SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
FIRST WASHINGTON REALTY TRUST, INC.
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the approxiate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 1a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on the table below per Exchange Act Rules 14a-6(i)(5) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transition applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth in the amount on
which the filing fee is calculated and state how it was
determined):
(4) Proposed maximum aggregate value of transaction:1
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[LETTERHEAD OF FIRST WASHINGTON REALTY TRUST, INC.]
March 31, 2000
Dear Stockholder:
You are cordially invited to attend our annual meeting of Stockholders
which will be held this year at The Hyatt Regency-Bethesda, One Bethesda Metro
Center, Bethesda, Maryland, on Friday, May 12, 2000, at 11:00 a.m. (EDT). On the
following pages you will find the Notice of Annual Meeting of Stockholders and
the accompanying Proxy Statement.
Your vote is important. We encourage you to vote by proxy so that your
shares will be represented and voted upon at the meeting even if you cannot
attend. Accordingly, please sign, date and return the enclosed proxy card
promptly.
Sincerely,
/s/ Stuart D. Halpert
Stuart D. Halpert
Chairman of the Board
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC.
4350 East-West Highway, Suite 400
Bethesda, Maryland 20814
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of First Washington Realty Trust, Inc.:
Notice is hereby given that the Annual Meeting of the Stockholders of
FIRST WASHINGTON REALTY TRUST, INC., a Maryland corporation (the "Company"),
will be held at The Hyatt Regency - Bethesda, One Bethesda Metro Center,
Bethesda, Maryland, on Friday, May 12, 2000, at 11:00 a.m. (EDT), for the
following purposes:
1. To elect three Directors to serve for a three-year term and until their
successors are elected and qualify.
2. To consider and vote upon amendments to the Company's Stock Option Plan
in order to (i) increase the number of shares of Common Stock available for
issuance under the Plan to officers, directors and employees, and (ii) permit
annual discretionary option grants to Independent Directors.
3. To consider and vote upon ratification of the appointment of
PricewaterhouseCoopers LLP to serve as independent auditors for the Company for
the calendar year ending December 31, 2000.
4. To transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on March 17,
2000 as the record date for determining stockholders of record entitled to
notice of and to vote at the Annual Meeting.
Accompanying this Notice is a proxy. WHETHER OR NOT YOU EXPECT TO BE AT
THE MEETING, PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY.
All stockholders are cordially invited to attend the meeting.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Jeffrey S. Distenfeld
JEFFREY S. DISTENFELD
Executive Vice President and Secretary
Bethesda, Maryland
March 31, 2000
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC.
4350 East-West Highway, Suite 400
Bethesda, Maryland 20814
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
May 12, 2000
The enclosed Proxy is solicited by the Board of Directors of First
Washington Realty Trust, Inc., a Maryland corporation (the "Company"), in
connection with the Annual Meeting of Stockholders to be held at 11:00 a.m.
(EDT) on May 12, 2000, at The Hyatt Regency - Bethesda, One Bethesda Metro
Center, Bethesda, Maryland 20814 (the "Annual Meeting"), and at any adjournment
or postponement thereof.
The Proxy is revocable at any time before its exercise by written
notice of revocation to the Secretary of the Company at its principal office, by
executing and returning another proxy bearing a later date or by attending and
voting in person at the Annual Meeting. Attendance at the Annual Meeting will
not in and of itself constitute a revocation of a Proxy. Execution of a Proxy
will not affect your right to attend the Annual Meeting and to vote in person.
Unless the accompanying Proxy has been previously revoked, the shares
represented by the Proxy will, unless otherwise directed, be voted at the Annual
Meeting for the nominees named below for election as Directors and for all other
proposals described in this Proxy Statement and in the discretion of the proxy
holder(s) on any other matters that may properly come before the Annual Meeting
or any postponement or adjournment thereof. Votes cast by Proxy or in person at
the Annual Meeting will be counted by the person appointed by the Company to act
as Inspector of Election for the Annual Meeting. Any valid and properly executed
but otherwise unmarked Proxies, including those submitted by brokers or
nominees, will be voted in favor of the proposals and nominees of the Board of
Directors, as indicated in the accompanying Proxy card.
The costs of solicitation of Proxies will be borne by the Company. In
addition to soliciting Proxies by mail, the Company's officers, directors and
other regular employees, without additional compensation, may solicit Proxies
personally or by other appropriate means. It is anticipated that banks, brokers,
fiduciaries, other custodians and nominees will forward proxy soliciting
materials to their principals and that the Company will reimburse such persons'
out-of-pocket expenses.
This Proxy Statement and the accompanying form of Proxy and the 1999
Annual Report are first being mailed to stockholders on or about March 31, 2000.
The Company's 1999 Annual Report to its stockholders is also enclosed and should
be read in conjunction with the matters set forth herein. See "Annual Report."
Only holders of record of the Company's Common Stock, $.01 par value
per share (the "Common Stock"), as of the close of business on March 17, 2000,
are entitled to notice of and to vote at the Annual Meeting. At the close of
business on March 17, 2000, there were outstanding 10,057,847 shares of the
Company's Common Stock, which constitute all of the outstanding voting
securities of the Company, each of which is entitled to one vote on each of the
matters to be presented to the stockholders at the meeting.
- 1 -
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors currently consists of the following seven Directors:
Stuart D. Halpert, William J. Wolfe, Lester Zimmerman, Stanley T. Burns, Matthew
J. Hart, William M. Russell and Heywood Wilansky. Pursuant to the Company's
charter, the Directors are divided into three classes. The terms of Directors
Stuart D. Halpert, Stanley T. Burns and Heywood Wilansky expire at the Annual
Meeting, while the terms of the remaining Directors expire in 2001 or 2002.
Messrs. Halpert, Burns and Wilansky have been nominated and recommended for
election to serve as Directors for a term of three years and until their
respective successors are duly elected and qualify. Messrs. Halpert, Burns and
Wilansky have advised the Board of Directors that they are able and willing to
serve as Directors. If, for any reason, any of them shall become unavailable for
election, an event that the Company does not anticipate, the individuals named
in the enclosed Proxy may exercise their discretion to vote for any substitute
nominee or nominees. The Board of Directors has no reason to believe that any
nominee named herein will be unable to serve.
Vote Required; Recommendation of the Board of Directors
A plurality of all the votes cast at the Annual Meeting by the holders
of shares of Common Stock present or represented by proxy, assuming a quorum is
present, will be sufficient to elect a nominee as a Director. For purposes of
the election of Directors, abstentions will not be counted as votes cast and
will have no effect on the result of the vote, although they will count toward
the presence of a quorum. The Board of Directors unanimously recommends a vote
FOR the nominees set forth above. Proxies solicited by the Company will be so
voted unless stockholders specify otherwise on the accompanying Proxy.
BOARD OF DIRECTORS AND OFFICERS
The nominees for election as Directors of the Company, the executive
officers of the Company and the other Directors whose terms continue after the
Annual Meeting, and their principal occupations for at least the past five
years, their ages, their positions and offices with the Company and information
as to their terms as Directors as of March 31, 2000, are as follows:
Director Term
Name Age Since Expires Position
---- --- -------- ------- --------
Stuart D. Halpert. . . . . 57 1994 2000 Chairman of the
Board of Directors
William J. Wolfe . . . . . 47 1994 2002 President, Chief
Executive Officer
and Director
Lester Zimmerman . . . . 50 1994 2001 Director
Stanley T. Burns . . . . . 55 1994 2000 Director
Matthew J. Hart. . . . . . 47 1994 2002 Director
William M. Russell . . . . 63 1994 2001 Director
Heywood Wilansky . . . . 52 1994 2000 Director
James G. Blumenthal . . . 43 Executive Vice
President and Chief
Financial Officer
Jeffrey S. Distenfeld . . 45 Executive Vice
President,
Secretary and
General Counsel
James G. Pounds . . . . . 44 Executive Vice
President and Chief
Operating Officer
- 2 -
<PAGE>
Stuart D. Halpert. Mr. Halpert is the Chairman of the Board of Directors of
the Company. He co-founded First Washington Management, Inc. ("FWM"), a
predecessor business to the Company, in 1983 and has been its Chairman from its
inception. He has been involved in the real estate industry for over 20 years.
