SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
__________________
FORM 8-K/A
CURRENT REPORT PURSUANT TO
SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): October 30, 1998
First Washington Realty Trust, Inc.
(Exact Name of Registrant as
Specified in Charter)
Maryland 0-25230 52-1879972
(State or Other (Commission File Number) (IRS Employer
Jurisdiction of Identification No.)
Incorporation)
4350 East-West Highway
Suite 400
Bethesda, Maryland 20814
(Address of Principal
Executive Offices)
(301) 907-7800
(Registrant's telephone
number, including area code)
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ITEM 5. Other Events
As a prospective investor in securities of First Washington Realty
Trust, Inc., you should carefully consider the following risk factors.
Although First Washington Realty Trust, Inc., First Washington Realty
Limited Partnership and First Washington Management, Inc. are separate
entities, for ease of reference, the terms "the Company," "we," "us," and
"ours" refer to the business and properties of all of these entities,
unless the context indicates otherwise. For ease of reference and clarity,
we refer to First Washington Realty Trust, Inc. as the "REIT," First
Washington Realty Limited Partnership as the "Operating Partnership," and
First Washington Management, Inc. as the "Management Company."
Risk Factors
We have substantial amounts of debt, which presents various risks.
We may have insufficient cash resources to make required payments of
principal and interest. At the current time, we have a significant level of
debt. We cannot guarantee that we can refinance or repay our existing
indebtedness at maturity. Also, the terms of any such refinancing may not
be as favorable as the terms of the existing financing. As of September 30,
1998, we had outstanding approximately $218 million of long-term mortgage
indebtedness and $25 million of exchangeable debentures. Our debt to total
market capitalization ratio is approximately 40.5%. The ratio of our debt
to total market capitalization, excluding the exchangeable debentures, is
approximately 36.3%. We define debt to market capitalization as debt
divided by the sum of debt and the market value of our outstanding
partnership units and shares of common stock.
Much of our debt comes due in the next two years. Additionally, a
large portion of our mortgage indebtedness will become due by 2000. These
mortgages provide for the repayment of principal in a lump sum or "balloon"
payment at maturity. This type of mortgage involves greater risks than
mortgages with principal amounts amortized over the term of the loan, since
our ability to repay the outstanding principal amount at maturity may
depend on obtaining adequate refinancing or selling the property which is
subject to the mortgage. These mortgages require balloon payments of $88.9
million (including $25.0 million of exchangeable debentures) in 1999 and
$24.3 million in 2000. From 1998 through 2021, we will have to refinance an
aggregate of approximately $204 million of debt.
We will need to refinance much of our debt. Only a small portion of
the principal of our mortgage indebtedness will be repaid prior to maturity
and we do not plan to retain in advance enough cash to repay this
indebtedness at maturity. Therefore, we will have to refinance this debt
through additional debt financing or equity offerings. If we cannot
refinance this indebtedness on acceptable terms, we may have to dispose of
properties upon disadvantageous terms, which may result in losses to us and
lower distributions to stockholders. If the refinancing has a higher
interest rate, our interest expense would increase, which would limit the
amount of cash to pay expected distributions to stockholders. Further, if
we cannot meet mortgage payments, we could lose the mortgaged property or
properties through foreclosure. Even if the
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indebtedness is otherwise nonrecourse, the lender may have the right to
recover deficiencies from us in certain circumstances, including
environmental liabilities.
Rising interest rates could cause us to pay more interest. At
September 30, 1998, $15.5 million of our debt carried a variable interest
rate, and we may incur additional debt in the future that also bears
interest at variable rates. If market interest rates increase, our debt
service requirements would also increase.
We can incur additional debt. While not required by our organizational
documents, we have a policy of maintaining a ratio of debt to total market
capitalization of 50% or less. However, our charter and bylaws do not
contain any debt incurrence restrictions and the Board of Directors could
alter or eliminate this policy.
Some of our properties secure more than a single mortgage loan. A
total of 17 properties are cross-collateralized with one or more other
properties. A default in a single loan which is cross-collateralized by
other properties may result in the foreclosure on all of the properties by
the mortgagee with a consequent loss of income and asset value to us. We
have experienced operating losses.
We historically have experienced losses allocated to common
stockholders before extraordinary items. These net losses reflect
substantial non-cash charges such as depreciation and amortization and the
effect of distributions to holders of the convertible preferred stock. The
terms of our preferred stock limit the amount of dividends we can pay to
our common stockholders.
When the Board of Directors authorizes distributions, each share of
convertible preferred stock is entitled to receive distributions equal to
$0.6094 per quarter. Each share of convertible preferred stock is also
entitled to a participating distribution, which is equal to the amount of
distributions in excess of $0.4875 per quarter payable to the common stock
multiplied by the number of shares of common stock into which the
convertible preferred stock is then convertible. The payment of
distributions to the convertible preferred stock reduces the income
allocable to the holders of common stock, which causes a decrease in common
stockholders' equity. The entitlement of the convertible preferred stock to
participating distributions limits the level of distributions we can pay on
the outstanding shares of common stock.
Our properties are concentrated in the Mid-Atlantic region.
Local economic and real estate conditions could affect our results.
Our properties are located primarily in the Mid-Atlantic region. More
particularly, approximately 45% of the total gross leaseable area of our
properties is located in the Washington-Baltimore corridor. Adverse
economic developments in this area could adversely impact the operations of
our properties and therefore our profitability. The concentration of
properties in a limited number of markets may expose us to risks of adverse
economic developments which are greater than the risks of owning properties
in several markets.
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The exchange of exchangeable debentures would reduce cash available for
distribution to common stockholders.
As part of our formation, the Operating Partnership issued $25.0
million of exchangeable debentures, which are exchangeable for 1,000,000
shares of convertible preferred stock. The exchangeable debentures bear
interest at the rate of 8.25% per year. If the exchangeable debentures are
exchanged for convertible preferred stock, our annual amount of
distribution payments on the convertible preferred stock (net of reductions
in interest payments) would be increased by approximately $0.375 million.
Such an increase in distributions on the convertible preferred stock would
reduce the annual cash available for distribution payable on outstanding
shares of common stock by $0.04 per share.
Environmental problems are possible and could be costly.
Various federal, state and local laws, ordinances and regulations
subject property owners or operators to liability for the costs of removal
or remediation of certain hazardous substances released on a property.
These laws often impose liability without regard to whether the owner or
operator knew of, or was responsible for, the release of the hazardous
substances. The presence or the failure to properly remediate hazardous
substances may adversely affect our ability to sell, rent or borrow against
contaminated property. In addition to the costs associated with
investigation and remediation actions brought by governmental agencies, the
presence of hazardous wastes on a property could result in personal injury
or similar claims by private plaintiffs.
Various laws also impose, on persons who arrange for the disposal or
treatment of hazardous or toxic substances, liability for the cost of
removal or remediation of hazardous substances at the treatment facility.
These laws often impose liability whether or not the person arranging for
the disposal ever owned or operated the disposal facility.
Independent environmental consultants have completed Phase I or
similar environmental audits on all of our properties. Phase I
environmental site assessments are intended to identify potential sources
of contamination for which a company may be responsible and to assess the
status of environmental regulatory compliance. An environmental audit
involves general inspections without soil sampling or groundwater analysis.
These environmental assessments and audits indicate that dry cleaning
solvents, petroleum and/or hydraulic fluid have been detected in the soil
and/or groundwater at seven of our properties.
Existing environmental studies of our properties may not have revealed
all environmental conditions, liabilities or compliance concerns. Also,
environmental conditions, liabilities or compliance concerns may have
arisen at a property after the related review was completed.
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Our third-party management, leasing and related service business presents
various risks.
Management contracts are generally terminable on short notice. We
intend to pursue actively the management, including contracts to lease
space, of properties owned by third parties. Managing properties owned by
third parties presents certain risks, including:
* Management and leasing contracts may generally be canceled upon 30 days'
notice or upon certain events, including sale of the property. The property
owner may terminate these contracts, or we may lose the contracts in
connection with a sale of the property.
* Contracts may not be renewed upon expiration or may not be renewed on terms
consistent with current terms.
* Management fees are based on rental revenues which may decline as a result
of general or specific market conditions.
We have limited control over the business of the Management Company.
Certain members of our management, own 100% of the voting common stock of
the Management Company and have the ability to elect the board of directors
of the Management Company. Consequently, we have no ability to influence
the decisions of the Management Company. As a result, the board of
directors and management of the Management Company may implement business
policies or decisions that are adverse to our interests or that lead to
adverse financial results. The voting common stock of the Management
Company is subject to an assignable right of first refusal held by Stuart
D. Halpert and William J. Wolfe.
Our REIT status limits the business of the Management Company. Certain
requirements for REIT qualification may limit our ability to increase
third-party management, leasing and related services offered by the
Management Company. Some of our management team have conflicts of interest
regarding the sale of some of our properties.
Holders of common units may suffer adverse tax consequences upon
certain of our properties' sales or refinancings. Therefore, holders of
common units, including members of our management may have their own
objectives regarding the appropriate pricing and timing of a property's
sale or refinancing. Although we, as the sole general partner of the
Operating Partnership have the exclusive authority to sell or refinance an
individual property, officers and directors who hold common units may
influence us not to sell or refinance certain properties (or repay debt
collateralized by these properties) even though a sale or refinancing might
be financially advantageous to stockholders. Policies adopted by the Board
to minimize the impact of this conflict may not succeed in eliminating the
influence of officers and directors who hold common units.
Some of our management own a shopping center that is managed by the Management
Company.
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Certain members of management are the owners (with others) of a
corporation that is the general partner of a general partner of
Mid-Atlantic Centers Limited Partnership. This partnership owns one
shopping center currently managed by the Management Company. These members
of management may have objectives different than ours regarding the
determination of the management fee charged by us for this property.
We can change our investment and financing policies without stockholder
approval.
The Board of Directors determines our investment and financing
policies, and our policies with respect to certain other activities,
including our growth, debt, capitalization, distributions, REIT status and
operating policies. Although they have no present intention to do so, the
Board of Directors may amend or revise these policies from time to time
without notice to or a vote of our stockholders. Accordingly, stockholders
may not have control over changes in our policies.
Our executive officers have substantial influence over our affairs.
As of September 30, 1998, our officers as a group beneficially owned
approximately 10.5% of the total issued and outstanding shares of common
stock (assuming exchange of common units and exercise of options) and 5.6%
of the outstanding shares of common stock (assuming the exchange and/or
conversion of all other securities convertible into common stock). They
have substantial influence on us which might not be consistent with the
interests of our other stockholders. Also, they may in the future have a
substantial influence on the outcome of any matters submitted to our
stockholders for approval.
We are dependent on a very limited member of key personnel.
We depend on the efforts of our executive officers, particularly
Messrs. Halpert and Wolfe. While we believe that we could replace these
individuals, the loss of their services could have an adverse effect on our
operations. Messrs. Halpert and Wolfe have entered into employment and
non-compete agreements with us.
We face risks common to all real estate companies.
Our ability to make expected distributions to stockholders depends on
our ability to generate funds from operations in excess of scheduled
principal payments on debt and capital expenditure requirements. Events and
conditions beyond our control may adversely affect funds from operations
and the value of our properties. Examples include:
* an adverse economic climate, particularly in the Mid-Atlantic Region;
* attractiveness of properties to tenants;
* an oversupply of space or reduction of demand for space in the areas where
we operate;
* competition from other retail properties;
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* our ability to provide adequate maintenance and insurance;
* increased operating costs, including insurance premiums, real estate taxes,
repair costs and renovation costs;
* changes in market rental rates;
* the availability of financing and interest rate levels;
* zoning or other regulatory restrictions;
* changes in traffic patterns; and
* environmental liability.
New acquisitions and developments could fail to perform as expected.
Acquisition and development of neighborhood shopping centers entails risks
that investments will fail to perform in accordance with our expectations.
Expansion, renovation and development projects generally require
expenditure of capital as well as various government and other approvals,
which cannot be assured. We will incur certain risks, including
expenditures of funds on, and devotion of management's time to, projects
which we may not complete. Acquisition agreement could fail to close.
Although from time to time we enter into agreements for the acquisition of
retail properties, these agreements are subject to customary conditions to
closing, including completion of due diligence investigations to our
satisfaction. It is possible that these agreements may not be consummated.
Any of the foregoing could have a material adverse effect on our ability to
make anticipated distributions to you.
We are dependent upon the financial health of our tenants. We derive
most of our income from rental income. A tenant may experience a downturn
in its business, which may weaken its financial condition and result in its
failure to make timely rental payments. Also, when our tenants decide not
to renew their leases, we may not be able to relet the space. Even if
tenants do renew, the terms of renewal or reletting may not be as favorable
as current lease terms. Leases on 9.4% and 9.5% of the gross leasable area
in the properties will be expiring in 1999 and 2000, respectively. In the
event of default by a lessee, we may experience delays in enforcing our
rights as lessor and may incur substantial costs in protecting our
investment.
The bankruptcy or insolvency of a major tenant may adversely affect the income
produced by our properties. As of October 23, 1998, three tenants were involved
in bankruptcy proceedings. These tenants represent approximately 0.15% of the
total annual minimum rents of our properties. These bankrupt tenants may not
continue to pay rent and additional tenants may become bankrupt or insolvent.
Some of our properties are not anchored by a supermarket or drug store.
Nine of our properties are relatively small in size, with less than 50,000
square feet of gross leasable area, and are not anchored by a supermarket or
drug store tenant. These properties may experience greater variability in
consumer traffic.
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Real estate investments are illiquid. We may not be able to sell
properties at the appropriate time. Equity real estate investments are
relatively illiquid and therefore tend to limit our ability to vary
our portfolio promptly in response to changes in economic or other
conditions. Our properties primarily are neighborhood shopping
centers, and we do not presently intend to substantially vary the
types of real estate in our portfolio. In addition, certain
significant expenditures associated with each equity investment (such
as mortgage payments, real estate taxes and maintenance costs) are
generally not reduced when circumstances cause a reduction in income
from the investment.
Some potential losses are not covered by insurance. Certain types
of losses, generally of a catastrophic nature, such as wars or
earthquakes may be either uninsurable or not economically insurable.
Should an uninsured loss occur, we could lose both our invested
capital in and anticipated profits from a property. In such event, we
might nevertheless remain obligated to repay any mortgage indebtedness
on the property.
We face vigorous competition. Numerous companies compete with us
in seeking properties for acquisition and tenants who will lease space
in these properties. We may not be able to acquire suitable leased
properties and tenants for our properties in the future.
We could invest in mortgages. Although we currently have no plans
to invest in mortgages, we may invest in mortgages in the future. If
we were to invest in mortgages, we would incur the risks of this type
of investment, which include:
* borrowers may not be able to make debt service payments or pay principal
when due;
* the value of mortgage property may be less than the amount owed; and
* interest rates payable on the mortgages may be lower than our costs of
funds.
Complying with the Americans with Disabilities Act and similar
laws could be costly. Under the Americans with Disabilities Act of
1990 all public accommodations must meet certain federal requirements
related to access and use by disabled persons. Although we believe
that our properties substantially comply with present requirements of
the act, we have not conducted an audit or investigation of all of our
properties to determine our compliance. We may incur additional costs
of complying with the act. A number of additional federal, state and
local laws also may require modifications to our properties, or
restrict our ability to renovate our properties. We cannot currently
ascertain the ultimate amount of the cost of compliance with the act
or other legislation. Although we do not expect such costs to have a
material effect on us, such costs could be substantial.
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In order to protect our REIT status among other things, our charter
contains limitations on ownership of our capital stock.
Our charter contains certain restrictions on the ownership and
transfer of our capital stock. These restrictions aim to prevent
concentration of stock ownership. These limitations may:
* discourage a change of control;
* deter tender offers for the capital stock, which may be attractive to our
stockholders; or
* limit the opportunity for stockholders to receive a premium for their
capital stock.
To maintain our qualification as a REIT, not more than 50% in
value of our outstanding capital stock may be owned, actually or
constructively, by five or fewer individuals (as defined in the
Internal Revenue Code of 1986, as amended (the "Code") to include
certain entities) at any time during the last half of our taxable year
other than during the first taxable year for which we elected to be
taxed as a REIT (the "five or fewer" requirement). In addition, rent
from a related party tenant, as defined in the Code, is not qualifying
income for purposes of the REIT gross income test. Attribution rules
in the Code determine if any individual or entity constructively owns
our stock under the "five or fewer" requirement and under the related
party tenant rules. Primarily because of fluctuations in values among
the different classes of our capital stock, these restrictions may not
ensure that we will satisfy the "five or fewer" requirement, or avoid
receiving rent from a related party tenant. If we do not satisfy the
"five or fewer" requirement, our status as a REIT will terminate. We
will not be able to prevent such termination.
The Board of Directors may waive certain of these limitations
with respect to a particular stockholder if it is satisfied, based
upon the advice of tax counsel, that ownership in excess of these
limitations will not jeopardize our status as a REIT. Any attempted
acquisition (actual or constructive) of shares by a person who, as a
result, would violate one of these limitations will cause the shares
purportedly transferred to be automatically transferred to a trust for
the benefit of a charitable beneficiary or, under certain
circumstances, the transfer will be deemed void. In addition,
violations of the ownership limitations which are caused by certain
other events (such as changes in the relative values of different
classes of our capital stock) generally will result in our automatic
repurchase of the violative shares.
In addition, in certain circumstances, a holder of convertible
preferred stock who is not otherwise in violation of the ownership
limits could be prevented from converting its convertible preferred
stock into shares of common stock.
Our charter also contains other provisions that may delay, defer, or
prevent a change of control.
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We have a staggered Board. Our Board of Directors has been
divided into three classes of directors. The staggered terms for
directors may reduce the possibility of a tender offer or an attempt
to change control even if a tender offer or a change in control were
in the stockholders' interest.
We could issue preferred stock without stockholder approval. Our
charter authorizes the Board of Directors to issue up to 10,000,000
shares of preferred stock, including the convertible preferred stock.
The Board of Directors may establish the preferences, rights and other
terms (including the right to vote and the right to convert into
common stock) of any shares issued. The issuance of preferred stock
could delay or prevent a tender offer or a change in control even if a
tender offer or a change in control were in our stockholders'
interest. No shares of preferred stock other than the convertible
preferred stock are currently issued or outstanding.
We have exempted our Chairman and our CEO from the Maryland
Business Combination Law. The Maryland General Corporation Law, as
amended, prohibits certain "business combinations" between a Maryland
corporation and an "interested stockholder" or an affiliate of an
interested stockholder for five years after the most recent date on
which the interested stockholder becomes an interested stockholder. An
interested stockholder is any person who beneficially owns ten percent
or more of the voting power of the corporation's shares. After the
five-year prohibition, any such business combination must be approved
by two supermajority stockholder votes unless, among other conditions,
the corporation's common stockholders receive a minimum price for
their shares and receive consideration in cash or in the same form as
previously paid by the interested stockholder for its shares. This
means that, unless an exemption applies, the transaction must be
approved by at least:
* 80% of the votes entitled to be cast by holders of outstanding voting
shares, and
* two-thirds of the votes entitled to be cast by holders of outstanding
voting shares other than shares held by the interested stockholder with
whom or with whose affiliate or associate the business combination is to be
effected.
As permitted by the statute, our Board of Directors has exempted
any business combination involving Messrs. Halpert and Wolfe and any
of their affiliates or associates or any person acting in concert with
any of such persons. Consequently, the five-year prohibition and the
super-majority vote requirements described above will not apply to
business combinations between us and any of these people. As a result,
Messrs. Halpert and Wolfe and other persons referred to in the
preceding sentence may be able to enter into business combinations
with us which may not be in the best interest of the stockholders. In
such case, we would not have to comply with the super-majority vote
requirements and other provisions of the statute.
We could adopt the Maryland Control Share Acquisition Statute.
Maryland law provides that "control shares" of a Maryland corporation
acquired in a "control share acquisition" have no voting rights except
to the extent approved by a stockholder vote. Two-thirds of the shares
eligible to vote must vote in favor of granting the "control shares"
voting rights. "Control Shares" are shares of stock that, taken
together with all other shares of stock the acquiror
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previously acquired, would entitle the acquiror to exercise voting power in
electing directors within three ranges of voting power, beginning with
one-fifth of all voting power. Control shares do not include shares of
stock the acquiring person is entitled to vote as a result of having
previously obtained stockholder approval. A "control share acquisition"
means the acquisition of control shares subject to certain exceptions.
If a person who has made (or proposes to make) a control share
acquisition satisfies certain conditions (including agreeing to pay
expenses), he may compel the Board of Directors to call a special
meeting of stockholders to be held within 50 days to consider the
voting rights of the shares. If such a person makes no request for a
meeting, the corporation has the option to present the question at any
stockholders' meeting.
