**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C.  20549**

 

**FORM 10-KSB**

 

**ANNUALREPORT PURSUANT TO SECTION 13 OR 15(d) OF**

**THESECURITIES EXCHANGE ACT OF 1934**

 

| For the fiscal year ended December 31, 2001 |   | Commission file number 1-7228 |
|---------------------------------------------|--------|-------------------------------|

** **

**THE WASHINGTON CORPORATION**

(Name of SmallBusiness Issuer in Its Charter)

 

| **Maryland**                             |   | **52-1157845**                       |
|------------------------------------------|--------|--------------------------------------|
| (State of Incorporation)                 |   | (I.R.S. Employer Identification No.) |
|                                     |   |                                 |
| **4550 Montgomery Avenue**               |
| **Bethesda, Maryland 20814**             |
| (Address of principal executive offices) |
| **(301) 657-3640**                       |
| (Issuer’s telephone number)         |

 

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**Securities registered pursuant to Section12(b) of the Act:**

None

 

 **Securities registered pursuant to Section 12(g) of theAct:**

Class B CommonStock, $.01 par value per share

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Check whether the issuer (1) filed allreports required to be filed by Section 13 or 15(d) of the Securities ExchangeAct during the past 12 months (or for such shorter period that the registrantwas required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.                                                Yes  ý  No  o

 

Check if there is no disclosure of delinquent filers in response toItem 405 of Regulation S-B in this form, and no disclosure will be contained,to the best of registrant’s knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-KSB or anyamendment to this Form 10-KSB.          ý

 

The registrant’s revenues for the fiscal year ended December 31, 2001were:  $3,505,665

 

The Registrant has been unable to ascertain any market for theRegistrant’s securities, and, therefore, the Registrant believes that the bestestimate of the market value of its voting stock held by non-affiliates is $0at the present time.

 

As of December 31, 2001, the number of shares outstanding of each classof the registrant’s classes of common stock were as follows:

1,640,327shares of Class A Common Stock

21,476 sharesof Class B Common Stock

45,119 sharesof Class C Common Stock

 

 

PART I

 

FORWARD-LOOKING STATEMENTS

 

The statementscontained in this report that are not purely historical are forward-lookingstatements within the meaning of Section 27A of the Securities Act of 1933 andSection 21E of the Securities Exchange Act of 1934, including withoutlimitation, statements about the Company’s expectations, beliefs, intentions orstrategies regarding the future.  Allforward-looking statements included in this report are based on informationavailable to the Company on the date hereof, and the Company assumes noobligation to update any such forward-looking statements.  The forward-looking statements containedherein involve risks and uncertainties. The Company’s actual results could differ materially from thoseanticipated in these forward-looking statements as a result of certain factors,including those set forth in this report.

 

ITEM 1.  DESCRIPTION OF BUSINESS

 

(a)  BUSINESS DEVELOPMENT

 

The WashingtonCorporation (individually, “TWC” and together with its affiliates that areconsolidated with it for financial reporting purposes, the “Company”), aMaryland corporation, was organized in 1979. The Company’s operations consist of the ownership of real estate, bothincome-producing and unimproved, and office building management, primarily inthe metropolitan Washington, D.C. area. The Company has been pursuing a plan to divest its three remainingnon-income-producing properties, and has obtained appropriate financing and along-term lease for its primary income-producing asset.

 

Recent Developments.   The following are descriptions of materialdevelopments within the past three years.

 

Timberlake

 

TWC, through a wholly-owned subsidiary, the Nanjemoy Associates LimitedPartnership (“NALP”) owned 361 acres in Charles County, Maryland for futureresidential development (the “Timberlake Project”).  NALP defaulted on its quarterly interest payments on the purchasemoney mortgage made to NALP (“PMM”) that was secured by 313 of the 361 acrescomprising the Timberlake property.  Theprincipal amount of the PMM was $880,000 and it matured on January 15,1998.  The PMM was not guaranteed by TWCand the note contained a provision that the holder will rely solely on theproperty for repayment of the PMM.  Thisdefault resulted in NALP losing 313 of the 361 acres of land due to foreclosureaction by the note holder on February 2, 1999. As a result, the approved preliminary site plan was voided together withthe various entitlements for the development of the property.  For the fiscal year ending December 31,1998, the net book value of the property was reduced by the $880,000 principalbalance on the PMM, and $177,449 of accrued interest and real estatetaxes.  Management estimated the valueof the remaining property to be $200,000, resulting in an additional estimatedloss on asset valuation of $97,771 for the fiscal year ended December 31,1999.  Management made an additionaladjustment to the net realizable value of the property during 2000 due to thepoor results of land development zoning tests on several of the remaininglots.  This resulted in a provision forestimated loss on asset valuation of $75,000 for the year ended December 31,2000.  No additional provision wasconsidered necessary in 2001.  The remaining48 acres most likely will be divided into lots.  The number of lots that can be sold depends primarily on theresults of percolation tests and the issuance of on-site sewage dischargepermits by the state of Maryland, among other issues.  To date, the

 

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Company has only been able to obtain sewage discharge permits for fivelots.

 

Election of Directors

 

TWC did not hold an annual or special stockholder’s meeting in 2001,and did not elect directors in 2001.

 

TWC’s Amended and Restated Charter (“Charter”) provides that the numberof directors of TWC shall be seven (7), consisting of:  (i) five (5) directors (“Class A Directors”)elected by the holders of TWC’s Class A Common Stock, par value $.01 per share(the “Class A Common Stock”), voting separately as a class; and (ii) two (2)directors (the “Class B and Class C Directors”) elected by holders of TWC’sClass B Common Stock, par value $.01 per share (the “Class B Common Stock”),and Class C Common Stock, par value $.01 per share (the “Class C CommonStock”), voting together as a single class. In addition, under Maryland Law, TWC is required to have at least three (3) directors.  Under TWC’s Bylaws, two (2) directors, atleast one of which is a Class A Director, constitute a quorum for a Board ofDirectors meeting and the vote of a majority of the Class A Directorsparticipating at such meeting is necessary for TWC’s Board of Directors to act.