Mr. Halpert is actively involved with all aspects of the Company's business,
including its work with the capital markets, acquisitions, asset management, and
third-party services. He shares overall responsibility for the Company's
day-to-day operations with Mr. Wolfe. Prior to the formation of FWM, Mr. Halpert
was a practicing attorney specializing in real estate transactions and banking
matters. Prior to entering private practice, Mr. Halpert served as Counsel to
the House Banking Committee, U.S. Congress. Mr. Halpert is a past member of the
Board of Directors of the District of Columbia National Bank and the National
Bank of Commerce. Mr. Halpert is a member of the International Council of
Shopping Centers. He received his Bachelor's Degree from Brown University and
his Juris Doctor Degree from The George Washington University Law School.
William J. Wolfe. Mr. Wolfe is the President and Chief Executive Officer of
the Company. He is also the President, Chief Executive Officer and co-founder of
FWM and has been its President from its inception. Mr. Wolfe shares overall
responsibility for the Company's day-to-day operations with Mr. Halpert, and is
actively involved in all aspects of the Company's business, including
acquisitions, development, renovation, leasing and management of the Company's
retail properties. Prior to co-founding the Company's predecessor, from 1979 to
1982, Mr. Wolfe was a principal in a commercial real estate firm in the
Washington, D.C. metropolitan area. Prior to entering the real estate business,
Mr. Wolfe served in the Executive Office of the President of the United States.
Mr. Wolfe is a member of the International Council of Shopping Centers, and is a
past member of the Board of Directors of the National Bank of Commerce. He
received his Bachelor's Degree from Clark University and his Master's Degree
from Harvard University.
Lester Zimmerman. Mr. Zimmerman was a co-founder of FWM and was an
Executive Vice President of the Company until 1998. Since then, he has been
President of LZ Realty, Inc. d/b/a First Capital Realty, a real estate brokerage
company which acquired the sales brokerage business conducted through the
Company's wholly-owned subsidiary, First Capital Realty, Inc. He has over 18
years of experience in the acquisition, management and disposition of commercial
properties. Mr. Zimmerman is a member of the National Multi-Housing Council and
the National Association of Real Estate Investment Trusts. Prior to joining the
Company's predecessor, Mr. Zimmerman was an executive with the Xerox Corporation
in Washington, D.C. and Sydney, Australia. Mr. Zimmerman received his Bachelor's
Degree from the College of William and Mary.
Stanley T. Burns. Mr. Burns is the principal of The Calloway Group, a
consulting firm specializing in business strategy and finance. Mr. Burns is the
former President and Chief Executive Officer of United Savings Bank of Virginia,
and served for over 22 years with Chase Manhattan Corporation and certain of its
affiliates. In 1985, Mr. Burns negotiated the acquisition of three banks in
Maryland on behalf of The Chase Manhattan Corporation, which banks were then
merged to form Chase Bank of Maryland, where he served as President and Chief
Executive Officer until 1988. He is the author of SAIC: The First Thirty Years
and Exceeding Expectations: The Story of Enterprise Rent-A-Car, co-author of
Educating Managers, and he currently serves on the faculty of The Johns Hopkins
University. He received his Bachelor's Degree from Duke University and a
Master's Degree from The Johns Hopkins University.
Matthew J. Hart. Mr. Hart is the Executive Vice President and Chief
Financial Officer of Hilton Hotels Corporation. Mr. Hart is primarily
responsible for Hilton's corporate finance and development activities. Prior to
joining Hilton, Mr. Hart was Senior Vice President and Treasurer of the Walt
Disney Company. Prior to joining Disney, Mr. Hart was Executive Vice President
and Chief Financial Officer of Host Marriott Corporation (formerly known as
Marriott Corporation). Before joining Marriott Corporation, Mr. Hart had been a
lending officer with Bankers Trust Company in New York. Mr. Hart received his
Bachelor's Degree from Vanderbilt University and a Master's of Business
Administration from Columbia University. He is also a member of the Board of
Directors of Kilroy Realty Corporation, an office property REIT based in El
Segundo, California.
- 3 -
<PAGE>
William M. Russell. Mr. Russell is the President of Corporate Real Estate
Advisors, an independent real estate consulting firm, and is a Senior Real
Estate Advisor of Aetna, Inc. Prior to his current position, Mr. Russell was
chairman of the Real Estate and Mortgage Investment Committee of the Aetna Life
& Casualty Companies. Over the term of his association with Aetna, Mr. Russell
held senior positions in virtually every area of its real estate operations,
including supervising Aetna's $23 billion mortgage portfolio and serving as past
president of Aetna Property Services, a subsidiary engaged in the on-site
management of Aetna-owned properties, and acting as former chairman of AE
Properties, Inc., a subsidiary engaged in real estate development. Mr. Russell
is a member of the Board of Directors and past president of the Connecticut
Housing Investment Fund. Mr. Russell was the Governor's appointee to the
Connecticut Blue Ribbon Commission on Housing and he is Vice Chairman of
Hartford's Downtown Council.
Heywood Wilansky. Mr. Wilansky is the President, Chief Executive Officer
and a Director of The Bon-Ton Stores, Inc., a retail department store chain.
Prior to joining his current position in August, 1995, Mr. Wilansky was the
president and chief executive officer of Foley's Department Store, a 50-store
division of May Department Stores Company. Mr. Wilansky is the former president
and chief executive officer of Filene's Department Store and the former
executive vice president for merchandising of Lord & Taylor. Prior to that, Mr.
Wilansky held various positions with Hecht's Department Store of Washington,
D.C., most recently serving as senior vice president and general merchandise
manager. Mr. Wilansky received his Bachelor's Degree from Canaan College.
James G. Blumenthal. Mr. Blumenthal is an Executive Vice President and the
Chief Financial Officer of the Company. Mr. Blumenthal joined FWM in 1986 and
has served in a variety of positions, including Senior Asset Manager and
Director of Acquisitions. He has responsibility for debt financing, management
information systems, accounting and financial reporting for the Company. Prior
to joining FWM, Mr. Blumenthal was a practicing CPA with Grant Thornton, a
national accounting firm. He is a member of the American Institute of Certified
Public Accountants. Mr. Blumenthal received his Bachelor's Degree from The
George Washington University and his Master's of Science in Taxation from The
American University.
Jeffrey S. Distenfeld. Mr. Distenfeld is an Executive Vice President and
the Secretary and General Counsel of the Company. He joined FWM in 1989 and is
responsible for all legal matters. Prior to joining FWM, Mr. Distenfeld was a
partner with the law firm of Lane and Edson, P.C., where he specialized in
commercial real estate and financing transactions. He is a member of the bar of,
and qualified to practice in, Maryland, Virginia and the District of Columbia.
Mr. Distenfeld received his Bachelor's Degree from The George Washington
University and his Juris Doctor Degree from the University of Virginia School of
Law.
James G. Pounds. Mr. Pounds is an Executive Vice President and the Chief
Operating Officer of the Company and has responsibility for the leasing and
management of the Company's properties, as well as its redevelopment and
renovation activities and its third-party management business. He joined FWM in
1988 and has had a variety of responsibilities, including construction
management and supervision of expansion and renovation projects. Prior to
joining FWM, Mr. Pounds was a vice president of T.F. Stone, a real estate
development firm, where he was responsible for the development and construction
of a variety of commercial and multifamily projects. Prior to that, he was a
project manager with HKS, Inc., an architectural firm, where he was responsible
for development and construction of commercial office properties. Mr. Pounds
received his Bachelor's Degree in Engineering from the University of Kansas and
Master's of Business Administration and Master's of Architecture from the
University of Illinois.
Committees of the Board of Directors; Meetings
The Board of Directors held eight meetings during the year ending December
31, 1999. For that year, no Director who served as a Director during the past
year attended fewer than 75% of the aggregate of the total number of meetings of
the Board of Directors and committees on which he served. The Board of Directors
has established the following standing committees: Audit Committee and
Compensation Committee. There is no standing Nominating Committee. The Board of
Directors has delegated certain functions to the following standing committees
of the Board:
- 4 -
<PAGE>
Audit Committee. The Audit Committee consists of four Directors, all of
whom are independent of the Company's management ("Independent Directors").
