of
Shares subject to the grant of an option for such year. Notwithstanding the
forgoing, the number of Share options which may be granted to any individual
is limited to 100,000 in any one year.
Under the New Stock Option Plan, whether the option is an ISO or an NQO,
the option price may not be less than the fair market value of the Shares on
the date the option is granted, and options will expire no later than ten
years from the date of the grant. On March 15, 2001, the closing price for the
Shares on the New York Stock Exchange was $22.08. The option price must be
paid in full at the time an option is exercised, in cash, by check or by
delivery of Shares already owned by the optionee. The New Stock Option Plan
provides that an option may be exercisable on grant or in one or more
installments as determined by the Board (or the Committee).
As required by Section 422 of the Code, the New Stock Option Plan provides
that the Trust may grant an optionee an ISO with respect to Shares with an
aggregate fair market value at the time of the grant in excess of $100,000
during any particular calendar year, provided that such option does not become
first exercisable by the optionee in an amount exceeding $100,000 per calendar
year. This provision does not apply to an option designated to be an NQO.
Options, whether an ISO or an NQO, are not assignable or transferable by
the optionee except by will or by the laws of descent and distribution. In
case of death, an option will continue in accordance with its terms and may be
exercised thereafter by the persons entitled to do so under the optionee's
will or by his legal representatives. If an optionee's employment is
terminated for any reason other than death, termination for cause or
retirement on or after attaining age 65, the option will terminate three
months after the date of such termination of employment, but in no event later
than the date of expiration of the option. If an optionee's employment is
terminated for cause, the option will terminate as of the date of such
termination of employment. If an optionee ceases to be employed by the Trust
due to retirement on or after attaining age 65, the option will continue in
accordance with its terms; however, the New Stock Option Plan provides that
the option will cease to be an ISO upon the expiration of three months from
the date of the optionee's retirement and will thereafter be treated as an
NQO.
The Board may terminate the New Stock Option Plan at any time and may amend
the New Stock Option Plan from time to time. However, the Board may not change
the maximum number of Shares for which options may be granted, the periods
during which options may be granted or exercised or materially increase the
benefits under the New Stock Option Plan without shareholder approval. No
amendment may adversely affect an optionee's rights under any issued option
without the optionee's consent.
The New Stock Option Plan provides that the number and price of the Shares
covered by each option and the total number of Shares that may be granted
under the New Stock Option Plan shall be proportionately adjusted to reflect,
as deemed equitable and appropriate by the Board, any stock dividend, stock
split or share combination of the Shares or recapitalization of the Trust. It
also provides that to the extent deemed equitable and appropriate by the
Board, in any merger, consolidation, reorganization, liquidation or
dissolution, any option granted under the New Stock Option Plan shall pertain
to the securities and other property to which a holder of the number of Shares
covered by the option would have been entitled to receive in connection with
such event.
Pursuant to the Code, an ISO plan may not have a term longer than ten years
from the earlier of the date the plan is adopted or the date the plan is
approved by the stockholders. Accordingly, the New Stock Option Plan will
expire on March 26, 2011 (except as to options outstanding on that date).
12
Federal Income Tax Treatment
Generally, the grant of either an ISO or a NQO under the New Stock Option
Plan will not cause recognition of income by the optionee or entitle the Trust
to an income tax deduction. Upon exercise of an option, the tax treatment will
generally vary depending on whether the option is an ISO or a NQO. The
exercise of an ISO will generally not cause recognition of income by the
optionee or entitle the Trust to a tax deduction. However, the amount by which
the fair market value of the Shares obtained exceeds the exercise price on the
day of exercise is an item of tax preference to the optionee for alternative
minimum tax purposes. Upon the sale of such Shares, the optionee generally
will recognize capital gain or loss if the Shares have been held for at least
two years from the date of the option grant and at least one year after the
Shares were purchased. If the applicable holding periods are not satisfied,
then any gain realized in connection with the disposition of such Shares will
generally be taxable as compensation income in the year in which the
disposition occurred, to the extent of the difference between fair market
value of such Shares on the date of exercise and the option exercise price.
The balance of any gain will be characterized as capital gain. The Trust is
entitled to a tax deduction to the extent, and at the time, that the
participant realizes compensation income.
The exercise of a NQO will generally cause the optionee to recognize
taxable income equal to the difference between the exercise price and the fair
market value of the Shares obtained on the date of exercise. The Trust must
then, in most cases, obtain from the optionee funds to meet tax withholding
requirements arising from that income recognition. The exercise of a NQO will
also generally entitle the Trust to an income tax deduction equal to the
amount of the income recognized by the exercising option holder. Upon the
disposal of Shares acquired pursuant to the exercise of a NQO, the optionee's
basis for determining taxable gain or loss will be the sum of the option price
paid for the Shares plus any related compensation income recognized by the
optionee, and such gain or loss will be long-term or short-term capital gain
or loss depending on whether the option holder has held the Shares for more
than one year.