 

On October 25, 1996 at TWC’s last annual stockholders meeting, WilliamN. Demas, formerly a Class B and Class C Director was elected as a Class ADirector and Jose Ma. C. Castro was elected as a Class B and Class C Directorto fill the position held by Mr. Demas. Jonathan C. Kinney was also re-elected as a Class B and Class CDirector.  In December of 2000, Jose Ma.C. Castro resigned as a Director of the Company.  In January of 2002, Jonathan C. Kinney resigned as a Director ofthe Company.  TWC is currently searchingfor Class B and Class C Directors.

 

(b)  BUSINESS OF THEREGISTRANT

 

The Company’s operations consist of the ownership of real estate, bothincome-producing and unimproved land, and the management of these real estateassets.

 

Ownership of Income-Producing Properties

 

TWC, directly and through Arlington Square, Inc. (“ASI”), owns a 74%interest in Arlington Square Limited Partnership (“ASLP”).  ASLP owns 1.07 acres of land and an officebuilding constructed thereon located in Arlington, Virginia.  The building is leased to an agency of theU.S. Government under a ten year lease expiring in September of 2008.  See “Business Development - Award of Bid andLease Execution.”  During the year endedDecember 31, 2001, approximately 97% of the Company’s revenues was derived fromincome on the Arlington Square Project. In November 1998, the Arlington Square Project was refinanced, and inconnection therewith, ASLP executed a promissory note and various other loandocuments and TWC entered into a guaranty agreement with MetLife.  See “Description of Properties - ArlingtonSquare Project.”

 

TWC also owns a parcel of land which is leased to Fort Washington InnAssociates (“FWIA”), a non-affiliate of the Company, until March of 2024.  The land is improved with a 222-room HolidayInn which is owned by FWIA.  TWCreceives base rent plus overage rent under the lease both of which are paid monthly.  See “Description of Properties - FortWashington.”

 

Ownership of Land

 

TWC, through wholly-owned subsidiaries, currently owns four parcels ofunimproved land -

 

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Timberlake, River Oaks, Winchester, and Port-O-Dumfries.  TWC is currently marketing or consideringmarketing each of these properties for sale.

 

Management of Real Estate

 

TWC manages the Arlington Square Project.  TWC receives management fees equal to 5% of monthly revenues ofthe Arlington Square Project.  See“Description of Properties - Arlington Square Project”.

 

Competition

 

The Company believes that the Washington, D.C. area real estate markethas fully recovered from most of the problems associated with the early 1990’s,however, the Company must compete with other owners of real property that isnow or will be for sale.  A lack ofbuyers and financing may make the sale of real estate extremely difficult.  Management believes this condition isexpected to continue for the foreseeable future.  The value of improved property, such as the Arlington SquareProject, has stabilized in recent years.

 

Regulatory Approvals

 

In the past, when the Company acquired land for development, certainregulatory approvals and permits were required to either improve, develop,lease or sell the property.  Additionalcounty, state and federal permits will be required for a purchaser to developeach of the Company’s four properties held for resale and the receipt of suchpermits and approvals may be a condition of any purchase contract.  If the cost to develop these propertiesexceeds their market value, then the properties may have no value.

 

Employees

 

As of December 31, 2001, the Company employed three full-time personsand two part-time persons.  Two of theCompany’s employees work at the Arlington Square Project as the Chief Engineerand the Assistant Engineer.

 

ITEM 2.  DESCRIPTION OFPROPERTIES

 

The Company’s operations involve ownership of income-producingproperties and unimproved land.  TheCompany currently owns four principal properties and leases its corporateheadquarters.

 

The following table summarizes, as of December 31, 2001, the Company’sownership interests in its four principal properties and in two properties ofsecondary importance.  More detaileddisclosure relating to the principal properties follows immediately after thetable.

 