Messrs. Hart, Burns, Russell and Wilansky are the current members of the Audit
Committee, and Mr. Hart is the Chairman of the Audit Committee. The Audit
Committee was established to make recommendations concerning the engagement of
independent public accountants, review with independent public accountants the
plans and results of the audit engagement, approve professional services
provided by the independent accountants, review the independence of the
independent accountants, consider the range of audit and non-audit fees and
review the adequacy of the Company's internal accounting controls. The Audit
Committee met three times during the year ending December 31, 1999.
Compensation Committee. The Compensation Committee consists of four
Directors, all of whom are Independent Directors. Messrs. Burns, Hart, Russell
and Wilansky are the current members of the Compensation Committee, and Mr.
Burns is the Chairman of the Compensation Committee. The Compensation Committee
determines compensation for the Company's executive officers, administers the
granting of stock options and administers the Company's stock option plan and
restricted stock plan. The Compensation Committee met four times during the year
ending December 31, 1999.
Directors' Compensation
Independent Directors receive a retainer of $18,000 per annum. In
addition, the Chairman of each Committee is paid $1,000 for each meeting which
he attends and chairs. The Chairman of the Compensation Committee receives an
additional $10,000 per year (paid in quarterly installments) for additional
services provided to the Company in such capacity. Each Independent Director
also is reimbursed for expenses incurred in attending meetings. Under the Stock
Option Plan, each Independent Director receives, upon initial election to the
Board of Directors, an option to purchase 2,500 shares of the Company's Common
Stock at an exercise price equal to the fair market value of a share of Common
Stock on the grant date. In accordance with the formula in effect prior to the
recent amendment to the Stock Option Plan, each Independent Director serving on
June 1, 1999 was granted an option to purchase 5,000 shares of Common Stock at
an exercise price of $21.75 per share (the fair market value of a share of
Common Stock on such date). Pursuant to the amendment to the Stock Option Plan
to be presented to the stockholders at the Annual Meeting, the Board of
Directors has discretion to make annual grants of options to each Independent
Director (at an exercise price equal to the fair market value of a share of
Common Stock on the date of grant). In accordance with this amendment, the Board
granted each Independent Director serving on June 1, 1999 an option to purchase
an additional 3,000 shares of stock at an exercise price of $21.75 per share.
One-third of the options granted on June 1, 1999 vest on each of the first,
second and third anniversary dates of the date of grant. Neither employees of
the Company who are Directors nor Lester Zimmerman are paid Director fees nor do
they receive options for their service as Directors of the Company.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 17, 2000, the Company had approximately 6,300 beneficial
holders of Common Stock. The following table sets forth information regarding
beneficial ownership of the shares of Common Stock as of such date by (i) the
Company's Chief Executive Officer and each of the other four most highly
compensated executive officers (collectively, the "Named Executive Officers"),
(ii) each Director of the Company, (iii) the Company's officers and Directors as
a group and (iv) all persons known by the Company to be the beneficial owner of
more than five percent of the Company's outstanding shares of Common Stock. For
purposes of this Proxy Statement, beneficial ownership of securities is defined
in accordance with the rules of the Securities and Exchange Commission (the
"SEC") and means generally the power to vote or exercise investment discretion
with respect to securities, regardless of any economic interests therein. Except
as otherwise indicated, the Company believes that the beneficial owners of the
securities listed below have sole investment and voting power with respect to
such shares, subject to community property laws where applicable. Unless
otherwise indicated, the business address for each of the individuals listed
below is c/o First Washington Realty Trust, Inc., 4350 East-West Highway, Suite
400, Bethesda, Maryland 20814.
- 5 -
<PAGE>
Shares Beneficially Owned
----------------------------------------
Amount and Nature of
Name of Beneficial Owner Beneficial Ownership (1) Percent of Class (2)
- ------------------------ ------------------------ --------------------
Stuart D. Halpert (3)(4 ) 547,060 5.34%
William J. Wolfe (3)(4) 547,060 5.34%
Lester Zimmerman 94,471 0.94%
James G. Blumenthal (3)(4) 31,393 *
Jeffrey S. Distenfeld (3)(4) 31,393 *
James G. Pounds (3)(4) 31,393 *
Stanley T. Burns (5) 6,499 *
Matthew J. Hart (5) 10,499 *
William M. Russell (5) 9,499 *
Heywood Wilansky (5) 6,499 *
All executive officers and
directors as a group (10 persons) 1,315,766 12.52%
T. Rowe Price
Associates, Inc. (6)(7) 863,300 8.58%
100 East Pratt Street
Baltimore, MD 21202
- ----------------------------------
* = less than 1%
(1) Includes shares of Common Stock issuable upon conversion of partnership
units ("Common Units") in First Washington Realty Limited Partnership (the
"Operating Partnership") which are convertible within 60 days. As of March
17, 2000, Common Units owned by the Named Executive Officers and Directors
was as follows: Stuart D. Halpert - 3,198, William J. Wolfe - 3,198 ,
Lester Zimmerman - 2,318, James G. Blumenthal - 3,077, Jeffrey S.
Distenfeld - 3,077, and James G. Pounds - 3,077.
(2) Based on 10,057,847 shares of Common Stock outstanding as of March 17,
2000, plus the shares of Common Stock issuable upon conversion of all
Common Units and the options to purchase shares of Common Stock (which are
exercisable within 60 days) held by such beneficial owner.
(3) Includes options to purchase shares of Common Stock (which are exercis-
able within 60 days) as follows: Stuart D. Halpert - 183,806, William J.
Wolfe - 183,806, James G. Blumenthal - 14,461, Jeffrey S. Distenfeld -
14,461, and James G. Pounds - 14,461.
(4) Includes restricted shares of Common Stock (not vested) held by Stuart D.
Halpert - 151,584, William J. Wolfe - 151,584, James G. Blumenthal - 5,410,
Jeffrey S. Distenfeld - 5,410, and James G. Pounds - 5,410.
(5) For Mr. Burns and Mr. Wilansky only, includes options to purchase 6,499
shares of Common Stock (which are exercisable within 60 days). For Mr. Hart
and Mr. Russell only, includes options to purchase 3,999 shares of Common
Stock (which are exercisable within 60 days).
(6) Reflects beneficial ownership as of December 31, 1999, as reported to the
Company on Schedule 13G filed in February, 2000.
(7) These securities are owned by various individual and institutional
investors for which T. Rowe Price Associates, Inc. ("Price Associates")
serves as investment advisor with power to direct investments and/or sole
power to vote the securities. For purposes of the reporting requirements of
the Securities Exchange Act of 1934, Price Associates is deemed to be a
beneficial owner of such securities; however, Price Associates expressly
disclaims that it is, in fact, the beneficial owner of such securities.
- 6 -
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The Named Executive Officers are employed and compensated by both
the Company and FWM. The Company believes that the effective allocation of such
executives' compensation between such entities reflects the services provided by
such executives with respect to each entity. The following table shows, for the
fiscal years ending December 31, 1999, December 31, 1998 and December 31, 1997,
respectively, the compensation paid by the Company and FWM to the Named
Executive Officers.