Section 162(m) of the Code generally limits the allowable deduction for
compensation paid to an officer of a publicly held company who is the chief
executive officer or one of the four most highly compensated officers (other
than the chief executive officer) to $1 million for each taxable year
beginning on or after January 1, 1994. Certain types of compensation are
exempted from the deduction limit imposed by Section 162(m), including
payments contingent on the attainment of one or more performance goals if the
performance goals are established by a compensation committee of the board
that is comprised solely of two or more outside directors and the material
terms of the compensation and performance goals are disclosed to and approved
by the company's stockholders before payment. In the case of a stock option
plan, a payment will satisfy the requirement that compensation be paid on the
basis of a preestablished performance goal if the stock option grant is made
by the compensation committee, the plan includes a per-employee limitation on
the number of shares for which options may be granted during a specified
period, the exercise price of the option is no less than the fair market value
of the stock on the date of grant, and the plan is approved by the company's
stockholders.
The New Stock Option Plan was designed to allow options granted thereunder
to qualify for the exemption from the limit on tax deductible payments under
Section 162(m). Accordingly, upon the shareholders' approval of the New Stock
Option Plan, the Trust's entitlement to tax deductions in connection with
stock option payments to the Chief Executive Officer and the other four most
highly compensated officers of the Trust under the New Stock Option Plan is
not expected to be limited by Section 162(m).
Registration with SEC
The Trust intends to file a registration statement with the SEC pursuant to
the Securities Act of 1933, as amended, covering the offering of the Shares
under the New Stock Option Plan.
13
Vote Required
The affirmative vote of the holders of record of a majority of the
outstanding Shares is required for approval of the New Stock Option Plan.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE IN FAVOR OF
THE NEW STOCK OPTION PLAN.
OTHER MATTERS
Independent Public Accountants
The firm of Arthur Andersen LLP served as the Trust's independent public
accountants for 2000. The Board has appointed Arthur Andersen LLP as the
Trust's independent public accountants for 2001. Representatives of Arthur
Andersen LLP are expected to attend the Annual Meeting, will be provided with
an opportunity to make a statement, should they desire to do so, and will be
available to respond to appropriate questions from the shareholders.
Securities Reporting Requirements
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
Trustees and certain officers to file reports of changes in stock ownership
with the SEC and with the New York Stock Exchange, with copies to the Trust.
Based solely on a review of such copies, the Trust believes that all such
filing requirements have been met for the year ended December 31, 2000.
Expenses and Administration
The cost of this solicitation of proxies will be borne by the Trust. In
addition to the use of the mails, some of the officers and regular employees
of the Trust may solicit proxies by telephone or facsimile, will request
brokerage houses and other custodians, nominees and fiduciaries to forward
soliciting material to the beneficial owners of Shares held of record by such
persons and may also verify the accuracy of marked proxies by contacting
record and beneficial owners of Shares. The Trust will reimburse such persons
for expenses incurred in forwarding such soliciting material.
2002 Annual Meeting
Shareholders may present proposals to be considered for inclusion in the
Proxy Statement relating to the 2001 Annual Meeting, provided they are
received by the Trust no later than December 21, 2001 and are in compliance
with applicable laws and SEC regulations.
/s/ Laura M. Franklin
Laura M. Franklin
CORPORATE SECRETARY
March 29, 2001.
14
Appendix A
AUDIT COMMITTEE OF THE BOARD OF TRUSTEES
CHARTER
I. PURPOSE
The primary function of the Audit Committee is to assist the Board of
Trustees in fulfilling its oversight responsibilities by reviewing the
financial reports and other financial information provided by Washington Real
Estate Investment Trust (WRIT) to any governmental body or the public; WRIT's
systems of internal controls regarding finance and accounting that management
and the Board have established; and WRIT's auditing, accounting and financial
reporting processes generally. Consistent with this function, the Audit
Committee shall encourage continuous improvement of, and foster adherence to,
WRIT's policies, procedures and practices at all levels. The Audit Committee's
primary duties and responsibilities are to:
. Serve as an independent and objective party to monitor WRIT's financial
reporting process and internal control system.
. Review the audit efforts of WRIT's independent accountants.
. Provide an open avenue of communication among the independent
accountants, financial and senior management, and the Board of Trustees.
The Audit Committee will primarily fulfill these responsibilities by
carrying out the activities enumerated in Section IV of this Charter.
II. COMPOSITION
(1) Composition of Audit Committee Members.
(a) The Audit Committee shall consist of at least three trustees, all
of whom have no relationship to WRIT that may interfere with the
exercise of their independence from management and WRIT
("Independent").
(b) Each member of the Audit Committee shall be financially literate,
as such qualification is interpreted by WRIT's Board of Trustees in
its business judgment, or must become financially literate within a
reasonable period of time after his or her appointment to the Audit
Committee.
(c) At least one member of the Audit Committee must have accounting or
related financial management expertise, as the Board of Trustees
interprets such qualification in its business judgment.
(2) Independence Requirement of Audit Committee Members.
In addition to the definition of Independent provided above in II(1)(a),
the following restrictions shall apply to every Audit Committee member:
(a) Employees. A trustee who is an employee (including non-employee
executive officers) of WRIT or any of its affiliates may not serve
on the Audit Committee until three years following the termination
of his or her employment. In the event the employment relationship
is with a former parent or predecessor of WRIT, the trustee may
serve on the Audit Committee after three years following the
termination of the relationship between WRIT and the former parent
or predecessor.