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THE WASHINGTON CORPORATION AND SUBSIDIARIES

REAL ESTATE PROPERTIES OWNED

 
| **NAME**                   |   | **DESCRIPTION**                                                                                   |   | **PERCENTAGE  OWNERSHIP** |   | **ENCUM-  BRANCES   INCLUDING  ACCRUED   INTEREST AND TAXES** |       | **LOAN   MATURITY  DATE** |   | **LAND**  |   | **COSTS   CAPITALIZED  SUBSEQUENT TO   PURCHASE** |       | **WRITE UP/  (DOWN) TO   FAIR   VALUE** |      | **NET   BOOK   VALUE** |    |
|----------------------------|--------|---------------------------------------------------------------------------------------------------|--------|---------------------------|--------|---------------------------------------------------------------|------------|---------------------------|--------|-----------|--------|---------------------------------------------------|------------|-----------------------------------------|-----------|------------------------|---------|
| Arlington Square   Project |   | 46,481 sq. ft. of land with  a building of approximately 135,000 sq. ft. in Arlington County, Va. |   | 74                        | %      | $                                                             | 21,105,417 |                      | 12/10  |      | 0      |                                              | 12,352,799 |                                    | 2,307,794 |                   | $       | 17,193,631 | (3) |
|                       |   |                                                                                              |   |                      |   | $                                                             | 1,672,613  |                      | 06/08  |      |   |                                              |       |                                    |      |                   |    |   |
|                       |   |                                                                                              |   |                      |   |                                                          |       |                      |   |      |   |                                              |       |                                    |      |                   |    |
| Timberlake                 |   | 48 acres of land zoned for  residential development located in Charles County, Md. (1)            |   | 100                       | %      | —                                                        |       |                      |   | 297,771   |   | —                                            |       | (172,771                                | )         | $                      | 125,000 | (4) |
|                       |   |                                                                                              |   |                      |   |                                                          |       |                      |   |      |   |                                              |       |                                    |      |                   |    |   |
| FL Washington              |   | 7.3 acres of land with a  222-room hotel located in Fl. Washington, Pa. (2)                       |   | 100                       | %      | —                                                        |       |                      |   | 400,000   |   | —                                            |       | —                                  |      | $                      | 400,000 |   |
|                       |   |                                                                                              |   |                      |   |                                                          |       |                      |   |      |   |                                              |       |                                    |      |                   |    |   |
| River Oaks                 |   | 16.6 acres of land zoned  for commercial development located in Prince William County, Va.        |   | 100                       | %      | —                                                        |       |                      |   | 1,821,670 |   | 520,220                                           |       | (2,141,890                              | )         | $                      | 200,000 |   |
|                       |   |                                                                                              |   |                      |   |                                                          |       |                      |   |      |   |                                              |       |                                    |      |                   |    |   |
| Winchester                 |   | 23.21 acres of land zoned  for multi-family garden apartments located in Memphis, Tn.             |   | 100                       | %      | —                                                        |       |                      |   | 100,000   |   | —                                            |       | (100,000                                | )         | 0                      |    |
|                       |   |                                                                                              |   |                      |   |                                                          |       |                      |   |      |   |                                              |       |                                    |      |                   |    |
| Port-O-

Dumfries          |   | 7 townhouse lots totalling  approximately 19,436 sq. ft. located in Dumfries, Va.                 |   | 100                       | %      | —                                                        |       |                      |   | 14,829    |   | —                                            |       | (14,829                                 | )         | 0                      |    |

 

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(1)               Thisproperty is owned by an wholly owned subsidiary of TWC.

(2)               Thelease on this property is subordinated to a first mortgage secured by the landand the leasehold which consists of a 222-room Holiday Inn.  The Company has no payment obligation on theloan which was fully paid as of December 31, 2001.

(3)               Thisamount reflects depreciation, deferred loan closing costs, and deferred rentalconcessions.

(4)               Thevalue of the Timberlake property was written down $75,000 due to the poorresults of land development zoning tests in several on the remaining lots.  The property was written down an additional$1,057,449 in 1999, the amount of principal and interest outstanding a loansecured by an additional 3.3 of the original 361 acres of the property, toreflect the foreclosure by the lender on such 313 acres.

 

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PROPERTIES

 

Arlington Square Project

 

TWC, directly and through a wholly-owned affiliate, owns a 74% interestin ASLP.  ASLP owns 1.07 acres of landand an office building containing 135,000 gross square feet constructed thereonlocated in Arlington, Virginia.  Thebuilding and parking garage is 100% leased to an agency of the U.S. Governmentunder a ten year lease expiring in September of 2008.  The terms of the lease require the tenant to pay base rent plusits proportionate share of certain operating expense increases.  Also, the lease requires the tenant to paybase rent on the parking garage subject to 5% annual increases.  During 2001 and 2000, the Company realizedrental income of approximately $3,316,000 and $3,288,000, respectively, peryear, or approximately $24.57 and $24.36, respectively, per rentable squarefoot based on a Building Owners and Managers Association (“BOMA”) standard.  During 2001 and 2000, approximately 97% and95%, respectively, of the Company’s revenues was derived from the ArlingtonSquare Project.

 

Forbearance Termination

 

On December31, 1999, the parties to the forbearance agreement entered into a terminationof the forbearance agreement, since all further payment obligations of theparties are contained in the Amended and Restated Promissory Note dated as ofDecember 1, 1998, and the related security and guarantee agreements andamendments thereto.

 

Interest Payments and Amortization

 

The annual interest rate on the outstanding principal balance of theloan from Metropolitan Life Insurance Company in the amount of $21,500,000 (the“MetLife Loan”) is 6.80% payable in monthly principal and interest payments of$147,058.  The note matures on December1, 2010.  The MetLife Loan is amortizedover 26 years with a balloon payment of all remaining indebtedness after 12years.  Prepayment of the MetLife Loanis not permitted during the first six years of the term, and is permittedthereafter with a prepayment penalty.

 

Escrow and Reserve Accounts

 

The MetLifeLoan requires that ASLP fund $20,155 monthly into an escrow account held byMetLife for the purpose of paying the semi-annual payments of real estatetaxes.  ASLP is also required to deposit$12,500 per month into a Leasing Escrow account held by MetLife for the purposeof accumulating the funds that may be required to pay for any improvementrequired under the terms of a new ten year lease with the U.S. Government.

 

Agreements Securing Payment of the MetLifeLoan

 

Payment of obligations under the MetLife Loan are secured by (i) theDeed of Trust, Security Agreement and Fixture Filing, dated November 25, 1998among ASLP and trustees for the benefit of MetLife (the “MetLife Deed ofTrust”); (ii) the Assignment of Leases dated November 25, 1998 between ASLP andMetLife; and (iii) the Assignment of Contracts and Agreements dated November25, 1998, between ASLP and MetLife.

 

In a GuarantyAgreement dated November 25, 1998, TWC has guaranteed to MetLife the

 

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payment and performance ofcertain obligations of ASLP under the note and the other documentation relatedto the MetLife Loan.  In a separateUnsecured Indemnity Agreement, dated November 25, 1998, TWC has an obligationto indemnify MetLife against any Environmental Claims until the loan is paid infull, as defined in the Unsecured Indemnity Agreement, which directly orindirectly relate to the Arlington Square Property.  Finally, TWC has entered into a Subordination of ManagementAgreement dated November 25, 1998, whereby TWC subordinates all of its rightsunder the Management Agreement between TWC and ASLP to any obligations of ASLPto MetLife.