<TABLE>
<CAPTION>
Annual
Compensation (1)
-----------------------------------
<S> <C> <C> <C>
Principal Position Year Salary ($)(2) Bonus ($)
- ------------------ ---- ------------- ---------
Stuart D. Halpert 1999 $350,000 $282,450
Chairman of 1998 $300,000 $255,000
the Board 1997 $250,000 $125,000
William J. Wolfe 1999 $350,000 $282,450
President and Chief 1998 $300,000 $255,000
Executive Officer 1997 $250,000 $125,000
James G. Blumenthal 1999 $175,000 $ 50,000
Executive Vice 1998 $160,000 $ 30,000
President and Chief 1997 $145,000 $ 25,000
Financial Officer
Jeffrey S. Distenfeld 1999 $175,000 $ 50,000
Executive Vice 1998 $160,000 $ 30,000
President and 1997 $155,000 $ 15,000
General Counsel
James G. Pounds 1999 $175,000 $ 50,000
Executive Vice 1998 $160,000 $ 30,000
President and 1997 $145,000 $ 25,000
Chief Operating Officer
Long Term
Compensation Awards
-----------------------------------------------------
<C> <C> <C> <C> <C>
Securities All
Restricted Under- Other
Stock lying Contingent Compen-
Grants Options Stock Stock sation
(#)(3) (#) Grants (#) Grants(#) ($)(4)
---------- ---------- ---------- ---------- --------
-- 32,000 -- 12,500 5,000
-- 16,000 -- 12,500 5,000
4,750 32,000 47,380 5,000 4,750
-- 32,000 -- 12,500 5,000
-- 16,000 -- 12,500 5,000
4,750 32,000 47,380 5,000 4,750
2,700 8,000 -- -- 5,000
1,500 4,000 -- -- 5,000
5,128 8,000 -- -- 4,750
2,700 8,000 -- -- 5,000
1,500 4,000 -- -- 5,000
5,128 8,000 -- -- 4,750
2,700 8,000 -- -- 5,000
1,500 4,000 -- -- 5,000
5,128 8,000 -- -- 4,750
</TABLE>
- -------------------------------
(1) Excludes the value of company-leased automobiles, membership fees to
professional organizations, and certain medical, disability and life
insurance benefits, which in the aggregate do not equal or exceed the
lesser of $50,000 or 10% of the total annual salary and bonus for the Named
Executive Officer for such year.
(2) Includes compensation that was deferred pursuant to the Company's 401(k)
Plan.
(3) The aggregate number of, and aggregate value of, shares of restricted stock
held as of December 31, 1999 (based on the closing market price on December
31, 1999), are as follows: Mr. Halpert - 3,167 shares at $59,183; Mr. Wolfe
- 3,167 shares at $59,183; Mr. Blumenthal - 3,210 shares at $59,969; Mr.
Distenfeld - 3,210 shares at $59,969; and Mr. Pounds - 3,210 shares at
$59,969. Dividends are payable on restricted stock. All awards of
restricted stock are subject to vesting in equal one-third installments on
each of the first three anniversaries of the date of grant, and are subject
to earlier vesting in the event of the Named Executive Officer's
termination of employment under specified circumstances.
(4) Consists of the contribution by the Company to the Company's 401(k) Plan
for the benefit of the Named Executive Officer.
- 7 -
<PAGE>
Stock Option Grants in Last Fiscal Year
The following table provides information concerning the grant of stock
options to the Named Executive Officers for the fiscal year ending December 31,
1999 under the Stock Option Plan. The Company does not have any outstanding
stock appreciation rights.
Individual Grants
- --------------------------------------------------------------------------------
Number of % of Total
Securities Options
Underlying Granted to
Options Employees in Exercise or Base
Name Granted Fiscal Year Price ($/Sh)
- ---- ------- ----------- ------------------
Stuart D. Halpert 32,000(1) 14.8% $20.75
William J. Wolfe 32,000(1) 14.8% $20.75
James G. Blumenthal 8,000(1) 3.7% $20.75
Jeffrey S. Distenfeld 8,000(1) 3.7% $20.75
James G. Pounds 8,000(1) 3.7% $20.75
Potential Realizable
Value at Assessed Annual
Rates of Stock
Price Appreciation
for Option Term
- --------------------------------------------------------------------------------
Expiration
Date 5%($)(2) 10%($)(2)
- ---------- -------- ---------
05/10/2009 $298,000 $798,000
05/10/2009 $298,000 $798,000
05/10/2009 $ 74,500 $199,500
05/10/2009 $ 74,500 $199,500
05/10/2009 $ 74,500 $199,500
- --------------------------------------
(1) These options are exercisable according to the following schedule:
one-third of such options vest on each of the first, second and third
anniversary dates of the date of grant (May 10, 1999). The exercise
price of the options is $20.75 (the market price on the date of grant).
(2) The total value of all outstanding shares of Common Stock, based on the
fair market value per share of Common Stock on March 17, 2000 of
$19.375 per share, was approximately $194.9 million. If the Common
Stock appreciated at the 5% and 10% compounded annual rates assumed in
the table, the value of Common Stock held by all stockholders would
have increased by approximately $107.4 million and $264.6 million,
respectively, by the May 10, 2009 expiration date of most of these
options. There can be no assurance that such increases in value will
occur.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Value
Table
The following table sets forth information related to the exercise of
stock options during the year ended December 31, 1999 by each of the Named
Executive Officers and the 1999 fiscal year-end value of unexercised options.
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<PAGE>
Shares Acquired Value
Name on Exercise (#) Realized ($)
- ---- ----------------- ------------
Stuart D. Halpert N/A N/A
William J. Wolfe N/A N/A
James G. Blumenthal N/A N/A
Jeffrey S. Distenfeld N/A N/A
James G. Pounds N/A N/A
Number of
Securities Value of
Unexercised In-the-Money
Underlying Unexercised
Options at Options at
FY-End (#) FY-End ($)(1)
- ------------ -------------
Exercisable/ Exercisable/
Unexercisable Unexercisable
- ------------- -------------
173,140/53,335 $-0-/$-0-
173,140/53,335 $-0-/$-0-
11,795/13,335 $-0-/$-0-
11,795/13,335 $-0-/$-0-
11,795/13,335 $-0-/$-0-
- -----------------------------------
(1) Represents the difference between the fair market value of the Common Stock
on December 31, 1999 and the exercise price of the options.
Employment Agreements
Messrs. Halpert and Wolfe have entered into amended employment
agreements with the Company effective March 13, 1998. The amended employment
agreements were most recently amended effective January 1, 2000 (the "Employment
Agreements"). The term of Mr. Wolfe's Employment Agreement will expire June 30,
2002, and the term of Mr. Halpert's Employment Agreement will expire December
31, 2002. The Employment Agreements provide that for a period of 18 months
following the period each is an officer of the Company, Messrs. Halpert and
Wolfe will not be employed or otherwise involved in any business engaged in the
acquisition, development, management or operation of principally retail shopping
centers within 25 miles of a shopping center in the Company's portfolio at the
time of such executive's termination of employment.
The Employment Agreements provide that in the event of expiration of
the term of employment without renewal, Messrs. Halpert and Wolfe will receive a
severance benefit equal to 300% of the sum of (a) the employee's base salary at
the time of such termination and (b) the average annual bonus paid or payable to
the employee for the last three calendar years of his employment with the
Company. The Employment Agreements provide that, under other specified
circumstances, including termination by the Company without cause, resignation
with good reason and death or disability (each as defined in the Employment
Agreements), Messrs. Halpert and Wolfe will receive a severance payment equal to
the sum of (a) the amount payable upon expiration of the term without renewal
and (b) the greater of (i) 200% of the sum of (x) the employee's annual base
salary at the time of such termination plus (y) the average annual bonus paid or
payable to the employee for the last three calendar years of the employment
term, or (ii) the sum of (x) the aggregate amount of annual base salary that
would have been paid through the scheduled expiration of the term of the
Employment Agreement plus (y) the average annual bonus paid or payable to the
employee for the last three calendar years of the employment term. If Mr.
Halpert's or Mr. Wolfe's employment is terminated prior to the expiration of his
Employment Agreement, he is also entitled to continue to receive medical,
disability and life insurance benefits until the date his term of employment
otherwise would have expired (but in any case for a minimum period of 24
months).
As described below, in the event of termination of employment under
specified circumstances, the Employment Agreements also provide for the
accelerated grant or vesting of options and restricted and contingent stock.