(b) Business Relationship. A trustee (i) who is a partner, controlling
shareholder, or executive officer of an organization that has a
business relationship with WRIT, or (ii) who has a direct business
relationship with WRIT (e.g., a consultant) may serve on the Audit
Committee only if WRIT's Board of Trustees determines in its
business judgment that the relationship does not interfere with the
trustee's exercise of independent judgment. In making a
determination regarding the independence of a trustee pursuant to
this paragraph, the Board of Trustees should consider, among other
things, the materiality of the relationship to WRIT, to the trustee
and, if applicable, to the organization with which the trustee is
affiliated.
A-1
"Business relationships" can include commercial, industrial, banking,
consulting, legal, accounting and other relationships. A trustee can have
this relationship directly with WRIT, or the trustee can be a partner,
officer or employee of an organization that has such a relationship. The
trustee may serve on the Audit Committee without the above-referenced Board
of Trustees' determination after three years following the termination of,
as applicable, (1) the relationship between the organization with which the
trustee is affiliated and WRIT, (2) the relationship between the trustee
and his or her partnership status, shareholder interest or executive
officer position, or (3) the direct business relationship between the
trustee and WRIT.
(c) Cross Compensation Committee Link. A trustee who is employed as an
executive of another corporation where any of WRIT's executives
serves on the corporation's compensation committee may not serve on
the WRIT Audit Committee.
(d) Immediate Family. A director who is an immediate family member of
an individual who is an executive officer of WRIT or any of its
affiliates cannot serve on the Audit Committee until three years
following the termination of such employment relationship.
The members of the Audit Committee shall be elected by the Board at the
Trustees Meeting following the Annual Meeting of Shareholders or until their
successors shall be duly elected and qualified. Unless a Chair is elected by
the full Board, the members of the Committee shall designate a Chair by
majority vote of the full Committee membership.
III. MEETINGS
The Committee shall meet at least four times annually, or more frequently
as circumstances dictate, including the meetings described below. To foster
open communication, the Committee shall meet at least annually with management
and the independent accountants in separate executive sessions to discuss any
matters that the Committee or each of these groups believe should be discussed
privately. In addition, the Committee shall meet with management quarterly to
review WRIT's financial statements consistent with IV.3 and IV.4 below.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
Documents/Reports Review
1. Review and update this Charter, at least annually, as conditions
dictate.
2. Review WRIT's annual financial statements: Form 10-K and Annual Report.
3. Review and discuss the regular internal quarterly reports to management.
4. Review with management the quarterly Earnings Press Release prior to its
release to the public. The Chair of the Committee may represent the
entire Committee for purposes of this review.
Independent Accountants
5. Inasmuch as WRIT's independent accountants are ultimately accountable to
the Board of Trustees and Audit Committee, join with the Board of
Trustees in exercising the authority and responsibility to select,
evaluate and, where appropriate, replace the independent accountants (or
to nominate the independent accountants for shareholder approval in any
proxy statement).
6. Require that the independent accountants submit on a periodic basis to
the Audit Committee a formal written statement delineating all
relationships between the independent accountants and WRIT, actively
engage in a dialogue with the independent accountants with respect to
any disclosed relationships or services that may impact the objectivity
and independence of the independent accountants, and recommend that the
Board of Trustees take appropriate action to ensure such independence.
7. Periodically consult with the independent accountants out of the
presence of management about internal controls and the fullness and
accuracy of WRIT's financial statements.
A-2
FRONT OF PROXY CARD
FOR WITHHELD
1. Election of three Trustees Nominees (for the terms
stated in the Proxy Statement):
For, Except vote withheld from the following
Nominee: Mr. Edmund B. Cronin, Jr.
Mr. John P. McDaniel
Mr. David M. Osnos
2. Proposal to approve 2001 Stock Option Plan FOR AGAINST ABSTAIN
3. Such other matters as may come before the meeting. IF NO CHOICE IS
SPECIFIED, THIS PROXY WILL BE VOTED "FOR" THE NOMINATED TRUSTEES AND PROPOSAL
#2. PROXIES WILL BE VOTED AS DIRECTED OR SPECIFIED.
PLEASE vote at once. It is important. Please mark your choice in black ink.
SIGNATURE _________________ DATE _________ SIGNATURE _________________
DATE______________________
NOTE: SIGNATURE(S) MUST CORRESPOND EXACTLY WITH NAME(S) AS IMPRINTED HEREON.
When signing as attorney, executor, administrator, trustee or guardian,
please give the full title as such and if the signer is a corporation,
please sign with the full corporate name by a duly authorized officer. If
stock is held in the name of more than one person, all named holders must
sign the proxy.
REAR OF PROXY CARD:
WASHINGTON REAL ESTATE INVESTMENT TRUST
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS MAY 22, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned shareholder of Washington Real Estate Investment Trust
appoints Larry E. Finger and Laura M. Franklin, and each of them, with full
power of substitution, as proxy to vote all shares of the undersigned in
Washington Real Estate Investment Trust at the Annual Meeting of Shareholders to
be held on May 22, 2001, and at any adjournment thereof, with like effect and as
if the undersigned were personally present and voting upon the following
matters:
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
APPENDIX TO PROXY
Material as filed with the Securities and Exchange Commission; Not Part of the
Proxy Soliciting Material to be Distributed to Shareholders.
