<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 17, 1995
REGISTRATION NO. 33-60581
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
WASHINGTON REAL ESTATE INVESTMENT TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DISTRICT OF COLUMBIA 53-0261100
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
------------------------
10400 CONNECTICUT AVENUE
KENSINGTON, MARYLAND 20895
(301) 929-5900
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
BENJAMIN H. DORSEY, ESQ.
GENERAL COUNSEL AND SECRETARY
10400 CONNECTICUT AVENUE
KENSINGTON, MARYLAND 20895
(301) 929-5900
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
JEFFREY E. JORDAN, ESQ. THOMAS R. SMITH, JR., ESQ.
ARENT FOX KINTNER PLOTKIN & KAHN BROWN & WOOD
1050 CONNECTICUT AVENUE, N.W. ONE WORLD TRADE CENTER
WASHINGTON, DC 20036-5339 NEW YORK, NY 10048-0557
(202) 857-6473 (212) 839-5535
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JULY 17, 1995
PROSPECTUS
[WRIT LOGO] 3,500,000 SHARES
WASHINGTON REAL ESTATE INVESTMENT TRUST
SHARES OF BENEFICIAL INTEREST
------------------------
The shares of beneficial interest (the "Shares") of Washington Real Estate
Investment Trust ("WRIT" or the "Trust") are listed on the American Stock
Exchange under the symbol "WRE." On June 30, 1995, the last reported sale price
of the Shares on the American Stock Exchange was $15 3/4 per Share.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) TRUST(2)
<CAPTION>
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share................................ $ $ $
- --------------------------------------------------------------------------------------------------
Total(3)................................. $ $ $
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) The Trust has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting".
(2) Before deducting expenses of the offering estimated at $210,000, payable by
the Trust.
(3) The Trust has granted the Underwriters a 30-day option to purchase up to an
additional 525,000 Shares to cover over-allotments, if any. If all of such
Shares are purchased, the total Price to Public, Underwriting Discount and
Proceeds to Trust will be $ , $ and
$ , respectively. See "Underwriting".
------------------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION
TO THE CONTRARY IS UNLAWFUL.
------------------------
The Shares are offered by the several Underwriters, subject to prior sale,
when, as and if delivered to and accepted by them, subject to approval of
certain legal matters by counsel for the Underwriters. The Underwriters reserve
the right to withdraw, cancel or modify such offer and to reject orders in whole
or in part. It is expected that the delivery of the Shares offered hereby will
be made in New York, New York on or about July , 1995.
------------------------
MERRILL LYNCH & CO.
ALEX. BROWN & SONS
INCORPORATED
A.G. EDWARDS & SONS, INC.
LEGG MASON WOOD WALKER
INCORPORATED
------------------------
The date of this Prospectus is July , 1995.
<PAGE> 3
WRIT
GROWTH OF
FUNDS FROM OPERATIONS AND
DIVIDENDS PAID
<TABLE>
<CAPTION>
DIVIDENDS FUNDS FROM
YEAR PAID OPERATIONS
---- ---- ----------
<S> <C> <C>
1980 3,484,210 4,990,351
1981 4,526,737 6,074,430
1982 4,929,329 6,590,953
1983 5,134,851 8,002,590
1984 8,053,184 9,889,957
1985 8,344,614 10,919,494
1986 9,822,265 12,703,890
1987 12,028,949 13,277,702
1988 13,087,538 14,587,538
1989 15,341,742 17,280,718
1990 17,030,987 19,229,034
1991 19,672,408 21,707,672
1992 22,513,368 23,850,876
1993 24,380,361 26,162,021
1994 25,981,388 27,100,541
</TABLE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE TRUST'S SHARES
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE> 4
PROSPECTUS SUMMARY
This summary is qualified in its entirety by reference to the more detailed
information and financial statements appearing elsewhere in this Prospectus or
incorporated herein by reference. Unless otherwise indicated, the information
presented herein assumes that the Underwriters' over-allotment option is not
exercised.
THE TRUST
Washington Real Estate Investment Trust ("WRIT" or the "Trust"), founded in
1960, is an equity real estate investment trust investing in income-producing
properties principally in the Greater Washington-Baltimore region. The Trust
owns a diversified portfolio of 38 properties consisting of 13 office buildings,
11 shopping centers, five high-rise apartment buildings and nine industrial
distribution properties.
WRIT's principal objective is to increase operating income by investing in
high quality real estate with strong growth potential in prime locations and
aggressively managing these properties with active leasing and capital
improvement programs.
The percentage leased at March 31, 1995 for the Trust's properties was 91%
for office buildings, 94% for shopping centers, 96% for apartment buildings and
95% for industrial distribution properties.
Total debt (all medium-term) on June 30, 1995 was $43,000,000, which
represented approximately 10% of the market capitalization of the Trust.
WRIT's income from operations and funds from operations have increased for
29 consecutive years. WRIT concentrates on increasing its funds from operations
to achieve its objective of paying increasing dividends to its shareholders.
Consecutive quarterly dividends have been paid for 33 years and the annual
dividend paid has increased every year since 1970. The most recent dividend
increase was to $.25 per Share payable June 30, 1995 to shareholders of record
on June 16, 1995, representing an indicated current annual rate of $1.00. Since
1980, combined Share splits have totaled 10-for-1.
The principal offices of the Trust are located at 10400 Connecticut Avenue,
Kensington, Maryland 20895, telephone (301) 929-5900/(800) 565-9748.
THE OFFERING
<TABLE>
<S> <C>
Shares Offered............................... 3,500,000
Shares to be Outstanding after the
Offering................................... 31,742,544
Use of Proceeds.............................. To repay certain indebtedness outstanding
under lines of credit, to acquire the
Frederick County Square Shopping Center and
to acquire and/or renovate, expand or
improve income producing properties. See
"Use of Proceeds".
American Stock Exchange Symbol............... WRE
</TABLE>
3
<PAGE> 5
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------ --------------------
1990 1991 1992 1993 1994 1994 1995
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA
Real estate rental revenue... $ 30,233 $ 33,311 $ 34,132 $ 39,375 $ 45,511 $ 11,312 $ 12,464
Income before gain on sale of
real estate................ 16,122 18,386 20,429 22,506 23,122 5,805 6,159
Gain on sale of real
estate..................... 0 0 0 741 0 0 0
Net income................... 16,122 18,386 20,429 23,247 23,122 5,805 6,159
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------------------------------ --------------------
1990 1991 1992 1993 1994 1994 1995
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Real estate (at cost)........ $113,317 $117,576 $155,765 $170,461 $206,378 $172,711 $225,585
Total assets................. 106,955 135,741 185,673 162,011 178,806 162,418 195,034
Mortgages payable............ 12,379 11,329 1,115 0 0 0 0
Lines of credit payable/
Short-term bank loan....... 0 0 21,000 0 18,000 0 34,000
Shareholders' equity......... 90,621 119,944 159,027 157,348 154,659 156,801 154,040
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------ --------------------
1990 1991 1992 1993 1994 1994 1995
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA
Funds from operations (1).... $ 19,187 $ 21,675 $ 23,817 $ 26,122 $ 27,055 $ 6,727 $ 7,234
Dividends paid............... 17,031 19,672 22,513 24,380 25,981 6,495 6,778
Dividends paid per share
(2)........................ 0.73 0.79 0.84 0.89 0.92 0.23 0.24
</TABLE>
- ---------------
(1) Funds from Operations ("FFO"), as defined by the National Association of
Real Estate Investment Trusts ("NAREIT"), is net income adjusted for
depreciation and amortization and gains or losses from property sales. FFO
does not represent cash flows from operations as defined by generally
accepted accounting principles, should be considered along with, but not as
an alternative to, net income as an indicator of the Company's operating
performance and is not indicative of cash available to fund all cash flow
needs. In March 1995, NAREIT issued a clarification of its definition of
FFO. The clarification provides that amortization of deferred financing
costs and depreciation of non-real estate assets are no longer to be added
back to net income in arriving at FFO and that extraordinary, nonrecurring
items should be adjusted out of net income. The amounts reflected in this
Prospectus have been adjusted to incorporate that clarification.
(2) Adjusted to give effect to the 3-for-2 share split in May 1992.
4
<PAGE> 6
THE TRUST
GENERAL OPERATING PRACTICES
The Trust generally observes the following operating practices:
Selection of Real Estate Investments: The Trust purchases properties
principally in the Greater Washington-Baltimore region where its senior
management is located and knows, on a firsthand basis, the market and the
economic factors which affect it. In order to avoid the greater risks of
speculative development, the Trust generally buys existing income producing
properties.
Property Type Diversification: The Trust seeks to invest in properties
with different supply-demand cycles and growth periods and therefore seeks to
maintain a balanced and diversified portfolio of office buildings, shopping
centers, apartment buildings and industrial distribution properties. The
percentage contribution to the Trust's total real estate rental revenue by
property group for the first quarter of 1995 was as follows:
<TABLE>
<S> <C>
Office Buildings...................................................... 42%
Shopping Centers...................................................... 25%
Apartment Buildings................................................... 23%
Industrial Distribution Properties.................................... 10%
---
100%
</TABLE>
Tenant Diversification: The Trust also seeks to maintain a diversified
tenant base in its commercial properties in order to minimize the influence of
any one tenant on the Trust's revenues. As of May 31, 1995, WRIT's commercial
tenant base was diversified among approximately 900 tenants, with the average
tenant occupying less than 3,600 square feet and no single lease accounting for
more than 2.1% of the Trust's annual revenues. As of the same date, annual rents
attributable to all Federal Government tenants totaled approximately 5.0% of the
Trust's annual revenues.
Capitalization and Finance Strategy: Until recently, the Trust maintained
substantial cash reserves from the proceeds of Share offerings in lieu of
utilizing debt for acquisitions and capital improvements. As a result of changed
market conditions, the Trust now has commitments for bank lines of credit with
medium-term rather than short-term features. For the foreseeable future, the
Trust intends to utilize these credit facilities to fund acquisitions and major
capital improvements. The Trust intends to retire these debt obligations from
future Share offerings. The Trust's management believes this method of funding
for future investment provides greater flexibility for timing of public Share
offerings, reduces exposure to yield maintenance costs and avoids lock out from
prepayment features found in long-term debt agreements.
In determining its borrowing policy, the Trust also considers its debt
service coverage ratio (funds from operations plus debt service divided by the
debt service). A ratio of 3:1 is generally considered conservative and the Trust
intends to maintain its debt service coverage ratio in excess of this. Capital
market conditions may from time to time influence management to reconsider this
policy if it deems that a change is in the best interest of the Trust.
The Trust currently has unsecured bank lines of credit and commitments
totaling $75,000,000. These commitments permit the Trust to extend the term of
the loans outstanding for up to a period of 5 years at the Trust's option. At
June 30, 1995, $43,000,000 was outstanding on these lines at a weighted average
interest rate of 6.8%.
100% Ownership: The Trust currently owns 100% of the equity of all of its
properties and has no partners, participating mortgages or other equity or
income sharing arrangements.
Although management of the Trust anticipates that it will generally
continue to follow the foregoing practices, management is not bound to do so and
may change particular practices in light of future economic conditions and other
relevant factors.
5
<PAGE> 7
RECENT DEVELOPMENTS
Management Transition
In March of 1995, Arthur A. Birney, a co-founder and Trustee of the Trust,
became Chairman of the Board of Trustees and Edmund B. Cronin, Jr., President,
Chief Operating Officer and Trustee, became Chief Executive Officer, succeeding
B. Franklin Kahn, who had served as Chairman and Chief Executive Officer until
his retirement.
The Trust has also increased its senior management strength and depth with
the addition of Larry E. Finger, Senior Vice President and Chief Financial
Officer, in December 1993, Thomas L. Regnell, Vice President -- Acquisitions, in
January 1995 and Mary Beth Avedesian, Vice President -- Investments, in March
1995. See "Management".
Property Acquisitions
On June 30, 1995, the Trust entered into a contract to purchase the
Frederick County Square Shopping Center in the City of Frederick, Maryland for
$13,350,000. The 233,000 rentable square foot center is 100% leased to 23
tenants, including KMart, MJ Designs, F & M Drugs, Jo-Ann Fabrics, Burger King
and Sizzler. As part of the purchase price, the Trust expects to assume an
existing mortgage in the approximate amount of $7,755,000, bearing interest at
9% and maturing on January 1, 2003. The Trust anticipates that this property
will produce a first full year return on investment (funds from operations
divided by total investment) in excess of 10%. Closing on the property is
expected to occur on or before July 31, 1995. No assurance can be given,
however, that the proposed acquisition will be consummated.
During the past 12 months, the Trust acquired the following properties:
- Tycon Plaza II and III office buildings containing approximately 293,000
rentable square feet, in Tysons Corner, Virginia
- The Shoppes of Foxchase, a 128,000 rentable square foot shopping center,
in Alexandria, Virginia
- 6110 Executive Boulevard, a 198,000 rentable square foot office building,
in Rockville, Maryland
- Tech 100 Industrial Park, a 167,000 square foot industrial distribution
complex in Howard County, Maryland, three miles from Baltimore-Washington
International Airport.
The aggregate purchase price of these properties totaled approximately
$53,000,000, and the Trust anticipates that these properties (including capital
improvements) will produce an average first full year return on investment
(funds from operations divided by total investment) of 11.3%. See "Description
of Real Estate Investments".
Property Repositionings
In late 1994 and continuing into 1995, the Trust has repositioned the
following properties, through capital improvements, to enable them to compete at
higher rental levels in their markets:
- Chevy Chase Metro Plaza -- The Trust is adding 10,000 square feet of
rentable area within a previously occupied two-story theater along with
other building improvements. Resulting rental increases are expected to
increase this property's anticipated annual operating income by 55%.
- 1901 Pennsylvania Avenue, N.W., Washington, D.C. -- Major renovations,
expected to be completed in the third quarter of 1995, to the main lobby,
building hallways, common areas and restrooms, and modernizing of the
elevator equipment, elevator cabs and building mechanical systems are
expected to enable this building to compete successfully in the downtown
Washington, D.C. market.
Renovations, expansions and tenant improvements, including those listed
above, are currently underway or are anticipated at several of the Trust's
properties, the estimated aggregate cost of which is approximately $11,300,000
for 1995.
6
<PAGE> 8
See "Description of Real Estate Investments" below for further information
regarding the improvements made to certain properties.
GREATER WASHINGTON-BALTIMORE REAL ESTATE MARKET
The Greater Washington-Baltimore regional real estate market continues to
be one of the strongest in the United States. All sectors of the region's
commercial and multi-family real estate market are experiencing relatively high
occupancy levels. Rents have stabilized, concessions have substantially receded,
and little speculative development is taking place in the region. Though credit
for real estate acquisitions and development is more available now than in
recent years, the providers of credit continue to be very selective. This
situation reduces competition for acquisitions.
The CMSA (Consolidated Metropolitan Statistical Area) region which includes
metropolitan Washington-Baltimore is the fourth largest region in the United
States with a population in excess of 6.9 million. Additionally, the region is
ranked number one nationally in both median household income and population with
higher education at the undergraduate and post graduate level based on Bureau of
Census statistical data. The Greater Washington-Baltimore regional economy is
principally service industry oriented and, particularly in the case of the
Greater Washington area, is driven by the presence of the Federal Government.
There has been, and management expects there will continue to be, a shrinking in
the size of the Federal Government as evidenced by, among other things, a
decrease in direct Federal Government employment. However, to date, this
decrease has been more than offset by an increase in employment in the private
business sectors of the Greater Washington economy. While the Federal Government
workforce reductions to date have not resulted in any major negative impact on
the business of the Trust, no assurance can be given as to the effect on the
Trust of further cutbacks in Federal spending or employment.
The strength of the Greater Washington-Baltimore region is evidenced by the
research of such groups as the Metropolitan Council of Governments and The
Greater Washington Research Center, which demonstrates that as a result of the
increased outsourcing of government goods and services requirements the region
is experiencing positive growth, though at a slower rate than during 1980-1989.
As the chart below demonstrates, during 1994 regional Federal Government
employment declined by approximately 11,000 while private sector employment
increased by approximately 56,000.
WAGE AND SALARY EMPLOYMENT
WASHINGTON PMSA*
JANUARY 1994 AND 1995
(EMPLOYMENT IN THOUSANDS)
<TABLE>
<CAPTION>
AT AT
SECTOR 1/94 1/95 CHANGE
-------------------------------------------------- ------- ------- ------
<S> <C> <C> <C>
Private........................................... 1,684.8 1,740.5 55.7
Federal Government................................ 381.2 370.3 -10.9
</TABLE>
-------------------------------
* Primary Metropolitan Statistical Area (PMSA) employment data
reflect official re-benchmarked totals for 1994 and
preliminary 1995 estimates.
The Trust has historically focused its leasing efforts toward the private
sector smaller space user. Only 5% of the Trust's anticipated 1995 gross revenue
is generated from space leased to the Federal Government. Management believes
that the combination of a strong capital structure, access to capital, strong
organizational capabilities and firsthand knowledge of regional economic and
real estate trends uniquely positions the Trust to take advantage of attractive
acquisition opportunities. In particular, the Trust's property type
diversification, property management and enhancement and leasing capabilities
enable it to be very flexible in property selection with the goal of increasing
property operating income over the near term and property values over the long
term.
7
<PAGE> 9
USE OF PROCEEDS
The net proceeds to be received by the Trust from the issuance and sale of
the Shares offered hereby (the "Offering") are estimated at $
($ if the Underwriters' over-allotment option is exercised in
full). Approximately $18,000,000 of the net proceeds will be used to repay
certain borrowings outstanding under the Trust's lines of credit. Those
borrowings were used to acquire the Tycon Plaza and Foxchase properties and
currently bear interest at a rate of 6.94% and are due and payable on August 25,
1995 (subject to extension until August 25, 1998 at the Trust's option). An
additional $5,700,000 of the net proceeds will be used in connection with the
acquisition of the Frederick County Square Shopping Center. See "The
Trust -- Recent Developments -- Property Acquisitions". The balance of the net
proceeds may be used to acquire and/or renovate, expand or improve
income-producing properties or to repay other indebtedness drawn under the lines
of credit. It is expected that properties purchased in the future will be of the
same general character as those presently held by the Trust.
Pending the uses described above, the net proceeds may be invested in
certificates of deposit, highly rated commercial paper or other similar
interest-bearing government or rated corporate securities.
CAPITALIZATION
The following table sets forth the capitalization of the Trust as of March
31, 1995, and as adjusted to give effect to an increase of approximately
$9,000,000 in amounts outstanding under the lines of credit since March 31, 1995
and the issuance and sale of the Shares offered hereby and the anticipated use
of $18,000,000 of the net proceeds to repay indebtedness outstanding under the
lines of credit.
<TABLE>
<CAPTION>
MARCH 31, 1995
---------------------
AS
ACTUAL ADJUSTED
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Lines of credit payable:............................................ $ 34,000 $25,000
-------- -------
Shareholders' equity:
Shares of beneficial interest; without par value; unlimited
authorization: 28,242,544 issued and outstanding, and
31,742,544, as adjusted........................................ 138,722
Undistributed gains on real estate dispositions................... 15,319 15,319
-------- -------
Total shareholders' equity................................... 154,041
-------- -------
Total capitalization......................................... $188,041 $
======== =======
</TABLE>
8
<PAGE> 10
DIVIDENDS
The Trust's policy is to pay quarterly dividends aggregating annually at
least 95% of its ordinary taxable income. Decisions by the Trustees as to
distributions of capital gains are made on a case by case basis. The Trust's
policy complies with the current distribution provisions of federal income tax
laws applicable to real estate investment trusts and, assuming compliance with
other requirements, income so distributed is not taxable to the Trust under such
laws. The declaration of dividends is discretionary with the Trustees and
depends upon the Trust's distributable funds, financial requirements, tax
considerations and other factors. It is the present intention of the Trustees to
consider the payment of cash dividends each quarter, but no assurance can be
given that past dividend practices will be followed in the future.
The tax status of 1994 dividends were reported as:
<TABLE>
<CAPTION>
RETURN
ORDINARY CAPITAL OF
INCOME GAINS CAPITAL TOTAL
-------- ------- ------- -----
<S> <C> <C> <C>
90.5% -- 9.5% 100%
</TABLE>
DIVIDEND REINVESTMENT PLAN
The Trust has a Dividend Reinvestment Plan (the "Plan") which allows
shareholders to acquire additional Shares by automatically reinvesting all or
part of their cash dividends. Shares are acquired pursuant to the Plan at a
price equal to the prevailing market price of such Shares, without payment of
any brokerage commission or service charge by the participant. The Plan also
allows participating shareholders to purchase Shares pursuant to the same terms
and in the same manner as cash dividends are invested in amounts of not less
than $100 nor more than $25,000 per calendar year, without payment of any
brokerage commission or service charge by the participant. Shareholders who do
not participate in the Plan continue to receive cash dividends, as declared.
9
<PAGE> 11
On Page 10 of the Prospectus there appears a map of the Greater
Washington, D.C. Metropolitan area indicating the location of the Trust's 38
properties and indicates whether each property is a shopping center, an office
building, industrial distribution property or an apartment building. There is
also a list of properties conforming to the list appearing on the following
pages of the Prospectus.
10
<PAGE> 12
INVESTMENTS OF THE TRUST
The following table describes the Trust's real estate investment portfolio.
All dollar amounts are in thousands and all information is as of March 31, 1995,
except for Tech 100 Industrial Park for which information is as of May 17, 1995,
the date of acquisition. Net square footage does not include garage or surface
parking. The percent leased is the percentage of net rentable space leased
including signed leases for space not yet occupied by the tenants.
<TABLE>
<CAPTION>
CAPITAL
REAL ESTATE INVESTMENTS NET IMPROVEMENTS
(CORRESPONDING NUMBER YEAR SQUARE PERCENT ACQUISITION SINCE TOTAL
ON PAGE 10 MAP) ACQUIRED FEET LEASED COST ACQUISITION INVESTMENT
- -------------------------------------- --------- --------- -------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
SHOPPING CENTERS
Takoma Park (1)....................... 1963 58,811 100% $ 1,500,000 $ 1,000 $ 1,501,000
Prince William Plaza (2).............. 1968 53,999 87 992,000 385,000 1,377,000
Westminster (3)....................... 1972 171,531 89 2,442,000 1,675,000 4,117,000
Dover Mart (4)........................ 1973 44,044 100 707,000 664,000 1,371,000
Concord Centre (5).................... 1973 76,383 91 1,263,000 2,605,000 3,868,000
Clairmont (6)......................... 1976 40,455 100 1,046,000 634,000 1,680,000
Wheaton Park (7)...................... 1977 46,716 100 1,480,000 690,000 2,170,000
Bradlee (8)........................... 1984 167,974 100 9,580,000 3,402,000 12,982,000
Chevy Chase Metro Plaza (9)........... 1985 49,893 93 5,854,000 2,344,000 8,198,000
Montgomery Village (10)............... 1992 196,464 93 20,730,000 458,000 21,188,000
Shoppes of Foxchase (11).............. 1994 127,564 94 8,818,000 261,000 9,079,000
--------- --- ------------ ----------- ------------
Sub-Total......................... 1,033,834 94% $ 54,412,000 $13,119,000 $ 67,531,000
--------- --- ------------ ----------- ------------
OFFICE BUILDINGS
1901 Pennsylvania Ave. (12)........... 1977 96,506 51%(a) $ 4,373,000 $ 3,243,000 $ 7,616,000
WRIT Building (13).................... 1979 65,885 96 1,912,000 2,900,000 4,812,000
One Metro Square (14)................. 1979 208,243 90 11,709,000 5,222,000 16,931,000
444 N. Frederick Ave. (15)............ 1989 65,809 90 4,630,000 1,196,000 5,826,000
7700 Leesburg Pike (16)............... 1990 122,222 95 7,670,000 2,107,000 9,777,000
Arlington Financial (17).............. 1992 51,655 100 6,293,000 136,000 6,429,000
515 King Street (18).................. 1992 78,073 98 8,034,000 605,000 8,639,000
Saratoga Office Bldg. (19)............ 1993 59,013 80 3,018,000 366,000 3,384,000
Lexington Office Bldg. (20)........... 1993 47,751 100 2,442,000 133,000 2,575,000
Brandywine Center (21)................ 1993 34,982 100 1,454,000 104,000 1,558,000
Tycon Plaza II (22)................... 1994 141,043 97 10,505,000 356,000 10,861,000
Tycon Plaza III (23).................. 1994 151,670 99 11,049,000 428,000 11,477,000
6110 Executive Boulevard (24)......... 1995 198,252 93 16,409,000 24,000 16,433,000
--------- --- ------------ ----------- ------------
Sub-Total......................... 1,321,104 91% $ 89,498,000 $16,820,000 $106,318,000
--------- --- ------------ ----------- ------------
APARTMENT BUILDINGS/UNITS
3801 Connecticut Avenue /307 (29)..... 1963 242,000 97% $ 3,098,000 $ 3,413,000 $ 6,511,000
Roosevelt Towers/191 (25)............. 1965 229,000 95 2,332,000 1,531,000 3,863,000
Park Adams/200 (26)................... 1969 210,000 99 1,940,000 2,308,000 4,248,000
Country Club Towers/227 (28).......... 1969 276,000 92 2,861,000 2,251,000 5,112,000
Munson Hill Towers/279 (27)(b)........ 1970 340,000 98 3,337,000 3,492,000 6,829,000
--------- --- ------------ ----------- ------------
Sub-Total (1,200 units)........... 1,297,000 96% $ 13,568,000 $12,995,000 $ 26,563,000
--------- --- ------------ ----------- ------------
INDUSTRIAL DISTRIBUTION PROPERTIES
Shirley I-395 (30).................... 1961 112,585 100% $ 1,917,000 $ 948,000 $ 2,865,000
Dept. of Commerce (31)................ 1971 105,000 100 1,356,000 1,261,000 2,617,000
V Street (33)......................... 1973 30,753 25 443,000 143,000 586,000
Capital Freeway (34).................. 1974 145,000 100 1,505,000 2,613,000 4,118,000
Fullerton (35)........................ 1985 103,339 95 4,267,000 606,000 4,873,000
Ravensworth Center (32)............... 1986 29,000 100 1,451,000 336,000 1,787,000
Pepsi-Cola (36)....................... 1987 68,750 100 2,552,000 1,514,000 4,066,000
Charleston (37)....................... 1993 85,267 92 4,136,000 126,000 4,262,000
Tech 100 (38)......................... 1995 167,267 96 6,832,000 N/A 6,832,000
--------- --- ------------ ----------- ------------
Sub-Total......................... 846,961 95% $ 24,459,000 $ 7,547,000 $ 32,006,000
--------- --- ------------ ----------- ------------
TOTAL................................. 4,498,899 94% $181,937,000 $50,481,000 $232,418,000
========= === ============ =========== ============
</TABLE>
- ---------------
(a) 1901 Pennsylvania Avenue is undergoing significant renovations; see "Recent
Developments" and "Description of Real Estate Investments".
