<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 8-B
FOR REGISTRATION OF SECURITIES OF
CERTAIN SUCCESSOR ISSUERS
FILED PURSUANT TO SECTION 12(b) OR 12(g) OF THE
SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<S> <C>
Washington Real Estate Investment Trust
- --------------------------------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Maryland 53-0261100
- -------------------------------------------------------------------------------- ----------------------
State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer
Identification No.)
10400 Connecticut Avenue, Kensington, Maryland 20895
- -------------------------------------------------------------------------------- -----------------------
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
------------------- ------------------------------
<S> <C>
Shares of beneficial interests American Stock Exchange, Inc.
- --------------------------------------------- ------------------------------------
- --------------------------------------------- ------------------------------------
</TABLE>
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
- --------------------------------------------------------------------------------
(Title of Class)
- --------------------------------------------------------------------------------
(Title of Class)
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
(a) Washington Real Estate Investment Trust was organized on April
5, 1996 under the laws of Maryland as a business trust
("WRIT"). WRIT's Declaration of Trust was received and
approved for record by the Maryland Department of Assessment
and Taxation on May 22, 1996.
(b) WRIT's fiscal year ends on December 31st.
ITEM 2. TRANSACTION OF SUCCESSION.
(a) The sole predecessor of WRIT was Washington Real Estate
Investment Trust, a District of Columbia business trust ("Old
WRIT"). Old WRIT's shares of beneficial interest were
registered pursuant to Section 12(b) of the Act prior to the
merger of Old WRIT into WRIT.
(b) WRIT was organized to effect a change in domicile of Old WRIT
from the District of Columbia to Maryland. WRIT was initially
formed as a wholly owned subsidiary of Old WRIT. Following
the approval of the shareholders of Old WRIT, Old WRIT merged
into WRIT, and WRIT survived the merger and succeeded to all
of the business, properties, assets and liabilities of Old
WRIT. Each Old WRIT share issued and outstanding immediately
prior to the effective date of the merger was converted into
one share of WRIT. On the effective date, certificates which
immediately prior to the merger represented shares of Old WRIT
were deemed for all purposes to represent the same number of
shares of WRIT. It will not be necessary for shareholders to
exchange Old WRIT certificates for WRIT certificates.
ITEM 3. SECURITIES TO BE REGISTERED.
WRIT is authorized to issue 100,000,000 shares of beneficial
interest, par value $.01 per share, all of the same class.
Immediately following the merger, WRIT had 31,751,734 shares
issued and outstanding. No shares are presently issued and
held by or for the account of WRIT.
ITEM 4. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
WRIT is authorized to issue 100,000,000 shares of beneficial
interest, par value $.01 per share, all of the same class (the
"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 WRIT, to receive their
pro rata share of the assets after payment of the liabilities
and expenses of WRIT. Reference is made to the Proxy
Statement dated April 22, 1996 filed by Old WRIT with the
Securities and Exchange Commission and a copy of which is
attached as an exhibit
-2-
<PAGE> 3
hereto for a further description of the rights of WRIT
shareholders. The sections of such Proxy Statement entitled
"The Board of Trustees and Management -- The Board of
Trustees" and "Proposal to Change the Trust's State of
Organization -- Comparison of Certain Declaration of Trust and
By-Law Provisions and of Certain Provisions of Maryland REIT
Law and District of Columbia Law" are incorporated herein by
reference.
ITEM 5. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements - Not Applicable
(b) Exhibits
1. Agreement and Articles of Merger dated June 20, 1996
between WRIT and Old WRIT.
2. Proxy Statement dated April 22, 1996.
3. Declaration of Trust dated April 5, 1996.
4. By-Laws dated April 5, 1996.
5. All other required exhibits are incorporated herein by
reference to the exhibits of the same designation filed as
an exhibit to Old WRIT's Annual Report on Form 10-K for
the year ended December 31, 1995.
-3-
<PAGE> 4
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the registrant has duly caused this registration
statement to be signed on its behalf by the undersigned, thereto duly
authorized.
Washington Real Estate Investment Trust
-----------------------------------------
(Registrant)
Date: July 10, 1996 By:/s/ Larry E. Finger
------------------------------ -----------------------------------------
Name: Larry E. Finger,
Title: Senior Vice President Finance and
Chief Financial Officer
-4-
<PAGE> 5
EXHIBIT INDEX
1. Agreement and Articles of Merger dated June 20, 1996
between WRIT and Old WRIT.
2. Proxy Statement dated April 22, 1996.
3. Declaration of Trust dated April 5, 1996.
4. By-Laws dated April 5, 1996.
<PAGE> 1
EXHIBIT 1
AGREEMENT AND ARTICLES OF MERGER
BETWEEN
WASHINGTON REAL ESTATE INVESTMENT TRUST
(A DISTRICT OF COLUMBIA BUSINESS TRUST)
AND
WASHINGTON REAL ESTATE INVESTMENT TRUST OF MARYLAND
(A MARYLAND REAL ESTATE INVESTMENT TRUST)
AGREEMENT AND ARTICLE OF MERGER, dated this 20th day of June,
1996, between Washington Real Estate Investment Trust, a District of Columbia
business trust ("WRIT"), and Washington Real Estate Investment Trust of
Maryland, a Maryland real estate investment trust ("Maryland WRIT").
Witnesseth that:
FIRST: WRIT and Maryland WRIT agree to merge. The terms and
conditions of the merger and the manner of carrying
the merger into effect are as set forth in this
Agreement and Articles of Merger (the "Merger").
SECOND: The name and place of organization of each party to
this Agreement and Articles of Merger are Washington
Real Estate Investment Trust, organized in the
District of Columbia, and Washington Real Estate
Investment Trust of Maryland, organized in Maryland.
Maryland WRIT shall be the surviving party of the
Merger.
THIRD: WRIT was organized under the laws of the District of
Columbia on November 18, 1960 and registered or
qualified to do business in the state of Maryland as
of September 30, 1964.
FOURTH: WRIT and Maryland WRIT both have their principal
offices located at 10400 Connecticut Avenue,
Kensington, Maryland 20895 in the county of
Montgomery.
FIFTH: WRIT owns an interest in land in the following
counties in the state of Maryland: Montgomery,
Wicomico, Howard, Frederick, Prince Georges, and
Carroll.
SIXTH: The terms and conditions of the Merger were advised,
authorized and approved by each of WRIT and Maryland
WRIT in the manner and by the vote required by its
declaration of trust and the laws of its jurisdiction
of organization. The manner of approval was as
follows:
(a) The Board of Trustees of Maryland WRIT, and WRIT,
as Maryland WRIT's sole shareholder, by a unanimous
written consent in lieu of a joint special meeting
dated May 28, 1996, adopted a joint resolution
approving the Merger.
<PAGE> 2
(b) The Board of Trustees of WRIT at a meeting held
on April 5, 1996 adopted a resolution which approved
the Merger, declared that the proposed Merger was
advisable on substantially the terms and conditions
set forth or referred to herein and directed that the
Merger be submitted for consideration at the annual
meeting of the shareholders of WRIT.
(c) The shareholders of WRIT at a meeting held on
June 20, 1996 duly adopted a resolution approving the
Merger.
SEVENTH: WRIT has authority to issue an unlimited amount of
shares of beneficial interest, all of the same class.
As of March 31, 1996, WRIT has 31,751,734 shares with
no par value issued and outstanding. Maryland WRIT
has authority to issue one hundred million
(100,000,000) shares of beneficial interest, all of
the same class, with a par value of $.01 per share.
Maryland WRIT has 100 shares issued, outstanding and
owned by WRIT.
EIGHTH: The Merger does not amend the Declaration of Trust of
the successor, Maryland WRIT, in any manner which
changes any information relating to the capital
stock.
NINTH: The effective date of the Merger shall be the date
this Agreement and Articles of Merger is filed with
the Maryland State Department of Assessment and
Taxation (the "Effective Date").
TENTH: Concurrent with the Effective Date of the Merger,
Article 1 of the Declaration of Trust of Maryland
WRIT shall be amended to change the name of Maryland
WRIT to Washington Real Estate Investment Trust.
ELEVENTH: The terms and conditions of the Merger, the mode of
carrying the same into effect and the manner and
basis of converting or exchanging issued shares of
the merging trusts is set forth below:
(a) Maryland WRIT has 100 shares issued, outstanding
and owned by WRIT, which shall be cancelled on the
Effective Date without consideration therefor.
(b) Each issued and outstanding share of WRIT on the
Effective Date shall without further act be
automatically converted into and become one share of
Maryland WRIT.
(c) Certificates representing shares of WRIT before
the Merger shall represent shares of Maryland WRIT
after the Effective Date.
-2-
<PAGE> 3
TWELFTH: The trustees of WRIT prior to the Merger shall be the
trustees of Maryland WRIT following the Effective
Date.
THIRTEENTH: The officers of WRIT prior to the Merger shall be the
officers of Maryland WRIT following the Effective
Date.
IN WITNESS WHEREOF, WRIT and MARYLAND WRIT, parties to this
Agreement and Articles of Merger, pursuant to the approval and authority duly
given by their respective Boards of Trustees, have caused these presents to be
executed by the president and attested to by the secretary of each party hereto
as the respective act, deed and agreement of each said trust.
Attest: WASHINGTON REAL ESTATE INVESTMENT TRUST
a District of Columbia business trust
/s/ Benjamin H. Dorsey By:/s/ Edmund B. Cronin, Jr.
- ------------------------- --------------------------------------------
Benjamin H. Dorsey Edmund B. Cronin, Jr.
Secretary President
Attest: WASHINGTON REAL ESTATE INVESTMENT TRUST
OF MARYLAND
a Maryland real estate investment trust
/s/ Benjamin H. Dorsey By:/s/ Edmund B. Cronin, Jr.
- --------------------------- --------------------------------------------
Benjamin H. Dorsey Edmund B. Cronin, Jr.
Secretary President
-3-
<PAGE> 4
THE UNDERSIGNED, President of Washington Real Estate
Investment Trust, a District of Columbia business trust ("WRIT"), who executed
on behalf of WRIT the foregoing Agreement and Articles of Merger of which this
certificate is made a part, hereby acknowledges in the name and on behalf of
WRIT the foregoing Agreement and Articles of Merger to be the act of WRIT and
hereby certifies that to the best of his knowledge, information and belief the
matters and facts set forth therein with respect to the authorization and
approval thereof are true in all material respects under the penalties of
perjury.
/s/ Edmund B. Cronin, Jr.
---------------------------------------
Edmund B. Cronin, Jr.
President
THE UNDERSIGNED, President of Washington Real Estate
Investment Trust of Maryland, a Maryland real estate investment trust
("Maryland WRIT"), who executed on behalf of Maryland WRIT the foregoing
Agreement and Articles of Merger of which this certificate is made a part,
hereby acknowledges in the name and on behalf of Maryland WRIT the foregoing
Agreement and Articles of Merger to be the act of Maryland WRIT and hereby
certifies that to the best of his knowledge, information and belief the matters
and facts set forth therein with respect to the authorization and approval
thereof are true in all material respects under the penalties of perjury.
/s/ Edmund B. Cronin, Jr.
---------------------------------------
Edmund B. Cronin, Jr.
President
-4-
<PAGE> 1
EXHIBIT 2
WASHINGTON REAL ESTATE INVESTMENT TRUST
10400 Connecticut Avenue
Kensington, Maryland 20895
April 22, 1996
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
of the Washington Real Estate Investment Trust to be held on June 20, 1996.
The formal Notice of the meeting and a Proxy Statement describing the proposals
to be voted on are enclosed.
The meeting is being held to elect two Trustees; to vote upon a
proposal to change the Trust's jurisdiction of organization from the District
of Columbia to Maryland by merging the Trust with and into a newly-formed
Maryland real estate investment trust that will survive the merger under the
name "Washington Real Estate Investment Trust"; to vote upon a proposal to
amend the Trust's Employee Stock Option Plan; and to transact such other
business as may properly come before the meeting.
The Trust proposes to change its jurisdiction of organization from the
District of Columbia to Maryland. This change is intended to permit the Trust
to obtain the benefit of several favorable provisions of Maryland law not
available under the laws of the District of Columbia. These provisions of
Maryland law are described in the attached proxy statement. Although the
change of jurisdiction of organization is accomplished by a merger, it will not
have any effect on the continued existence of the Trust, will not require any
exchange of shares by investors and will not have any tax consequences to
investors.