WASHINGTON REAL ESTATE INVESTMENT TRUST
STOCK OPTION AGREEMENT
This Stock Option Agreement
dated ___________, 200__
WITNESSETH:
1. Pursuant to the provisions of the Washington Real Estate Investment
Trust 2001 Stock Option Plan, as amended (the "Plan"), Washington Real Estate
Investment Trust, a real estate investment trust organized under the laws of
Maryland (the "Trust") on the date set forth above has granted, and hereby
evidences the grant to ____________________ (the "Optionee"), subject to the
terms and conditions set forth or incorporated herein, of the right and Option
to purchase from the Trust an aggregate of _____ shares of beneficial interest
of the Trust ("Shares") at the purchase price of $_______ per share, such Option
to be exercisable as hereinafter provided. The Option [is] [is not] intended to
qualify as an incentive stock option ("Incentive Stock Option") under Section
422(b) of the Internal Revenue Code of 1986, as amended. A copy of the Plan is
attached hereto as Exhibit A and made a part hereof with the same effect as if
set forth herein.
2. Subject to all of the terms and conditions hereof and of the Plan, the
right to purchase the optioned Shares shall accrue on the date hereof and shall
end upon the expiration of the option period as defined in paragraph 3(a) below.
The Optionee shall have the right to exercise the Option granted hereunder to
the maximum extent described above or for any lesser number of Shares.
The Shares may be purchased by giving the Trust written notice to
exercise by letter in the form attached hereto as Exhibit B, specifying the
number of Shares to be purchased and the date on which the purchase will be
completed. If required by the Trust, such notice shall contain a statement by
the Optionee that the Optionee has represented to it that it is his/her present
intention to acquire the Shares being purchased for investment and not with a
view to resale or distribution. If required by the Trust, the certificates
representing the Shares shall be legended appropriately to reflect the fact that
the Shares have not been registered under the Securities Act of 1933 and that no
sale or other distribution of such Shares may be made except pursuant to an
effective registration statement under said Act or in a transaction exempt from
such registration requirements. Upon the date of purchase so specified, the
Optionee shall deliver to the Trust the purchase price of the Shares to be
purchased against delivery thereof to the Optionee. The purchase price shall be
paid in the form of cash, personal check and/or Shares of the Trust (at the
current fair market value of such Shares). The Trust shall deliver such Shares
on such date of purchase or within a reasonable period of time thereafter,
provided, however, that if any law, regulation, or agreement requires the Trust
to take any action with respect to such Shares before the issuance thereof, then
the date of delivery of such Shares shall be extended for the period necessary
to take such actions.
3. Without limiting the generality of the preceding paragraphs, it is
understood and agreed that this Agreement and the Option evidenced hereby are
subject to the following conditions:
(a) the Option shall not in any event be exercisable after the close of
business on __________________;
(b) the Option shall not be assignable or transferable by the Optionee
except by will or the laws of descent and distribution, and during the
lifetime of the Optionee, shall be exercisable only by the Optionee or the
Optionee's guardian or legal representative. Upon any attempt to transfer,
assign, pledge, hypothecate or otherwise dispose of the Option or any of
the rights of the Optionee hereunder (other than by will or the laws of
descent and distribution), the Option shall immediately become null and
void and the rights and privileges of the Optionee hereunder shall
immediately terminate;
(c) if the Optionee ceases to be employed by the Trust other than by
reason of death, termination for cause, retirement on or after attaining
age sixty-five (65), disability, or lay-off in connection with a reduction
in force, the Option or unexercised portion thereof (whether or not
otherwise currently exercisable) shall terminate three (3) months after the
date of such termination of employment, but in no event later than the date
of expiration of the Option;
(d) upon the death of the Optionee, the Option shall be exercisable
only in accordance with Section 6(e) of the Plan;
(e) If the Optionee ceases to be employed by the Trust due to
termination of his/her employment for cause, the Option or unexercised
portion thereof (whether or not otherwise currently exercisable) shall
terminate as of the date of such termination of employment;
(f) if the Optionee ceases to be employed by the Trust due to
retirement on or after attaining age sixty-five (65), disability, or lay-
off in connection with a reduction in force, the Option shall continue in
accordance with its terms and shall expire on its normal date of expiration
unless previously exercised. [However, the Option shall cease to be an
Incentive Stock Option upon the expiration of three (3) months from the
date of the Optionee's retirement and shall thereafter be treated as a
Nonqualified Stock Option];
(g) the Optionee shall have none of the rights or privileges of a
shareholder with respect to the Shares issuable upon the exercise of the
Option until certificates representing such Shares shall have been issued
and delivered to him/her upon the exercise of his/her Option;
(h) the Trust's obligation to deliver Shares upon the exercise of the
Option evidenced hereby shall not constitute or be evidence of any
agreement or
understanding, express or implied, on the part of the Trust to
employ the Optionee for any specific period; and
(i) the Trust's obligation to deliver Shares upon the exercise of any
Option shall be subject to applicable federal, state and local tax
withholding requirements.