(b) The site of Munson Hill Towers apartments is rented under a ground lease
requiring annual payments of $22,590 until the expiration of the lease in
2060.
11
<PAGE> 13
DESCRIPTION OF REAL ESTATE INVESTMENTS
The Trust's portfolio of 38 properties consists of 13 office buildings with
approximately 1,321,000 rentable square feet, 11 shopping centers with
approximately 1,034,000 rentable square feet, five high-rise apartment buildings
with approximately 1,200 units and nine industrial distribution properties with
approximately 847,000 square feet. In the opinion of management, the Trust's
properties are adequately protected by "all risk" insurance coverage, have been
well maintained and are in good condition.
The following are descriptions of WRIT's most significant properties in
each property group, in terms of total investment.
OFFICE BUILDING GROUP:
Tycon Plaza II and III
8229-8245 Boone Boulevard
Tysons Corner, Virginia
In June 1994, the Trust purchased these two 8-story office buildings
containing a total of 293,000 rentable square feet plus on-site parking for 895
cars. At the time of purchase, the property was 71% leased and at March 31,
1995, was 98% leased. Over the past year, extensive improvements totaling
approximately $784,000 have been made in order to reposition the property in its
market.
One Metro Square
51 Monroe Street
Rockville, Maryland
One Metro Square, purchased in 1979, is a 22-story office building
containing 208,000 rentable square feet of office and retail space. The property
includes an indoor garage with 360 parking spaces. The building is connected by
elevated pedestrian bridges to the Montgomery County Office Building-Courthouse
complex and to a Washington Metro (subway) station. Portions of the roof are
leased for communications antennae, creating additional current annual income of
approximately $270,000.
6110 Executive Boulevard
Rockville, Maryland
In January 1995, the Trust purchased this 10-story office building
containing 198,000 rentable square feet. This property includes a detached
3-story parking deck and on-site parking area for 565 cars. At the time of
purchase, the property was 91% leased. At March 31, 1995, the property was 93%
leased, and new leases are being signed at rents of $17.50 per square foot,
which is above the building average of $15.86.
7700 Leesburg Pike
Falls Church, Virginia
In October 1990, WRIT purchased 7700 Leesburg Pike, a circular four-story
office building and parking deck with an interior wooded atrium and office tower
in the center. The property contains a total of 122,000 rentable square feet,
and is located just inside the Capital Beltway (I-495) near Tysons Corner,
Virginia. There are approximately 465 decked and open parking spaces. The
building won an American Institute of Architecture award and is set in a wooded
campus environment on seven acres of land. The existing building was 95% leased
at March 31, 1995, and there is strong leasing interest from prospective tenants
for additional space. Plans and specifications are now complete for the addition
of 20,000 square feet of office space to the top deck of the parking structure.
Completion of the construction of the addition is expected in the fourth quarter
of 1995.
12
<PAGE> 14
1901 Pennsylvania Avenue, N.W.
Washington, D.C.
1901 Pennsylvania Avenue is an 11-story office building with 97,000
rentable square feet located three blocks west of the White House and two blocks
from a Washington Metro station. As the result of three lease expirations in
late 1994 and early 1995, this property was 51% leased at March 31, 1995. Though
this occupancy level is not acceptable, it provides the Trust with an
opportunity to make major capital improvements to this 35-year old building. The
Trust has remodeled the lobby, replaced the roof and is in the process of
modernizing the hallways, elevators, mechanical systems and restrooms. The
Pennsylvania Avenue location and the desire of the Trust to lease to small space
users, along with the upgraded building features, are expected to reposition
this property in its market.
SHOPPING CENTER GROUP:
Montgomery Village Center
Montgomery Village Avenue
Gaithersburg, Maryland
In December 1992, the Trust purchased Montgomery Village Center, a Giant
Food supermarket anchored shopping center, containing 169,000 square feet of
retail space, 28,000 square feet of townhouse-type office space and on-site
parking for 791 cars. At March 31, 1995, this property was 93% leased. This
property is located in the Montgomery Village Planned Unit Development
("P.U.D."), and its value is substantially enhanced by the controlled nature of
the zoning restrictions in the P.U.D. and in the Gaithersburg, Maryland area in
general with its existing restrictions on commercial growth and lack of
available building sites.
Bradlee Shopping Center
3600 King Street
Alexandria, Virginia
The Bradlee Shopping Center contains 168,000 square feet of rentable area,
and existing tenants include Giant Food, G.C. Murphy, Rite-Aid and 43 other
tenants. As the Trust has expanded and improved the shopping center and its
tenancy, annual rents have increased from $1,124,000 in 1985, the first full
year of the property's operations under WRIT, to $3,614,000 in 1995. Located in
a densely populated area with few vacant building sites, this property was 100%
leased at March 31, 1995.
The Shoppes of Foxchase
4600 Duke Street
Alexandria, Virginia
In 1994, the Trust purchased the Shoppes of Foxchase containing 128,000
rentable square feet, plus on-site parking for 583 cars. The center is anchored
by Rite-Aid and Magruder's stores and was 94% leased at March 31, 1995. The
timing of various lease expirations affords the Trust opportunities to enhance
the property's gross revenues over the near term. In the meantime, the property
is earning a 12% return on investment (funds from operations divided by total
investment).
Chevy Chase Metro Plaza
5252 Wisconsin Avenue, N.W.
Washington, D.C.
The Trust has recently repositioned this property. Beginning in the fourth
quarter of 1994, with completion expected in the third quarter of 1995, the
property is being increased in size by the addition of 10,000 square feet
through the termination of a movie theater lease, installation of two floors in
the theater area and the renovation of other vacant space in the building. The
property now contains 49,000 square feet of retail space. All of the new
addition and renovation area, totaling 31,500 square feet, has been leased to
T.J. Maxx. Riggs National Bank and two restaurants occupy the balance of the
leased space. There is strong tenant interest in leasing the remaining 10,000
square feet in the property. Interior parking is provided in the
13
<PAGE> 15
attached three deck parking garage containing 133 parking spaces. This property
was formerly known as Jenifer One Shopping Center and is located in the Chevy
Chase area of the District of Columbia, adjacent to a Metro entrance. Nearby
shopping anchored by Lord & Taylor, Saks Fifth Avenue and Neiman-Marcus provides
substantial retail traffic.
APARTMENT BUILDING GROUP:
Munson Hill Towers
6129 Leesburg Pike
Falls Church, Virginia
Munson Hill Towers is a luxury, architecture award-winning, 12-story
apartment building that contains 279 apartments and is located approximately
eight miles from downtown Washington, D.C. The 12 1/2 acre property upon which
the building is situated includes a swimming pool, tennis court and other
recreational facilities. In addition, there are 450 on-site parking spaces. This
property was 98% leased at March 31, 1995.
3801 Connecticut Avenue, N.W.
Washington, D.C.
3801 Connecticut Avenue is a nine-story apartment building containing 307
apartment units and 3,150 square feet of office space. The building has 92
indoor parking spaces. The apartments are subject to District of Columbia rent
control laws, which allow landlords to make rent increases tied to the rate of
inflation (subject to an annual maximum of 10%) and also allow additional rent
increases as units are re-rented to new tenants. This property was 97% leased at
March 31, 1995.
INDUSTRIAL DISTRIBUTION PROPERTY GROUP:
Tech 100 Industrial Park
N/E/C Route #100 and Route #1
Howard County, Maryland
In May 1995, the Trust purchased the Tech 100 Industrial Park, a 3-building
industrial distribution complex containing 167,000 square feet plus on-site
parking for 331 cars. Tech 100 is located 25 miles northeast of Washington, D.C.
and 7 miles southwest of Baltimore, Maryland, in the Route 100 Industrial Park
which contains 2.5 million square feet of industrial distribution space within 3
miles of Baltimore-Washington International Airport. Route 100 is a major
arterial road connecting Interstate 95 with Interstate 97 and Route 301. At the
time of acquisition, the property was 96% leased. With leases beginning to
mature, the Trust expects to renew tenant leases at current market rental rates,
which it believes are above existing rates on maturing leases.
Fullerton Business Center
7401 Fullerton Road
Springfield, Virginia
Fullerton Business Center is located in the 2,000,000 square foot Fullerton
Industrial Park. This multi-tenanted property contains 103,000 square feet plus
on-site parking for 247 cars. At March 31, 1995, the property was 95% leased.
14
<PAGE> 16
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth selected financial data for the Trust and
should be read in conjunction with the Financial Statements and Notes
incorporated herein by reference.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------------- ---------------------
1990 1991 1992 1993 1994 1994 1995
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA
Real estate rental revenue.... $ 30,233 $ 33,311 $ 34,132 $ 39,375 $ 45,511 $ 11,312 $ 12,464
Real estate expenses.......... (9,557) (10,089) (10,330) (11,830) (14,031) (3,280) (3,897)
-------- -------- -------- -------- -------- -------- --------
20,676 23,222 23,802 27,545 31,480 8,032 8,567
Depreciation.................. (3,065) (3,289) (3,388) (3,616) (3,933) (922) (1,075)
-------- -------- -------- -------- -------- -------- --------
Income from real estate....... 17,611 19,933 20,414 23,929 27,547 7,110 7,492
Other income (expense)........ 2,213 2,326 3,311 1,496 (550) (654) 102
Interest expense.............. (1,053) (1,080) (454) (61) (614) 0 (532)
General and administrative.... (2,649) (2,793) (2,842) (2,858) (3,261) (651) (903)
-------- -------- -------- -------- -------- -------- --------
Income before gain on sale of
real estate................. 16,122 18,386 20,429 22,506 23,122 5,805 6,159
Gain on sale of real estate... 0 0 0 741 0 0 0
-------- -------- -------- -------- -------- -------- --------
Net income.................... $ 16,122 $ 18,386 $ 20,429 $ 23,247 $ 23,122 $ 5,805 $ 6,159
======== ======== ======== ======== ======== ======== ========
Income before gain on sale of
real estate per share (1)... $ 0.69 $ 0.74 $ 0.76 $ 0.80 $ 0.82 $ 0.21 $ 0.22
======== ======== ======== ======== ======== ======== ========
Net income per share (1)...... $ 0.69 $ 0.74 $ 0.76 $ 0.82 $ 0.82 $ 0.21 $ 0.22
======== ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------------------------------------------- ---------------------
1990 1991 1992 1993 1994 1994 1995
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Real estate (at cost)......... $113,317 $117,576 $155,765 $170,461 $206,378 $172,711 $225,585
Total assets.................. 106,955 135,741 185,673 162,011 178,806 162,418 195,034
Mortgages payable............. 12,379 11,329 1,115 0 0 0 0
Lines of credit payable/
Short-term bank loan........ 0 0 21,000 0 18,000 0 34,000
Shareholders' equity.......... 90,621 119,944 159,027 157,348 154,659 156,801 154,040
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------------- ---------------------
1990 1991 1992 1993 1994 1994 1995
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA
Funds from operations (2)..... $ 19,187 $ 21,675 $ 23,817 $ 26,122 $ 27,055 $ 6,727 $ 7,234
Weighted average number of
shares outstanding (1)...... 23,223 24,708 26,910 28,223 28,239 28,233 28,243
Dividends paid................ $ 17,031 $ 19,672 $ 22,513 $ 24,380 $ 25,981 $ 6,495 $ 6,778
Dividends paid per share
(1)......................... $ 0.73 $ 0.79 $ 0.84 $ 0.89 $ 0.92 $ 0.23 $ 0.24
</TABLE>
- ---------------
(1) Adjusted to give effect to the 3-for-2 share split in May 1992.
(2) Funds from Operations ("FFO"), as defined by the National Association of
Real Estate Investment Trusts ("NAREIT"), is net income adjusted for
depreciation and amortization and gains or losses from property sales. FFO
does not represent cash flows from operations as defined by generally
accepted accounting principles, should be considered along with, but not as
an alternative to, net income as an indicator of the Company's operating
performance and is not indicative of cash available to fund all cash flow
needs. In March 1995, NAREIT issued a clarification of its definition of
FFO. The clarification provides that amortization of deferred financing
costs and depreciation of non-real estate assets are no longer to be added
back to net income in arriving at FFO and that extraordinary, nonrecurring
items should be adjusted out of net income. The amounts reflected in this
Prospectus have been adjusted to incorporate that clarification.
15
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
WRIT's fundamental emphasis is on the growth of cash flow from operating
activities. Dividends to shareholders are based upon these cash flows. WRIT's
capital improvements, leasing and management, and acquisitions of additional
properties are the major contributors to sustained growth of cash flows.
Occupancy rates have a major impact on rental revenue. Other factors such
as new or renewal leases at market rates, Consumer Price Index based annual
rental rate increases, increases in rentable area, timing of new property
acquisitions and certain other capital expenditures also influence rental
revenue.
Three Months Ended March 31, 1995 and 1994:
Income from real estate in the first quarter of 1995 of $7,492,497
increased 5% compared with $7,110,032 for the first quarter of 1994. This
increase is primarily attributable to the Tycon Plaza II and III office
buildings acquired June 1, 1994, the Shoppes of Foxchase acquired June 30, 1994
and the 6110 Executive Boulevard office building acquired January 26, 1995. Net
income for the three months ended March 31, 1995 in the amount of $6,159,411 or
$.22 per share increased 6% from $5,805,007 or $.21 per share from the
comparable quarter of 1994.
The average occupancy of 95% for the year 1994 decreased to 93% for the
first quarter of 1995. This decrease is due primarily to vacancies at one of
WRIT's office buildings, 1901 Pennsylvania Avenue and one shopping center, Chevy
Chase Metro Plaza. In late 1994, WRIT commenced a major capital improvement
program at 1901 Pennsylvania Avenue in order to promote the expeditious lease-up
of this property. On March 23, 1995, T.J. Maxx, a national retailer, took
possession of 31,500 square feet of space at Chevy Chase Metro Plaza. This
increased the occupancy level from 39% on March 22, 1995 to 90% on the date of
possession. The term of this lease is ten years.
Real estate operating expenses as a percentage of revenue were 31% for the
three months ended March 31, 1995 as compared to 29% for the comparable period
of 1994. This increase is attributable to the decline in occupancy levels in the
first quarter of 1995 as compared to the first quarter of 1994 and to the fact
that operating expenses as a percentage of revenues are higher for office
building properties than all other property types within the WRIT portfolio.
WRIT's percentage of office buildings within its entire real estate portfolio
has increased from 39% at March 31, 1994 to 42% as of March 31, 1995 based on
revenues. This increase is primarily attributable to the acquisitions of the
Tycon Plaza II and III office buildings in June 1994 and the 6110 Executive
Boulevard office building in January 1995.
In the first quarter of 1994, a marketable investment security was written
down to its estimated realizable value, resulting in a charge of $799,571 to
operations. This amount is included in the $654,209 of other expense in the
statement of operations at March 31, 1994.
Investment income declined for the three months ended March 31, 1995
compared to the same period of 1994 due to substantial funds previously invested
in marketable securities being utilized for property acquisitions.
Interest expense was $531,625 for the quarter ended March 31, 1995 as a
result of the $18,000,000 of outstanding advances on the line of credit obtained
in June 1994 and $16,000,000 of outstanding advances obtained in connection with
the January 26, 1995 acquisition of the 6110 Executive Boulevard office
building.
General and administrative expenses increased $252,573 or 39% for the three
months ended March 31, 1995 as compared to the same period in 1994. The majority
of this increase is the result of personnel additions since June 1994 and annual
increases in officers' salaries effective January 1, 1995. These personnel
additions include WRIT's current president and chief executive officer who
joined WRIT in June 1994 as president and chief operating officer.
16
<PAGE> 18
Twelve Months Ended December 31, 1994:
The percentage increase in real estate rental revenue from 1993 to 1994 by
property type was as follows:
<TABLE>
<S> <C>
Office Buildings...................................................... 34%
Apartment Buildings................................................... 4%
Shopping Centers...................................................... 5%
Industrial Distribution Properties.................................... 17%
</TABLE>
During 1994, WRIT's office building group achieved increases of 34% in
revenues and 36% in operating income, mostly due to the acquisitions of the
three Heritage office buildings in November 1993 and the two Tycon Plaza office
buildings in June 1994.
The Tycon office buildings were 71% leased at acquisition in June 1994, 90%
leased at December 31, 1994 and 98% leased as of March 31, 1995. The Heritage
properties were acquired in November 1993 and include three office buildings
(the Lexington, Saratoga and Brandywine), and one industrial distribution
property (the Charleston). At December 31, 1994, the Lexington and Brandywine
office buildings were 100% leased and the Saratoga 96% leased.
The income growth from office buildings owned for all of 1993 and 1994 was
due to increases in rental rates and improved occupancy levels at 7700 Leesburg
Pike. This growth was partially offset by a substantial increase in vacancy
during 1994 at the 1901 Pennsylvania Avenue property, which lost 3 major tenants
resulting in an occupancy level of 52% at year end. The Trust commenced a major
capital improvement program at 1901 Pennsylvania Avenue in 1994 in order to
promote the expeditious lease-up of this property. See "Description of Real
Estate Investments".
During 1994, WRIT's apartment building group showed increases of 4% in
revenues and 7% in operating income due to the combination of a 2% increase in
rental rates and an overall increase in occupancy to 97% in 1994 from 95% in
1993, together with an increase in operating expenses of only 1%.
During 1994, WRIT's shopping center group showed an increase of 5% in
revenues and 3% in operating income due to the acquisition of the Shoppes of
Foxchase in June 1994.
Excluding the Shoppes of Foxchase, shopping center revenue was down 1% and
operating income down 4% for 1994. Major elements of the decrease in operating
income included a 10% increase in overall operating expenses and the vacancy at
Chevy Chase Metro Plaza to accommodate renovations. See "Description of Real
Estate Investments". WRIT has leased the majority of the Chevy Chase Metro Plaza
vacancy to T.J. Maxx.
During 1994, WRIT's industrial distribution property group showed increases
of 17% in revenues and 15% in operating income due to the acquisition of the
Charleston Business Center in November 1993 and major occupancy increases at the
Fullerton and Department of Commerce Information Center properties, only
slightly offset by an occupancy decrease at the V Street property.
For 1994, excluding the Charleston Business Center, industrial distribution
property revenue was up 4% and operating income was up 3%. In 1994, rental rates
for these properties declined 1% from 1993, but overall occupancy increased to
94% in 1994 from 89% in 1993.
The average occupancy (for the entire real estate portfolio) was 95% for
1994.
Real estate operating expenses as a percentage of revenue was 31% during
1994.
In 1994, other income (expense) became an expense/charge to operations as a
result of the following:
a) A decline in interest income from 1993 to 1994 due to the use of
funds for properties acquired in 1994.
b) At March 31, 1994, a marketable investment security was written
down to its estimated realizable value, resulting in a charge of $800,000
to operations in the first quarter of 1994. This security was sold in May,
1994 for its March 31, 1994 realizable value.
17
<PAGE> 19
c) During 1994, WRIT was audited by a State Unclaimed Property
Division, resulting in an assessment to WRIT of $271,000. This amount was
charged to operations in the fourth quarter of 1994.
Interest expense was $614,000 for the year of 1994 as a result of the
$9,000,000 advance on the line of credit on June 1, 1994 for the acquisition of
Tycon Plaza II and III and an additional advance of $9,000,000 for the
acquisition of The Shoppes of Foxchase on June 30, 1994.
CAPITAL RESOURCES AND LIQUIDITY
WRIT has utilized the proceeds of Share offerings, long-term fixed interest
rate debt, lines of credit and cash flow from operations for its capital needs.
The WRIT philosophy has been to acquire income-producing real estate with strong
growth potential and to improve its real estate holdings through carefully
planned additions and improvements to control operating expenses and generate
higher rental income.
On January 26, 1995, WRIT acquired the 6110 Executive Boulevard office
building with approximately 198,000 rentable square feet of office space and a
detached three story parking deck in Rockville, Maryland, at a purchase price of
$16,380,000. Capital improvements (including tenant work) of $2,691,000 to
WRIT's various properties were completed in the first three months of 1995.
After the acquisition of 6110 Executive Boulevard in January 1995 and capital
improvements in the first quarter of 1995, the remainder of cash and marketable
investment securities was approximately $1,008,000 at March 31, 1995.
External sources of capital are available to WRIT from its existing
unsecured credit commitments and management believes that additional sources of
capital are available from selling additional Shares and/or the issuance of
debt. As of June 30, 1995, WRIT had line of credit commitments in place from
commercial banks for up to $75,000,000 of which $43,000,000 is currently
outstanding at a weighted average interest rate of 6.8% with maturities ranging
from August 25, 1995 (subject to extension until August 25, 1998 at WRIT's
option) to January 31, 1999. These lines of credit may be used to purchase
income-producing property or for capital improvements. Of these lines,
$25,000,000 are under a 4-year revolving credit agreement and $50,000,000 are
for 1 year with WRIT having the right to extend the maturity date of advances
for up to 4 years. Both lines of credit are therefore considered medium-term
rather than short-term.
Cash flow from operating activities totaled $8,300,000 for the three months
ended March 31, 1995 including net income of $6,200,000 and depreciation of
$1,100,000. Rental revenue has been the principal source of funds to pay the
Trust's operating expenses, interest expense and dividends to shareholders. The
Trust paid a dividend of $6,800,000 during the first quarter.
Net cash used in investing activities for the three months ended March 31,
1995 was $17,800,000, including the acquisition of 6110 Executive Boulevard for
$16,500,000 and capital improvements to the Trust's properties of $2,700,000,
less $1,400,000 provided by the maturity and or sale of marketable securities.
Financing activities provided $16,000,000 from borrowings under the Trust's
lines of credit.
Management believes that it has the liquidity and the access to capital
necessary to meet all of its known obligations and to make additional property
acquisitions when appropriate. WRIT continues to pursue acquisition
opportunities and capital improvement projects to enhance long-term growth.
18
<PAGE> 20
MANAGEMENT
The Trustees and executive officers of the Trust are:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------- --- -----------------------------------------
<S> <C> <C>
Arthur A. Birney......................... 67 Trustee and Chairman of the Board
Edmund B. Cronin, Jr. ................... 58 Trustee, President and Chief Executive
Officer
Mary Beth Avedesian...................... 35 Vice President -- Investments
William N. Cafritz....................... 69 Trustee (President, William Cafritz
Development Corp., a real estate
development company)
Benjamin H. Dorsey....................... 71 Trustee, Secretary and General Counsel
Larry E. Finger.......................... 42 Senior Vice President and Chief Financial
Officer
Laura M. Franklin........................ 34 Vice President and Chief Accounting
Officer
Sandra T. Hunt........................... 43 Vice President -- Leasing
B. Franklin Kahn......................... 70 Trustee and Chairman Emeritus (President,
Benjamin Franklin Corporation)
David M. Osnos........................... 63 Trustee (Senior partner, Arent Fox
Kintner Plotkin & Kahn (legal counsel to
the Trust); Director, VSE Corporation,
an engineering company; Director,
EastGroup Properties, a real estate
company)
Kenneth C. Reed.......................... 42 Vice President -- Property Management
Thomas L. Regnell........................ 38 Vice President -- Acquisitions
Stanley P. Snyder........................ 60 Trustee (Chairman, Snyder, Kamerow &
Associates, P.C., Certified Public
Accountants)
</TABLE>
Mr. Arthur A. Birney, a founding Trustee, is Managing Partner and Chief
Executive Officer of Washington Brick & Terra Cotta Company, a real estate
investment and holding company founded in 1892, and President of Port Annapolis
Marina, Inc.
Mr. Edmund B. Cronin, Jr. has 35 years of real estate investment,
operations and finance experience in the Washington-Baltimore metropolitan
market. From 1977 to 1993, he served as Chairman and Chief Executive Officer of
Smithy Braedon, a full service commercial real estate firm providing leasing,
sales, asset management, finance, consulting, investment advisory and
development services. From 1993 until joining WRIT in June 1994, Mr. Cronin was
Chief Executive Officer of H.G. Smithy Company, a real estate management and
investment advisory service company whose debt and equity assets under
management total approximately $1.5 billion.
Ms. Mary Beth Avedesian joined the Trust as Vice President -- Investments
in March 1995. Ms. Avedesian was an Assistant Vice President for Towle Financial
Services from 1993 to 1995, where she was responsible for acquisition due
diligence and asset management. From 1991 to 1993, Ms. Avedesian was a Marketing
Manager for AMRESCO, a subsidiary of NationsBank formed to dispose of bank-owned
property; and from 1987 to 1991 Ms. Avedesian was a Financial Analyst and
Development Coordinator with Himmel and Company on the $350 million Reston Town
Center.
Mr. Benjamin H. Dorsey, a co-founder of the Trust, has held the position of
Secretary and General Counsel since 1960.
Mr. Larry E. Finger, an attorney and CPA, joined the Trust as Vice
President and Chief Financial Officer in December 1993 and was promoted to
Senior Vice President and Chief Financial Officer in June 1995. Mr. Finger
previously served as Chief Operating Officer of Savage/Fogarty Companies, Inc.,
a real estate
19
<PAGE> 21
investment, management and development company based in Alexandria, Virginia.
Mr. Finger was employed by Savage/Fogarty for 13 years, from 1978 to 1991
serving four years in the accounting division, ultimately as Vice
President -- Finance, seven years as Senior Vice President and General Counsel
then Executive Vice President and General Counsel, and finally two years as
Chief Operating Officer. During 1992 and until he joined the Trust, Mr. Finger
created and operated a multi-restaurant delivery business in Richmond, Virginia.
Ms. Laura M. Franklin, a CPA, joined the Trust as Assistant Vice
President -- Finance in August 1993 and was promoted to Vice President and Chief
Accounting Officer in June 1995. From 1985 to 1993, Ms. Franklin was an
associate with Reznick, Fedder and Silverman, P.C., a regional public accounting
firm known nationally to the real estate industry. While at Reznick, Ms.
Franklin provided audit and tax services to clients.
Ms. Sandra T. Hunt has held the position of Vice President -- Leasing since
1984.
