EXHIBIT 2
WASHINGTON REAL ESTATE INVESTMENT TRUST
10400 Connecticut Avenue
Kensington, Maryland 20895
April 22, 1996
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
of the Washington Real Estate Investment Trust to be held on June 20, 1996.
The formal Notice of the meeting and a Proxy Statement describing the proposals
to be voted on are enclosed.
The meeting is being held to elect two Trustees; to vote upon a
proposal to change the Trust's jurisdiction of organization from the District
of Columbia to Maryland by merging the Trust with and into a newly-formed
Maryland real estate investment trust that will survive the merger under the
name "Washington Real Estate Investment Trust"; to vote upon a proposal to
amend the Trust's Employee Stock Option Plan; and to transact such other
business as may properly come before the meeting.
The Trust proposes to change its jurisdiction of organization from the
District of Columbia to Maryland. This change is intended to permit the Trust
to obtain the benefit of several favorable provisions of Maryland law not
available under the laws of the District of Columbia. These provisions of
Maryland law are described in the attached proxy statement. Although the
change of jurisdiction of organization is accomplished by a merger, it will not
have any effect on the continued existence of the Trust, will not require any
exchange of shares by investors and will not have any tax consequences to
investors.
Please read the Proxy Statement, then complete, sign and return your
proxy in the enclosed envelope. Regardless of the number of shares you own,
your vote is important.
Sincerely,
/s/ ARTHUR A. BIRNEY
--------------------------
Arthur A. Birney
Chairman of the Board
WASHINGTON REAL ESTATE INVESTMENT TRUST
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of the Shareholders (the "Annual Meeting") of the
Washington Real Estate Investment Trust (the "Trust") will be held in the
Mayflower Hotel Grand Ball Room, 1127 Connecticut Avenue, N.W., Washington,
D.C., on June 20, 1996 at 11:00 a.m., for the following purposes:
1. To elect two Trustees;
2. To vote upon a proposal to change the Trust's jurisdiction of
organization from the District of Columbia to Maryland by merging
the Trust with and into a newly-formed Maryland real estate
investment trust that will survive the merger under the name
"Washington Real Estate Investment Trust";
3. To vote upon a proposal to amend the Trust's Employee Stock Option
Plan; and
4. To transact such other business as may properly come before the
meeting.
The Trustees have fixed the close of business on April 19, 1996 as the
record date for shares entitled to vote at the Annual Meeting.
The Annual Report of the Trust, Proxy Statement and a Proxy are
enclosed with this Notice.
You are requested, if you cannot be present at the meeting, to sign
and return the Proxy in the enclosed business reply envelope promptly.
/s/ BENJAMIN H. DORSEY
----------------------
BENJAMIN H. DORSEY
Secretary
April 22, 1996.
WASHINGTON REAL ESTATE INVESTMENT TRUST
10400 Connecticut Avenue
Kensington, Maryland 20895
PROXY STATEMENT
This Proxy Statement is furnished by the Trust's Board of Trustees
(the "Board") in connection with its solicitation of proxies for use at the
Annual Meeting of Shareholders on June 20, 1996, and at any and all
adjournments thereof. Mailing of this Proxy Statement will commence on or
about April 26, 1996. All proxies will be voted in accordance with the
instructions contained therein, and if no choice is specified, the proxies will
be voted in favor of the proposals set forth in the Notice of Annual Meeting.
Abstentions are voted neither "for" nor "against", but are counted in the
determination of a quorum. A Proxy on the enclosed form may be revoked by the
shareholder at any time prior to its exercise at the meeting by submitting, to
the Secretary of the Trust, a duly executed Proxy bearing a later date or by
attending the Annual Meeting and orally withdrawing the Proxy.
The voting securities of the Trust consist of shares of beneficial
interest, no par value ("Shares"), of which 31,751,734 Shares were issued and
outstanding at the close of business on March 31, 1996. So far as is known to
the Trust, no person holds of record or beneficially as much as 5% of the
outstanding Shares. The Trust has no other class of voting security. Each
Share outstanding on April 19, 1996, will be entitled to one vote.
Shareholders do not have cumulative voting rights.
I.
THE BOARD OF TRUSTEES AND MANAGEMENT
THE BOARD OF TRUSTEES
The Board consists of seven Trustees divided into two classes of two
Trustees each and one class of three Trustees. The terms of the Trustees
continue until the Annual Meetings to be held in 1996, 1997 and 1998,
respectively, and until their respective successors are elected and qualified.
At each Annual Meeting, two or three Trustees are elected, subject to the
limitations described below, for a term of three years to succeed those
Trustees whose terms expire at such Annual Meeting. The Trust's By-Laws
provide that no Trustee shall be nominated or elected as a Trustee after such
person's 72nd birthday. The By-Laws further provide that any Trustee who is
first elected a Trustee after December 19, 1995 shall tender his resignation as
a Trustee on his 72nd birthday.
The Board held 19 meetings in 1995. The Board has no standing
nominating committee; however, the Trustees meet as a committee of the whole to
consider such matters. The Trustees met once in 1995 for this purpose. The
Trustees will consider recommendations for nominations for Trustee received
from shareholders provided that the shareholder submits such recommendation in
writing before April 15, 1997 accompanied by a written statement setting forth
the reasons the Trust would benefit from the election of such nominee. An
Audit Committee, consisting of Messrs. Cafritz and Osnos was formed on April
11, 1995. The Audit Committee meets at least quarterly with the President and
Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer
to review operating results and other matters. The Audit Committee also makes
recommendations to the Board regarding dividend declarations and receives
reports from and participates in discussions with the Trust's independent
auditors, at least annually. The Audit Committee met 3 times in 1995. A
Compensation Committee, composed of Messrs. Cronin, Snyder and Cafritz, is
responsible for making recommendations to the Board with respect to
compensation decisions. The Compensation Committee met three times during
1995. See "Report on Executive Compensation" below. All members of the Board
attended more than 75% of the total number of meetings held during 1995.
The five non-officer Trustees of the Trust, Messrs. Birney, Cafritz,
Kahn, Osnos and Snyder, were compensated in the form of fees. This amount for
each such Trustee was $33,000 for 1995, except Mr. Kahn who was compensated as
an officer until June 21, 1995. Mr. Kahn's non-officer Trustee fees totaled
$16,500 in 1995. Mr. Birney, who acted as the recording secretary, received
additional remuneration for such services of $9,500. During 1995 the Trust
utilized the legal services of the law firm of Arent Fox Kintner Plotkin & Kahn
1
and advisory services of the accounting firm of Snyder, Kamerow & Associates,
P.C. Trustee David M. Osnos is a senior partner of Arent Fox and Trustee
Stanley P. Snyder is Chairman of Snyder, Kamerow. The amount of fees paid to
Arent Fox and Snyder, Kamerow did not exceed 5% of either firm's 1995 gross
revenues or 5% of the Trust's 1995 gross revenues.
The following table sets forth the names and certain biographical
information concerning each of the current Trustees.
SERVED AS TERM
NAME PRINCIPAL OCCUPATION(*) TRUSTEE SINCE AGE EXPIRES
- ----- ----------------------- ------------- --- -------
William N. Cafritz President, William Cafritz 1984 70 1996
Development Corp. (real
estate development)
Stanley P. Snyder Chairman, Snyder, Kamerow & 1968 61 1996
Associates, P.C. (Certified
Public Accountants)
Arthur A. Birney Chairman of the Trustees 1961 68 1997
Managing Partner and Chief Executive
Officer, Washington Brick & Terra
Cotta Co.(Real Estate Holding and
Development Company); Managing
Partner, Queenstown Harbor Golf
Links LP
B. Franklin Kahn Chairman Emeritus 1960 71 1997
Edmund B. Cronin, Jr. President and Chief Executive 1994 59 1998
Officer
Benjamin H. Dorsey Secretary of the Trust 1960 72 1998
Retired General Counsel
David M. Osnos Senior partner, Arent Fox Kintner 1987 64 1998
Plotkin & Kahn (Legal counsel
to the Trust);Director, VSE
Corporation (engineering);
Director, EastGroup Properties
(real estate investment trust)
(*) Each person has held the indicated position for more than the past five
years except Messrs. Birney, Cronin, Dorsey and Kahn.
Mr. Arthur A. Birney, a founding Trustee, is Managing Partner and
Chief Executive Officer of Washington Brick & Terra Cotta Co., a real estate
investment and holding company founded in 1892, President of Port Annapolis
Marina, Inc. and Managing Partner of Queenstown Harbor Golf Links L.P.
Mr. Edmund B. Cronin, Jr. has 35 years of real estate investment,
development, operations and finance experience in the Washington, D.C.
metropolitan market. From 1977 to 1993, he served as Chairman and Chief
Executive Officer of Smithy Braedon, a full service commercial real estate firm
providing leasing, sales, asset management, finance, consulting, advisory and
development services. From 1993 until joining the Trust in June 1994, Mr.
Cronin was Chief Executive Officer of H.G. Smithy Company, a real estate
management and advisory service company whose debt and equity assets under
management total approximately $1.5 billion.
Mr. Benjamin H. Dorsey retired as General Counsel of the Trust as of
December 31, 1995. Mr. Dorsey had served as Secretary and General Counsel of
the Trust since 1960. Mr. Dorsey continues to serve as Secretary and as a
Trustee.
Mr. B. Franklin Kahn retired as Chairman of the Trustees and Chief
Executive Officer of the Trust effective March 9, 1995, a position he had held
since 1960. The Trustees elected Arthur A. Birney as Chairman of the Trustees
and Edmund B. Cronin, Jr. as Chief Executive Officer of the Trust. Mr. Kahn
continues to serve as a Trustee.