Please read the Proxy Statement, then complete, sign and return your
proxy in the enclosed envelope. Regardless of the number of shares you own,
your vote is important.
Sincerely,
/s/ ARTHUR A. BIRNEY
--------------------------
Arthur A. Birney
Chairman of the Board
<PAGE> 2
WASHINGTON REAL ESTATE INVESTMENT TRUST
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of the Shareholders (the "Annual Meeting") of the
Washington Real Estate Investment Trust (the "Trust") will be held in the
Mayflower Hotel Grand Ball Room, 1127 Connecticut Avenue, N.W., Washington,
D.C., on June 20, 1996 at 11:00 a.m., for the following purposes:
1. To elect two Trustees;
2. To vote upon a proposal to change the Trust's jurisdiction of
organization from the District of Columbia to Maryland by merging
the Trust with and into a newly-formed Maryland real estate
investment trust that will survive the merger under the name
"Washington Real Estate Investment Trust";
3. To vote upon a proposal to amend the Trust's Employee Stock Option
Plan; and
4. To transact such other business as may properly come before the
meeting.
The Trustees have fixed the close of business on April 19, 1996 as the
record date for shares entitled to vote at the Annual Meeting.
The Annual Report of the Trust, Proxy Statement and a Proxy are
enclosed with this Notice.
You are requested, if you cannot be present at the meeting, to sign
and return the Proxy in the enclosed business reply envelope promptly.
/s/ BENJAMIN H. DORSEY
----------------------
BENJAMIN H. DORSEY
Secretary
April 22, 1996.
<PAGE> 3
WASHINGTON REAL ESTATE INVESTMENT TRUST
10400 Connecticut Avenue
Kensington, Maryland 20895
PROXY STATEMENT
This Proxy Statement is furnished by the Trust's Board of Trustees
(the "Board") in connection with its solicitation of proxies for use at the
Annual Meeting of Shareholders on June 20, 1996, and at any and all
adjournments thereof. Mailing of this Proxy Statement will commence on or
about April 26, 1996. All proxies will be voted in accordance with the
instructions contained therein, and if no choice is specified, the proxies will
be voted in favor of the proposals set forth in the Notice of Annual Meeting.
Abstentions are voted neither "for" nor "against", but are counted in the
determination of a quorum. A Proxy on the enclosed form may be revoked by the
shareholder at any time prior to its exercise at the meeting by submitting, to
the Secretary of the Trust, a duly executed Proxy bearing a later date or by
attending the Annual Meeting and orally withdrawing the Proxy.
The voting securities of the Trust consist of shares of beneficial
interest, no par value ("Shares"), of which 31,751,734 Shares were issued and
outstanding at the close of business on March 31, 1996. So far as is known to
the Trust, no person holds of record or beneficially as much as 5% of the
outstanding Shares. The Trust has no other class of voting security. Each
Share outstanding on April 19, 1996, will be entitled to one vote.
Shareholders do not have cumulative voting rights.
I.
THE BOARD OF TRUSTEES AND MANAGEMENT
THE BOARD OF TRUSTEES
The Board consists of seven Trustees divided into two classes of two
Trustees each and one class of three Trustees. The terms of the Trustees
continue until the Annual Meetings to be held in 1996, 1997 and 1998,
respectively, and until their respective successors are elected and qualified.
At each Annual Meeting, two or three Trustees are elected, subject to the
limitations described below, for a term of three years to succeed those
Trustees whose terms expire at such Annual Meeting. The Trust's By-Laws
provide that no Trustee shall be nominated or elected as a Trustee after such
person's 72nd birthday. The By-Laws further provide that any Trustee who is
first elected a Trustee after December 19, 1995 shall tender his resignation as
a Trustee on his 72nd birthday.
The Board held 19 meetings in 1995. The Board has no standing
nominating committee; however, the Trustees meet as a committee of the whole to
consider such matters. The Trustees met once in 1995 for this purpose. The
Trustees will consider recommendations for nominations for Trustee received
from shareholders provided that the shareholder submits such recommendation in
writing before April 15, 1997 accompanied by a written statement setting forth
the reasons the Trust would benefit from the election of such nominee. An
Audit Committee, consisting of Messrs. Cafritz and Osnos was formed on April
11, 1995. The Audit Committee meets at least quarterly with the President and
Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer
to review operating results and other matters. The Audit Committee also makes
recommendations to the Board regarding dividend declarations and receives
reports from and participates in discussions with the Trust's independent
auditors, at least annually. The Audit Committee met 3 times in 1995. A
Compensation Committee, composed of Messrs. Cronin, Snyder and Cafritz, is
responsible for making recommendations to the Board with respect to
compensation decisions. The Compensation Committee met three times during
1995. See "Report on Executive Compensation" below. All members of the Board
attended more than 75% of the total number of meetings held during 1995.
The five non-officer Trustees of the Trust, Messrs. Birney, Cafritz,
Kahn, Osnos and Snyder, were compensated in the form of fees. This amount for
each such Trustee was $33,000 for 1995, except Mr. Kahn who was compensated as
an officer until June 21, 1995. Mr. Kahn's non-officer Trustee fees totaled
$16,500 in 1995. Mr. Birney, who acted as the recording secretary, received
additional remuneration for such services of $9,500. During 1995 the Trust
utilized the legal services of the law firm of Arent Fox Kintner Plotkin & Kahn
1
<PAGE> 4
and advisory services of the accounting firm of Snyder, Kamerow & Associates,
P.C. Trustee David M. Osnos is a senior partner of Arent Fox and Trustee
Stanley P. Snyder is Chairman of Snyder, Kamerow. The amount of fees paid to
Arent Fox and Snyder, Kamerow did not exceed 5% of either firm's 1995 gross
revenues or 5% of the Trust's 1995 gross revenues.
The following table sets forth the names and certain biographical
information concerning each of the current Trustees.
<TABLE>
<CAPTION>
SERVED AS TERM
NAME PRINCIPAL OCCUPATION(*) TRUSTEE SINCE AGE EXPIRES
- ----- ----------------------- ------------- --- -------
<S> <C> <C> <C> <C>
William N. Cafritz President, William Cafritz 1984 70 1996
Development Corp. (real
estate development)
Stanley P. Snyder Chairman, Snyder, Kamerow & 1968 61 1996
Associates, P.C. (Certified
Public Accountants)
Arthur A. Birney Chairman of the Trustees 1961 68 1997
Managing Partner and Chief Executive
Officer, Washington Brick & Terra
Cotta Co.(Real Estate Holding and
Development Company); Managing
Partner, Queenstown Harbor Golf
Links LP
B. Franklin Kahn Chairman Emeritus 1960 71 1997
Edmund B. Cronin, Jr. President and Chief Executive 1994 59 1998
Officer
Benjamin H. Dorsey Secretary of the Trust 1960 72 1998
Retired General Counsel
David M. Osnos Senior partner, Arent Fox Kintner 1987 64 1998
Plotkin & Kahn (Legal counsel
to the Trust);Director, VSE
Corporation (engineering);
Director, EastGroup Properties
(real estate investment trust)
<FN>
(*) Each person has held the indicated position for more than the past five
years except Messrs. Birney, Cronin, Dorsey and Kahn.
</FN>
</TABLE>
Mr. Arthur A. Birney, a founding Trustee, is Managing Partner and
Chief Executive Officer of Washington Brick & Terra Cotta Co., a real estate
investment and holding company founded in 1892, President of Port Annapolis
Marina, Inc. and Managing Partner of Queenstown Harbor Golf Links L.P.
Mr. Edmund B. Cronin, Jr. has 35 years of real estate investment,
development, operations and finance experience in the Washington, D.C.
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, advisory and
development services. From 1993 until joining the Trust in June 1994, Mr.
Cronin was Chief Executive Officer of H.G. Smithy Company, a real estate
management and advisory service company whose debt and equity assets under
management total approximately $1.5 billion.
Mr. Benjamin H. Dorsey retired as General Counsel of the Trust as of
December 31, 1995. Mr. Dorsey had served as Secretary and General Counsel of
the Trust since 1960. Mr. Dorsey continues to serve as Secretary and as a
Trustee.
Mr. B. Franklin Kahn retired as Chairman of the Trustees and Chief
Executive Officer of the Trust effective March 9, 1995, a position he had held
since 1960. The Trustees elected Arthur A. Birney as Chairman of the Trustees
and Edmund B. Cronin, Jr. as Chief Executive Officer of the Trust. Mr. Kahn
continues to serve as a Trustee.
2
<PAGE> 5
OTHER EXECUTIVE OFFICERS
The following table contains information regarding other executive
officers of the Trust. Such officers are elected annually by the Board and
serve at the Board's discretion.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------- --- ------------------------
<S> <C> <C>
Mary Beth Avedesian 35 Vice President--Investments
Larry E. Finger 42 Senior Vice President--Chief Financial Officer
Brian J. Fitzgerald 34 Vice President--Leasing Division Manager
Laura M. Franklin 35 Vice President--Chief Accounting Officer
Sandra T. Hunt 44 Vice President--Leasing
Thomas L. Regnell 39 Vice President--Acquisitions
</TABLE>
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 1993-1995, where she performed
acquisition due diligence and asset management. Before Towle, Ms. Avedesian
was employed for 2 years as an Assistant Manager and Marketing Manager for
AMRESCO, a subsidiary of NationsBank formed to dispose of bank-owned property;
and for 4 years with Himmel and Company as a Financial Analyst and Development
Coordinator.
Mr. Larry E. Finger, an attorney and CPA, joined the Trust as Vice
President and Chief Financial Officer in December of 1993 and was elected
Senior Vice President and Chief Financial Officer in June of 1995. Prior to
joining the Trust, Mr. Finger served as Chief Operating Officer of
Savage/Fogarty Companies, Inc., a real estate investment, management and
development company based in Alexandria, Virginia. Mr. Finger was employed by
Savage/Fogarty for 13 years, from 1978-1991 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.
Mr. Brian J. Fitzgerald joined the Trust in January of 1996 as Vice
President and Division Manager of Leasing. Prior to coming to the Trust, Mr.
Fitzgerald served as a commercial leasing broker from 1984 to 1993 with Smithy
Braedon Company, in Northern Virginia. In 1993, he became a Vice President of
H. G. Smithy Company, with responsibilities for managing all agency leasing
activities. From the date of the merger of H. G. Smithy Commercial Management
Group with Cushman & Wakefield of Washington, D.C., Inc. in June of 1994 until
joining the Trust, Mr. Fitzgerald managed institutional agency leasing
activities at Cushman & Wakefield, Inc. of Washington, D.C.
Ms. Laura M. Franklin, a CPA, joined the Trust in 1993. Prior to
joining the Trust, Ms. Franklin spent over 10 years with the public accounting
firm of Reznick, Fedder and Silverman, P.C. specializing in auditing and tax
for real estate clients.
Ms. Sandra T. Hunt joined the Trust in 1983 and has held the position
of Vice President--Leasing for more than five years.
Mr. Thomas L. Regnell joined the Trust as Vice
President--Acquisitions in January of 1995. From 1992 through 1994, Mr.
Regnell served as an Investment Officer with Federal Realty Investment Trust in
Bethesda, Maryland. Mr. Regnell 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. Mr. Regnell was associated with Spaulding & Slye for
seven years.
There are no family relationships between any Trustee or executive
officer.
3
<PAGE> 6
OWNERSHIP OF SHARES BY TRUSTEES AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning all
Shares beneficially owned as of April 19, 1996, by each Trustee, by each of the
"Named Officers" (as defined in "Executive Compensation" below) and by all
Trustees and Executive Officers as a group. Unless otherwise indicated, the
voting and investment powers for the Shares listed are held solely by the named
holder.