Mr. Kenneth C. Reed, Vice President -- Property Management, is President of
CSN Management, Inc., which manages the Trust's properties. Mr. Reed has been
with CSN Management since 1983 and has held the position of President since
1991.
Mr. Thomas L. Regnell joined the Trust as Vice President -- Acquisitions in
January 1995. Mr. Regnell previously served as an Investment Officer with
Federal Realty Investment Trust in Bethesda, Maryland. Mr. Regnell was employed
by Federal Realty from 1992 to 1995, and was responsible for Federal Realty's
real estate acquisitions in the Midwest and Southeast United States. Prior to
joining Federal Realty, Mr. Regnell was a Vice President with Spaulding & Slye
Company, a real estate development, brokerage and management company in
Bethesda, Maryland.
SHARES
The Trust is authorized to issue an unlimited number of Shares. The Shares
do not have preference, conversion, exchange, preemptive, cumulative voting or
redemption rights. Holders of Shares are entitled to one vote per Share, to
participate pro rata in distributions as may be declared by the Trustees and,
upon liquidation of the Trust, to receive their pro rata share of the assets
after payment of liabilities and expenses of the Trust. All of the Trust's
outstanding Shares are, and the Shares offered hereby will be, when issued
against full payment of the agreed purchase price, validly issued, fully paid
and, subject to the matters set forth below, non-assessable.
The Shares are not redeemable at the option of the Trust except (i) to the
extent that would be necessary to maintain the Trust's "real estate investment
trust" tax status under the Internal Revenue Code of 1986, as amended (the
"Code"), or (ii) where necessary to prevent any person or entity from owning
more than 10% of the Shares. The Trust's Declaration of Trust provides that any
merger, consolidation or liquidation of the Trust, or any sale of all or
substantially all of its assets, must be approved by a majority of the Trustees,
and that if any such transaction is with, into or to a Related Shareholder (a
person or entity beneficially owning, directly or indirectly, 5% or more of the
outstanding Shares), the transaction must be approved by a majority of the
Trustees not appointed or nominated by or acting on behalf of the Related
Shareholder or an affiliate or associate of the Related Shareholder. The
Declaration of Trust also establishes the number of Trustees at not less than
three nor more than seven and divides the Trustees into three classes to be
elected on a staggered basis. The provisions referred to in this paragraph may
be amended only by the affirmative vote of the holders of 70% or more of the
outstanding Shares. The Declaration of Trust may otherwise be amended by a vote
of the holders of a majority of the outstanding Shares. Shareholders may remove
any Trustee by the affirmative vote of the holders of two-thirds of the
outstanding Shares at a meeting called for such purpose.
The Declaration of Trust provides that no shareholder shall be personally
liable in connection with the Trust's property or the affairs of the Trust. The
Declaration of Trust further provides that the Trust shall indemnify and hold
harmless shareholders against all claims and liabilities and related reasonable
expenses to which they become subject by reason of their being or having been
shareholders. In addition, the Trust as a matter of practice inserts a clause in
its business, management and other contracts which provides that shareholders
shall not be personally liable thereunder. Benjamin H. Dorsey, Esquire, General
Counsel for the
20
<PAGE> 22
Trust, is of the opinion that under the laws of the District of Columbia and
most other jurisdictions, no personal liability will attach to the Trust's
shareholders for contract claims under any contract containing such a clause
where adequate notice is given. However, in respect to tort claims and contract
claims where shareholder liability is not so negated, claims for taxes and
certain statutory liabilities, the shareholders may, in some jurisdictions, be
personally liable to the extent that such claims are not satisfied by the Trust.
The Trust carries public liability insurance which the Trustees consider
adequate. Thus, any risk of personal liability to shareholders is limited to
situations in which the Trust's assets, plus its insurance coverage, would be
insufficient to satisfy the claims against the Trust and its shareholders or the
Trust's assets were insufficient to satisfy such claims and the Trust's
insurance did not cover them.
Outstanding Shares are listed on the American Stock Exchange and
application has been made to list the additional Shares that are being offered
hereby by the Trust. American Stock Transfer & Trust Company, New York, New York
is the transfer agent for the Trust's Shares.
TAXATION
The Trust has elected to be taxed as a real estate investment trust under
the Code. Real estate investment trusts which meet certain qualifications are
relieved of federal income taxes on ordinary income and capital gains
distributed to shareholders. In the opinion of Arent Fox Kintner Plotkin & Kahn,
legal counsel for WRIT, the Trust has qualified as a real estate investment
trust for the years 1978-1994 and its present and contemplated method of
operation will put it in a position to continue to so qualify. David M. Osnos, a
Trustee, is a partner of such firm.
21
<PAGE> 23
UNDERWRITING
Subject to the terms and conditions set forth in a Purchase Agreement (the
"Purchase Agreement"), the Trust has agreed to sell to each of the Underwriters
named below, and each of the Underwriters, for whom Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Alex. Brown & Sons Incorporated, A.G. Edwards &
Sons, Inc. and Legg Mason Wood Walker, Incorporated are acting as
representatives (the "Representatives"), has severally agreed to purchase from
the Trust, the number of Shares set forth below opposite their respective names.
The Underwriters are committed to purchase all of such Shares if any are
purchased. Under certain circumstances, the commitments of non-defaulting
Underwriters may be increased as set forth in the Purchase Agreement.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................................
Alex. Brown & Sons Incorporated..........................................
A.G. Edwards & Sons, Inc.................................................
Legg Mason Wood Walker, Incorporated.....................................
---------
Total....................................................... 3,500,000
========
</TABLE>
The Representatives have advised the Trust that the Underwriters propose
initially to offer the Shares to the public at the public offering price set
forth on the cover of this Prospectus, and to certain dealers at such price less
a concession not in excess of $. per Share. The Underwriters may allow,
and such dealers may reallow, a discount not in excess of $. per Share on
sales to certain other dealers. After the initial public offering, the public
offering price, concession and discount may be changed.
The Trust has granted to the Underwriters an option exercisable within 30
days after the date hereof to purchase up to 525,000 additional Shares to cover
over-allotments, if any, at the initial public offering price less the
underwriting discount set forth on the cover page of this Prospectus. If the
Underwriters exercise this option, each of the Underwriters will have a firm
commitment, subject to certain conditions, to purchase approximately the same
percentage thereof that the number of Shares to be purchased by it shown in the
foregoing table is of the 3,500,000 Shares initially offered hereby.
The Trust has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
The Trust and its officers and Trustees have agreed that for a period of 90
days from the date of this Prospectus they will not, without the prior written
consent of the Representatives, offer, sell, grant any option for the sale of or
otherwise dispose of any Shares, except for grants of options or issuances of
Shares upon exercise of options pursuant to the Trust's Incentive Share Option
Plan and the Trust's Dividend Reinvestment Plan.
22
<PAGE> 24
EXPERTS
The financial statements incorporated in this Prospectus by reference to
the Trust's Annual Report on Form 10-K for the year ended December 31, 1994 have
been so incorporated in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
LEGAL OPINIONS
Arent Fox Kintner Plotkin & Kahn, Washington, D.C., legal counsel to the
Trust, has delivered an opinion to the effect that the Shares offered hereby are
legally issued, fully paid, free of preemptive rights and, subject to the
matters discussed under the caption "Shares," non-assessable, and have passed on
certain tax matters relating to the qualification of the Trust as a real estate
investment trust. Certain legal matters with respect to the Shares offered
hereby will be passed on for the Underwriters by Brown & Wood, New York, New
York.
AVAILABLE INFORMATION
The Trust is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by the Trust can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the Commission's Regional Offices at 7 World Trade Center, New
York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661, and copies of such material can be obtained at prescribed rates from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Trust's Shares are listed on the American Stock
Exchange, 86 Trinity Place, New York, New York 10005 and reports, proxy
statements and other information filed by the Trust can be inspected at such
Exchange. The Trust has filed a Registration Statement on Form S-3 (together
with all amendments and exhibits thereto, the "Registration Statement") under
the Securities Act of 1933, as amended. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information, reference is made to the Registration Statement.
DOCUMENTS INCORPORATED BY REFERENCE
The Trust hereby incorporates by reference the following documents filed
with the Commission pursuant to the Exchange Act: the Annual Report of the Trust
on Form 10-K for the year ended December 31, 1994 and the Quarterly Report of
the Trust on Form 10-Q for the quarter ended March 31, 1995. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein, or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
All documents filed by the Trust pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of this offering shall be deemed to be incorporated by reference
into this Prospectus and to be a part hereof from the date of filing such
documents.
Copies of all documents incorporated by reference, other than exhibits to
such documents not specifically incorporated by reference therein, will be
provided without charge to each person who receives a copy of this Prospectus on
the written or oral request of such person directed to Larry E. Finger,
Washington Real Estate Investment Trust, 10400 Connecticut Avenue, Kensington,
Maryland 20895, telephone (301) 929-5900 or (800) 565-9748.
23
<PAGE> 25
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESMAN OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE TRUST OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE SHARES IN ANY JURISDICTION
WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF
THE TRUST SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---
<S> <C>
Prospectus Summary.................... 3
The Trust............................. 5
Use of Proceeds....................... 8
Capitalization........................ 8
Dividends............................. 9
Dividend Reinvestment Plan............ 9
Investments of the Trust.............. 11
Description of Real Estate
Investments......................... 12
Selected Financial Data............... 15
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 16
Management............................ 19
Shares................................ 20
Underwriting.......................... 22
Experts............................... 23
Legal Opinions........................ 23
Available Information................. 23
Documents Incorporated by Reference... 23
</TABLE>
[WRIT LOGO]
WASHINGTON
REAL ESTATE
INVESTMENT TRUST
3,500,000 SHARES OF
BENEFICIAL INTEREST
---------------------------
PROSPECTUS
---------------------------
MERRILL LYNCH & CO.
ALEX. BROWN & SONS
INCORPORATED
A.G. EDWARDS & SONS, INC.
LEGG MASON WOOD WALKER
INCORPORATED
JULY , 1995
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 26
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses in connection with the issuance
and distribution of the securities being registered, other than underwriting
discounts and commissions:
<TABLE>
<S> <C>
Registration fee -- Securities and Exchange Commission.................... $ 21,687
Filing fee -- NASD........................................................ 6,790
American Stock Exchange Listing Fee....................................... 17,500
*Blue Sky fees and expenses (including legal fees)........................ 15,000
*Accounting fees and expenses............................................. 35,000
*Legal fees and expenses.................................................. 47,500
*Printing and engraving................................................... 46,000
*Transfer agent and registrar fees........................................ 3,500
*Miscellaneous............................................................ 17,023
--------
Total........................................................... $210,000
========
</TABLE>
- ---------------
* Estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Amendment to the Trust's Declaration of Trust dated June 24, 1987
provides that no Trustee or officer of the Trust shall be personally liable, in
tort, contract or otherwise, in connection with Trust property or the affairs of
the Trust, or on account of his own acts or omissions to the Trust, or to any
shareholder, Trustee, officer or agent thereof except for (i) any breach of the
duty of loyalty of the Trustee or officer to the Trust or its shareholders, (ii)
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, or (iii) any transaction from which the Trustee or
officer derived any improper personal benefit. All persons shall look solely to
the Trust property for satisfaction of claims of any nature in connection with
the affairs of the Trust.
The form of Purchase Agreement included in Exhibit 1 to this Registration
Statement provides for indemnification of the Trustees and officers against
certain liabilities, including liabilities under the Securities Act of 1933.
ITEM 16. EXHIBITS.
<TABLE>
<S> <C>
1. -- Form of Purchase Agreement.
3. -- Declaration of Trust and By-Laws.
(a) -- Declaration of Trust, as amended.
(b) -- By-Laws.
5. -- Opinion of Arent Fox Kintner Plotkin & Kahn.*
8. -- Tax opinion of Arent Fox Kintner Plotkin & Kahn (included in Exhibit 5).*
</TABLE>
II-1
<PAGE> 27
<TABLE>
<S> <C>
10. -- Management contracts, plans and arrangements.
(a) -- Employment Agreement dated May 11, 1994 with Edmund Cronin, Jr.
(b) -- 1991 Incentive Stock Option Plan.
(c) -- Nonqualified Stock Option Agreement dated June 27, 1990 with B. Franklin Kahn.
(d) -- Nonqualified Stock Option Agreement dated December 14, 1994 with Edmund B. Cronin,
Jr.
23. -- Consents of experts and counsel.
(a) -- Arent Fox Kintner Plotkin & Kahn (counsel) (included in Exhibit 5).
(b) -- Price Waterhouse LLP (independent accountants).*
</TABLE>
- ---------------
* Previously filed.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to Trustees, officers, and controlling persons of the
Registrant pursuant to the Registrant's Declaration of Trust or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a Trustee, officer, or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
Trustee, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, (i) each filing of
the Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof; (ii)
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective; and (iii) each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-2
<PAGE> 28
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 2 to
be signed on its behalf by the undersigned, thereunto duly authorized in the
City of Bethesda, State of Maryland on the 17th day of July, 1995.
WASHINGTON REAL ESTATE INVESTMENT
TRUST
By: /s/ EDMUND B. CRONIN, JR.
------------------------------------
Edmund B. Cronin, Jr., President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------ --------------
<S> <C> <C>
/s/ ARTHUR A. BIRNEY* Chairman of the Trustees July 17, 1995
- ------------------------------------------
Arthur A. Birney
/s/ WILLIAM N. CAFRITZ* Trustee July 17, 1995
- ------------------------------------------
William N. Cafritz
/s/ EDMUND B. CRONIN, JR. Trustee, President and July 17, 1995
- ------------------------------------------ Chief Executive Officer
Edmund B. Cronin, Jr.
/s/ BENJAMIN H. DORSEY* Trustee July 17, 1995
- ------------------------------------------
Benjamin H. Dorsey
/s/ LARRY E. FINGER Senior Vice President and July 17, 1995
- ------------------------------------------ Chief Financial Officer
Larry E. Finger (Principal Accounting Officer)
/s/ B. FRANKLIN KAHN* Trustee July 17, 1995
- ------------------------------------------
B. Franklin Kahn
/s/ DAVID M. OSNOS* Trustee July 17, 1995
- ------------------------------------------
David M. Osnos
</TABLE>
II-3
<PAGE> 29
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------ --------------
<S> <C> <C>
/s/ STANLEY P. SNYDER* Trustee July 17, 1995
- ------------------------------------------
Stanley P. Snyder
- ---------------
* Signed by Edmund B. Cronin, Jr.,
pursuant to a power of attorney
previously filed.
/s/ EDMUND B. CRONIN, JR.
- ------------------------------------------
Edmund B. Cronin, Jr.
</TABLE>
II-4
<PAGE> 1
3,500,000 Shares
WASHINGTON REAL ESTATE INVESTMENT TRUST
(a District of Columbia business trust)
Shares of Beneficial Interest
(No Par Value)
PURCHASE AGREEMENT
July __, 1995
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
ALEX. BROWN & SONS INCORPORATED
A.G. EDWARDS & SONS, INC.
LEGG MASON WOOD WALKER, INCORPORATED
As Representatives of the several Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1305
Dear Sirs:
Washington Real Estate Investment Trust, a real estate investment
trust organized under the laws of the District of Columbia (the "Company"),
confirms its agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("Merrill Lynch"), Alex. Brown & Sons Incorporated ("Alex.
Brown"), A.G. Edwards & Sons, Inc. ("A.G. Edwards") and Legg Mason Wood Walker,
Incorporated ("Legg Mason") and each of the other Underwriters named in
Schedule A hereto (collectively, the "Underwriters", which term shall also
include any underwriter substituted as hereinafter provided in Section 10),
for whom Merrill Lynch, Alex. Brown, A.G. Edwards and Legg Mason are acting as
representatives (in such capacity, Merrill Lynch, Alex. Brown, A.G. Edwards
and Legg Mason shall hereinafter be referred to as the "Representatives"), with
respect to the sale by the Company and the purchase by the Underwriters, acting
severally and not jointly, of the respective numbers of shares of beneficial
interest, no par value, of the Company (the "Shares of Beneficial Interest")
set forth in said Schedule A, and with respect to the grant by the Company to
the Underwriters of the
<PAGE> 2
option described in Section 2 hereof to purchase all or any part of an
additional 525,000 shares to cover over-allotments. The aforesaid 3,500,000
shares (the "Initial Shares"), together with all or any part of the 525,000
shares subject to the option described in Section 2 hereof (the "Option
Shares"), are collectively hereinafter called the "Shares".
Prior to the purchase and public offering of the Shares by the several
Underwriters, the Company and the Representatives, acting on behalf of the
several Underwriters, shall enter into an agreement substantially in the form
of Exhibit A hereto (the "Pricing Agreement"). The Pricing Agreement may take
the form of an exchange of any standard form of written telecommunication
between the Company and the Representatives and shall specify such applicable
information as is indicated in Exhibit A hereto. The offering of the Shares
will be governed by this Agreement, as supplemented by the Pricing Agreement.
From and after the date of the execution and delivery of the Pricing Agreement,
this Agreement shall be deemed to incorporate the Pricing Agreement.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 33-60581) and a related
preliminary prospectus for the registration of the Shares under the Securities
Act of 1933, as amended (the "1933 Act"), has filed such amendments thereto, if
any, and such amended preliminary prospectuses as may have been required to the
date hereof. Such registration statement (as amended, if applicable) and the
prospectus constituting a part thereof (including in each case all documents
incorporated or deemed to be incorporated by reference therein and the
information, if any, deemed to be a part thereof pursuant to Rule 430A(b) or
Rule 434 of the rules and regulations under the 1933 Act (the "1933 Act
Regulations")), as from time to time amended or supplemented pursuant to the
1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act"), or
otherwise, are hereinafter referred to as the "Registration Statement" and the
"Prospectus", respectively, except that if any revised prospectus shall be
provided to the Underwriters by the Company for use in connection with the
offering of the Shares which differs from the Prospectus on file at the
Commission at the time the Registration Statement becomes effective (whether or
not such revised prospectus is required to be filed by the Company pursuant to
Rule 424(b) of the 1933 Act Regulations), the term "Prospectus" shall refer to
such revised prospectus from and after the time it is first provided to the
Underwriters for such use. All references in this Agreement to financial
statements and schedules and other information which is "contained," "included"
or "stated" in the Registration Statement or the Prospectus (and all other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other
2
<PAGE> 3
information which is or is deemed to be incorporated by reference in the
Registration Statement or the Prospectus, as the case may be; and all
references in this Agreement to amendments or supplements to the Registration
Statement or the Prospectus shall be deemed to mean and include the filing of
any document under the 1934 Act which is or is deemed to be incorporated by
reference in the Registration Statement or the Prospectus, as the case may be.
If the Company elects to rely on Rule 434 under 1933 Act Regulations, all
references to the Prospectus shall be deemed to include, without limitation,
the form of prospectus and the abbreviated term sheet, taken together, provided
to the Underwriters by the Company in reliance on Rule 434 under the 1933 Act
(the "Rule 434 Prospectus"). If the Company files a registration statement to
register a portion of the Shares and relies on Rule 462(b) for such
registration statement to become effective upon filing with the Commission (the
"Rule 462 Registration Statement"), then any reference to "Registration
Statement" herein shall be deemed to be to both the registration statement
referred to above (No. 33-60581) and the Rule 462 Registration Statement, as
each such registration statement may be amended pursuant to the 1933 Act.
The Company understands that the Underwriters propose to make a public
offering of the Shares as soon as the Representatives deem advisable after the
Registration Statement becomes effective and the Pricing Agreement has been
executed and delivered.
Section 1. Representations and Warranties.
(a) The Company represents and warrants to each Underwriter as of the
date hereof, as of the date of the Pricing Agreement (such latter date being
hereinafter referred to as the "Representation Date") and as of the Closing
Time referred to in Section 2(a) hereof, and agrees with each Underwriter as
follows:
(i) At the time the Registration Statement and any amendments
thereto become effective and at the Representation Date, the
Registration Statement will comply in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations and will not
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading. The Prospectus, at the
Representation Date (unless the term "Prospectus" refers to a
prospectus which has been provided to the Underwriters by the Company
for use in connection with the offering of the Shares which differs
from the Prospectus on file at the Commission at the time the
Registration Statement first becomes effective, in which case at the
time
3
<PAGE> 4
it is first provided to the Underwriters for such use) and at Closing
Time, will not contain an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; provided, however, that the representations and
warranties in this subsection shall not apply to that part of the
Registration Statement or Prospectus made in reliance upon and in
conformity with information furnished to the Company in writing by any
Underwriter through the Representatives expressly for use in the
Registration Statement or Prospectus.
(ii) The documents incorporated or deemed to be incorporated by
reference into the Prospectus, at the time they were or hereafter are
filed with the Commission, complied and will comply in all material
respects with the requirements of the 1934 Act and the rules and
regulations of the Commission thereunder (the "1934 Act Regulations"),
and, when read together with the other information in the Prospectus,
at the time the Registration Statement and any post-effective
amendments thereto become effective and at Closing Time, will not
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading.
(iii) The Company has been duly organized and is validly existing
as a business trust of unlimited duration with transferable shares of
beneficial interest in good standing under the laws of the District of
Columbia, with full power and authority to own, lease and operate its
properties and conduct its business as described in the Prospectus and
to enter into and perform its obligations under this Agreement and
the Pricing Agreement; the Company has no subsidiaries; and the
Company is duly qualified to transact business in all jurisdictions
in which the conduct of its business or the ownership or leasing of
property requires such qualification.
(iv) The outstanding Shares of Beneficial Interest of the Company
have been duly authorized and validly issued and are fully paid and,
except as described in the Prospectus under the caption "Shares,"
non-assessable; the Shares have been duly authorized for issuance and
sale to the Underwriters pursuant to this Agreement and, when issued
and delivered by the Company pursuant to this Agreement against
payment of the consideration set forth in the Pricing Agreement, will
be validly issued, fully paid and, except as described in the
Prospectus under the caption "Shares,"
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<PAGE> 5
non-assessable; and no preemptive rights of shareholders exist with
respect to any of the Shares or the issue and sale thereof.
(v) The capitalization of the Company is as set forth in the
Prospectus; the Shares conform with the statements concerning them in
the Prospectus.
(vi) The financial statements of the Company together with
related notes and schedules as set forth or incorporated by reference
in the Registration Statement present fairly the financial position
and the results of operations of the Company at the indicated dates
and for the indicated periods. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied throughout the periods involved, and all
adjustments necessary for a fair presentation of results for such
periods have been made. The summary financial and statistical data
included in the Prospectus present fairly the information shown
therein and have been compiled on a basis consistent with the
financial statements presented therein.
(vii) There is no action, suit or proceeding before or by any
court or governmental agency or body, domestic or foreign, now
pending, or, to the knowledge of the Company, threatened, against or
affecting the Company, which is required to be disclosed in the
Registration Statement (other than as disclosed therein), or which
might reasonably be expected to result in any material adverse change
in the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Company, or which might
reasonably be expected to materially and adversely affect the
properties or assets thereof or the consummation of this Agreement and
the Pricing Agreement or the performance by the Company of its
obligations hereunder or thereunder; all pending legal or governmental
proceedings to which the Company is a party or of which any of its
property or assets is the subject which are not described in the
Registration Statement, including ordinary routine litigation
incidental to the business, are, considered in the aggregate, not
material.
(viii) There are no contracts or documents which are required to
be described in the Registration Statement, the Prospectus or the
documents incorporated by reference therein or to be filed as exhibits
thereto by the 1933 Act, the 1933 Act Regulations, the 1934 Act or the
1934 Act Regulations which have not been so described and filed as
required.
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<PAGE> 6
(ix) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal
property referred to in the Prospectus as owned or leased by the
Company, in each case free and clear of all liens, encumbrances,
claims, security interests and defects, other than those referred to
in the Prospectus or which are not material in amount. Each lease of
real property by the Company as lessor requiring annual lease payments
in excess of $100,000 is the legal, valid and binding obligation of
the lessee in accordance with its terms (except that the remedy of
specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought and to
the Bankruptcy Act) and the rents which at present have remained due
and unpaid for more than 30 days are not payable under leases such
that, were no further rental payments to be received under such
leases, the financial condition or results of operations of the
Company would be materially adversely affected thereby. The Company
has no reason to believe that the lessee under any lease (excluding
leases for which rent payments due for the remainder of such lease are
less than $500,000) calling for annual lease payments in excess of
$500,000 is not financially capable of performing its obligations
thereunder.
(x) The Company has filed all Federal, State and foreign income
tax returns which have been required to be filed and has paid all
taxes indicated by said returns and all assessments received by it to
the extent that such taxes have become due.
(xi) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, except as otherwise
stated therein, there has not been any material adverse change or any
development involving a prospective material adverse change in or
affecting the condition, financial or otherwise, of the Company or the
earnings, business affairs, management, or business prospects of the
Company whether or not occurring in the ordinary course of business,
and there has not been any material transaction entered into by the
Company, other than transactions in the ordinary course of business
and changes and transactions contemplated by the Registration
Statement and Prospectus. The Company has no material contingent
obligations which are not disclosed in the Registration Statement and
the Prospectus, as they may be amended or supplemented.
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<PAGE> 7
(xii) The Company is not in violation of its Declaration or Trust
or in default under any agreement, lease, contract, indenture or other
instrument or obligation to which it is a party or by which it or any
of its properties is bound and which default is of material
significance in respect of the business or financial condition of the
Company. The execution, delivery and performance of this Agreement
and the Pricing Agreement and the consummation of the transactions
contemplated herein and therein and compliance by the Company with its
obligations hereunder and thereunder have been duly authorized by all
necessary action on the part of the Company and will not conflict with
or result in a breach of any of the terms or provisions of, or
constitute a default under, any contract, indenture, mortgage, loan
agreement, note, lease, deed of trust or other agreement or instrument
to which the Company is a party, nor will such action result in any
violation of the provisions of the Declaration of Trust or By-Laws of
the Company or any order, rule or regulation applicable to the Company
of any court or of any regulatory body or administrative agency or
other governmental body having jurisdiction.
(xiii) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or
other governmental body necessary in connection with the execution and
delivery by the Company of this Agreement and the Pricing Agreement
and the consummation of the transactions herein and therein
contemplated (except such additional steps as may be required by the
National Association of Securities Dealers, Inc. (the "NASD") or may
be necessary to qualify the Shares for public offering by the
Underwriters under State securities or Blue Sky laws) has been
obtained or made and is in full force and effect.
(xiv) The Company holds all material licenses, certificates and
permits from governmental authorities which are necessary to the
conduct of its business; and the Company has not infringed any
patents, patent rights, trade names, trademarks or copyrights, which
infringement is material to the business of the Company.