 

General Information

 

For federal income tax purposes at December 31, 2001, the basis of theArlington Square Project, including the land, building, tenant improvements onthe project and equipment (including asset adjustments under Section 754 of theInternal Revenue Code of 1986, as amended) are stated as follows:

 

| Land                          |   | $          | 2,791,072  |   |
|-------------------------------|--------|------------|------------|--------|
| Building                      |   | 19,422,020 |       |
| Tenant improvements           |   | 1,587,548  |       |
| Equipment                     |   | 34,589     |       |
|                          |   | 23,835,229 |       |
| Less accumulated depreciation |   | (8,408,030 | )          |
| Total                         |   | $          | 15,427,199 |   |

 

Depreciation is determined using the straight-line method over theestimated useful lives of the assets. Building and tenant improvements are depreciated over 31.5 and 39 yearsrespectively, and equipment is depreciated over seven years.  The realty tax rate on the project is1.029%, and in 2001 ASLP paid an aggregate of $252,177 in realty taxes.

 

Fort Washington

 

TWC owns a fee simple interest in a parcel of land on which a 222-roomhotel is built.  The property is locatedin Fort Washington, Pennsylvania. Pursuant to a certain Lease Agreement dated March 24, 1974, TWC, aslandlord, is paid an annual minimum rent of $66,000, plus one percent of grossroom sales, but not less than $1,000 a month. The lease provides that upon termination of the lease on March 29, 2024,the property together with all improvements thereon shall accrue to thelandlord free and clear of all liens. The Company believes that the Fort Washington property is adequate forits present use.  During 2001 and 2000,the Company recorded revenues of $108,484 and $113,578 respectively, under thelease agreement.

 

Timberlake

 

TWC, through wholly-owned subsidiaries, owns 48 acres for futureresidential development in Charles County, Maryland.  The Company has no plans for the future development of theTimberlake property, as its preliminary site plan was voided by the foreclosureby the note holder on 313 additional acres. The Company believes that the remaining 48 acres can be divided intolots, depending on the results of percolation tests and the issuance of on-sitesewage discharge permits by the State of Maryland.  To date, the Company has only been able to obtain sewagedischarge permits for five lots.  See“Business Development - Recent Developments - Timberlake.”

 

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River Oaks

 

TWC, through a wholly-owned subsidiary, owns 100% of the partnershipinterests of Four Year Trail Limited Partnership.  The partnership owns 16.6 acres of land zoned B-1 for commercialuse  located in Prince William County,Virginia, known as River Oaks.  TheCompany has no obligations on this property except for the periodic payment ofreal estate taxes.

 

Company Headquarters

 

TWC has an operating lease for its office space at 4550 MontgomeryAvenue, Suite 220 North, Bethesda, Maryland 20814, which expires on January 31,2004.  Currently, TWC’s rent obligationsunder the lease are $24,938 per annum. The rent increases annually at a rate of 3%.

 

Competition

 

The Company believes that the real estate market in the Washington,D.C. area has fully recovered from most of the problems associated with theearly 1990’s, however, the Company must compete with other owners of realproperty that is for sale.  A lack ofbuyers and financing may make the sale of the Company’s properties extremelydifficult.  The value of the ArlingtonSquare Project has stabilized in recent years.

 

Competition for tenants to lease land and office space is also verystrong, however, the Company’s two principal income producing properties, theArlington Square Project located in Arlington, Virginia and the Fort Washingtonproperty located in Fort Washington, Pennsylvania, as of December 31, 2001, arefully under lease to tenants until 2008 and 2024, respectively.  Leasing is extremely competitive in thesetwo areas.

 

Insurance

 

The Company believes that all of the Company’s primary real estateassets are adequately covered by insurance. This includes comprehensive liability and property damage insurancewhich includes loss of rents.

 

Investment Policies

 

No limitations exist on the percentage of the Company’s assets whichmay be invested in any one investment, or type of investment.  However, approval by the shareholders of amajority of the outstanding shares of Class A, Class B and Class C CommonStock, voting jointly as a class, is required before a sale or otherdisposition of all or substantially all of the assets of the Company or anymaterial subsidiary.

 

Management’s objective for the foreseeable future is to retain theincome-producing properties and to prepare for sale all non-income-producingreal estate assets.  In the foreseeablefuture, the Company contemplates no new investments in real estate, interestsin real estate, real estate mortgages or securities of, or interests in,entities primarily engaged in real estate activities.  In addition, during such period, the Company does not intend toacquire other assets, either primarily for possible capital gain or primarilyfor income.

 

ITEM 3.  LEGAL PROCEEDINGS

 

None.

 

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ITEM 4.  SUBMISSION OF MATTERSTO A VOTE OF SECURITY HOLDERS

 

None.

 

PART II

 

ITEM 5.  MARKET FOR COMMONEQUITY AND RELATED STOCKHOLDER MATTERS

 

Under TWC’s Amended and Restated Charter, filed July 30, 1992 with theMaryland Department of Assessments and Taxation (“TWC’s Charter”), TWC hasthree classes of common stock:  Class ACommon Stock, Class B Common Stock, and Class C Common Stock (Class A, B and CCommon Stock collectively referred to herein as the “New Common Stock”).  At the present time, there is no establishedpublic trading market for any class of the New Common Stock.  As of December 31, 2001, there were 123record holders of the Class A Common Stock, 418 record holders of the Class BCommon Stock, and 16 record holders of the Class C Common Stock.  There are no outstanding options or warrantsto purchase securities convertible into common equity of the Company.

 

TWC has been unable to ascertain any market for TWC’s common stockduring 2001 or 2000.  Consequently, TWCdoes not have any information concerning high and low bids on any class of itscommon stock during 2001 or 2000.