<TABLE>
<CAPTION>
Percentage
Name Shares Owned of Total
- ----- ------------ --------
<S> <C> <C>
Arthur A. Birney 48,433(1) 0.153%
William N. Cafritz 17,648(1) 0.056%
Edmund B. Cronin, Jr. 26,453(2) 0.083%
Benjamin H. Dorsey 108,134(1,2) 0.341%
Larry E. Finger 4,261(2) 0.013%
Sandra T. Hunt 51,702(2) 0.163%
B. Franklin Kahn 393,389(1,2) 1.239%
David M. Osnos 900 0.003%
Thomas L. Regnell --- ---
Stanley P. Snyder 5,062 0.016%
All Trustees and Executive Officers
as a group (12 persons) 661,971(2) 2.085%
<FN>
- ------------
(1) Includes shares held in a trust or estate or by spouse.
(2) Includes shares subject to options exercisable within 60 days, as follows:
Mr. Cronin, 7,838; Mr. Dorsey, 23,376; Mr. Finger, 3,292; Ms. Hunt,
48,879; Mr. Kahn, 84,161 shares; and all Trustees and Executive Officers
as a group, 173,225.
</FN>
</TABLE>
II.
ELECTION OF TRUSTEES
Two Trustees, Messrs. Cafritz and Snyder, stand for election at the
Annual Meeting, to serve for three years. It is intended that the proxies
given to the persons named in the accompanying Proxy (unless otherwise
indicated on such Proxy) will be voted for the election of Messrs. Cafritz and
Snyder, each of whom currently serves as a Trustee. If a nominee becomes
unable or unwilling to stand for election for any reason not presently known or
contemplated, the persons named in the enclosed Proxy will have discretionary
authority to vote pursuant to the Proxy for a substitute nominee nominated by
the Board. The election of Trustees requires the affirmative vote of the
holders of a majority of the shares voting at the Annual Meeting either in
person or by proxy.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE IN FAVOR OF THE
ELECTION OF WILLIAM N. CAFRITZ AND STANLEY P. SNYDER.
III.
PROPOSAL TO CHANGE THE TRUST'S STATE OF ORGANIZATION
On April 5, 1996, the Board approved, subject to shareholder approval,
a proposal to change the Trust's state of organization from the District of
Columbia to Maryland by means of a merger (the "Merger") of the Trust with and
into Washington Real Estate Investment Trust of Maryland ("Maryland WRIT"), a
newly formed Maryland real estate investment trust that initially will be a
subsidiary of the Trust (the "Change of Domicile Proposal"). Maryland WRIT
will be the survivor of the Merger and will change its name to Washington Real
Estate Investment Trust. The principal effect of the Merger will be to change
the law governing the Trust's organization and operations as an unincorporated
business trust from the law of the District of Columbia to the law of the state
of Maryland, including the portion of the Maryland Corporations and
Associations law pertaining to real estate investment trusts (the "Maryland
REIT Law").
4
<PAGE> 7
The following discussion summarizes certain aspects of the Change of
Domicile Proposal, including certain differences between District of Columbia
and Maryland law. This summary does not purport to be a complete description
of the Change of Domicile Proposal or the differences between shareholders'
rights under District of Columbia and Maryland law and is qualified in its
entirety by reference to the Maryland WRIT Declaration of Trust and By-Laws,
copies of which are available for inspection at the Trust's offices and will be
provided to shareholders on request and without charge by written or oral
request to the Trust at 10400 Connecticut Avenue, Kensington, Maryland 20895,
Attention: Brenda Barnhart (telephone (301) 929-5900).
Approval of the Change of Domicile Proposal by the Trust's
shareholders will also constitute approval of the Merger.
PRINCIPAL FEATURES OF THE CHANGE OF DOMICILE PROPOSAL
On the effective date of the Merger, the separate existence of the
Trust, as a District of Columbia trust, will cease, and Maryland WRIT will
succeed to all of the business, properties, assets and liabilities of the
Trust. Each Share issued and outstanding immediately prior to the effective
date will by virtue of the Merger be converted into one share of Maryland WRIT.
At the effective date, certificates which immediately prior to the effective
date represented Shares will be deemed for all purposes to represent the same
number of shares of Maryland WRIT. IT WILL NOT BE NECESSARY FOR SHAREHOLDERS
TO EXCHANGE THEIR EXISTING CERTIFICATES FOR MARYLAND WRIT CERTIFICATES.
Approval of the Change of Domicile Proposal will not result in any
change in the business, management, assets or liabilities of the Trust.
Following consummation of the Merger, Maryland WRIT shares will be listed on
the American Stock Exchange, the exchange on which the Shares are currently
listed. The American Stock Exchange will consider the delivery of existing
certificates representing Shares as constituting "good delivery" of shares of
Maryland WRIT in transactions subsequent to the Merger.
Pursuant to the terms of the Merger, Maryland WRIT will adopt the 1991
Stock Option Plan, as amended, and each option to purchase Shares outstanding
immediately prior to the Merger will become an option to purchase Maryland WRIT
shares, subject to the same terms and conditions as set forth in the agreements
pursuant to which such options were granted. All other employee benefit plans
and other agreements and arrangements of the Trust will continue on the same
terms and subject to the same conditions.
It is anticipated that the Merger will become effective as soon as
practicable after the Annual Meeting. However, the Merger may be abandoned by
the Board prior to the effective date, either before or after shareholder
approval. In addition, the terms of the Merger may be amended prior to the
effective date, either before or after shareholder approval; provided, however,
that the terms of the Merger may not be amended after shareholder approval if
such amendment would (i) alter the amount or kind of shares or other
consideration to be received by shareholders in the Merger, (ii) alter any
material terms of the Maryland WRIT Declaration of Trust, (iii) alter any of
the terms and conditions of the Merger if such alteration would adversely
affect the shareholders or (iv) otherwise violate applicable law. No federal
or state regulatory requirements must be complied with or approvals obtained in
connection with the Merger, other than the acceptance for filing of Articles of
Merger by the Maryland Department of Assessments and Taxation and the District
of Columbia Recorder of Deeds.
PRINCIPAL REASONS FOR THE CHANGE OF DOMICILE PROPOSAL
Maryland has adopted detailed laws governing the organization and
operations of real estate investment trusts, while the District of Columbia has
no statutory provisions pertaining to real estate investment trusts and little
other law pertaining to the organization and operations of trusts. The Board
believes that the best interest of the Trust and the shareholders will be
served by changing the Trust's state of organization from the District of
Columbia to Maryland. At the time of the Trust's organization in 1960, no
state had statutory provisions pertaining to the organization or operation of a
real estate investment trust and a larger portion of the Trust's property was
located in the District of Columbia.
Since that time, Maryland has adopted and continued to improve
statutory provisions pertaining to the organization and operation of real
estate investment trusts. The Trustees believe that Maryland law, including
the
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Maryland REIT Law, will provide specific rights and powers in connection with
the organization and operation of the Trust which are not available under
District of Columbia law and will make clear rights and powers which are not
expressly granted to trusts under District of Columbia law. The Trust
understands that currently seventeen publicly owned real estate investment
trusts are organized under Maryland law, including the Maryland REIT Law.
COMPARISON OF CERTAIN DECLARATION OF TRUST AND BY-LAW PROVISIONS AND OF CERTAIN
PROVISIONS OF MARYLAND REIT LAW AND DISTRICT OF COLUMBIA LAW
The Declaration of Trust of Maryland WRIT (the "New Articles") are
substantially similar to the Trust's current Declaration of Trust (the "Current
Articles"). The differences between the New Articles and the Current Articles
are primarily the result of the adoption of provisions intended to take
advantage of the additional rights and powers specifically provided by the
Maryland REIT Law. Significant provisions of the New Articles and new By-Laws,
certain important differences between such documents and the Current Articles
and current By-Laws and certain differences between the Maryland REIT Law and
District of Columbia law are discussed below.
LIMITATION OF LIABILITY OF SHAREHOLDERS. The Current Articles provide
that no shareholder shall be personally liable in connection with the Trust's
property or affairs. The Current Articles further provide 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.
Although there are no District of Columbia statutes addressing the subject, the
Trust in the past has received the advice of counsel, based upon the judicial
decisions of other jurisdictions, 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,
contract claims where shareholder liability is not so negated, claims for taxes
and certain statutory liabilities, the shareholders of the Trust 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.
The text of Section 3.3 of the New Articles, which deals with
shareholder liability, is virtually unchanged from the same provision of the
Current Articles. However, under the applicable provisions of Maryland law,
including the Maryland REIT Law, shareholders of a real estate investment
trust, in their capacity as shareholders, bear no liability for the obligations
or liabilities of the Trust. Accordingly, the adoption of the Change of
Domicile Proposal will provide express statutory authority for the Section 3.3
negation of shareholder liability. The Trust believes that this statutory
authority for Section 3.3 will eliminate uncertainty as to the Trust's
authority to negate shareholder liability and eliminate the remaining risk of
shareholder liability for any of the Trust's obligations or liabilities.
LIMITATION OF LIABILITY OF TRUSTEES AND OFFICERS. The Current
Articles provide that the Trust's Trustees and officers shall not be liable to
the Trust or its shareholders 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. Again, although there are
judicial decisions supporting the proposition that a trust may include
limitations on the liability of its trustees in its declaration of trust, there
is no District of Columbia statute authorizing such provisions nor stating the
extent to which the liability of the Trustees or officers may be so limited.
The Trust believes that a court would find that the Trust may limit the
liability of its Trustees and officers, but it is not certain that a court
would uphold the extent of the limitation of liability included in the Current
Articles. The Trust has modeled the limitation on liability included in the
Current Articles on similar provisions authorized in the corporation statutes
of other jurisdictions, but a court, absent
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more direct authority, may not necessarily hold that the Trust has the
authority or power to limit the liability of the Trustees or officers to the
extent provided in the Current Articles.
Under the Maryland REIT Law, there is express authority for a real
estate investment trust's declaration of trust to include provisions limiting
the liability of trustees and officers to the trust and its shareholders and
specifying the extent of the permitted limitations of liability. The New
Articles give the Trustees and officers the benefit of the fullest protection
permitted by the Maryland REIT Law. The New Articles, as authorized by the
Maryland REIT Law, provide that the Trustees and officers shall be liable to
the Trust or the shareholders only (i) to the extent the Trustee or officer
actually received an improper benefit or profit in money, property or services,
in which case any such liability shall not exceed the amount of the benefit or
profit in money, property or services actually received; or (ii) to the extent
that a judgment or other final adjudication adverse to such Trustee or officer
is entered in a proceeding based on a finding in the proceeding that such
Trustee's or officer's action or failure to act was the result of active and
deliberate dishonesty and was material to the cause of action adjudicated in
the proceeding.
In addition to receiving the benefit of express statutory authority
for the inclusion of a limitation on the liability of Trustees and officers and
for the extent of such limitation, the New Articles also, as permitted by the
Maryland REIT Law, expand the limitation of liability of the Trustees and
officers by excluding liability for a breach of the duty of loyalty, unless it
results in an improper personal benefit or was the result of active and
deliberate dishonesty, as described above. In situations in which the
provisions of the New Articles limiting Trustee and officer liability would
apply, the remedies available to the Trust or its shareholders would be limited
to equitable remedies such as an injunction or rescission.
The Trust believes that it is important that the New Articles provide
the fullest limitation on liability permitted by the Maryland REIT Law. The
Board currently includes six Trustees who are not employees of the Trust. In
addition, the Trust enjoys the benefit of a staff of skilled and professional
executive officers. The Trust believes that in order to retain its outside
Trustees and executive officers, and to obtain the services of outside Trustees
and executive officers in the future, it is essential to provide these persons
with reasonable assurances of protection from personal liability. The Trust
believes that the limitations on liability included in the New Articles are
comparable to those provided by other publicly-held real estate investment
trusts and are reasonable.
INDEMNIFICATION OF TRUSTEES AND OFFICERS. The Current Articles
provide for the indemnification of Trustees and officers to the same extent and
in the same manner as provided in the District of Columbia Business
Corporations Act. There is, however, no statute in the District of Columbia
applicable to real estate investment trusts expressly permitting a real estate
investment trust to indemnify its trustees and officers. As with respect to
the limitation of liability, the Trust believes that a court would hold that
the Trust may include provisions in its Declaration of Trust providing for the
indemnification of the Trust's Trustees and officers in certain circumstances,
but again, the extent to which such indemnification would be permitted is not
certain. The Maryland REIT Law, however, provides that indemnification of
trustees and officers is permitted to the fullest extent permitted under
Section 2-418 of the Corporation and Associations Article of the Annotated Code
of Maryland ("Section 2-418"). By providing express statutory authority, the
Maryland law reduces the likelihood that the indemnification provisions in the
New Articles would be found to exceed the permitted indemnification.