2
OTHER EXECUTIVE OFFICERS
The following table contains information regarding other executive
officers of the Trust. Such officers are elected annually by the Board and
serve at the Board's discretion.
NAME AGE POSITION
- ------------------- --- ------------------------
Mary Beth Avedesian 35 Vice President--Investments
Larry E. Finger 42 Senior Vice President--Chief Financial Officer
Brian J. Fitzgerald 34 Vice President--Leasing Division Manager
Laura M. Franklin 35 Vice President--Chief Accounting Officer
Sandra T. Hunt 44 Vice President--Leasing
Thomas L. Regnell 39 Vice President--Acquisitions
Ms. Mary Beth Avedesian joined the Trust as Vice
President--Investments in March 1995. Ms. Avedesian was an Assistant Vice
President for Towle Financial Services from 1993-1995, where she performed
acquisition due diligence and asset management. Before Towle, Ms. Avedesian
was employed for 2 years as an Assistant Manager and Marketing Manager for
AMRESCO, a subsidiary of NationsBank formed to dispose of bank-owned property;
and for 4 years with Himmel and Company as a Financial Analyst and Development
Coordinator.
Mr. Larry E. Finger, an attorney and CPA, joined the Trust as Vice
President and Chief Financial Officer in December of 1993 and was elected
Senior Vice President and Chief Financial Officer in June of 1995. Prior to
joining the Trust, Mr. Finger served as Chief Operating Officer of
Savage/Fogarty Companies, Inc., a real estate investment, management and
development company based in Alexandria, Virginia. Mr. Finger was employed by
Savage/Fogarty for 13 years, from 1978-1991 serving four years in the
accounting division, ultimately as Vice President--Finance, seven years as
Senior Vice President and General Counsel then Executive Vice President and
General Counsel and finally two years as Chief Operating Officer. During 1992
and until he joined the Trust, Mr. Finger created and operated a
multi-restaurant delivery business in Richmond, Virginia.
Mr. Brian J. Fitzgerald joined the Trust in January of 1996 as Vice
President and Division Manager of Leasing. Prior to coming to the Trust, Mr.
Fitzgerald served as a commercial leasing broker from 1984 to 1993 with Smithy
Braedon Company, in Northern Virginia. In 1993, he became a Vice President of
H. G. Smithy Company, with responsibilities for managing all agency leasing
activities. From the date of the merger of H. G. Smithy Commercial Management
Group with Cushman & Wakefield of Washington, D.C., Inc. in June of 1994 until
joining the Trust, Mr. Fitzgerald managed institutional agency leasing
activities at Cushman & Wakefield, Inc. of Washington, D.C.
Ms. Laura M. Franklin, a CPA, joined the Trust in 1993. Prior to
joining the Trust, Ms. Franklin spent over 10 years with the public accounting
firm of Reznick, Fedder and Silverman, P.C. specializing in auditing and tax
for real estate clients.
Ms. Sandra T. Hunt joined the Trust in 1983 and has held the position
of Vice President--Leasing for more than five years.
Mr. Thomas L. Regnell joined the Trust as Vice
President--Acquisitions in January of 1995. From 1992 through 1994, Mr.
Regnell served as an Investment Officer with Federal Realty Investment Trust in
Bethesda, Maryland. Mr. Regnell was responsible for Federal Realty's real
estate acquisitions in the Midwest and Southeast United States. Prior to
joining Federal Realty, Mr. Regnell was a Vice President with Spaulding & Slye
Company, a real estate development, brokerage and management company in
Bethesda, Maryland. Mr. Regnell was associated with Spaulding & Slye for
seven years.
There are no family relationships between any Trustee or executive
officer.
3
OWNERSHIP OF SHARES BY TRUSTEES AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning all
Shares beneficially owned as of April 19, 1996, by each Trustee, by each of the
"Named Officers" (as defined in "Executive Compensation" below) and by all
Trustees and Executive Officers as a group. Unless otherwise indicated, the
voting and investment powers for the Shares listed are held solely by the named
holder.
Percentage
Name Shares Owned of Total
- ----- ------------ --------
Arthur A. Birney 48,433(1) 0.153%
William N. Cafritz 17,648(1) 0.056%
Edmund B. Cronin, Jr. 26,453(2) 0.083%
Benjamin H. Dorsey 108,134(1,2) 0.341%
Larry E. Finger 4,261(2) 0.013%
Sandra T. Hunt 51,702(2) 0.163%
B. Franklin Kahn 393,389(1,2) 1.239%
David M. Osnos 900 0.003%
Thomas L. Regnell --- ---
Stanley P. Snyder 5,062 0.016%
All Trustees and Executive Officers
as a group (12 persons) 661,971(2) 2.085%
- ------------
(1) Includes shares held in a trust or estate or by spouse.
(2) Includes shares subject to options exercisable within 60 days, as follows:
Mr. Cronin, 7,838; Mr. Dorsey, 23,376; Mr. Finger, 3,292; Ms. Hunt,
48,879; Mr. Kahn, 84,161 shares; and all Trustees and Executive Officers
as a group, 173,225.
II.
ELECTION OF TRUSTEES
Two Trustees, Messrs. Cafritz and Snyder, stand for election at the
Annual Meeting, to serve for three years. It is intended that the proxies
given to the persons named in the accompanying Proxy (unless otherwise
indicated on such Proxy) will be voted for the election of Messrs. Cafritz and
Snyder, each of whom currently serves as a Trustee. If a nominee becomes
unable or unwilling to stand for election for any reason not presently known or
contemplated, the persons named in the enclosed Proxy will have discretionary
authority to vote pursuant to the Proxy for a substitute nominee nominated by
the Board. The election of Trustees requires the affirmative vote of the
holders of a majority of the shares voting at the Annual Meeting either in
person or by proxy.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE IN FAVOR OF THE
ELECTION OF WILLIAM N. CAFRITZ AND STANLEY P. SNYDER.
III.
PROPOSAL TO CHANGE THE TRUST'S STATE OF ORGANIZATION
On April 5, 1996, the Board approved, subject to shareholder approval,
a proposal to change the Trust's state of organization from the District of
Columbia to Maryland by means of a merger (the "Merger") of the Trust with and
into Washington Real Estate Investment Trust of Maryland ("Maryland WRIT"), a
newly formed Maryland real estate investment trust that initially will be a
subsidiary of the Trust (the "Change of Domicile Proposal"). Maryland WRIT
will be the survivor of the Merger and will change its name to Washington Real
Estate Investment Trust. The principal effect of the Merger will be to change
the law governing the Trust's organization and operations as an unincorporated
business trust from the law of the District of Columbia to the law of the state
of Maryland, including the portion of the Maryland Corporations and
Associations law pertaining to real estate investment trusts (the "Maryland
REIT Law").
4
The following discussion summarizes certain aspects of the Change of
Domicile Proposal, including certain differences between District of Columbia
and Maryland law. This summary does not purport to be a complete description
of the Change of Domicile Proposal or the differences between shareholders'
rights under District of Columbia and Maryland law and is qualified in its
entirety by reference to the Maryland WRIT Declaration of Trust and By-Laws,
copies of which are available for inspection at the Trust's offices and will be
provided to shareholders on request and without charge by written or oral
request to the Trust at 10400 Connecticut Avenue, Kensington, Maryland 20895,
Attention: Brenda Barnhart (telephone (301) 929-5900).
Approval of the Change of Domicile Proposal by the Trust's
shareholders will also constitute approval of the Merger.
PRINCIPAL FEATURES OF THE CHANGE OF DOMICILE PROPOSAL
On the effective date of the Merger, the separate existence of the
Trust, as a District of Columbia trust, will cease, and Maryland WRIT will
succeed to all of the business, properties, assets and liabilities of the
Trust. Each Share issued and outstanding immediately prior to the effective
date will by virtue of the Merger be converted into one share of Maryland WRIT.
At the effective date, certificates which immediately prior to the effective
date represented Shares will be deemed for all purposes to represent the same
number of shares of Maryland WRIT. IT WILL NOT BE NECESSARY FOR SHAREHOLDERS
TO EXCHANGE THEIR EXISTING CERTIFICATES FOR MARYLAND WRIT CERTIFICATES.
Approval of the Change of Domicile Proposal will not result in any
change in the business, management, assets or liabilities of the Trust.
Following consummation of the Merger, Maryland WRIT shares will be listed on
the American Stock Exchange, the exchange on which the Shares are currently
listed. The American Stock Exchange will consider the delivery of existing
certificates representing Shares as constituting "good delivery" of shares of
Maryland WRIT in transactions subsequent to the Merger.
Pursuant to the terms of the Merger, Maryland WRIT will adopt the 1991
Stock Option Plan, as amended, and each option to purchase Shares outstanding
immediately prior to the Merger will become an option to purchase Maryland WRIT
shares, subject to the same terms and conditions as set forth in the agreements
pursuant to which such options were granted. All other employee benefit plans
and other agreements and arrangements of the Trust will continue on the same
terms and subject to the same conditions.
It is anticipated that the Merger will become effective as soon as
practicable after the Annual Meeting. However, the Merger may be abandoned by
the Board prior to the effective date, either before or after shareholder
approval. In addition, the terms of the Merger may be amended prior to the
effective date, either before or after shareholder approval; provided, however,
that the terms of the Merger may not be amended after shareholder approval if
such amendment would (i) alter the amount or kind of shares or other
consideration to be received by shareholders in the Merger, (ii) alter any
material terms of the Maryland WRIT Declaration of Trust, (iii) alter any of
the terms and conditions of the Merger if such alteration would adversely
affect the shareholders or (iv) otherwise violate applicable law. No federal
or state regulatory requirements must be complied with or approvals obtained in
connection with the Merger, other than the acceptance for filing of Articles of
Merger by the Maryland Department of Assessments and Taxation and the District
of Columbia Recorder of Deeds.