If voting rights are not approved at a meeting of stockholders
then, subject to certain conditions and limitations, the corporation
may redeem any or all of the control shares (except those for which
voting rights have previously been approved) for fair value. Fair
value is determined without regard to the absence of voting rights for
control shares, as of the date of either:
* the last control share acquisition; or
* any meeting where stockholders considered and did not approve voting rights
of the control shares.
If voting rights for control shares are approved at a
stockholders' meeting and the acquiror becomes entitled to vote a
majority of the shares of stock entitled to vote, all other
stockholders may exercise appraisal rights. Under Maryland law, the
fair value as determined for purposes of these appraisal rights may
not be less than the highest price per share paid in the control share
acquisition.
Pursuant to the statute, our bylaws contain a provision exempting
from the control share acquisition act any and all acquisitions by any
person of our shares of stock. Our Board of Directors may amend or
eliminate this provision at any time in the future.
We have a Stockholder Rights Plan. On October 10, 1998, our Board
of Directors adopted a stockholders' rights plan and declared a
distribution of one preferred share purchase right for each
outstanding share of common stock. The rights were issued on
October 26, 1998 to each stockholder of record on that date. The
rights have certain anti- takeover effects. The rights would cause
substantial dilution to a person or group that attempts to acquire us
on terms that our Board of Directors does not approve. We may redeem
the shares for $.01 per right, prior to the time that a person or
group has acquired beneficial ownership of 15% or more of our common
stock. Therefore, the rights should not interfere with any merger or
business combination our Board of Directors approves.
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Our classification as a REIT depends on compliance with federal law.
Failure to qualify as a REIT would have serious adverse consequences.
The requirements for qualification as a REIT are technical and
complex, and we could fail to qualify. We believe we have operated so
as to qualify as a REIT under the Code, commencing with our taxable
year ended December 31, 1994. However, we may not have qualified, or
may not remain qualified. Qualification as a REIT involves the
application of highly technical and complex Code provisions for which
there are only limited judicial and administrative interpretations.
The determination of various factual matters and circumstances not
entirely within our control may affect our ability to qualify as a
REIT. For example, in order to qualify as a REIT, at least 95% of our
gross income in any year must be derived from qualifying sources.
Also, we must make distributions to stockholders aggregating annually
at least 95% of our REIT taxable income (excluding capital gains). In
addition, legislation, new regulations, administrative interpretations
or court decisions may significantly change the tax laws with respect
to qualification as a REIT or the federal income tax consequences of
such qualification.
To qualify as a REIT, not more than 5% of our total assets may
consist of securities of one issuer. We believe that the value of the
securities of the Management Company held by us did not exceed at any
time 5% of the value of our total assets and will not exceed such
amount in the future. We based this belief on the initial allocation
of shares among participants in the formation transactions and our
opinion regarding the maximum value that could be assigned to the
existing and expected future assets and net operating income of the
Management Company. If we fail to qualify as a REIT in any year, we
would be subject to federal income tax (including any applicable
alternative minimum tax) on our taxable income at regular corporate
rates. Distributions to shareholders in any year in which we fail to
qualify will not be deductible by us, nor will they be required to be
made. If this happens, to the extent of our current or accumulated
earnings and profits, all distributions to shareholders will be
dividends, and subject to certain limitations of the Code, corporate
distributees may be eligible for the dividends-received deduction.
Unless we are entitled to relief under certain statutory provisions,
we will also be disqualified from taxation as a REIT for the four
taxable years following the year during which we lost our
qualification. The additional tax would significantly reduce the cash
flow available for distribution to stockholders.
In order to satisfy the REIT qualifications, we might need to
borrow money to find distributions to our stockholders. To qualify as
a REIT, we generally must distribute to our stockholders at least 95%
of our net taxable income each year. In addition, we will be subject
to a 4% nondeductible excise tax on the amount by which certain
distributions paid by us in any calendar year are less than the sum of
85% of ordinary income, 95% of capital gain net income and 100% of
undistributed income from prior years.
We might need to borrow funds on a short-term basis to meet the
distribution requirements necessary to qualify as a REIT. These
short-term borrowing needs could result from differences in timing
between the actual receipt of income and inclusion of income for tax
purposes, or the effect of non-deductible capital expenditures, the
creation of reserves or required debt or amortization payments. In
this instance, we might need to borrow funds to avoid adverse tax
consequences even if then prevailing market conditions were not
generally favorable for these borrowings.
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We continue to pay some taxes. Even if we qualify as a REIT, we
will be subject to certain federal, state and local taxes on our
income and property. In addition, the Management Company generally is
subject to federal and state income tax at regular corporate rates on
its net taxable income, which includes its management, leasing and
related service business. Our computer system could be vulnerable to
the Year 2000 Problem.
Many of the world's computer systems currently record years in a
two digit format. These computer systems will be unable to properly
interpret dates beyond the year 1999, which could lead to disruptions
in our operations. This problem is commonly referred to as the Year
2000 issue.
Although we are taking steps to establish Year 2000 compliance,
we cannot guarantee that all of our systems will be Year 2000
compliant or that other companies on which we rely will be timely
converted. As a result, our operations could be adversely affected.
Sales of a substantial number of shares of common stock, or the
perception that this could occur, could adversely affect prevailing
prices for our common stock.
We have reserved:
* 2,876,828 shares of common stock for issuance upon exchange of common units
issued in connection with our formation and in connection with property
acquisitions,
* 2,966,908 shares of common stock for issuance upon conversion of
outstanding convertible preferred stock issued in connection with our
formation and in connection with property acquisitions (which becomes
convertible on or after May 31, 1999),
* 1,832,239 shares of common stock for issuance upon conversion of reserved
convertible preferred stock (reserved for exchange of exchangeable
preferred units and the exchangeable debentures issued in connection with
the formation and subsequent property acquisitions),
* 1,862,523 shares of common stock for issuance under our employee benefit
plans.
We have filed or have agreed to file registration statements
covering the issuance of shares of common stock and convertible
preferred stock upon exchange of common units and exchangeable
preferred units and the resale of convertible preferred stock issued
in connection with our formation and subsequent property acquisitions.
We also have filed registration statements covering the sale of common
stock issued or to be issued under our employee benefit plans. The
exchange of partnership units for common stock and convertible
preferred stock will
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increase the number of outstanding shares of common stock and convertible
preferred stock, and will increase our percentage ownership interest in the
Operating Partnership.
ITEM 7(c). Exhibits
Exhibits
10.1 Second Amended and Restated Employment Agreement Between First Washington
Realty Trust, Inc. and William J. Wolfe, dated as of May 1, 1998, effective
as of March 13, 1998.
10.2 Second Amended and Restated Employment Agreement Between First Washington
Realty Trust, Inc. and Stuart D. Halpert, dated as of May 1, 1998,
effective as of March 13, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized. First Washington
Realty Trust, Inc.
By:/s/ Jeffrey S. Distenfeld
Jeffrey S. Distenfeld
Senior Vice President and General Counsel
Date: January 19, 1999
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Exhibit Index
10.1 Second Amended and Restated Employment Agreement Between First Washington
Realty Trust, Inc. and William J. Wolfe, dated as of May 1, 1998, effective
as of March 13, 1998.
10.2 Second Amended and Restated Employment Agreement Between First Washington
Realty Trust, Inc. and Stuart D. Halpert, dated as of May 1, 1998,
effective as of March 13, 1998.
II-1
SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS SECOND AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT
is made as of May 1, 1998, effective as of March 13, 1998, by and
between First Washington Realty Trust, Inc., a Maryland corporation
(the "REIT"), and William J. Wolfe (the "Employee").
RECITALS
A. WHEREAS, the REIT and the Employee executed an Executive
Employment Agreement dated as of June 26, 1994, and subsequently
executed an Amended and Restated Executive Employment Agreement dated
as of June 30, 1996 (the "Amended Agreement");
B. WHEREAS, the REIT and the Employee mutually desire to amend
and restate the Amended Agreement pursuant to the terms set forth
herein; and
C. WHEREAS, the REIT wishes to contract for the managerial and
business skills possessed by the Employee and the Employee desires to
be employed by the REIT upon the terms and subject to the conditions
herein provided.
NOW, THEREFORE, in consideration of the foregoing premises and
mutual covenants and conditions hereinafter set forth, and for other
good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereby agree as follows:
AGREEMENT
1. Employment and Duties
(a) Position and Duties. The Employee shall serve as Chairman of
the Board of the REIT, with such duties and authority as are customary
for, and commensurate with, such position, including developing
policy, supervising staff, directing day-to-day operations, and such
other duties as the Board of Directors of the REIT (the "Board")
prescribes. The Employee shall have such other duties and authority as
may from time to time be delegated or assigned to him by the Board.
(b) Preclusion of Outside Business Activities. During the Term,
the Employee shall devote substantially all of his professional
energies, interest, abilities and productive work time to the
performance of duties pursuant to this Agreement. The Employee shall
not, without the prior written consent of the Board, perform other
professional services of any kind or engage in any other business
activity, with or without compensation; provided, however, that the
Employee shall be allowed (i) to continue to engage in the development
of First Washington Management, Inc., a Maryland corporation ("FWM"),
at a level consistent with past duties; (ii) to engage in
administering the business and activities of First Washington Realty
Limited Partnership, a Maryland limited partnership (the "Operating
Partnership"); (iii) to serve as a director on the boards of up to
three (3) non-competing companies; and (iv) to engage in passive
investments that the Employee may make from time to time for his
personal account, so long as the activities
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described in clauses (i) through (iv) do not detract or adversely affect
the Employee's duties and responsibilities under this Agreement. The
Employee shall not, without the prior written consent of the Board, engage
in any activity adverse to the REIT's interests.
2. Term of Employment
(a) Term. This Agreement shall continue in full force and effect until
December 31, 2002, unless sooner terminated or extended as hereinafter
provided (the "Term").
(b) Extension of Term. The employment term set forth in a paragraph 2(a) above
may be extended by written amendment to this Agreement signed by both
parties. The parties agree that they will use their best efforts to
negotiate the extension of this Agreement, if both parties desire such an
extension, not later than twelve months before the scheduled end of the
Term.
(c) Termination by the REIT.
(i) Without Cause. The REIT may terminate the Employee's employment at any time
for any reason other than with Cause (as hereinafter defined) or for no
reason at all upon at least two weeks prior written notice to the Employee;
provided, however, that in connection with such a termination of
employment, the REIT may elect to require the Employee to continue to
perform his duties under this Agreement for an additional sixty (60) days
commencing on the date the Employee receives notice of such termination. In
connection with the termination of the Employee's employment pursuant to
this Section 2(c)(i), the Employee shall (A) be paid salary and any bonus
payable to him in accordance with Sections 3(a) and 3(b) hereof accrued
through the effective date of termination; (B) be entitled to the benefits
set forth in Sections 3(c) through 3(e) hereof in accordance with the terms
thereof; (C) be entitled to the benefits set forth in Sections 3(f) through
3(h) hereof accrued through the effective date of such termination in
accordance with such plans, programs and arrangements; (D) receive the
Termination Compensation specified in Section 5(a) hereof; and (E) be
entitled to the continuation of benefits specified in Section 5(c) hereof.
(ii) With Cause. The REIT may terminate the Employee's employment with Cause
immediately upon delivery of notice thereof. In connection with the
termination of the Employee's employment pursuant to this Section 2(c)(ii),
the Employee shall (A) be paid salary and any bonus payable to him in
accordance with Sections 3(a) and 3(b) hereof accrued through the effective
date of termination; (B) be entitled to the benefits set forth in Sections
3(c) through 3(e) hereof in accordance with the terms thereof; and (C) be
entitled to the benefits set forth in Sections 3(f) through 3(h) hereof
accrued through the effective date of such termination in accordance with
such plans, programs and arrangements. For purposes of this Agreement,
"Cause" shall mean the Employee's (A) material incompetence in the
performance of his duties or obligations hereunder, including, without
limitation, those duties and obligations specified in Section 1(a) hereof;
(B) commission of any act which is materially injurious to the REIT; (C)
personal dishonesty, willful misconduct, or breach of fiduciary duty
involving personal profit; (D) intentional and material failure to perform
his stated duties for the REIT; (E) willful violation of any
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law which violation materially adversely affects his ability to discharge
his duties for the REIT or has an adverse effect on the REIT's interest or
(F) breach in any material respect of any of the terms of this Agreement or
any confidentiality or proprietary information agreement between the
Employee and FWM, the Operating Partnership or the REIT; provided, however,
that "Cause" shall not exist unless and until the Board provides the
Employee with (X) at least 15 days prior written notice of its intention to
terminate his employment with Cause, together with a certified copy of the
resolution of the Board approving the termination of the Employee's
employment with Cause by the affirmative vote of not less than a majority
of the Board, and a written statement describing the nature of the Cause,
and (Y) a reasonable opportunity and a reasonable period of time to cure
any curable acts or omissions on which the finding of Cause is based. If
the Employee cures the acts or omissions on which the finding of Cause is
based, the REIT shall not have Cause to terminate the Employee's employment
hereunder.
(d) Termination by the Employee.
(i) With Good Reason or After Change of Control. The Employee may terminate
this Agreement prior to the expiration of the Term upon two weeks prior
written notice to the REIT with Good Reason (as hereinafter defined) at any
time (including within twenty-four (24) months following any Change of
Control (as hereinafter defined) of the REIT). The Employee shall continue
to perform, at the election of the REIT, his duties under this Agreement
for an additional thirty (30) days following the REIT's receipt of his
notice of termination in accordance with this Section 2(d). In connection
with termination of the Employee's employment pursuant to this Section
2(d), the Employee shall (A) be paid salary and any bonus otherwise payable
to him in accordance with Sections 3(a) and 3(b) hereof accrued through the
effective date of such termination; (B) be entitled to the benefits set
forth in Sections 3(c) through 3(e) hereof in accordance with the terms
thereof; (C) be entitled to the benefits set forth in Sections 3(f) through
3(h) hereof accrued through the effective date of such termination in
accordance with such plans, programs and arrangements; (D) receive the
Termination Compensation specified in Section 5(a) hereof; and (E) be
entitled to the continuation of benefits specified in Section 5(c) hereof.
(ii) For purposes of this Section 2(d), "Good Reason" shall mean (A) the breach
by the REIT of any of its obligations hereunder and the failure of the REIT
to cure such breach within sixty (60) days after receipt by the REIT of a
written notice of the Employee specifying in reasonable detail the nature
of the alleged breach or (B) any material diminution in the scope of
Employee's responsibilities and duties without his consent.
(iii)For purposes of this Section 2(d), a "Change of Control" shall mean the
first occurrence of any of the following events: (A) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the REIT, a corporation owned
directly or indirectly by the stockholders of the REIT in substantially the
same proportions as their ownership of stock of the REIT, the Employee or
William J. Wolfe,
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or any of their respective affiliates, becomes the "beneficial owner" (as
defined in Rule 13d-3 under said Act), directly or indirectly, of
securities representing 50% or more of the total voting power represented
by the then outstanding securities which vote generally in the election of
directors (referred to herein as "Voting Securities") of the REIT; (B)
during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board and any new directors whose
election by the Board or nomination for election by the REIT's stockholders
was approved by a vote of at least two-thirds (2/3) the directors then
still in office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved, cease
for any reason to constitute a majority of the Board; (C) the stockholders
of the REIT approve a merger or consolidation of the REIT with any other
entity, other than a merger or consolidation which would result in the
Voting Securities of the REIT outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into Voting Securities of the surviving entity) at least 50% of
the total voting power represented by the Voting Securities of the REIT or
such surviving entity outstanding immediately after such merger or
consolidation; or (D) the stockholders of the REIT approve a plan of
complete liquidation of the REIT or an agreement for the sale or
disposition by the REIT of (in one transaction or a series of transactions)
all or substantially all of the REIT's assets.
(e) Termination Due to Death or Disability. The Employee's employment hereunder
shall terminate immediately upon his death prior to the expiration of the
Term. In the event that by reason of injury, illness or other physical or
mental impairment the Employee shall be: (i) completely unable to perform
his services hereunder for more than six consecutive months or (ii) unable
to perform his services hereunder for fifty percent or more of the normal
working day throughout twelve consecutive months (each of (i) and (ii)
constituting the "Disability" of the Employee for purposes of this
Agreement), then the REIT may terminate the Employee's employment hereunder
immediately upon delivery of notice thereof. In the event of the
termination of the Employee's employment pursuant to this Section 2(e), the
Employee or the Employee's beneficiaries, estate, heirs, representatives or
assigns, as appropriate, shall be (A) be paid the salary and any other
bonus otherwise payable to the Employee in accordance with Sections 3(a)
and 3(b) hereof accrued through the effective date of such termination; (B)
be entitled to the benefits set forth in Sections 3(c) through 3(e) hereof
in accordance with the terms thereof; (C) receive the Termination
Compensation specified in Section 5(a) hereof; (D) receive the proceeds, if
any, due under any REIT-paid life insurance policy held by the Employee, as
determined by and in accordance with the terms of any such policy; and (E)
solely in the event of the Employee's Disability, be entitled to the
continuation of benefits specified in Section 5(c) hereof.
(f) Removal as Director. Notwithstanding any other provision of this Agreement,
if the Employee shall be removed from (or fail to be re-elected to) office
as a director of the REIT at any time during the Term, then the Employee
may notify the REIT in writing of his election to terminate this Agreement
upon written notice to the REIT and such notice shall be effective
immediately upon receipt by the REIT. In connection with the Employee's
termination of employment pursuant to this Section 2(f), the Employee shall
(A) be paid the salary and any bonus payable to him in accordance with
Sections 3(a) and 3(b) hereof accrued through the
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effective date of such termination; (B) be entitled to the benefits set forth in
Sections 3(c) through 3(e) hereof in accordance with the terms thereof; (C) be
entitled to the benefits set forth in Sections 3(f) through 3(h) hereof accrued
through the effective date of such termination in accordance with such plans,
programs and arrangements; (D) receive the Termination Compensation specified in
Section 5(a) hereof and (E) be entitled to the continuation of benefits
specified in Section 5(c) hereof; provided, however, that the Employee shall not
be entitled to the payments and benefits described in subsections (D) and (E)
above if he is removed as a director for cause under the corporation law of the
State of Maryland.
3. Compensation and Related Matters.
(a) Salary. The Employee's annual base salary during the Term shall be $300,000
per annum effective January 1, 1998. Such salary shall be reviewed by the
Board annually during the first quarter of fiscal year of the REIT during
the Term, and the Employee shall receive such salary increases, if any, as
the Board, in its sole discretion, shall determine; provided, however, that
the Employee's annual base salary shall not be less than $400,000 effective
January 1, 2000 and thereafter. Such salary shall be payable in accordance
with the REIT's normal payment practices, but in no event shall such salary
be payable less frequently than monthly in equal installments.
(b) Bonus.
(i) For calendar year 1998, in addition to the salary set forth in Section 3(a)
above, the Employee shall be eligible to receive such bonus, if any, as the
Board shall determine, in accordance with the criteria set forth in Annex
A-1 hereto.
(ii) Effective January 1, 1999 and thereafter, the Employee shall be eligible to
receive an Annual Incentive Bonus in accordance with the Plan set forth on
Annex A hereto.
(c) Options.
(i) Provided that he is employed by the REIT as of January 1, 2000,
effective as of such date the Employee shall be granted, and hereby is
granted, an option to purchase 250,000 shares of Common Stock at an
exercise price equal to the Fair Market Value (as defined in the Option
Plan) of a share of Common Stock on January 1, 2000 (the "Option") subject
to the terms and provisions of the 1994 Stock Option Plan for Officers,
Directors and Employees of First Washington Realty Trust, Inc., First
Washington Realty Limited Partnership and First Washington Management, Inc.
(the "Option Plan") (or a successor option plan then maintained by the
REIT) and a written Stock Option Agreement between the Employee and the
REIT (the "Stock Option Agreement"). The Stock Option Agreement shall
provide that the Option shall become exercisable in equal cumulative
installments of one-third each on each of the first three anniversaries of
the date of grant (subject to the Employee's continued employment by the
REIT on such dates) and shall be subject to immediate vesting in the event
of the Employee's termination of employment pursuant to Section 2(c)(i),
2(d), 2(e) or 2(f) (other than in connection with Employee's removal as a
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director for cause under the corporation law of the State of Maryland) or by
reason of expiration of the Term without renewal (collectively an "Early
Termination") and shall be the Stock Option Agreement attached hereto as Annex
C.
(ii) If the Employee's employment is terminated in an Early Termination prior to
January 1, 2000, then, effective as January 1, 2000, the Employee shall be
granted, and hereby is granted the Option to purchase 250,000 shares of
Common Stock at an exercise price equal to the Fair Market Value of a share
of Common Stock on January 1, 2000 subject, if permitted by the terms
thereof, to the Option Plan (or a successor option plan then maintained by
the REIT), and, in any event, the written Stock Option Agreement between
the Employee and the REIT. The Stock Option Agreement shall provide that
the Option shall be fully exercisable as of the date of grant and shall
expire on the date specified in Section 2(a) herein and shall be the Stock
Option Agreement attached hereto as Annex C.