 

TWC has not paid any dividends or distributions on its common stocksince 1990.

 

Under TWC’s Charter and except as may otherwise be required by law,holders of Class A Common Stock are entitled to receive 100% of all dividendsand other distributions (the “Dividend Preference”) made by TWC in respect ofits capital stock until such time as dividends and other distributions paid tothe holders of Class A Common Stock equal, in aggregate, to approximately $5,500,000(the “First Trigger”).

 

Following the First Trigger, if it occurs, the holders of Class ACommon Stock are to receive approximately 98.6%, and holders of Class B CommonStock are to receive the remaining approximate 1.4%, of all dividends and otherdistributions paid in respect of TWC’s capital stock until such time as theDividend Preference paid to the holders of Class A Common Stock equal 100% ofthe unsecured allowed claims in excess of $500 (“Allowed Class 7 Claims”) (the“Second Trigger”).  Until the occurrenceof the Second Trigger, if any, the holders of Class C Common Stock have noright to receive any dividends in respect of Class C Common Stock.

 

In addition, under the Charter, the Class A Common Stock has anaggregate liquidation preference in an amount equal to approximately$11,000,000 reduced (but not below zero) by the aggregate amount of dividendsand other distributions paid to the holders of the Class A Common Stock.

 

Under the Charter, following the Second Trigger, if it occurs, alloutstanding shares of Class A Common Stock, Class B Common Stock and Class CCommon Stock will automatically be converted into a single class of commonstock (the “Single Class Common Stock”). Upon such conversion, the holders of Class B Common Stock and theholders of the Class C Common Stock will receive an aggregate of 25% of theoutstanding shares of the Single Class Common Stock, such 25% to be allocated prorata based on the number of shares of Class B Common Stock and Class CCommon Stock

 

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outstanding at the time of such conversion.  Except as otherwise provided in the Charter or required by law,upon the occurrence of the Second Trigger: (i) shares of the Single Class Common Stock will rank paripassuand will share equally, share for share, in any dividends or otherdistributions made by  TWC, and will beidentical in all respects; and (ii) the holders of the Single Class CommonStock will be entitled to one vote per share on all matters submitted forshareholder vote.

 

Following the Second Trigger, if it occurs, TWC is required to providethe holders of outstanding shares of Class A Common Stock, Class B Common Stockand Class C Common Stock with a quarterly statement (which may be contained inreports periodically filed by TWC with the Securities and Exchange Commissionor regularly provided by TWC to its shareholders) of the then-current amount ofthe Dividend Preference and other distributions theretofore paid to the holdersof Class A Common Stock.  As of December31, 1998, the then-current amount of the Dividend Preference was approximately$11,000,000.  The aggregate amount ofthe Dividend Preference paid to holders of the Class A Common Stock was $0.

 

ITEM 6.  MANAGEMENT’S DISCUSSIONAND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Material Changes in Financial Condition

 

During the year ended December 31, 2001 the Company’s total assets werereduced by $810,000 from $18,343,000 to $17,533,000.  Such decrease was primarily the result of depreciation ofoperating property and equipment, and a decrease in cash and cash equivalents,partially offset by an increase in escrow deposits.

 

Operating property and equipment decreased by $755,000 from $16,411,000at December 31, 2000 to $15,656,000 at December 31, 2001.  Such decrease was primarily the result ofdepreciation and the amortization of deferred rent concessions on the ArlingtonSquare Project.

 

Cash and cash equivalents decreased by $178,000 from $426,000 atDecember 31, 2000 to $248,000 at December 31, 2001.  Such decrease was primarily the result of escrow deposits made onthe Arlington Square Project and a reduction in the installment obligation onthe Arlington Square Project.

 

Escrow deposits increased by $156,000 from $419,000 at December 31,2000 to $575,000 at December 31, 2001. Such increase was primarily the result of periodic deposits made to thereserves on the Arlington Square Project.

 

Accounts receivable – tenant increased by $28,000 from $284,000 atDecember 31, 2000 to $312,000 at December 31, 2001.  This increase was primarily the result of an increase in parkinggarage lease income receivable in the Arlington Square Project.

 

Other assets decreased by $62,000 from $78,000 at December 31, 2000 to$16,000 at December 31, 2001.  Thisdecrease was primarily the result of a decrease in accounts receivable inArlington Square, Inc. from the build out of the Arlington Square Project.

 

During the year ended December 31, 2001, the Company’s totalliabilities decreased by $585,000 from $22,635,000 at December 31, 2000 to$22,050,000 at December 31, 2001.  Suchdecrease was primarily the result of a reduction in the installment obligationfor the Arlington Square Project and a reduction in accounts payable and otherliabilities.

 

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Installment obligation/Notes payable - Arlington Square Projectdecreased by $520,000 from $22,414,000 at December 31, 2000 to $21,894,000 atDecember 31, 2001.  Such decrease wasthe result of principal payments on the two mortgages.

 

Accounts payable and other liabilities decreased by $63,000 from$94,000 at December 31, 2000 to $31,000 at December 31, 2001.  Such decrease was primarily the result of adecrease in accrued expenses.

 

Results of Operations

 

Revenues increased by $42,000 from $3,464,000 for the year endedDecember 31, 2000 to $3,506,000 for the year ended December 31, 2001.  Such increase was primarily the result of anincrease in operating property rental income and an increase in other income.

 

Operating property rental income increased by $28,000 from $3,288,000for the year ended December 31, 2000 to $3,316,000 for the year ended December31, 2001.  This increase was the resultof increased income received from the Arlington Square Project, which is theCompany’s primary source of rental income.