PRINCIPAL REASONS FOR THE CHANGE OF DOMICILE PROPOSAL
Maryland has adopted detailed laws governing the organization and
operations of real estate investment trusts, while the District of Columbia has
no statutory provisions pertaining to real estate investment trusts and little
other law pertaining to the organization and operations of trusts. The Board
believes that the best interest of the Trust and the shareholders will be
served by changing the Trust's state of organization from the District of
Columbia to Maryland. At the time of the Trust's organization in 1960, no
state had statutory provisions pertaining to the organization or operation of a
real estate investment trust and a larger portion of the Trust's property was
located in the District of Columbia.
Since that time, Maryland has adopted and continued to improve
statutory provisions pertaining to the organization and operation of real
estate investment trusts. The Trustees believe that Maryland law, including
the
5
Maryland REIT Law, will provide specific rights and powers in connection with
the organization and operation of the Trust which are not available under
District of Columbia law and will make clear rights and powers which are not
expressly granted to trusts under District of Columbia law. The Trust
understands that currently seventeen publicly owned real estate investment
trusts are organized under Maryland law, including the Maryland REIT Law.
COMPARISON OF CERTAIN DECLARATION OF TRUST AND BY-LAW PROVISIONS AND OF CERTAIN
PROVISIONS OF MARYLAND REIT LAW AND DISTRICT OF COLUMBIA LAW
The Declaration of Trust of Maryland WRIT (the "New Articles") are
substantially similar to the Trust's current Declaration of Trust (the "Current
Articles"). The differences between the New Articles and the Current Articles
are primarily the result of the adoption of provisions intended to take
advantage of the additional rights and powers specifically provided by the
Maryland REIT Law. Significant provisions of the New Articles and new By-Laws,
certain important differences between such documents and the Current Articles
and current By-Laws and certain differences between the Maryland REIT Law and
District of Columbia law are discussed below.
LIMITATION OF LIABILITY OF SHAREHOLDERS. The Current Articles provide
that no shareholder shall be personally liable in connection with the Trust's
property or affairs. The Current Articles further provide that the Trust shall
indemnify and hold harmless shareholders against all claims and liabilities and
related reasonable expenses to which they become subject by reason of their
being or having been shareholders. In addition, the Trust as a matter of
practice, inserts a clause in its business, management and other contracts
which provides that shareholders shall not be personally liable thereunder.
Although there are no District of Columbia statutes addressing the subject, the
Trust in the past has received the advice of counsel, based upon the judicial
decisions of other jurisdictions, that under the laws of the District of
Columbia and most other jurisdictions, no personal liability will attach to the
Trust's shareholders for contract claims under any contract containing such a
clause where adequate notice is given. However, in respect to tort claims,
contract claims where shareholder liability is not so negated, claims for taxes
and certain statutory liabilities, the shareholders of the Trust may, in some
jurisdictions, be personally liable to the extent that such claims are not
satisfied by the Trust. The Trust carries public liability insurance which the
Trustees consider adequate. Thus, any risk of personal liability to
shareholders is limited to situations in which the Trust's assets plus its
insurance coverage would be insufficient to satisfy the claims against the
Trust and its shareholders or the Trust's assets were insufficient to satisfy
such claims and the Trust's insurance did not cover them.
The text of Section 3.3 of the New Articles, which deals with
shareholder liability, is virtually unchanged from the same provision of the
Current Articles. However, under the applicable provisions of Maryland law,
including the Maryland REIT Law, shareholders of a real estate investment
trust, in their capacity as shareholders, bear no liability for the obligations
or liabilities of the Trust. Accordingly, the adoption of the Change of
Domicile Proposal will provide express statutory authority for the Section 3.3
negation of shareholder liability. The Trust believes that this statutory
authority for Section 3.3 will eliminate uncertainty as to the Trust's
authority to negate shareholder liability and eliminate the remaining risk of
shareholder liability for any of the Trust's obligations or liabilities.
LIMITATION OF LIABILITY OF TRUSTEES AND OFFICERS. The Current
Articles provide that the Trust's Trustees and officers shall not be liable to
the Trust or its shareholders except for (i) any breach of the duty of loyalty
of the Trustee or officer to the Trust or its shareholders, (ii) acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law or (iii) any transaction from which the Trustee or
officer derived any improper personal benefit. Again, although there are
judicial decisions supporting the proposition that a trust may include
limitations on the liability of its trustees in its declaration of trust, there
is no District of Columbia statute authorizing such provisions nor stating the
extent to which the liability of the Trustees or officers may be so limited.
The Trust believes that a court would find that the Trust may limit the
liability of its Trustees and officers, but it is not certain that a court
would uphold the extent of the limitation of liability included in the Current
Articles. The Trust has modeled the limitation on liability included in the
Current Articles on similar provisions authorized in the corporation statutes
of other jurisdictions, but a court, absent
6
more direct authority, may not necessarily hold that the Trust has the
authority or power to limit the liability of the Trustees or officers to the
extent provided in the Current Articles.
Under the Maryland REIT Law, there is express authority for a real
estate investment trust's declaration of trust to include provisions limiting
the liability of trustees and officers to the trust and its shareholders and
specifying the extent of the permitted limitations of liability. The New
Articles give the Trustees and officers the benefit of the fullest protection
permitted by the Maryland REIT Law. The New Articles, as authorized by the
Maryland REIT Law, provide that the Trustees and officers shall be liable to
the Trust or the shareholders only (i) to the extent the Trustee or officer
actually received an improper benefit or profit in money, property or services,
in which case any such liability shall not exceed the amount of the benefit or
profit in money, property or services actually received; or (ii) to the extent
that a judgment or other final adjudication adverse to such Trustee or officer
is entered in a proceeding based on a finding in the proceeding that such
Trustee's or officer's action or failure to act was the result of active and
deliberate dishonesty and was material to the cause of action adjudicated in
the proceeding.
In addition to receiving the benefit of express statutory authority
for the inclusion of a limitation on the liability of Trustees and officers and
for the extent of such limitation, the New Articles also, as permitted by the
Maryland REIT Law, expand the limitation of liability of the Trustees and
officers by excluding liability for a breach of the duty of loyalty, unless it
results in an improper personal benefit or was the result of active and
deliberate dishonesty, as described above. In situations in which the
provisions of the New Articles limiting Trustee and officer liability would
apply, the remedies available to the Trust or its shareholders would be limited
to equitable remedies such as an injunction or rescission.
The Trust believes that it is important that the New Articles provide
the fullest limitation on liability permitted by the Maryland REIT Law. The
Board currently includes six Trustees who are not employees of the Trust. In
addition, the Trust enjoys the benefit of a staff of skilled and professional
executive officers. The Trust believes that in order to retain its outside
Trustees and executive officers, and to obtain the services of outside Trustees
and executive officers in the future, it is essential to provide these persons
with reasonable assurances of protection from personal liability. The Trust
believes that the limitations on liability included in the New Articles are
comparable to those provided by other publicly-held real estate investment
trusts and are reasonable.
INDEMNIFICATION OF TRUSTEES AND OFFICERS. The Current Articles
provide for the indemnification of Trustees and officers to the same extent and
in the same manner as provided in the District of Columbia Business
Corporations Act. There is, however, no statute in the District of Columbia
applicable to real estate investment trusts expressly permitting a real estate
investment trust to indemnify its trustees and officers. As with respect to
the limitation of liability, the Trust believes that a court would hold that
the Trust may include provisions in its Declaration of Trust providing for the
indemnification of the Trust's Trustees and officers in certain circumstances,
but again, the extent to which such indemnification would be permitted is not
certain. The Maryland REIT Law, however, provides that indemnification of
trustees and officers is permitted to the fullest extent permitted under
Section 2-418 of the Corporation and Associations Article of the Annotated Code
of Maryland ("Section 2-418"). By providing express statutory authority, the
Maryland law reduces the likelihood that the indemnification provisions in the
New Articles would be found to exceed the permitted indemnification.
Section 2-418 also provides broader protection than the comparable
provision of the District of Columbia Business Corporation Act. Under District
of Columbia law, a director or officer cannot be indemnified if he or she is
found by a court to be liable for negligence or misconduct in the performance
of duty. Under Section 2-418 indemnification is restricted only if (i) an act
or omission of the trustee or officer was material to the matter giving rise to
the proceeding and (a) was committed in bad faith or (b) was the result of
active and deliberate dishonesty; (ii) the trustee actually received an
improper personal benefit in money, property or services; or (iii) in the case
of any criminal proceeding, the trustee or officer had reasonable cause to
believe that the act or omission was unlawful. Section 3.2 of the New Articles
provides for the indemnification of Trustees and officers to the fullest extent
permitted under Section 2-418.
For the reasons stated above with respect to the limitations of
liability of the Trustees and officers, the Trust also believes that it is
important that the New Articles provide the fullest indemnification permitted
by the
7
Maryland REIT Law. The Trust believes that the indemnification included in the
New Articles is comparable to that provided by other publicly-held real estate
investment trusts and is reasonable.
INDEMNIFICATION OF EMPLOYEES AND AGENTS. There is no provision in the
Current Articles authorizing indemnification of the Trust's employees or
agents. Under the Maryland REIT Law, however, indemnification of these
individuals is p rmitted. The New Articles, therefore, take advantage of the
greater flexibility permitted under Maryland law. Under Section 3.2 of the New
Articles, indemnification of employees and agents of the Trust is permitted to
the extent authorized by the Trustees or provided for in the provisions of the
new By-Laws.