(d) Restricted Stock.
(i) Provided that he is employed by the REIT as of January 1, 2000, effective
as of such date the Employee shall be granted, and hereby is granted,
150,000 shares of common stock of the REIT (the "Restricted Stock") subject
to the terms and conditions of the First Washington Realty Trust, Inc.
Restricted Stock Plan (the "Stock Plan") and a written Restricted Stock
Agreement between the Employee and the REIT (the "Restricted Stock
Agreement"). The Restricted Stock Agreement shall provide that shares of
the Restricted Stock shall become vested in cumulative installments of
one-sixth, one-third and one-half, respectively, on each of the first three
anniversaries of the date of grant (subject to the Employee's continued
employment by the REIT on such dates) and shall be subject to immediate
vesting in the event of the Employee's termination of employment in an
Early Termination and shall be the Restricted Stock Agreement attached
hereto as Annex D.
(ii) If the Employee's employment is terminated in an Early Termination prior to
January 1, 2000, then effective immediately prior to such termination the
Employee shall be granted, and hereby is granted, the 150,000 shares of
Restricted Stock subject to the terms and conditions of the Stock Plan and,
in any event, the written Restricted Stock Agreement between the Employee
and the REIT. The Restricted Stock Agreement shall provide that shares of
the Restricted Stock shall be fully vested on the date of grant and shall
be the Restricted Stock Agreement attached hereto as Annex D.
(e) Contingent Stock. Subject to stockholder approval as provided in the
Amended and Restated Contingent Stock Agreement dated as of April 1, 1998
by and between the REIT and the Employee (the "Amended Contingent Stock
Agreement"), the Employee shall be entitled to receive shares of Contingent
Stock (as defined therein) pursuant to such agreement. Unless and until the
Amended Contingent Stock Agreement is approved by the REIT's stockholders
as therein provided, the terms of the Contingent Stock Agreement dated June
30, 1996 between the REIT and the Employee shall remain in effect and the
Employee shall be entitled to receive shares of Contingent Stock as therein
provided.
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(f) Benefits. During the Term the Employee shall be entitled to participate in
or receive benefits under any employee benefit plan or other arrangement
(including, but not limited to, any medical, dental, retirement,
disability, life insurance, sick leave and vacation plans or arrangements
and the REIT's executive deferred compensation plan) made available by the
REIT to any of its employees, subject to and on a basis consistent with the
terms, conditions and overall administration of such plans or arrangements.
(g) Expenses. The REIT shall promptly pay directly or reimburse the Employee
for all reasonable travel and other business expenses incurred by the
Employee in the performance of his duties to the REIT under this Agreement.
(h) Vacation. The Employee shall be entitled to vacation benefits in accordance
with the REIT's normal vacation policies, but in no event shall he receive
less than four weeks of paid vacation each calendar year during the Term.
(i) Professional Memberships. The REIT shall promptly pay directly or reimburse
the Employee for all reasonable expenses incurred by the Employee with
respect to professional memberships maintained by him during the Term.
(j) Automobile Allowance. During the Term, the REIT shall provide the Employee
with an automobile allowance for a company automobile of comparable quality
as automobiles customarily provided to executive officers in the industry.
Expenses relating to such automobile will be paid in accordance with the
normal and customary practices of the REIT.
(k) Deductions and Withholdings. All amounts payable or which become payable
under any provision of this Agreement shall be subject to all deductions
authorized by the Employee and to all deductions and withholdings required
by law.
4. Covenant Not to Compete or Solicit
(a) Non-Competition.
(i) The Employee agrees that during the Term he will not directly or indirectly
engage in (whether as an employee, consultant, proprietor, partner,
director, member or otherwise), or have any ownership interest in, or
participate in the financing, operation, management or control of, any
person, firm, corporation or business that engages in or intends to engage
in a Restricted Business. "Restricted Business" shall mean any business
that is engaged in or (to the Employee's knowledge after due inquiry)
preparing to engage in the real estate business of the acquisition,
development, management and operation of principally retail shopping
centers; provided, however, that "Restricted Business" shall not include
the operation and management of those properties listed on Annex B hereto.
(ii) The Employee further agrees that for the eighteen (18) month period
following the end of the Term, he will not directly or indirectly engage in
(whether as an employee, consultant, proprietor, partner, director, member
or otherwise), or have any ownership interest in, or participate in the
financing, operation, management or control of, any person, firm,
corporation or business that engages in or intends to engage in a Post-
Employment Restricted Business. "Post-Employment Restricted Business" shall
mean any business that is engaged in or (to the Employee's knowledge after
due inquiry) preparing to engage in the real estate business of the
acquisition, development, management and operation of principally retail
shopping centers within twenty-five (25) miles of a retail property owned,
directly or through one or more subsidiaries or otherwise, by the REIT, the
Operating Partnership or FWM at the end of the Term; provided, however,
that "Post- Employment Restricted Business" shall not include the operation
and management of those properties listed on Annex B hereto.
(iii)Ownership of (A) no more than one percent (1%) of the outstanding voting
stock of a publicly traded entity or (B) any stock owned by the Employee as
of June 26, 1994 shall not constitute a violation of this Section 4(a).
(iv) This Section 4(a) shall not prohibit the Employee from working for a
division or subsidiary of a company which division or subsidiary does not
engage in a Restricted Business or a Post-Employment Restricted Business,
even though other divisions or subsidiaries of such company do engage in a
Restricted Business or Post- Employment Restricted Business, provided that
the REIT receives adequate assurances as it may request that the Employee
has no involvement with the divisions or subsidiaries engaged in the
Restricted Business or Post-Employment Restricted Business.
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(b) Non-Solicitation. The Employee agrees that during the Term he will not (i)
solicit, encourage or take any other action which is intended to induce any
other employee of the REIT to terminate his or her employment with the REIT
or (ii) interfere in any manner with the contractual or other employment
relationship between the REIT and any such employee of the REIT.
(c) Severability. The parties intend that the covenants contained in the
preceding paragraphs of this Section 4 shall be construed as a series of
separate covenants, one for each county of Maryland, Virginia,
Pennsylvania, North Carolina, South Carolina and Delaware, and to the
District of Columbia, each state of the United States of America and each
nation. Except for geographic coverage, each such separate covenant shall
be deemed identical in terms to the covenant contained in the preceding
paragraphs. If, in any judicial proceeding, a court shall refuse to enforce
any of the separate covenants (or any part thereof) deemed included in said
paragraphs, then such unenforceable covenant (or such part) shall be deemed
eliminated from this Agreement for the purpose of those proceedings to the
extent necessary to permit the remaining separate covenants (or portions
thereof) to be enforced. In the event that the provisions of this Section 4
should ever be deemed to exceed the time, scope or geographic limitation
permitted by applicable law, then such provisions shall be reformed to the
maximum time, scope or geographic limitations, as the case may be,
permitted by applicable law.
5. Termination.
(a) If the Employee's employment is terminated (i) in an Early Termination or
(ii) by reason of expiration of the Term without renewal, then the Employee
shall be paid a lump sum amount (the "Termination Compensation") equal to
the greater of:
(A) 200% of the sum of (I) the Employee's rate of annual base salary at the
time of such termination (as determined pursuant to Section 3(a)) and (II)
the average annual bonus (if any) paid to the Employee during the Term
(i.e., the entire term of employment with the REIT); or
(B) the sum of (I) the aggregate annual base salary (as determined pursuant to
Section 3(a)) the Employee would otherwise be entitled to receive from the
time of such termination through the scheduled end of the Term (as
determined pursuant to Section 2(a)) and (II) the average annual bonus (if
any) paid to the Employee during the Term (i.e., the entire term of
employment with the REIT).
(b) No Termination Compensation shall be paid if the Employee's employment is
terminated during the Term (i) by the REIT with Cause pursuant to Section
2(c)(ii) hereof or (ii) by the Employee other than in accordance with
Section 2(d) or Section 2(e) or Section 2(f) in connection with the
Employee's failure to be re-elected as a director or his removal as a
director without cause.
(c) If the Employee's employment is terminated prior to the expiration of the
Term for any reason other than pursuant to Section 2(c)(ii) or pursuant to
Section 2(f) in connection with the Employee's removal as a director for
cause under the corporation law of the State of Maryland, the REIT will
continue to provide to the Employee comparable medical, disability and life
insurance benefits as were in effect at the time of termination until such
time as the Term would otherwise have expired if the Employee had not been
terminated (but in no event for a period of less than twenty-four months).
(d) Survival. The expiration or termination of the Term shall not impair the
rights or obligations of any party hereto which shall have accrued
hereunder prior to such expiration, nor shall such expiration or
termination impair the rights and obligations of any party hereto that are
intended by their terms to survive such expiration or termination.
(e) Mitigation of Damages. In the event of any termination of the Employee's
employment with the REIT for any reason, the Employee shall not be required
to seek other employment to mitigate damages, and any income earned by the
Employee from other employment or self-employment shall not be offset
against any obligations of the REIT to the Employee under this Agreement.
6. The Employee's Representations. The Employee represents and warrants to the
REIT as follows:
(a) The Employee is familiar with and approves the covenants not to compete and
not to solicit set forth in Section 4, including, without limitation, the
reasonableness of the length of time, scope and geographic coverage of
these covenants.
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(b) Notwithstanding any "what-if" scenarios of the future results of operations
and stock prices of the REIT under certain assumptions which the parties
may have discussed, the Employee has not relied on any such scenarios or
any forecasts or projections provided by the REIT and understands that
neither the REIT nor FWM has made any representation or warranty whatsoever
regarding any forecasts or projections to the Employee.
7. Miscellaneous.
(a) Notices. Any notice, report or other communication required or permitted to
be given hereunder shall be in writing and shall be deemed given and
received on the date of delivery, if delivered [in person], or three days
after mailing, if mailed first-class mail, postage prepaid, to the
following addresses:
If to the Employee:
4350 East-West Highway, Suite 400
Bethesda, Maryland 20814
Attn: Stuart D. Halpert
If to the REIT:
4350 East-West Highway, Suite 400
Bethesda, Maryland 20814
Attn: General Counsel
or to such other address as any party hereto may designate by notice given
as herein provided.
(b) Entire Agreement. This Agreement contains the entire understanding and sole
and entire agreement between the parties with respect to the subject matter
hereof, and supersedes any and all prior agreements, negotiations and
discussions between the parties hereto with respect to the subject matter
covered hereby. Each party to this Agreement acknowledges that no
representations, inducements, promises or agreements, oral or otherwise,
have been made by any party, or anyone acting on behalf of any party, which
are not embodied herein, and that no other agreement, statement or promise
not contained in this Agreement shall be valid or binding. This Agreement
may not be modified or amended by oral agreement, but only by an agreement
in writing signed by the REIT and by the Employee, and which states the
intent of the parties to amend this Agreement.
(c) Assignment and Binding Effect. Neither this Agreement nor the rights or
obligations hereunder shall be assignable by the Employee. The REIT may
assign this Agreement to any successor of the REIT, and upon such
assignment any such successor shall be deemed substituted for the REIT upon
the terms and subject to the conditions hereof, provided, that
substantially all of the assets of the REIT are also transferred to the
same party.
(d) Successor to the REIT. The REIT will require any successor or assign
(whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all the business and/or assets of the
REIT, as the case may be, by agreement in form and substance reasonably
satisfactory to the Employee, expressly, absolutely and unconditionally to
assume and
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agree to perform this Agreement in the same manner and to the same extent
that the REIT would be required to perform it if no such succession or
assignment had taken place. Any failure of the REIT to obtain such
agreement prior to the effectiveness of any such succession or assignment
shall be a material breach of this Agreement. This Agreement shall inure to
the benefit of and be enforceable by the Employee's personal and legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Employee should die while any
amounts are still payable to the Employee hereunder, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to the Employee's devisee, legatee or other
designee or, if there be no such designee, to the Employee's estate.
(e) Arbitration. The parties agree that any and all disputes (contract, tort or
statutory, whether under federal, state or local law) between the Employee
and the REIT (including other REIT employees, officers, directors and
representatives) arising out of the Employee's employment with the REIT,
the termination of that employment or this Agreement, shall be submitted to
final and binding arbitration. The arbitration shall take place in the
County of Montgomery, State of Maryland and may be compelled and enforced
according to the Maryland Arbitration Act. Unless the parties mutually
agree otherwise, the arbitration shall be conducted before the American
Arbitration Association, according to its Commercial Arbitration Rules.
Judgment on the award the arbitrator renders may be entered in any court
having jurisdiction over the parties. Arbitration shall be initiated in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association.
(f) Amendments; Waivers. This Agreement may not be modified, amended, or
terminated except by an instrument in writing, approved by the Board and
signed by the Employee and the REIT. By an instrument in writing similarly
executed, the Employee or the REIT may waive compliance by the other party
or parties with any provision of this Agreement that such other party was
or is obligated to comply with or perform; provided, however, that such
waiver shall not operate as a waiver of, or estoppel with respect to, any
other or subsequent failure. No failure to exercise and no delay in
exercising any right, remedy or power hereunder shall preclude any other,
or further, exercise of any right, remedy or power provided herein or by
law or equity.
(g) Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Maryland as applied to
agreements made and performed in Maryland by residents of Maryland.
(h) Effectiveness. This Agreement shall become effective on March 13, 1998.
(i) Attorneys' Fees. In the event of any arbitration or legal action or
proceeding to enforce or interpret the provisions hereof, the prevailing
party shall be entitled to reasonable attorneys' fees, whether or not the
proceeding results in a final judgment.
(j) Counterparts. This Agreement may be executed in several counterparts, each
of which shall be an original, but all of which together shall constitute
one and the same agreement.
(k) Effect of Headings. The section headings herein are for convenience only
and shall not affect the construction or interpretation of this Agreement.
(l) Severability. The provisions of this Agreement are severable. If any
provision of this Agreement shall be held to be invalid or otherwise
unenforceable in whole or in part, the remainder of the provisions or
enforceable parts hereof shall not be affected thereby and shall be
enforced to the fullest extent permitted by law.
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amended and Restated Executive Employment Agreement as of the date
first written above.
ATTEST: FIRST WASHINGTON REALTY TRUST, INC.,
a Maryland corporation
________________________________ By:_____________________________________
Jeffrey S. Distenfeld, Secretary Stuart D. Halpert
Chairman
EMPLOYEE:
_______________________________________
William J. Wolfe
6211 Kennedy Drive
Chevy Chase, Maryland 20815
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ANNEX A
SENIOR EXECUTIVE INCENTIVE BONUS PROGRAM
APPENDIX TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT
1. PURPOSE
The senior executive incentive bonus program (the "Incentive
Plan") is designed to provide meaningful quantitative performance
standards and to ensure that the bonuses paid hereunder are deductible
without limit under Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code"), and the regulations and interpretations
promulgated thereunder.
2. THE COMMITTEE
The "Committee" shall be the Compensation Committee of the Board
or another committee appointed by and serving at the pleasure of the
Board, and shall consist of at least two members of the Board who
shall each qualify as both "outside directors" under Section 162(m) of
the Code and as "non-employee directors" as defined under Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended. The
Committee shall have the sole discretion and authority to administer
and interpret the Incentive Plan.
3. BONUS DETERMINATIONS
The Executive may receive a bonus payment under the Incentive
Plan based upon the attainment of performance objectives which are
established by the Committee and relate to one or more of the
following company performance goals (the "Performance Goals"): funds
from operations, total return (measured as the sum of the annual
dividend plus increases in the market price of the Common Stock);
portfolio growth (measured as increases in the aggregate value of the
real property in the Company's portfolio, based upon the original cost
of such property); stock price; operating income; cost reductions and
savings; and earnings before any one or more of the following:
interest, taxes, depreciation or amortization.
Any bonus payable to the Executive under the Incentive Plan shall
be based upon objectively determinable bonus formulas that tie such
bonuses to one or more objective performance criteria relating to the
Performance Goals. Bonus formulas for each fiscal year commencing on
or after January 1, 1999 through December 31, 2002 shall be
established by the Committee no later than the latest time permitted
by Section 162(m) of the Code (generally, for performance periods of
one year or more, no later than 90 days after the commencement of the
performance period). No bonuses shall be paid to the Executive unless
and until the Committee makes a certification in writing with respect
to the attainment of the performance objectives as required by Section
162(m) of the Code. Although the Committee may in its sole discretion
reduce a bonus payable to the Executive pursuant to the applicable
bonus formula, the Committee shall have no discretion to increase the
amount of the Executive's bonus as determined under the applicable
bonus formula.
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The target annual incentive bonus payable to the Executive under
the Incentive Plan with respect to any fiscal year of the Company
shall be 50% of his base salary as in effect at the start of the
applicable year, and shall not exceed 100% of such base salary.
The payment of a bonus to the Executive with respect to a
performance period shall be conditioned upon the Executive's
employment by the Company on the last day of the performance period;
provided, however, that the Committee may make exceptions to this
requirement, in its sole discretion, in the case of the Executive's
retirement, death or disability.
4. AMENDMENT AND TERMINATION
The Incentive Plan may be amended or terminated only by written
agreement executed by the Executive and the Company. Any amendments to
the Incentive Plan shall require stockholder approval only to the
extent required by Section 162(m) of the Code.
5. STOCKHOLDER APPROVAL
No bonuses shall be paid under the Incentive Plan unless and
until the Company's stockholders shall have approved the Incentive
Plan and the Performance Goals as required by Section 162(m) of the
Code. So long as the Incentive Plan shall not have been previously
terminated by the Board, it shall be resubmitted for approval by the
Company's stockholders, to the extent required by Section 162(m) of
the Code, if it is amended in any way which materially modifies the
Performance Goals or increases the maximum bonus payable under the
Incentive Plan.
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ANNEX A-1
Bonus Payments under Section 3(b)(i)
For calendar year 1998, the Employee shall be eligible for a
bonus payment pursuant to Section 3(b)(i) (the "Bonus") in accordance
with the following:
(1) Amount. The amount of the Bonus shall range from 0 to 100% of the
Employee's annual salary, determined pursuant to Section 3(a), for the most
recent fiscal year. If during 1998 the REIT achieves targeted performance
and the employee performs at an acceptable level, then the targeted Bonus
for any such year shall be fifty percent (50%).
(2) Criteria.
(a) The Board's determination regarding Bonus based on the REIT's performance
from January 1, 1998 through December 31, 1998 shall be based upon the
performance criteria set forth below:
Measure Target Weight
FFO Growth 6% 15%
Total Return 15% 15%
Portfolio Growth 10% 20%
Board Discretion N/A 50%
(b) FFO Growth shall be calculated as the annual growth rate in funds from
operations per share (calculated on a fully diluted basis).
(c) Total Return shall be calculated as the sum of (x) the annual dividend
and (y) the increase in the appreciation in the REIT's stock, measured
as the annual change in the market price of the REIT's common stock.
(d) Portfolio Growth shall be calculated as the increase in the aggregate
value of real property in the REIT's portfolio, based upon the
original cost of such properties.
(3) Timing.
(a) As described in paragraph 2 above, the Bonus shall be based upon the
REIT's performance during 1998. The Board shall determine the
Employee's Bonus, if any, during the first quarter of the following
fiscal year, and such Bonus, if any, shall be paid to the Employee, no
later than March 31st of the following fiscal year.
(b) Except as provided in 3(iii) below, the Employee must be actively
employed as the end of the REIT's fiscal year to be eligible to
receive a Bonus for such year.
(c) Notwithstanding Section 3(b), the Employee shall be eligible for a
prorated Bonus if the Employee is not actively employed by the REIT
due to one of the following reasons:actively employed by the REIT due
to one of the following reasons:
(i) if the Employee terminates employment for Good Reason or following a
Change of Control pursuant to Section 2(d) of the Agreement.
(ii) if the Employee's employment is terminated due to death or Disability
pursuant to Section 2(e) of the Agreement.
<PAGE>
ANNEX B
LIST OF PROPERTIES AND ENTITIES EMPLOYEE MAY CONTINUE TO OWN AND
PARTICIPATE IN THE OPERATION AND MANAGEMENT OF:
1. 727 15th Street
2. Properties currently owned by Mid-Atlantic Centers Limited Partnership
a. Tarrytown Mall
b. Quality Center
<PAGE>
ANNEX C
INCENTIVE STOCK OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION AGREEMENT, dated as of May 1, 1998, is made by
and between First Washington Realty Trust, Inc., a Maryland corporation
(the "Company"), and William J. Wolfe (the "Optionee"), an employee of the
Company:
WHEREAS, the Company has adopted The Amended and Restated 1994 Stock Option
Plan for Officers, Directors and Employees of First Washington Realty
Trust, Inc., First Washington Realty Limited Partnership and First
Washington Management, Inc., as amended from time to time (the "Plan"), for
the benefit of its eligible employees and directors; and
WHEREAS, the Company wishes to afford the Optionee the opportunity to
purchase shares of its Common Stock; and
WHEREAS, the Company wishes to carry out the Plan (the terms of which are
hereby incorporated by reference and made a part of this Agreement); and
WHEREAS, the Committee appointed to administer the Plan has determined that
it would be to the advantage and best interest of the Company and its
stockholders to grant the Incentive Stock Option provided for herein to the
Optionee to enable the Company to obtain and retain the services of the
Optionee considered essential to the long-range success of the Company and
to provide an additional incentive for the Optionee to further the growth,
development and financial success of the Company by rewarding the Optionee
for such growth, development and financial success through the ownership of
Company stock;
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
The masculine pronoun shall include the feminine and neuter, and the
singular the plural, unless the context clearly indicates otherwise.
Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to them in the Plan. Whenever the following terms are
used in this Agreement, they shall have the meaning specified below unless
the context clearly indicates to the contrary.
Section 1.1 - Employment Agreement
"Employment Agreement" shall mean that certain Second Amended and Restated
Employment Agreement between the Optionee and the Company dated as of May
1, 1998.
Section 1.2 - Officer
"Officer" shall mean an officer of the Company, as defined in Rule 16a-1(f)
under the Exchange Act, as such Rule may be amended in the future.
Section 1.3 - Option
"Option" shall mean the incentive stock option to purchase Common Stock of
the Company granted under this Agreement, which option is intended to
qualify as an "incentive stock option" under Section 422 of the Code.
Section 1.4 - Secretary
"Secretary" shall mean the Secretary of the Company.
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Section 1.5 - Termination of Employment
"Termination of Employment" shall mean the time when the employee-employer
relationship between the Optionee and the Company or a Company Subsidiary
is terminated for any reason, with or without cause, including, but not by
way of limitation, a termination by resignation, discharge, death,
permanent and total disability or retirement, but excluding (i) any
termination where there is a simultaneous reemployment or continuing
employment by the Company or a Company Subsidiary and (ii) at the sole and
absolute discretion of the Committee, a termination that results in a
temporary severance of the employee-employer relationship that does not
exceed one (1) year. The Committee, in its sole and absolute discretion,
shall determine the effect of all other matters and questions relating to
Termination of Employment, including, but not by way of limitation, all
questions of whether a particular leave of absence constitutes a
Termination of Employment; provided, however, that a leave of absence shall
constitute a Termination of Employment if, and to the extent that, such
leave of absence interrupts employment for purposes of Section 422(a)(2) of
the Code and the then applicable regulations and rulings under said
Section. Notwithstanding any other provision of the Plan, the right of the
Company or any Company Subsidiary to terminate the Optionee's employment is
subject to the terms of the Employment Agreement.
ARTICLE II
GRANT OF OPTION
Section 2.1 - Grant of Option
In partial consideration of the Optionee's past services to the Company
and/or the Optionees' agreement to remain in the employ of the Company or a
Company Subsidiary pursuant to the Employment Agreement and for other good
and valuable consideration, provided that the Optionee is employed by the
REIT as of January 1, 2000, then the Company shall irrevocably grant to the
Optionee, and hereby does grant to the Optionee, effective as of January 1,
2000, the option to purchase any part or all of an aggregate of two-hundred
fifty thousand (250,000) shares of its Common Stock upon the terms and
conditions set forth in this Agreement.
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Section 2.2 - Purchase Price
The purchase price of the shares of stock covered by the Option shall be a
price per share equal to the Fair Market Value (as defined in the Plan) of
a share of Common Stock on January 1, 2000, without commission or other
charge.
Section 2.3 - Consideration to Company
In consideration of the granting of this Option by the Company, the
Optionee agrees to render faithful and efficient services to the Company or
a Company Subsidiary, with such duties and responsibilities as the Company
or such Company Subsidiary shall from time to time prescribe, pursuant to
the Employment Agreement. Nothing in this Agreement or in the Plan shall
confer upon the Optionee any right to continue in the employ of the Company
or any Company Subsidiary.
Section 2.4 - Adjustments in Option
In the event that the outstanding shares of the stock subject to the Option
are changed into or exchanged for a different number or kind of shares of
the Company or other securities of the Company by reason of merger,
consolidation, recapitalization, reclassification, stock split up, stock
dividend or combination of shares, the Committee shall make an appropriate
and equitable adjustment in the number and kind of shares as to which the
Option, or portions thereof then unexercised, shall be exercisable, to the
end that after such event the Optionee's proportionate interest shall be
maintained as before the occurrence of such event. Such adjustment in the
Option shall be made without change in the total price applicable to the
unexercised portion of the Option (except for any change in the aggregate
price resulting from rounding-off of share quantities or prices) and with
any necessary corresponding adjustment in the Option price per share;
provided, however, that each such adjustment shall be made in such manner
as not to constitute a "modification" within the meaning of Section
424(h)(3) of the Code. Any such adjustment made by the Committee shall be
final and binding upon the Optionee, the Company and all other interested
persons.
ARTICLE III
PERIOD OF EXERCISABILITY
Section 3.1 - Commencement of Exercisability
(a) Subject to Sections 3.4 and 5.6, the Option shall become exercisable in
three (3) cumulative installments as follows:
(1) The first installment shall consist of thirty-three and one-third
percent (33-1/3%) of the shares covered by the Option (rounded down to
the nearest one (1) share) and shall become exercisable on the first
anniversary of the date that the Option is granted.
(2) The second installment shall consist of thirty- three and one-third
percent (33-1/3%) of the shares covered by the Option (rounded down to
the
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nearest one (1) share) and shall become exercisable on the second anniversary of
the date that the Option is granted.
(3) The third installment shall consist of the balance of the shares
covered by the Option and shall become exercisable on the third
anniversary of the date that the Option is granted.
(b) Except to the extent expressly provided otherwise elsewhere in
writing, no portion of the Option that is unexercisable at Termination
of Employment shall thereafter become exercisable.
Section 3.2 - Duration of Exercisability
The installments provided for in Section 3.1 are cumulative. Each such
installment that becomes exercisable pursuant to Section 3.1 shall remain
exercisable until it becomes unexercisable under Section 3.3.
Section 3.3 - Expiration of Option
The Option may not be exercised to any extent by anyone after the first to
occur of the following events:
(a) The expiration of ten (10) years from the date that the Option was
granted; or
(b) If the Optionee owned (within the meaning of Section 424(d) of the
Code), at the time the Option was granted, more than ten percent (10%)
of the total combined voting power of all classes of stock of the
Company or any Company Subsidiary, the expiration of five (5) years
from the date that the Option was granted.
Section 3.4 - Duration of Exercisability
This Option shall be exercisable as to all of the shares covered hereby,
notwithstanding that this Option may not yet have become fully exercisable
under Section 3.1 (a) in the event the employee-employer relationship
between the Optionee and the Company is terminated (i) by the Company
pursuant to Section 2(c)(i) of the Employment Agreement; (ii) by the
Optionee pursuant to Section 2(d) of the Employment Agreement; (iii) by the
Optionee pursuant to Section 2(e) of the Employment Agreement; (iv) by the
Optionee pursuant to Section 2(f) of the Employment Agreement (other than
in connection with Optionee's removal as a director for cause under the
corporation law of the State of Maryland); or (v) due to the fact that the
Employment Agreement expires and its not renewed pursuant to Section 2(b)
of the Employment Agreement; provided, however, that this acceleration of
exercisability shall not take place if:
(a) This Option becomes unexercisable under Section 3.3 prior to said
effective date; or
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(b) In connection with such an event, provision is made for an assumption
of this Option or a substitution therefor of a new option by an
employer corporation, or a parent or subsidiary of such corporation,
so that such assumption or substitution complies with the provisions
of Section 424(a) of the Code; and provided, further, that nothing in
this Section 3.4 shall make this Option exercisable if it is otherwise
unexercisable by reason of Section 5.6.
The Committee may make such determinations and adopt such rules and
conditions as it, in its absolute discretion, deems appropriate in
connection with such acceleration of exercisability, including, but not by
way of limitation, provisions to ensure that any such acceleration and
resulting exercise shall be conditioned upon the consummation of the
contemplated corporate transaction, and terminations regarding whether
provisions for assumption or substitution have been made as defined in
subsection (b) above.
Section 3.5 - Termination of Employment Prior to January 1, 2000
Notwithstanding anything to the contrary contained herein, if the
Optionee's employment with the Company is terminated in an Early
Termination (as defined in the Employment Agreement) prior to January 1,
2000, then the Company shall irrevocably grant to the Optionee, and hereby
does grant to the Optionee, effective as of January 1, 2000, the Option to
purchase any part or all of the 250,000 shares of Common Stock, and this
Option shall become fully exercisable as of the date of grant and shall
expire on December 31, 2002.
Section 3.6 - Special Tax Consequences
(a) The Optionee acknowledges that, to the extent that the aggregate fair
market value of stock with respect to which "incentive stock options"
(within the meaning of Section 422 of the Code, but without regard to
Section 422(d) of the Code), including the Option, are exercisable for
the first time by the Optionee during any calendar year (under the
Plan and all other incentive stock option plans of the Company and any
Company Subsidiary) exceeds $100,000, such options shall be treated as
not qualifying under Section 422 of the Code but rather shall be
treated as non-qualified options to the extent required by Section 422
of the Code. The Optionee further acknowledges that the rule set forth
in the preceding sentence shall be applied by taking options into
account in the order in which they were granted. For purposes of these
rules, the fair market value of stock shall be determined as of the
time the option with respect to such stock is granted.
(b) The Optionee acknowledges that if any portion of the Option is not
exercised within the applicable time period specified in Section 422
of the Code following a Termination of Employment, then such portion
shall be treated as not qualifying under Section 422 of the Code but
rather shall be treated as non-qualified options to the extent
required under Section 422 of the Code.
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ARTICLE IV
EXERCISE OF OPTION
Section 4.1 - Person Eligible to Exercise
During the lifetime of the Optionee, only he or his guardian or legal
representative may exercise the Option or any portion thereof. After the
death of the Optionee, any exercisable portion of the Option may, prior to
the time when the Option becomes unexercisable under Section 3.3, be
exercised by his Beneficiary.
Section 4.2 - Partial Exercise
Any exercisable installment of the Option or the entire Option, if then
wholly exercisable, may be exercised in whole or in part at any time prior
to the time when the Option or portion thereof becomes unexercisable under
Section 3.3; provided, however, that each partial exercise shall be for not
less than 1,000 shares (or the minimum installment set forth in Section
3.1, if a smaller number of shares) and shall be for whole shares only.
Section 4.3 - Manner of Exercise
The Option, or any exercisable portion thereof, may be exercised only on
the first business day of a calendar month and solely by delivery to the
Secretary or his office of all of the following prior to the time when the
Option or such portion becomes unexercisable under Section 3.3:
(a) Notice in writing signed by the Optionee or the other person then
entitled to exercise the Option or portion, stating that the Option or
portion is thereby exercised, such notice complying with all
applicable rules established by the Committee; and
(b) Full payment for the shares with respect to which such Option or
portion thereof is exercised, by:
(1) Cash or check; or
(2) With the consent of the Committee, (A) shares of the Company's Common
Stock owned by the Optionee duly endorsed for transfer to the Company
or (B) shares of the Company's Common Stock issuable to the Optionee
upon exercise of the Option, with a fair market value (as determined
under Section 1.15 of the Plan) on the date of Option exercise equal
to the aggregate purchase price of the shares with respect to which
such Option or portion is exercised; or
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(3) With the consent of the Committee, any combination of the
consideration provided in the foregoing subparagraphs (1) and (2) or
through delivery of property of any kind which constitutes good and
valuable consideration, consistent with the provisions of the Plan;
and
(c) A bona fide written representation and agreement, in a form
satisfactory to the Committee, signed by the Optionee or other person
then entitled to exercise such Option or portion, stating that:
(1) the shares of stock are being acquired for his own account, for
investment and without any present intention of distributing or
reselling said shares or any of them except as may be permitted under
the Securities Act and then applicable rules and regulations
thereunder; and
(2) that the Optionee or other person then entitled to exercise such
Option or portion will indemnify the Company against and hold it free
and harmless from any loss, damage, expense or liability resulting to
the Company if any sale or distribution of the shares by such person
is contrary to the representation and agreement referred to above. The
Committee may, in its absolute discretion, take whatever additional
actions it deems appropriate to insure the observance and performance
of such representation and agreement and to effect compliance with the
Securities Act and any other federal or state securities laws or
regulations. Without limiting the generality of the foregoing, the
Committee may require an opinion of counsel acceptable to it to the
effect that any subsequent transfer of shares acquired on an Option
exercise does not violate the Securities Act, and may issue
stop-transfer orders covering such shares. Share certificates
evidencing stock issued on exercise of this Option shall bear an
appropriate legend referring to the provisions of this subsection (c)
and the agreements herein. The written representation and agreement
referred to in the first sentence of this subsection (c) shall,
however, not be required if the shares to be issued pursuant to such
exercise have been registered under the Securities Act, and such
registration is then effective in respect of such shares; and
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(d) In the event the Option or portion shall be exercised pursuant to
Section 4.1 by any person or persons other than the Optionee,
appropriate proof of the right of such person or persons to exercise
the Option.
Section 4.4 - Conditions to Issuance of Stock Certificates
The shares of stock deliverable upon the exercise of the Option, or any
portion thereof, may be either previously authorized but unissued shares or
issued shares that have then been reacquired by the Company. Such shares
shall be fully paid and nonassessable. The Company shall not be required
to issue or deliver any certificate or certificates for shares of stock
purchased upon the exercise of the Option or portion thereof prior to
fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on
which such class of stock is then listed; and
(b) The completion of any registration or other qualification of such
shares under any state or federal law or under rulings or regulations
of the Securities and Exchange Commission or of any other governmental
regulatory body, that the Committee shall, in its sole and absolute
discretion, deem necessary or advisable; and
(c) The obtaining of any approval or other clearance from any state or
federal governmental agency that the Committee shall, in its sole and
absolute discretion, determine to be necessary or advisable; and
(d) The payment to the Company (or other employer corporation) of all
amounts that, under federal, state or local tax law, it is required to
withhold upon exercise of the Option; and
(e) The lapse of such reasonable period of time following the exercise of
the Option as the Committee may from time to time establish for
reasons of administrative convenience.
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Section 4.5 - Rights as Stockholder
The holder of the Option shall not be, nor have any of the rights or
privileges of, a stockholder of the Company in respect of any shares
purchasable upon the exercise of any part of the Option unless and until
certificates representing such shares shall have been issued by the Company
to such holder.
Section 4.6 - Ownership and Transfer Restrictions
Shares acquired through the exercise of an Option shall be subject to the
restrictions on ownership and transfer set forth in the Company's Amended
and Restated Charter, as in effect from time to time.
Section 4.7 - Restrictions on Exercise of Option
An Option is not exercisable if the exercise of such Option would likely
result in any of the following:
(a) the Optionee's ownership of Capital Stock being in violation of the
Stock Ownership Limit set forth in the Company's Amended and Restated
Charter, as in effect from time to time.
(b) income to the Company that could impair the Company's status as a real
estate investment trust, within the meaning of Section 856 through 860
of the Code; or
(c) a transfer, at any one time, of more than one- tenth of one percent
(0.1%) (measured in value or in number of shares, whichever is more
restrictive) of the Company's total Capital Stock from the Company to
First Washington Management, Inc. or to the Partnership pursuant to
Section 5.5(a) or 5.6(a)(i) of the Plan, respectively.
Notwithstanding any other provision of this Agreement, the Optionee shall
have no rights under this Agreement or the Plan to acquire Common Stock
that would otherwise be prohibited under the Company's Amended and Restated
Charter, as in effect from time to time.
ARTICLE V
OTHER PROVISIONS
Section 5.1 - Administration
The Committee shall have the power to interpret the Plan and this Agreement
and to adopt such rules for the administration, interpretation and
application of the Plan as are consistent therewith and to interpret or
revoke any such rules. All actions taken and all interpretations and
determinations made by the Committee in good faith shall be final and
binding upon the Optionee, the Company and all other interested persons.
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No member of the Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan
or the Option.
Section 5.2 - Option Not Transferable
Neither the Option nor any interest or right therein or part thereof shall
be liable for the debts, contracts or engagements of the Optionee or his
successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other
means whether such disposition be voluntary or involuntary or by operation
of law by judgment, levy, attachment, garnishment or any other legal or
equitable proceedings (including bankruptcy), and any attempted disposition
thereof shall be null and void and of no effect; provided, however, that,
subject to the Stock Ownership Limit, this Section 5.2 shall not prevent
transfers by will or by the applicable laws of descent and distribution.
Section 5.3 - Shares to Be Reserved
The Company shall at all times during the term of the Option reserve and
keep available such number of shares of stock as will be sufficient to
satisfy the requirements of this Agreement.
Section 5.4 - Notices
Any notice to be given by the Optionee under the terms of this Agreement to
the Company shall be addressed to the Company in care of its Secretary, and
any notice to be given to the Optionee shall be addressed to him at the
address given beneath his signature hereto. By a notice given pursuant to
this Section 5.4, either party may hereafter designate a different address
for notices to be given to him. Any notice that is required to be given to
the Optionee shall, if the Optionee is then deceased, be given to the
Optionee's personal representative if such representative has previously
informed the Company of his status and address by written notice under this
Section 5.4. Any notice shall be deemed duly given when enclosed in a
properly sealed envelope or wrapper addressed as aforesaid, deposited (with
postage prepaid) in a post office or branch post office regularly
maintained by the United States Postal Service.
Section 5.5 - Titles
Titles are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of this Agreement.
Section 5.6 - Stockholder Approval
The Plan will be submitted for approval by the Company's stockholders
within twelve (12) months after the date that the Plan was initially
adopted by the Board. This Option may not be exercised to any extent by
anyone prior to the time when the Plan is approved by the stockholders, and
if such approval has not been obtained by the end of said twelve-month
period, this Option shall thereupon be canceled and become null and void.
The Company shall take such actions as may be necessary to satisfy the
requirements of Rule 16b-3(b).
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Section 5.7 - Notification of Disposition
The Optionee shall give prompt notice to the Company of any disposition or
other transfer of any shares of stock acquired under this Agreement if such
disposition or transfer is made (a) within two (2) years from the date of
granting the Option with respect to such shares or (b) within one (1) year
after the transfer of such shares to him. Such notice shall specify the
date of such disposition or other transfer and the amount realized, in
cash, other property, assumption of indebtedness or other consideration, by
the Optionee in such disposition or other transfer.
Section 5.8 - Governing Law
This Agreement shall be administered, interpreted and enforced under the
internal laws of the State of Maryland without regard to conflicts of laws
thereof.
Section 5.9 - Conformity to Securities Laws
The Optionee acknowledges that the Plan is intended to conform to the
extent necessary with all provisions of the Securities Act and the Exchange
Act and any and all regulations and rules promulgated by the Securities and
Exchange Commission thereunder, including without limitation Rule 16b-3.
Notwithstanding anything herein to the contrary, the Plan shall be
administered, and the Option is granted and may be exercised, only in such
a manner as to conform to such laws, rules and regulations. To the extent
permitted by applicable law, the Plan and this Agreement shall be deemed
amended to the extent necessary to conform to such laws, rules and
regulations.
IN WITNESS WHEREOF, this Agreement has been executed and
delivered by the parties hereto.
FIRST WASHINGTON REALTY TRUST,
INC.,
a Maryland corporation
By:_____________________________________
Title: Secretary
____________________________________
Optionee
____________________________________
____________________________________
Address
Optionee's Taxpayer Identification Number:
____________________________________
11
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ANNEX D
RESTRICTED STOCK AGREEMENT
THIS RESTRICTED STOCK AGREEMENT, dated as of May 1, 1998, is made by and
between First Washington Realty Trust, Inc., a Maryland corporation (the
"Company"), and William J. Wolfe, an officer of the Company (the
"Employee"):
WHEREAS, the Company has established the First Washington Trust, Inc.
Restricted Stock Plan, as amended from time to time, (the "Plan"); and
WHEREAS, the Company wishes to carry out the Plan (the terms of which are
hereby incorporated by reference and made a part of this Agreement); and
WHEREAS, the Plan provides for the issuance of shares of the Company's
Common Stock (as defined herein) subject to certain restrictions thereon
(hereinafter referred to as the "Restricted Stock"); and
WHEREAS, the Compensation Committee of the Company's Board of Directors
(the "Committee"), has determined that it would be to the advantage and in
the best interest of the Company and its stockholders to issue certain
shares of the Company's Common Stock, par value $0.01 per share (the
"Common Stock") to the Employee in partial consideration of past services
to the Company and/or as an incentive to remain as an employee of the
Company, subject to the restrictions set forth herein, and has advised the
Company thereof.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 -"Employment Agreement" shall mean that certain Second Amended
and Restated Executive Employment Agreement between Employee and the
Company dated as of May 1, 1998.