 

Other income increased by $12,000 from $24,000 for the year endedDecember 31, 2000 to $36,000 for the year ended December 31, 2001.  This increase was the result of expensereimbursements received from the Arlington Square Project.

 

Total expenses decreased by $205,000 from $3,147,000 for the year endedDecember 31, 2000 to $2,942,000 for the year ended December 31, 2001.  This decrease is primarily due to a decreasein operating property expenses, interest expense, general and administrativeexpenses, and provision for estimated losses on assets.

 

Operating propertyexpenses decreased by $65,000 from $1,045,000 for the year ended December 31,2000 to $980,000 for the year ended December 31, 2001.  This decrease is due to an decrease inoperating expenses relating to the Arlington Square Project.

 

Interest expensedecreased by $13,000 from $1,549,000 for the year ended December 31, 2000 to$1,536,000 for the year ended December 31, 2001.  This decrease was the result of current payments on the ArlingtonSquare Project mortgage balance.

 

General andadministrative expenses decreased by $43,000 from $469,000 for the year endedDecember 31, 2000 to $426,000 for the year ended December 31, 2001.  This decrease is due to a decrease inadministrative expenses relating to The Washington Corporation.

 

During 2000, the Company recorded a provision for estimated losses dueto the reduction in net realizable value of certain real estate and developmentproperties of the Company in the amount of $83,000.  No such provision was made in 2001.

 

Net income before depreciation and amortization increased by $247,000to income of $564,000 for the year ended December 31, 2001 from $317,000 forthe year ended December 31, 2000.  Suchincrease was a result of an increase in total income as described above, and adecrease in expenses.

 

Depreciation and amortization decreased by $27,000 from $816,000 forthe year ended December 31, 2000 to $789,000 for the year ended December 31,2001.  This decrease results primarilyfrom depreciation on the Arlington Square Project.

 

11

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Net loss decreased by $274,000 from a net loss of $499,000 for the yearended December 31, 2000 to a net loss of $225,000 for the year ended December31, 2001.  This decrease was the resultof the changes in the items described above.

 

Liquidity and Capital Resources: Outlook

 

The Company’s primary sources of funds for 2001 came from rental incomeand property management fees.  As ofDecember 31, 2001, the Company had cash and cash equivalents and escrowdeposits totaling approximately $823,000 of which $575,000 was escrow deposits.  The Company expects its primary source offunds for 2002 to continue to be rents received on the Arlington SquareProject.

 

During 2001, cash and cash equivalents decreased by $178,000 ascompared to a decrease of $314,000 for 2000. This decrease in 2001 was primarily due to the result of escrow depositsmade on the Arlington Square Project and a reduction in the installmentobligation on the Arlington Square Project. Future sources of funds areanticipated to come from the rents and property management fees.  The Company has tried without success tosell its remaining assets.

 

TWC’s agreement to manage the Arlington Square Project provides formanagement fees approximating $166,000 annually.  See “Description of Properties - Arlington Square Project”.  The continued ownership of the ArlingtonSquare Project is necessary to provide the Company with sufficient cash foroperations.

 

The Company’s primary use of operating funds is anticipated to be forcorporate overhead expenses and principal and interest payments on the ASLPNotes.

 

On October 25, 1996 at TWC’s annual stockholders meeting, William N.Demas, formerly a Class B and Class C Director was elected as a Class ADirector and Jose Ma. C. Castro was elected as a Class B and Class C Directorto fill the position held by Mr. Demas. Jonathan C. Kinney was also re-elected as a Class B and Class CDirector.  In December of 2000, Jose Ma.C. Castro resigned as a Director of the company.  In January of 2002, Jonathan C. Kinney resigned as a Director ofthe Company.

 

The Company does not have a plan to address its liquidity problemsother than to continue to try to sell assets held for investment and tocontinue to manage and collect rents from the Arlington Square Project.  If these attempts are not successful, or, ifthe Arlington Square Project were to suffer a significant setback, the Companymay be forced to sell its remaining properties for significantly less thanrecorded values.

 

Recent Accounting Pronouncements

 

In June 2001,the Financial Accounting Standards Board issued Statements of FinancialAccounting Standards (“SFAS”) as follows:

 
| No. 141 |   | Business Combinations.                        |
|---------|--------|-----------------------------------------------|
| No. 142 |   | Goodwill and Other Intangible Assets.         |
| No. 143 |   | Accounting for Assets Retirement Obligations. |

 

12

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No. 143             Accountingfor Assets Retirement Obligations.

 

SFAS No. 141eliminates the use of the pooling-of-interests method of accounting forbusiness combinations and requires that all such transactions be accounted forby the purchase method.  In addition,SFAS No. 141 requires that intangible assets be recognized as assets apart fromgoodwill and that they meet specific criteria described in the SFAS.  This SFAS is applicable to all businesscombinations initiated after June 30, 2001 and all business combinationsaccounted for using the purchase method for which the date of acquisition isJuly 1, 2001 or later.  The Companyintends to follow the SFAS in accounting for all future business combinationsand does not believe that adoption will have any significant impact on theCompany’s financial statements.

 

SFAS No. 142eliminates the requirement to amortize goodwill and requires that otherintangible assets be separated into assets that have a finite useful life andthose with an indefinite useful life. Intangible assets with a finite useful life are to be amortized overthat useful life.  Intangible assetswith an indefinite life are to be measured for impairment annually, or morefrequently if circumstances indicate impairment may have occurred.  With respect to goodwill, the SFAS requiresthat it be measured annually for impairment under a defined two-step processthat begins with an estimation of the fair value of a “reporting unit,” whichis defined in the SFAS.  The first stepin the process is a screening for impairment and the second step measures theamount of impairment, if any.  Uponinitial adoption of SFAS No. 142, the change is to be reported on the financialstatements as a change in accounting principle with the cumulative effectreported in the statement of income in the period of adoption.  The SFAS is required to be applied startingwith fiscal years beginning after December 15, 2001, with early applicationpermitted for entities with fiscal years beginning after March 15, 2001.  The Company expects to adopt this new SFASwith its fiscal year beginning January 1, 2001.  The Company has no intangible assets as of December 31, 2001, andtherefore, does not believe that adoption of the SFAS will have any impact onits financial statements.