Furthermore, the Employment Agreements also provide that the Company will make
an additional payment to Messrs. Halpert and Wolfe in the event payments made to
the employee (such as severance payments and the value of the acceleration of
the grant or vesting of options and stock) are subject to an excise tax for
"parachute payments" under the Internal Revenue Code, which applies to payments
in connection with a "change in control" of the Company where the aggregate
amount of all such payments equals or exceeds 300% of the employee's "base
amount" (as such terms are
- 9 -
<PAGE>
defined in the Internal Revenue Code). The excise tax is equal to 20% of the
aggregate payments in excess of 100% of the base amount (which is generally
equal to the most recent five-year average of the employee's compensation), and
could apply to severance benefits for Messrs. Halpert and Wolfe (including cash
payments and the accelerated grant or vesting of stock and options, if
applicable) if the termination of employment was deemed to be in connection with
such a change in control. If the employee is subject to the excise tax, the
Company will make a payment to the employee sufficient for him to pay the excise
tax and all related taxes on such amount, so that after payment of the
additional taxes, the employee retains the full amount payable to him.
Each of the Employment Agreements provides for an annual base salary in
the amount of $400,000 for calendar year 2000, subject to increase as determined
by the Compensation Committee. As part of the March 1998 amendments to the
employment agreements, the Board structured the bonus component of such
agreements to qualify as performance-based compensation pursuant to Code Section
162(m) for the remainder of the employment term (as extended) beginning January
1, 1999, so that bonus payments made for periods thereafter will be eligible to
be fully deductible for federal income tax purposes. Pursuant to the bonus
targets and performance goals established by the Compensation Committee and
based on the Committee's certification of the attainment of applicable
performance goals for the fiscal year ending December 31, 1999, the amount of
annual bonus payable to each of Messrs. Halpert and Wolfe for 1999 was $282,450.
Pursuant to the Employment Agreements, on January 1, 2000 each of
Messrs. Halpert and Wolfe were granted options to purchase 250,000 shares of
Common Stock, at an exercise price equal to $18.6875, the fair market value of a
share of Common Stock on January 1, 2000. The stock options shall be exercisable
until January 1, 2010, and, subject to the executive's continued employment with
the Company, shall become exercisable in accordance with the following schedule:
one-third of such options become exercisable on January 1 of each of years 2001,
2002 and 2003. In the event of termination of employment under specified
circumstances, including by the Company without cause and resignation with good
reason or following a change in control (each as defined in the Employment
Agreements), all of the executive's options shall be immediately exercisable in
full. Pursuant to the Employment Agreements, awards were made to each of Messrs.
Halpert and Wolfe of 150,000 shares of Restricted Stock on January 1, 2000 under
the Company's Restricted Stock Plan, which awards are subject to vesting as
follows: one-sixth on January 1, 2001, one-third on January 1, 2002 and one-half
on January 1, 2003. In the event of termination of employment under specified
circumstances, including by the Company without cause and resignation with good
reason or following a change in control (each as defined in the Employment
Agreements), all of the executive's Restricted Stock shall immediately vest in
full.
Consistent with the provisions of the Employment Agreements, the Board
has approved future performance-based Contingent Stock awards of up to 25,000
shares of Common Stock to each of Messrs. Halpert and Wolfe on each of March 31,
2001, 2002 and 2003, based on the Company's attainment of performance goals
during the preceding fiscal year as established by the Compensation Committee.
In addition, the Compensation Committee has established the performance goals
applicable for fiscal years 2000 through 2003 in the event of termination of
employment under specified circumstances (including termination by the Company
without cause, resignation with good reason or following a change in control and
death or disability) such that if his employment terminates prior to March 31,
2003 in such circumstances and if the Company has achieved the performance goal
for the year of termination, the Company will award the employee that portion of
the 75,000 shares of Contingent Stock that have not yet been granted. The Board
has structured the Contingent Stock awards to qualify as performance-based
compensation pursuant to Code Section 162(m), so that any Contingent Stock
awards made for such periods will be eligible to be fully deductible for federal
income tax purposes.
Stock Performance Graph
The following stock performance graph compares the Company's
performance to the S&P 500 and the index of equity real estate investment trusts
prepared by the National Association of Real Estate Investment Trusts
("NAREIT"). Equity real estate investment trusts are defined as those which
derive more than 75% of their income from equity investments in real estate
assets. The NAREIT equity index includes all tax-qualified real estate
investment trusts listed on the New York Stock Exchange, the American Stock
Exchange or the NASDAQ National Market. Stock price performance for the past
year is not necessarily indicative of future results. All stock price
performance includes the reinvestment of dividends.
- 10 -
<PAGE>
[graph to be inserted]
Base
Period Return Return Return Return Return
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
The Company 100.00 132.00 185.33 232.25 216.52 188.63
NAREIT Equity Index 100.00 115.27 155.92 187.51 154.69 147.55
S&P 500 Index 100.00 137.43 168.99 225.36 289.77 350.71
Compensation Committee Interlocks and Insider Participation
The Compensation Committee was established in November, 1994 and consists
of Mr. Burns (Chairman), Mr. Hart, Mr. Russell and Mr. Wilansky, none of whom is
or has been an officer or employee of the Company. For a description of the
background of each of these individuals, see "Board of Directors and Officers."
To the Company's knowledge, there were no interrelationships involving members
of the Compensation Committee or other directors of the Company requiring
disclosures in this Proxy Statement.
COMPENSATION COMMITTEE REPORT
The information set forth below shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933, as amended, or under
the Securities Exchange Act of 1934, as amended, except to the extent the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
General. The Company's compensation and benefit practices for employees are
established and governed by the Compensation Committee, which is comprised
entirely of Independent Directors who are not employees of the Company. The
Committee establishes the general compensation policy of the Company, approves
compensation of the senior executive officers of the Company and administers the
Stock Option Plan, the Restricted Stock Plan and any other employee benefit
plans which may be established by the Company.
The Company's compensation program is designed to achieve both short-term
and long-term objectives, balancing compensation to reward past performance and,
consistent with the Company's growth philosophy, to provide incentives for
superior performance over the long term. The Committee works with management to
design compensation structures which will best serve these goals. The Committee
utilizes base salary, cash bonuses, incentive stock plans and other forms of
compensation as part of its programs.
- 11 -
<PAGE>
Executive Compensation. The Committee believes that the Company's success
is attributable in large part to the management and leadership efforts of its
executive officers. The Company's management team has substantial experience in
owning, operating, managing, developing and acquiring interests in shopping
centers. Stuart Halpert, Chairman of the Board, and William Wolfe, President and
Chief Executive Officer, provide the Company with strategic business direction.
Under the guidance of the Committee, the Company is committed to develop and
maintain compensation policies, plans and programs which will provide additional
incentives for the enhancement of cash flows, and consequently real property and
stockholder values, by aligning the financial interests of the Company's senior
management with those of its stockholders. The Company currently has employment
contracts with each of Messrs. Halpert and Wolfe (see "Employment Agreements").
Base salaries and cash bonuses for each of the named executive officers are
generally reviewed each year for each of the named executive officers other than
Messrs. Halpert and Wolfe. Pursuant to their Employment Agreements, the annual
base salaries for each of Messrs. Halpert and Wolfe will be reviewed for
possible increase during the first quarter of each fiscal year.
The Employment Agreements for Messrs. Halpert and Wolfe provide for annual
cash bonuses based upon the Company's performance as measured by performance
targets established annually by the Committee. See "Employment Agreements."
Stock-based compensation is also an important element of the Company's
compensation philosophy. The Company maintains the Stock Option Plan and the
Restricted Stock Plan for executives and other employees. The Committee
determines in its sole discretion, subject to the terms and conditions of the
plans, the specific terms of each grant under the plans other than as set forth
for Messrs. Halpert and Wolfe in their Employment Agreements. In granting awards
under the Stock Option Plan and Restricted Stock Plan, the Committee considers
the employee's responsibilities and duties and how his or her performance
contributes to the Company's performance and also what incentives may be
appropriate for future performance. The Committee also believes that awards
pursuant to these plans align the interests of management with those of the
Company's stockholders.
The Committee awarded each of James G. Blumenthal, Jeffrey S. Distenfeld
and James G. Pounds 2,700 shares of Restricted Stock on January 1, 2000 pursuant
to the Restricted Stock Plan. Such shares of Restricted Stock vest, and the
restrictions applicable thereto lapse, in equal one-third installments on each
of the first three anniversaries of the date of grant, subject to the
individuals' continued employment with the Company on such date.