Section 1.2 - "Fair Market Value" of a share of the Company's stock as of a
given date shall be: (i) the closing price of the Common Stock on the New
York Stock Exchange on such date, or, if shares were not traded on such
date, then on the next preceding trading day during which a sale occurred;
or (ii) if such stock is not traded on an exchange but is quoted on Nasdaq
or a successor quotation system, (1) the last sales price (if the stock is
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then listed as a National Market Issue under the NASD National Market
System) or (2) the mean between the closing representative bid and asked
prices (in all other cases) for the stock on the day previous to such date
as reported by Nasdaq or such successor quotation system; or (iii) if such
stock is not publicly traded on an exchange and not quoted on Nasdaq or a
successor quotation system, the mean between the closing bid and asked
prices for the stock, on the day previous to such date, as determined in
good faith by the Committee; or (iv) if the Company's stock is not publicly
traded, the fair market value established by the Committee acting in good
faith. In determining the Fair Market Value of the Company's Common Stock
under Paragraph (i) of this Section 1.2, the Committee may rely on the
closing price as reported in the New York Stock Exchange composite
transactions published in the Wall Street Journal.
Section 1.3 - "Restricted Stock" shall mean Common Stock of the Company
issued under this Agreement and subject to the Restrictions imposed
hereunder.
Section 1.4 - "Restrictions" shall mean the reacquisition and
transferability restrictions imposed upon Restricted Stock under this
Agreement.
Section 1.5 - "Rule 16b-3" shall mean that certain Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as such
Rule may be amended in the future.
ARTICLE II
ISSUANCE OF RESTRICTED STOCK
Section 2.1 - Issuance of Restricted Stock. In partial consideration of
Employee's past services to the Company and/or Employee's agreement to
remain in the employ of the Company pursuant to the Employment Agreement
and for other good and valuable consideration which the Committee has
determined to be equal to the par value of its Common Stock provided that
the Employee is employed by the REIT as of January 1, 2000, then the
Company shall issue to the Employee, and hereby does issue to the Employee,
effective as of January 1, 2000, one hundred fifty thousand (150,000)
shares of its Common Stock upon the terms and conditions set forth in this
Agreement.
ARTICLE III
RESTRICTIONS
Section 3.1 - Reacquisition of Restricted Stock; Acceleration; Vesting. (a)
Reacquisition. All shares of Restricted Stock issued to the Employee
pursuant to Section 2.1 are initially subject to reacquisition by the
Company immediately if the employee-employer relationship between the
Employee and the Company is terminated: (i) by the Company pursuant to
Section 2(c)(ii) of the Employment Agreement or (ii) by Employee other than
(A) pursuant to Section 2(d) of the Employment Agreement, (B) pursuant to
Section 2(e) of the Employment Agreement or (C) pursuant to Section 2(f) of
the Employment Agreement (other than in connection with Employee's removal
as a director for cause under the corporation laws of the State of
Maryland), or (D) due to the fact that the Employment Agreement expired and
was not renewed pursuant to Section 2(b) of the Employment Agreement.
Following such a reacquisition by the Company, the Company shall promptly
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Company shall promptly pay to the Employee an amount equal to the product
of $.01 times the number of shares of Restricted Stock reacquired. The
restriction that such shares of Restricted Stock be subject to
reacquisition by the Company shall not apply to any "Vested Shares" held by
the Employee.
(b) Acceleration. All shares of Restricted Stock shall immediately fully vest
and all Restrictions with respect to such shares of Restricted Stock shall
immediately expire if the employee-employer relationship between the
Employee and the Company is terminated (i) by the Company pursuant to
Section 2(c)(i) of the Employment Agreement; (ii) by the Employee pursuant
to Section 2(d) of the Employment Agreement; (iii) by the Employee pursuant
to Section 2(e) of the Employment Agreement; or (iv) by the Employee
pursuant to Section 2(f) of the Employment Agreement (other than in
connection with Employee's removal as a director for cause under the
corporation law of the State of Maryland); or (v) due to the fact that the
Employment Agreement expires and is not renewed pursuant to Section 2(b) of
the Employment Agreement.
(c) Vesting. The shares of Restricted Stock shall vest, and all Restrictions
with respect to such shares shall expire, in accordance with the schedule
set forth below. "Vested Shares" shall mean that number of shares of
Restricted Stock which have vested and are no longer subject to
Restrictions.
Number of Aggregate Number of
Vesting Date Vested Shares Vested Shares
January 1, 2001 25,000 25,000
January 1, 2002 50,000 75,000
January 1, 2003 75,000 150,000
Section 3.2 - Legend. (a) Certificates representing shares of Restricted
Stock issued pursuant to this Agreement shall, until all restrictions lapse
and new certificates are issued pursuant to Section 3.3, bear the following
legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
VESTING REQUIREMENTS AND MAY BE SUBJECT TO REACQUISITION BY THE COMPANY
UNDER THE TERMS OF THAT CERTAIN RESTRICTED STOCK AGREEMENT BY AND BETWEEN
FIRST WASHINGTON REALTY TRUST, INC. (THE "COMPANY") AND THE HOLDER OF THE
SECURITIES. PRIOR TO VESTING OF OWNERSHIP IN THE SECURITIES, THEY MAY NOT
BE, DIRECTLY OR INDIRECTLY, OFFERED, TRANSFERRED, SOLD, ASSIGNED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNDER ANY CIRCUMSTANCES. COPIES OF
THE ABOVE REFERENCED AGREEMENT ARE ON FILE AT THE OFFICES OF THE COMPANY AT
4350 EAST-WEST HIGHWAY, SUITE 400, BETHESDA, MARYLAND 20814."
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(b) Unless such shares shall have been registered pursuant to an effective
registration statement under the Securities Act of 1933, as amended,
certificates representing shares of Restricted Stock issued pursuant
to this Agreement shall also bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). NO
SALE, HYPOTHECATION, TRANSFER OR OTHER DISPOSITION OF THESE SECURITIES MAY
BE MADE UNLESS EITHER (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR (B) PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT."
Section 3.3 - Lapse of Restrictions. Upon the vesting of the shares of
Restricted Stock as provided in Section 3.1 and subject to Section 4.3, the
Company shall cause new certificates to be issued with respect to such
Vested Shares and delivered to the Employee or his legal representative,
free from the legend provided for in Section 3.2(a) and any of the other
Restrictions. Such Vested Shares shall cease to be considered Restricted
Stock subject to the terms and conditions of this Agreement.
Section 3.4 - Termination of Employment prior to January 1, 2000.
Notwithstanding anything to the contrary contained herein, if the
Employee's employment with the Company is terminated in an Early
Termination (as defined in the Employment Agreement) prior to January 1,
2000, then the Company shall issue to the Employee, and hereby does issue
to the Employee, effective as of the date immediately prior to such Early
Termination, the 150,000 shares of Restricted Stock, and all of such shares
of Restricted Stock shall be fully vested on the date of such issuance.
ARTICLE IV
MISCELLANEOUS
Section 4.1 - Administration. The Committee shall have the power to
interpret the Plan, this Agreement and all other documents relating to
Restricted Stock and to adopt such rules for the administration,
interpretation and application of this Agreement as are consistent herewith
and to interpret, amend or revoke any such rules. All actions taken and all
interpretations and determinations made by the Committee in good faith
shall be final and binding upon the Employee, the Company and all other
interested persons. No member of the Committee shall be personally liable
for any action, determination or interpretation made in good faith with
respect to the Plan or the Restricted Stock and all members of the
Committee shall be fully protected by the Company in respect to any such
action, determination or interpretation. The Board shall have no right to
exercise any of the rights or duties of the Committee under the Plan and
this Agreement.
Section 4.2 - Restricted Stock Not Transferable. No Restricted Stock or any
interest or right therein or part thereof shall be liable for the debts,
contracts or engagements of the Employee or his successors in interest or
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<PAGE>
his successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other
means whether such disposition be voluntary or involuntary or by operation
of law by judgment, levy, attachment, garnishment or any other legal or
equitable proceedings (including bankruptcy) unless and until any such
share of Restricted Stock is a Vested Share, and any attempted disposition
thereof prior to such vesting, shall be null and void and of no effect;
provided, however, that this Section 4.2 shall not prevent transfers by
will or by applicable laws of descent and distribution.
Section 4.3 - Conditions to Issuance of Stock Certificates. The Company
shall not be required to issue or deliver any certificate or certificates
for shares of stock pursuant to this Agreement prior to fulfillment of all
of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on
which such class of stock is then listed; and
(b) The completion of any registration or other qualification of such
shares under any state or Federal law or under rulings or regulations
of the Securities and Exchange Commission or of any other governmental
regulatory body, which the Committee shall, in its absolute
discretion, deem necessary or advisable; and
(c) The obtaining of any approval or other clearance from any state or
Federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable; and
(d) The payment by the Employee of all amounts required to be withheld,
under federal, state and local tax laws, with respect to the issuance
of Restricted Stock and/or the lapse or removal of any of the
Restrictions; and
(e) The lapse of such reasonable period of time as the Committee may from
time to time establish for reasons of administrative convenience.
Section 4.4 - Escrow. The Secretary of the Company or such other escrow
holder as the Committee may appoint shall retain physical custody of the
certificates representing Restricted Stock until all of the Restrictions
expire or shall have been removed; provided, however, that in no event
shall the Employee retain physical custody of any certificates representing
Restricted Stock issued to him.
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<PAGE>
Section 4.5 - Notices. Any notice to be given under the terms of this
Agreement to the Company shall be addressed to the Company in care of its
Secretary, and any notice to be given to the Employee shall be addressed to
him at the address given beneath his signature hereto. By a notice given
pursuant to this Section 4.5, either party may hereafter designate a
different address for notices to be given to it or him. Any notice which
is required to be given to the Employee shall, if the Employee is then
deceased, be given to the Employee's personal representative if such
representative has previously informed the Company of his status and
address by written notice under this Section 4.5. Any notice shall have
been deemed duly given when enclosed in a properly sealed envelope or
wrapper addressed as aforesaid, deposited (with postage prepaid) in a post
office or branch post office regularly maintained by the United States
Postal Service.
Section 4.6 - Rights as Stockholder. Upon delivery of the shares of
Restricted Stock from the escrow holder pursuant to Section 4.4, the
Employee shall have all the rights of a stockholder with respect to said
shares, subject to the restrictions herein, including the right to vote the
shares and to receive all dividends or other distributions paid or made
with respect to the shares.
Section 4.7 - Titles. Titles are provided herein for convenience only and
are not to serve as a basis for interpretation or construction of this
Agreement.
Section 4.8 - Conformity to Securities Laws. This Agreement is intended to
conform to the extent necessary with all provisions of the Securities Act
of 1933, as amended, and the Exchange Act and any and all regulations and
rules promulgated by the Securities and Exchange Commission thereunder,
including without limitation Rule 16b-3. Notwithstanding anything herein to
the contrary, this Agreement shall be administered, and the Restricted
Stock shall be issued, only in such a manner as to conform to such laws,
rules and regulations. To the extent permitted by applicable law, this
Agreement and the Restricted Stock issued hereunder shall be deemed amended
to the extent necessary to conform to such laws, rules and regulations.
Section 4.9 - Amendment. This Agreement may be amended only by a writing
executed by the parties hereto which specifically states that it is
amending this Agreement.
Section 4.10 - Approval of Plan by Stockholders. The Plan will be submitted
for the approval of the Company's stockholders within twelve months after
the date of the Board's initial adoption of the Plan. Restricted Stock
issued following the adoption of the Plan but prior to such stockholder
approval shall not vest prior to the time when the Plan is approved by the
stockholders; provided, that if such approval has not been obtained at the
end of said twelve-month period, all Restricted Stock issued during such
time period under the Agreement shall thereupon be cancelled and become
null and void. The Company and the Employee shall take such action with
respect to the Plan and this Agreement as may be necessary to satisfy the
requirements of Rule 16b-3(b).
Section 4.11 - Tax Withholding. The Company's obligation (i) to issue or
deliver to the Employee any certificate or certificates for unrestricted
shares of stock or (ii) to pay to the Employee any dividends or make any
distributions with respect to the Restricted Stock, is expressly
conditioned upon receipt from the Employee, on or prior to the date the
same is required to be withheld, of:
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(a) Full payment (in cash or by check) of any amount that must be withheld
by the Company for federal, state and/or local tax purposes; or
(b) Subject to the Committee's consent and Section 4.10(c), full payment
by delivery to the Company of unrestricted shares of the Company's
Common Stock previously owned by the Employee duly endorsed for
transfer to the Company by the Employee with an aggregate Fair Market
Value (determined, as applicable, as of the date of the lapse of the
restrictions or vesting, or as of the date of the distribution) equal
to the amount that must be withheld by the Company for federal, state
and/or local tax purposes; or
(c) With respect to the withholding obligation for shares of Restricted
Stock that become unrestricted shares of stock as of a certain date
(the "Vesting Date"), subject to the Committee's consent and to the
timing requirements set forth in this Section 4.10(c), full payment by
retention by the Company of a portion of such shares of Restricted
Stock which become unrestricted or vested with an aggregate Fair
Market Value (determined as of the Vesting Date) equal to the amount
that must be withheld by the Company for federal, state and/or local
tax purposes; or
(d) Subject to the Committee's consent, any combination of payments
provided for in the foregoing subsections (a), (b) or (c).
Section 4.12 - Changes in Company's Shares. In the event that the
outstanding shares of Common Stock of the Company are hereafter changed
into or exchanged for a different number or kind of shares or other
securities of the Company, or of another corporation, by reason of
reorganization, merger, consolidation, recapitalization, reclassification,
or the number of shares is increased or decreased by reason of a stock
split-up, stock dividend, combination of shares or any other increase or
decrease in the number of such shares of Common Stock effected without
receipt of consideration by the Company (provided, however, that conversion
of any convertible securities of the Company shall not be deemed to have
been "effected without receipt of consideration"), the Committee shall make
appropriate adjustments in the number and kind of shares of Restricted
Stock which may be issued.
Section 4.13 - Governing Law. The laws of the State of Maryland shall
govern the interpretation, validity, administration, enforcement and
performance of the terms of this Agreement regardless of the law that might
be applied under principles of conflicts of laws.
IN WITNESS HEREOF, this Agreement has been executed and delivered
by the parties hereto.
FIRST WASHINGTON REALTY TRUST, INC.
By:________________________________
Its:________________________________
_____________________________________
Employee
_____________________________________
_____________________________________
Address
7
SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS SECOND AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT
is made as of May 1, 1998, effective as of March 13, 1998, by and
between First Washington Realty Trust, Inc., a Maryland corporation
(the "REIT"), and Stuart D. Halpert (the "Employee").
RECITALS
A. WHEREAS, the REIT and the Employee executed an Executive
Employment Agreement dated as of June 26, 1994, and subsequently
executed an Amended and Restated Executive Employment Agreement dated
as of June 30, 1996 (the "Amended Agreement");
B. WHEREAS, the REIT and the Employee mutually desire to amend
and restate the Amended Agreement pursuant to the terms set forth
herein; and
C. WHEREAS, the REIT wishes to contract for the managerial and
business skills possessed by the Employee and the Employee desires to
be employed by the REIT upon the terms and subject to the conditions
herein provided.
NOW, THEREFORE, in consideration of the foregoing premises and
mutual covenants and conditions hereinafter set forth, and for other
good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereby agree as follows:
AGREEMENT
1. Employment and Duties
(a) Position and Duties. The Employee shall serve as Chairman of the Board
of the REIT, with such duties and authority as are customary for, and
commensurate with, such position, including developing policy,
supervising staff, directing day- to-day operations, and such other
duties as the Board of Directors of the REIT (the "Board") prescribes.
The Employee shall have such other duties and authority as may from
time to time be delegated or assigned to him by the Board.
(b) Preclusion of Outside Business Activities. During the Term, the
Employee shall devote substantially all of his professional energies,
interest, abilities and productive work time to the performance of
duties pursuant to this Agreement. The Employee shall not, without the
prior written consent of the Board, perform other professional
services of any kind or engage in any other business activity, with or
without compensation; provided, however, that the Employee shall be
allowed (i) to continue to engage in the development of First
Washington Management, Inc., a Maryland corporation ("FWM"), at a
level consistent with past duties; (ii) to engage in administering the
business and activities of First Washington Realty Limited
Partnership, a Maryland limited partnership (the "Operating
Partnership"); (iii) to serve as a director on the boards of up to
three (3) non-competing companies, and (iv) to engage in passive
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investments that the Employee may make from time to time for his personal
account, so long as the activities described in clauses (i) through (iv) do
not detract or adversely affect the Employee's duties and responsibilities
under this Agreement. The Employee shall not, without the prior written
consent of the Board, engage in any activity adverse to the REIT's
interests.
2. Term of Employment
(a) Term. This Agreement shall continue in full force and effect until
December 31, 2002, unless sooner terminated or extended as hereinafter
provided (the "Term").
(b) Extension of Term. The employment term set forth in a paragraph 2(a)
above may be extended by written amendment to this Agreement signed by
both parties. The parties agree that they will use their best efforts
to negotiate the extension of this Agreement, if both parties desire
such an extension, not later than twelve months before the scheduled
end of the Term.
(c) Termination by the REIT.
(i) Without Cause. The REIT may terminate the Employee's employment at any
time for any reason other than with Cause (as hereinafter defined) or
for no reason at all upon at least two weeks prior written notice to
the Employee; provided, however, that in connection with such a
termination of employment, the REIT may elect to require the Employee
to continue to perform his duties under this Agreement for an
additional sixty (60) days commencing on the date the Employee
receives notice of such termination. In connection with the
termination of the Employee's employment pursuant to this Section
2(c)(i), the Employee shall (A) be paid salary and any bonus payable
to him in accordance with Sections 3(a) and 3(b) hereof accrued
through the effective date of termination; (B) be entitled to the
benefits set forth in Sections 3(c) through 3(e) hereof in accordance
with the terms thereof ; (C) be entitled to the benefits set forth in
Sections 3(f) through 3(h) hereof accrued through the effective date
of such termination in accordance with such plans, programs and
arrangements; (D) receive the Termination Compensation specified in
Section 5(a) hereof; and (E) be entitled to the continuation of
benefits specified in Section 5(c) hereof.
(ii) With Cause. The REIT may terminate the Employee's employment with
Cause immediately upon delivery of notice thereof. In connection with
the termination of the Employee's employment pursuant to this Section
2(c)(ii), the Employee shall (A) be paid salary and any bonus payable
to him in accordance with Sections 3(a) and 3(b) hereof accrued
through the effective date of termination; (B) be entitled to the
benefits set forth in Sections 3(c) through 3(e) hereof in accordance
with the terms thereof; and (C) be entitled to the benefits set forth
in Sections 3(f) through 3(h) hereof accrued through the effective
date of such termination in accordance with such plans, programs and
arrangements. For purposes of this Agreement, "Cause" shall mean the
Employee's (A) material incompetence in the performance of his duties
or obligations hereunder, including, without limitation, those duties
and obligations specified in Section 1(a) hereof; (B) commission of
any act which is materially injurious to the REIT; (C) personal
dishonesty, willful misconduct, or breach of fiduciary duty involving
personal profit; (D) intentional and material failure to perform his
stated duties for the REIT; (E) willful violation of any law which
violation materially adversely affects his ability to discharge his
duties for the REIT or has an adverse effect on the REIT's interest or
(F) breach in any material respect of any of the terms of this
Agreement or any confidentiality or proprietary information agreement
between the Employee and FWM, the Operating Partnership or the REIT;
provided, however, that "Cause" shall not exist unless and until the
Board provides the Employee with (X) at least 15 days prior written
notice of its intention to terminate his employment with Cause,
together with a certified copy of the resolution of the Board
approving the termination of the Employee's employment with Cause by
the affirmative vote of not less than a majority of the Board, and a
written statement describing the nature of the Cause, and (Y) a
reasonable opportunity and a reasonable period of time to cure any
curable acts or omissions on which the finding of Cause is based. If
the Employee cures the acts or omissions on which the finding of Cause
is based, the REIT shall not have Cause to terminate the Employee's
employment hereunder.
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(d) Termination by the Employee.
(i) With Good Reason or After Change of Control. The Employee may terminate
this Agreement prior to the expiration of the Term upon two weeks prior
written notice to the REIT with Good Reason (as hereinafter defined) at any
time (including within twenty-four (24) months following any Change of
Control (as hereinafter defined) of the REIT). The Employee shall continue
to perform, at the election of the REIT, his duties under this Agreement
for an additional thirty (30) days following the REIT's receipt of his
notice of termination in accordance with this Section 2(d). In connection
with termination of the Employee's employment pursuant to this Section
2(d), the Employee shall (A) be paid salary and any bonus otherwise payable
to him in accordance with Sections 3(a) and 3(b) hereof accrued through the
effective date of such termination; (B) be entitled to the benefits set
forth in Sections 3(c) through 3(e) hereof in accordance with the terms
thereof; (C) be entitled to the benefits set forth in Sections 3(f) through
3(h) hereof accrued through the effective date of such termination in
accordance with such plans, programs and arrangements; (D) receive the
Termination Compensation specified in Section 5(a) hereof; and (E) be
entitled to the continuation of benefits specified in Section 5(c) hereof.