Section 2-418 also provides broader protection than the comparable
provision of the District of Columbia Business Corporation Act. Under District
of Columbia law, a director or officer cannot be indemnified if he or she is
found by a court to be liable for negligence or misconduct in the performance
of duty. Under Section 2-418 indemnification is restricted only if (i) an act
or omission of the trustee or officer was material to the matter giving rise to
the proceeding and (a) was committed in bad faith or (b) was the result of
active and deliberate dishonesty; (ii) the trustee actually received an
improper personal benefit in money, property or services; or (iii) in the case
of any criminal proceeding, the trustee or officer had reasonable cause to
believe that the act or omission was unlawful. Section 3.2 of the New Articles
provides for the indemnification of Trustees and officers to the fullest extent
permitted under Section 2-418.
For the reasons stated above with respect to the limitations of
liability of the Trustees and officers, the Trust also believes that it is
important that the New Articles provide the fullest indemnification permitted
by the
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Maryland REIT Law. The Trust believes that the indemnification included in the
New Articles is comparable to that provided by other publicly-held real estate
investment trusts and is reasonable.
INDEMNIFICATION OF EMPLOYEES AND AGENTS. There is no provision in the
Current Articles authorizing indemnification of the Trust's employees or
agents. Under the Maryland REIT Law, however, indemnification of these
individuals is p rmitted. The New Articles, therefore, take advantage of the
greater flexibility permitted under Maryland law. Under Section 3.2 of the New
Articles, indemnification of employees and agents of the Trust is permitted to
the extent authorized by the Trustees or provided for in the provisions of the
new By-Laws.
For the reasons stated above with respect to the limitations of
liability and indemnification of the Trustees and officers, the Trust also
believes that it is important that the New Articles provide the fullest
indemnification of its employees and agents permitted by the Maryland REIT Law.
The Trust believes that the indemnification included in the New Articles is
comparable to that provided by other publicly-held real estate investment
trusts and is reasonable.
BUSINESS COMBINATION PROVISIONS. The Current Articles provide 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 (defined as 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. An identical provision is included in the New Articles.
These provisions may be amended only by the affirmative vote of the holders of
70% or more of the outstanding Shares.
In the New Articles, the Trust, as permitted by Maryland Law, has
expressly elected to be governed by the special voting requirement of the
Maryland Corporations and Associations Article (the "Special Voting Article").
Opting to be governed by the Special Voting Article adds additional
restrictions to those already set forth in the Current Articles concerning
business combinations. The Special Voting Article establishes special
requirements with respect to "business combinations" between an "interested
stockholder" and a Maryland corporation unless exemptions are applicable.
Among other things, the Special Voting Article prohibits, for a period of five
years, a merger and other specific or similar transactions between a Maryland
corporation and an interested stockholder and requires a super majority-vote
for such transactions after the end of such five-year period. (For the
purposes of the Special Voting Article and the Control Share Article (described
below), a "Maryland corporation" includes a Maryland real estate investment
trust. They are referred to collectively in this section as a "Maryland
company".)
"Interested stockholders" are all persons owning beneficially,
directly or indirectly, more than 10% of the outstanding voting stock of a
Maryland company. "Business combinations" include any merger or similar
transaction subject to a statutory vote and additional transactions involving
transfers of assets or securities in specified amounts to interested
stockholders or their affiliates. Unless an exemption is available,
transactions of these types may not be consummated between a Maryland company
and an interested stockholder or its affiliates for a period of five years
after the date on which the stockholder first became an interested stockholder
and, thereafter, may not be consummated unless recommended by the board of the
Maryland company and approved by the affirmative vote of at least 80% of the
votes entitled to be cast by all holders of outstanding shares of voting stock
and 66-2/3% of the votes entitled to be cast by all holders of outstanding
shares of voting stock other than the interested stockholder unless, among
other things, the company's stockholders receive a minimum price (as defined in
the Special Voting Article) for their shares and the consideration is received
in cash or in the same form as previously paid by the interested stockholder
for its shares. This provision was included in the Special Voting Article to
protect investors in Maryland companies who may be involved in an attempt by a
person or entity to gain control of a Maryland company using a "front-end
loaded" tender offer. In this technique, the person or entity offers to
purchase up to a certain amount of a company's stock, such as 51%, and states
its intention to follow with a second-stage merger or similar transaction
following the tender at a lower price than was paid for the first 51%. The
opportunity to obtain the earlier, higher price is often availed of by
arbitrageurs who purchase large quantities of stock and tender it during such
tender offer. Other investors are frequently left with the second-stage
transaction following the tender offer at a lower price.
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A business combination with an interested stockholder which is
approved by the board of a Maryland company at any time before an interested
stockholder first becomes an interested stockholder is not subject to the
special voting requirements or fair price provisions of the Special Voting
Article. An amendment to a Maryland company's charter electing not to be
subject to the foregoing requirements must be approved by the affirmative vote
of at least 80% of the votes entitled to be cast by all holders of outstanding
shares of voting stock and 66-2/3% of the votes entitled to be cast by holders
of outstanding shares of voting stock who are not interested stockholders. Any
such amendment is not effective until eighteen months after the vote of
stockholders and does not apply to any business combination of a company with a
stockholder who was an interested stockholder on the date of the stockholder
vote.
In the New Articles, the Trust, as permitted by Maryland law, has also
expressly elected to be governed by the control share provisions of the
Maryland Corporations and Associations Article (the "Control Share Article").
Under the Control Share Article, "control shares" of a Maryland company
acquired in a "control share acquisition" have no voting rights except to the
extent approved by a vote of two-thirds of the votes entitled to be cast on the
matter, excluding shares of stock owned by the acquirer or by officers or
directors who are employees of the company. "Control shares" are voting shares
of stock which, if aggregated with all other shares of stock previously
acquired by such a person, would entitle the acquirer to exercise voting power
in electing directors within one of the following ranges of voting power: (i)
20% or more but less than 33-1/3%, or (ii) 33-1/3% or more but less than a
majority, or (iii) a majority of all voting power. Control shares do not
include shares the acquiring person is then entitled to vote as a result of
having previously obtained shareholder approval. A "control share acquisition"
means, subject to certain exceptions, the acquisition of, ownership of, or the
power to direct the exercise of voting power with respect to, control shares.
A person who has made or proposes to make a control share acquisition
upon satisfaction of certain conditions (including an undertaking to pay
expenses), may compel the board of directors to call a special meeting of
shareholders to be held within 50 days of demand to consider the voting rights
of the shares. If no request for a meeting is made, the Maryland company may
itself present the question at any shareholders' meeting.
If voting rights are not approved at the meeting or if the acquiring
person does not deliver an acquiring person statement as permitted by the
statute, then, subject to certain conditions and limitations, the Maryland
company may redeem any or all of the control shares (except those for which
voting rights have previously been approved) for fair value, without regard to
voting rights. Fair value shall be determined as of the date of the meeting of
the shareholders at which the voting rights of the control shares are
considered but not approved. If no such meeting is held, fair value shall be
determined as of the date of the last acquisition of control shares by the
acquiring person. If voting rights for control shares are approved at a
shareholders' meeting and the acquirer becomes entitled to vote a majority of
the shares entitled to vote, all other shareholders may exercise appraisal
rights. The fair value of the shares as determined for purposes of such
appraisal rights may not be less than the highest price per share paid in the
control share acquisition, and certain limitations and restrictions otherwise
applicable to the exercise of dissenters' rights do not apply in the context of
a control share acquisition.
The Control Share Article does not apply to shares acquired in a
merger, consolidation or share exchange if the Maryland company is a party to
the transaction, to acquisitions approved or exempted by the charter or bylaws
of the Maryland company or to shares acquired before November 4, 1988 or
pursuant to a contract entered into before November 4, 1988.
The foregoing provisions may have the effect of discouraging
unilateral tender offers or other takeover proposals which certain shareholders
might deem in their interests or pursuant to which they might receive a
substantial premium for their Shares. The Control Share Article in particular
has the effect of making a unilateral tender offer or other takeover of the
Trust much more difficult. The provisions could also have the effect of
insulating current management against the possibility of removal and could, by
possibly reducing temporary fluctuations in market price caused by
accumulations of Shares, deprive shareholders of opportunities to sell at a
temporarily higher market price. However, the Trustees believe that inclusion
of the business combination provisions in the New Articles may help assure fair
treatment of shareholders and preserve the assets of the Trust.
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EXCESS SHARE PROVISIONS. The excess share provisions in the Current
Articles have not been altered in the New Articles. The provisions have been
maintained because the Board believes it is in the best interests of the Trust
to protect its status as a real estate investment trust.
For the Trust to qualify as a real estate investment trust (a "REIT")
under the Internal Revenue Code (the "Code"), in any taxable year, not more
than 50% in value of its outstanding Shares may be owned, directly or
indirectly, by five or fewer individuals during the last six months of such
year, and the Shares must be owned by 100 or more persons during at least 335
days of a taxable year or a proportionate part of a taxable year less than 12
months. In order to meet these and other requirements, the Trustees have the
power to redeem or prohibit the transfer of a sufficient number of Shares to
maintain or bring the ownership of the Shares into conformity with such
requirements. In connection with the foregoing, if the Trustees shall, at any
time and in good faith, be of the opinion that direct or indirect ownership of
Shares representing more than 10% in value of the total Shares outstanding (the
"Excess Shares") has or may become concentrated in the hands of one beneficial
owner, the Trustees shall have the power (i) to repurchase from any shareholder
of the Trust such Excess Shares and (ii) to refuse to sell, transfer or deliver
Shares to any person whose acquisition of such Shares would, in the opinion of
the Trustees, result in the direct or indirect beneficial ownership by any
person of Shares representing more than 10% in value of the outstanding Shares.
The purchase price for any Shares so repurchased shall be at cost or at the
last sale price of the Share as of the date immediately preceding the day on
which the demand for repurchase is mailed, whichever price is higher. From and
after the date fixed for repurchase by the Trustees, and so long as payment of
the purchase price for the Shares to be so repurchased shall have been made or
duly provided for, the holder of any Excess Shares so called for repurchase
shall cease to be entitled to distributions, voting rights and other benefits
with respect to such Shares, except the right to payment of the purchase price
for the Shares.
Both the Current Articles and the New Articles have a similar excess
share provision to ensure that any rent paid to the Trust by a "sister
corporation" not become disqualified as rent from real property by virtue of
Section 856(d)(2)(B) of the Code. Under these provisions, the Trustees have
the power (i) by lot or other means deemed equitable to call for purchase from
any shareholder such numbers of Shares as shall be sufficient in the opinion of
the Trustees to maintain or bring the direct or indirect ownership of Shares in
conformity with the requirements of Section 856(d)(2)(B), and (ii) to refuse to
register the transfer of Shares to any person whose ownership would jeopardize
the Trust's compliance with Section 856(d)(2)(B). For purposes of this
provision, 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. This provision shall apply
even if a "sister corporation" does not exist (i) at the time the Trustees
determine that the ownership of Shares has or may become so concentrated, or
(ii) 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
thereto 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 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, both the Current Articles and the New Articles have a
provision that provides that if any transfer of Shares would prevent amounts
received by the 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, the
transfer shall be void ab initio and the intended transferee of such Shares
shall be deemed never to have had an interest therein. If this provision is
deemed void or invalid by virtue of any legal decision, statute, rule or
regulation, then the transferee of such Shares is deemed to have acted as an
agent on behalf of the Trust. Furthermore, both the Current Articles and the
New Articles provide that shareholders shall upon demand disclose to the
Trustees in writing such information with respect to their direct and indirect
ownership of the Shares as the Trustees deem necessary to determine whether the
Trust satisfies the provisions of Sections 856(a)(5) and (6) and Section 856(d)
of the Code or the regulations thereunder, as the same shall from time to time
be amended, or to comply with the requirements of any other taxing authority.
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Similarly to the business combination provisions, the excess share
provisions may deter or render more difficult attempts by third parties to
obtain control of the Trust if such attempts are not supported by the Board.