Compensation of the Chairman and the Chief Executive Officer. Amounts
earned during 1999 by Messrs. Halpert and Wolfe, the Chief Executive Officer and
Chairman of the Company, respectively, are shown in the Summary Compensation
Table. The Committee believes that the annual base salaries for Messrs. Halpert
and Wolfe, as adjusted pursuant to their Employment Agreements, are appropriate
and are reflective of industry practices of other similar public real estate
investment trusts. The maximum bonus payable under each of Messrs. Halpert's and
Wolfe's Employment Agreements is 100% of annual base salary and the target bonus
payable under their employment agreements is 50% of their annual base salaries,
and such bonuses are to be determined based on the achievement of specified
criteria. After reviewing the performance-based criteria for the bonus for
fiscal year 1999, the Committee awarded to each of Messrs. Halpert and Wolfe a
cash bonus for the period January 1, 1999 to December 31, 1999 equal to
$282,450. In addition, after reviewing the performance-based criteria for the
Contingent Stock award for fiscal year 1999, the Committee granted to each of
Messrs. Halpert and Wolfe 12,500 shares of Contingent Stock. The Committee has
also established the performance criteria for bonuses to be paid for calendar
year 2000 and for the Contingent Stock available to be awarded for calendar year
2000, all in accordance with the Employment Agreements. The Committee believes
that the future performance-based bonuses and performance-based Contingent Stock
awards provided under the Employment Agreements will combine to be an effective
method of aligning Messrs. Halpert's and Wolfe's interests with those of the
Company's stockholders and for rewarding them appropriately for their services
as Chairman and Chief Executive Officer of the Company, respectively.
Date: March 24, 2000 STANLEY T. BURNS (CHAIRMAN)
MATTHEW J. HART
WILLIAM M. RUSSELL
HEYWOOD WILANSKY
- 12 -
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Messrs. Halpert, Wolfe and Zimmerman each held a minority ownership
interest in an office building for which FWM provided management services.
During the fiscal year ended December 31, 1999, the partnership which owned the
office building paid management fees of $7,500 to FWM.
All of the voting common stock of FWM is owned by Messrs. Halpert and
Wolfe, which enables them to control the election of the board of directors of
FWM. The Operating Partnership owns all of the non-voting preferred stock of
FWM, which is generally entitled to dividends equal to 99% of the net cash flow
of FWM. Messrs. Halpert and Wolfe have a right of first refusal with respect to
the remaining capital stock of FWM. During the fiscal year ended December 31,
1999, the Company paid advisory, leasing and management fees of approximately
$5,530,000 to FWM.
FWM transferred, effective as of January 1, 1998, its sales brokerage
business conducted through its wholly-owned subsidiary First Capital Realty,
Inc. ("FCR") to LZ Realty, Inc. ("LZ Realty"), a Maryland corporation controlled
by Lester Zimmerman, a director of the Company. FCR had provided sales brokerage
services since 1984 and was managed by Lester Zimmerman. The transaction
transferred substantially all the assets of FCR (consisting primarily of
commission and listing agreements) to LZ Realty for an interest-free, three-year
promissory note equal to approximately $300,000, payable in annual installments
over a three-year period and guaranteed by Mr. Zimmerman. As of December 31,
1999, the outstanding balance of the note was approximately $100,000. FWM also
licensed to LZ Realty the right to use the name First Capital Realty.
Furthermore, FWM provided LZ Realty for two years a line of credit up to
$350,000 (guaranteed by Mr. Zimmerman) with a variable interest rate equal to
FWM's borrowing rate in exchange for a portion of LZ Realty's profits during the
term of the line of credit. The line of credit expired on December 31, 1999. As
part of the transaction, Mr. Zimmerman withdrew as an officer of the Company and
of FWM. By consummating this transaction, FWM intends to eliminate the
volatility of the income stream generated by the sales brokerage business.
The Company has paid legal fees in excess of $60,000 during 1999 to the
law firm of Latham & Watkins. William J. Wolfe's brother, Scott N. Wolfe, is a
partner of Latham & Watkins.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Under Section 16(a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), executive officers, directors and beneficial owners of ten
percent or more of the Company's Common Stock and Preferred Stock ("Reporting
Persons") are required to file beneficial ownership statements with the SEC on a
timely basis reporting the initiation of their status as Reporting Persons and
any subsequent changes with respect to their beneficial ownership of the
Company's Common Stock or Preferred Stock. Based solely on its review of copies
of such beneficial ownership statements received by it or representations that
no such reports were required, the Company believes that during the fiscal year
ending December 31, 1999, its executive officers, directors and beneficial
owners of more than ten percent of the Company's Common Stock or Preferred Stock
complied with the requirements of Section 16(a).
PROPOSAL 2
AMENDMENT OF THE STOCK OPTION PLAN
At the Annual Meeting, the stockholders of the Company will be asked to
consider and vote upon a proposal to amend 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. (the "Stock Option Plan") described herein. The Stock Option
Plan was originally adopted by the Company's Board of Directors and approved by
the Company's stockholders in June, 1994, and amendments were approved by the
stockholders in May, 1997 and in May, 1998. An amendment to the Stock Option
Plan was adopted by the Company's Board of Directors in March, 2000.
The following description of the Stock Option Plan is qualified in its
entirety by reference to the amendment to the Stock Option Plan. Copies of the
amendment to the Stock Option Plan will be available at the Annual Meeting and
can also be obtained by making a written request of the Company's Secretary.
- 13 -
<PAGE>
The principal purposes of the Stock Option Plan are to provide
additional incentives for directors, executive officers and other key employees
of the Company, the Operating Partnership and FWM, to further the growth,
development and financial success of the Company, and to obtain and retain the
services of such directors, executive officers and other key employees essential
to the long range success of the Company.
The shares available under the Stock Option Plan may be either
previously unissued shares or issued shares which have been repurchased by the
Company and may be equity securities of the Company other than Common Stock. The
Stock Option Plan provides for appropriate adjustments in the number and kind of
shares subject to the Stock Option Plan and to outstanding grants thereunder in
the event of a stock split, stock dividend or certain other types of
recapitalizations.
If any portion of a stock option or other award terminates or lapses
unexercised, or is canceled without having been fully exercised, the shares
which were subject to the unexercised portion of such option or other award will
continue to be available for issuance under the Stock Option Plan.
The Stock Option Plan is administered by the Compensation Committee of
the Board of Directors (or the Board in the case of options granted to members
of the Board who are Independent Directors). The Compensation Committee consists
of at least three Independent Directors, each of whom is a "non-employee
director" as defined by Rule 16b-3 of the Exchange Act and an "outside director"
for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"). Presently, there are four members of the Compensation Committee.
The Compensation Committee is authorized to select from among the
eligible employees of the Company, the Operating Partnership and FWM the
individuals to whom options are to be granted and to determine the number of
shares to be subject thereto and the terms and conditions thereof, consistent
with the Stock Option Plan. The Compensation Committee is also authorized to
adopt, amend and rescind rules relating to the administration of the Stock
Option Plan. Non-qualified stock options may be granted to each Independent
Director annually as determined by the full Board, and the full Board shall
determine the number of shares to be subject thereto and the terms and
conditions thereof; provided, however, that the exercise price of all options
granted to Independent Directors shall be the fair market value of a share of
Common Stock on the date of grant.
The Stock Option Plan also authorizes the Compensation Committee to
delegate to the Chief Financial Officer or the Chief Executive Officer of the
Company, or both, any or all of the administrative duties and authority of the
Compensation Committee under the Stock Option Plan, including the authority to
make grants of options under the Plan other than to "Section 16 Persons" or
"Section 162(m) Participants" (each as defined in the Stock Option Plan),
consistent with an approved program authorized by the Compensation Committee and
specifying the maximum aggregate number of shares for which grants may be made
pursuant to such program.