For the reasons stated above with respect to the limitations of
liability and indemnification of the Trustees and officers, the Trust also
believes that it is important that the New Articles provide the fullest
indemnification of its employees and agents permitted by the Maryland REIT Law.
The Trust believes that the indemnification included in the New Articles is
comparable to that provided by other publicly-held real estate investment
trusts and is reasonable.
BUSINESS COMBINATION PROVISIONS. The Current Articles provide that
any merger, consolidation or liquidation of the Trust, or any sale of all or
substantially all of its assets, must be approved by a majority of the
Trustees, and that if any such transaction is with, into or to a Related
Shareholder (defined as a person or entity beneficially owning, directly or
indirectly, 5% or more of the outstanding Shares), the transaction must be
approved by a majority of the Trustees not appointed or nominated by or acting
on behalf of the Related Shareholder or an affiliate or associate of the
Related Shareholder. An identical provision is included in the New Articles.
These provisions may be amended only by the affirmative vote of the holders of
70% or more of the outstanding Shares.
In the New Articles, the Trust, as permitted by Maryland Law, has
expressly elected to be governed by the special voting requirement of the
Maryland Corporations and Associations Article (the "Special Voting Article").
Opting to be governed by the Special Voting Article adds additional
restrictions to those already set forth in the Current Articles concerning
business combinations. The Special Voting Article establishes special
requirements with respect to "business combinations" between an "interested
stockholder" and a Maryland corporation unless exemptions are applicable.
Among other things, the Special Voting Article prohibits, for a period of five
years, a merger and other specific or similar transactions between a Maryland
corporation and an interested stockholder and requires a super majority-vote
for such transactions after the end of such five-year period. (For the
purposes of the Special Voting Article and the Control Share Article (described
below), a "Maryland corporation" includes a Maryland real estate investment
trust. They are referred to collectively in this section as a "Maryland
company".)
"Interested stockholders" are all persons owning beneficially,
directly or indirectly, more than 10% of the outstanding voting stock of a
Maryland company. "Business combinations" include any merger or similar
transaction subject to a statutory vote and additional transactions involving
transfers of assets or securities in specified amounts to interested
stockholders or their affiliates. Unless an exemption is available,
transactions of these types may not be consummated between a Maryland company
and an interested stockholder or its affiliates for a period of five years
after the date on which the stockholder first became an interested stockholder
and, thereafter, may not be consummated unless recommended by the board of the
Maryland company and approved by the affirmative vote of at least 80% of the
votes entitled to be cast by all holders of outstanding shares of voting stock
and 66-2/3% of the votes entitled to be cast by all holders of outstanding
shares of voting stock other than the interested stockholder unless, among
other things, the company's stockholders receive a minimum price (as defined in
the Special Voting Article) for their shares and the consideration is received
in cash or in the same form as previously paid by the interested stockholder
for its shares. This provision was included in the Special Voting Article to
protect investors in Maryland companies who may be involved in an attempt by a
person or entity to gain control of a Maryland company using a "front-end
loaded" tender offer. In this technique, the person or entity offers to
purchase up to a certain amount of a company's stock, such as 51%, and states
its intention to follow with a second-stage merger or similar transaction
following the tender at a lower price than was paid for the first 51%. The
opportunity to obtain the earlier, higher price is often availed of by
arbitrageurs who purchase large quantities of stock and tender it during such
tender offer. Other investors are frequently left with the second-stage
transaction following the tender offer at a lower price.
8
A business combination with an interested stockholder which is
approved by the board of a Maryland company at any time before an interested
stockholder first becomes an interested stockholder is not subject to the
special voting requirements or fair price provisions of the Special Voting
Article. An amendment to a Maryland company's charter electing not to be
subject to the foregoing requirements must be approved by the affirmative vote
of at least 80% of the votes entitled to be cast by all holders of outstanding
shares of voting stock and 66-2/3% of the votes entitled to be cast by holders
of outstanding shares of voting stock who are not interested stockholders. Any
such amendment is not effective until eighteen months after the vote of
stockholders and does not apply to any business combination of a company with a
stockholder who was an interested stockholder on the date of the stockholder
vote.
In the New Articles, the Trust, as permitted by Maryland law, has also
expressly elected to be governed by the control share provisions of the
Maryland Corporations and Associations Article (the "Control Share Article").
Under the Control Share Article, "control shares" of a Maryland company
acquired in a "control share acquisition" have no voting rights except to the
extent approved by a vote of two-thirds of the votes entitled to be cast on the
matter, excluding shares of stock owned by the acquirer or by officers or
directors who are employees of the company. "Control shares" are voting shares
of stock which, if aggregated with all other shares of stock previously
acquired by such a person, would entitle the acquirer to exercise voting power
in electing directors within one of the following ranges of voting power: (i)
20% or more but less than 33-1/3%, or (ii) 33-1/3% or more but less than a
majority, or (iii) a majority of all voting power. Control shares do not
include shares the acquiring person is then entitled to vote as a result of
having previously obtained shareholder approval. A "control share acquisition"
means, subject to certain exceptions, the acquisition of, ownership of, or the
power to direct the exercise of voting power with respect to, control shares.
A person who has made or proposes to make a control share acquisition
upon satisfaction of certain conditions (including an undertaking to pay
expenses), may compel the board of directors to call a special meeting of
shareholders to be held within 50 days of demand to consider the voting rights
of the shares. If no request for a meeting is made, the Maryland company may
itself present the question at any shareholders' meeting.
If voting rights are not approved at the meeting or if the acquiring
person does not deliver an acquiring person statement as permitted by the
statute, then, subject to certain conditions and limitations, the Maryland
company may redeem any or all of the control shares (except those for which
voting rights have previously been approved) for fair value, without regard to
voting rights. Fair value shall be determined as of the date of the meeting of
the shareholders at which the voting rights of the control shares are
considered but not approved. If no such meeting is held, fair value shall be
determined as of the date of the last acquisition of control shares by the
acquiring person. If voting rights for control shares are approved at a
shareholders' meeting and the acquirer becomes entitled to vote a majority of
the shares entitled to vote, all other shareholders may exercise appraisal
rights. The fair value of the shares as determined for purposes of such
appraisal rights may not be less than the highest price per share paid in the
control share acquisition, and certain limitations and restrictions otherwise
applicable to the exercise of dissenters' rights do not apply in the context of
a control share acquisition.
The Control Share Article does not apply to shares acquired in a
merger, consolidation or share exchange if the Maryland company is a party to
the transaction, to acquisitions approved or exempted by the charter or bylaws
of the Maryland company or to shares acquired before November 4, 1988 or
pursuant to a contract entered into before November 4, 1988.
The foregoing provisions may have the effect of discouraging
unilateral tender offers or other takeover proposals which certain shareholders
might deem in their interests or pursuant to which they might receive a
substantial premium for their Shares. The Control Share Article in particular
has the effect of making a unilateral tender offer or other takeover of the
Trust much more difficult. The provisions could also have the effect of
insulating current management against the possibility of removal and could, by
possibly reducing temporary fluctuations in market price caused by
accumulations of Shares, deprive shareholders of opportunities to sell at a
temporarily higher market price. However, the Trustees believe that inclusion
of the business combination provisions in the New Articles may help assure fair
treatment of shareholders and preserve the assets of the Trust.
9
EXCESS SHARE PROVISIONS. The excess share provisions in the Current
Articles have not been altered in the New Articles. The provisions have been
maintained because the Board believes it is in the best interests of the Trust
to protect its status as a real estate investment trust.
For the Trust to qualify as a real estate investment trust (a "REIT")
under the Internal Revenue Code (the "Code"), in any taxable year, not more
than 50% in value of its outstanding Shares may be owned, directly or
indirectly, by five or fewer individuals during the last six months of such
year, and the Shares must be owned by 100 or more persons during at least 335
days of a taxable year or a proportionate part of a taxable year less than 12
months. In order to meet these and other requirements, the Trustees have the
power to redeem or prohibit the transfer of a sufficient number of Shares to
maintain or bring the ownership of the Shares into conformity with such
requirements. In connection with the foregoing, if the Trustees shall, at any
time and in good faith, be of the opinion that direct or indirect ownership of
Shares representing more than 10% in value of the total Shares outstanding (the
"Excess Shares") has or may become concentrated in the hands of one beneficial
owner, the Trustees shall have the power (i) to repurchase from any shareholder
of the Trust such Excess Shares and (ii) to refuse to sell, transfer or deliver
Shares to any person whose acquisition of such Shares would, in the opinion of
the Trustees, result in the direct or indirect beneficial ownership by any
person of Shares representing more than 10% in value of the outstanding Shares.
The purchase price for any Shares so repurchased shall be at cost or at the
last sale price of the Share as of the date immediately preceding the day on
which the demand for repurchase is mailed, whichever price is higher. From and
after the date fixed for repurchase by the Trustees, and so long as payment of
the purchase price for the Shares to be so repurchased shall have been made or
duly provided for, the holder of any Excess Shares so called for repurchase
shall cease to be entitled to distributions, voting rights and other benefits
with respect to such Shares, except the right to payment of the purchase price
for the Shares.