The Board, however, believes these provisions are necessary to protect the
Trust's interests in maintaining its status as an REIT under the Code.
OTHER DIFFERENCES IN THE LAW. As mentioned in several sections of
this discussion, the District of Columbia law does not include statutory
provisions pertaining expressly to real estate investment trusts. The
principal provisions of the Maryland REIT Law which will be applicable to
Maryland WRIT are discussed above. Set forth below is a brief description of
other matters expressly addressed in the Maryland REIT Law for which there is
no comparable provision in District of Columbia law.
Section 8-301 of the Maryland REIT Law specifically sets forth the
powers of a Maryland real estate investment trust. These powers are
substantially the same as the powers set forth in the Current Articles and the
New Articles. Section 8-301, however, provides specific authority for the
Trust to make and alter bylaws not inconsistent with law or the New Articles to
regulate the government of the Trust and the administration of its affairs.
Although the Trust, in accordance with the Current Articles, has adopted
By-Laws for the administration and operation of the Trust, it is not clear
under District of Columbia law to what extent a trust is permitted to adopt
bylaws. Section 8- 301 eliminates this concern with respect to the By-Laws of
Maryland WRIT.
Section 8-402 of the Maryland REIT Law grants the shareholders of a
Maryland real estate investment trust the same specific rights to inspect
records of the trust as are granted to shareholders in a Maryland corporation.
Although District of Columbia law has no comparable provision, Section 7.7 of
the Current Articles grants shareholders of the Trust the rights of inspection
provided to shareholders of a District of Columbia corporation. The
shareholder inspection statutes for Maryland and the District of Columbia are
very similar; however, Maryland law permits limited rights to inspect the
records of a corporation to any shareholder of the corporation. Upon meeting
requirements of a 5% minimum shareholder interest and ownership for at least
six months, a shareholder of a Maryland corporation may gain access to the
corporation's stock ledger. Shareholders may combine to meet the 5%
shareholder interest requirement. The District of Columbia law imposes a 5%
shareholder interest requirement to inspect the records of a corporation or the
corporation's stock ledger, but does not require a minimum ownership period.
Shareholders also may combine to meet the District of Columbia's 5% minimum
shareholder interest requirement.
Section 8-501.1 of the Maryland REIT Law specifically authorizes a
Maryland real estate investment trust to enter into a merger with a
corporation, another trust, a limited liability company or a limited
partnership, specifies the procedures for such a merger and grants shareholders
objecting to any such merger the same rights to dissent as provided to
shareholders of a Maryland corporation. Although judicial decisions authorize
trusts to enter into mergers and the Current Articles also specifically
contemplate that the Trust may enter into a merger, neither District of
Columbia law nor the Current Articles specify the procedures for a merger
involving a real estate investment trust or grants dissenter rights with
respect to such a merger.
OTHER ARTICLE PROVISIONS. The New Articles also differ from the
Current Articles in several other respects. Among these differences are the
following provisions.
Under Section 2.20 of the Current Articles, the Trust is prohibited
from investing in investment securities, including certificates of interest or
shares of beneficial interest in other real estate investment trusts ("REIT
Shares"), beyond 25% of the net assets of the Trust. The Code currently
specifies that at least 75% of a REIT's assets must be invested in real estate
assets, government securities, cash and cash items, including receivables. The
Code, however, defines "real estate assets" to include REIT Shares.
Accordingly, although the Board has no current intention to invest Trust assets
in a material amount of REIT Shares, because the Code defines "real estate
assets" to include REIT Shares, an exception has been inserted in Section 2.20
of the New Articles to permit unlimited investments in REIT Shares.
The Maryland REIT Law requires the New Articles to explicitly state the
number of authorized shares, and accordingly, under Section 4.1(a) of the New
Articles, the total number of authorized shares is set at 100,000,000 shares,
with a par value of $.01 per share. This differs from the Current Articles,
which permit an unlimited number of authorized Shares. The requirement to
state the number of authorized shares in the New Articles,
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however, is not restrictive because the New Articles, in accordance with the
Maryland REIT Law, also authorize the Board to increase the aggregate number of
authorized Shares without shareholder approval.
As discussed below under "Vote Required," the Current Articles do not
clearly specify the shareholder vote required to approve certain actions.
Section 7.5 of the New Articles expressly specifies that, except as otherwise
set forth in the New Articles, any matter requiring a vote of shareholders
shall be approved by a vote of the holders of a majority of the Shares.
CHANGES TO CURRENT BY-LAWS. The new By-Laws contain only minor
changes from the current By-Laws. Sections 7.1 and 7.2 of the Current
Articles, which set forth the manner in which annual and special meetings can
be called and held, have been moved to the new By-Laws, and the provisions for
calling a meeting of the Trustees have also been moved to the new By-Laws. The
principal consequence of including provisions in the By-Laws rather than the
New Articles is to permit their further amendment by Board vote rather than
requiring shareholder approval.
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The Merger will constitute a reorganization under Section 368(a)(1)(F)
of the Code. Consequently, holders of Shares will not recognize any gain or
loss for federal income tax purposes as a result of the conversion of their
Shares into shares of Maryland WRIT. For federal income tax purposes, a
holder's aggregate basis in the shares of Maryland WRIT received in the Merger
will equal such holder's adjusted basis in the Shares converted therefor and
such holder's holding period for the Maryland WRIT shares received in the
Merger will include such holder's holding period in the Shares converted
therefor.
Likewise, the Trust will not recognize any gain or loss for federal
income tax purposes upon the transfer of its property to Maryland WRIT pursuant
to the Merger. In addition, Maryland WRIT will succeed to and take into
account the earnings and profits, accounting methods, and other tax attributes
of the Trust specified in Section 381(c) of the Code.
Holders of Shares should consult their own tax advisors as to the
application and effect of state, local and foreign income and other tax laws to
the conversion of their Shares into shares of Maryland WRIT pursuant to the
Merger.
VOTE REQUIRED
Although the Current Articles permit the Trust to enter into a merger,
the Current Articles do not expressly state the percentage vote of shareholders
required to approve the Change of Domicile Proposal. Section 10.1 of the
Current Articles, however, provides that the Trust may be terminated with the
approval of the holders of a majority of the Shares. It also provides that the
Current Articles may be amended with the approval of the holders of a majority
of the Shares, except that an amendment to certain Sections, including Section
8.1 specifying the number of Trustees, Section 8.2 providing for the election
of the Trustees in three staggered classes, Section 10.1 specifying the
percentage of shareholder approval required for certain actions and Article 15
requiring a special Trustee vote in connection with certain transactions
relating to the acquisition of the Trust or its assets, require the vote of
holders of 70 percent of the outstanding Shares.
Because the New Articles, as described above, do not differ in any
material respect from Sections 8.1, 8.2 and 10.1 and Article 15 of the Current
Articles, and because the Change of Domicile Proposal will be effected through
the Merger and not by an amendment of the Current Articles, the Trust believes
that the Change of Domicile Proposal may be approved by the vote of the holders
of a majority of the outstanding Shares.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE CHANGE OF
DOMICILE PROPOSAL
12
<PAGE> 15
IV.
ADOPTION OF AMENDMENTS TO OPTION PLAN
The Trust currently maintains the Washington Real Estate Investment
Trust 1991 Stock Option Plan (the "Plan"), which provides for the grant to
officers and employees of the Trust of options to purchase up to an aggregate
of 1,515,241.5 Shares (as adjusted for the three-for-two split effected in
1992). Since its adoption, the Plan has provided that each option initially
granted under the Plan shall be an incentive stock option ("ISO"), as that term
is defined in Section 422 of the Internal Revenue Code (the "Code") and as
further described below. See "Federal Income Tax Consequences."
The Board has approved amendments to the Plan (the "Amendments") which
provide (i) that options granted under the Plan may be granted as an ISO (as
the Plan currently provides) or may be granted as an option which does not
qualify as an ISO (a non-qualified option or "NQO"), (ii) that options may be
exercisable upon grant or on such vesting schedule as the Board may determine,
(iii) that options shall continue for their original term following the death
of the option holder and (iv) that the Board may amend the adjustment
provisions of the Plan without shareholder approval. The Amendments do not
increase the number of Shares available in the aggregate for option grants
under the Plan, do not expand the persons eligible to receive options under the
Plan and do not change the terms of options granted under the Plan, except as
described below. The terms of the Plan and the effect of the Amendments are
described in more detail below.
DESCRIPTION OF THE PLAN
The Plan provides that it may be administered by the Board or a
committee of the Board composed of at least three Trustees (the "Committee").
The Board (or the Committee) has authority, subject to the limits of the Plan,
to designate persons to whom options are granted, to determine the number of
Shares covered by each option and to determine the terms and provisions of each
option. As amended, the Plan provides that the Board (or the Committee) also
will be authorized to designate whether the option is an ISO or an NQO.
Options only may be granted to an employee of the Trust, including any Trustee
or officer who is an employee. Currently, approximately 28 employees are
eligible to receive option grants under the Plan.
Under the Plan, whether the option is an ISO or an NQO, the option
price may not be less than the fair market value of the Shares on the date the
option is granted, and options will expire no later than ten years from the
date of the grant. As of April 19, 1996, the closing price for the Shares on
the American Stock Exchange was $16 3/8. The option price must be paid in full
at the time an option is exercised, in cash, by check or by delivery of Shares
already owned by the optionee. As amended, the Plan provides that an option
may be exercisable on grant or in one or more installments as determined by the
Board (or the Committee).
As required by the Code, the Plan currently provides that the Trust
may grant an optionee an ISO with respect to Shares with an aggregate fair
market value at the time of the grant in excess of $100,000 during any
particular calendar year, provided that such option does not become first
exercisable by the optionee in an amount exceeding $100,000 per calendar year.
This provision would not apply to an option designated to be an NQO.
Options, whether an ISO or an NQO, are not assignable or transferable
by the optionee except by will or by the laws of descent and distribution. As
amended, the Plan provides that in case of death, an option will continue in
accordance with its terms and may be exercised thereafter by the persons
entitled to do so under the optionee's will or by his legal representatives.
If an optionee's employment is terminated for any reason other than death,
termination for cause or retirement on or after attaining age 65, the option
will terminate three months after the date of such termination of employment,
but in no event later than the date of expiration of the option. If an
optionee's employment is terminated for cause, the option will terminate as of
the date of such termination of employment. If an optionee ceases to be
employed by the Trust due to retirement on or after attaining age 65, the
option will continue in accordance with its terms; however, the Plan provides
that the option will cease to be an ISO upon the expiration of three months
from the date of the optionee's retirement and will thereafter be treated as an
NQO.
13
<PAGE> 16
The Board may terminate the Plan at any time and may amend the Plan
from time to time. However, the Board may not change the maximum number of
Shares for which options may be granted, the periods during which options may
be granted or exercised or materially increase the benefits under the Plan
without shareholder approval. No amendment may adversely affect an optionee's
rights under any issued option without the optionee's consent.
Pursuant to the Code, an ISO plan may not have a term longer than ten
years from the earlier of the date the plan is adopted or the date the plan is
approved by the stockholders. Accordingly, the Plan will expire on June 25,
2001 (except as to options outstanding on that date), and the Amendments will
not extend the term of the Plan.
EFFECT OF THE AMENDMENTS
NQOs. As described above, the Plan currently provides that the Board
(or Committee) may grant an optionee an ISO with respect to Shares with an
aggregate fair market value at the time of the grant in excess of $100,000
during any particular calendar year, provided that such option does not become
first exercisable by the optionee in an amount exceeding $100,000 per calendar
year. The Amendments will permit the grant of options which would not be
subject to this provision, and therefore would not qualify for treatment as an
ISO. The provision would also permit the grant of options which otherwise
would satisfy all requirements for ISO status, but because of their NQO
designation, would not be treated as an ISO. See "Federal Income Tax
Consequences."