(ii) For purposes of this Section 2(d), "Good Reason" shall mean (A) the breach
by the REIT of any of its obligations hereunder and the failure of the REIT
to cure such breach within sixty (60) days after receipt by the REIT of a
written notice of the Employee specifying in reasonable detail the nature
of the alleged breach or (B) any material diminution in the scope of
Employee's responsibilities and duties without his consent.
(iii)For purposes of this Section 2(d), a "Change of Control" shall mean the
first occurrence of any of the following events: (A) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the REIT, a corporation owned
directly or indirectly by the stockholders of the REIT in substantially the
same proportions as their ownership of stock of the REIT, the Employee or
William J. Wolfe, or any of their respective affiliates, becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities representing 50% or more of the total voting
power represented by the then outstanding securities which vote generally
in the election of directors (referred to herein as "Voting Securities") of
the REIT; (B) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board and any new directors
whose election by the Board or nomination for election by the REIT's
stockholders was approved by a vote of at least
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two-thirds (2/3) the directors then still in office who either were
directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute
a majority of the Board; (C) the stockholders of the REIT approve a merger
or consolidation of the REIT with any other entity, other than a merger or
consolidation which would result in the Voting Securities of the REIT
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 50% of the total voting power represented by the
Voting Securities of the REIT or such surviving entity outstanding
immediately after such merger or consolidation; or (D) the stockholders of
the REIT approve a plan of complete liquidation of the REIT or an agreement
for the sale or disposition by the REIT of (in one transaction or a series
of transactions) all or substantially all of the REIT's assets.
(e) Termination Due to Death or Disability. The Employee's employment
hereunder shall terminate immediately upon his death prior to the
expiration of the Term. In the event that by reason of injury, illness
or other physical or mental impairment the Employee shall be: (i)
completely unable to perform his services hereunder for more than six
consecutive months or (ii) unable to perform his services hereunder
for fifty percent or more of the normal working day throughout twelve
consecutive months (each of (i) and (ii) constituting the "Disability"
of the Employee for purposes of this Agreement), then the REIT may
terminate the Employee's employment hereunder immediately upon
delivery of notice thereof. In the event of the termination of the
Employee's employment pursuant to this Section 2(e), the Employee or
the Employee's beneficiaries, estate, heirs, representatives or
assigns, as appropriate, shall be (A) be paid the salary and any other
bonus otherwise payable to the Employee in accordance with Sections
3(a) and 3(b) hereof accrued through the effective date of such
termination; (B) be entitled to the benefits set forth in Sections
3(c) through 3(e) hereof in accordance with the terms thereof; (C)
receive the Termination Compensation specified in Section 5(a) hereof;
(D) receive the proceeds, if any, due under any REIT-paid life
insurance policy held by the Employee, as determined by and in
accordance with the terms of any such policy; and (E) solely in the
event of the Employee's Disability, be entitled to the continuation of
benefits specified in Section 5(c) hereof.
(f) Removal as Director. Notwithstanding any other provision of this Agreement,
if the Employee shall be removed from (or fail to be re-elected to) office
as a director of the REIT at any time during the Term, then the Employee
may notify the REIT in writing of his election to terminate this Agreement
upon written notice to the REIT and such notice shall be effective
immediately upon receipt by the REIT. In connection with the Employee's
termination of employment pursuant to this Section 2(f), the Employee shall
(A) be paid the salary and any bonus payable to him in accordance with
Sections 3(a) and 3(b) hereof accrued through the effective date of such
termination; (B) be entitled to the benefits set forth in Sections 3(c)
through 3(e) hereof in accordance with the terms thereof; (C) be entitled
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to the benefits set forth in Sections 3(f) through 3(h) hereof accrued through
the effective date of such termination in accordance with such plans, programs
and arrangements; (D) receive the Termination Compensation specified in Section
5(a) hereof and (E) be entitled to the continuation of benefits specified in
Section 5(c) hereof; provided, however, that the Employee shall not be entitled
to the payments and benefits described in subsections (D) and (E) above if he is
removed as a director for cause under the corporation law of the State of
Maryland.
3. Compensation and Related Matters.
(a) Salary. The Employee's annual base salary during the Term shall be
$300,000 per annum effective January 1, 1998. Such salary shall be
reviewed by the Board annually during the first quarter of fiscal year
of the REIT during the Term, and the Employee shall receive such
salary increases, if any, as the Board, in its sole discretion, shall
determine; provided, however, that the Employee's annual base salary
shall not be less than $400,000 effective January 1, 2000 and
thereafter. Such salary shall be payable in accordance with the REIT's
normal payment practices, but in no event shall such salary be payable
less frequently than monthly in equal installments.
(b) Bonus.
(i) For calendar year 1998, in addition to the salary set forth in Section
3(a) above, the Employee shall be eligible to receive such bonus, if
any, as the Board shall determine, in accordance with the criteria set
forth in Annex A-1 hereto.
(ii) Effective January 1, 1999 and thereafter, the Employee shall be
eligible to receive an Annual Incentive Bonus in accordance with the
Plan set forth on Annex A hereto.
(c) Options.
(i) Provided that he is employed by the REIT as of January 1, 2000,
effective as of such date the Employee shall be granted, and hereby is
granted, an option to purchase 250,000 shares of Common Stock at an
exercise price equal to the Fair Market Value (as defined in the
Option Plan) of a share of Common Stock on January 1, 2000 (the
"Option") subject to the terms and provisions of the 1994 Stock Option
Plan for Officers, Directors and Employees of First Washington Realty
Trust, Inc., First Washington Realty Limited Partnership and First
Washington Management, Inc. (the "Option Plan") (or a successor option
plan then maintained by the REIT) and a written Stock Option Agreement
between the Employee and the REIT (the "Stock Option Agreement"). The
Stock Option Agreement shall provide that the Option shall become
exercisable in equal cumulative installments of one- third each on
each of the first three anniversaries of the date of grant (subject to
the Employee's continued employment by the REIT on such dates) and
shall be subject to immediate vesting in the event of the Employee's
termination of employment pursuant to Section 2(c)(i), 2(d), 2(e) or
2(f) (other than in connection with Employee's removal as a director
for cause under the corporation law of the State of Maryland) or by
reason of expiration of the Term without renewal (collectively an
"Early Termination") and shall be the Stock Option Agreement attached
hereto as Annex C.
(ii) If the Employee's employment is terminated in an Early Termination
prior to January 1, 2000, then, effective as January 1, 2000, the
Employee shall be granted, and hereby is granted the Option to
purchase 250,000 shares of Common Stock at an exercise price equal to
the Fair Market Value of a share of Common Stock on January 1, 2000
subject, if permitted by the terms thereof, to the Option Plan (or a
successor option plan then maintained by the REIT), and, in any event,
the written Stock Option Agreement between the Employee and the REIT.
The Stock Option Agreement shall provide that the Option shall be
fully exercisable as of the date of grant and shall expire on the date
specified in Section 2(a) herein and shall be the Stock Option
Agreement attached hereto as Annex C.
(d) Restricted Stock.
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(i) Provided that he is employed by the REIT as of January 1, 2000, effective
as of such date the Employee shall be granted, and hereby is granted,
150,000 shares of common stock of the REIT (the "Restricted Stock") subject
to the terms and conditions of the First Washington Realty Trust, Inc.
Restricted Stock Plan (the "Stock Plan") and a written Restricted Stock
Agreement between the Employee and the REIT (the "Restricted Stock
Agreement"). The Restricted Stock Agreement shall provide that shares of
the Restricted Stock shall become vested in cumulative installments of
one-sixth, one-third and one-half, respectively, on each of the first three
anniversaries of the date of grant (subject to the Employee's continued
employment by the REIT on such dates) and shall be subject to immediate
vesting in the event of the Employee's termination of employment in an
Early Termination and shall be the Restricted Stock Agreement attached
hereto as Annex D.
(ii) If the Employee's employment is terminated in an Early Termination prior to
January 1, 2000, then effective immediately prior to such termination the
Employee shall be granted, and hereby is granted, the 150,000 shares of
Restricted Stock subject to the terms and conditions of the Stock Plan and,
in any event, the written Restricted Stock Agreement between the Employee
and the REIT. The Restricted Stock Agreement shall provide that shares of
the Restricted Stock shall be fully vested on the date of grant and shall
be the Restricted Stock Agreement attached hereto as Annex D.
(e) Contingent Stock. Subject to stockholder approval as provided in the
Amended and Restated Contingent Stock Agreement dated as of April 1,
1998 by and between the REIT and the Employee (the "Amended Contingent
Stock Agreement"), the Employee shall be entitled to receive shares of
Contingent Stock (as defined therein) pursuant to such agreement.
Unless and until the Amended Contingent Stock Agreement is approved by
the REIT's stockholders as therein provided, the terms of the
Contingent Stock Agreement dated June 30, 1996 between the REIT and
the Employee shall remain in effect and the Employee shall be entitled
to receive shares of Contingent Stock as therein provided.
(f) Benefits. During the Term the Employee shall be entitled to
participate in or receive benefits under any employee benefit plan or
other arrangement (including, but not limited to, any medical, dental,
retirement, disability, life insurance, sick leave and vacation plans
or arrangements and the REIT's executive deferred compensation plan)
made available by the REIT to any of its employees, subject to and on
a basis consistent with the terms, conditions and overall
administration of such plans or arrangements.
(g) Expenses. The REIT shall promptly pay directly or reimburse the
Employee for all reasonable travel and other business expenses
incurred by the Employee in the performance of his duties to the REIT
under this Agreement.
(h) Vacation. The Employee shall be entitled to vacation benefits in
accordance with the REIT's normal vacation policies, but in no event
shall he receive less than four weeks of paid vacation each calendar
year during the Term.
(i) Professional Memberships. The REIT shall promptly pay directly or
reimburse the Employee for all reasonable expenses incurred by the
Employee with respect to professional memberships maintained by him
during the Term.
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(j) Automobile Allowance. During the Term, the REIT shall provide the
Employee with an automobile allowance for a company automobile of
comparable quality as automobiles customarily provided to executive
officers in the industry. Expenses relating to such automobile will be
paid in accordance with the normal and customary practices of the
REIT.
(k) Deductions and Withholdings. All amounts payable or which become
payable under any provision of this Agreement shall be subject to all
deductions authorized by the Employee and to all deductions and
withholdings required by law.
4. Covenant Not to Compete or Solicit
(a) Non-Competition.
(i) The Employee agrees that during the Term he will not directly or
indirectly engage in (whether as an employee, consultant, proprietor,
partner, director, member or otherwise), or have any ownership
interest in, or participate in the financing, operation, management or
control of, any person, firm, corporation or business that engages in
or intends to engage in a Restricted Business. "Restricted Business"
shall mean any business that is engaged in or (to the Employee's
knowledge after due inquiry) preparing to engage in the real estate
business of the acquisition, development, management and operation of
principally retail shopping centers; provided, however, that
"Restricted Business" shall not include the operation and management
of those properties listed on Annex B hereto.
(ii) The Employee further agrees that for the eighteen (18) month period
following the end of the Term, he will not directly or indirectly
engage in (whether as an employee, consultant, proprietor, partner,
director, member or otherwise), or have any ownership interest in, or
participate in the financing, operation, management or control of, any
person, firm, corporation or business that engages in or intends to
engage in a Post-Employment Restricted Business. "Post-Employment
Restricted Business" shall mean any business that is engaged in or (to
the Employee's knowledge after due inquiry) preparing to engage in the
real estate business of the acquisition, development, management and
operation of principally retail shopping centers within twenty-five
(25) miles of a retail property owned, directly or through one or more
subsidiaries or otherwise, by the REIT, the Operating Partnership or
FWM at the end of the Term; provided, however, that "Post- Employment
Restricted Business" shall not include the operation and management of
those properties listed on Annex B hereto.
(iii)Ownership of (A) no more than one percent (1%) of the outstanding
voting stock of a publicly traded entity or (B) any stock owned by the
Employee as of June 26, 1994 shall not constitute a violation of this
Section 4(a).
(iv) This Section 4(a) shall not prohibit the Employee from working for a
division or subsidiary of a company which division or subsidiary does
not engage in a Restricted Business or a Post-Employment Restricted
Business, even though other divisions or subsidiaries of such company
do engage in a Restricted Business or Post-Employment Restricted
Business, provided that the REIT receives adequate assurances as it
may request that the Employee has no involvement with the divisions or
subsidiaries engaged in the Restricted Business or Post-Employment
Restricted Business.
(b) Non-Solicitation. The Employee agrees that during the Term he will not
(i) solicit, encourage or take any other action which is intended to
induce any other employee of the REIT to terminate his or her
employment with the REIT or (ii) interfere in any manner with the
contractual or other employment relationship between the REIT and any
such employee of the REIT.
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(c) Severability. The parties intend that the covenants contained in the
preceding paragraphs of this Section 4 shall be construed as a series
of separate covenants, one for each county of Maryland, Virginia,
Pennsylvania, North Carolina, South Carolina and Delaware, and to the
District of Columbia, each state of the United States of America and
each nation. Except for geographic coverage, each such separate
covenant shall be deemed identical in terms to the covenant contained
in the preceding paragraphs. If, in any judicial proceeding, a court
shall refuse to enforce any of the separate covenants (or any part
thereof) deemed included in said paragraphs, then such unenforceable
covenant (or such part) shall be deemed eliminated from this Agreement
for the purpose of those proceedings to the extent necessary to permit
the remaining separate covenants (or portions thereof) to be enforced.
In the event that the provisions of this Section 4 should ever be
deemed to exceed the time, scope or geographic limitation permitted by
applicable law, then such provisions shall be reformed to the maximum
time, scope or geographic limitations, as the case may be, permitted
by applicable law.
5. Termination.
(a) If the Employee's employment is terminated (i) in an Early Termination
or (ii) by reason of expiration of the Term without renewal, then the
Employee shall be paid a lump sum amount (the "Termination
Compensation") equal to the greater of:
(A) 200% of the sum of (I) the Employee's rate of annual base salary at
the time of such termination (as determined pursuant to Section 3(a))
and (II) the average annual bonus (if any) paid to the Employee during
the Term (i.e., the entire term of employment with the REIT); or
(B) the sum of (I) the aggregate annual base salary (as determined
pursuant to Section 3(a)) the Employee would otherwise be entitled to
receive from the time of such termination through the scheduled end of
the Term (as determined pursuant to Section 2(a)) and (II) the average
annual bonus (if any) paid to the Employee during the Term (i.e., the
entire term of employment with the REIT).
(b) No Termination Compensation shall be paid if the Employee's employment
is terminated during the Term (i) by the REIT with Cause pursuant to
Section 2(c)(ii) hereof or (ii) by the Employee other than in
accordance with Section 2(d) or Section 2(e) or Section 2(f) in
connection with the Employee's failure to be re-elected as a director
or his removal as a director without cause.
(c) If the Employee's employment is terminated prior to the expiration of
the Term for any reason other than pursuant to Section 2(c)(ii) or
pursuant to Section 2(f) in connection with the Employee's removal as
a director for cause under the corporation law of the State of
Maryland, the REIT will continue to provide to the Employee comparable
medical, disability and life insurance benefits as were in effect at
the time of termination until such time as the Term would otherwise
have expired if the Employee had not been terminated (but in no event
for a period of less than twenty-four months).
(d) Survival. The expiration or termination of the Term shall not impair
the rights or obligations of any party hereto which shall have accrued
hereunder prior to such expiration, nor shall such expiration or
termination impair the rights and obligations of any party hereto that
are intended by their terms to survive such expiration or termination.
(e) Mitigation of Damages. In the event of any termination of the
Employee's employment with the REIT for any reason, the Employee shall
not be required to seek other employment to mitigate damages, and any
income earned by the Employee from other employment or self-employment
shall not be offset against any obligations of the REIT to the
Employee under this Agreement.
6. The Employee's Representations. The Employee represents and warrants
to the REIT as follows:
(a) The Employee is familiar with and approves the covenants not to
compete and not to solicit set forth in Section 4, including, without
limitation, the reasonableness of the length of time, scope and
geographic coverage of these covenants.
(b) Notwithstanding any "what-if" scenarios of the future results of
operations and stock prices of the REIT under certain assumptions
which the parties may have discussed, the Employee has not relied on
any such scenarios or any forecasts or projections provided by the
REIT and understands that neither the REIT nor FWM has made any
representation or warranty whatsoever regarding any forecasts or
projections to the Employee.
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7. Miscellaneous.
(a) Notices. Any notice, report or other communication required or
permitted to be given hereunder shall be in writing and shall be
deemed given and received on the date of delivery, if delivered [in
person], or three days after mailing, if mailed first- class mail,
postage prepaid, to the following addresses:
If to the Employee:
4350 East-West Highway, Suite 400
Bethesda, Maryland 20814
Attn: Stuart D. Halpert
If to the REIT:
4350 East-West Highway, Suite 400
Bethesda, Maryland 20814
Attn: General Counsel
or to such other address as any party hereto may designate by notice given
as herein provided.
(b) Entire Agreement. This Agreement contains the entire understanding and
sole and entire agreement between the parties with respect to the
subject matter hereof, and supersedes any and all prior agreements,
negotiations and discussions between the parties hereto with respect
to the subject matter covered hereby. Each party to this Agreement
acknowledges that no representations, inducements, promises or
agreements, oral or otherwise, have been made by any party, or anyone
acting on behalf of any party, which are not embodied herein, and that
no other agreement, statement or promise not contained in this
Agreement shall be valid or binding. This Agreement may not be
modified or amended by oral agreement, but only by an agreement in
writing signed by the REIT and by the Employee, and which states the
intent of the parties to amend this Agreement.
(c) Assignment and Binding Effect. Neither this Agreement nor the rights
or obligations hereunder shall be assignable by the Employee. The REIT
may assign this Agreement to any successor of the REIT, and upon such
assignment any such successor shall be deemed substituted for the REIT
upon the terms and subject to the conditions hereof, provided, that
substantially all of the assets of the REIT are also transferred to
the same party.
(d) Successor to the REIT. The REIT will require any successor or assign
(whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all the business and/or assets of
the REIT, as the case may be, by agreement in form and substance
reasonably satisfactory to the Employee, expressly, absolutely and
unconditionally to assume and agree to perform this Agreement in the
same manner and to the same extent that the REIT would be required to
perform it if no such succession or assignment had taken place. Any
failure of the REIT to obtain such agreement prior to the
effectiveness of any such succession or assignment shall be a material
breach of this Agreement. This Agreement shall inure to the benefit of
and be enforceable by the Employee's personal and legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Employee should die while
any amounts are still payable to the Employee hereunder, all such
amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to the Employee's devisee, legatee or
other designee or, if there be no such designee, to the Employee's
estate.
(e) Arbitration. The parties agree that any and all disputes (contract,
tort or statutory, whether under federal, state or local law) between
the Employee and the REIT (including other REIT employees, officers,
directors and representatives) arising out of the Employee's
employment with the REIT, the termination of that employment or this
Agreement, shall be submitted to final and binding arbitration. The
arbitration shall take place in the County of Montgomery, State of
Maryland and may be compelled and enforced according to the Maryland
Arbitration Act. Unless the parties mutually agree otherwise, the
arbitration shall be conducted before the American Arbitration
Association, according to its Commercial Arbitration Rules. Judgment
on the award the arbitrator renders may be entered in any court having
jurisdiction over the parties. Arbitration shall be initiated in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association.
(f) Amendments; Waivers. This Agreement may not be modified, amended, or
terminated except by an instrument in writing, approved by the Board
and signed by the Employee and the REIT. By an instrument in writing
similarly executed, the Employee or the REIT may waive compliance by
the other party or parties with any provision of this Agreement that
such other party was or is obligated to comply with or perform;
provided, however, that such waiver shall not operate as a waiver of,
or estoppel with respect to, any other or subsequent failure. No
failure to exercise and no delay in exercising any right, remedy or
power hereunder shall preclude any other, or further, exercise of any
right, remedy or power provided herein or by law or equity.
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(g) Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Maryland as
applied to agreements made and performed in Maryland by residents of
Maryland.
(h) Effectiveness. This Agreement shall become effective on March 13,
1998.
(i) Attorneys' Fees. In the event of any arbitration or legal action or
proceeding to enforce or interpret the provisions hereof, the
prevailing party shall be entitled to reasonable attorneys' fees,
whether or not the proceeding results in a final judgment.
(j) Counterparts. This Agreement may be executed in several counterparts,
each of which shall be an original, but all of which together shall
constitute one and the same agreement.
(k) Effect of Headings. The section headings herein are for convenience
only and shall not affect the construction or interpretation of this
Agreement.
(l) Severability. The provisions of this Agreement are severable. If any
provision of this Agreement shall be held to be invalid or otherwise
unenforceable in whole or in part, the remainder of the provisions or
enforceable parts hereof shall not be affected thereby and shall be
enforced to the fullest extent permitted by law.