The Company has issued to certain officers and key employees of the
Company, the Operating Partnership and FWM options to purchase, in each case
subject to the Common Stock Ownership Limit and the Aggregate Stock Ownership
Limit (as such terms are defined in the Company's Charter), an aggregate of
1,199,633 shares of Common Stock pursuant to the Stock Option Plan. The Named
Executive Officers hold options for 1,028,340 shares of Common Stock (see also
"Executive Compensation -- Stock Option Grants Table" above), and the Company
has issued to other employees (as a group) options to purchase 171,293 shares of
Common Stock.
The Company has also granted options to purchase a total of 69,000
shares of Common Stock to Independent Directors (including options for 12,000
shares subject to stockholder approval at the Annual Meeting) as set forth under
Director Compensation.
The exercise or purchase price for all options to acquire Common Stock,
together with any applicable tax required to be withheld, must be paid in full
in cash at the time of exercise or purchase or may, with the approval of the
Compensation Committee, be paid in whole or in part in Common Stock of the
Company owned by the optionee and having a fair market value on the date of
exercise equal to the aggregate exercise price of the shares so to be purchased,
by other lawful consideration including services rendered or by surrender of
shares to be issued under presently exercisable options.
- 14 -
<PAGE>
Amendments of the Stock Option Plan to increase the number of shares as
to which options may be granted (except for adjustments resulting from any stock
splits, reorganization, merger, consolidation, recapitalization,
reclassification or stock dividend or other extraordinary corporate events), to
materially modify eligibility requirements under the Stock Option Plan, to
reduce the minimum option price requirements, to materially increase benefits
accruing to Independent Directors under the Stock Option Plan, to extend the
period during which options may be granted or to otherwise materially increase
the benefits accruing to participants under the Stock Option Plan require the
approval of the Company's stockholders. In all other respects the Stock Option
Plan can be amended, modified, suspended or terminated by the Board. Amendments
of the Stock Option Plan will not, without the consent of the participant,
affect such person's rights under an award previously granted, unless the award
itself otherwise expressly so provides. No termination date is specified for the
Stock Option Plan.
Options granted under the Stock Option Plan may provide for their
termination upon dissolution or liquidation of the Company, the merger or
consolidation of the Company into another corporation, the acquisition by
another corporation of all or substantially all of the Company's assets, or the
acquisition by another corporation of 80% or more of the Company's then
outstanding voting stock; but in such event the Compensation Committee (or the
Board in the case of options granted to members of the Board who are Independent
Directors) may also give optionees and other grantees the right to exercise
their outstanding options or rights in full during some period prior to such
event, even though the options or rights have not yet become fully exercisable.
In consideration of the granting of a stock option, each employee and
each director must agree in the written agreement embodying such award to remain
in the employ or remain as a director, respectively, of the Company or a
subsidiary of the Company, the Operating Partnership or FWM for at least one
year after the award is granted.
Subject to the respective option agreements, unless otherwise specified
in writing, stock options cannot be exercised after one year from the date the
optionee's employment terminates by reason of death or disability, nor more than
three months after termination of employment for any reason other than death or
disability.
No option or other right granted under the Stock Option Plan may be
assigned or transferred by the optionee, except by will or the laws of intestate
succession. During the lifetime of the holder of any option or right, the option
or right may be exercised only by the holder or his guardian or legal
representative.
The Company requires participants to discharge withholding tax
obligations in connection with the exercise of an option granted under the Stock
Option Plan, as a condition to the issuance or delivery of stock or payment of
other compensation pursuant thereto. Shares held by or to be issued to a
participant may also be used to discharge tax withholding obligations related to
exercise of options or receipt of other awards, subject to the discretion of the
Compensation Committee to disapprove such use.
Federal Income Tax Consequences
The tax consequences of the Stock Option Plan under current federal law
are summarized in the following discussion which deals with the general tax
principles applicable to the Stock Option Plan, and is intended for general
information only. The discussion is based on the Code, regulations thereunder,
rulings and decisions now in effect, all of which are subject to change. State
and local income taxes are not discussed and may vary from locality to locality.
Non-qualified Stock Options. For federal income tax purposes, assuming
the option is not issued at an exercise price below market value, the recipient
of non-qualified stock options granted under the Stock Option Plan generally
will not recognize taxable income upon the grant of the option, nor will the
Company then be entitled to any deduction. Generally, upon exercise of a
non-qualified stock option the optionee will recognize ordinary income, and the
Company (or other employer) will be entitled to a deduction (subject to the
limits of Section 162(m) of the Code which limits the deductibility of certain
compensation in excess of $1,000,000 and the limits of Section 280G of the Code
which limits the deductability of certain "parachute payments" paid in
connection with a "change in control"), in an amount equal to the difference
between the option exercise price and the fair market value of the stock at the
date of exercise. An optionee's basis for the stock for purposes of determining
his gain or loss on his subsequent disposition of the shares generally will be
the fair market value of the stock on the date of exercise of the non-qualified
stock option.
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<PAGE>
The tax consequences resulting from the exercise of a non-qualified
stock option through delivery of already owned shares of Common Stock are not
completely certain. In published rulings, the Internal Revenue Service has taken
the position that, to the extent an equivalent value of shares is acquired upon
such exercise, an optionee will recognize no gain and the optionee's basis in
the shares acquired upon such exercise will be equal to the optionee's basis in
the surrendered shares, that any additional shares acquired upon such exercise
will be compensation to the optionee taxable under the rules described above and
that the optionee's basis in any such additional shares will be their then fair
market value.
Incentive Stock Options. There is no taxable income to an optionee when
an incentive stock option is granted to him or when that option is exercised;
however, the amount by which the fair market value of the shares at the time of
exercise exceeds the option price will be an "item of tax preference" for the
optionee. Gain realized by an optionee upon the sale of stock issued on exercise
of an incentive stock option is taxable at capital gains rates, and no tax
deduction is available to the Company, unless the optionee disposes of the
shares within two years after the date of grant of the option or within one year
of the date the shares were transferred to the optionee. If the shares are
disposed of before the expiration of these one-year or two-year periods, the
difference between the option exercise price and the fair market value of the
shares on the date of the option's exercise will be taxed at ordinary income
rates; the balance of the gain, if any, will be taxed as capital gain. If the
shares are disposed of before the expiration of these one-year or two-year
periods and the amount realized is less than the fair market value of the shares
at the date of exercise, the employee's ordinary income is limited to the amount
realized less the option exercise price paid. The Company (or other employer)
will be entitled to a deduction (subject to Section 162(m) of the Code) to the
extent the employee must recognize ordinary income. An incentive stock option
exercised more than three months after an optionee's retirement from employment,
other than by reason of death or disability, will be taxed as a non-qualified
stock option, with the optionee deemed to have received income upon such
exercise taxable at ordinary income rates. The Company (or other employer) will
be entitled to a tax deduction (subject to Sections 162(m) and 280G of the Code)
equal to the ordinary income, if any, realized by the optionee.
The tax consequences resulting from exercise of an incentive stock
option through delivery of already-owned shares of Common Stock are not
completely certain. In published rulings and proposed regulations, the Internal
Revenue Service has taken the position that generally the optionee will
recognize no income upon such stock-for-stock exercise (subject to the
discussion above), that to the extent an equivalent number of shares is
acquired, the optionee's basis in the shares acquired upon such exercise is
equal to the employee's basis in the surrendered shares increased by any
compensation income recognized by the optionee, that the optionee's basis in any
additional shares acquired upon such exercise is zero and that any sale or other
disposition of the acquired shares within the one-year or two-year periods
described above will be viewed as a disposition of the shares with the lowest
basis first.
Proposed Amendments to the Stock Option Plan
A total of 1,292,481 shares of Common Stock are currently reserved for
issuance under the Stock Option Plan, subject to certain adjustments in the
Company's Common Stock or other extraordinary corporate events. The Board of
Directors recommends an amendment to the Stock Option Plan to increase the
number of shares available for issuance under the Stock Option Plan by 500,000
shares, for a total of 1,792,481 shares.
As of March 17, 2000, options to purchase an aggregate of 1,268,633
shares of Common Stock had been granted under the Stock Option Plan.