 

SFAS No. 143requires that asset retirement obligations be recognized as a liability in theperiod in which they are incurred at their fair value if a reasonable estimatecan be made.  The associated assetretirement costs are capitalized as part of the carrying amount of thelong-lived asset.  The SFAS requiresthat the liability be discounted and accretion expense be recognized.  SFAS No. 143 is effective for financialstatements issued for fiscal years beginning after June 15, 2001, with earlierapplication permitted.  The Company doesnot have any asset retirement obligations as of December 31, 2001, andtherefore, does not believe that this new SFAS will have any impact upon itsfinancial statements when adopted.

 

13

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ITEM 7.  FINANCIAL STATEMENTS

 

INDEX TOCONSOLIDATED FINANCIAL STATEMENTS

 
| Independent Auditor’s Report                                                                  |
|----------------------------------------------------------------------------------------------------|
|                                                                                               |
| Consolidated Balance Sheets at December 31,  2001 and 2000                                         |
|                                                                                               |
| Consolidated Statements of Operations for  the years ended December 31, 2001 and December 31, 2000 |
|                                                                                               |
| Consolidated Statements of Deficiency in  Stockholders’ Equity                                |
|                                                                                               |
| Consolidated Statements of Cash Flows                                                              |
|                                                                                               |
| Notes to Consolidated Financial Statements                                                         |

 

14

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700 KING FARM BOULEVARD, SUITE 300

ROCKVILLE, MARYLAND 20850

PHONE 301.231.6200

FAX 301.231.7630

 

[LOGO OF Aronson & Company]

 

www.aronsoncompany.com

 

**Independent Auditor's Report**

 

Board of Directors andShareholders

**TheWashington Corporation**

Bethesda, Maryland

 

We have audited theaccompanying Consolidated Balance Sheets of **TheWashington Corporation and Subsidiaries** (the "Company") asof December 31, 2001 and 2000, and the related Consolidated Statements ofOperations, Deficiency in Stockholders' Equity and Cash Flows for the yearsthen ended.  These consolidated financialstatements are the responsibility of the Company's management.  Our responsibility is to express an opinionon these financial statements based on our audits.

 

We conducted our audits inaccordance with auditing standards generally accepted in the United States ofAmerica.  Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement.  An audit includes examining, on a testbasis, evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audits provide areasonable basis for our opinion.

 

In our opinion, theconsolidated financial statements referred to above present fairly, in allmaterial respects, the financial position of **TheWashington Corporation and Subsidiaries** as of December 31, 2001 and2000, and the results of their operations and their cash flows for the yearsthen ended in conformity with accounting principles generally accepted in theUnited States of America.

 

The accompanying financialstatements have been prepared assuming that the Company will continue as agoing concern.  As discussed in Note 10to the financial statements, the Company has incurred continuing losses fromoperations and has been unable to dispose of certain of its real estate assets.  As a result, the Company may not be able tocontinue to meet its obligations as they come due.  These conditions raise substantial doubt about the Company'sability to continue as a going concern. Management's plans in regard to thesematters are also discussed in Note 13. The consolidated financial statements do not include any adjustmentsthat might arise from the outcome of this uncertainty.

 

ARONSON & COMPANY

 
| /s/ ARONSON  & COMPANY |   |
|----------------------------|--------|
| Rockville,  Maryland       |   |
| January 31,  2002          |   |

 
|                         | [Logo  of  Moores  Rowland  International] | A  member of  Moores Rowland International  an association of independent  accounting firms throughout  the world |
|------------------------------|--------------------------------------------|-------------------------------------------------------------------------------------------------------------------|
|                         |
| CERTIFIED PUBLIC ACCOUNTANTS |
| AND MANAGEMENT CONSULTANTS   |
|                         |
|                         |
|                         |
|                         |

 

 

 

 