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amended and Restated Executive Employment Agreement as of the date
first written above.
ATTEST: FIRST WASHINGTON REALTY TRUST, INC.,
a Maryland corporation
________________________________ By:_________________________________
Jeffrey S. Distenfeld, Secretary William J. Wolfe
President
EMPLOYEE:
_______________________________________
Stuart D. Halpert
5110 Cape Cod Court
Bethesda, Maryland 20816
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ANNEX A
SENIOR EXECUTIVE INCENTIVE BONUS PROGRAM
APPENDIX TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT
1.PURPOSE
The senior executive incentive bonus program (the "Incentive
Plan") is designed to provide meaningful quantitative performance
standards and to ensure that the bonuses paid hereunder are deductible
without limit under Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code"), and the regulations and interpretations
promulgated thereunder.
2. THE COMMITTEE
The "Committee" shall be the Compensation Committee of the Board
or another committee appointed by and serving at the pleasure of the
Board, and shall consist of at least two members of the Board who
shall each qualify as both "outside directors" under Section 162(m) of
the Code and as "non-employee directors" as defined under Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended. The
Committee shall have the sole discretion and authority to administer
and interpret the Incentive Plan.
3. BONUS DETERMINATIONS
The Executive may receive a bonus payment under the Incentive
Plan based upon the attainment of performance objectives which are
established by the Committee and relate to one or more of the
following company performance goals (the "Performance Goals"): funds
from operations, total return (measured as the sum of the annual
dividend plus increases in the market price of the Common Stock);
portfolio growth (measured as increases in the aggregate value of the
real property in the Company's portfolio, based upon the original cost
of such property); stock price; operating income; cost reductions and
savings; and earnings before any one or more of the following:
interest, taxes, depreciation or amortization.
Any bonus payable to the Executive under the Incentive Plan shall
be based upon objectively determinable bonus formulas that tie such
bonuses to one or more objective performance criteria relating to the
Performance Goals. Bonus formulas for each fiscal year commencing on
or after January 1, 1999 through December 31, 2002 shall be
established by the Committee no later than the latest time permitted
by Section 162(m) of the Code (generally, for performance periods of
one year or more, no later than 90 days after the commencement of the
performance period). No bonuses shall be paid to the Executive unless
and until the Committee makes a certification in writing with respect
to the attainment of the performance objectives as required by Section
162(m) of the Code. Although the Committee may in its sole discretion
reduce a bonus payable to the Executive pursuant to the applicable
bonus formula, the Committee
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shall have no discretion to increase the amount of the Executive's bonus as
determined under the applicable bonus formula.
The target annual incentive bonus payable to the Executive under
the Incentive Plan with respect to any fiscal year of the Company
shall be 50% of his base salary as in effect at the start of the
applicable year, and shall not exceed 100% of such base salary.
The payment of a bonus to the Executive with respect to a
performance period shall be conditioned upon the Executive's
employment by the Company on the last day of the performance period;
provided, however, that the Committee may make exceptions to this
requirement, in its sole discretion, in the case of the Executive's
retirement, death or disability.
4. AMENDMENT AND TERMINATION
The Incentive Plan may be amended or terminated only by written
agreement executed by the Executive and the Company. Any amendments to
the Incentive Plan shall require stockholder approval only to the
extent required by Section 162(m) of the Code.
5. STOCKHOLDER APPROVAL
No bonuses shall be paid under the Incentive Plan unless and
until the Company's stockholders shall have approved the Incentive
Plan and the Performance Goals as required by Section 162(m) of the
Code. So long as the Incentive Plan shall not have been previously
terminated by the Board, it shall be resubmitted for approval by the
Company's stockholders, to the extent required by Section 162(m) of
the Code, if it is amended in any way which materially modifies the
Performance Goals or increases the maximum bonus payable under the
Incentive Plan.
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ANNEX A-1
Bonus Payments under Section 3(b)(i)
For calendar year 1998, the Employee shall be eligible for a bonus payment
pursuant to Section 3(b)(i) (the "Bonus") in accordance with the following:
(1) Amount. The amount of the Bonus shall range from 0 to 100% of the
Employee's annual salary, determined pursuant to Section 3(a), for the
most recent fiscal year. If during 1998 the REIT achieves targeted
performance and the employee performs at an acceptable level, then the
targeted Bonus for any such year shall be fifty percent (50%).
(2) Criteria.
(a) The Board's determination regarding Bonus based on the REIT's
performance from January 1, 1998 through December 31, 1998 shall be
based upon the performance criteria set forth below:
Measure Target Weight
FFO Growth 6% 15%
Total Return 15% 15%
Portfolio Growth 10% 20%
Board Discretion N/A 50%
(b) FFO Growth shall be calculated as the annual growth rate in funds from
operations per share (calculated on a fully diluted basis).
(c) Total Return shall be calculated as the sum of (x) the annual dividend
and (y) the increase in the appreciation in the REIT's stock, measured
as the annual change in the market price of the REIT's common stock.
(d) Portfolio Growth shall be calculated as the increase in the aggregate
value of real property in the REIT's portfolio, based upon the
original cost of such properties.
(3) Timing.
(a) As described in paragraph 2 above, the Bonus shall be based upon the
REIT's performance during 1998. The Board shall determine the
Employee's Bonus, if any, during the first quarter of the following
fiscal year, and such Bonus, if any, shall be paid to the Employee, no
later than March 31st of the following fiscal year.
(b) Except as provided in 3(iii) below, the Employee must be actively
employed as the end of the REIT's fiscal year to be eligible to
receive a Bonus for such year.
(c) Notwithstanding Section 3(b), the Employee shall be eligible for a
prorated Bonus if the Employee is not actively employed by the REIT
due to one of the following reasons:
(i) if the Employee terminates employment for Good Reason or following a
Change of Control pursuant to Section 2(d) of the Agreement.
(ii) if the Employee's employment is terminated due to death or Disability
pursuant to Section 2(e) of the Agreement.
<PAGE>
ANNEX B
LIST OF PROPERTIES AND ENTITIES EMPLOYEE MAY CONTINUE TO OWN AND
PARTICIPATE IN THE OPERATION AND MANAGEMENT OF:
1.727 15th Street
2.Properties currently owned by Mid-Atlantic Centers Limited Partnership
a. Tarrytown Mall
b. Quality Center
<PAGE>
ANNEX C
INCENTIVE STOCK OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION AGREEMENT, dated as of May 1, 1998, is made by
and between First Washington Realty Trust, Inc., a Maryland corporation
(the "Company"), and Stuart D. Halpert (the "Optionee"), an employee of the
Company:
WHEREAS, the Company has adopted The Amended and Restated 1994 Stock Option
Plan for Officers, Directors and Employees of First Washington Realty
Trust, Inc., First Washington Realty Limited Partnership and First
Washington Management, Inc., as amended from time to time (the "Plan"), for
the benefit of its eligible employees and directors; and
WHEREAS, the Company wishes to afford the Optionee the opportunity to
purchase shares of its Common Stock; and
WHEREAS, the Company wishes to carry out the Plan (the terms of which are
hereby incorporated by reference and made a part of this Agreement); and
WHEREAS, the Committee appointed to administer the Plan has determined that
it would be to the advantage and best interest of the Company and its
stockholders to grant the Incentive Stock Option provided for herein to the
Optionee to enable the Company to obtain and retain the services of the
Optionee considered essential to the long-range success of the Company and
to provide an additional incentive for the Optionee to further the growth,
development and financial success of the Company by rewarding the Optionee
for such growth, development and financial success through the ownership of
Company stock;
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
The masculine pronoun shall include the feminine and neuter, and the
singular the plural, unless the context clearly indicates otherwise.
Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to them in the Plan. Whenever the following terms are
used in this Agreement, they shall have the meaning specified below unless
the context clearly indicates to the contrary.
Section 1.1 - Employment Agreement
"Employment Agreement" shall mean that certain Second Amended and Restated
Employment Agreement between the Optionee and the Company dated as of May
1, 1998.
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Section 1.2 - Officer
"Officer" shall mean an officer of the Company, as defined in Rule 16a-1(f)
under the Exchange Act, as such Rule may be amended in the future.
Section 1.3 - Option
"Option" shall mean the incentive stock option to purchase Common Stock of
the Company granted under this Agreement, which option is intended to
qualify as an "incentive stock option" under Section 422 of the Code.
Section 1.4 - Secretary
"Secretary" shall mean the Secretary of the Company.
Section 1.5 - Termination of Employment
"Termination of Employment" shall mean the time when the employee-employer
relationship between the Optionee and the Company or a Company Subsidiary
is terminated for any reason, with or without cause, including, but not by
way of limitation, a termination by resignation, discharge, death,
permanent and total disability or retirement, but excluding (i) any
termination where there is a simultaneous reemployment or continuing
employment by the Company or a Company Subsidiary and (ii) at the sole and
absolute discretion of the Committee, a termination that results in a
temporary severance of the employee-employer relationship that does not
exceed one (1) year. The Committee, in its sole and absolute discretion,
shall determine the effect of all other matters and questions relating to
Termination of Employment, including, but not by way of limitation, all
questions of whether a particular leave of absence constitutes a
Termination of Employment; provided, however, that a leave of absence shall
constitute a Termination of Employment if, and to the extent that, such
leave of absence interrupts employment for purposes of Section 422(a)(2) of
the Code and the then applicable regulations and rulings under said
Section. Notwithstanding any other provision of the Plan, the right of the
Company or any Company Subsidiary to terminate the Optionee's employment is
subject to the terms of the Employment Agreement.
ARTICLE II
GRANT OF OPTION
Section 2.1 - Grant of Option
In partial consideration of the Optionee's past services to the Company
and/or the Optionees' agreement to remain in the employ of the Company or a
Company Subsidiary pursuant to the Employment Agreement and for other good
and valuable consideration, provided that the Optionee is employed by the
REIT as of January 1, 2000, then the Company shall irrevocably grant to the
Optionee, and hereby does grant to the Optionee, effective as of January 1,
2000, the option to purchase any part or all of an aggregate of two-hundred
fifty thousand (250,000) shares of its Common Stock upon the terms and
conditions set forth in this Agreement.
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Section 2.2 - Purchase Price
The purchase price of the shares of stock covered by the Option shall be a
price per share equal to the Fair Market Value (as defined in the Plan) of
a share of Common Stock on January 1, 2000, without commission or other
charge.
Section 2.3 - Consideration to Company
In consideration of the granting of this Option by the Company, the
Optionee agrees to render faithful and efficient services to the Company or
a Company Subsidiary, with such duties and responsibilities as the Company
or such Company Subsidiary shall from time to time prescribe, pursuant to
the Employment Agreement. Nothing in this Agreement or in the Plan shall
confer upon the Optionee any right to continue in the employ of the Company
or any Company Subsidiary.
Section 2.4 - Adjustments in Option
In the event that the outstanding shares of the stock subject to the Option
are changed into or exchanged for a different number or kind of shares of
the Company or other securities of the Company by reason of merger,
consolidation, recapitalization, reclassification, stock split up, stock
dividend or combination of shares, the Committee shall make an appropriate
and equitable adjustment in the number and kind of shares as to which the
Option, or portions thereof then unexercised, shall be exercisable, to the
end that after such event the Optionee's proportionate interest shall be
maintained as before the occurrence of such event. Such adjustment in the
Option shall be made without change in the total price applicable to the
unexercised portion of the Option (except for any change in the aggregate
price resulting from rounding-off of share quantities or prices) and with
any necessary corresponding adjustment in the Option price per share;
provided, however, that each such adjustment shall be made in such manner
as not to constitute a "modification" within the meaning of Section
424(h)(3) of the Code. Any such adjustment made by the Committee shall be
final and binding upon the Optionee, the Company and all other interested
persons.
ARTICLE III
PERIOD OF EXERCISABILITY
Section 3.1 - Commencement of Exercisability
(a) Subject to Sections 3.4 and 5.6, the Option shall become exercisable
in three (3) cumulative installments as follows:
(1) The first installment shall consist of thirty-three and one-third
percent (33-1/3%) of the shares covered by the Option (rounded down to
the nearest one (1) share) and shall become exercisable on the first
anniversary of the date that the Option is granted.
(2) The second installment shall consist of thirty- three and one-third
percent (33-1/3%) of the shares covered by the Option (rounded down to
the nearest one (1) share) and shall become exercisable on the second
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anniversary of the date that the Option is granted.
(3) The third installment shall consist of the balance of the shares
covered by the Option and shall become exercisable on the third
anniversary of the date that the Option is granted.
(b) Except to the extent expressly provided otherwise elsewhere in
writing, no portion of the Option that is unexercisable at Termination
of Employment shall thereafter become exercisable.
Section 3.2 - Duration of Exercisability
The installments provided for in Section 3.1 are cumulative. Each such
installment that becomes exercisable pursuant to Section 3.1 shall remain
exercisable until it becomes unexercisable under Section 3.3.
Section 3.3 - Expiration of Option
The Option may not be exercised to any extent by anyone after the first to
occur of the following events:
(a) The expiration of ten (10) years from the date that the Option was
granted; or
(b) If the Optionee owned (within the meaning of Section 424(d) of the
Code), at the time the Option was granted, more than ten percent (10%)
of the total combined voting power of all classes of stock of the
Company or any Company Subsidiary, the expiration of five (5) years
from the date that the Option was granted.
Section 3.4 - Duration of Exercisability
This Option shall be exercisable as to all of the shares covered hereby,
notwithstanding that this Option may not yet have become fully exercisable
under Section 3.1 (a) in the event the employee-employer relationship
between the Optionee and the Company is terminated (i) by the Company
pursuant to Section 2(c)(i) of the Employment Agreement; (ii) by the
Optionee pursuant to Section 2(d) of the Employment Agreement; (iii) by the
Optionee pursuant to Section 2(e) of the Employment Agreement; (iv) by the
Optionee pursuant to Section 2(f) of the Employment Agreement (other than
in connection with Optionee's removal as a director for cause under the
corporation law of the State of Maryland); or (v) due to the fact that the
Employment Agreement expires and its not renewed pursuant to Section 2(b)
of the Employment Agreement; provided, however, that this acceleration of
exercisability shall not take place if:
(a) This Option becomes unexercisable under Section 3.3 prior to said
effective date; or
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(b) In connection with such an event, provision is made for an assumption of
this Option or a substitution therefor of a new option by an employer
corporation, or a parent or subsidiary of such corporation, so that such
assumption or substitution complies with the provisions of Section 424(a)
of the Code; and provided, further, that nothing in this Section 3.4 shall
make this Option exercisable if it is otherwise unexercisable by reason of
Section 5.6.
The Committee may make such determinations and adopt such rules and
conditions as it, in its absolute discretion, deems appropriate in
connection with such acceleration of exercisability, including, but not by
way of limitation, provisions to ensure that any such acceleration and
resulting exercise shall be conditioned upon the consummation of the
contemplated corporate transaction, and terminations regarding whether
provisions for assumption or substitution have been made as defined in
subsection (b) above.
Section 3.5 - Termination of Employment Prior to January 1, 2000
Notwithstanding anything to the contrary contained herein, if the
Optionee's employment with the Company is terminated in an Early
Termination (as defined in the Employment Agreement) prior to January 1,
2000, then the Company shall irrevocably grant to the Optionee, and hereby
does grant to the Optionee, effective as of January 1, 2000, the Option to
purchase any part or all of the 250,000 shares of Common Stock, and this
Option shall become fully exercisable as of the date of grant and shall
expire on December 31, 2002.
Section 3.6 - Special Tax Consequences
(a) The Optionee acknowledges that, to the extent that the aggregate fair
market value of stock with respect to which "incentive stock options"
(within the meaning of Section 422 of the Code, but without regard to
Section 422(d) of the Code), including the Option, are exercisable for
the first time by the Optionee during any calendar year (under the
Plan and all other incentive stock option plans of the Company and any
Company Subsidiary) exceeds $100,000, such options shall be treated as
not qualifying under Section 422 of the Code but rather shall be
treated as non-qualified options to the extent required by Section 422
of the Code. The Optionee further acknowledges that the rule set forth
in the preceding sentence shall be applied by taking options into
account in the order in which they were granted. For purposes of these
rules, the fair market value of stock shall be determined as of the
time the option with respect to such stock is granted.
(b) The Optionee acknowledges that if any portion of the Option is not
exercised within the applicable time period specified in Section 422
of the Code following a Termination of Employment, then such portion
shall be treated as not qualifying under Section 422 of the Code but
rather shall be treated as non-qualified options to the extent
required under Section 422 of the Code.
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ARTICLE IV
EXERCISE OF OPTION
Section 4.1 - Person Eligible to Exercise
During the lifetime of the Optionee, only he or his guardian or legal
representative may exercise the Option or any portion thereof. After the
death of the Optionee, any exercisable portion of the Option may, prior to
the time when the Option becomes unexercisable under Section 3.3, be
exercised by his Beneficiary.
Section 4.2 - Partial Exercise
Any exercisable installment of the Option or the entire Option, if then
wholly exercisable, may be exercised in whole or in part at any time prior
to the time when the Option or portion thereof becomes unexercisable under
Section 3.3; provided, however, that each partial exercise shall be for not
less than 1,000 shares (or the minimum installment set forth in Section
3.1, if a smaller number of shares) and shall be for whole shares only.
Section 4.3 - Manner of Exercise
The Option, or any exercisable portion thereof, may be exercised only on
the first business day of a calendar month and solely by delivery to the
Secretary or his office of all of the following prior to the time when the
Option or such portion becomes unexercisable under Section 3.3:
(a) Notice in writing signed by the Optionee or the other person then
entitled to exercise the Option or portion, stating that the Option or
portion is thereby exercised, such notice complying with all
applicable rules established by the Committee; and
(b) Full payment for the shares with respect to which such Option or
portion thereof is exercised, by:
(1) Cash or check; or
(2) With the consent of the Committee, (A) shares of the Company's Common
Stock owned by the Optionee duly endorsed for transfer to the Company
or (B) shares of the Company's Common Stock issuable to the Optionee
upon exercise of the Option, with a fair market value (as determined
under Section 1.15 of the Plan) on the date of Option exercise equal
to the aggregate purchase price of the shares with respect to which
such Option or portion is exercised; or
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(3) With the consent of the Committee, any combination of the
consideration provided in the foregoing subparagraphs (1) and (2) or
through delivery of property of any kind which constitutes good and
valuable consideration, consistent with the provisions of the Plan;
and
(c) A bona fide written representation and agreement, in a form
satisfactory to the Committee, signed by the Optionee or other person
then entitled to exercise such Option or portion, stating that:
(1) the shares of stock are being acquired for his own account, for
investment and without any present intention of distributing or
reselling said shares or any of them except as may be permitted under
the Securities Act and then applicable rules and regulations
thereunder; and
(2) that the Optionee or other person then entitled to exercise such
Option or portion will indemnify the Company against and hold it free
and harmless from any loss, damage, expense or liability resulting to
the Company if any sale or distribution of the shares by such person
is contrary to the representation and agreement referred to above. The
Committee may, in its absolute discretion, take whatever additional
actions it deems appropriate to insure the observance and performance
of such representation and agreement and to effect compliance with the
Securities Act and any other federal or state securities laws or
regulations. Without limiting the generality of the foregoing, the
Committee may require an opinion of counsel acceptable to it to the
effect that any subsequent transfer of shares acquired on an Option
exercise does not violate the Securities Act, and may issue
stop-transfer orders covering such shares. Share certificates
evidencing stock issued on exercise of this Option shall bear an
appropriate legend referring to the provisions of this subsection (c)
and the agreements herein. The written representation and agreement
referred to in the first sentence of this subsection (c) shall,
however, not be required if the shares to be issued pursuant to such
exercise have been registered under the Securities Act, and such
registration is then effective in respect of such shares; and
(d) In the event the Option or portion shall be exercised pursuant to
Section 4.1 by any person or persons other than the Optionee,
appropriate proof of the right of such person or persons to exercise
the Option.
Section 4.4 - Conditions to Issuance of Stock Certificates
The shares of stock deliverable upon the exercise of the Option, or any
portion thereof, may be either previously authorized but unissued shares or
issued shares that have then been reacquired by the Company. Such shares
shall be fully paid and nonassessable. The Company shall not be required
to issue or deliver any certificate or certificates for shares of stock
purchased upon the exercise of the Option or portion thereof prior to
fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on
which such class of stock is then listed; and
(b) The completion of any registration or other qualification of such
shares under any state or federal law or under rulings or regulations
of the Securities and Exchange Commission or of any other governmental
regulatory body, that the Committee shall, in its sole and absolute
discretion, deem necessary or advisable; and
(c) The obtaining of any approval or other clearance from any state or
federal governmental agency that the Committee shall, in its sole and
absolute discretion, determine to be necessary or advisable; and
(d) The payment to the Company (or other employer corporation) of all
amounts that, under federal, state or local tax law, it is required to
withhold upon exercise of the Option; and
(e) The lapse of such reasonable period of time following the exercise of
the Option as the Committee may from time to time establish for
reasons of administrative convenience.