4. The number and price of the Shares subject to this Option shall be
proportionately adjusted to reflect, as deemed equitable and appropriate by the
Trust, any stock dividends, stock split or share combination of the Shares or
recapitalization of the Trust or any new underwriting of the Trust. To the
extent deemed equitable and appropriate by the Trust, subject to any required
action by shareholders, in any merger, consolidation, reorganization,
liquidation or dissolution, this Option shall pertain to the securities and
other property to which a holder of the number of Shares covered by the Option
would have been entitled to receive in connection with such event.
Upon the dissolution or liquidation of the Trust, this Option shall
terminate; but the Optionee shall have the right, immediately prior to such
dissolution or liquidation, to exercise this Option in full to the extent not
theretofore exercised regardless of any provision in this Agreement providing
for the deferment of the exercise thereof.
5. Neither the execution and delivery hereof, nor the granting of the
Option evidenced hereby, shall constitute or be evidence of any agreement or
understanding, express or implied, on the part of the Trust to employ the
Optionee for any specific period.
6. Any notice required to be given hereunder to the Trust shall be
addressed to the Trust as follows: Washington Real Estate Investment Trust,
10400 Connecticut Avenue, Kensington, Maryland 20895, and any notice required to
be given hereunder to the Optionee shall be addressed to him/her at his/her
address shown hereinabove, or to such other address as either party shall
furnish in writing to the other.
7. The Optionee acknowledges receipt of the Plan and agrees to be bound by
the terms and conditions hereof and of the Plan.
8. Any capitalized term or phrase used herein and defined in the Plan but
not herein shall have such meaning provided in the Plan.
9. This Agreement may be amended at any time by the written consent of
both parties hereto.
IN WITNESS WHEREOF, the Trust, by its duly authorized officer, and the
Optionee have executed this agreement in duplicate as of the day and year first
above written.
WASHINGTON REAL ESTATE
ATTEST: INVESTMENT TRUST
BY:
- ----------------------------- -------------
WITNESS: OPTIONEE:
- ----------------------------- -------------
EXHIBIT A
---------
WASHINGTON REAL ESTATE INVESTMENT TRUST
2001 STOCK OPTION PLAN
1. Purpose. This 2001 Stock Option Plan ("Plan") is intended to provide
--------
incentive to selected officers of Washington Real Estate Investment Trust (the
"Trust"), and to persons who are otherwise designated by the Committee
(described in Section 2) as key employees of the Trust, by providing those
individuals with opportunities to purchase shares of beneficial interest of the
Trust ("Shares") under (a) incentive stock options ("Incentive Stock Options")
as such term is defined in Section 422(b) of the Internal Revenue Code of 1986,
as amended ("Code") and (b) other stock options ("Nonqualified Stock Options").
(Incentive Stock Options and Nonqualified Stock Options shall be referred to
collectively as "Options".)
2. Administration. The Plan shall be administered by the Board of
--------------
Trustees of the Trust (the "Board"). However, the Board, in its sole
discretion, may at any time delegate its administrative authority hereunder to a
committee of trustees (the "Committee") who shall be selected by the members of
the Board, provided that the Committee shall be composed of three or more
trustees and all of the members of the Committee are "Non-Employee" trustees as
defined in Rule 16b-3 under the Securities and Exchange Act of 1934, as amended.
The Board (or the Committee, if applicable) shall have authority, subject to the
terms of the Plan, to determine the individuals to whom Options shall be
granted, the number of Shares to be covered by each
Option, the designation of an Option as an Incentive Stock Option or as a
Nonqualified Stock Option, the purchase price of the Shares covered by each
Option, the time or times at which Options shall be granted, and the terms and
provisions of the instruments by which Options shall be evidenced; to interpret
the Plan; and to make all determinations necessary or advisable for the
administration of the Plan. Subject to the requirements of the first sentence of
this Section, business shall be transacted by a majority vote of the members of
the Board (or the Committee) and a decision or determination reduced to writing
and signed by the members of the Board (or the Committee) shall be fully
effective as if it had been made by a vote at a meeting duly called and held. No
member of the Board (or the Committee) shall be liable for any action or
determination made in good faith with respect to the Plan or any Option granted
under the Plan.
3. Eligibility. Options may be granted for the benefit of employees of
-----------
the Trust. Granting of any Option to an employee shall neither entitle such
employee to, nor disqualify him/her from, participation in any other grant of
Options.
4. Shares. The Shares as to which Options may be granted shall be shares
-------
of beneficial interest of the Trust. When Options are exercised, the Trust may
either issue unissued Shares or transfer issued Shares held in its treasury. The
total amount of Shares which may be granted under the Plan shall not exceed
_____________ Shares (subject to further adjustment as provided in Section 7).
In the event that any outstanding Option under the Plan for any reason expires
or is terminated prior to the end of the period during which Options may be
granted, the Shares allocable to the unexercised portion of such Option may
again be subject in full or in part to any Option under the Plan.