(xv) Price Waterhouse LLP, who have certified the financial
statements filed with the Commission as part of, or incorporated by
reference in, the Registration Statement and Prospectus, are
independent public accountants as required by the 1933 Act and the
1933 Act Regulations.
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<PAGE> 8
(xvi) With respect to all tax periods regarding which the
Internal Revenue Service is or will be entitled to assert any claim,
the Company has met the requirements for qualification as a real
estate investment trust under Sections 856 through 860 of the Internal
Revenue Code, as amended, and the Company's present and contemplated
operations, assets and income continue to meet such requirements; and
the Company is not an "investment company" or an entity "controlled"
by an "investment company" as such terms are defined in the Investment
Company Act of 1940, as amended (the "1940 Act").
(xvii) The conditions for use of registration statements on Form
S-3 set forth in the General Instructions on Form S-3 have been
satisfied and the Company is entitled to use such form for the
transaction contemplated herein.
(xviii) The Company has complied with, and is and will be in
compliance with, the provisions of that certain Florida act relating
to disclosure of doing business with Cuba, codified as Section 517.075
of the Florida statutes, and the rules and regulations thereunder
(collectively, the "Cuba Act") or is exempt therefrom.
(xix) The Company has no knowledge of (a) the unlawful presence of
any hazardous substances, hazardous materials, toxic substances or
waste materials (collectively, "Hazardous Materials") on any of the
properties owned by it, or of (b) any unlawful spills, releases,
discharges or disposal of Hazardous Materials that have occurred or
are presently occurring off such properties as a result of any
construction on or operation and use of such properties which presence
or occurrence would materially adversely affect the condition,
financial or otherwise, or the earnings, business or business
prospects of the Company. In connection with the construction on or
operation and use of the properties owned by the Company, the Company
represents that, as of the date of this Agreement, it has no knowledge
of any material failure to comply with all applicable local, state and
federal environmental laws, regulations, ordinances and administrative
and judicial orders relating to the generation, recycling, reuse,
sale, storage, handling, transport and disposal of any Hazardous
Materials.
(b) Any certificate signed by any officer of the Company and delivered
to the Representatives or to counsel for the Underwriters shall be deemed a
representation and warranty by the Company to each Underwriter as to the
matters covered thereby.
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<PAGE> 9
Section 2. Sale and Delivery to Underwriters: Closing.
(a) On the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Company
agrees to sell to each Underwriter, severally and not jointly, and each
Underwriter agrees to purchase from the Company, at the price per share set
forth in the Pricing Agreement, the number of Initial Shares set forth in
Schedule A opposite the name of such Underwriter (except as otherwise provided
in the Pricing Agreement), plus any additional number of Initial Shares which
such Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof.
(1) If the Company has elected not to rely upon Rule 430A
under the 1933 Act Regulations, the initial public offering price and
the purchase price per share to be paid by the several Underwriters
for the Shares have each been determined and set forth in the Pricing
Agreement, dated the hate hereof, and an amendment to the Registration
Statement and the Prospectus will be filed before the Registration
Statement becomes effective.
(2) If the Company has elected to rely upon Rule 430A under
the 1933 Act Regulations, the purchase price per share to be paid by
the several Underwriters for the Shares shall be an amount equal to
the initial public offering price, less an amount per share to be
determined by agreement between the Representatives and the Company.
The initial public offering price per share of the Shares shall be a
fixed price to be determined by agreement between the Representatives
and the Company. The initial public offering price per share of the
Shares shall not be higher than the last reported sale price (regular
way) or the last reported asked price, whichever is higher, of the
Shares of Beneficial Interest on the American Stock Exchange
immediately prior to determination of the initial public offering
price. The initial public offering price and the purchase price, when
so determined, shall be set forth in the Pricing Agreement. In the
event that such prices have not been agreed upon and the Pricing
Agreement has not been executed and delivered by all parties thereto
by the close of business on the fourteenth business day following the
date of this Agreement, this Agreement shall terminate forthwith,
without liability of any party to any other party, unless otherwise
agreed to by the Company and the Representatives.
(3) In addition, on the basis of the representations and
warranties herein contained and subject to the terms and
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<PAGE> 10
conditions herein set forth, the Company hereby grants an option to
the Underwriters, severally and not jointly, to purchase up to an
additional 525,000 Shares at the price per share set forth in the
Pricing Agreement. The option hereby granted will expire 30 days
after the date the Registration Statement becomes effective and may be
exercised in whole or in part from time to time only for the purpose
of covering over-allotments which may be made in connection with the
offering and distribution of the Initial Shares upon notice by the
Representatives to the Company setting forth the principal amount of
Option Shares as to which the several Underwriters are then exercising
the option and the time, date and place of payment and delivery for
such Option Shares. Any such time and date of delivery (a "Date of
Delivery") shall be determined by the Representatives but shall not be
later than seven full business days after the exercise of said option,
nor in any event prior to Closing Time, as hereinafter defined, unless
otherwise agreed upon by the Representatives and the Company. If the
option is exercised as to all or any portion of the Option Shares, the
Option Shares shall be purchased by the Underwriters, severally and
not jointly, in proportion to their respective Initial Share
underwriting obligations as set forth in Schedule A.
(b) Payment of the purchase price for and delivery of certificates
for the Initial Shares shall be made at the office of Brown & Wood, One World
Trade Center, New York, New York 10048-0557, or at such other place as shall be
agreed upon by the Representatives and the Company, at 10:00 A.M. on the fourth
business day (unless postponed in accordance with the provisions of Section 10)
following the date the Registration Statement becomes effective (or, if the
Company has elected to rely upon Rule 430A, the fourth business day after
execution of the Pricing Agreement), or such other time not later than ten
business days after such date as shall be agreed upon by the Representatives
and the Company (such time and date of payment and delivery being herein called
"Closing Time"). In addition, in the event that any or all of the Option
Shares are purchased by the Underwriters, payment of the purchase price for and
the delivery of such Option Shares shall be made at the above-mentioned office
of Brown & Wood, or at such other place as shall be mutually agreed upon by the
Representatives and the Company, on each Date of Delivery as specified in the
notice from the Representatives to the Company. Payment shall be made by
certified or official bank check or checks in New York Clearing House or
similar next day funds payable to the order of the Company against delivery to
the Representatives for the respective accounts of the Underwriters of
certificates for the Shares to be purchased by them. The certificates for the
Initial Shares and the Option Shares shall
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<PAGE> 11
be in such authorized denominations and registered in such names as the
Representatives may request in writing at least one business day before Closing
Time or the Date of Delivery, as the case may be. It is understood that each
Underwriter has authorized the Representatives, for its account, to accept
delivery of, receipt for, and make payment of the purchase price for, the
Shares which it has agreed to purchase. Merrill Lynch, Alex. Brown, A.G.
Edwards or Legg Mason, individually and not as representatives of the several
Underwriters, may (but shall not be obligated to) make payment of the purchase
price for the Shares to be purchased by any Underwriter whose check has not
been received by Closing Time, but any such payment shall not relieve such
Underwriter from its obligations hereunder. The certificates for the Initial
Shares and the Option Shares will be made available for examination and
packaging by the Representatives not later than 3:00 P.M. on the last business
day prior to Closing Time or the Date of Delivery, as the case may be.
Section 3. Covenants of the Company. The Company covenants with each
Underwriter as follows:
(a) The Company will notify the Representatives immediately, and
confirm the notice in writing, (i) of the effectiveness of the Registration
Statement and any amendment thereto (including any post-effective amendment),
(ii) of the receipt of any comments from the Commission, (iii) of any request
by the Commission for any amendment to the Registration Statement or any
amendment or supplement to the Prospectus or for additional information, and
(iv) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose. The Company will make every reasonable effort to
prevent the issuance of any such stop order and, if any stop order is issued,
to obtain the lifting thereof at the earliest possible moment. If the Company
elects to rely on Rule 434 under the 1933 Act Regulations, the Company will
prepare an "abbreviated term sheet" that complies with the requirements of Rule
434 under the 1933 Act Regulations. If Company elects not to rely on Rule 434,
the Company will provide the Underwriters with copies of the form of
Prospectus, in such number as the Underwriters may reasonably request, and file
or transmit for filing with the Commission such Prospectus in accordance with
Rule 424(b) of the 1933 Act by the close of business in New York on the
business day immediately succeeding the date of the Pricing Agreement. If the
Company elects to rely on Rule 434, the Company will provide the Underwriters
with copies of the form of Rule 434 Prospectus, in such number as the
Underwriters may reasonably request, and file or transmit for filing with the
Commission the form of Prospectus complying with Rule 434(c)(2)
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<PAGE> 12
of the 1933 Act in accordance with Rule 424(b) of the 1933 Act by the close of
business in New York on the business day immediately succeeding the date of the
Pricing Agreement.
(b) The Company will give the Representatives notice of its
intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to the
Prospectus, whether pursuant to the 1933 Act, the 1934 Act or otherwise
(including any revised prospectus which the Company proposes for use by the
Underwriters in connection with the offering of the Shares which differs from
the prospectus on file at the Commission at the time the Registration Statement
first becomes effective, whether or not such revised prospectus is required to
be filed pursuant to Rule 424(b) of the 1933 Act Regulations, or any
abbreviated term sheet prepared in reliance on Rule 434 of the 1933 Act
Regulations), will furnish the Representatives with copies of any such
amendment or supplement a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file any such amendment or
supplement or use any such prospectus to which the Representatives or counsel
for the Underwriters shall reasonably object.
(c) The Company will deliver to the Representatives four signed
copies of the Registration Statement as originally filed and of each amendment
thereto (including exhibits filed therewith or incorporated by reference
therein and documents incorporated by reference into the Prospectus pursuant to
Item 12 of Form S-3 under the 1933 Act) and will also deliver to the
Representatives a conformed copy of the Registration Statement as originally
filed and of each amendment thereto (including documents incorporated by
reference into the Prospectus but without exhibits) for each of the
Underwriters.
(d) The Company will deliver to each Underwriter, without charge,
from time to time until the effective date of the Registration Statement (or,
if the Company has elected to rely upon Rule 430A, until such time the Pricing
Agreement is executed and delivered), as many copies of each preliminary
prospectus as such Underwriter may reasonably request, and the Company hereby
consents to the use of such copies for purposes permitted by the 1933 Act. The
Company will furnish to each Underwriter, from time to time during the period
when the Prospectus is required to be delivered under the 1933 Act or the 1934
Act, such number of copies of the Prospectus (as amended or supplemented) as
such Underwriter may reasonably request for the purposes contemplated by the
1933 Act, the 1933 Act Regulations, the 1934 Act or the 1934 Act Regulations.
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<PAGE> 13
(e) If any event shall occur as a result of which it is necessary,
in the opinion of counsel for the Underwriters, to amend or supplement the
Prospectus in order to make the Prospectus not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser, the Company
will either (i) forthwith prepare and furnish to the Underwriters a reasonable
number of copies of an amendment of or supplement to the Prospectus or (ii)
make an appropriate filing pursuant to Section 13, 14 or 15 of the 1934 Act, in
form and substance satisfactory to counsel for the Underwriters which will
amend or supplement the Prospectus so that it will not contain an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
existing at the time it is delivered to a purchaser, not misleading.
(f) If, at the time that the Registration Statement becomes
effective, any information shall have been omitted therefrom in reliance upon
Rule 430A of the 1933 Act Regulations, then immediately following the execution
of the Pricing Agreement, the Company will prepare, and file or transmit for
filing with the Commission in accordance with such Rule 430A and Rule 424(b) of
the 1933 Act Regulations, copies of an amended Prospectus, or, if required by
such Rule 430A, a post-effective amendment to the Registration Statement
(including an amended Prospectus), containing all information so omitted and
will use its best efforts to cause such post-effective amendment to be declared
effective as promptly as practicable.
(g) The Company will endeavor, in cooperation with the
Underwriters, to qualify the Shares for offering and sale under the applicable
securities laws and real estate syndication laws of such states and other
jurisdictions of the United States as the Representatives may designate. In
each jurisdiction in which the Shares have been so qualified the Company will
file such statements and reports as may be required by the laws of such
jurisdiction to continue such qualification in effect for a period of not less
than one year from the effective date of the Registration Statement.
(h) The Company will make generally available to its security
holders as soon as practicable, but not later than 60 days after the close of
the period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 of the 1933 Act Regulations) covering a twelve month
period beginning not later than the first day of the Company's fiscal quarter
next following the "effective date" (as defined in such Rule 158) of the
Registration Statement.
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(i) The Company will use the net proceeds received by it from the
sale of the Shares in the manner specified in the Prospectus under the caption
"Use of Proceeds".
(j) The Company will use its best efforts to effect the listing of
the Shares on the American Stock Exchange ("AMEX").
(k) The Company will not, during the 90 days following the
effective date of the Registration Statement, except with the prior written
consent of the Representatives, offer for sale, sell or otherwise dispose of
any Shares of Beneficial Interest (except for the issuance of Shares of
Beneficial Interest pursuant to the Company's Dividend Reinvestment Plan or
pursuant to grants or options pursuant to the Company's Incentive Share Option
Plan), or sell or grant options, rights or warrants with respect to any Shares
of Beneficial Interest (other than the grant of options pursuant to the
Company's Incentive Share Option Plan), otherwise than in accordance with this
Agreement or as contemplated in the Prospectus.
(l) Except as provided for in the Prospectus, the Company will
cause each officer and trustee of the Company who own Shares of Beneficial
Interest to agree not to offer for sale, sell or otherwise dispose of any
Shares of Beneficial Interest during the 90 days following the effective date
of the Registration Statement, except with the prior written consent of the
Underwriters.
(m) The Company will elect to qualify as a "real estate investment
trust" under the Internal Revenue Code of 1986, as amended, and will use its
best efforts to continue to meet the requirements to qualify as a "real estate
investment trust".
Section 4. Payment of Expenses. The Company will pay all expenses
incident to the performance of its obligations under this Agreement, including
(i) the printing and filing of the Registration Statement as originally filed
and of each amendment hereto, (ii) the cost of printing, or reproducing, and
distributing to the Underwriters copies of this Agreement and the Pricing
Agreement, (iii) the preparation, issuance and delivery of the certificates for
the Shares to the Underwriters, (iv) the fees and disbursements of counsel for
the Company, referred to in Section 5(b) hereof, (v) the fees and disbursements
of the Company's accountants, (vi) the qualification of the Shares under
securities law and real estate syndication laws in accordance with the
provisions of Section 3(g), including filing fees and the fee and disbursements
of counsel for the Underwriters in connection therewith and in connection with
the preparation of the Blue Sky Survey, (vii) the printing and delivery to the
underwriters of copies of the Registration Statement as originally filed and of
each amendment thereto, of the preliminary prospectuses, and of the Prospectus
and any
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amendments or supplements thereto including the abbreviated term sheet
delivered by the Company pursuant to Rule 434 of the 1933 Act Regulations,
(viii) the cost of printing or reproducing and delivering to the Underwriters
copies of the Blue Sky Survey, (ix) the fee of the NASD, (x) the fees and
expenses incurred in connection with the listing of the Shares on the AMEX and
(xi) any transfer taxes imposed on the sale of the Shares to the several
Underwriters.
If this Agreement is terminated by the Representatives in accordance
with the provisions of Section 5 or Section 9(a)(i), the Company shall
reimburse the Underwriters for all of their out-of-pocket expenses, including
the reasonable fees and disbursements of counsel for the Underwriters.
Section 5. Conditions of Underwriters' Obligations. The obligations
of the Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company herein contained, to the
performance by the Company of its obligations hereunder, and to the following
further conditions:
(a) The Registration Statement shall have become effective not
later than 5:30 P.M. on the date hereof, or, with the consent of the
Representatives, at a later time and date, not later, however, than 5:30 P.M.
on the first business day following the date hereof or at such later time and
date as may be approved by a majority in interest of the Underwriters; and at
Closing Time no stop order suspending the effectiveness of the Registration
Statement shall have been issued under the 1933 Act or proceedings therefor
initiated or threatened by the Commission. If the Company has elected to rely
upon Rule 430A of the 1933 Act Regulations, the price of the Shares and any
price-related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the 1933 Act Regulations
within the prescribed time period, and prior to Closing Time the Company shall
have provided evidence satisfactory to the Representatives of such timely
filing, or a post-effective amendment providing such information shall have
been promptly filed and declared effective in accordance with the requirements
of Rule 430A of the 1933 Act Regulations.
(b) At Closing Time the Representatives shall have received:
(1) The favorable opinion, dated as of Closing Time, of
Arent Fox Kintner Plotkin & Kahn, special counsel for the Company, in
form and substance satisfactory to counsel for the Underwriters, to
the effect that:
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(i) The Company has been duly organized and is
validly existing as a business trust in good standing under
the laws of the District of Columbia, with power and
authority to own, lease and operate its properties and
conduct its business as described in the Prospectus and to
enter into and perform its obligations under this Agreement
and the Pricing Agreement; and the conditions for use of a
registration statement on Form S-3 have been satisfied.
(ii) The Company has authorized and outstanding
capital securities as set forth under the caption
"Capitalization" in the Prospectus; the authorized Shares of
Beneficial Interest of the Company have been duly authorized;
the outstanding Shares of Beneficial Interest have been duly
authorized and validly issued and are fully paid and, except
as set forth in the Prospectus under the caption "Shares,"
non-assessable.
(iii) The Shares conform to the description thereof
contained in the Prospectus; the certificates for the Shares
are in due and proper form; the Shares have been duly
authorized by the Company for issuance and sale to the
Underwriters pursuant to this Agreement and, when issued and
delivered by the Company pursuant to this Agreement against
payment of the consideration set forth in the Pricing
Agreement, will be validly issued, fully paid and, except as
set forth in the Prospectus under the caption "Shares,"
non-assessable; and no preemptive rights of shareholders exist
with respect to any of the Shares or the issue and sale
thereof.
(iv) The Registration Statement has been declared
effective under the 1933 Act and, to the best of the knowledge
of such counsel, no stop order proceedings with respect
thereto have been instituted or are pending or threatened
under the 1933 Act.
(v) The Registration Statement, all preliminary
prospectuses, the Prospectus and each amendment or supplement
thereto and any documents incorporated by reference therein,
when they became effective or were filed with the Commission,
as the case may be, complied as to form in all material
respects with the requirements of the 1933 Act or the 1934
Act, as applicable, and the applicable rules and regulations
thereunder (except that such counsel need express no opinion
as to the financial statements, schedules and other financial
information included or incorporated by reference therein);
and the Rule 434 Prospectus
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<PAGE> 17
conforms to the requirements of Rule 434 in all material
respects.
(vi) The statements under the caption "Shares" in
the Prospectus, insofar as such statements constitute a
summary of documents referred to therein or matters of law,
are accurate summaries and fairly and correctly present the
information called for with respect to such documents and
matters.
(vii) Such counsel does not know of any contracts
or documents required to be filed as exhibits to or
incorporated by reference in the Registration Statement or
described in the Registration Statement or the Prospectus
which are not so filed, incorporated by reference or described
as required, and such contracts and documents as are
summarized in the Registration Statement or the Prospectus are
fairly summarized in all material respects (except that such
counsel need express no opinion as to the financial
statements, schedules and other financial information included
or incorporated by reference therein).
(viii) Such counsel knows of no material legal
proceedings pending or threatened against the Company.
(ix) This Agreement and the Pricing Agreement have
been duly authorized, executed and delivered by the Company.
(x) No approval, consent, order, authorization,
designation, declaration or filing by or with any regulatory,
administrative or other governmental body is necessary in
connection with the execution and delivery of this Agreement
and the Pricing Agreement and the consummation of the
transactions herein and therein contemplated by the Company
(other than as may be required by the NASD or as required by
State securities or Blue Sky laws, as to which such counsel
need express no opinion) except such as have been obtained or
made, specifying the same.
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(xi) The investments of the Company described in
the Prospectus are permitted investments under the Declaration
of Trust.
(xii) The Company has qualified to be taxed as a
real estate investment trust pursuant to Sections 856-860 of
the Internal Revenue Code, as amended, for the fiscal years
ended December 31, 1978 through December 31, 1994, and the
Company's present method of operation and its assets and
contemplated income are such that the Company is in a position
under present law to so qualify for the fiscal year ending
December 31, 1995, and under present law the federal income
tax treatment of the Company and its shareholders will be as
set forth in the Prospectus under the heading "Shares".
(xiii) The Company is not an "investment company" or
an entity "controlled" by an "investment company" as such
terms are defined in the 1940 Act.
In rendering such opinion, Arent Fox Kintner Plotkin & Kahn
may rely as to matters governed by the laws of jurisdictions other
than the District of Columbia or Federal laws on local counsel in such
jurisdictions, provided that in each case Arent Fox Kintner Plotkin &
Kahn shall state that they believe that they and the Underwriters are
justified in relying on such other counsel. In addition to the
matters set forth above, such opinion shall also include a statement
to the effect that nothing has come to the attention of such counsel
which leads them to believe that the Registration Statement, as of the
time it became effective under the 1933 Act or at the Representation
Date, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading or that the Prospectus at
the Representation Date (unless the term "Prospectus" refers to a
prospectus which has been provided to the Underwriters by the Company
for use in connection with the offering of the Shares which differs
from the Prospectus on file at the Commission at the time the
Registration Statement becomes effective, in which case at the date of
such Prospectus) or at Closing Time, contained or contains an untrue
statement of a material fact or omitted or omits to state a material
fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading
(except that such counsel need express no view as to financial
statements, schedules and other financial information included or
incorporated by reference therein). With respect to such statement,
Arent Fox Kintner
18
<PAGE> 19
Plotkin & Kahn may state that their belief is based upon the
procedures set forth therein, but is without independent check and
verification.
(2) The favorable opinion, dated as of Closing Time, of
Benjamin H. Dorsey, Esq., General Counsel and Secretary to the
Company, in form and substance satisfactory to counsel for the
Underwriters, to the effect that: (i) the Company is duly qualified
to transact business in all jurisdictions in which the conduct of its
business or ownership or leasing of property requires such
qualification, or in which the failure to qualify would have a
materially adverse effect upon the business of the Company; (ii) the
Company has the authorized and outstanding capital securities as set
forth under the caption "Capitalization" in the Prospectus; the
authorized Shares of Beneficial Interest have been validly authorized
and the outstanding Shares of Beneficial Interest have been duly
authorized and validly issued and are fully paid and, except as set
forth in the Prospectus under the caption "Shares," non-assessable;
(iii) the execution and delivery of this Agreement and the Pricing
Agreement and the consummation of the transactions contemplated herein
and therein and compliance by the Company with its obligations
hereunder and thereunder do not and will not conflict with or result
in a breach of any of the terms or provisions of, or constitute a
default under, (a) the Declaration of Trust or By-Laws of the Company,
(b) any agreement or instrument known to such counsel to which the
Company is a party or by which the Company may be bound, or (c) any
order, rule or regulation known to such counsel of any court or
government agency or body having jurisdiction over the Company or any
of its properties; (iv) to the best of such counsel's knowledge,
the Company is not in violation of its Declaration of Trust or By-Laws
and the Company is in compliance with all material rules, regulations,
judgments, decrees, orders and statutes in the jurisdictions in which
it is conducting its business; and (v) all pending legal or
governmental proceedings to which the Company is a party or to which
any of its property is subject which are not described in the
Registration Statement, including ordinary routine litigation
incidental to the business, are, considered in the aggregate, not
material.
(3) The favorable opinion, dated as of Closing Time, of
Brown & Wood, counsel for the Underwriters, with respect to the
matters set forth in (iii) to (vi), inclusive, and (ix) and (x) of
subsection (b)(l) of this Section, except that with respect to the
matters referred to in (v), no opinion need be expressed as to the
documents incorporated by reference in the Registration Statement. In
addition to the matters set forth above, such opinion shall also
include a statement to the effect that nothing has come to the
attention of such counsel which leads them to believe that the
Registration Statement, as of the time it became
19
<PAGE> 20
effective under the 1933 Act or at the Representation Date, contained
an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading or that the Prospectus at the Representation
Date (unless the term "Prospectus" refers to a prospectus which has
been provided to the Underwriters by the Company for use in connection
with the offering of the Shares which differs from the Prospectus on
file at the Commission at the time the Registration Statement becomes
effective, in which case at the date of such Prospectus) or at Closing
Time, contained or contains an untrue statement of a material fact or
omitted or omits to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which
they were made, not misleading (except that such counsel need express
no view as to financial statements, schedules and other financial
information included or incorporated by reference therein). With
respect to such statement, Brown & Wood may state that their belief
is based upon the procedures set forth therein, but is without
independent check and verification.
(c) At Closing Time there shall not have been, since the date
hereof or since the respective dates as of which information is given in the
Prospectus, any material adverse change in the condition, financial or
otherwise, of the Company or in its earnings, business affairs or business
prospects, whether or not arising in the ordinary course of business, and the
Representatives shall have received a certificate of the President and Chief
Executive Officer and the Vice President and Chief Financial Officer of the
Company, dated as of Closing Time, to the effect that (i) there has been no
such material adverse change, (ii) the representations and warranties set forth
in Section 1(a) hereof are true and correct with the same force and effect as
though expressly made at and as of Closing Time, (iii) the Company has complied
with all agreements and satisfied all conditions on its part to be performed or
satisfied at or prior to Closing Time and (iv) no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been initiated or threatened by the Commission. As used
in this Section 5(c), the term "Prospectus" means the Prospectus in the form
first used to confirm sales of the Shares.