Both the Current Articles and the New Articles have a similar excess
share provision to ensure that any rent paid to the Trust by a "sister
corporation" not become disqualified as rent from real property by virtue of
Section 856(d)(2)(B) of the Code. Under these provisions, the Trustees have
the power (i) by lot or other means deemed equitable to call for purchase from
any shareholder such numbers of Shares as shall be sufficient in the opinion of
the Trustees to maintain or bring the direct or indirect ownership of Shares in
conformity with the requirements of Section 856(d)(2)(B), and (ii) to refuse to
register the transfer of Shares to any person whose ownership would jeopardize
the Trust's compliance with Section 856(d)(2)(B). For purposes of this
provision, the term "sister corporation" means a corporation the shares of
which are owned by exactly or substantially the same persons and in exactly or
substantially the same numbers as are the shares. This provision shall apply
even if a "sister corporation" does not exist (i) at the time the Trustees
determine that the ownership of Shares has or may become so concentrated, or
(ii) at the time the Trustees call Shares for purchase or refuse to register
the transfer of Shares. The purchase price for the Shares purchased pursuant
thereto shall be equal to the fair market value of such Shares as reflected in
the closing price for such Shares on the principal stock exchange on which such
Shares are listed or, if such Shares are not listed, then the last bid for the
Shares, as of the close of business on the date fixed by the Trustees for such
purchase or, if no such quotation is available, as shall be determined in good
faith by the Trustees. From and after the date fixed for purchase by the
Trustees, the holder of any Shares so called for purchase shall cease to be
entitled to dividends, voting rights and other benefits with respect to such
Shares, except the right to payment of the purchase price fixed as aforesaid.
In order to further assure that ownership of the Shares does not
become so concentrated, both the Current Articles and the New Articles have a
provision that provides that if any transfer of Shares would prevent amounts
received by the Trust from a "sister corporation," if one existed, from
qualifying as "rents from real property" as defined in Section 856(d) of the
Code, by virtue of the application of Section 856(d)(2)(B) of the Code, the
transfer shall be void ab initio and the intended transferee of such Shares
shall be deemed never to have had an interest therein. If this provision is
deemed void or invalid by virtue of any legal decision, statute, rule or
regulation, then the transferee of such Shares is deemed to have acted as an
agent on behalf of the Trust. Furthermore, both the Current Articles and the
New Articles provide that shareholders shall upon demand disclose to the
Trustees in writing such information with respect to their direct and indirect
ownership of the Shares as the Trustees deem necessary to determine whether the
Trust satisfies the provisions of Sections 856(a)(5) and (6) and Section 856(d)
of the Code or the regulations thereunder, as the same shall from time to time
be amended, or to comply with the requirements of any other taxing authority.
10
Similarly to the business combination provisions, the excess share
provisions may deter or render more difficult attempts by third parties to
obtain control of the Trust if such attempts are not supported by the Board.
The Board, however, believes these provisions are necessary to protect the
Trust's interests in maintaining its status as an REIT under the Code.
OTHER DIFFERENCES IN THE LAW. As mentioned in several sections of
this discussion, the District of Columbia law does not include statutory
provisions pertaining expressly to real estate investment trusts. The
principal provisions of the Maryland REIT Law which will be applicable to
Maryland WRIT are discussed above. Set forth below is a brief description of
other matters expressly addressed in the Maryland REIT Law for which there is
no comparable provision in District of Columbia law.
Section 8-301 of the Maryland REIT Law specifically sets forth the
powers of a Maryland real estate investment trust. These powers are
substantially the same as the powers set forth in the Current Articles and the
New Articles. Section 8-301, however, provides specific authority for the
Trust to make and alter bylaws not inconsistent with law or the New Articles to
regulate the government of the Trust and the administration of its affairs.
Although the Trust, in accordance with the Current Articles, has adopted
By-Laws for the administration and operation of the Trust, it is not clear
under District of Columbia law to what extent a trust is permitted to adopt
bylaws. Section 8- 301 eliminates this concern with respect to the By-Laws of
Maryland WRIT.
Section 8-402 of the Maryland REIT Law grants the shareholders of a
Maryland real estate investment trust the same specific rights to inspect
records of the trust as are granted to shareholders in a Maryland corporation.
Although District of Columbia law has no comparable provision, Section 7.7 of
the Current Articles grants shareholders of the Trust the rights of inspection
provided to shareholders of a District of Columbia corporation. The
shareholder inspection statutes for Maryland and the District of Columbia are
very similar; however, Maryland law permits limited rights to inspect the
records of a corporation to any shareholder of the corporation. Upon meeting
requirements of a 5% minimum shareholder interest and ownership for at least
six months, a shareholder of a Maryland corporation may gain access to the
corporation's stock ledger. Shareholders may combine to meet the 5%
shareholder interest requirement. The District of Columbia law imposes a 5%
shareholder interest requirement to inspect the records of a corporation or the
corporation's stock ledger, but does not require a minimum ownership period.
Shareholders also may combine to meet the District of Columbia's 5% minimum
shareholder interest requirement.
Section 8-501.1 of the Maryland REIT Law specifically authorizes a
Maryland real estate investment trust to enter into a merger with a
corporation, another trust, a limited liability company or a limited
partnership, specifies the procedures for such a merger and grants shareholders
objecting to any such merger the same rights to dissent as provided to
shareholders of a Maryland corporation. Although judicial decisions authorize
trusts to enter into mergers and the Current Articles also specifically
contemplate that the Trust may enter into a merger, neither District of
Columbia law nor the Current Articles specify the procedures for a merger
involving a real estate investment trust or grants dissenter rights with
respect to such a merger.
OTHER ARTICLE PROVISIONS. The New Articles also differ from the
Current Articles in several other respects. Among these differences are the
following provisions.
Under Section 2.20 of the Current Articles, the Trust is prohibited
from investing in investment securities, including certificates of interest or
shares of beneficial interest in other real estate investment trusts ("REIT
Shares"), beyond 25% of the net assets of the Trust. The Code currently
specifies that at least 75% of a REIT's assets must be invested in real estate
assets, government securities, cash and cash items, including receivables. The
Code, however, defines "real estate assets" to include REIT Shares.
Accordingly, although the Board has no current intention to invest Trust assets
in a material amount of REIT Shares, because the Code defines "real estate
assets" to include REIT Shares, an exception has been inserted in Section 2.20
of the New Articles to permit unlimited investments in REIT Shares.
The Maryland REIT Law requires the New Articles to explicitly state the
number of authorized shares, and accordingly, under Section 4.1(a) of the New
Articles, the total number of authorized shares is set at 100,000,000 shares,
with a par value of $.01 per share. This differs from the Current Articles,
which permit an unlimited number of authorized Shares. The requirement to
state the number of authorized shares in the New Articles,
11
however, is not restrictive because the New Articles, in accordance with the
Maryland REIT Law, also authorize the Board to increase the aggregate number of
authorized Shares without shareholder approval.
As discussed below under "Vote Required," the Current Articles do not
clearly specify the shareholder vote required to approve certain actions.
Section 7.5 of the New Articles expressly specifies that, except as otherwise
set forth in the New Articles, any matter requiring a vote of shareholders
shall be approved by a vote of the holders of a majority of the Shares.
CHANGES TO CURRENT BY-LAWS. The new By-Laws contain only minor
changes from the current By-Laws. Sections 7.1 and 7.2 of the Current
Articles, which set forth the manner in which annual and special meetings can
be called and held, have been moved to the new By-Laws, and the provisions for
calling a meeting of the Trustees have also been moved to the new By-Laws. The
principal consequence of including provisions in the By-Laws rather than the
New Articles is to permit their further amendment by Board vote rather than
requiring shareholder approval.
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The Merger will constitute a reorganization under Section 368(a)(1)(F)
of the Code. Consequently, holders of Shares will not recognize any gain or
loss for federal income tax purposes as a result of the conversion of their
Shares into shares of Maryland WRIT. For federal income tax purposes, a
holder's aggregate basis in the shares of Maryland WRIT received in the Merger
will equal such holder's adjusted basis in the Shares converted therefor and
such holder's holding period for the Maryland WRIT shares received in the
Merger will include such holder's holding period in the Shares converted
therefor.
Likewise, the Trust will not recognize any gain or loss for federal
income tax purposes upon the transfer of its property to Maryland WRIT pursuant
to the Merger. In addition, Maryland WRIT will succeed to and take into
account the earnings and profits, accounting methods, and other tax attributes
of the Trust specified in Section 381(c) of the Code.
Holders of Shares should consult their own tax advisors as to the
application and effect of state, local and foreign income and other tax laws to
the conversion of their Shares into shares of Maryland WRIT pursuant to the
Merger.
VOTE REQUIRED
Although the Current Articles permit the Trust to enter into a merger,
the Current Articles do not expressly state the percentage vote of shareholders
required to approve the Change of Domicile Proposal. Section 10.1 of the
Current Articles, however, provides that the Trust may be terminated with the
approval of the holders of a majority of the Shares. It also provides that the
Current Articles may be amended with the approval of the holders of a majority
of the Shares, except that an amendment to certain Sections, including Section
8.1 specifying the number of Trustees, Section 8.2 providing for the election
of the Trustees in three staggered classes, Section 10.1 specifying the
percentage of shareholder approval required for certain actions and Article 15
requiring a special Trustee vote in connection with certain transactions
relating to the acquisition of the Trust or its assets, require the vote of
holders of 70 percent of the outstanding Shares.
Because the New Articles, as described above, do not differ in any
material respect from Sections 8.1, 8.2 and 10.1 and Article 15 of the Current
Articles, and because the Change of Domicile Proposal will be effected through
the Merger and not by an amendment of the Current Articles, the Trust believes
that the Change of Domicile Proposal may be approved by the vote of the holders
of a majority of the outstanding Shares.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE CHANGE OF
DOMICILE PROPOSAL
12
IV.