5. Granting of Options. Options may be granted under the Plan at any time
--------------------
prior to March __, 2011. The date of grant of an Option under the Plan shall be
the date on which the Option is awarded by the Board (or the Committee). In
granting such Options, the Board (or the Committee) shall bear in mind that the
Plan is designed to retain key employees and to reward such key employees for
their dedication and loyalty to the Trust. Therefore, it is the Board's
expectation and desire that Shares obtained through the exercise of Options
shall generally be retained by such key employees during their period of
employment with the Trust so that such individuals shall enjoy the benefits and
the ongoing incentive which is provided through equity ownership in the Trust.
Each year the amount of options to be granted to key employees and shall be as
follows:
(a) Employee - Chief Executive Officer. With respect to the Chief
----------------------------------
Executive Officer, an amount equal to thirty-six percent (36%) of the
total cash compensation payable to such individual with respect to the
current calendar year (the "Total Cash Compensation") shall be
identified. For purposes of this Section 5, Total Cash Compensation
shall mean an amount equal to such individual's annual salary plus the
bonus amount projected to be paid under the Trust's bonus pool
arrangement with respect to such year. As of the date of the Option
grant, the Board (or the Committee) shall determine the value of the
right to purchase one (1) Share for its fair market value on the date
of grant for a period of ten (10) years. For these purposes, the
Board (or the Committee) shall select, in its discretion, a valuation
methodology which shall yield an Option value which is no lower than
the value which could be obtained through use of the Black Scholes
model. The value of the right to purchase one (1) Share, as so
determined, shall then be divided into an amount equal to thirty-six
percent (36%) of the Total Cash Compensation payable to such
individual and the resulting number shall be the number of Shares
subject to the grant of an Option for such year. Such Option shall
first be exercisable with respect to fifty percent (50%) of the Shares
subject to the Option upon the first anniversary of its date of grant
and shall become exercisable as to the remaining Shares upon the
second anniversary of its date of grant. Subject to any dollar
limitation imposed by applicable law, such Option shall constitute an
Incentive Stock Option. Notwithstanding the foregoing, the total
number of Shares which may be granted to the Chief Executive Officer
during any calendar year shall be limited to 100,000.
(b) Employees - Senior Vice President. With respect to the Senior
---------------------------------
Vice President, an amount equal to twenty-eight percent (28%) of the
Total Cash Compensation payable to such individual with respect to the
current calendar year shall be identified. As of the date of the
Option grant, the Board (or the Committee) shall determine the value
of the right to purchase one (1) Share for its fair market value on
the date of grant for a period of ten (10) years. For these purposes,
the Board (or the Committee) shall select, in its discretion, a
valuation methodology which shall yield an Option value which is no
lower than the value which could be obtained through use of the Black
Scholes model. The value of the right to purchase one (1) Share, as so
determined, shall then be divided into an amount equal to twenty-eight
percent (28%) of the Total Cash Compensation payable to such
individual and the resulting number shall be the number of Shares
subject to the grant of an Option for such year. Such Option shall
first be exercisable with respect to fifty percent (50%) of the Shares
subject to the Option upon the first anniversary of its date of grant
and shall become exercisable as to the remaining Shares upon the
second anniversary of its date of grant. Subject to any dollar
limitation imposed by applicable law, such Option shall constitute an
Incentive Stock Option. Notwithstanding the foregoing, the total
number of Shares which may be granted to the Senior Vice President
during any calendar year shall be limited to 100,000.
(c) Employees - Vice President. With respect to individuals
--------------------------
holding the position of Vice President, an amount equal to twenty-two
and one-half percent (22.5%) of the Total Cash Compensation payable to
each such individual with respect to the current calendar year shall
be identified. As of the date of the Option grant, the Board (or the
Committee) shall determine the value of the right to purchase one (1)
Share for its fair market value on the date of grant for a period of
ten (10) years. For these purposes, the Board (or the Committee) shall
select, in its discretion, a valuation methodology which shall yield
an Option value which is no lower than the value which could be
obtained through use of the Black Scholes model. The value of the
right to purchase one (1) Share, as so determined, shall then be
divided into an amount equal to twenty-two and one-half percent
(22.5%) of the Total Cash Compensation payable to such individual and
the resulting
number shall be the number of Shares subject to the grant of an Option
for such year. Such Option shall first be exercisable with respect to
fifty percent (50%) of the Shares subject to the Option upon the first
anniversary of its date of grant and shall become exercisable as to
the remaining Shares upon the second anniversary of its date of grant.
Subject to any dollar limitation imposed by applicable law, such
Option shall be constitute an Incentive Stock Option. Notwithstanding
the foregoing, the total number of Shares which may be granted to any
Vice President during any calendar year shall be limited to 100,000.
6. Terms and Conditions of Options. Options shall be evidenced by
-------------------------------
instruments in such form as the Board may from time-to-time approve. Such
instruments shall conform to the following terms and conditions:
(a) Option Price. The Option price per Share for Options which are
------------
Incentive Stock Options shall not be less than the fair market value of a
Share on the day the Option is granted. The Option price per Share for
Options which are Nonqualified Stock Options shall not be less than the
fair market value of a Share on the day the Option is granted. The "fair
market value" of a Share shall be determined as the price equal to the mean
of the highest and lowest selling prices for a Share on the stock exchange
on which the Shares are traded as of the day the Option is granted. The
Option price of any Share as to which an Option is exercised shall, upon
delivery of the Shares, be paid in full by money order, by cashier's check
or by delivery of Shares already owned by the holder of the Option for a
minimum of six (6) months (at the current fair market value of such
Shares).