Accordingly, only 23,848 shares of Common Stock are available for the issuance
of new stock options. The Board of Directors believes that increasing the number
of shares available for issuance under the Stock Option Plan is necessary in
order for the Board of Directors to have sufficient flexibility to carry out its
responsibilities to (i) further the growth, development and financial success of
the Company by providing additional incentives to its directors, executive
officers and other employees, and (ii) enable the Company to obtain and retain
the services of such directors, executive officers and other employees
considered essential to the long-range success of the Company.
Additionally, the Board has determined that it is appropriate to grant
options to Independent Directors other than upon their initial election. For
several years the Board has granted options to Independent Directors pursuant to
a formula in the Stock Option Plan. However, the Board has determined that
greater flexibility is needed to respond to changes in compensation practices
and to appropriately link the interests of Independent Directors with those of
the Company's stockholders. The Board has thus adopted an amendment to permit
annual option grants to each of the Independent Directors, in such amounts and
on such terms as determined by the full Board. In accordance with this
- 16 -
<PAGE>
change, the full Board approved a grant of options to purchase 8,000 shares of
Common Stock to each Independent Director serving on June 1, 1999 (options to
purchase 3,000 of such shares are subject to stockholder approval of the
proposed amendments to the Stock Option Plan at the Annual Meeting), in part to
provide increased compensation to Independent Directors without increasing
retainer fees. The Board believes that this amendment to the Stock Option Plan
(including approval of the discretionary Options granted June 1, 1999) will
assist the Company in attracting and retaining Independent Directors of superior
ability and will align their interests with those of the Company's stockholders.
Vote Required; Recommendation of the Board of Directors
A majority of all the votes cast at the Annual Meeting, assuming a
quorum is present, is necessary for approval of the amendments to the Stock
Option Plan. For purposes of the vote on the amendments to the Stock Option
Plan, abstentions and "broker non-votes" will not be counted as votes cast and
will have no effect on the result of the vote, although they will count toward
the presence of a quorum. The Board of Directors unanimously recommends that
stockholders vote FOR approval of the amendments to the Stock Option Plan.
Proxies solicited by the Board of Directors will be so voted unless stockholders
specify otherwise on the accompanying Proxy cards.
PROPOSAL 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The firm of PricewaterhouseCoopers LLP, the Company's independent
auditors for the fiscal year ending December 31, 1999, was appointed by the
Board of Directors, upon the recommendation of the Audit Committee, to act in
the same capacity for the fiscal year ending December 31, 2000, subject to
ratification by the stockholders. There are no affiliations between the Company
and PricewaterhouseCoopers LLP, its partners, associates or employees, other
than as pertains to its engagement as independent auditors for the Company in
the previous year. Representatives of PricewaterhouseCoopers LLP are expected to
be present at the Annual Meeting and will be given the opportunity to make a
statement if they so desire and to respond to appropriate questions.
Vote Required; Recommendation of the Board of Directors
A majority of all the votes cast at the Annual Meeting, assuming a
quorum is present, is necessary for approval of the ratification of
PricewaterhouseCoopers LLP as the Company's independent auditors for the fiscal
year ending December 31, 2000. For purposes of the vote on this proposal,
abstentions will not be counted as votes cast and will have no effect on the
result of the vote, although they will count toward the presence of a quorum.
The Board of Directors unanimously recommends a vote FOR ratification of the
appointment of the independent auditors set forth above. Proxies solicited by
the Company will be so voted unless stockholders specify otherwise on the
accompanying Proxy.
OTHER MATTERS
The Board of Directors is not aware of any other matter that is likely
to come before the Annual Meeting. If other matters should properly come before
the Annual Meeting, the persons named in the accompanying Proxy will vote all
Proxies in their discretion.
Annual Report
The Annual Report of the Company for the fiscal year ending December
31, 1999 is provided with this Proxy Statement to the stockholders of record as
of the close of business on March 17, 2000. However, the Annual Report does not
constitute, and should not be considered, a part of this Proxy solicitation
material.
Any stockholder who desires a copy of the Company's 1999 Annual Report
on Form 10-K filed with the Securities and Exchange Commission may obtain a copy
(including exhibits) without charge by sending a request to Jeffrey S.
Distenfeld, Secretary, First Washington Realty Trust, Inc., 4350 East West
Highway, Suite 400, Bethesda, Maryland 20814.
- 17 -
<PAGE>
Stockholders' Proposals
Any proposal intended to be presented by a stockholder at the next
annual meeting of stockholders must be received by the Company at its principal
executive offices not later than December 15, 2000, in order to be included in
the Company's proxy statement and form of proxy relating to that meeting. In
addition, the Bylaws of the Company provide that in order for a stockholder to
nominate a candidate for election as a director at an annual meeting of
stockholders or propose business for consideration at such meeting, notice must
generally be given to the Secretary of the Company no more than 90 days nor less
than 60 days prior to the first anniversary of the preceding year's annual
meeting. The fact that the Company may not insist upon compliance with these
requirements should not be construed as a waiver by the Company of its right to
do so at any time in the future.
STOCKHOLDERS ARE URGED TO IMMEDIATELY MARK, DATE, SIGN AND RETURN THE ENCLOSED
PROXY IN THE ENVELOPE PROVIDED, TO WHICH NO POSTAGE NEED BE AFFIXED IF MAILED IN
THE UNITED STATES.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Jeffrey S. Distenfeld
JEFFREY S. DISTENFELD
Executive Vice President and Secretary
Bethesda, Maryland
March 31, 2000
- 18 -
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC.
PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of First Washington Realty Trust, Inc., a
Maryland corporation (the "Company"), revoking previous proxies, hereby
acknowledges the receipt of the Notice and Proxy Statement dated March 31, 2000
in connection with the Annual Meeting of Stockholders of the Company to be held
at 11:00 a.m. on Friday, May 12, 2000 at The Hyatt Regency-Bethesda, One
Bethesda Metro Center, Bethesda, MD 20814, and hereby appoints STUART D. HALPERT
and WILLIAM J. WOLFE, or either of them, as proxies for the undersigned, with
full power of substitution in each of them, to attend the meeting or any
adjournment or postponement thereof, to cast all the votes that the undersigned
is entitled to cast upon all matters properly coming before the meeting or any
adjournment or postponement thereof, and otherwise to represent the undersigned
at the meeting with all powers possessed by the undersigned as if personally
present at the meeting.
INSTRUCTIONS: This proxy when properly executed will be voted in the
manner directed herein by the undersigned stockholder. If no direction is made,
this proxy will be voted FOR items 1, 2 and 3 and in the discretion of the
holder(s) on any other matter properly coming before the meeting.
(Important - Please sign and date on other side)
SEE REVERSE SIDE
<PAGE>
Please date, sign and mail your proxy
card back as soon as possible!
Annual Meeting of Stockholders
FIRST WASHINGTON REALTY TRUST, INC.
May 12, 2000
Please Detach and Mail in the Envelope Provided
- --------------------------------------------------------------------------------
A [ X ] Please mark your
votes as in this
example.
- --------------------------------------------------------------------------------
The Board of Directors recommends that you vote FOR Items 1, 2 and 3,
as more fully described in the accompanying Proxy Statement.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR ALL nominees WITHHELD FROM ALL FOR AGAINST ABSTAIN
nominees --- ------- -------
<S> <C> <C> <C> <C> <C> <C>
1. Election of 2. Proposal to amend [ ] [ ] [ ]
the following [ ] [ ] Company's Stock Option
nominees as Plan to (i) increase the number
Directors: of shares available for issuance to
officers, directors and employees
and (ii) permit annual discretionary
grants to Independent Directors.
3. Ratification of [ ] [ ] [ ]
PricewaterhouseCoopers LLP
as auditors for the year ending
December 31, 2000.
4. In the discretion of the proxy holder(s) on any
other matter coming before the Meeting or
any postponement or adjournment thereof.
Nominees: Stuart D. Halpert, Stanley T. Burns and
Heywood Wilansky
FOR ALL EXCEPT vote withheld from the following nominees:
_______________________________________________________
Signature(s) ___________________________________ Signature(s) ___________________________________ Date____________________
NOTE: Each joint tenant should sign: executors, administrators, trustees, etc.
should give full title and where more than one is named, a majority should sign.
Please read other side before signing.
</TABLE>