(d) At the time of execution of this Agreement, the
Representatives shall have received from Price Waterhouse LLP a letter dated
such date, in form and substance satisfactory to the Representatives, to the
effect that (i) they are independent public accountants with respect to the
Company as required by the 1933 Act and the 1934 Act and the applicable
published rules and
20
<PAGE> 21
regulations thereunder; (ii) it is their opinion that the financial statements
and supporting schedules of the Company included or incorporated by reference
in the Registration Statement and covered by their opinions therein comply as
to form in all material respects with the applicable accounting requirements of
the 1933 Act and the 1934 Act and the related published rules and regulations
thereunder; (iii) based upon limited procedures set forth in detail in such
letter (which shall include, without limitation, the procedures specified by
the American Institute of Certified Public Accountants for a review of interim
financial information as described in SAS No. 71, Interim Financial
Information, with respect to the unaudited condensed financial statements of
the Company included or incorporated by reference in the Registration
Statement), nothing has come to their attention which causes them to believe
that:
(A) any material modifications should be made to the
unaudited condensed financial statements included or incorporated by
reference in the Registration Statement for them to be in conformity
with generally accepted accounting principles;
(B) the unaudited condensed financial statements included
or incorporated by reference in the Registration Statement do not
comply as to form in all material respects with the applicable
accounting requirements of the 1933 Act and the 1934 Act as it applies
to Form 10-Q and the related published rules and regulations;
(C) at a specified date not more than three days prior to
the date of such letter, there was any change in the capitalization of
the Company, any decrease in total assets, any change in long-term
debt or any change in short-term borrowings of the Company, as
compared with the amounts shown in the March 31, 1995 balance sheet
incorporated by reference in the Registration Statement; or
(D) during the period from April 1, 1995 to a specified
date not more than three days prior to the date of such letter, there
were any decreases, as compared with the corresponding period in the
preceding year, in real estate rental revenue, net income or net
income per share;
except in all cases for changes, increases or decreases which the Registration
Statement discloses have occurred or may occur; (iv) in addition to the limited
procedures referred to in clause (iii) above, they have carried out certain
specified procedures, not constituting an audit, with respect to certain
amounts, percentages and financial information which are derived from the
general accounting records of the Company, which are included or
21
<PAGE> 22
incorporated by reference in the Registration Statement and which are specified
by the Representatives, and have compared such amounts, percentages and
financial information with the accounting records of the Company and have found
them to be in agreement; and (v) they have compared the information in the
Prospectus under the caption "Selected Financial Data" with the disclosure
requirements of Regulation S-K and on the basis of limited procedures specified
in such letter nothing came to their attention as a result of the foregoing
procedures that caused them to believe that this information does not conform
in all material respects with the disclosure requirements of Item 301 of
Regulation S-K.
(e) At Closing Time, the Representatives shall have received from
Price Waterhouse LLP a letter dated as of Closing Time to the effect that they
reaffirm the statements made in the letter furnished pursuant to subsection (d)
of this Section, except that the "specified date" referred to shall be a date
not more than three days prior to Closing Time, and, if the Company has elected
to rely on Rule 430A of the 1933 Act Regulations, to the further effect that
they have carried out procedures as specified in clause (iv) of subsection (d)
of this Section with respect to certain amounts, percentages and financial
information deemed to be a part of the Registration Statement pursuant to Rule
430A(b) and have found such amounts, percentages and financial information to
be in agreement with the records specified in such clause (iv).
(f) At Closing Time, counsel for the Underwriters shall have been
furnished with such documents and opinions as they may reasonably require for
the purpose of enabling them to pass upon the issuance and sale of the Shares
as herein contemplated and related proceedings, or in order to evidence the
accuracy of any of the representations or warranties, or the fulfillment of any
of the conditions, herein contained; and all proceedings taken by the Company
in connection with the issuance and sale of the Shares as herein contemplated
shall be satisfactory in form and substance to the Representatives and counsel
for the Underwriters.
(g) In the event the Underwriters exercise their option provided
in Section 2 hereof to purchase all or any portion of the Option Shares, the
representations and warranties of the Company contained herein and the
statements in any certificates furnished by the Company hereunder shall be true
and correct as of each Date of Delivery, and the Representatives shall have
received:
(1) A certificate of the President and Chief Executive
Officer and the Vice President and Chief Financial Officer
22
<PAGE> 23
of the Company, dated such Date of Delivery, confirming that the
certificate delivered at Closing Time pursuant to Section 5(c) hereof
remains true as of such Date of Delivery.
(2) The favorable opinion of Arent Fox Kintner Plotkin &
Kahn, special counsel for the Company, in form and substance
satisfactory to counsel for the Underwriters, dated such Date of
Delivery, relating to the Option Shares and otherwise to the same
effect as the opinion required by Section 5(b)(1) hereof.
(3) The favorable opinion of Benjamin H. Dorsey, Esq.,
General Counsel and Secretary to the Company, in form and substance
satisfactory to counsel for the Underwriters, dated such Date of
Delivery, relating to the Option Shares and otherwise to the same
effect as the opinion required by Section 5(b)(2) hereof.
(4) The favorable opinion of Brown & Wood, counsel for
the Underwriters, dated such Date of Delivery, relating to the Option
Shares and otherwise to the same effect as the opinion required by
Section 5(b)(3) hereof.
(5) A letter from Price Waterhouse LLP, in form and
substance satisfactory to the Representatives, dated such Date of
Delivery, substantially the same in scope and substance as the letter
furnished to the Representatives pursuant to Section 5(e) hereof,
except that the "specified date" in the letter furnished pursuant to
this Section 5(g)(5) shall be a date not more than three days prior to
such Date of Delivery.
If any condition specified in this Section shall not have been
fulfilled when and as required to be fulfilled, this Agreement may be
terminated by the Representatives by notice to the Company at any time at or
prior to Closing Time, and such termination shall be without liability of any
party to any other party except as provided in Section 4 and except that
Sections 6 and 7 shall survive any such termination and remain in full force
and effect.
Section 6. Indemnification. (a) The Company hereby agrees to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act as follows:
(1) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of any
23
<PAGE> 24
untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement (or any amendment thereto),
including the information deemed to be part of the Registration
Statement pursuant to Rule 430A(b) or Rule 434 of the 1933 Act
Regulations, if applicable, or the omission or alleged omission
therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out
of any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto), or the omission, or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(2) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission, if such settlement is effected with the written consent of
the Company; and
(3) against any and all expense whatsoever, as incurred
(including, subject to Section 6(c) hereof, the fees and disbursements
of counsel chosen by the Representatives), reasonably incurred in
investigating, preparing or defending against any litigation, or any
investigation or proceedings by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under (1) or
(2) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through the Representatives expressly for use in the Registration
Statement (or any amendment thereto) or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto).
(b) Each Underwriter severally agrees to indemnify and hold
harmless the Company, its trustees, each of its officers who signed the
Registration Statement, and each person, if any, who
24
<PAGE> 25
controls the Company within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act against any and all loss, liability, claim, damage
and expense described in the indemnity contained in subsection (a) of this
Section, as incurred, but only with respect to untrue statements or omissions,
or alleged untrue statements or omissions, made in the Registration Statement
(or any amendment thereto) or any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Company by such Underwriter through the
Representatives expressly for use in the Registration Statement (or any
amendment thereto) or such preliminary prospectus or the Prospectus (or any
amendment or supplement thereto).
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action commenced
against it in respect of which indemnity may be sought hereunder, but failure
to so notify an indemnifying party shall not relieve such indemnifying party
from any liability which it may have otherwise than on account of this
indemnity agreement. An indemnifying party may participate at its own expense
in the defense of any such action. In no event shall the indemnifying
parties be liable for fees and expenses of more than one counsel (in addition
to any local counsel) separate from their own counsel for all indemnified
parties in connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances. No indemnifying party shall, without the prior written consent
of the indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 6 or Section 7 hereof (whether or not the indemnified
parties are actual or potential parties thereto), unless such settlement,
compromise or consent includes an unconditional release of each indemnified
party from all liability arising out of such litigation, investigation,
proceeding or claim.
Section 7. Contribution. If the indemnification provided for in
Section 6 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred, (i) in
25
<PAGE> 26
such proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand and the Underwriters on the other hand from the
offering of the Shares pursuant to this Agreement or (ii) if the allocation
provided by clause (i) is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company on the one hand and
of the Underwriters on the other hand in connection with the statements or
omissions which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Underwriters on the
other hand in connection with the offering of the Shares pursuant to this
Agreement shall be deemed to be in the same respective proportions as the total
net proceeds from the offering of the Shares pursuant to this Agreement (before
deducting expenses) received by the Company and the total underwriting discount
received by the Underwriters, in each case as set forth on the cover of the
Prospectus, bear to the aggregate initial public offering price of the Shares
as set forth on such cover. The relative fault of the Company on the one hand
and the Underwriters on the other hand shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the
Underwriters agree that it would not be just and equitable if contribution
pursuant to this Section 7 were determined by pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to above in this Section 7. The aggregate amount of
losses, liabilities, claims, damages and expenses incurred by an indemnified
party and referred to above in this Section 7 shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged
untrue statement or omission or alleged omission. Notwithstanding the
provisions of this Section 7, no Underwriter shall be required to contribute
any amount in excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
26
<PAGE> 27
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section, each person, if any, who
controls an Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act shall have the same rights to contribution as such
Underwriter, and each trustee of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act shall have the same rights to contribution as the Company. The
Underwriters' respective obligations to contribute pursuant to this Section 7
are several in proportion to the number of Initial Shares set forth opposite
their respective names in Schedule A hereto and not joint.
Section 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement and the Pricing Agreement, or contained in certificates of officers
of the Company submitted pursuant hereto, shall remain operative and in full
force and effect, regardless of any investigation made by or on behalf of any
Underwriter or any controlling person, or by or on behalf of the Company, and
shall survive delivery of the Shares to the Underwriters.
Section 9. Termination of Agreement. (a) The Representatives may
terminate this Agreement, by notice to the Company, at any time at or prior to
Closing Time (i) if there has been, since the date of this Agreement or since
the respective dates as of which information is given in the Prospectus, any
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company, whether or not
arising in the ordinary course of business, or (ii) if there has occurred any
material adverse change in the financial markets in the United States or any
outbreak of hostilities or escalation of existing hostilities or other calamity
or crisis the effect of which on the financial markets of the United States is
such as to make it, in the Representatives' reasonable judgment, impracticable
to market the Shares or enforce contracts for the sale of the Shares, or (iii)
if trading in the Shares of Beneficial Interest of the Company has been
suspended or limited by the Commission or the American Stock Exchange, or if
trading generally on either the American Stock Exchange or the New York Stock
Exchange has been suspended or limited, or minimum or maximum prices for
trading have been fixed, or maximum ranges for prices for securities have been
required, by either of said exchanges or by order of the Commission, the NASD
or any other governmental authority, or (iv) if a banking moratorium has been
declared by Federal, New York or District of Columbia
27
<PAGE> 28
authorities. As used in this Section 9(a), the term "Prospectus" means the
Prospectus in the form first used to confirm sales of the Shares.
(b) If this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other party except
as provided in Section 4, and provided further that Sections 6 and 7 hereof
shall survive such termination.
Section 10. Default by One or More of the Underwriters. If one or
more of the Underwriters shall fail at Closing Time to purchase the Shares
which it or they are obligated to purchase under this Agreement and the Pricing
Agreement (the "Defaulted Shares"), the Representatives shall have the right,
within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting Underwriters, or any other underwriters, to purchase all, but
not less than all, of the Defaulted Shares in such amounts as may be agreed
upon and upon the terms herein set forth; if, however, the Representatives
shall not have completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Shares does not exceed 10% of the
number of Initial Shares, each of the non-defaulting Underwriters shall be
obligated, severally and not jointly, to purchase the full amount thereof in
the proportions that their respective underwriting obligations hereunder bear
to the underwriting obligations of all non-defaulting Underwriters, or
(b) if the number of Defaulted Shares exceeds 10% of the number of
Initial Shares, this Agreement shall terminate without liability on the part of
any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement, either the Representatives or the Company shall
have the right to postpone Closing Time for a period not exceeding seven days
in order to effect any required changes in the Registration Statement or
Prospectus or in any other documents or arrangements.
Section 11. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Representatives c/o Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated at Merrill Lynch World
Headquarters, North Tower, World Financial Center, New York, New
28
<PAGE> 29
York 10281-1209, attention of Mr. Fred F. Hessinger, Vice President, Corporate
Syndicate; and notices to the Company shall be directed to it at Washington
Real Estate Investment Trust, 10400 Connecticut Avenue, Kensington, Maryland
20895, attention of: Benjamin H. Dorsey, Esq.
Section 12. Parties. This Agreement and the Pricing Agreement shall
each inure to the benefit of and be binding upon the Underwriters, the Company
and their respective successors. Nothing expressed or mentioned in this
Agreement or the Pricing Agreement is intended or shall be construed to give
any person, firm or corporation, other than the Underwriters and the Company
and their respective successors and the controlling persons and officers and
trustees referred to in Sections 6 and 7 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or the Pricing Agreement or any provision herein or
therein contained. This Agreement and the Pricing Agreement and all conditions
and provisions hereof and thereof are intended to be for the sole and exclusive
benefit of the parties hereto and thereto and their respective successors and
said controlling persons and officers and trustees and their heirs and legal
representatives, and for the benefit of no other person, firm or corporation.
No purchaser of Shares from any Underwriter shall be deemed to be a successor
by reason merely of such purchase.
Section 13. Governing Law and Time; Miscellaneous. This Agreement
and the Pricing Agreement shall be governed by and construed in accordance with
the laws of the State of New York applicable to agreements made and to be
performed in said State. Specified times of day refer to New York City time.
The Washington Real Estate Investment Trust is a common law trust
organized under District of Columbia law on November 18, 1960. Under the terms
of the Declaration of Trust all persons dealing with the Company shall look
solely to the Company property for satisfaction of claims of any nature, and no
trustee, officer or agent of the Company shall be held to any personal liability
whatsoever, in tort, contract or otherwise as the result of the execution and
delivery of this Agreement by the Company.
29
<PAGE> 30
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
instrument along with all counterparts will become a binding agreement between
the Underwriters and the Company in accordance with its terms.
Very truly yours,
WASHINGTON REAL ESTATE INVESTMENT
TRUST
By
------------------------------
President and Chief Executive
Officer
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
ALEX. BROWN & SONS INCORPORATED
A.G. EDWARDS & SONS, INC.
LEGG MASON WOOD WALKER, INCORPORATED
By: Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By
--------------------------------------
For themselves and as Representatives
of the other Underwriters named
in Schedule A hereto.
30
<PAGE> 31
SCHEDULE A
<TABLE>
<CAPTION>
Number
of Initial
Name of Underwriter Shares
------------------- ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Alex. Brown & Sons Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A.G. Edwards & Sons, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legg Mason Wood Walker, Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . .
_________
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,500,000
=========
</TABLE>
<PAGE> 32
Exhibit A
3,500,000 Shares
WASHINGTON REAL ESTATE INVESTMENT TRUST
(a District of Columbia business trust)
Shares of Beneficial Interest
(No Par Value)
PRICING AGREEMENT
July __, 1995
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
ALEX. BROWN & SONS INCORPORATED
A.G. EDWARDS & SONS, INC.
LEGG MASON WOOD WALKER, INCORPORATED
as Representatives of the several Underwriters
named in the within-mentioned Purchase Agreement
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1209
Dear Sirs:
Reference is made to the Purchase Agreement, dated July __, 1995 (the
"Purchase Agreement"), relating to the purchase by the several Underwriters
named in Schedule A thereto, for whom Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Alex. Brown & Sons Incorporated, A.G.
Edwards & Sons, Inc. and Legg Mason Wood Walker, Incorporated are acting as
representatives (the "Representatives"), of the above shares of beneficial
interest (the "Shares") of Washington Real Estate Investment Trust
(the "Company").
Pursuant to Section 2 of the Purchase Agreement, the Company agrees
with each Underwriter as follows:
1. The initial public offering price per share for the
Shares, determined as provided in said Section 2, shall be $______.
<PAGE> 33
2. The purchase price per share for the Shares to be paid by
the several Underwriters shall be $______, being an amount equal to
the initial public offering price set forth above less $_______ per
share.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement between the Underwriters and the Company in accordance with its
terms.
Very truly yours,
WASHINGTON REAL ESTATE INVESTMENT
TRUST
By
-------------------------------
President and Chief Executive
Officer
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
ALEX. BROWN & SONS INCORPORATED
A.G. EDWARDS & SONS, INC.
LEGG MASON WOOD WALKER, INCORPORATED
By: Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By
---------------------------------------
Vice President
For themselves and as Representatives
of the other Underwriters named in
Schedule A to the Purchase Agreement.
2
<PAGE> 1
DECLARATION OF TRUST
of
WASHINGTON REAL ESTATE INVESTMENT TRUST
as amended to June 20, 1973
as amended to June 26, 1974
as amended to June 19, 1980
as amended to June 24, 1982
as amended to August 9, 1983
as amended to June 19, 1985
as amended to June 24, 1987
<PAGE> 2
WASHINGTON REAL ESTATE INVESTMENT TRUST
Table of Contents
to
DECLARATION OF TRUST
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1.
Name and Title to Property. 1
ARTICLE 2.
Powers of Trustees.
Section 2.1. General Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.2. Acquisition and Dealing in Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.3. Acquisition and Dealing in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.4. Manner of Holding Title to Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.5. Power to Borrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.6. Power to Lend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.7. Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.8. Organization of Corporations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.9. Rights with Respect to Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.10. Delegation of Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.11. Collection and Compromise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.12. Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.13. Power to Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.14. Deposit of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.15. Allocation of Receipts and Expenses between
Capital and Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.16. Valuations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.17. Fiscal Year and Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.18. Respecting Certain Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.19. Other Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.20. Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 3.
Limitations of Liability of Shareholders, Trustees, and Others.
Section 3.1. Liability to Third Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.2. Trustees' Right of Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.3. Limitation of Shareholder Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
<PAGE> 3
<TABLE>
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ARTICLE 4.
Shares of Beneficial Interest.
Section 4.1. General Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.2. Right to Certificate and Form of
Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.3. Issuance of Additional Shares and Fractional
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 5.
Record and Transfers of Shares.
Section 5.1. Register of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.2. Transfer Agent and Registrar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.3. Deposit of Certificates with Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.4. Method of Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.5. Transfer by Operation of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.6. Method of Recording Certain Type of
Share Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.7. Record of Register Conclusive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.8. Purchase or Retention Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.9. Notice to Shareholders; Loss of Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 6.
Characteristics of Shares.
Section 6.1. Ownership of Property in Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 6.2. Shares Deemed Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 6.3. Rights of Shares Acquired by Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6.4. Dealing in Shares by Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 7.
Meetings of Shareholders.
Section 7.1. Annual and Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 7.2. Notice of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 7.3. Effect of Shareholder Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 7.4. Establishment of Record Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 7.5. Rights to Vote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 7.6. Report to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 7.7. Right to Inspect Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 8.
Trustees.
Section 8.1. Number of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
- ii -
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 8.2. Term of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 8.3. Resignation of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 8.4. Appointment of Trustee to Fill Vacancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 8.5. Effect of Death, Resignation, or Removal
of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 8.6. Action by Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 8.7. Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 8.8. By-laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 8.9. Executive Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 9.
Distributions of Property.
Section 9.1. Distributions of Profits or Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 9.2. Retention of Profits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 10.
Amendment of Trust; Removal of Trustees.
Section 10.1. Amendment of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 10.2. Removal of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 10.3. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 11
Miscellaneous.
Section 11.1. Definition of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 11.2. District of Columbia Law Governs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 11.3. Execution of Trust in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 11.4. Certificate of One or More Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 11.5. Effect of Certificate in Other Jurisdictions . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 12.
Duration of Trust. 22
ARTICLE 13.
Federal Housing Administration Insured Mortgages. 22
ARTICLE 14.
Investment Policies.
Section 14.1. Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 14.2. Mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 14.3. Borrowing (Deleted June 20, 1973) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 14.4. Temporary Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 14.5. Area of Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
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<PAGE> 5
<TABLE>
<S> <C> <C> <C>
Section 14.6. Prohibited Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 14.7. Prohibited Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 14.8. Dealings with Affiliated Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 15. 23
</TABLE>
- iv -
<PAGE> 6
DECLARATION OF TRUST
OF
WASHINGTON REAL ESTATE INVESTMENT TRUST
THIS DECLARATION OF TRUST made this 18th day of November, 1960, by B.
Franklin Kahn of Bethesda, Maryland, James K. Sullivan of Washington D.C., and
Benjamin H. Dorsey of Westmoreland Hills Maryland,
WITNESS that:
WHEREAS the Trustees are desirous of forming a trust for the purpose
of acquiring, holding, managing, improving, dealing with, and disposing of
property real and/or personal, wherever situated; and
WHEREAS, in furtherance of such purpose, the Trustees are acquiring
and may hereafter acquire certain property and shall hold and manage all such
property as such Trustees in the manner hereinafter stated; and
WHEREAS it is likewise proposed that the beneficial interest in the
property from time to time held by the Trustees shall be divided into shares to
be evidenced by certificates therefor, as hereinafter provided;
NOW, THEREFORE, the Trustees hereby declare that they will hold all
property of every type and description which they are acquiring or may
hereafter acquire as such Trustees, together with the proceeds thereof, in
trust, to manage and dispose of the same or the benefit of the holders from
time to time of the certificates of shares being issued and to be issued
hereunder and in the manner and subject to the stipulations contained herein,
to wit:
ARTICLE 1.
Name and Title to Property.
The name of this Trust shall be "Washington Real Estate Investment
Trust" and so far as may be practicable the business of the Trust shall be
conducted and transacted under that name, which name (and the words "this
Trust" wherever used in this Declaration, except where the context otherwise
requires) shall refer to the Trustees as trustees but not personally and shall
not refer to the officers, agents, or shareholders of this Trust. All the
property subject from time to time to this Declaration of Trust shall be vested
in the Trustees as joint tenant and held by and transferred to the Trustees as
joint tenant except as provided in Section 2.4 of Article 2 hereof.
<PAGE> 7
-2-
ARTICLE 2.
Powers of Trustees.
Section 2.1. The Trustees shall have without other or further
authorization full and absolute power ad control and authority over the Trust
property held by them at any time hereunder and over the business of the Trust
to the same extent as if the Trustees were the sole owners of such property and
business in their own right, subject only to the limitations herein expressly
stated, and to the superior control of the shareholders so far as the same is
herein expressly stated. No person (the word "person" whenever used in this
Declaration, except where the context otherwise requires, to be deemed to mean
any individual, individuals, association, trust, partnership, corporation, or
other entity) shall in any event be bound to see to the application of any
money or property paid to or delivered to the Trustees or their authorized
representative. No investment or reinvestment of the Trust property hereunder
shall be deemed improper because of its speculative character or because a
greater proportion of the Trust property is invested therein than is usual for
trustees, or by reason of any interest therein, direct or indirect, of any
Trustee or any other party whatsoever. Without restricting or limiting the
generality of the foregoing, such powers of the Trustees shall include among
others the powers enumerated in Sections 2.2 to 2.20, inclusive, of this
Article 2.
Section 2.2. The Trustees shall have power as principal, agent, or
otherwise, for such consideration as they may deem proper, to purchase, acquire
through the issuance of shares representing a beneficial interest in the Trust
property or through the issuance of notes, debentures, bonds, or other
obligations of the Trust, or otherwise acquire, hold, manage, improve, lease
(including building leases, part of the consideration for which is the building
on or adding to the premises by the lessee) for a term extending beyond the
possible termination of the Trust or for a lesser term, rent, convey, sell,
exchange, mortgage (with or without power of sale), release, partition, or
otherwise deal in real estate of any type and description, including any type
of interest therein, and/or buildings and structures and tangible personal
property of any type and description situated thereon or elsewhere, such real
estate and/or buildings and structures and personal property being located in
any part of the United States of America or any of the territories or
possessions thereof or the Dominion of Canada; and to erect, construct, alter,
repair, demolish or otherwise physically affect any buildings or structures of
any type or description located in any part of the United States of America or
any of the territories or possessions thereof or the Dominion of Canada.
<PAGE> 8
-3-
Section 2.3. The Trustees shall have power as principal, agent, or
otherwise, for such consideration as they may deem proper, to purchase, acquire
through the issuance of shares representing a beneficial interest in the Trust
property, or through the issuance of notes, debentures, bonds, or other
obligations of this Trust, or otherwise acquire, hold, sell, exchange, pledge,
collect, pay, underwrite, and in any manner deal in stocks, bonds, notes,
certificates of indebtedness, debentures, mortgages and deeds of trust (first
or otherwise), bank acceptances, drafts, certificates of interest, securities,
obligations, and in general any property or rights (legal or equitable) owned,
held, created, or issued by or representing an interest in any corporation,
business trust (including the business trust created by these presents),
trusts, partnership, or other organization whether domestic or foreign, any
individual, the United States of America or any of the several states or
territories or any political subdivisions or agencies thereof, or foreign
governments or political subdivisions thereof.
Section 2.4. The Trustees shall have power to cause legal title to
any property of this Trust to be held by and/or in the name of one or more of
the Trustees or by any other person, or on such terms, in such manner, and with
such powers as the Trustees hereunder may determine and without disclosure that
the Trustees are interested therein.
Section 2.5. The Trustees shall have power to borrow money for the
purposes of this Trust, and to give notes, debentures, bonds, and other
negotiable or non-negotiable instruments of this Trust therefor, to enter into
other obligations on behalf of the Trust, and to mortgage and pledge the real
and personal property of this Trust or any part thereof to secure such notes,
debentures, bonds, contracts, or other obligations. Any notes, debentures,
bonds, instruments, or other obligations of or on behalf of this Trust
authorized pursuant to section 2.2, 2.3, or 2.5 of the Article 2 may be
convertible into shares of beneficial interest described in Article 4 hereof.
Section 2.6. The Trustees shall have power to loan money and to
invest and reinvest any funds of the Trust as they shall deem wise; and to
create a reserve fund or reserve funds for such purposes as the Trustees deem
advisable and invest or reinvest the same in such manner as they may deem best.
Section 2.7. The Trustees shall have power to pay all taxes or
assessments, of whatever kind or nature imposed upon or against the Trustees
individually or collectively in connection with the Trust property, or upon or
against the Trust property or any part thereof; and to make with the District
of Columbia or any State or other taxing authority any agreement for the
payment of taxes to said District of Columbia or any State or other
<PAGE> 9
-4-
taxing authority, whether or not said taxes would otherwise be payable or
assessable by or against or in respect of the Trustees or the Trust property or
the income therefrom, all as may be required or permitted by any present or
future law; and for any of the foregoing purposes to make such returns and do
all such other acts and things as may be deemed by the Trustees necessary or
desirable.
Section 2.8. The Trustees shall have power to cause to be organized
or assist in organizing a corporation or corporations under the laws of any
jurisdiction or any other trust, association, or other organization to take
over the Trust property or any part or parts thereof or to carry on any
business in which this Trust shall directly or indirectly have any interest,
and to sell, convey, and transfer the Trust property or any part or parts
thereof to any such corporation, trust association, or organization in exchange
for the shares or securities thereof or otherwise, and to lend money to,
subscribe for the shares or securities of, and enter into any contracts with
any such corporation, trust, association, or organization, or any corporation,
trust, partnership, association, or organization in which this Trust holds or
is about to acquire shares or any other interest.