(b) Term of Options. Each Option shall expire no later than the tenth
---------------
anniversary of the date of its grant.
(c) Exercisability. Each Option may be exercisable on grant or may
--------------
become exercisable in one or more installments at the time or times
provided in the instrument evidencing the Option, as the Board (or the
Committee) shall determine. Each grant of Option shall be subject to a risk
of forfeiture such that the Option shall become first vested as to fifty
percent (50%) of the Shares subject to the Option on the first anniversary
of the date of grant and first vested as to the remaining fifty percent
(50%) of the Shares subject to the Option on the second anniversary of the
date of grant.
The holder of an Option shall have none of the rights or privileges of
a shareholder with respect to the Shares issuable upon the exercise of the
Option until certificates representing such Shares shall have been issued
and delivered to him/her upon the exercise of his/her Option.
The Trust shall make delivery of such Shares within a reasonable period
of time, provided, however, that if any law, regulation, or agreement
requires the Trust to take any action with respect to such Shares before
the issuance thereof, then the date of delivery of such Shares shall be
extended for the period necessary to take such action.
(d) Termination of Employment. If an Optionee ceases to be employed
--------------------------
by the Trust other than by reason of death, termination for cause,
retirement on or after attaining age sixty-five (65), disability, lay-off
in connection with a reduction in force or, after a Change in Control, any
nonvested portion of an Option shall be forfeited and any otherwise vested
Option or unexercised portion thereof granted to him/her (whether or not
otherwise currently exercisable) shall terminate three (3) months after the
date of such termination of employment, but in no event later than the date
of expiration of the Option. However, if an Optionee ceases to be employed
by the Trust due to termination of his/her employment for cause, the Option
or unexercised portion thereof (whether or not otherwise currently
exercisable) shall terminate as of the date of such termination of
employment. If an Optionee ceases to be employed by the Trust due to
retirement on or after attaining age sixty-five (65), disability, or a lay-
off in connection with a reduction in force, the Option shall become fully
vested and shall continue in accordance with its terms and shall expire on
its normal date of expiration unless previously exercised. However, any
Incentive Stock Option shall cease to be an Incentive Stock Option upon the
expiration of three (3) months from the date of the Optionee's retirement
and shall thereafter be treated as a Nonqualified Stock Option.
(e) Death. If an Optionee dies, any Option of the deceased Optionee
------
shall become fully vested and shall continue in accordance with its terms,
may be exercised, to the extent of the number of Shares with respect to
which he/she could have exercised the Option on the date of his/her death,
by his/her estate, personal representative or beneficiary who acquires the
Option by will or by the laws of descent and distribution, and shall expire
on its normal date of expiration unless previously exercised.
(f) Change in Control. - In the event of a Change in Control, an
-----------------
Optionee's nonvested Options shall become fully vested and may be exercised
until their normal date of expiration unless previously exercised. For
these purposes, the term "Change in Control" shall mean an occasion upon
which (i) any "person" (as such term is used in Section 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")),
other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Trust or a corporation owned, directly or
indirectly, by the shareholders of the Trust in substantially the same
proportions as their ownership of Shares of the Trust, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Trust representing 30% or more
of the combined voting power of the Trust's then outstanding securities; or
(ii) during any period of twenty-four (24) consecutive months (not
including any period prior to the adoption of this Plan), individuals who
at the beginning of such period constitute the Board and any new trustee
(other than a trustee designated by a person who has entered into an
agreement with the Trust to effect a transaction described in clauses (i)
or (iii) of this Paragraph) whose election by the Board or nomination for
election by the Trust's shareholders was approved by a vote of at least
two-thirds (2/3) of the trustees then still in office who either were
trustees at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof; or (iii) either (a) the shareholders of the Trust approve
a merger or consolidation of the Trust with any other corporation or trust
other than a
merger or consolidation which would result in the voting securities
of the Trust outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 70% of the combined voting
power of the voting securities of the Trust or such surviving entity
outstanding immediately after such merger or consolidation, (b) the
shareholders of the Trust approve a plan of complete liquidation of the
Trust, or (c) the shareholders of the Trust approve an agreement for the
sale or disposition by the Trust of all or substantially all the Trust's
assets.
(g) Assignability. No Option shall be assignable or transferable by
-------------
the Optionee except by will or the laws of descent and distribution, and
during the lifetime of the Optionee, each Option shall be exercisable only
by the Optionee or the Optionee's guardian or legal representative. Upon
any attempt to transfer, assign, pledge, hypothecate or otherwise dispose
of an Option or any of the rights of the Optionee thereunder (other than by
will or the laws of descent and distribution), such Option shall
immediately become null and void and the rights and privileges of the
Optionee thereunder shall immediately terminate.