As described in "Executive Compensation," Mr. Cronin's Employment
Agreement provides for the grant of options to him with respect to Shares with
an aggregate fair market value at the time of the grant equal to his base
salary during 1994, 1995 and 1996. Because of the required terms of these
options, a portion of the options cannot qualify as ISOs, and accordingly the
Board previously has granted Mr. Cronin non-qualified options which are not
subject to or governed by the Plan. This arrangement, however, has a number of
consequences. First, these options are not subject to the provisions of the
Plan, including the limitation on the number of Shares reserved for options
under the Plan. If the Amendments are approved, the Board contemplates that
future grants of NQO's would be made under the Plan to the extent that Shares
are available. Further, because these options are not granted pursuant to the
Plan, they are not entitled to the exemptions from the short-swing trading
prohibition of Section 16(b) of the Securities Exchange Act ("Section 16(b)")
provided to options granted under the Plan. The ability to grant NQOs under
the Plan would enable the Board to grant Mr. Cronin options which are entitled
to the benefit of this exemption. See "Section 16."
EXERCISE. Previously the Plan has provided that options may not be
exercised prior to one year from the date of grant. The Board believes that
this is an unnecessary constraint upon the administration of the Plan and that
the Board (or the Committee) should be granted the discretion to make options
vest more quickly, including becoming exercisable upon grant. Currently, the
Board grants certain NQOs, including Mr. Cronin's, outside of the Plan with
immediate vesting. For the reasons discussed above under "NQOs," the Board
believes it is preferable to grant options pursuant to the Plan and has adopted
this amendment to provide the same flexibility in determining vesting terms as
is available with respect to such non-Plan options.
OPTION TERM. The Plan also has previously provided that, upon the
death of an optionee, the option could be exercised by the persons entitled to
do so under the optionee's will or the optionee's legal representative for a
period not to exceed twelve months after the optionee's death. The Board
believes that this provision unnecessarily and unreasonably deprives a deceased
optionee's estate of the full benefit of the option. The Board has amended the
Plan to provide that in these circumstances the option will continue in
accordance with its terms until its originally specified expiration date. The
Plan, however, will continue to specify that, if the option includes a vesting
provision, no further vesting would occur following the optionee's death.
ADJUSTMENT. The Plan provides that the number and price of the Shares
covered by each option and the total number of Shares that may be granted under
the Plan shall be proportionately adjusted to reflect, as deemed equitable and
appropriate by the Board, any stock dividend, stock split or share combination
of the Shares or recapitalization of the Trust. It also provides that to the
extent deemed equitable and appropriate by the Board, in any merger,
consolidation, reorganization, liquidation or dissolution, any option granted
under the Plan shall pertain to the securities and other property to which a
holder of the number of Shares covered by the option
14
<PAGE> 17
would have been entitled to receive in connection with such event. The Plan
also provides, however, that the foregoing provisions relating to adjustments
to be made upon changes in capitalization may not be amended without
shareholder approval.
In view of the broad discretion granted to the Board to determine what
adjustment would be "equitable and appropriate," the restriction on the Board's
ability to amend these provisions is inconsistent and imposes an unnecessary
limitation on the proper administration of the Plan. Although the Board is not
currently aware of any pending proposal, transaction or other event, other than
the Change of Domicile Proposal, which would trigger the application of these
provisions, the Board believes it is efficient, while it is seeking shareholder
approval of the Amendments, to correct this inconsistency in the Plan now
rather than attempt to do so at some time in the future in conjunction with a
transaction which might call for further flexibility in these provisions. No
adjustments are expected to be made in connection with the Change of Domicile
Proposal other than to substitute WRIT Maryland shares for the current Shares.
In order to make clear that any amendment to the adjustment provisions is
intended only to address a particular transaction and not increase the benefits
under the Plan, the Board has also amended the Plan to specify that no
amendment to the Plan may materially increase the benefits accruing to
participants under the Plan without shareholder approval.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the federal income tax consequences
relating to stock options.
ISO. Under the Code, an optionee will not recognize income at the
time of grant of an ISO or the subsequent purchase of the Shares pursuant to
the exercise of such ISO. The amount by which the fair market value of the
Shares purchased at the time of exercise exceeds the option price will
constitute an item of tax preference and may be potentially subject to the
alternative minimum tax. If the optionee makes no disposition of the Shares
purchased on exercise of an ISO within two years from the grant date and within
one year from the date of exercise of the option, upon a subsequent sale of
Shares the optionee will recognize a long-term capital gain or loss equal to
the difference between the amount realized on the disposition of such Shares
and his option exercise price.
If an optionee disposes of Shares purchased through the exercise of an
ISO within the foregoing two- or one-year periods, the transaction will be
treated as a disqualifying disposition and the optionee will be required to
include in his gross income as compensation for the taxable year in which the
disposition occurs, the amount by which the fair market value of the Shares on
the date the option was exercised by the optionee (or the amount realized upon
disposition, if that amount is less than the fair market value on the date of
exercise) exceeds the option exercise price. In addition, upon a sale within
either period, the optionee will recognize a capital gain or loss equal to the
difference between (a) the sum of the exercise price he paid (or if the
exercise price is paid in whole or in part by the transfer of Shares previously
owned by the optionee, the amount of money plus the adjusted basis of such
previously owned Shares) and any amount he or she is required to include in his
or her gross income in accordance with the preceding sentence and (b) the
amount realized on the sale.
The Trust will be entitled to a deduction for compensation with
respect to an ISO only if and to the extent that the optionee recognizes
ordinary income from a disqualifying disposition of Shares received upon the
exercise of such ISO.
NQO. The grant of an NQO will have no immediate tax consequences to
the optionee or the Trust. If Shares received on the exercise of an NQO are
not subject to a substantial risk of forfeiture, the optionee will recognize
ordinary income equal to the excess, if any, of the fair market value of the
Shares at the time of exercise over the exercise price. It is not contemplated
that the Trust will, upon the exercise of an NQO, issue or deliver Shares that
are subject to a substantial risk of forfeiture, except as noted in the next
paragraph.
Shares received on the exercise of an NQO will be treated as subject
to a substantial risk of forfeiture for up to a six-month period if the sale of
the Shares at a profit during such six months could subject the optionee to
suit under Section 16(b). Under these circumstances, however, the optionee has
a right to elect, within a 30-day period from the date of transfer of the
Shares, to include in his or her taxable income for the taxable year of
exercise an amount equal to the excess of the fair market value of such Shares
at the time of the exercise over the
15
<PAGE> 18
exercise price. If the optionee does not make the preceding election, the
optionee will recognize ordinary income upon the expiration of the
above-referenced six-month period. The amount of such income will be equal to
the excess of the fair market value of the Shares at that time over the
exercise price, and the holding period for determining whether any capital gain
or loss on the subsequent sale or exchange of the Shares is long-term or
short-term capital gain or loss will commence at that time.
Where ordinary income is recognized by an optionee as described above
in connection with Shares received on the exercise of an NQO, the Trust will be
entitled to a deduction in the amount of ordinary income so recognized by the
optionee.
SECTION 16
Currently, pursuant to Securities Exchange Act Rule 16b-3, the
acquisition of an option pursuant to the Plan by an officer of the Trust is
exempt from the provisions of Section 16(b). Section 16(b) provides, among
other things, that an officer who purchases and sells the shares of the company
that employs him within a six-month period is liable to the company for the
difference between the purchase price and the sale price. Rule 16b-3 provides
that the acquisition of a stock option by an officer of a company pursuant to a
stock option plan which meets certain requirements (one of which is shareholder
approval of the plan) is not subject to Section 16(b). Approval of the
Amendments will permit the Trust to adopt the Amendments and maintain the
foregoing exemption for options granted to officers of the Trust pursuant to
the Plan.
The affirmative vote of the holders of record of a majority of the
outstanding Shares is required for approval of the Amendments.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENTS
16
<PAGE> 19
V.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The Summary Compensation Table shows the compensation awarded, earned
or paid during the past three years to the Trust's Chief Executive Officer and
each of the Trust's four other most highly compensated executive officers (the
"Named Officers") whose compensation exceeded $100,000 for the periods
indicated.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
---------------------
ANNUAL CASH OPTIONS GRANTED(1)(2)
NAME AND PRINCIPAL POSITION YEAR COMPENSATION (NUMBER OF SHARES)
- --------------------------- ---- ------------ ---------------------
<S> <C> <C> <C>
B. Franklin Kahn(3) 1995 $280,109 --
Chairman of the Trustees and 1994 591,300 --
Chief Executive Officer 1993 591,300 --
Edmund B. Cronin, Jr 1995 $295,000 20,171
President and Chief Executive Officer 1994 171,875 15,675
Benjamin H. Dorsey(3) 1995 $100,000 --
General Counsel 1994 150,500 6,584
Secretary and Trustee 1993 158,000 4,848
Larry E. Finger 1995 $150,000 6,838
Senior Vice President and 1994 125,000 6,584
Chief Financial Officer 1993 6,170 --
Sandra T. Hunt 1995 $180,246 6,838
Vice President-Leasing 1994 151,700 6,584
1993 145,850 4,848
Thomas L. Regnell 1995 $107,913 6,838
Vice President-Acquisitions
<FN>
(1) All options reflected in the table were granted under the Incentive Stock
Option Plan except 9,091 of Mr. Cronin's 1994 options and 13,333 of Mr.
Cronin's 1995 options, which were granted as non-qualified options.
(2) Options indicated for 1993 were granted January 11, 1994 for the year
1993.
(3) Mr. Kahn retired March 9, 1995, and Mr. Dorsey retired December 31,
1995.
</FN>
</TABLE>
The Trust has entered into an Employment Agreement with Edmund B.
Cronin, Jr., establishing Mr. Cronin's position initially as President and
Chief Operating Officer of the Trust. The Agreement was entered into on May
11, 1994 for a term of two years and eight months ending on December 31, 1996,
unless earlier terminated by either party. Pursuant to the Employment
Agreement, Mr. Cronin received an annual base salary of $275,000 in his first
year of employment, subject to annual review by the Board. Mr. Cronin
receives standard insurance, vacation and sick leave benefits and is eligible
to participate in the Trust's Pension Plan. The Agreement provides for the
grant to Mr. Cronin of incentive stock options in December 1994, 1995 and 1996
to purchase $100,000 worth of Trust shares each year, based on the then current
market price of such shares, which shall also be the option exercise price. In
addition, Mr. Cronin shall receive non-qualified options in December 1994,
1995 and 1996 for an amount equal to the difference between his then current
base salary and $100,000, based on the then current market price of the Shares,
except for options granted in December 1994 for which the exercise price was
based on the market value of the Shares as of June 1, 1994.
The Employment Agreement further provided that not later than
September 30, 1994, the Board would consider whether Mr. Cronin should be
nominated to a position as Trustee. He was appointed a Trustee on September
13, 1994 and was elected President and Chief Executive Officer effective March
9, 1995.
17
<PAGE> 20
Under the Employment Agreement, Mr. Cronin may be terminated upon his
death or disability or at any time for cause. Mr. Cronin may be terminated
without cause upon thirty days notice, provided, however, the Trust shall
thereafter be obligated to pay severance equal to all cash compensation
otherwise payable for the balance of the term of the Employment Agreement, plus
medical benefits during such period.
OPTION GRANTS TABLE
The following table shows the specified information with respect to
options granted to the Named Officers in 1995.
1995 OPTION GRANTS TABLE
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
NUMBER OF PERCENTAGE PRICE APPRECIATION
SECURITIES OF TOTAL FULL 10-YEAR
UNDERLYING OPTIONS OPTION TERM
OPTIONS GRANTED TO EXERCISE EXPIRATION ----------------------
NAME GRANTED(1) EMPLOYEES(2) PRICE DATE 5% 10%
- ---- ---------- ------------ -------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Edmund B. Cronin, Jr. 20,171 29.20% 14.6250 12/19/2005 185,524 470,155
Benjamin H. Dorsey 0 N/A N/A N/A N/A N/A
Larry E. Finger 6,838 9.90% 14.6250 12/19/2005 62,893 159,383
Sandra T. Hunt 6,838 9.90% 14.6250 12/19/2005 62,893 159,383
B. Franklin Kahn 0 N/A N/A N/A N/A N/A
Thomas L. Regnell 6,838 9.90% 14.6250 12/19/2005 62,893 159,383
<FN>
- -------------
(1) Options become exercisable 50% after one year and 100% after two years.
(2) 13,333 of Mr. Cronin's options were granted as non-qualified stock
options. See "V. Report on Executive Compensation--Executive Compensation
Program." Percentages reflect the percentage of all options granted,
including these 13,333 non-qualified options.