Section 2.9. The Trustees shall have power to exercise all the
rights, powers and privileges appertaining to the ownership of all or any
securities forming part of the Trust property to the same extent that an
individual might, and without limiting the generality of the foregoing, to vote
or give any consent, request, or notice or waive any notice either in person or
by proxy or power of attorney with or without power of substitution, to one or
more persons, which proxies and powers of attorney may be for meetings or
action generally or for any particular meetings or action, and any include the
exercise of discretionary powers.
Section 2.10. The Trustees shall have power to delegate from time to
time to such one or more of their number or to such other person as the
Trustees may deem best, the doing of such things and the execution of such
deeds or other instruments either in the names of all the Trustees or as their
attorney or attorneys or otherwise, as the Trustees may from time to time deem
expedient.
Section 2.11. The Trustees shall have power to collect, sue for,
receive and receipt for all sums of money coming due to this Trust, to consent
to the extension of the time for payment, or to the renewal, of any bonds or
other securities, mortgages, deeds of trust or other obligations, and to engage
or intervene in, prosecute, defend, compound, compromise, abandon, or adjust by
arbitration or otherwise any actions, suits, proceedings, disputes, claims,
demands, or things relating to the Trust
<PAGE> 10
-5-
property; to be parties to reorganizations and to transfer to and deposit with
any corporation, committee, voting trustees, or other persons any stocks,
shares, or bonds, or other securities or obligations of any corporation, trust,
association, or other organization, the securities of which form a part of the
Trust property, for the purpose of any reorganization of any such corporation,
trust, association, or other organization, or otherwise to participate in any
arrangement for enforcing or protecting the interests of the Trustees as the
owners or holders of such stocks, shares, bonds, or other securities or
obligations and to pay any assessment levied in connection with such
reorganization or arrangement; and to give time with or without security for
the payment or delivery of any debts or property and to execute and enter into
releases, agreements, and other instruments; and to pay or satisfy any debts or
claims upon any evidence that the Trustees shall think sufficient.
Section 2.12. The Trustees shall have power to incur and pay any
charges or expenses in the opinion of the Trustees necessary or incidental to
or proper for carrying out any of the purposes of this Trust; to appoint or
contract with any one or more of themselves or any firm in which one or more of
them may be members, or with any other person, to carry on and supervise all or
any part of the active management of the property and business of the Trust, or
to give investment advice, with such rights and such compensation as the
Trustees may deem proper; and to employ such clerical assistance as they deem
necessary to the transaction of the business of the Trust and such other
persons, including consultants, accountants, technical advisers, attorneys,
brokers, corporate fiduciaries, depositaries, corporations, escrow agents,
partnerships, or trusts (including a corporation, partnership, or trust of
which one or more of the Trustees is a stockholder, member, or Trustees) and to
fix their duties, periods of employment and compensation.
Section 2.13. The Trustees shall have power to endorse or guarantee
the payment of any notes or other obligations of any person; to make contracts
of guaranty or suretyship, or enter into other obligations therefor; and to
mortgage and pledge the real and personal property of this Trust or any part
thereof to secure any or all of such obligations.
Section 2.14. The Trustees shall have power to deposit any moneys or
securities included in the Trust property with any one or more banks, trust
companies or other banking institutions deemed by the Trustees to be
responsible, such moneys or securities to be subject to withdrawal on notice or
upon demand and in such manner as the Trustees may determine, and the Trustees
shall have no responsibility for any loss which may occur by reason of the
failure of the person with whom the moneys or securities have been deposited
properly to account for the moneys or securities so deposited.
<PAGE> 11
-6-
Section 2.15. The Trustees shall have power to determine conclusively
whether any moneys, securities, or other properties of the Trust property are
for the purposes of the Trust to be considered as capital or income and in what
manner any expenses or disbursements are to be borne as between capital and
income whether or not in the absence of this provision such moneys, securities,
or other properties would be regarded as capital or as income and whether or
not in the absence of this provision such expense or disbursement would
ordinarily be charged to capital or to income.
Section 2.16. The Trustees shall have power to determine conclusively
the value of any of the real estate, securities, or other properties of this
Trust and of any services, securities, property or other consideration
hereafter to be acquired by this Trust; and to revalue the real estate,
securities, or other properties of the Trust from time to time in accordance
with appraisals made by one or more of the Trustees or any one or more of such
appraisers as they deem responsible and experienced, and to keep the books of
the Trust and render reports to the shareholders of the Trust on the basis of
the figures so adopted.
Section 2.17. The Trustees shall have power to determine the fiscal
year of the Trust and the method or form in which its accounts shall be kept
and from time to time change the fiscal year or method or form of accounts.
Section 2.18. No contracts or other transactions between or among the
Trustees, the shareholders, or any other person and no act of any of them shall
be affected by the fact that such Trustees, shareholders, or any other person
are directly or indirectly interested in or are Directors, officers, members,
shareholders, or fiduciaries of such other person and/or this Trust or
otherwise connected with such other person and/or this Trust.
(a) No contract or other transaction between the Trust
and one or more of its Trustees or any other trust, corporation, firm,
association or entity in which one or more of the Trustees are
trustees, directors or officers or have a material financial interest,
shall be void or voidable because of such relationship or interest or
because such Trustee or Trustees are present at the meeting of the
Trustees or a committee thereof which authorizes, approves or ratifies
such contract or transaction, if:
(1) the fact of such relationship or interest is
disclosed or known to the Trustees or committee which authorizes,
approves or ratifies the contract or transaction by a vote or consent
sufficient for the
<PAGE> 12
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purpose without counting the votes or consents of such interested
Trustee or Trustees; or
(2) the fact of such relationship or interest is
disclosed or known to be the shareholders entitled to vote and they
authorize, approve or ratify such contract or transaction by vote or
written consent; or
(3) the contract or transaction is fair and reasonable to
the Trust.
Common or interested Trustees may be counted in determining
the presence of a quorum at a meeting of the Trustees or a committee
thereof which authorizes, approves or ratifies such contract or
transaction.
Any contract or transaction authorized, approved or ratified
in accordance with this Section (a) shall be presumed to be as valid
as if such contract or transaction had been entered into with a
disinterested party.
Section 2.19. The Trustees shall have power to do all such other
matters and things as in their judgment will promote or advance the business
which they are authorized to carry on although such matters or things are not
herein specifically mentioned.
Section 2.20. The Trustees shall not have the power or authority to
issue face amount certificates or periodic payment plan certificates as such
terms are defined in the Investment Company Act of 1940, nor shall the Trustees
invest in investment securities, including certificates of interest or shares
of beneficial interest in other real estate investment trusts, beyond 25% of
the net assets of the Trust.
ARTICLE 3.
Limitations of Liability of
Shareholders, Trustees, and Others.
Section 3.1.
(a) No Trustee or officer of this Trust shall be
personally liable, in tort, contract or otherwise, in connection with
Trust property or the affairs of this Trust, or on account of his own
acts or omissions to this Trust, or to any shareholder, Trustee,
officer or agent thereof except for (i) any breach of the duty of
loyalty of the Trustee or officer to the Trust or its shareholders,
(ii) acts or omissions not in good faith or which involve intentional
<PAGE> 13
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misconduct or a knowing violation of law, or (iii) any transaction
from which the Trustee or officer derived any improper personal
benefit.
(b) All persons shall look solely to the Trust property
for satisfaction of claims of any nature arising in connection with
the affairs of this Trust.
Section 3.2.
(a) Each individual who was or is made a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
("Proceeding"), by reason of the fact that he, or an individual for
whom he is the legal representative, is or was a Trustee or officer of
the Trust or is or was serving at the request of the Trust as a
director, trustee, officer, employee or agent of another entity
(including service with respect to an employee benefit plan) whether
the basis of such Proceeding is alleged action in an official capacity
as a trustee, director, officer, employee or agent or in any other
capacity while serving as a director, trustee, officer, employee or
agent, shall be indemnified and held harmless by the Trust to the
fullest extent not prohibited to directors and officers of
corporations by the District of Columbia Business Corporations Act
(the "Law"), as the same exists or hereafter may be amended (but, in
the case of any such amendment, only to the extent that such amendment
permits broader indemnification rights than the Law permitted prior to
such amendment) against all expenses, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and
amounts paid or to be paid in settlement) reasonably incurred or
suffered by such individual in connection therewith. Such right shall
include the right to be paid by the Trust expenses incurred in
defending any such Proceeding in advance of its final disposition;
provided, however, that the payment of such expenses incurred by a
Trustee or officer in his capacity as a Trustee or officer (and not in
any other capacity in which service was or is rendered by such person
while a Trustee or officer, including, without limitation, service to
an employee benefit plan) in advance of the final disposition of such
Proceeding, shall be made only upon delivery to the Trust of an
undertaking, by or on behalf of such Trustee or officer, to repay all
amounts so advanced if it should be determined ultimately that such
Trustee or officer is not entitled to be indemnified under this
section or otherwise.
<PAGE> 14
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(b) The rights conferred on an individual by Paragraph
(a) of this Section shall not be exclusive of any other right which
such individual may have or hereafter acquire under any statute,
provision of the Declaration of Trust, By-laws, agreement, vote of
shareholders or disinterested Trustees or otherwise.
Section 3.3. To shareholder, as such, of this Trust shall be held to
any personal liability whatsoever, in tort, contract or otherwise, in
connection with Trust property or the affairs of this Trust or upon any
obligation of the Trust; and this Trust will indemnify and hold harmless each
shareholder from and against any and all losses, damages and liabilities
(including any reasonable expenses, including legal expenses, incurred by the
shareholder after the giving of the notice hereunder and in conformity with the
provisions of this section 3.3), if the shareholder complies with the following
conditions. After any claim is asserted in writing, or any suit or action is
brought against any shareholder, such shareholder shall notify the Trust
thereof within ten (10) business days after such shareholder has actual
knowledge of the same, and shall thereafter fully cooperate with the Trust in
defending such claim, suit or action in such manner as the Trust alone may see
fit. The Trust shall have the right to employ counsel of its choosing to
defend any such claim, suit or action. In the event that the Trust fails to
diligently defend against any such claim, suit or action, the shareholder shall
have the right to employ counsel of his choosing and to take such other action
and incur such other expense as is reasonably necessary to conduct such
defense.
ARTICLE 4.
Shares of Beneficial Interest.
Section 4.1. The shares issuable hereunder by the Trustees shall be
without par value. No assessment shall ever be made upon shareholders.
Section 4.2. Every shareholder shall be entitled to receive a
certificate in such form as the Trustees shall from time to time approve
specifying the number of shares held by him. The certificates in the form so
approved shall be treated as negotiable and title thereto and to the shares
represented thereby shall be transferred by delivery thereof to the same extent
in all respects as a stock certificate and the shares represented thereby of
any business corporation. Unless otherwise determined by the Trustees, such
certificates shall be signed by the President of the Trustees, and shall be
countersigned by a Transfer Agent, and registered by a Registrar, if any.
There shall be filed with each Transfer Agent and Registrar, if any, a copy of
the form of certificate so approved
<PAGE> 15
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by the Trustees, certified by the President of the Trustees, and such form
shall continue to be used unless and until the Trustees approve some other
form. In case any one or more officers of this Trust who shall have signed
certificates shall cease to be such officer or officers before the certificates
so signed shall have been actually issued, such certificates my nevertheless be
issued with the same effect as though the persons who signed such certificates
had not ceased to be such officers of this Trust. The Trustees may in their
discretion authorize certificates to be signed or authenticated by the
facsimile signature of the officer or officers who are authorized to sign such
certificates; provided that any certificate signed or authenticated by the
facsimile signature of an officer shall not be valid unless countersigned by a
Transfer Agent.
Section 4.3. The Trustees in their discretion may from time to time
without vote of the shareholders issue shares of this Trust, in addition to the
then issued and outstanding shares and shares held in the treasury, to such
party or parties and for such property or consideration, at such time or times,
and on such terms as the Trustees may deem best, and may in such manner acquire
other assets (real, personal, or mixed) and businesses, and no prior offering
thereof to any of the shareholders hereunder need be made. In connection with
any issuance of shares, the Trustees may issue fractional shares or may provide
for the issue of scrip for fractions of shares and determine the terms of such
scrip including, without limitation, the time within which the same must be
surrendered for exchange into full shares and the rights if any of holders of
scrip upon the expiration of the time so fixed, the rights if any to receive
proportional distributions, and the rights if any to redeem scrip for cash, or
the Trustees may in their discretion, or if they see fit at the option of each
shareholder, provide in lieu of scrip for the adjustment of fractions in cash.
The provisions of Section 4.2 hereinabove relative to certificates for shares
shall apply so far as applicable to such scrip, except that such scrip may in
the discretion of the Trustees be signed by a Transfer Agent alone. The
Trustees may also authorize the issuance of warrants or options to purchase
shares from time to time to such persons, including themselves, upon such terms
and conditions and for such consideration as they determine to be proper.
ARTICLE 5.
Record and Transfer of Shares.
Section 5.1. A register shall be kept by or on behalf of the
Trustees, under the direction of the Trustees, which shall contain the names
and addresses of the shareholders and the number of shares held by them
respectively and the numbers of the certificates representing the same and a
record of all transfers
<PAGE> 16
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thereof. Only shareholders whose certificates are so recorded shall be
entitled to vote or to receive dividends or otherwise to exercise or enjoy the
rights of shareholders. No shareholder shall be entitled to receive payment of
any dividend, nor to have notice given to him as herein provided, until he has
given his address to a Transfer Agent or such other officer or agent of the
Trustees as shall keep the said register for entry thereon.
Section 5.2. The Trustees shall have power to employ a transfer agent
or transfer agents, and if they so determine, a registrar or registrars. The
transfer agent or transfer agents may keep the said register and record therein
the original issues and transfers, if any, of the said shares and countersign
certificates of shares issued to the persons entitled to the same. The
transfer agents and registrars shall perform the duties usually performed by
transfer agents and registrars of certificates of stock in a corporation,
except as modified by the Trustees.
Section 5.3. In accordance with the usual custom of corporations
having a transfer agent, signed certificates for shares in blank may be
deposited with any transfer agent of this Trust, to be used by the transfer
agent in accordance with authority conferred upon it as occasion may require,
and in so doing the signers of such certificates shall not be responsible for
any loss resulting therefrom.
Section 5.4. Shares shall be transferable on the records of the Trust
(other than by operation of law) only by the record holder thereof or by his
agent thereunto duly authorized in writing, upon delivery to the Trustees or a
transfer agent of this Trust of the certificate or certificates therefor,
properly endorsed or accompanied by duly executed instrument or instruments of
transfer, together with such evidence of the genuineness of each such
endorsement, execution, and authorization and of other matters as may
reasonably be required. Upon such delivery the transfer shall be recorded on
the register of the Trust and a new certificate for the shares so transferred
shall be issued to the transferee, and in case of a transfer of only a part of
the shares represented by any certificate a new certificate for the residue
shall be issued to the transferor. But until such record is made the
shareholder of record shall be deemed to be the holder of such shares for all
purposes hereof and neither the Trustees nor any transfer agent or registrar
nor any officer or agent of this Trust shall be affected by any notice of the
proposed transfer.
Section 5.5. Any person becoming entitled to any shares in
consequence of the death, bankruptcy or insolvency of any shareholder, or
otherwise by operation of law, shall be recorded as the holder of the said
shares and receive a new certificate for the same upon production of the proper
evidence thereof and
<PAGE> 17
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delivery of the existing certificate to the Trustees or a transfer agent of
this Trust. But until such record is made, the shareholder of record shall be
deemed to be the holder of such shares for all purposes hereof and neither the
Trustees nor any transfer agent or registrar nor any officer or agent of this
Trust shall be affected by any notice of such death, bankruptcy, or insolvency.
Section 5.6. The Trustees may treat two or more persons holding any
share as joint tenants of the entire interest therein unless their ownership is
expressly otherwise recorded on the register of the Trust, but no entry shall
be made in the register or in any certificate that any person is in any other
manner entitled to any future, limited or contingent interest in any share;
provided, however, that any person recorded as a holder of any share may,
subject to the provisions hereinafter contained, be described in the register
or in any certificate as a fiduciary of any kind and any customary words may be
added to the description of the holder to identify the nature of such fiduciary
relationship.
Section 5.7. The Trustees shall not, nor shall the shareholders or
any officer, transfer agent or other agent of this Trust or of the Trustees, be
bound to see to the execution of any trust, express, implied or constructive,
or of any charge, pledge, or equity to which any of the shares of the Trust or
any interests therein are subject, or to ascertain or inquire whether any sale
or transfer of any such shares or interest therein by any such shareholder or
his personal representatives is authorized by such trust, charge, pledge, or
equity, or to recognize any person as having any interest therein except for
the persons recorded as such shareholders. The receipt of the person in whose
name any share is recorded, or if such share is recorded in the names of more
than one person, the receipt of any one of such persons or of the duly
authorized agent of any such person shall be a sufficient discharge for all
dividends and other money and for all shares, bonds, obligations, and other
property payable, issuable, or deliverable in respect of such share and from
all liability to see to the application thereof.
Section 5.8. If any person, corporation, partnership, trust or any
other legal entity is or becomes at any time the beneficial owner, directly or
indirectly, of more than ten percent (10%) of the outstanding shares, or if the
tax status of the Trust under Public Law 86-779 or any other tax statute or
regulation is or can be endangered by the purchase or retention of shares by
any person, corporation, partnership, trust or any other legal entity, the
Trustees may, in their sole discretion, refuse to sell, transfer or deliver
shares to such person or entity, or, may repurchase any or all shares held by
such person or entity at cost or at the last sale price of a share as of the
date immediately preceding the day on which the demand for
<PAGE> 18
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repurchase is mailed, whichever price is higher. After the mailing of the
demand for repurchase, the shares may be cancelled upon the records of the
Trust by the order of the Trustees and the Trust shall pay promptly for such
shares as above determined.
Section 5.9. Any and all notices to which shareholders hereunder may
be entitled and any and all communications shall be deemed duly served or given
if mailed, postage prepaid, addressed to shareholders of record at their last
known post office address as recorded on the register of the Trustees. In case
of the loss, mutilation, or destruction of any certificate of shares hereunder,
the Trustees may issue or cause to be issued a new certificate on such terms as
they may see fit.
Section 5.10. If the Trustees shall at any time and in good faith be
of the opinion that direct or indirect ownership of shares of this Trust has or
may become concentrated to an extent which would cause any rent to be paid to
this Trust by a "sister corporation," if one existed, to fail to qualify or be
disqualified as rent from real property by virtue of Section 856(d)(2)(B) of
the Internal Revenue Code of 1954 (the "Code"), or similar provisions of
successor statutes, pertaining to the qualification of this Trust as a real
estate investment trust, trustees shall have the power (1) by lot or other
means deemed equitable by them to call for purchase from any shareholder of
this Trust of such number of shares as shall be sufficient in the opinion of
the Trustees to maintain or bring the direct or indirect ownership of shares of
this Trust into conformity with the requirements of said Section 856(d)(2)(B)
pertaining to this Trust, and (2) to refuse to register the transfer of shares
to any person whose acquisition of such shares would, in the opinion of the
Trustees, result in this Trust being unable to conform to the requirements of
said Section 856(d)(2)(B). For purposes of this Section, the term "sister
corporation" means a corporation, the shares of which are owned by exactly or
substantially the same persons and in exactly or substantially the same numbers
as are the shares of this Trust. This Section shall apply even if a "sister
corporation" does not exist (1) at the time the Trustees determine that the
ownership of shares of this Trust has or may become so concentrated, or (2) at
the time the Trustees call shares for purchase or refuse to register the
transfer of shares.
The purchase price for the shares purchased pursuant hereto shall be
equal to the fair market value of such shares as reflected in the closing price
for such shares on the principal stock exchange on which such shares are listed
or, if such shares are not listed, then the last bid for the shares, as of the
close of business on the date fixed by the Trustees for such purchase or, if no
such quotation is available, as shall be determined in good faith by the
Trustees. From and after the date fixed for purchase by the Trustees, the
holder of any shares so called for purchase shall cease to be entitled to
dividends, voting rights
<PAGE> 19
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and other benefits with respect to such shares, except the right to payment of
the purchase price fixed as aforesaid.
In order to further assure that ownership of the shares does not
become so concentrated, any transfer of shares that would prevent amounts
received by this Trust from a "sister corporation," if one existed, from
qualifying as "rents from real property" as defined in Section 856(d) of the
Code, by virtue of the application of Section 856(d)(2)(B) of the Code, shall
be void ab initio and the intended transferee of such shares shall be deemed
never to have had an interest therein. If the foregoing provision is
determined to be void or invalid by virtue of any legal decision, statute, rule
or regulation, then the transferee of such shares shall be deemed to have acted
as agent on behalf of this Trust in acquiring such shares and to hold such
shares on behalf of this Trust. For purposes of determining whether this Trust
is in compliance with Section 856(d)(2)(B), Section 856(d)(5) of the Code, or
similar provisions of successor statutes shall be applied. The shareholders of
this Trust shall upon demand disclose to the Trustees in writing such
information with respect to their direct and indirect ownership of the shares
of this Trust as the Trustees deem necessary to determine whether this Trust
satisfies the provisions of Section 856(a)(5) and (6) and Section 856(d) of the
Code or the regulations thereunder as the same shall be from time to time be
amended, or to comply with the requirements of any other taxing authority.
ARTICLE 6.
Characteristics of Shares.
Section 6.1. The ownership of the Trust property of every description
and the right of the conduct of any business hereinbefore described are vested
exclusively in the Trustees, and the shareholders shall have no interest
therein other than the beneficial interest conferred by their shares issued
hereunder, and they shall have no right to call for any partition or division
of any property, profits, rights, or interests.
Section 6.2. The shares issued hereunder shall be personal property
giving only the rights in this instrument and in the certificates thereof
specifically set forth. The death of a shareholder during the continuance of
this Trust shall not terminate the Trust nor give his or her legal
representatives a right to an accounting or to take any action in the courts or
otherwise against other shareholders or the Trustees or the property held
hereunder, but shall simply entitle the legal representatives of the deceased
shareholder to demand any receive a new certificate of shares in place of the
certificate held by the deceased shareholder, and upon the acceptance of which
such
<PAGE> 20
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legal representatives shall succeed to all the rights of the deceased
shareholder under this Trust.
Section 6.3. Shares issued hereunder and purchased or otherwise
acquired by the Trustees for the account of the Trust shall not so long as they
belong to the Trust either receive dividends (except that they shall be
entitled to receive dividends payable in shares of the Trust) or be voted at
any meeting of the shareholders. Such shares may in the discretion of the
Trustees be cancelled and the number of shares authorized be thereby reduced,
or such shares may in the discretion of the Trustees be held in the treasury
and be disposed of by the Trustees at such time or times, to such party or
parties, and for such consideration as the Trustees may determine.
Section 6.4. The Trustees, or any one of them, may, in their
individual capacity, purchase and otherwise acquire or sell and otherwise
dispose of shares issued hereunder without restriction or liability to any
person.
ARTICLE 7.
Meetings of Shareholders.
Section 7.1. Annual meetings of the shareholders shall be held at a
convenient location on proper notice to shareholders following delivery of the
annual report. Special meetings of the shareholders shall be called at any
time and place when ordered by the President of the Trustees or a majority of
the Trustees, or upon the written request of the holders of 25% of the
outstanding shares, specifying the purpose or purposes for which such meeting
is called. If for any reason the annual meeting of the shareholders as herein
provided shall be omitted, a special meeting of the shareholders may
subsequently be held in lieu thereof and the business of the annual meeting may
be transacted thereat.
Section 7.2. Notice of all meetings of the shareholders shall be
given by a Trustee or other officer by mail to each shareholder at his
registered address, mailed at least fourteen (14) days before the meeting. No
business shall be transacted at any special meeting of shareholders unless
notice of such business has been given in the call for the meeting. Any
adjourned meeting may be held as adjourned without further notice.
Section 7.3. No action taken by the shareholders at any meeting other
than a meeting of the type specified either in Section 10.1 or Section 10.2
hereof (and then only if such action is taken by the percentage of shares in
each case therein specified) shall in any way bind the Trustees.
<PAGE> 21
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Section 7.4. For the purpose of determining the shareholders who are
entitled to vote or act at any meeting or any adjournment thereof, or who are
entitled to participate in any dividend, the Trustees may from time to time
close the transfer books for such period not exceeding twenty (20) days as the
Trustees may determine; or without closing the transfer books the Trustees may
fix a date not less than ten (10) nor more than ninety (90) days (1983
amendment) prior to the date of any meeting of shareholders or dividend payment
as a record date for the determination of shareholders entitled to vote at such
meeting or any adjournment thereof or to receive such dividend and any
shareholder who as a shareholder at the time so fixed shall be entitled to vote
at such meeting or any adjournment thereof or to receive such dividend even
though he has since that date disposed of his shares, and no shareholder
becoming such after said date shall be so entitled to vote at said meeting or
any adjournment thereof or to receive such dividend.
Section 7.5. At any meeting of the shareholders, any shareholder of
shares entitled to vote thereat may vote by proxy. Only shareholders of record
of such shares shall be entitled to vote and each full share shall be entitled
to one vote. Fractional shares shall not be entitled to any vote. When any
such share is held jointly by several persons, any one of them may vote at any
meeting in person or by proxy in respect of such share, but if more than one of
them shall be present at such meeting in person or by proxy, and such joint
owners or their proxies so present disagree as to any vote to be cast, such
vote shall not be received in respect of such share. If the holder of any such
share is a minor or a person of unsound mind, and subject to guardianship or to
the legal control of any other person as regards the charge or management of
such share, he may vote by his guardian or such other person appointed or
having such control, and such vote may be given in person or by proxy.
Section 7.6. At each annual meeting of the shareholders the Trustees
shall make a report upon the affairs of the Trust and upon its business and
operations, together with the statement of its financial standing as shown by
the books of account of the Trust. The Trustees shall have prepared and shall
submit to the Beneficiaries an annual report consisting of a balance sheet,
statement of income, and surplus of the Trust, and an opinion thereon of an
independent certified public accountant based on an examination of the books
and records of the Trust, which opinion shall not be materially limited in
scope and which shall be made in accordance with generally accepted auditing
procedures.
The aforesaid annual report shall be filed by the independent
certified public accountant who prepares the same with the Trustees and with
such federal or state regulatory authorities as shall require such filing with
them. The Trustees shall mail a copy of such annual report to each shareholder
at
<PAGE> 22
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his address as recorded on the books of the Trustees, as soon as practicable
after the close of the period covered by the report.