(h) Withholding. The Trust's obligation to deliver Shares upon the
-----------
exercise of any Option shall be subject to applicable federal, state and
local tax withholding requirements.
(i) Limit. Incentive Stock Options shall not be granted to any
-----
employee to the extent that the grant of such Options to such employee
would otherwise cause the aggregate fair market value (as determined at the
time each Incentive Stock Option is granted) of the Shares subject to
Incentive Stock Options held by such employee which first become
exercisable during a particular calendar year to exceed $100,000; provided
that such limitation shall be increased to any greater amount permitted by
the Code from time-to-time.
(j) Number of Shares Subject to Each Option and Nature of Each Option.
-----------------------------------------------------------------
The Board (or the Committee) shall determine, in its sole discretion, the
number of Shares subject to each Option granted to each selected employee.
In addition, at the time of the grant of each Option, the Board (or the
Committee) shall determine whether such Option is to be designated as an
Incentive Stock Option or as a Nonqualified Stock Option.
Instruments evidencing Options may contain such other provisions, not
inconsistent with the Plan, as the Board (or the Committee) deems advisable.
Among those provisions may be a requirement that the Optionee represent to the
Trust in writing, when an Option is granted or when he/she purchases Shares on
its exercise, that he/she is accepting such Option or purchasing such Shares
(unless they are then covered by a registration statement under the Securities
Act of 1933) for his/her own account for investment only. All Shares which are
not registered under the Securities Act of 1933 at the time of the exercise of
any Option shall be, at the direction of the Board and upon advice of counsel to
the Trust, marked with an appropriate legend restricting their transfer to
insure compliance with said Act.
7. Capital Adjustments. The number and price of the Shares covered by
-------------------
each Option and the total number of Shares that may be granted under the Plan
shall be proportionately adjusted to reflect, as deemed equitable and
appropriate by the Board, any stock dividends, stock split or share combination
of the Shares or recapitalization of the Trust. To the extent deemed equitable
and appropriate by the Board, subject to any required action by shareholders, in
any merger, consolidation, reorganization, liquidation or dissolution, any
Option granted under the Plan shall pertain to the securities and other property
to which a holder of the number of Shares covered by the Option would have been
entitled to receive in connection with such event.
Upon the dissolution or liquidation of the Trust, each Option granted under
the Plan shall terminate; but the Optionee shall have the right, immediately
prior to such dissolution or liquidation, to exercise his/her Option in full to
the extent not theretofore exercised regardless of any provision in the Option
contract providing for the deferment of the exercise thereof.
8. Indemnification of Board. In addition to such other rights of
------------------------
indemnification as they may have as members of the Board, the members of the
Board shall be indemnified by the Trust against all costs and expenses
reasonably incurred by them in connection with any action, suit or proceeding to
which they or any of them may be party by reason of any action taken or failure
to act under or in connection with the Plan, or any Option granted thereunder,
and against all amounts paid by them in settlement thereof (provided such
settlement is approved by legal counsel selected by the Trust) or paid by them
in satisfaction of a judgment in any such action, suit or proceeding, except a
judgment based upon a finding of bad faith. Upon the institution of any such
action, suit or proceeding, a Board member shall notify the Trust in writing,
giving the Trust an opportunity, at its own expense, to handle and defend the
same before such Board member undertakes to handle it on his/her own behalf.
9. Termination and Amendment. The Plan shall expire on March __, 2011
-------------------------
(except as to Options outstanding on that date). The Plan may be terminated or
amended with the approval of the shareholders of the Trust, or by the Board as
provided below.
The Board by majority vote and without shareholder approval may terminate
the Plan and at any time and from time-to-time amend the Plan in such respects
as it shall deem advisable to conform to any change in the law or for any other
purpose, but shall not have the authority to change:
(a) the maximum number of Shares for which Options may be granted under
the Plan (except by operation of the adjustment provision of the Plan); or
(b) the periods during which Options may be granted or exercised; or
(c) the provisions so as to materially increase the benefits accruing
to participants under the Plan.
The amendment of the Plan shall not, without the written consent of the
employee, affect his/her rights under an Option theretofore granted to him/her.
EXHIBIT B
---------
Washington Real Estate Investment Trust
10400 Connecticut Avenue
Kensington, MD 20895
Dear Sirs:
I wish to exercise the Option evidenced by my Stock Option Agreement dated
_________________ to the extent of _____ shares of beneficial interest of
Washington Real Estate Investment Trust at the Option price of $_______ per
share. On such date I herewith deliver payment in cash or other current funds
in the amount of $____________ to you against delivery to me of a certificate
for these shares registered in my name.
I agree that prior to any sale of any of the shares purchased pursuant to
the Stock Option Agreement, I will notify the Trust to enable the Trust to take
any steps required by the Securities Act of 1933 in connection with such sale or
to advise me of what steps need to be taken with respect to such sale. I
further agree that I will not complete any such sale until I have been advised
by the Trust that such steps have been taken. In addition, I agree that I will
report to the Trust any sale of Shares acquired under the Stock Option Agreement
within thirty (30) days after completion of such sales.
-------------------------
(Name)
-------------------------
-------------------------
(Address)
-------------------------
(Date)