</FN>
</TABLE>
The dollar amounts under the 5% and 10% columns in the table above are the
result of calculations required by the SEC's rules and therefore are not
intended to forecast possible future appreciation in the price of the Shares,
which would benefit all shareholders. For example, in order for the Named
Officers to realize the potential values set forth in the 5% and 10% columns in
the table above, the price per Share of the Shares would have to be
approximately $23-7/8 and $37-7/8, respectively, as of the expiration date of
the option. Actual gains, if any, on option exercises and Share holdings are
dependent on the future performance of the Shares and overall stock market
conditions.
AGGREGATED OPTION EXERCISES AND OPTION VALUE TABLE
The following table shows information concerning the exercise of stock
options during 1995 by each of the Named Officers and the year-end value of
unexercised options.
AGGREGATED OPTION EXERCISES IN 1995 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED IN
NUMBER OF UNEXERCISED THE MONEY OPTIONS AT
SHARES OPTIONS AT DECEMBER 31, 1995 DECEMBER 31, 1995
ACQUIRED VALUE ----------------------------- -----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Edmund B. Cronin, Jr -- -- 7,838 28,009 5,388 30,602
Benjamin H. Dorsey 7,497 81,005 23,376 0 8,899 0
Larry E. Finger -- -- 3,292 10,130 2,263 10,811
Sandra T. Hunt 1,693 14,611 48,879 10,130 115,527 10,811
B. Franklin Kahn -- -- 84,161 32,214 333,616 111,623
Thomas L. Regnell -- -- 0 6,838 0 8,548
</TABLE>
18
<PAGE> 21
PENSION PLAN
The Trust has a non-contributory defined benefit pension plan (the
"Pension Plan") that covers all employees who meet certain requirements
regarding age and years of service before December 31, 1995. The Pension Plan
was amended on December 12, 1995 to fix benefits and years of service accruals
as of December 31, 1995.
The following table is illustrative of various annual payments that
would be made pursuant to the Pension Plan and the Supplemental Benefit Plan
(as defined below) upon retirement on an individual's 65th birthday, assuming
the indicated five-year average remuneration and years of service.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
---------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ ------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
$125,000 $ 34,440 $ 45,920 $ 57,400 $ 68,880 $ 71,176
150,000 41,565 55,420 69,275 83,130 85,901
175,000 48,690 64,920 81,150 97,380 100,626
200,000 55,815 74,420 93,025 111,630 115,351
225,000 62,940 83,920 104,900 125,880 130,076
250,000 70,065 93,420 116,775 140,130 144,801
300,000 84,315 112,420 140,525 168,630 174,251
400,000 112,815 150,420 188,025 225,630 233,151
450,000 127,065 169,420 211,775 254,130 262,601
500,000 141,315 188,420 235,525 282,630 292,051
</TABLE>
The Pension Plan provides for retirement upon the participant's 65th
birthday, disability or upon attainment of age 50 with 10 or more years of
service at an actuarially reduced benefit. The Pension Plan provides both
retirement benefits and death benefits prior to retirement. Retirement
benefits are based on the participant's average salary during the five years of
employment which produces the highest average. Accrued pension benefits are
fully vested after six years of employment. Death benefits are based on the
projected monthly pension benefit.
The Code limits the maximum annual benefit for a person retiring under
a defined benefit pension plan such as the Pension Plan. The Board has adopted
a plan to provide supplemental retirement benefits to employees who are
restricted by such limitation and who had accrued a benefit under the Pension
Plan prior to January 1, 1994 (the "Supplemental Benefit Plan"). Mr. Kahn is
the only employee eligible to receive a benefit under the Supplemental Benefit
Plan. The supplemental benefit provided equals the difference between the
retirement benefits to which the employee was entitled at the time of
retirement, assuming the Code limitation was not in effect under the Pension
Plan, and the benefits to which such employee is actually entitled under the
Pension Plan at that time.
The Board also authorized the establishment of a separate trust fund
to acquire ownership of a life insurance policy on the life of Mr. Kahn. In
the event of Mr. Kahn's demise prior to his receipt of all accrued
supplemental retirement benefits, the assets of such separate trust fund would
be used to pay any remaining supplemental retirement benefit entitlements to
Mr. Kahn's beneficiaries. Any remaining assets of the separate trust fund
would then revert to the general use of the Trust.
19
<PAGE> 22
VI.
REPORT ON EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
IN COMPENSATION DECISION
The Board determined executive compensation for 1995. A Compensation
Committee (the "Compensation Committee") composed of Messrs. Kahn, Osnos and
Snyder was responsible for making recommendations to the Board with respect to
1995 compensation decisions. Mr. Kahn, the Trust's Chief Executive Officer at
the time, was not involved in the consideration or vote concerning his own
compensation. Mr. Osnos is a senior partner with the Trust's legal counsel
and Mr. Snyder is Chairman of an accounting firm providing advisory services to
the Trust. See "I. The Board of Trustees and Management--The Board of
Trustees" above.
EXECUTIVE COMPENSATION PRINCIPLES
The Trust's Executive Compensation Program is based on guiding
principles designed to align executive compensation with Trust values and
objectives, business strategy, management initiatives and business financial
performance. In applying these principles the Compensation Committee has
established a program designed to:
- Attract and retain key executives critical to the long-term success of
the Trust.
- Reward executives for long-term strategic management and the enhancement
of shareholder value.
- Support a performance-oriented environment that rewards performance not
only with respect to Trust goals but also Trust performance as compared
to that of industry performance levels.
EXECUTIVE COMPENSATION PROGRAM
The Trust's compensation program consists of both cash and stock
options. Through the award of stock options, the objective is to align the
executive officers' long-range interests with those of the shareholders.
During 1995, cash compensation consisted of a base salary; bonuses were not
utilized.
The Board, upon the recommendation of the Compensation Committee, has
determined the salary for each executive officer based upon (i) a review of the
compensation paid to similarly situated executive officers employed by
companies comprising the EREIT Index and (ii) a subjective evaluation of each
officer's performance throughout the year. See "Executive
Compensation--Performance Graph" for additional discussion regarding the EREIT
Index. Specific performance goals were not established for the Trust's
executive officers during 1995. In general, the EREIT Index comparison and the
subjective evaluation were weighted equally by the Board when making individual
compensation decisions. The Board believes that compensation paid to the
Trust's executive officers is comparable to that paid by the companies
comprising the EREIT Index.
Long-term incentives are provided through a "qualified" Incentive
Stock Option Plan and Non-qualified Stock Options. Options granted each year
under the Incentive Stock Option Plan are based on individual determinations
predicated on the Board's desire to retain, reward and encourage the optionee
and to promote entrepreneurship. Such "qualified" stock options are limited to
a maximum annual grant value of $100,000 as set by federal tax law. All option
prices are at fair market value on the date of grant and expire after 10 years.
The size of an individual award is based on subjective evaluation.
With respect to non-qualified stock options, the Compensation
Committee can recommend to the Board optionees, option terms and the number of
option shares without regard to the restrictions established by federal tax law
for incentive stock option plans. The determination of whether to grant
qualified or non-qualified options is based on subjective evaluation, except in
the case of Mr. Cronin whose option grant is determined in accordance with his
Employment Agreement. See "IV. Executive Compensation-Summary Compensation
Table" for more details on this Employment Agreement. Mr. Cronin received
non-qualified stock option grants for 13,333 shares in 1995.
20
<PAGE> 23
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Kahn's 1995 compensation consisted solely of his salary and was
determined by the Board (excluding Mr. Kahn) after a recommendation by the
Compensation Committee and was based upon (i) a review of the compensation paid
to Chief Executive Officers employed by companies comprising EREIT Index and
(ii) a subjective evaluation of Mr. Kahn's performance throughout the year.
Specific performance goals were not established for Mr. Kahn during 1995. In
general, the EREIT Index comparison and the subjective evaluation were weighted
equally by the Board when making the decision to maintain Mr. Kahn's 1995
salary at the level established in 1994. Compensation paid to Mr. Kahn is
comparable to compensation paid to the Chief Executive Officers of the
companies comprising the EREIT Index.
Mr. Kahn retired as Chairman and Chief Executive Officer effective
March 9, 1995, and Mr. Edmund B. Cronin, Jr. was elected Chief Executive
Officer effective March 9, 1995. Mr. Cronin's compensation was not adjusted
during 1995 as a result of this promotion.
THE BOARD OF TRUSTEES
Arthur A. Birney
William N. Cafritz
Edmund B. Cronin, Jr.
Benjamin H. Dorsey
B. Franklin Kahn
David M. Osnos
Stanley P. Snyder
21
<PAGE> 24
PERFORMANCE GRAPH
Set forth below is a graph comparing the cumulative total shareholder
return on the Shares with the cumulative total return of companies making up
the Standard & Poor's 500 Stock Index as provided by Standard & Poor's
Corporation and the Equity Real Estate Investment Trust Index (excluding Health
Care REITs) (the "EREIT Index") as provided by the National Association of Real
Estate Investment Trusts. The EREIT Index is a compilation of 171 companies as
of December 31, 1995 which qualify as real estate investment trusts and own
real property and/or equity interests in real property and has been weighted
according to each individual company's stock market capitalization. The EREIT
Index companies are traded on the New York and American Stock Exchanges and on
the NASDAQ National Market. The graph assumes an initial investment of $100 on
December 31, 1990 and the reinvestment of all dividends paid thereafter with
respect to such $100 investment.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
[GRAPHIC]
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
WRIT $100 $167 $199 $211 $175 $182
EREIT 100 129 156 185 190 218
S&P 100 131 141 155 157 215
</TABLE>
22
<PAGE> 25
VII.
OTHER MATTERS
INDEPENDENT ACCOUNTANTS
The firm of Price Waterhouse LLP served as the Company's independent
accountants for 1995. The Company has not yet selected its independent
accountants for 1996. This selection is expected to be made by the Board
during the second or third quarter of 1996, based upon the recommendation of
the Audit Committee. Representatives of Price Waterhouse LLP are expected to
attend the Annual Meeting, will be provided with an opportunity to make a
statement, should they desire to do so, and will be available to respond to
appropriate questions from the stockholders.
SECURITIES REPORTING REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires Trustees and certain officers to file reports of changes in stock
ownership with the SEC and with the American Stock Exchange, with copies to the
Trust. Based solely on a review of such copies, the Trust believes that all
such filing requirements have been met for the year ended December 31, 1995.
EXPENSES AND ADMINISTRATION
The cost of this solicitation of proxies will be borne by the Trust.
In addition to the use of the mails, some of the officers and regular employees
of the Trust may solicit proxies by telephone or telecopier, will request
brokerage houses and other custodians, nominees and fiduciaries to forward
soliciting material to the beneficial owners of shares held of record by such
persons and may also verify the accuracy of marked proxies by contacting record
and beneficial owners of shares. The Trust will reimburse such persons for
expenses incurred in forwarding such soliciting material.
1997 ANNUAL MEETING
Shareholders may present proposals to be considered for inclusion in
the Proxy Statement relating to the 1997 Annual Meeting, provided they are
received by the Trust no later than December 24, 1996 and are in compliance
with applicable laws and SEC regulations.
/s/ BENJAMIN H. DORSEY
----------------------
Benjamin H. Dorsey
Secretary
April 22, 1996.
23
<PAGE> 1
EXHIBIT 3
DECLARATION OF TRUST
of
WASHINGTON REAL ESTATE INVESTMENT TRUST
OF MARYLAND
AS ADOPTED ON APRIL 5, 1996
<PAGE> 2
WASHINGTON REAL ESTATE INVESTMENT TRUST
OF MARYLAND
Table of Contents
to
DECLARATION OF TRUST
<TABLE>
<CAPTION>
Page
ARTICLE 1.
<S> <C> <C>
Name and Title to Property. 1
Section 1.1. Name and Title to Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Resident Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.3. Nature of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2.
Powers of Trustees. 2
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.16. Valuations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.17. Fiscal Year and Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.18. Respecting Certain Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.19. Other Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.20. Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
ARTICLE 3.
<S> <C> <C>
Limitations of Liability of Shareholders, Trustees, and Others. 6
Section 3.1. Limitation of Trustees' and Officer's Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.2. Trustee, Officer, and other Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.3. Limitation of Shareholder Liability & Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 4.