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Section 4.5 - Rights as Stockholder
The holder of the Option shall not be, nor have any of the rights or
privileges of, a stockholder of the Company in respect of any shares
purchasable upon the exercise of any part of the Option unless and until
certificates representing such shares shall have been issued by the Company
to such holder.
Section 4.6 - Ownership and Transfer Restrictions
Shares acquired through the exercise of an Option shall be subject to the
restrictions on ownership and transfer set forth in the Company's Amended
and Restated Charter, as in effect from time to time.
Section 4.7 - Restrictions on Exercise of Option
An Option is not exercisable if the exercise of such Option would likely
result in any of the following:
(a) the Optionee's ownership of Capital Stock being in violation of the
Stock Ownership Limit set forth in the Company's Amended and Restated
Charter, as in effect from time to time.
(b) income to the Company that could impair the Company's status as a real
estate investment trust, within the meaning of Section 856 through 860
of the Code; or
(c) a transfer, at any one time, of more than one- tenth of one percent
(0.1%) (measured in value or in number of shares, whichever is more
restrictive) of the Company's total Capital Stock from the Company to
First Washington Management, Inc. or to the Partnership pursuant to
Section 5.5(a) or 5.6(a)(i) of the Plan, respectively.
Notwithstanding any other provision of this Agreement, the Optionee shall
have no rights under this Agreement or the Plan to acquire Common Stock
that would otherwise be prohibited under the Company's Amended and Restated
Charter, as in effect from time to time.
ARTICLE V
OTHER PROVISIONS
Section 5.1 - Administration
The Committee shall have the power to interpret the Plan and this Agreement and
to adopt such rules for the administration, interpretation and application of
the Plan as are consistent therewith and to interpret or revoke any such rules.
All actions taken and all interpretations and determinations made by the
Committee in good faith shall be final and binding upon the Optionee, the
Company
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and all other interested persons. No member of the Committee shall be
personally liable for any action, determination or interpretation made in good
faith with respect to the Plan or the Option.
Section 5.2 - Option Not Transferable
Neither the Option nor any interest or right therein or part thereof shall be
liable for the debts, contracts or engagements of the Optionee or his successors
in interest or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means whether such
disposition be voluntary or involuntary or by operation of law by judgment,
levy, attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy), and any attempted disposition thereof shall be null and
void and of no effect; provided, however, that, subject to the Stock Ownership
Limit, this Section 5.2 shall not prevent transfers by will or by the applicable
laws of descent and distribution.
Section 5.3 - Shares to Be Reserved
The Company shall at all times during the term of the Option reserve and keep
available such number of shares of stock as will be sufficient to satisfy the
requirements of this Agreement.
Section 5.4 - Notices
Any notice to be given by the Optionee under the terms of this Agreement to the
Company shall be addressed to the Company in care of its Secretary, and any
notice to be given to the Optionee shall be addressed to him at the address
given beneath his signature hereto. By a notice given pursuant to this Section
5.4, either party may hereafter designate a different address for notices to be
given to him. Any notice that is required to be given to the Optionee shall, if
the Optionee is then deceased, be given to the Optionee's personal
representative if such representative has previously informed the Company of his
status and address by written notice under this Section 5.4. Any notice shall
be deemed duly given when enclosed in a properly sealed envelope or wrapper
addressed as aforesaid, deposited (with postage prepaid) in a post office or
branch post office regularly maintained by the United States Postal Service.
Section 5.5 - Titles
Titles are provided herein for convenience only and are not to serve as a basis
for interpretation or construction of this Agreement.
Section 5.6 - Stockholder Approval
The Plan will be submitted for approval by the Company's stockholders within
twelve (12) months after the date that the Plan was initially adopted by the
Board. This Option may not be exercised to any extent by anyone prior to the
time when the Plan is approved by the stockholders, and if such approval has not
been obtained by the end of said twelve-month period, this Option shall
thereupon be canceled and become null and void. The Company shall take such
actions as may be necessary to satisfy the requirements of Rule 16b-3(b).
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Section 5.7 - Notification of Disposition
The Optionee shall give prompt notice to the Company of any disposition or other
transfer of any shares of stock acquired under this Agreement if such
disposition or transfer is made (a) within two (2) years from the date of
granting the Option with respect to such shares or (b) within one (1) year after
the transfer of such shares to him. Such notice shall specify the date of such
disposition or other transfer and the amount realized, in cash, other property,
assumption of indebtedness or other consideration, by the Optionee in such
disposition or other transfer.
Section 5.8 - Governing Law
This Agreement shall be administered, interpreted and enforced under the
internal laws of the State of Maryland without regard to conflicts of laws
thereof.
Section 5.9 - Conformity to Securities Laws
The Optionee acknowledges that the Plan is intended to conform to the extent
necessary with all provisions of the Securities Act and the Exchange Act and any
and all regulations and rules promulgated by the Securities and Exchange
Commission thereunder, including without limitation Rule 16b-3. Notwithstanding
anything herein to the contrary, the Plan shall be administered, and the Option
is granted and may be exercised, only in such a manner as to conform to such
laws, rules and regulations. To the extent permitted by applicable law, the Plan
and this Agreement shall be deemed amended to the extent necessary to conform to
such laws, rules and regulations.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto.
FIRST WASHINGTON REALTY TRUST, INC.
a Maryland corporation
By:________________________________
Title:Secretary
____________________________________
Optionee
____________________________________
____________________________________
Address
Optionee's Taxpayer Identification Number:
____________________________________
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ANNEX D
RESTRICTED STOCK AGREEMENT
THIS RESTRICTED STOCK AGREEMENT, dated as of May 1, 1998, is made by and between
First Washington Realty Trust, Inc., a Maryland corporation (the "Company"), and
Stuart D. Halpert, an officer of the Company (the "Employee"):
WHEREAS, the Company has established the First Washington Trust, Inc. Restricted
Stock Plan, as amended from time to time, (the "Plan"); and
WHEREAS, the Company wishes to carry out the Plan (the terms of which are hereby
incorporated by reference and made a part of this Agreement); and
WHEREAS, the Plan provides for the issuance of shares of the Company's Common
Stock (as defined herein) subject to certain restrictions thereon (hereinafter
referred to as the "Restricted Stock"); and
WHEREAS, the Compensation Committee of the Company's Board of Directors (the
"Committee"), has determined that it would be to the advantage and in the best
interest of the Company and its stockholders to issue certain shares of the
Company's Common Stock, par value $0.01 per share (the "Common Stock") to the
Employee in partial consideration of past services to the Company and/or as an
incentive to remain as an employee of the Company, subject to the restrictions
set forth herein, and has advised the Company thereof.
NOW, THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable consideration, receipt of which is hereby acknowledged,
the parties hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 -"Employment Agreement" shall mean that certain Second Amended and
Restated Executive Employment Agreement between Employee and the Company dated
as of May 1, 1998.
Section 1.2 - "Fair Market Value" of a share of the Company's stock as of a
given date shall be: (i) the closing price of the Common Stock on the New York
Stock Exchange on such date, or, if shares were not traded on such date, then on
the next preceding trading day during which a sale occurred; or (ii) if such
stock is not traded on an exchange but is quoted on Nasdaq or a
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successor quotation system, (1) the last sales price (if the stock is then
listed as a National Market Issue under the NASD National Market System) or (2)
the mean between the closing representative bid and asked prices (in all other
cases) for the stock on the day previous to such date as reported by Nasdaq or
such successor quotation system; or (iii) if such stock is not publicly traded
on an exchange and not quoted on Nasdaq or a successor quotation system, the
mean between the closing bid and asked prices for the stock, on the day previous
to such date, as determined in good faith by the Committee; or (iv) if the
Company's stock is not publicly traded, the fair market value established by the
Committee acting in good faith. In determining the Fair Market Value of the
Company's Common Stock under Paragraph (i) of this Section 1.2, the Committee
may rely on the closing price as reported in the New York Stock Exchange
composite transactions published in the Wall Street Journal.
Section 1.3 - "Restricted Stock" shall mean Common Stock of the Company issued
under this Agreement and subject to the Restrictions imposed hereunder.
Section 1.4 - "Restrictions" shall mean the reacquisition and transferability
restrictions imposed upon Restricted Stock under this Agreement.
Section 1.5 - "Rule 16b-3" shall mean that certain Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as such Rule
may be amended in the future.
ARTICLE II
ISSUANCE OF RESTRICTED STOCK
Section 2.1 - Issuance of Restricted Stock. In partial consideration of
Employee's past services to the Company and/or Employee's agreement to remain in
the employ of the Company pursuant to the Employment Agreement and for other
good and valuable consideration which the Committee has determined to be equal
to the par value of its Common Stock provided that the Employee is employed by
the REIT as of January 1, 2000, then the Company shall issue to the Employee,
and hereby does issue to the Employee, effective as of January 1, 2000, one
hundred fifty thousand (150,000) shares of its Common Stock upon the terms and
conditions set forth in this Agreement.
ARTICLE III
RESTRICTIONS
Section 3.1 - Reacquisition of Restricted Stock; Acceleration; Vesting. (a)
Reacquisition. All shares of Restricted Stock issued to the Employee pursuant to
Section 2.1 are initially subject to reacquisition by the Company immediately if
the employee-employer relationship between the Employee and the Company is
terminated: (i) by the Company pursuant to Section 2(c)(ii) of the Employment
Agreement or (ii) by Employee other than (A) pursuant to Section 2(d) of the
Employment Agreement, (B) pursuant to Section 2(e) of the Employment Agreement
or (C) pursuant to Section 2(f) of the Employment Agreement (other than in
connection with Employee's removal as a director for cause under the corporation
laws of the State of Maryland), or (D) due to the fact that the Employment
Agreement expired and was not renewed pursuant to Section 2(b) of the Employment
Agreement. Following such a reacquisition by the Company, the
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Company shall promptly pay to the Employee an amount equal to the product of
$.01 times the number of shares of Restricted Stock reacquired. The restriction
that such shares of Restricted Stock be subject to reacquisition by the Company
shall not apply to any "Vested Shares" held by the Employee.
(b) Acceleration. All shares of Restricted Stock shall immediately fully vest
and all Restrictions with respect to such shares of Restricted Stock shall
immediately expire if the employee-employer relationship between the
Employee and the Company is terminated (i) by the Company pursuant to
Section 2(c)(i) of the Employment Agreement; (ii) by the Employee pursuant
to Section 2(d) of the Employment Agreement; (iii) by the Employee pursuant
to Section 2(e) of the Employment Agreement; or (iv) by the Employee
pursuant to Section 2(f) of the Employment Agreement (other than in
connection with Employee's removal as a director for cause under the
corporation law of the State of Maryland); or (v) due to the fact that the
Employment Agreement expires and is not renewed pursuant to Section 2(b) of
the Employment Agreement.
(c) Vesting. The shares of Restricted Stock shall vest, and all Restrictions
with respect to such shares shall expire, in accordance with the schedule
set forth below. "Vested Shares" shall mean that number of shares of
Restricted Stock which have vested and are no longer subject to
Restrictions.
Number of Aggregate Number of
Vesting Date Vested Shares Vested Shares
January 1, 2001 25,000 25,000
January 1, 2002 50,000 75,000
January 1, 2003 75,000 150,000
Section 3.2 - Legend. (a) Certificates representing shares of Restricted Stock
issued pursuant to this Agreement shall, until all restrictions lapse and new
certificates are issued pursuant to Section 3.3, bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN VESTING
REQUIREMENTS AND MAY BE SUBJECT TO REACQUISITION BY THE COMPANY UNDER THE TERMS
OF THAT CERTAIN RESTRICTED STOCK AGREEMENT BY AND BETWEEN FIRST WASHINGTON
REALTY TRUST, INC. (THE "COMPANY") AND THE HOLDER OF THE SECURITIES. PRIOR TO
VESTING OF OWNERSHIP IN THE SECURITIES, THEY MAY NOT BE, DIRECTLY OR INDIRECTLY,
OFFERED, TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNDER ANY CIRCUMSTANCES. COPIES OF THE ABOVE REFERENCED AGREEMENT
ARE ON FILE AT THE OFFICES OF THE COMPANY AT 4350 EAST-WEST HIGHWAY, SUITE 400,
BETHESDA, MARYLAND 20814."
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(b) Unless such shares shall have been registered pursuant to an effective
registration statement under the Securities Act of 1933, as amended,
certificates representing shares of Restricted Stock issued pursuant to
this Agreement shall also bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). NO SALE,
HYPOTHECATION, TRANSFER OR OTHER DISPOSITION OF THESE SECURITIES MAY BE MADE
UNLESS EITHER (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR (B) PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT."
Section 3.3 - Lapse of Restrictions. Upon the vesting of the shares of
Restricted Stock as provided in Section 3.1 and subject to Section 4.3, the
Company shall cause new certificates to be issued with respect to such Vested
Shares and delivered to the Employee or his legal representative, free from the
legend provided for in Section 3.2(a) and any of the other Restrictions. Such
Vested Shares shall cease to be considered Restricted Stock subject to the terms
and conditions of this Agreement.
Section 3.4 - Termination of Employment prior to January 1, 2000.
Notwithstanding anything to the contrary contained herein, if the Employee's
employment with the Company is terminated in an Early Termination (as defined in
the Employment Agreement) prior to January 1, 2000, then the Company shall issue
to the Employee, and hereby does issue to the Employee, effective as of the date
immediately prior to such Early Termination, the 150,000 shares of Restricted
Stock, and all of such shares of Restricted Stock shall be fully vested on the
date of such issuance.
ARTICLE IV
MISCELLANEOUS
Section 4.1 - Administration. The Committee shall have the power to interpret
the Plan, this Agreement and all other documents relating to Restricted Stock
and to adopt such rules for the administration, interpretation and application
of this Agreement as are consistent herewith and to interpret, amend or revoke
any such rules. All actions taken and all interpretations and determinations
made by the Committee in good faith shall be final and binding upon the
Employee, the Company and all other interested persons. No member of the
Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or the Restricted
Stock and all members of the Committee shall be fully protected by the Company
in respect to any such action, determination or interpretation. The Board shall
have no right to exercise any of the rights or duties of the Committee under the
Plan and this Agreement.
Section 4.2 - Restricted Stock Not Transferable. No Restricted Stock or any
interest or right therein or part thereof shall be liable for the debts,
contracts or engagements of the Employee or
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his successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy) unless and until any such share of Restricted
Stock is a Vested Share, and any attempted disposition thereof prior to such
vesting, shall be null and void and of no effect; provided, however, that this
Section 4.2 shall not prevent transfers by will or by applicable laws of descent
and distribution.
Section 4.3 - Conditions to Issuance of Stock Certificates. The Company shall
not be required to issue or deliver any certificate or certificates for shares
of stock pursuant to this Agreement prior to fulfillment of all of the following
conditions:
(a) The admission of such shares to listing on all stock exchanges on which
such class of stock is then listed; and
(b) The completion of any registration or other qualification of such shares
under any state or Federal law or under rulings or regulations of the
Securities and Exchange Commission or of any other governmental regulatory
body, which the Committee shall, in its absolute discretion, deem necessary
or advisable; and
(c) The obtaining of any approval or other clearance from any state or Federal
governmental agency which the Committee shall, in its absolute discretion,
determine to be necessary or advisable; and
(d) The payment by the Employee of all amounts required to be withheld, under
federal, state and local tax laws, with respect to the issuance of
Restricted Stock and/or the lapse or removal of any of the Restrictions;
and
(e) The lapse of such reasonable period of time as the Committee may from time
to time establish for reasons of administrative convenience.
Section 4.4 - Escrow. The Secretary of the Company or such other escrow holder
as the Committee may appoint shall retain physical custody of the certificates
representing Restricted Stock until all of the Restrictions expire or shall have
been removed; provided, however, that in no event shall the Employee retain
physical custody of any certificates representing Restricted Stock issued to
him.
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Section 4.5 - Notices. Any notice to be given under the terms of this Agreement
to the Company shall be addressed to the Company in care of its Secretary, and
any notice to be given to the Employee shall be addressed to him at the address
given beneath his signature hereto. By a notice given pursuant to this Section
4.5, either party may hereafter designate a different address for notices to be
given to it or him. Any notice which is required to be given to the Employee
shall, if the Employee is then deceased, be given to the Employee's personal
representative if such representative has previously informed the Company of his
status and address by written notice under this Section 4.5. Any notice shall
have been deemed duly given when enclosed in a properly sealed envelope or
wrapper addressed as aforesaid, deposited (with postage prepaid) in a post
office or branch post office regularly maintained by the United States Postal
Service.
Section 4.6 - Rights as Stockholder. Upon delivery of the shares of Restricted
Stock from the escrow holder pursuant to Section 4.4, the Employee shall have
all the rights of a stockholder with respect to said shares, subject to the
restrictions herein, including the right to vote the shares and to receive all
dividends or other distributions paid or made with respect to the shares.
Section 4.7 - Titles. Titles are provided herein for convenience only and are
not to serve as a basis for interpretation or construction of this Agreement.
Section 4.8 - Conformity to Securities Laws. This Agreement is intended to
conform to the extent necessary with all provisions of the Securities Act of
1933, as amended, and the Exchange Act and any and all regulations and rules
promulgated by the Securities and Exchange Commission thereunder, including
without limitation Rule 16b-3. Notwithstanding anything herein to the contrary,
this Agreement shall be administered, and the Restricted Stock shall be issued,
only in such a manner as to conform to such laws, rules and regulations. To the
extent permitted by applicable law, this Agreement and the Restricted Stock
issued hereunder shall be deemed amended to the extent necessary to conform to
such laws, rules and regulations.
Section 4.9 - Amendment. This Agreement may be amended only by a writing
executed by the parties hereto which specifically states that it is amending
this Agreement.
Section 4.10 - Approval of Plan by Stockholders. The Plan will be submitted for
the approval of the Company's stockholders within twelve months after the date
of the Board's initial adoption of the Plan. Restricted Stock issued following
the adoption of the Plan but prior to such stockholder approval shall not vest
prior to the time when the Plan is approved by the stockholders; provided, that
if such approval has not been obtained at the end of said twelve-month period,
all Restricted Stock issued during such time period under the Agreement shall
thereupon be cancelled and become null and void. The Company and the Employee
shall take such action with respect to the Plan and this Agreement as may be
necessary to satisfy the requirements of Rule 16b-3(b).
Section 4.11 - Tax Withholding. The Company's obligation (i) to issue or deliver
to the Employee any certificate or certificates for unrestricted shares of stock
or (ii) to pay to the Employee any dividends or make any distributions with
respect to the Restricted Stock, is expressly conditioned upon receipt from the
Employee, on or prior to the date the same is required to be withheld, of:
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(a) Full payment (in cash or by check) of any amount that must be withheld by
the Company for federal, state and/or local tax purposes; or
(b) Subject to the Committee's consent and Section 4.10(c), full payment by
delivery to the Company of unrestricted shares of the Company's Common
Stock previously owned by the Employee duly endorsed for transfer to the
Company by the Employee with an aggregate Fair Market Value (determined, as
applicable, as of the date of the lapse of the restrictions or vesting, or
as of the date of the distribution) equal to the amount that must be
withheld by the Company for federal, state and/or local tax purposes; or
(c) With respect to the withholding obligation for shares of Restricted Stock
that become unrestricted shares of stock as of a certain date (the "Vesting
Date"), subject to the Committee's consent and to the timing requirements
set forth in this Section 4.10(c), full payment by retention by the Company
of a portion of such shares of Restricted Stock which become unrestricted
or vested with an aggregate Fair Market Value (determined as of the Vesting
Date) equal to the amount that must be withheld by the Company for federal,
state and/or local tax purposes; or
(d) Subject to the Committee's consent, any combination of payments provided
for in the foregoing subsections (a), (b) or (c).
Section 4.12 - Changes in Company's Shares. In the event that the outstanding
shares of Common Stock of the Company are hereafter changed into or exchanged
for a different number or kind of shares or other securities of the Company, or
of another corporation, by reason of reorganization, merger, consolidation,
recapitalization, reclassification, or the number of shares is increased or
decreased by reason of a stock split-up, stock dividend, combination of shares
or any other increase or decrease in the number of such shares of Common Stock
effected without receipt of consideration by the Company (provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration"), the Committee shall
make appropriate adjustments in the number and kind of shares of Restricted
Stock which may be issued.
Section 4.13 - Governing Law. The laws of the State of Maryland shall govern the
interpretation, validity, administration, enforcement and performance of the
terms of this Agreement regardless of the law that might be applied under
principles of conflicts of laws.
IN WITNESS HEREOF, this Agreement has been executed and delivered by the
parties hereto.
FIRST WASHINGTON REALTY TRUST, INC.
By:________________________________
Its:________________________________
________________________________
Employee
________________________________
________________________________
Address
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