ADOPTION OF AMENDMENTS TO OPTION PLAN
The Trust currently maintains the Washington Real Estate Investment
Trust 1991 Stock Option Plan (the "Plan"), which provides for the grant to
officers and employees of the Trust of options to purchase up to an aggregate
of 1,515,241.5 Shares (as adjusted for the three-for-two split effected in
1992). Since its adoption, the Plan has provided that each option initially
granted under the Plan shall be an incentive stock option ("ISO"), as that term
is defined in Section 422 of the Internal Revenue Code (the "Code") and as
further described below. See "Federal Income Tax Consequences."
The Board has approved amendments to the Plan (the "Amendments") which
provide (i) that options granted under the Plan may be granted as an ISO (as
the Plan currently provides) or may be granted as an option which does not
qualify as an ISO (a non-qualified option or "NQO"), (ii) that options may be
exercisable upon grant or on such vesting schedule as the Board may determine,
(iii) that options shall continue for their original term following the death
of the option holder and (iv) that the Board may amend the adjustment
provisions of the Plan without shareholder approval. The Amendments do not
increase the number of Shares available in the aggregate for option grants
under the Plan, do not expand the persons eligible to receive options under the
Plan and do not change the terms of options granted under the Plan, except as
described below. The terms of the Plan and the effect of the Amendments are
described in more detail below.
DESCRIPTION OF THE PLAN
The Plan provides that it may be administered by the Board or a
committee of the Board composed of at least three Trustees (the "Committee").
The Board (or the Committee) has authority, subject to the limits of the Plan,
to designate persons to whom options are granted, to determine the number of
Shares covered by each option and to determine the terms and provisions of each
option. As amended, the Plan provides that the Board (or the Committee) also
will be authorized to designate whether the option is an ISO or an NQO.
Options only may be granted to an employee of the Trust, including any Trustee
or officer who is an employee. Currently, approximately 28 employees are
eligible to receive option grants under the Plan.
Under the Plan, whether the option is an ISO or an NQO, the option
price may not be less than the fair market value of the Shares on the date the
option is granted, and options will expire no later than ten years from the
date of the grant. As of April 19, 1996, the closing price for the Shares on
the American Stock Exchange was $16 3/8. The option price must be paid in full
at the time an option is exercised, in cash, by check or by delivery of Shares
already owned by the optionee. As amended, the Plan provides that an option
may be exercisable on grant or in one or more installments as determined by the
Board (or the Committee).
As required by the Code, the Plan currently provides that the Trust
may grant an optionee an ISO with respect to Shares with an aggregate fair
market value at the time of the grant in excess of $100,000 during any
particular calendar year, provided that such option does not become first
exercisable by the optionee in an amount exceeding $100,000 per calendar year.
This provision would not apply to an option designated to be an NQO.
Options, whether an ISO or an NQO, are not assignable or transferable
by the optionee except by will or by the laws of descent and distribution. As
amended, the Plan provides that in case of death, an option will continue in
accordance with its terms and may be exercised thereafter by the persons
entitled to do so under the optionee's will or by his legal representatives.
If an optionee's employment is terminated for any reason other than death,
termination for cause or retirement on or after attaining age 65, the option
will terminate three months after the date of such termination of employment,
but in no event later than the date of expiration of the option. If an
optionee's employment is terminated for cause, the option will terminate as of
the date of such termination of employment. If an optionee ceases to be
employed by the Trust due to retirement on or after attaining age 65, the
option will continue in accordance with its terms; however, the Plan provides
that the option will cease to be an ISO upon the expiration of three months
from the date of the optionee's retirement and will thereafter be treated as an
NQO.
13
The Board may terminate the Plan at any time and may amend the Plan
from time to time. However, the Board may not change the maximum number of
Shares for which options may be granted, the periods during which options may
be granted or exercised or materially increase the benefits under the Plan
without shareholder approval. No amendment may adversely affect an optionee's
rights under any issued option without the optionee's consent.
Pursuant to the Code, an ISO plan may not have a term longer than ten
years from the earlier of the date the plan is adopted or the date the plan is
approved by the stockholders. Accordingly, the Plan will expire on June 25,
2001 (except as to options outstanding on that date), and the Amendments will
not extend the term of the Plan.
EFFECT OF THE AMENDMENTS
NQOs. As described above, the Plan currently provides that the Board
(or Committee) may grant an optionee an ISO with respect to Shares with an
aggregate fair market value at the time of the grant in excess of $100,000
during any particular calendar year, provided that such option does not become
first exercisable by the optionee in an amount exceeding $100,000 per calendar
year. The Amendments will permit the grant of options which would not be
subject to this provision, and therefore would not qualify for treatment as an
ISO. The provision would also permit the grant of options which otherwise
would satisfy all requirements for ISO status, but because of their NQO
designation, would not be treated as an ISO. See "Federal Income Tax
Consequences."
As described in "Executive Compensation," Mr. Cronin's Employment
Agreement provides for the grant of options to him with respect to Shares with
an aggregate fair market value at the time of the grant equal to his base
salary during 1994, 1995 and 1996. Because of the required terms of these
options, a portion of the options cannot qualify as ISOs, and accordingly the
Board previously has granted Mr. Cronin non-qualified options which are not
subject to or governed by the Plan. This arrangement, however, has a number of
consequences. First, these options are not subject to the provisions of the
Plan, including the limitation on the number of Shares reserved for options
under the Plan. If the Amendments are approved, the Board contemplates that
future grants of NQO's would be made under the Plan to the extent that Shares
are available. Further, because these options are not granted pursuant to the
Plan, they are not entitled to the exemptions from the short-swing trading
prohibition of Section 16(b) of the Securities Exchange Act ("Section 16(b)")
provided to options granted under the Plan. The ability to grant NQOs under
the Plan would enable the Board to grant Mr. Cronin options which are entitled
to the benefit of this exemption. See "Section 16."
EXERCISE. Previously the Plan has provided that options may not be
exercised prior to one year from the date of grant. The Board believes that
this is an unnecessary constraint upon the administration of the Plan and that
the Board (or the Committee) should be granted the discretion to make options
vest more quickly, including becoming exercisable upon grant. Currently, the
Board grants certain NQOs, including Mr. Cronin's, outside of the Plan with
immediate vesting. For the reasons discussed above under "NQOs," the Board
believes it is preferable to grant options pursuant to the Plan and has adopted
this amendment to provide the same flexibility in determining vesting terms as
is available with respect to such non-Plan options.
OPTION TERM. The Plan also has previously provided that, upon the
death of an optionee, the option could be exercised by the persons entitled to
do so under the optionee's will or the optionee's legal representative for a
period not to exceed twelve months after the optionee's death. The Board
believes that this provision unnecessarily and unreasonably deprives a deceased
optionee's estate of the full benefit of the option. The Board has amended the
Plan to provide that in these circumstances the option will continue in
accordance with its terms until its originally specified expiration date. The
Plan, however, will continue to specify that, if the option includes a vesting
provision, no further vesting would occur following the optionee's death.
ADJUSTMENT. The Plan provides that the number and price of the Shares
covered by each option and the total number of Shares that may be granted under
the Plan shall be proportionately adjusted to reflect, as deemed equitable and
appropriate by the Board, any stock dividend, stock split or share combination
of the Shares or recapitalization of the Trust. It also provides that to the
extent deemed equitable and appropriate by the Board, in any merger,
consolidation, reorganization, liquidation or dissolution, any option granted
under the Plan shall pertain to the securities and other property to which a
holder of the number of Shares covered by the option
14
would have been entitled to receive in connection with such event. The Plan
also provides, however, that the foregoing provisions relating to adjustments
to be made upon changes in capitalization may not be amended without
shareholder approval.
In view of the broad discretion granted to the Board to determine what
adjustment would be "equitable and appropriate," the restriction on the Board's
ability to amend these provisions is inconsistent and imposes an unnecessary
limitation on the proper administration of the Plan. Although the Board is not
currently aware of any pending proposal, transaction or other event, other than
the Change of Domicile Proposal, which would trigger the application of these
provisions, the Board believes it is efficient, while it is seeking shareholder
approval of the Amendments, to correct this inconsistency in the Plan now
rather than attempt to do so at some time in the future in conjunction with a
transaction which might call for further flexibility in these provisions. No
adjustments are expected to be made in connection with the Change of Domicile
Proposal other than to substitute WRIT Maryland shares for the current Shares.
In order to make clear that any amendment to the adjustment provisions is
intended only to address a particular transaction and not increase the benefits
under the Plan, the Board has also amended the Plan to specify that no
amendment to the Plan may materially increase the benefits accruing to
participants under the Plan without shareholder approval.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the federal income tax consequences
relating to stock options.
ISO. Under the Code, an optionee will not recognize income at the
time of grant of an ISO or the subsequent purchase of the Shares pursuant to
the exercise of such ISO. The amount by which the fair market value of the
Shares purchased at the time of exercise exceeds the option price will
constitute an item of tax preference and may be potentially subject to the
alternative minimum tax. If the optionee makes no disposition of the Shares
purchased on exercise of an ISO within two years from the grant date and within
one year from the date of exercise of the option, upon a subsequent sale of
Shares the optionee will recognize a long-term capital gain or loss equal to
the difference between the amount realized on the disposition of such Shares
and his option exercise price.