The Trustees shall have quarterly reports prepared and shall submit a
quarterly report to such federal or state regulatory authorities as shall
require the same. A quarterly report, which shall contain a current balance
sheet and statement of income, and surplus, may be unaudited.
Section 7.7. The records and books of account of the Trust shall be
open to the inspection of federal or state regulatory authorities at any
reasonable time or times, at the principal office of the Trust. Any
shareholder, upon written demand stating the specific purpose thereof, shall
have the right to examine the trust records at the principal office of the
Trust, as permitted under District of Columbia law to the same extent as is
permitted corporate shareholders.
ARTICLE 8.
Trustees.
Section 8.1. The number of Trustees shall not be less than three (3)
nor more than seven (7). Whenever a vacancy in the number of Trustees shall
occur, until such vacancy is filled, the continuing or surviving Trustee or
Trustees shall have all the powers granted to the Trustees and discharge all
the duties imposed upon the Trustees by this Declaration. The term "majority
of the Trustees" whenever used herein shall mean more than one-half of the
total number of Trustees then in office.
The following persons shall be the Trustees subject to the provisions
of Section 8.2 below: B. Franklin Kahn, Benjamin H. Dorsey, Arthur A. Birney,
William C. Eacho, Jr., Worthington H. Talcott, Jarvis J. Slade, Stanley S.
Snyder.
Section 8.2. The Trustees presently serving as such shall be divided
into three classes, as nearly equal in number as is feasible, with respect to
the term during which they shall severally hold office. One class shall serve
until the annual election of Trustees in 1969 and until their respective
successors are duly qualified and assume office; one class shall serve until
the annual election of Trustees in 1970 and until their respective successors
are duly qualified and assume office; and one class shall serve until the
annual election of Trustees in 1971 and until their respective successors are
duly qualified and assume office. Commencing in 1969 the Trustees shall be
elected for three year terms for the class of Trustees whose terms then expire,
so that the term of office of one class of Trustees shall expire each year.
The Trustees shall be individuals of full age and not under any legal
disability, and
<PAGE> 23
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no person shall qualify as a Trustee until he shall have either signed this
Declaration of Trust or agreed in writing to be bound in all respects by the
Declaration. No Trustee shall be required to give bond, surety or security to
secure the performance of his duties or obligations.
Section 8.3. Any Trustee may resign his trust by instrument in
writing signed by him and delivered or mailed to the President of the Trustees,
and such resignation shall take effect immediately or at a later date according
to the terms of the notice, but no such resignation shall become effective
unless and until a copy of such instrument shall have been acknowledged by the
resigning Trustee and recorded in the Office of the Recorder of Deeds for the
District of Columbia (hereinafter in this Declaration called the "Recorder's
Office").
Section 8.4. In case a vacancy in the number of Trustees shall occur
through death, resignation, or removal (unless the vacancy occurring through
removal has already been filled by the shareholders acting pursuant to the
provisions of Section 10.2 hereof), the remaining Trustees or Trustee may fill
such vacancy by appointing by an instrument in writing signed by a majority of
the Trustees such person as they or he in their or his absolute discretion
shall see fit, but no such appointment shall become effective unless and until
such instrument bearing the acceptance of the person so appointed shall have
been acknowledged by one or more of the existing Trustees and recorded in the
Recorder's Office. Thereupon the Trust property shall vest in the new Trustee
jointly with the continuing Trustee or Trustees without any further act or
conveyance.
Section 8.5. The death, resignation, or removal of any one or more of
the Trustees shall not operate to annul the Trust or to revoke any existing
agency created pursuant to the terms of this Declaration of Trust. No person
interested in any investment advisor to the Trust shall sell real property to
the Trust or buy real property from the Trust.
Section 8.6. Meetings of the Trustees shall be held from time to time
upon the call of the President of the Trustees or any two of the Trustees.
Notice of any meetings shall be given not less than three (3) days before the
meeting but may be waived by any Trustee either before or after such meeting.
The concurrence of all the Trustees shall not be necessary for the validity of
any action taken by them, but a decision expressed in a vote passed at a
meeting by a majority of the Trustees or expressed in a writing signed by a
majority of the Trustees without a meeting, shall constitute the action of the
Trustees and have the same effect as if assented to by all. At any meeting a
majority of the Trustees shall constitute a quorum. Any deed, mortgage, lease
or other instrument or writing executed by two or more of the Trustees shall be
valid and binding upon
<PAGE> 24
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the Trustees and upon the Trust when authorized by a vote or writing passed or
signed as above provided.
Section 8.7. The Trustees shall annually elect from among their
number a President, who shall be the principal officer of the Trust, and may
elect from among their number or otherwise a Secretary and such other officers
or agents as they may deem advisable and may act in any manner by or through
any such officer or agent. The Trustees shall fix the compensation of all
officers whom they may elect or appoint, shall receive reasonable compensation
for their general services as Trustees and officers hereunder, and may pay
themselves or any one or more of them such compensation for special services as
they in good faith may deem reasonable. The aggregate annual expenses of every
character paid or incurred by the Trust, excluding interest, taxes, expenses in
connection with the issuance of securities, shareholder relations, and
acquisition, operation, maintenance, protection and disposition of Trust
properties, but including advisory fees and mortgage servicing fees and all
other expenses, shall not exceed the greater of: 1. 1-1/2% of the average net
assets of the Trust, net assets being defined as total invested assets at cost
before deducting depreciation reserves, less total liabilities, calculated at
least quarterly on a basis consistently applied; or 2. 25% of the net income
of the Trust, excluding provision for depreciation and realized capital gains
and losses and extraordinary items, and before deducting fees and mortgage
servicing fees and all other expenses, calculated at least quarterly on a basis
consistently applied; but in no event shall aggregate annual expenses exceed
1-1/2% of the total invested assets of the Trust at year end.
Section 8.8. The Trustees may adopt a seal and from time to time
adopt, amend or repeal by-laws for the conduct of their business, and in such
by-laws may define duties of their officers, agents, servants, and
representatives.
Section 8.9. The Trustees may appoint from among their own number an
executive committee of two or more persons to whom they may delegate such of
the powers herein given to the Trustees as they may deem expedient, except as
herein otherwise provided.
ARTICLE 9.
Distributions of Property.
Section 9.1. The Trustees shall from time to time distribute ratably
among the shareholders such proportions of the net profits, surplus (including
paid-in surplus), capital, or assets held by the Trustees as they may deem
proper and such distribution may be made in cash or property (including without
limitation any type of obligations of the Trust or any assets
<PAGE> 25
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thereof); and the Trustees may distribute ratably among the shareholders
additional shares issuable hereunder in such manner and on such terms as the
Trustees may deem proper; but the amount of all distributions and the time of
declaration and payment thereof shall be wholly in the discretion of the
Trustees, as shall also the determination of what constitutes net profits or
surplus, and such distributions may be made even though the paid-in capital of
this Trust at the time of any distribution exceeds the net assets of the Trust
based either on the market value (as determined by the Trustees under Section
2.16 of Article 2 hereinabove) or the book value; and such distribution may be
among the shareholders of record at such other date (not more than twenty (20)
days prior to payment of such distribution) as the Trustees shall determine.
Section 9.2. The Trustees may always retain from the net profits such
amount as they may deem necessary to pay the debts or expenses of the Trust or
to meet obligations of the Trust, or as they may deem desirable to use in the
conduct of its affairs or to retain for future requirements or extensions of
the business.
ARTICLE 10.
Amendment of Trust;
Removal of Trustees.
Section 10.1. The provisions of this Declaration of Trust may be
amended by a vote of the holders of a majority of shares, or the Trust may be
terminated by the vote of the Trustees with the approval of the holders of a
majority of shares; but no amendment, alteration, or termination shall become
effective unless and until such instrument shall have been acknowledged and
recorded in said Recorder's Office. Notwithstanding the foregoing (and
notwithstanding the fact that some lesser percentage may be permitted by law),
the affirmative vote of the holders of 70% or more of the outstanding shares of
the Trust entitled to vote generally in the election of Trustees shall be
required to amend or repeal Sections 5.8, 5.10, 8.1, 8.2, this Section 10.1, or
Article 15 of this Declaration of Trust.
Section 10.2. Any Trustee may be removed either (1) at any meeting of
shareholders called for the purpose, by the affirmative vote of not less than
two-thirds in interest of the shares then outstanding hereunder and entitled to
vote; or (2) by the unanimous vote of all other Trustees with the approval of
the holders of a majority of the share; provided, however, that no such removal
shall become effective unless and until a certificate to that effect signed and
acknowledged by an officer of the Trust shall have been recorded in the
Recorder's Office.
<PAGE> 26
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Section 10.3. The Trustees shall maintain insurance against possible
tort liability on the part of the Trust in an amount customarily carried by
prudent businessmen in the operation of the same or a similar type of business.
ARTICLE 11.
Miscellaneous.
Section 11.1. The term "Trustees" as used herein shall mean, where
the context admits, such of the undersigned or their duly appointed and
qualified successors as shall be at the time acting as Trustees hereunder.
Section 11.2. This instrument is executed by the Trustees and
delivered in the District of Columbia and with reference to the laws thereof,
and the rights of all parties and the construction and effect of every
provision hereof shall be subject to and construed according to the laws of
said District of Columbia.
Section 11.3. This Declaration may be simultaneously executed in
several counterparts, each of which so executed shall be deemed to be an
original, and such counterparts, together, shall constitute but one and the
same instrument, which shall be sufficiently evidenced by any such original
counterpart.
Section 11.4. Any certificate signed by a person who according to the
records in said Recorder's Office appears to be a Trustee hereunder, concerning
the number or identity of Trustees or shareholders, that the execution of any
instrument or writing has been duly authorized, the form of any vote passed at
a meeting of Trustees or shareholders, the fact that the number of Trustees or
shareholders present at any meeting or executing any written instrument
satisfied the requirements of this Declaration of Trust, the form of any by-law
adopted by or the identity of any officer elected by the Trustees or the
existence or nonexistence of any fact or facts which in any manner relate to
the affairs of the Trust shall be conclusive evidence as to the matters so
certified in favor of any person dealing with the Trustees or any one or more
of them, and the successors of such person.
Section 11.5. If this Declaration of Trust is filed or recorded in
any other recording office, anyone dealing with real estate so located that
instruments affecting the same should be filed or recorded in such recording
office may rely conclusively upon any certificate of the kind described in
Section 11.4 hereof which is signed by a person who according to the records in
such recording office appears to be a Trustee hereunder.
<PAGE> 27
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ARTICLE 12.
Duration of Trust.
This Trust shall continue without limitation of time but subject to
the provisions of Article 10 hereof.
ARTICLE 13.
Federal Housing Administration Insured Mortgages.
The Trustees shall not have the power to sell or otherwise dispose of
any mortgage or mortgages or partial interest in such mortgage or mortgages
insured by the Federal Housing Administration which the Trust owns unless such
transfer is to a mortgagee approved by the Federal Housing Administration or is
otherwise in accordance with the provisions of the National Housing Act, as
amended, or Regulations promulgated thereunder.
ARTICLE 14.
Investment Policies.
Section 14.1. It is the policy of the Trust to invest primarily in
income producing real estate, including shopping centers, commercial office
buildings, apartment houses and industrial buildings. Investments will be made
on a long-term basis and not with the intention of resale in the immediate
future. It is also a policy to improve and upgrade real estate investments
with a view toward increasing income.
Section 14.2. It is the policy of the Trust to finance the purchase
of its properties through the use of cash and long-term first mortgages. The
Trust may also acquire properties by the issuance of shares or senior
securities, which may or may not be convertible to shares of the Trust, or by
the exchange of properties.
Section 14.3. [Deleted].
Section 14.4. The Trust may, on a temporary basis, invest in United
States government obligations, state or municipal obligations, mortgages,
commercial papers, or similar investments, as a means of providing for
contingencies and future purchases. Such investments will not be in amounts
which would, in the option of counsel for the Trust, disqualify the Trust for
treatment as a "real estate investment trust" under the Internal Revenue Code
and Regulations thereunder.
<PAGE> 28
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Section 14.5. It is the policy of the Trust to make investments in
any state of the United States or the Dominion of Canada where, in the opinion
of counsel for the Trust, the Trust may legally operate without affecting the
limited liability of the shareholders (other than for tort claims, contract
claims where shareholder liability is not negated, claims for taxes, and
certain statutory liabilities).
Section 14.6. The Trust may not invest in (1) equity securities in
any company holding investment or engaging in activities prohibited by the
Declaration of Trust except where the investment is to acquire underlying real
estate assets by dissolution of such company, or (2) commodities.
Section 14.7. The Trust may not (1) engage in any short sale, (2)
engage in trading as compared with investment activities, (3) issue redeemable
securities as that term is defined in the Investment Company Act of 1940, (4)
engage in distribution of securities issued by others, (5) engage in
underwriting securities of other issuers, (6) invest in securities of other
issues for the purpose of exercising control or in securities of or interests
in persons primarily engaged in real estate activities, except where the
purpose is to acquire the underlying properties of said issuer or persons, (7)
make unsecured loans to other persons, (8) enter into any advisory contract for
a period of more than one year.
Section 14.8. The Trust shall not, in dealing with any Trustee,
investment adviser, officer or employee of the Trust, enter into any
transactions, contrary to the obligations imposed upon Trustees by courts of
equity.
ARTICLE 15.
Any merger, consolidation or liquidation involving the Trust, or any
sale, lease, pledge, exchange or other transfer of all or substantially all of
the Trust's assets, shall require the approval of a majority of the Trustees.
If any such transaction is with, into or to a Related Shareholder, such
transaction also shall require the approval of a majority of the Trustees not
appointed or nominated by, acting on behalf of, or representing, such Related
Shareholder, and not an "affiliate" or "associate" of such Related Shareholder.
For purposes of this Article, the terms "affiliate" and "associate"
have the meanings assigned to them in Rule 12b-2 under the Securities Exchange
Act of 1934 (the "Exchange Act").
For purposes of this Article, the term "Related Shareholder" means any
person, corporation or other entity who or which is the beneficial owner
(within the meaning of Rule 13d-3 of the
<PAGE> 29
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Exchange Act) of five percent (5%) or more of the outstanding shares of the
Trust entitled to vote generally in the election of Trustees after including
among his or its shares those owned by an "affiliate" or "associate." A
person, corporation or other entity who or which was a "Related Shareholder" at
any time remains a "Related Shareholder" so long as he or it remain an
"affiliate" of the Trust.
<PAGE> 1
WASHINGTON REAL ESTATE INVESTMENT TRUST
BY-LAWS
AS ADOPTED MARCH 11, 1975
<PAGE> 2
BY-LAWS
I. Any nomination of a trustee made by a shareholder (who is not a
trustee) shall be made in writing to the trustees and received on or
before April 15 of any year together with a statement setting forth
reasons why the Trust would benefit from the election of such nominee.
II. The funds in the accounts of the Trust which represent unclaimed Cash
Distributions to Shareholders shall be held by the Trust in trust for
the shareholder without interest and may be used by the Trust in any
manner it deems appropriate.
III. No merger of the Trust or sale of substantially all of the assets of
the Trust shall be valid unless approved by a majority of the
Trustees.
IV. The nomination of an existing trustee for another term must be made by
a majority of all trustees then in office, and all trustees present
including nominees shall vote on nominations.
V. Only United States citizens shall be nominated as trustees.
VI. The trustees may, at the expense of the Trust, procure such Directors
and Officers Liability Insurance Policies or Errors and Omissions
Policies of Insurance or both on themselves and officers and employees
of the Trust as they deem necessary.
VII. A proxy given by a shareholder shall not be valid after one year from
the date hereof.
VIII. The trustee may, in advance of any annual or special meeting of the
shareholders, prescribe additional regulations concerning the manner
of execution and filing of proxies and validation of the same, which
are intended to be voted at any such meeting.
IX. Proxies for annual meetings shall be kept by the Secretary until the
next annual meeting and thereafter destroyed.
X. By-laws may be amended at any time by a majority of all trustees after
ten days written notice of proposed changes.
<PAGE> 1
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into on May 11, 1994, effective as
of May 1, 1994, by and between Washington Real Estate Investment Trust
(hereinafter "the Trust"), a real estate investment trust organized under the
laws of the District of Columbia, and Edmund B. Cronin, Jr. (hereinafter the
"Executive").
WHEREAS, the Executive desires to obtain employment with the Trust; and
WHEREAS, the Trust desires to employ the Executive upon the terms and
conditions hereinafter provided; and
WHEREAS, the Executive knowingly and voluntarily agrees to accept
employment with the Trust under such terms and conditions;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, and for other good and valuable consideration, the adequacy of which is
hereby acknowledged, the parties agree as follows:
1. EMPLOYMENT
The Trust hereby employees the Executive as its President and
Chief Operating Officer, to perform and discharge such services and duties as
are reasonably assigned from time to time by the Trust's Chief Executive
Officer or Board of Trustees, including without limitation direct authority
over leasing and property management activities and the normal duties of a
chief operating officer. The Executive agrees to accept such employment under
the terms and conditions herein, and to devote his full and best efforts,
energies and abilities to the Trust on a full-time basis. In addition to his
employment hereunder, not later than September 30, 1994 the Board of Trustees
of the Trust will consider whether the Executive should be added to the Board
of Trustees.
2. TERM
The term of this Agreement shall commence on May 1, 1994 and
shall continue for a period of two years and eight months, through December 31,
1996, unless sooner terminated pursuant to
<PAGE> 2
the provisions of Section 11 herein. It is understood and agreed that during
the first month of the term of this Agreement, May 1994, the Executive shall
work on a half-time basis, and that during said month he shall be paid at
one-half of the salary rate specified in Section 3 below. The Executive shall
assume full-time duties hereunder effective June 1, 1994.
3. COMPENSATION
As compensation for services rendered by the Executive during
the term of this Agreement, the Trust shall pay him a base salary at the rate
of two hundred seventy-five thousand dollars ($275,000.00) per annum, payable
in installments in accordance with the Trust's policy governing salary payments
to executive employees generally, except that during the first month of the
term of this Agreement, the Executive shall work and be paid on a half-time
basis. On or about January 2nd of every year during the term of this
Agreement, the Executive's compensation will be subject to review by the
Compensation Committee of the Trust's Board of Trustees, in the same manner as
all other officers of the Trust, it being understood that during the term of
this Agreement the Executive's base salary shall not ever be less than the rate
of two hundred seventy-five thousand dollars ($275,000.00) per annum. Except
as specifically provided for otherwise herein, the Executive shall not be
entitled to salary or other compensation from the Trust for periods of time
that he is not actively working for the Trust.
4. BENEFITS
The Executive shall be entitled to the following benefits,
which shall be provided in accordance with the Trust's policies:
a. INSURANCE
The Executive shall be eligible to participate in group
health, hospitalization, welfare and life insurance plans and
all other programs granted to executives of the Trust in
accordance with its customary practices, procedures and
policies as they may be amended from time to time ("Customary
Practices"). The Trust shall furnish to the Executive
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<PAGE> 3
information concerning the Trust's medical and hospital insurance,
life insurance and disability insurance.
b. VACATION, HOLIDAYS AND SICK LEAVE
The Executive shall be entitled to three (3) weeks of paid
vacation per year of employment with the Trust. The Executive
shall also be entitled to paid holidays and sick leave in
accordance with the Trust's Customary Practices.
c. PENSION PLAN
The Executive shall be eligible to participate in the Trust's
pension plan in accordance with the terms of said plan.
5. STOCK OPTIONS
a. INCENTIVE STOCK OPTIONS (QUALIFIED)
In December 1994, December 1995 and December 1996, the
Executive shall, except at any such time when he is not employed by the Trust,
be granted incentive stock options, as defined in Section 422 of the Internal
Revenue Code of 1986, as amended, to purchase one hundred thousand dollars
($100,000) worth (which worth is based on the exercise price) of shares of
beneficial interest ("Shares") in the Trust at an exercise price per Share
equal to the market value of the Shares on the date of grant. Such grants
shall be made at the same time option grants are made to other Trust
executives, and they shall be issued pursuant to and shall be subject to the
terms and conditions of Incentive Stock Option Agreements in the form attached
hereto and incorporated by reference herein as Appendix A and to the terms and
conditions of the Trust's 1991 Incentive Stock Option Plan.
b. NONQUALIFIED STOCK OPTIONS
In December 1994, December 1995 and December 1996, the
Executive shall, except at any such time when he is not employed by the Trust,
be granted nonqualified stock options to purchase a number of Shares in the
Trust with a then-current value (which value is based on the exercise price)
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<PAGE> 4
equal to the difference between his base salary rate at the time of the grant
and one hundred thousand dollars ($100,000), at an exercise price per Share
equal to the market value of the Shares on the date of the grant, provided
that, with respect to the nonqualified stock options issued in December 1994,
the exercise price per Share shall be based upon the market value of the Shares
as of June 1, 1994. Such nonqualified stock options shall be issued at the
same time as the aforesaid incentive stock options, and shall be pursuant to
NonQualified Stock Option Agreements in the form attached hereto and
incorporated by reference herein as Appendix B.
c. REGISTRATION
In the event the Executive is employed by the Trust upon
attainment of age 65, at the request of the Executive, the Trust shall file
with the Securities and Exchange Commission a registration statement on Form
S-8, or its then-current equivalent, covering (i) any otherwise unregistered
Shares then held by the Executive and his family or heirs or distributees as a
result of the exercise of any of the options granted pursuant to this Section 5
and (ii) any Shares issuable to the Executive upon the exercise of any
unexercised options granted pursuant to this Section 5.
6. EXPENSES
The Trust shall reimburse the Executive for all reasonable and
necessary business expenses incurred by him in the performance of his duties
hereunder, in accordance with its Customary Practices, and provided they are
vouchered in a form satisfactory to the Internal Revenue Service for the
deduction of such expenses. Notwithstanding the foregoing, the Executive shall
not be reimbursed by the Trust for automobile expenses.
7. COMPLIANCE WITH OTHER AGREEMENTS
The Executive represents and warrants that his performance
hereunder shall not conflict with any other agreements to which he was or is a
party. He further represents and warrants that he will not use in his
performance hereunder any information, material or documents of a former
employer which
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<PAGE> 5
are trade secrets or are otherwise confidential or proprietary to said
employer, unless he has first obtained written authorization from such former
employer for their possession or use.
8. EXCLUSIVE SERVICES, CONFIDENTIAL INFORMATION, BUSINESS
OPPORTUNITIES AND NON-SOLICITATION
a. EXCLUSIVE SERVICES
(i) Except as otherwise specified in subsection
(iii) below, or in the second sentence of Section 2 above, during the term of
his employment, the Executive shall at all times devote his entire time,
attention, energies, efforts and skills to the business of the Trust, and shall
not, directly or indirectly, engage in any other business activity, whether or
not for profit, gain or other pecuniary advantages, without the express written
permission of the Trust, provided that such prior permission shall not be
required with respect to the Executive's charitable, eleemosynary,
philanthropic or professional association activities.
(ii) Except as otherwise specified in subsection
(iii), below, the Executive shall not, without prior written permission of the
Trust, directly or indirectly, either as an officer, director, employee, agent,
advisor, consultant, principal, stockholder, partner, owner or in any other
capacity, on his own behalf or otherwise, in any way engage in, represent, be
connected with or have a financial interest in, any business which is, or to
the best of his knowledge, is about to become, engaged in real estate
investment, development or finance. Notwithstanding the foregoing, the
Executive shall be permitted to own passive investments (not exceeding five
percent (5%) of the equity securities of any investee) in publicly-held
companies, provided that the Executive shall disclose to the Trust any such
investments in companies primarily engaged in real estate investment, finance
or development.
(iii) Attached as Appendix C hereto is a list of all
businesses in which the Executive, directly or indirectly, has during the last
three years performed services as an officer, director, employee, agent,
advisor, consultant, principal, stockholder, partner or in any other capacity,
on his own behalf or otherwise. Appendix C sets forth the manner in which the
Executive has been so connected with
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<PAGE> 6
or has had a financial interest in such businesses. Appendix C also sets forth
the manner in which the Executive has severed such relationships and holdings,
or how and when the Executive will either sever or retain such relationships
and holdings, including transactions involving his family members, trusts,
rights, options or other agreements, and the amount of time, money, risk and
other commitments of the Executive which may or could be involved in the future
with respect to such businesses. Appendix C lists only the described
relationships or activities of the Executive, and excludes clients or customers
of the Executive's employer for which the Executive acted as a consultant,
advisor, correspondent or in some other similar capacity and the disclosure of
which would violate an understanding concerning confidentiality.
b. CONFIDENTIAL INFORMATION
The Executive shall not at any time during or after
his employment with the Trust disclose or use, directly or indirectly, any
confidential or proprietary information of the Trust or its affiliates. For
the purposes of this Agreement, "confidential or proprietary information" shall
mean all information disclosed to the Executive, or known by him as a
consequence of or through his employment with the Trust, where such information
is not generally known in the trade or industry or was regarded or treated as
confidential by the Trust, and where such information refers or relates in any
manner whatsoever to the business activities, processes, services or products
of the Trust or its affiliates. Such information includes, but is not limited
to, business and development plans (whether contemplated, initiated or
completed), development sites, business contacts, methods of operation, results
of analysis, tenant lists, business forecasts, financial data, costs, revenues,
and similar information. Upon termination of this Agreement, the Executive
shall immediately return to the Trust all of its property and confidential and
proprietary information which is in tangible form, and all copies thereof.
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<PAGE> 7
c. BUSINESS OPPORTUNITIES
During the term of his employment, the Executive
shall promptly disclose to the Trust each business opportunity of a type which,
based upon its prospects and relationship to the business of the Trust or its
affiliates, it might reasonably consider pursuing. In the event that the
Executive's employment is terminated for any reason, the Trust or its
affiliates shall have the exclusive right to participate in or undertake any
such opportunity on their own behalf without any involvement by the Executive.
d. NON-SOLICITATION OF EMPLOYEES AND TENANTS
The Executive agrees that during the term of his
employment, and for a period of two (2) years after termination of such
employment, he shall not, except in the course of his duties hereunder,
directly or indirectly, induce or attempt to induce or otherwise counsel,
advise, ask or encourage any person to leave the employ of the Trust or its
affiliates, or solicit or offer employment to any person who was employed by
the Trust at any time during the twelve-month period preceding the solicitation
or offer. The Executive further agrees that for a period of two (2) years
after the termination of his employment for any reason, he will not directly or
indirectly solicit any person or entity who, as of the termination date, was a
tenant of the Trust or was in negotiation to become a tenant of the Trust to
move from a location owned by the Trust to a location not owned by the Trust,
or in the case of a person or entity in negotiation to become a tenant of the
Trust, to move to a location not owned by the Trust, instead of a location
owned by the Trust.
e. SPECIFIC PERFORMANCE
The Executive agrees that in the event of his breach
of any of the provisions of this Section 8, the remedies available at law to
the Trust would be inadequate and in lieu thereof or in addition thereto the
Trust shall be entitled to appropriate equitable remedies, including specific
performance and injunctive relief. The Executive agrees not to enter into any
agreement, either written
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<PAGE> 8
or oral, which may conflict with this Agreement, and he authorizes the Trust to
make known the terms of Sections 8, 9 and 10 of this Agreement to any person or
entity, including, but not limited to, tenants of the Trust or future employers
of the Executive.