Shares of Beneficial Interest. 8
Section 4.1. General Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.2. Right to Certificate and Form of
Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.3. Issuance of Additional Shares and Fractional
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 5.
Record and Transfers of Shares. 9
Section 5.1. Register of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.2. Transfer Agent and Registrar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.3. Deposit of Certificates with Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.4. Method of Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.5. Transfer by Operation of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.6. Method of Recording Certain Type of
Share Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.7. Record of Register Conclusive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.8. Purchase or Retention Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.9. Notice to Shareholders; Loss of Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.10. Excess Share Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 6.
Characteristics of Shares. 13
Section 6.1. Ownership of Property in Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 6.2. Shares Deemed Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 6.3. Rights of Shares Acquired by Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 6.4. Dealing in Shares by Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
- ii -
<PAGE> 4
<TABLE>
<CAPTION>
ARTICLE 7.
<S> <C> <C>
Meetings of Shareholders. 13
Section 7.1. Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 7.2. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 7.3. Effect of Shareholder Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 7.4. Establishment of Record Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 7.5. Rights to Vote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 7.6. Report to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 7.7. Right to Inspect Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 8.
Trustees. 15
Section 8.1. Number of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 8.2. Term of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 8.3. Resignation of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 8.4. Appointment of Trustee to Fill Vacancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 8.5. Effect of Death, Resignation, or Removal
of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 8.6. Action by Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 8.7. Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 8.8. Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 9.
Distributions of Property. 17
Section 9.1. Distributions of Profits or Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 9.2. Retention of Profits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 10.
Amendment of Trust; Removal of Trustees. 17
Section 10.1. Amendment of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 10.2. Removal of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 10.3. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
- iii -
<PAGE> 5
<TABLE>
<CAPTION>
ARTICLE 11
<S> <C> <C>
Miscellaneous. 18
Section 11.1. Definition of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11.2. Maryland Law Governs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11.3. Execution of Trust in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11.4. Certificate of One or More Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 12.
Duration of Trust. 18
ARTICLE 13.
Federal Housing Administration Insured Mortgages. 19
ARTICLE 14.
Investment Policies. 19
Section 14.1. Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 14.2. Mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 14.3. Temporary Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 14.4. Area of Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 14.5. Prohibited Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 14.6. Prohibited Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 14.7. Dealings with Affiliated Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 15.
Special Voting Requirements 20
Section 15.1. Related Shareholder Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 15.2. Application of Title 3, Subtitles 6 and 7 of Maryland Law . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
- iv -
<PAGE> 6
DECLARATION OF TRUST
OF
WASHINGTON REAL ESTATE INVESTMENT TRUST
OF MARYLAND
THIS DECLARATION OF TRUST made this 5th day of April, 1996, by
the persons named on the signature page hereof,
WITNESS that:
WHEREAS the Trustees are desirous of forming a Maryland real
estate investment 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 for 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.
Section 1.1. The name of this Trust shall be "Washington Real
Estate Investment Trust of Maryland" 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 of Trust,
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 tenants and held
by and transferred to the Trustees as joint tenants except as provided in
Section 2.4 of Article 2 hereof.
<PAGE> 7
Section 1.2. The name and address of the resident agent for
service of process of this Trust in the State of Maryland is The Corporation
Trust Incorporated, 32 South Street, Baltimore, Maryland 21202. This Trust may
have such offices or places of business within or without the State of Maryland
as the Trustee may from time to time determine.
Section 1.3. The Trust is a real estate investment trust
within the meaning of Title 8 of the Corporation and Associations Article of
the Annotated Code of Maryland.
ARTICLE 2.
Powers of Trustees.
Section 2.1. The Trustees shall have without other or further
authorization full and absolute power and 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 of Trust, except where the context otherwise requires, is deemed to
mean any individual, 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.
- 2 -
<PAGE> 8
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 State of
Maryland or any other State or other taxing authority any agreement for the
payment of taxes to said State of Maryland or any other State or other 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
- 3 -
<PAGE> 9
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, including 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 give 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 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
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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 trustee) 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.
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 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
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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
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 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 2.18 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 beyond 25% of the net
assets of the Trust, except certificates of interest or shares of beneficial
interest in other real estate investment trusts or interests in partnerships
all or substantially all of whose assets are interests in real estate.
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 (i)
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to the extent that it is proved that such Trustee or officer actually received
an improper benefit or profit in money, property, or services, in which case
any such liability shall not exceed the amount of the benefit or profit in
money, property, or services actually received; or (2) to the extent that a
judgment or other final adjudication adverse to such Trustee or officer is
entered in a proceeding based on a finding in the proceeding that such
Trustee's or officer's action or failure to act was the result of active and
deliberate dishonesty and was material to the cause of action adjudicated in
the proceeding. If Section 5-350 of the Courts and Judicial Proceeding Law of
the State of Maryland is subsequently amended to further eliminate or limit the
liability of a trustee or officer, as set forth in the preceding sentence, then
a Trustee or officer shall likewise not be liable to the fullest extent
permitted by the amended law. Neither the amendment nor repeal of this
Section, nor the adoption or amendment of any other provision of the
Declaration of Trust inconsistent with this Section, shall apply to or affect
in any respect the applicability of the preceding sentence with respect to any
act or failure to act which occurred prior to such amendment, repeal, or
adoption.
(b) All persons shall look solely to the Trust property for
satisfaction of claims of any nature arising in connection with the affairs of
the 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 permitted by Section 2-418 of the Maryland General Corporation Laws (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 (i)
in each and every situation where the Trust is obligated to make such
indemnification pursuant to Section 2-418 and (ii) in each and every situation
where, under Section 2-418, the Trust is not obligated, but is permitted or
empowered, to make such indemnification. The Trust shall promptly make or
cause to be made any determination that Section 2-418 requires. 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
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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.
The Trust shall indemnify employees and agents of the Trust to such extent as
shall be authorized by the Trustees or provided for in the provisions of the
Bylaws as permitted by Section 8-301 of the Maryland General Corporation Law,
as it may be amended from time to time. Any repeal or notification of the
forgoing provisions of this Section 3.2 by the stockholders of the Trust shall
not adversely affect any right or protection of an individual existing at the
time of such repeal or modification.
(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, Bylaws, agreement, vote of shareholders or disinterested
Trustees or otherwise.
Section 3.3. No 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 solely by virtue of such shareholder being a shareholder of the
Trust 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.
(a) The total number of shares which this Trust has authority
to issue is one hundred million shares (100,000,000) with a par value of $.01
per share. No assessment shall ever be made upon shareholders.
(b) The Board of Trustees may increase the aggregate number
of shares authorized to be issued by the Trust without shareholder approval.
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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 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 authorized shares of this Trust,
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
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of shares held by them respectively and the numbers of the certificates
representing the same and a record of all transfers 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 Trust 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 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 or provided for in the bylaws.
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 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.
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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 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
Trust. 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
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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 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 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.
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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 and receive a new certificate of shares in place
of the certificate held by the deceased shareholder, and upon the acceptance of
which such 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. There shall be an annual meeting of the
Shareholders, to be held at such convenient time and place after delivery of
the Trust's annual report and proper notice as shall be determined by or in the
manner prescribed in the Bylaws. Except as otherwise provided in this
Declaration of Trust, special meetings of Shareholders may be called in the
manner provided in the Bylaws.
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Section 7.2. 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 7.3. 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.
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 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. Except as expressly set forth herein, any matter
requiring a vote of shareholders shall be approved by a vote of the holders of
a majority of shares. 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 Shareholders 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.
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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 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 Maryland 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: Arthur A. Birney, William N. Cafritz, Edmund
B. Cronin, Jr., Benjamin H. Dorsey, B. Franklin Kahn, David M. Osnos, Stanley
P. 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. The Board
of Trustees, by resolution, shall designate the Trustees who will serve in each
class. One class shall serve until the annual election of Trustees in 1997
and until their respective successors are duly qualified and assume office; one
class shall serve until the annual election of Trustees in 1998 and until their
respective successors are duly qualified and assume office; and one class shall
serve until the annual election of Trustees in 1999 and until their respective
successors are duly qualified and assume office. Commencing in 1997 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. Except as additional qualifications shall otherwise be
specified in the bylaws, the Trustees shall be individuals of full age, not
under any legal disability, and no person shall qualify as a Trustee until he
shall have
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either signed this Declaration of Trust or agreed in writing to be bound in all
respects by the Declaration of Trust. 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 Trust,
and such resignation shall take effect immediately or at a later date according
to the terms of the notice.
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 the person so appointed shall have delivered to the
President of the Trust an instrument in writing, signed by such person
acknowledging and agreeing to be bound by this Declaration of Trust. 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.
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 as provided in the bylaws 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.
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.
Section 8.8. The Trustees may adopt a seal and from time to
time adopt, amend or repeal bylaws not inconsistent with law or this
Declaration of Trust to regulate the government of the Trust and administration
of its affairs, including, but not limited to, the duties of the Trust's
officers, agents, servants and representatives.
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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 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. 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 shares.
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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 State of Maryland 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
Maryland.
Section 11.3. This Declaration of Trust 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 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.
ARTICLE 12.
Duration of Trust.
This Trust shall continue without limitation of time but
subject to the provisions of Article 10 hereof.
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<PAGE> 24
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 unsecured and/or secured
financing. 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,
by the exchange of properties and by the formation of one or more partnerships
and the exchange of partnership interests therein for properties.
Section 14.3. 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 opinion of counsel for the Trust, disqualify the
Trust for treatment as a "real estate investment trust" under the Internal
Revenue Code and Regulations thereunder.
Section 14.4. 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 14.5. 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
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<PAGE> 25
investment is to acquire underlying real estate assets by dissolution of such
company, or (2) commodities.
Section 14.6. 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 14.7. 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.
Special Voting Requirements.
Section 15.1.
(a) 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.
(b) 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") and 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 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.
Section 15.2. The provisions of Title 3, Subtitle 6 and 7 of
the Corporations and Associations Article of the Annotated Code of Maryland
entitled "Special Voting Requirements" and "Voting Rights of Certain Control
Shares", respectively (or any successor statutes) shall apply to this Trust.
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<PAGE> 26
In witness whereof, the undersigned Trustees have executed
this Declaration of Trust as of the date first set forth above.
/s/ Arthur A. Birney
----------------------------------------------------
Arthur A. Birney
/s/ William N. Cafritz
----------------------------------------------------
William N. Cafritz
/s/ Edmund B. Cronin, Jr.
----------------------------------------------------
Edmund B. Cronin, Jr.
/s/ Benjamin H. Dorsey
----------------------------------------------------
Benjamin H. Dorsey
/s/ B. Franklin Kahn
----------------------------------------------------
B. Franklin Kahn
/s/ David M. Osnos
----------------------------------------------------
David M. Osnos
/s/ Stanley P. Snyder
----------------------------------------------------
Stanley P. Snyder
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<PAGE> 1
EXHIBIT 4
WASHINGTON REAL ESTATE INVESTMENT TRUST
BY-LAWS
AS ADOPTED APRIL 5, 1996
<PAGE> 2
BY-LAWS
I. Any nomination of a proposed 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 Distribution 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. The nomination of a proposed trustee by the trustees must be
made by a majority of all trustees then in office, and all
trustees present including nominees shall vote on nominations.
IV. The President, any Vice President and any other officer or
agent of the Trust as the trustees shall designate shall be
authorized to execute any deed, mortgage, lease, contract or
other instrument or agreement on behalf of the Trust.
V. No person shall be nominated or elected as a trustee after
such person's 72nd birthday.
VI. All trustees first elected on or after April 5, 1996 shall
tender their resignation as a Trustee upon their 72nd
birthday.
VII. 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 the trustees deem
necessary.
VIII. A proxy given by a shareholder shall not be valid after one
year from the date thereof.
IX. The trustees 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.
X. Proxies for annual meetings shall be kept by the Secretary
until the next annual meeting and thereafter destroyed.
XI. By-laws may be amended at any time by a majority of all
trustees after ten days written notice to all trustees of
proposed changes.
XII. 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
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the Trust 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.
XIII. 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.
XIV. Notice of all meetings of trustees shall be given to all
trustees not less than three (3) days before the meeting.
2