If an optionee disposes of Shares purchased through the exercise of an
ISO within the foregoing two- or one-year periods, the transaction will be
treated as a disqualifying disposition and the optionee will be required to
include in his gross income as compensation for the taxable year in which the
disposition occurs, the amount by which the fair market value of the Shares on
the date the option was exercised by the optionee (or the amount realized upon
disposition, if that amount is less than the fair market value on the date of
exercise) exceeds the option exercise price. In addition, upon a sale within
either period, the optionee will recognize a capital gain or loss equal to the
difference between (a) the sum of the exercise price he paid (or if the
exercise price is paid in whole or in part by the transfer of Shares previously
owned by the optionee, the amount of money plus the adjusted basis of such
previously owned Shares) and any amount he or she is required to include in his
or her gross income in accordance with the preceding sentence and (b) the
amount realized on the sale.
The Trust will be entitled to a deduction for compensation with
respect to an ISO only if and to the extent that the optionee recognizes
ordinary income from a disqualifying disposition of Shares received upon the
exercise of such ISO.
NQO. The grant of an NQO will have no immediate tax consequences to
the optionee or the Trust. If Shares received on the exercise of an NQO are
not subject to a substantial risk of forfeiture, the optionee will recognize
ordinary income equal to the excess, if any, of the fair market value of the
Shares at the time of exercise over the exercise price. It is not contemplated
that the Trust will, upon the exercise of an NQO, issue or deliver Shares that
are subject to a substantial risk of forfeiture, except as noted in the next
paragraph.
Shares received on the exercise of an NQO will be treated as subject
to a substantial risk of forfeiture for up to a six-month period if the sale of
the Shares at a profit during such six months could subject the optionee to
suit under Section 16(b). Under these circumstances, however, the optionee has
a right to elect, within a 30-day period from the date of transfer of the
Shares, to include in his or her taxable income for the taxable year of
exercise an amount equal to the excess of the fair market value of such Shares
at the time of the exercise over the
15
exercise price. If the optionee does not make the preceding election, the
optionee will recognize ordinary income upon the expiration of the
above-referenced six-month period. The amount of such income will be equal to
the excess of the fair market value of the Shares at that time over the
exercise price, and the holding period for determining whether any capital gain
or loss on the subsequent sale or exchange of the Shares is long-term or
short-term capital gain or loss will commence at that time.
Where ordinary income is recognized by an optionee as described above
in connection with Shares received on the exercise of an NQO, the Trust will be
entitled to a deduction in the amount of ordinary income so recognized by the
optionee.
SECTION 16
Currently, pursuant to Securities Exchange Act Rule 16b-3, the
acquisition of an option pursuant to the Plan by an officer of the Trust is
exempt from the provisions of Section 16(b). Section 16(b) provides, among
other things, that an officer who purchases and sells the shares of the company
that employs him within a six-month period is liable to the company for the
difference between the purchase price and the sale price. Rule 16b-3 provides
that the acquisition of a stock option by an officer of a company pursuant to a
stock option plan which meets certain requirements (one of which is shareholder
approval of the plan) is not subject to Section 16(b). Approval of the
Amendments will permit the Trust to adopt the Amendments and maintain the
foregoing exemption for options granted to officers of the Trust pursuant to
the Plan.
The affirmative vote of the holders of record of a majority of the
outstanding Shares is required for approval of the Amendments.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENTS
16
V.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The Summary Compensation Table shows the compensation awarded, earned
or paid during the past three years to the Trust's Chief Executive Officer and
each of the Trust's four other most highly compensated executive officers (the
"Named Officers") whose compensation exceeded $100,000 for the periods
indicated.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
---------------------
ANNUAL CASH OPTIONS GRANTED(1)(2)
NAME AND PRINCIPAL POSITION YEAR COMPENSATION (NUMBER OF SHARES)
- --------------------------- ---- ------------ ---------------------
B. Franklin Kahn(3) 1995 $280,109 --
Chairman of the Trustees and 1994 591,300 --
Chief Executive Officer 1993 591,300 --
Edmund B. Cronin, Jr 1995 $295,000 20,171
President and Chief Executive Officer 1994 171,875 15,675
Benjamin H. Dorsey(3) 1995 $100,000 --
General Counsel 1994 150,500 6,584
Secretary and Trustee 1993 158,000 4,848
Larry E. Finger 1995 $150,000 6,838
Senior Vice President and 1994 125,000 6,584
Chief Financial Officer 1993 6,170 --
Sandra T. Hunt 1995 $180,246 6,838
Vice President-Leasing 1994 151,700 6,584
1993 145,850 4,848
Thomas L. Regnell 1995 $107,913 6,838
Vice President-Acquisitions
(1) All options reflected in the table were granted under the Incentive Stock
Option Plan except 9,091 of Mr. Cronin's 1994 options and 13,333 of Mr.
Cronin's 1995 options, which were granted as non-qualified options.
(2) Options indicated for 1993 were granted January 11, 1994 for the year
1993.
(3) Mr. Kahn retired March 9, 1995, and Mr. Dorsey retired December 31,
1995.
The Trust has entered into an Employment Agreement with Edmund B.
Cronin, Jr., establishing Mr. Cronin's position initially as President and
Chief Operating Officer of the Trust. The Agreement was entered into on May
11, 1994 for a term of two years and eight months ending on December 31, 1996,
unless earlier terminated by either party. Pursuant to the Employment
Agreement, Mr. Cronin received an annual base salary of $275,000 in his first
year of employment, subject to annual review by the Board. Mr. Cronin
receives standard insurance, vacation and sick leave benefits and is eligible
to participate in the Trust's Pension Plan. The Agreement provides for the
grant to Mr. Cronin of incentive stock options in December 1994, 1995 and 1996
to purchase $100,000 worth of Trust shares each year, based on the then current
market price of such shares, which shall also be the option exercise price. In
addition, Mr. Cronin shall receive non-qualified options in December 1994,
1995 and 1996 for an amount equal to the difference between his then current
base salary and $100,000, based on the then current market price of the Shares,
except for options granted in December 1994 for which the exercise price was
based on the market value of the Shares as of June 1, 1994.
The Employment Agreement further provided that not later than
September 30, 1994, the Board would consider whether Mr. Cronin should be
nominated to a position as Trustee. He was appointed a Trustee on September
13, 1994 and was elected President and Chief Executive Officer effective March
9, 1995.
17
Under the Employment Agreement, Mr. Cronin may be terminated upon his
death or disability or at any time for cause. Mr. Cronin may be terminated
without cause upon thirty days notice, provided, however, the Trust shall
thereafter be obligated to pay severance equal to all cash compensation
otherwise payable for the balance of the term of the Employment Agreement, plus
medical benefits during such period.
OPTION GRANTS TABLE
The following table shows the specified information with respect to
options granted to the Named Officers in 1995.
1995 OPTION GRANTS TABLE
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
NUMBER OF PERCENTAGE PRICE APPRECIATION
SECURITIES OF TOTAL FULL 10-YEAR
UNDERLYING OPTIONS OPTION TERM
OPTIONS GRANTED TO EXERCISE EXPIRATION ----------------------
NAME GRANTED(1) EMPLOYEES(2) PRICE DATE 5% 10%
- ---- ---------- ------------ -------- ---------- ------- -------
Edmund B. Cronin, Jr. 20,171 29.20% 14.6250 12/19/2005 185,524 470,155
Benjamin H. Dorsey 0 N/A N/A N/A N/A N/A
Larry E. Finger 6,838 9.90% 14.6250 12/19/2005 62,893 159,383
Sandra T. Hunt 6,838 9.90% 14.6250 12/19/2005 62,893 159,383
B. Franklin Kahn 0 N/A N/A N/A N/A N/A
Thomas L. Regnell 6,838 9.90% 14.6250 12/19/2005 62,893 159,383
- -------------
(1) Options become exercisable 50% after one year and 100% after two years.
(2) 13,333 of Mr. Cronin's options were granted as non-qualified stock
options. See "V. Report on Executive Compensation--Executive Compensation
Program." Percentages reflect the percentage of all options granted,
including these 13,333 non-qualified options.
The dollar amounts under the 5% and 10% columns in the table above are the
result of calculations required by the SEC's rules and therefore are not
intended to forecast possible future appreciation in the price of the Shares,
which would benefit all shareholders. For example, in order for the Named
Officers to realize the potential values set forth in the 5% and 10% columns in
the table above, the price per Share of the Shares would have to be
approximately $23-7/8 and $37-7/8, respectively, as of the expiration date of
the option. Actual gains, if any, on option exercises and Share holdings are
dependent on the future performance of the Shares and overall stock market
conditions.
AGGREGATED OPTION EXERCISES AND OPTION VALUE TABLE
The following table shows information concerning the exercise of stock
options during 1995 by each of the Named Officers and the year-end value of
unexercised options.
AGGREGATED OPTION EXERCISES IN 1995 AND YEAR-END OPTION VALUES
VALUE OF UNEXERCISED IN
NUMBER OF UNEXERCISED THE MONEY OPTIONS AT
SHARES OPTIONS AT DECEMBER 31, 1995 DECEMBER 31, 1995
ACQUIRED VALUE ----------------------------- -----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----- ----------- -------- ----------- ------------- ----------- -------------
Edmund B. Cronin, Jr -- -- 7,838 28,009 5,388 30,602
Benjamin H. Dorsey 7,497 81,005 23,376 0 8,899 0
Larry E. Finger -- -- 3,292 10,130 2,263 10,811
Sandra T. Hunt 1,693 14,611 48,879 10,130 115,527 10,811
B. Franklin Kahn -- -- 84,161 32,214 333,616 111,623
Thomas L. Regnell -- -- 0 6,838 0 8,548
18
PENSION PLAN
The Trust has a non-contributory defined benefit pension plan (the
"Pension Plan") that covers all employees who meet certain requirements
regarding age and years of service before December 31, 1995. The Pension Plan
was amended on December 12, 1995 to fix benefits and years of service accruals
as of December 31, 1995.