9. CONFLICTS OF INTEREST
At any time while serving as an employee or trustee (or both)
of the Trust, the Executive shall refrain from engaging in any activity,
practice or act which conflicts with, or has the potential to conflict with,
the interests of the Trust, and he shall avoid any acts or omissions which are
disloyal, disruptive, competitive with or damaging to the Trust, specifically
including, but not limited to, any such acts or omissions involving persons or
entities listed on Appendix C attached hereto. By way of example only, the
Executive shall not, directly or indirectly, in any capacity, on his own behalf
or on behalf of any other person or entity: 1) participate or be involved in
the actual or potential acquisition of any real property by purchasers other
than the Trust for other than the Executive's personal use, which real property
the Trust might be interested in acquiring; 2) participate in discussions with
any tenants or potential tenants concerning the actual or potential rental of
property which is or might be in competition with the Trust from landlords
other than the Trust; 3) divert, refer or solicit individuals whom the Trust
employs or might consider employing for employment with other employers, except
for employees who have been or are being terminated by the Trust involuntarily;
4) subject to the fiduciary duties which he owes to the Trust, participate or
be involved in any attempt to gain stock control of the Trust, ; or 5) except
as specifically permitted in Section 8(a)(ii) above, or as otherwise may be
approved in writing by the Board of Trustees of the Trust, invest or become an
owner, partner, shareholder or officer in any business enterprise which
competes with the actual or intended business activities of the Trust.
10. RELATIONSHIP WITH H.G. SMITHY COMPANY
Upon or prior to the execution of this Agreement, the
Executive will resign all positions he may hold as an officer, director or
employee with H.G. Smithy Company and its affiliated entities
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<PAGE> 9
(collectively "Smithy"). At any time while serving as an employee, officer
and/or trustee of the Trust, the Executive shall have no direct or indirect
business interest in or business relationship with Smithy, except the share
ownership described in Appendix C attached hereto, and shall give an
irrevocable proxy with respect to voting all shares he owns in Smithy to a
person who is from time to time selected by him and approved by the Trust,
which approval shall not unreasonably be withheld. The Executive will attempt
to sell or otherwise dispose of any and all of his stock and other interests in
Smithy as soon as it is reasonably possible to do so on a commercially
reasonable basis and in no event more than three years from the date hereof,
and will keep the Trust informed of his efforts on a continuing basis.
11. TERMINATION
a. BY THE TRUST
(i) TERMINATION FOR CAUSE
The Trust may terminate the employment of the
Executive at any time by written notice prior to the expiration of the term of
this Agreement for cause. For purposes of this Agreement, the term "cause"
means any one or more of the following: 1) conduct by the Executive which is
illegal, dishonest, fraudulent or disloyal; 2) conduct by the Executive which
jeopardizes the Trust's right or ability to operate its business; 3) the
breach or violation by the Executive of any of the material provisions of this
Agreement, provided that the Executive must first be given notice by the Trust
of the alleged breach or violation and a reasonable opportunity promptly and
diligently to cure said alleged breach or violation; 4) the Executive's use of
illegal drugs or abuse of alcohol or drugs which impairs the Executive's
ability to perform his duties hereunder; 5) the breach of any fiduciary duties
the Executive owes to the Trust; 6) the Executive's knowing and willful
neglect of duties or gross negligence in the performance of his duties which
materially affects the business of the Trust, provided that the Executive must
first be given notice by the Trust of such alleged neglect or negligence and a
reasonable opportunity promptly and diligently to cure said alleged neglect or
negligence; and 7) conduct by the
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<PAGE> 10
Executive constituting a material conflict of interest as defined in Section 9
above. To provide the Executive with an opportunity to exercise the
then-exercisable portion of his incentive stock options granted hereunder, in
the event of termination pursuant to clauses 1, 2, 4, 5 or 7 above the
termination shall be effective three (3) business days after the date the
Executive receives notice of termination, but the Executive shall be relieved
of all of his duties hereunder in the interim.
(ii) TERMINATION WITHOUT CAUSE
The Trust may, in its sole discretion,
without any cause whatsoever, terminate the Executive's employment by providing
him with 30 days' prior written notice at any time during the term hereof. In
the event the Trust exercises its right of termination, the Trust shall provide
the Executive with a severance benefit (payable in equal monthly installments)
equal to the salary the Executive would have received in the remainder of the
term through December 31, 1996, plus the continuation of medical and
hospitalization benefits during said period. If the Trust exercises its right
of termination pursuant to this subparagraph (ii), the Executive shall not be
entitled to the accrual or provision of any benefits other than the severance
benefit described above for the period after the date of termination, including
without limitation new pension contributions or new pension rights or new stock
options. For the purposes of this Section 11(a)(ii), the Executive shall be
deemed to have been terminated without cause if he resigns his employment
because : 1) he has not been appointed to the Trust's Board of Trustees by
December 31, 1994; or 2) the Trust willfully, substantially and consistently
fails or refuses to provide the Executive with meaningful authority over and
involvement in the Trust's leasing and property management operations or fails
to consult with him about acquisitions, major capital expenditures and finance,
including debt and equity raised publicly or privately or both, over which the
Chief Executive Officer will maintain authority. In any proceeding in which
there is a disagreement as to whether the Executive resigned for the second
reason specified in the preceding sentence, the Executive shall have the burden
of proving the existence of such reason.
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<PAGE> 11
b. DEATH OR DISABILITY
The Executive's employment shall be terminated in the
event of his death or 30 days after notice from the Trust's Board of Trustees
in the event of his disability. The term "disability" shall mean inability of
the Executive to perform all of the essential functions of his position
hereunder as determined by the Trust for a period of 26 consecutive weeks or
for an aggregate of 150 work days during any 12-month period by reason of
illness, accident or any other physical or mental incapacity, as may be
permitted by applicable law.
c. BY THE EXECUTIVE
The Executive may, in his sole discretion, terminate
this Agreement without any cause whatsoever upon 120 days' written notice to
the Trust. In the event that the Executive exercises his right of termination
hereunder, the Trust may, at its option, at any time after receiving such
notice from the Executive, relieve him of his duties and terminate this
Agreement at any time prior to the expiration of said notice period. If this
Agreement is terminated by the Executive or the Trust pursuant to this section,
unless the Executive is deemed pursuant to Section 11 (a)(ii) to have been
terminated without cause by the Trust, the Executive shall not be entitled to
the accrual or provision of any benefits for the period following the
termination date, including without limitation any of the severance benefits
described in Section 11(a)(ii) above.
12. ARBITRATION
Whenever a dispute arises between the parties concerning this
Agreement or any of the obligations hereunder, or the Executive's employment
generally, the parties shall use their best efforts to resolve the dispute by
mutual agreement. If such a dispute cannot be so resolved, it shall be
submitted to arbitration to the exclusion of all other avenues of relief and
adjudicated pursuant to the American Arbitration Association's Rules for
Commercial Arbitration then in effect. The decision of the arbitrator must be
in writing and shall be final and binding on the parties, and judgment may be
entered on the
- 11 -
<PAGE> 12
arbitrator's award in any court having jurisdiction thereof. The arbitrator's
authority in granting relief to the Executive shall be limited to an award of
compensation, benefits, stock options and unreimbursed expenses as described in
Sections 3, 4, 5 and 6 above, and the arbitrator shall have no authority to
award other types of damages or relief to the Executive, including but not
limited to consequential or punitive damages. The arbitrator shall also have
no authority to award consequential or punitive damages to the Trust for
violations of this Agreement by the Executive. The expenses of the arbitration
shall be borne equally by the parties, and each party shall be responsible for
his or its own costs and attorneys' fees. Nothing in this Section shall be
construed to derogate the Trust's right to seek legal and equitable relief in a
court of competent jurisdiction as contemplated by Section 8(e) hereof.
13. NON-WAIVER
It is understood and agreed that one party's failure at any
time to require the performance by the other party of any of the terms,
provisions, covenants or conditions hereof shall in no way affect the first
party's right thereafter to enforce the same, nor shall the waiver by either
party of the breach of any term, provision, covenant or condition hereof be
taken or held to be a waiver of any succeeding breach.
14. SEVERABILITY
In the event that any provision of this Agreement conflicts
with the law under which this Agreement is to be construed, or if any such
provision is held invalid or unenforceable by a court of competent jurisdiction
or any arbitrator, such provision shall be deleted from this Agreement and the
Agreement shall be construed to give full effect to the remaining provisions
thereof.
15. SURVIVABILITY
Upon termination or expiration of this Agreement, the
provisions of Sections 5(c), 8(b) and 8(d) shall nevertheless remain in full
force and effect.
- 12 -
<PAGE> 13
16. GOVERNING LAW
This Agreement shall be interpreted, construed and governed
according to the laws of the State of Maryland, without regard to the conflicts
of law provisions thereof.
17. HEADINGS AND CAPTIONS
The paragraph headings and captions contained in this
Agreement are for convenience only and shall not be construed to define, limit
or affect the scope or meaning of the provisions hereof.
18. DISCLAIMER OF INDIVIDUAL LIABILITY OF TRUSTEES AND SHAREHOLDERS
Each and every agreement made by the Trust in this Agreement
is binding only upon the Trust and upon the Trustees of the Trust in their
capacity as Trustees, and is not binding upon the Trustees of the Trust in
their individual capacities or upon holders of the shares of beneficial
interest in the Trust (the "Shareholders"). The Trustees of the Trust are
acting herein in their representative or fiduciary capacity pursuant to the
Declaration of Trust dated as of November 18, 1960, as amended, establishing
the Trust for the benefit of the Shareholders. The Shareholders shall in no
way be held liable for any agreement, debt, demand or liability incurred by or
under the authority of the Trustees and no such agreement, debt, demand or
liability shall have any force and effect against the Shareholders or their
respective successors or assigns nor shall any such agreement, debt, demand or
liability have any force and effect against the Trustees individually or
against their respective legal representatives, distributees or assigns. The
Executive agrees for himself and his legal representatives that the
Shareholders and the Trustees shall not be personally liable under this
Agreement or any written agreement, undertaking or obligation made or issued on
behalf of the Trust pursuant to, or in connection with, this Agreement, that
the Executive will look solely to the assets of the Trust for any claim which
he may have hereunder and that he shall assert no claim against the
Shareholders or against the Trustees in their individual capacity.
- 13 -
<PAGE> 14
19. ENTIRE AGREEMENT
This Agreement contains and represents the entire agreement of
the parties and supersedes all prior agreements, representations or
understandings, oral or written, express or implied with respect to the subject
matter hereof. This Agreement may not be modified or amended in any way unless
in a writing signed by both the Executive and the Trust. No representation,
promise or inducement has been made by either party hereto that is not embodied
in this Agreement, and neither party shall be bound by or liable for any
alleged representation, promise or inducement not specifically set forth
herein.
20. ASSIGNABILITY
Neither this Agreement nor any rights or obligations hereunder
may be assigned by either party without the prior written consent of the other.
Subject to the foregoing, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their heirs, successors and assigns.
21. NOTICES
All notices required or permitted hereunder shall be in
writing and shall be deemed properly given if delivered personally or sent by
certified or registered mail, postage prepaid, return receipt requested, or
sent by telegram, telex, telecopy or similar form of telecommunication, and
shall be deemed to have been given when received. Any such notice or
communication shall be addressed:
(a) if to the Trust, to B. Franklin Kahn, Chairman, Washington
Real Estate Investment Trust, 10400 Connecticut Avenue, Concourse Level,
Kensington, MD 20895 with a copy to: David M. Osnos, Esquire, Arent Fox
Kintner Plotkin & Kahn, 1050 Connecticut Avenue, N.W., Washington, D.C.
20036-5339 or (b) if to the Executive, to his last known home address on file
with the Trust with a copy to Martin D. Krall, Esquire, Shaw, Pittman, Potts &
Trowbridge, 2300 N Street, N.W., Washington, D.C., 20037-1128; or to such other
address as either party shall have furnished to the other in writing.
- 14 -
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, to be effective as of the day and year first above written.
WASHINGTON REAL ESTATE
INVESTMENT TRUST
/s/ Edmund B. Cronin, Jr. By:/s/ B. Franklin Kahn
- ---------------------------- ------------------------------------
Edmund B. Cronin, Jr. B. Franklin Kahn
Chairman and Chief Executive Officer
Date: 5/11/94 Date: 5/11/94
------------ --------------------
- 15 -
<PAGE> 1
WASHINGTON REAL ESTATE INVESTMENT TRUST
1991 INCENTIVE STOCK OPTION PLAN
1. Purpose. This 1991 Incentive Stock Option Plan ("Plan") is
intended to provide incentive to selected employees of Washington Real Estate
Investment Trust (the "Trust") by providing those employees with opportunities
to purchase shares of beneficial interest of the Trust ("Shares") under
incentive stock options ("Options") as such term is defined in Section 422(b)
of the Internal Revenue Code of 1986, as amended ("Code"). The Plan is
intended to be a successor plan to the Washington Incentive Stock Option Plan
approved by the shareholders of the Trust in 1982 and thereafter amended from
time to time and is intended to become effective on June 26, 1991.
2. Administration. The Plan shall be administered by a committee
(the "Committee") comprised of all of the members of the Board of Trustees of
the Trust (the "Board") other than those, if any, who, during the one-year
period prior to making any determination concerning the timing, pricing or
amount of any Option grant, have been granted Options under the Plan or equity
securities pursuant to any other plan of the Trust. The Committee shall have
authority, subject to the terms of the Plan, to determine the employees to whom
Options shall be granted, the number of Shares to be covered by each 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.
Business shall be transacted by a majority vote of the members of the Committee
(except that any member of the Committee who would be directly affected by a
particular proposed action in respect of the Plan, including the issuance of an
Option to such member, shall abstain from voting in connection with such
proposed action) and any decision or determination reduced to writing and
signed by a majority of the members of the Committee shall be fully effective
as if it has been made by a majority vote at a meeting duly called and held.
No member of the Board 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. The fact that an employee is a Trustee of the Trust
shall not make him ineligible for an Option grant. Granting of any Option to
an employee shall neither entitle such employee to, nor disqualify him 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
<PAGE> 2
of Shares which may be granted under the Plan shall not exceed 1,010,161 Shares
(subject to 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 June 25, 2001. The date of grant of an Option under the Plan
will be the date on which the Option is awarded by the Board.
6. Terms and Conditions. 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 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 in cash, by check or by delivery of Shares already owned
by the holder of the Option (at the current fair market value of such
Shares).
(b) Terms of Options. Each Option shall expire no later
than the tenth (10th) anniversary of the date of its grant.
(c) Exercisability. Each Option shall become exercisable
in one or more installments at the time or times provided in the
instrument evidencing the Option, provided, however, that no Option
shall become exercisable prior to one year from the date of its 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 upon the exercise of his
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
- 2 -
<PAGE> 3
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 or retirement on or after attaining age sixty-five (65), any
Option or unexercised portion thereof granted to him (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. If an Optionee
ceases to be employed by the Trust due to termination of 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), 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 (as
defined in Section 422(b) of the Internal Revenue Code of 1986, as
amended) 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 may be exercised, to the extent of the number of
Shares with respect to which he could have exercised the Option on the
date of his death, by his estate, personal representative or
beneficiary who acquires the Option by will or by the laws of descent
and distribution, within twelve (12) months from the date of the
Optionee's death, but in any event not later than ten (10) years from
the date of granting thereof. On the earlier of such dates, the
Option shall then terminate.
(f) 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
- 3 -
<PAGE> 4
immediately become null and void, and the rights and privileges of the
Optionee thereunder shall immediately terminate.
(g) 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.
(h) Limit. 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 Option is granted) of the Shares subject to 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.
(i) Number of Shares Subject to Each Option. In respect
of Options granted during the first year of the plan, the Committee
shall determine the number of Shares subject to each Option granted to
each selected employee so that the current value of the Shares for
which each employee receives an Option shall be equal to the following
percentage of his then current annual salary on the basis of the
following schedule:
<TABLE>
<CAPTION>
Years of Service Percentage of Then
at Date of Grant Annual Salary
---------------- -------------------
<S> <C>
1 40%
2 50%
3 60%
4 70%
5 80%
6 90%
7 or more 100%
</TABLE>
For these purposes, the term "Years of Service" shall be
defined as twelve-month periods of employment, together with any
twelve-month periods of time during which an individual was not
employed by the Trust but served as a Trustee of the Trust.
The Committee may modify the above schedule in its sole
discretion in respect of Options granted in future years.
- 4 -
<PAGE> 5
Instruments evidencing Options may contain such other provisions, not
inconsistent with the Plan, as 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 purchases Shares on its exercise,
that he 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 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 Committee 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 Committee, 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 Committee, 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 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 own behalf.
- 5 -
<PAGE> 6
9. Term and Amendment of Plan. The Plan shall expire on June 25,
2001 (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 may 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 relating to adjustments to be made
upon changes in capitalization.
The amendment of the Plan shall not, without the written consent of
the employee, affect his rights under the Option theretofore granted to him.
- 6 -
<PAGE> 1
WASHINGTON REAL ESTATE INVESTMENT TRUST
NONQUALIFIED STOCK OPTION AGREEMENT
This Nonqualified Stock Option Agreement dated June 27, 1990.
WITNESSETH:
1. Washington Real Estate Investment Trust, a real estate
investment trust organized under the laws of the District of Columbia (the
"Trust") on the date set forth above has granted, and hereby evidences the
grant to B. Franklin Kahn, 5215 Edgemoor Lane, Bethesda, Maryland 20814 (the
"Optionee"), subject to the terms and conditions set forth herein, of the right
and option to purchase from the Trust an aggregate of 100,000 shares of
beneficial interest of the Trust ("Shares") at the purchase price of $17.56 per
share, such option to be exercisable as hereinafter provided.
2. The above-referenced option is exercisable (a) immediately, to
the extent of Twenty Thousand (20,000) Shares; (b) to the extent of an
additional Twenty Thousand (20,000) Shares on the first anniversary of the date
upon which this Agreement was executed; (c) to the extent of an additional
Twenty Thousand (20,000) Shares on the second anniversary of the date upon
which this Agreement was executed; (d) to the extent of an additional Twenty
Thousand (20,000) Shares on the third anniversary date upon which this
Agreement was executed; and (e) to the extent of an additional Twenty Thousand
(20,000) Shares on the fourth anniversary date upon which this Agreement was
executed.
Notwithstanding the above, the above-referenced option shall become
exercisable in full as to the total number of Shares hereinabove referred to in
the event of Optionee's termination of employment from the Trust (i) due to
death, (ii) due to the incurrence of a total and permanent disability or (ii)
due to an involuntary discharge without cause by the Trust. The option is
cumulative; any portion of the option not exercised at the time it first
becomes exercisable may be exercised at any time thereafter prior to the
expiration of the term hereof.
The Shares may be purchased by giving the Trust written notice to
exercise by written notice specifying the number of Shares to be purchased and
the date on which the purchase will be completed. Such notice shall contain a
statement by the Optionee that the Optionee has represented to it that it is
his present intention to acquire the Shares being purchased for investment and
not with a view to resale or distribution. 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
<PAGE> 2
registration statement under said Act or in a transaction exempt from such
registration requirements. Upon the date of purchase so specified, Optionee
shall deliver to the Trust the purchase price of the Shares to be purchased
against delivery thereof to 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.
Prior to delivery of such Shares, the Optionee shall pay to the Trust
such amount as the Trust determines is necessary to enable the Trust to meet
any Federal and estate tax withholding obligations attributable to the exercise
of the option or make appropriate arrangements with the Trust to effectuate
such Federal and local tax withholding obligations.
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 June 27, 2000;
(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) upon the death of the Optionee, the option or
unexercised portion thereof shall terminate one year after the date of such
death but in no event later than the date of expiration of the option. During
this period of time, the option may be exercised by the Optionee's estate,
personal representative or beneficiary who acquires the option by will or by
the laws of descent and distribution;
(d) if the Optionee ceases to be employed by the Trust
due to termination of his employment for cause, the option or unexercised
portion thereof (whether or not otherwise currently
- 2 -
<PAGE> 3
exercisable) shall terminate as of the date of such termination of employment;
(e) if the Optionee ceases to be employed by the Trust
due to retirement, the option shall continue in accordance with its terms and
shall expire on its normal date of expiration unless previously exercised;
(f) 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 upon the exercise of his Option;
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 equity 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, the granting of the
option evidenced hereby, nor the Trust's obligation to deliver Shares upon the
exercise 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 nor the Optionee to continue such employment for any
specified 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,
4936 Fairmont Avenue, Bethesda, Maryland 20814, and any notice required to be
given hereunder to the Optionee shall be addressed to him at his address shown
hereinabove, or to such other address as either party shall furnish in writing
to the other.
7. The Optionee and the Trust agree to be bound by the terms and
conditions hereof.
- 3 -
<PAGE> 4
8. This Agreement may be amended at any time by the written
consent of both parties hereto, but shall not be amended so as to increase the
number of Shares purchasable hereunder or decree the purchase price thereof
(other than as herein provided) without the approval by vote of Shareholders
owning a majority of the Trust's outstanding Shares.
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
/s/ Mary T. Dean By: /s/ Benjamin H. Dorsey
- ---------------------------------- ----------------------------------
WITNESS: OPTIONEE:
/s/ Mary T. Dean /s/ B. Franklin Kahn
- ---------------------------------- ------------------------------------
B. Franklin Kahn
- 4 -
<PAGE> 1
WASHINGTON REAL ESTATE INVESTMENT TRUST
NONQUALIFIED STOCK OPTION AGREEMENT
This Nonqualified Stock Option Agreement dated December 14, 1994.
WITNESSETH:
1. Washington Real Estate Investment Trust, a real estate investment
trust organized under the laws of the District of Columbia (the "Trust"), on
the date set forth above has granted, and hereby evidences the grant to Edmund
B. Cronin, Jr. residing at 16320 Batchelors Forest Road, Olney, Maryland 20832
(the "Optionee"), subject to the terms and conditions set forth herein, of the
right and option to purchase from the Trust an aggregate of 9,091 shares of
beneficial interest of the Trust ("Shares") at the purchase price of $19.25 per
share, such option to be exercisable as hereinafter provided.
2. The above-referenced option is exercisable as follows: fifty percent
(50%) of such Shares may be purchased from the Trust in whole at any time or in
part from time-to-time after the first anniversary date hereof, and one hundred
percent (100%) may be so purchased after the second anniversary of such date.
Notwithstanding the above, the above-referenced option shall become
exercisable in full as to the total number of Shares hereinabove referred to in
the event of Optionee's termination of employment from the Trust (i) due to
death or (ii) due to the incurrence of a total and permanent disability.
The option is cumulative; any portion of the option not exercised at the
time it first becomes exercisable may be exercised at any time thereafter prior
to the expiration of the term hereof.
The Shares may be purchased by giving the Trust written notice to exercise
by written notice specifying the number of Shares to be purchased and the date
on which the purchase will be completed. Such notice shall contain a statement
by the Optionee that the Optionee has represented to the Trust that it is his
present intention to acquire the Shares being purchased for investment and not
with a view to resale or distribution. 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, Optionee
shall deliver to the Trust the purchase price of the Shares to be purchased
against delivery thereof to 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.
<PAGE> 2
Prior to delivery of such Shares, the Optionee shall pay to the Trust such
amount as the Trust determines is necessary to enable the Trust to meet any
Federal and state tax withholding obligations attributable to the exercise of
the option or make appropriate arrangements with the Trust to effectuate such
Federal and state tax withholding obligations.
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 the day ("Expiration Date") which is ten (10) years after the
date hereof;
(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) upon the death or total and permanent disability of the
Optionee, the then exercisable portion of the option shall terminate one year
after the date of such event but in no event later than the Expiration Date of
the option. During this period of time, the option may be exercised by the
Optionee, or the Optionee's guardian or legal representative, or in the event
of the Optionee's death, the Optionee's estate, personal representative or
beneficiary who acquires the option by will or by the laws of descent and
distribution;
(d) if the Optionee ceases to be employed by the Trust due to
termination of his employment without cause by the Trust, or expiration of the
Optionee's Employment Agreement with the Trust without continuation of
employment by the Trust, the then non-exercisable portion of the option shall
terminate immediately and the then exercisable portion of the option shall
terminate one year after the date of such termination of employment.
(e) if the Optionee ceases to be employed by the Trust due to
termination of his employment for cause or voluntary termination by the
Optionee, the then non-exercisable portion of the option shall terminate
immediately and the then exercisable portion of the option shall terminate
ninety (90) days after the date of such termination of employment;
(f) if the Optionee ceases to be employed by the Trust due to
retirement at or after age 65, the option shall continue in accordance with its
terms and shall expire on its Expiration Date unless previously exercised;
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<PAGE> 3
(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 upon the exercise of his Option;
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 equity 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, the granting of the option
evidenced hereby, nor the Trust's obligation to deliver Shares upon the
exercise 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, Concourse Level, Kensington, MD 20895 and any notice
required to be given hereunder to the Optionee shall be addressed to him at his
address shown hereinabove, or to such other address as either party shall
furnish in writing to the other.
7. The Optionee agrees to be bound by the terms and conditions hereof.
8. This Agreement may be amended at any time by the written consent of
both parties hereto, but shall not be amended so as to increase the number of
Shares purchasable hereunder or decrease the purchase price thereof without the
approval by vote of Shareholders owning a majority of the Trust's outstanding
Shares.
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<PAGE> 4
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
/s/ Mary T. Dean By: /s/ B. Franklin Kahn
- ------------------------------ ---------------------------------
WITNESS:
/s/ Mary T. Dean /s/ Edmund B. Cronin, Jr.
- ------------------------------ --------------------------------------
Edmund B. Cronin, Jr.
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