The following table is illustrative of various annual payments that
would be made pursuant to the Pension Plan and the Supplemental Benefit Plan
(as defined below) upon retirement on an individual's 65th birthday, assuming
the indicated five-year average remuneration and years of service.
PENSION PLAN TABLE
YEARS OF SERVICE
---------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ ------- -------- -------- -------- -------
$125,000 $ 34,440 $ 45,920 $ 57,400 $ 68,880 $ 71,176
150,000 41,565 55,420 69,275 83,130 85,901
175,000 48,690 64,920 81,150 97,380 100,626
200,000 55,815 74,420 93,025 111,630 115,351
225,000 62,940 83,920 104,900 125,880 130,076
250,000 70,065 93,420 116,775 140,130 144,801
300,000 84,315 112,420 140,525 168,630 174,251
400,000 112,815 150,420 188,025 225,630 233,151
450,000 127,065 169,420 211,775 254,130 262,601
500,000 141,315 188,420 235,525 282,630 292,051
The Pension Plan provides for retirement upon the participant's 65th
birthday, disability or upon attainment of age 50 with 10 or more years of
service at an actuarially reduced benefit. The Pension Plan provides both
retirement benefits and death benefits prior to retirement. Retirement
benefits are based on the participant's average salary during the five years of
employment which produces the highest average. Accrued pension benefits are
fully vested after six years of employment. Death benefits are based on the
projected monthly pension benefit.
The Code limits the maximum annual benefit for a person retiring under
a defined benefit pension plan such as the Pension Plan. The Board has adopted
a plan to provide supplemental retirement benefits to employees who are
restricted by such limitation and who had accrued a benefit under the Pension
Plan prior to January 1, 1994 (the "Supplemental Benefit Plan"). Mr. Kahn is
the only employee eligible to receive a benefit under the Supplemental Benefit
Plan. The supplemental benefit provided equals the difference between the
retirement benefits to which the employee was entitled at the time of
retirement, assuming the Code limitation was not in effect under the Pension
Plan, and the benefits to which such employee is actually entitled under the
Pension Plan at that time.
The Board also authorized the establishment of a separate trust fund
to acquire ownership of a life insurance policy on the life of Mr. Kahn. In
the event of Mr. Kahn's demise prior to his receipt of all accrued
supplemental retirement benefits, the assets of such separate trust fund would
be used to pay any remaining supplemental retirement benefit entitlements to
Mr. Kahn's beneficiaries. Any remaining assets of the separate trust fund
would then revert to the general use of the Trust.
19
VI.
REPORT ON EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
IN COMPENSATION DECISION
The Board determined executive compensation for 1995. A Compensation
Committee (the "Compensation Committee") composed of Messrs. Kahn, Osnos and
Snyder was responsible for making recommendations to the Board with respect to
1995 compensation decisions. Mr. Kahn, the Trust's Chief Executive Officer at
the time, was not involved in the consideration or vote concerning his own
compensation. Mr. Osnos is a senior partner with the Trust's legal counsel
and Mr. Snyder is Chairman of an accounting firm providing advisory services to
the Trust. See "I. The Board of Trustees and Management--The Board of
Trustees" above.
EXECUTIVE COMPENSATION PRINCIPLES
The Trust's Executive Compensation Program is based on guiding
principles designed to align executive compensation with Trust values and
objectives, business strategy, management initiatives and business financial
performance. In applying these principles the Compensation Committee has
established a program designed to:
- Attract and retain key executives critical to the long-term success of
the Trust.
- Reward executives for long-term strategic management and the enhancement
of shareholder value.
- Support a performance-oriented environment that rewards performance not
only with respect to Trust goals but also Trust performance as compared
to that of industry performance levels.
EXECUTIVE COMPENSATION PROGRAM
The Trust's compensation program consists of both cash and stock
options. Through the award of stock options, the objective is to align the
executive officers' long-range interests with those of the shareholders.
During 1995, cash compensation consisted of a base salary; bonuses were not
utilized.
The Board, upon the recommendation of the Compensation Committee, has
determined the salary for each executive officer based upon (i) a review of the
compensation paid to similarly situated executive officers employed by
companies comprising the EREIT Index and (ii) a subjective evaluation of each
officer's performance throughout the year. See "Executive
Compensation--Performance Graph" for additional discussion regarding the EREIT
Index. Specific performance goals were not established for the Trust's
executive officers during 1995. In general, the EREIT Index comparison and the
subjective evaluation were weighted equally by the Board when making individual
compensation decisions. The Board believes that compensation paid to the
Trust's executive officers is comparable to that paid by the companies
comprising the EREIT Index.
Long-term incentives are provided through a "qualified" Incentive
Stock Option Plan and Non-qualified Stock Options. Options granted each year
under the Incentive Stock Option Plan are based on individual determinations
predicated on the Board's desire to retain, reward and encourage the optionee
and to promote entrepreneurship. Such "qualified" stock options are limited to
a maximum annual grant value of $100,000 as set by federal tax law. All option
prices are at fair market value on the date of grant and expire after 10 years.
The size of an individual award is based on subjective evaluation.
With respect to non-qualified stock options, the Compensation
Committee can recommend to the Board optionees, option terms and the number of
option shares without regard to the restrictions established by federal tax law
for incentive stock option plans. The determination of whether to grant
qualified or non-qualified options is based on subjective evaluation, except in
the case of Mr. Cronin whose option grant is determined in accordance with his
Employment Agreement. See "IV. Executive Compensation-Summary Compensation
Table" for more details on this Employment Agreement. Mr. Cronin received
non-qualified stock option grants for 13,333 shares in 1995.
20
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Kahn's 1995 compensation consisted solely of his salary and was
determined by the Board (excluding Mr. Kahn) after a recommendation by the
Compensation Committee and was based upon (i) a review of the compensation paid
to Chief Executive Officers employed by companies comprising EREIT Index and
(ii) a subjective evaluation of Mr. Kahn's performance throughout the year.
Specific performance goals were not established for Mr. Kahn during 1995. In
general, the EREIT Index comparison and the subjective evaluation were weighted
equally by the Board when making the decision to maintain Mr. Kahn's 1995
salary at the level established in 1994. Compensation paid to Mr. Kahn is
comparable to compensation paid to the Chief Executive Officers of the
companies comprising the EREIT Index.
Mr. Kahn retired as Chairman and Chief Executive Officer effective
March 9, 1995, and Mr. Edmund B. Cronin, Jr. was elected Chief Executive
Officer effective March 9, 1995. Mr. Cronin's compensation was not adjusted
during 1995 as a result of this promotion.
THE BOARD OF TRUSTEES
Arthur A. Birney
William N. Cafritz
Edmund B. Cronin, Jr.
Benjamin H. Dorsey
B. Franklin Kahn
David M. Osnos
Stanley P. Snyder
21
PERFORMANCE GRAPH
Set forth below is a graph comparing the cumulative total shareholder
return on the Shares with the cumulative total return of companies making up
the Standard & Poor's 500 Stock Index as provided by Standard & Poor's
Corporation and the Equity Real Estate Investment Trust Index (excluding Health
Care REITs) (the "EREIT Index") as provided by the National Association of Real
Estate Investment Trusts. The EREIT Index is a compilation of 171 companies as
of December 31, 1995 which qualify as real estate investment trusts and own
real property and/or equity interests in real property and has been weighted
according to each individual company's stock market capitalization. The EREIT
Index companies are traded on the New York and American Stock Exchanges and on
the NASDAQ National Market. The graph assumes an initial investment of $100 on
December 31, 1990 and the reinvestment of all dividends paid thereafter with
respect to such $100 investment.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
[GRAPHIC]
1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ----
WRIT $100 $167 $199 $211 $175 $182
EREIT 100 129 156 185 190 218
S&P 100 131 141 155 157 215
22
VII.
OTHER MATTERS
INDEPENDENT ACCOUNTANTS
The firm of Price Waterhouse LLP served as the Company's independent
accountants for 1995. The Company has not yet selected its independent
accountants for 1996. This selection is expected to be made by the Board
during the second or third quarter of 1996, based upon the recommendation of
the Audit Committee. Representatives of Price Waterhouse LLP are expected to
attend the Annual Meeting, will be provided with an opportunity to make a
statement, should they desire to do so, and will be available to respond to
appropriate questions from the stockholders.
SECURITIES REPORTING REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires Trustees and certain officers to file reports of changes in stock
ownership with the SEC and with the American Stock Exchange, with copies to the
Trust. Based solely on a review of such copies, the Trust believes that all
such filing requirements have been met for the year ended December 31, 1995.
EXPENSES AND ADMINISTRATION
The cost of this solicitation of proxies will be borne by the Trust.
In addition to the use of the mails, some of the officers and regular employees
of the Trust may solicit proxies by telephone or telecopier, will request
brokerage houses and other custodians, nominees and fiduciaries to forward
soliciting material to the beneficial owners of shares held of record by such
persons and may also verify the accuracy of marked proxies by contacting record
and beneficial owners of shares. The Trust will reimburse such persons for
expenses incurred in forwarding such soliciting material.
1997 ANNUAL MEETING
Shareholders may present proposals to be considered for inclusion in
the Proxy Statement relating to the 1997 Annual Meeting, provided they are
received by the Trust no later than December 24, 1996 and are in compliance
with applicable laws and SEC regulations.
/s/ BENJAMIN H. DORSEY
----------------------
Benjamin H. Dorsey
Secretary
April 22, 1996.
23