15

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**THEWASHINGTON CORPORATION AND SUBSIDIARIES**

**CONSOLIDATED BALANCE SHEETS**

**AT DECEMBER 31, 2001AND 2000**

 
|                                                                          |   | **2001**   |       | **2000**   |   |
|-------------------------------------------------------------------------------|--------|------------|------------|------------|--------|
| ASSETS                                                                        |   |       |       |       |   |
|                                                                          |   |       |       |       |   |
| Operating property and equipment, net                                         |   | $          | 15,656,154 |       | $      | 16,410,644 |   |
| Real estate and development property                                          |   | 325,002    |       | 325,002    |   |
| Cash and cash equivalents                                                     |   | 248,434    |       | 426,367    |   |
|                                                                          |   |       |       |       |   |
| Escrow deposits                                                               |   | 574,909    |       | 418,833    |   |
| Land purchase leaseback                                                       |   | 400,000    |       | 400,000    |   |
| Other assets                                                                  |   | 16,210     |       | 78,257     |   |
| Total Assets                                                                  |   | $          | 17,220,709 |       | $      | 18,059,103 |   |
|                                                                          |   |       |       |       |   |
| LIABILITIES                                                                   |   |       |       |       |   |
|                                                                          |   |       |       |       |   |
| Installment obligation – Arlington Square  Project                       |   | $          | 21,894,105 |       | $      | 22,413,659 |   |
| Accrued interest payable                                                      |   | 124,895    |       | 127,870    |   |
| Accounts payable and other liabilities                                        |   | 31,201     |       | 93,884     |   |
| Total Liabilities                                                             |   | 22,050,201 |       | 22,635,413 |   |
|                                                                          |   |       |       |       |   |
| COMMITMENTS AND CONTINGENCIES                                                 |   |       |       |       |   |
|                                                                          |   |       |       |       |   |
| DEFICIENCY IN STOCKHOLDERS’ EQUITY                                       |   |       |       |       |   |
|                                                                          |   |       |       |       |   |
| Common stock, $.01 par value; shares issued                                   |   |       |       |       |   |
| Class A – 1,675,163 authorized, 1,640,327  shares issued and outstanding |   | 16,403     |       | 16,403     |   |
| Class B – 24,429 authorized, 21,476 shares  issued and outstanding       |   | 215        |       | 215        |   |
| Class C – 45,639 authorized, 45,119 shares  issued and outstanding       |   | 451        |       | 451        |   |
| Additional paid-in capital                                                    |   | 2,804,821  |       | 2,804,821  |   |
| Accumulated deficit                                                           |   | (7,339,103 | )          | (7,114,188 | )      |
|                                                                          |   |       |       |       |   |
| Total Deficiency in Stockholders’ Equity                                 |   | (4,517,213 | )          | (4,292,298 | )      |
|                                                                          |   |       |       |       |   |
| Total Liabilities and Deficiency in  Stockholders’ Equity                |   | 17,532,988 |       | 18,343,115 |   |

 

The accompanying Notes to ConsolidatedFinancial Statements are an integral part of these financial statements.

 

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**THE WASHINGTONCORPORATION AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**FOR THE YEARS ENDEDDECEMBER 31, 2001 AND 2000**

 
|                                                       |   | **2001**  |      | **2000**  |   |
|------------------------------------------------------------|--------|-----------|-----------|-----------|--------|
| REVENUES                                                   |   |      |      |      |   |
|                                                       |   |      |      |      |   |
| Operating property rental income                           |   | $         | 3,316,103 |      | $      | 3,287,703 |   |
| Rent from land purchase leaseback                          |   | 108,484   |      | 113,578   |   |
| Other income                                               |   | 35,618    |      | 24,470    |   |
| Interest income                                            |   | 45,460    |      | 37,765    |   |
|                                                       |   |      |      |      |   |
| Total revenues                                             |   | 3,505,665 |      | 3,463,516 |   |
|                                                       |   |      |      |      |   |
| EXPENSES                                                   |   |      |      |      |   |
|                                                       |   |      |      |      |   |
| Operating property expenses                                |   | 979,981   |      | 1,045,479 |   |
| Interest expense                                           |   | 1,535,898 |      | 1,549,459 |   |
| General and administrative expenses                        |   | 425,701   |      | 468,702   |   |
| Provision for estimated losses on asset  value adjustments |   | —    |      | 82,998    |   |
|                                                       |   |      |      |      |   |
| Total expenses                                             |   | 2,941,580 |      | 3,146,638 |   |
|                                                       |   |      |      |      |   |
| NET INCOME BEFORE DEPRECIATION AND  AMORTIZATION           |   | 564,085   |      | 316,878   |   |
|                                                       |   |      |      |      |   |
| DEPRECIATION AND AMORTIZATION                              |   | 789,000   |      | 815,765   |   |
|                                                       |   |      |      |      |   |
| NET LOSS                                                   |   | $         | (224,915  | )         | $      | (498,887 | ) |
|                                                       |   |      |      |      |   |
| LOSS PER COMMON SHARE  (BASIC):                       |   |      |      |      |   |
|                                                       |   | $         | (0.13     | )         | $      | (0.29 | ) |

 

The accompanying Notes to ConsolidatedFinancial Statements are an integral part of these financial statements.

 

17

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**THE WASHINGTONCORPORATION AND SUBSIDIARIES**

**CONSOLIDATEDSTATEMENTS OF DEFICIENCY IN STOCKHOLDERS’ EQUITY**

**FOR THE YEARS ENDEDDECEMBER 31, 2001 AND 2000**

 
|                        |   | **COMMONSTOCK** |   | **ADDITIONAL  PAID-INCAPITAL** |      | **ACCUMULATEDDEFICIT** |   | **TOTAL**  |       |
|-----------------------------|--------|-----------------|--------|--------------------------------|-----------|------------------------|--------|------------|------------|
| BALANCE, JANUARY 1, 2000    |   | 17,069          |   | $                              | 2,804,821 |                   | $      | (6,615,301 | )          | $ | (3,793,411 | ) |
|                        |   |            |   |                           |      |                   |   |       |       |
| NET LOSS                    |   | —          |   | —                         |      | (498,887               | )      | $          | (498,887   | ) |
|                        |   |            |   |                           |      |                   |   |       |       |
| BALANCE, DECEMBER 31,  2000 |   | 17,069          |   | 2,804,821                      |      | (7,114,188             | )      | $          | (4,292,298 | ) |
|                        |   |            |   |                           |      |                   |   |       |       |
| NET LOSS                    |   | —          |   | —                         |      | (224,915               | )      | $          | (224,915   | ) |
|                        |   |            |   |                           |      |                   |   |       |       |
| BALANCE, DECEMBER 31,  2001 |   | $               | 17,069 |                           | $         | 2,804,821              |   | $          | (7,339,103 | ) | $ | (4,517,213 | ) |
|                             |        |                 |        |                                |           |                        |        |            |            |  |  |  |  |

 

The accompanying Notes to ConsolidatedFinancial Statements are an integral part of these financial statements.

 

18

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**THEWASHINGTON CORPORATION AND SUBSIDIARIES**

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

**FORTHE YEARS ENDED DECEMBER 31, 2001 AND 2000**

 
|                                                                             |   | **2001** |      | **2000** |   |
|----------------------------------------------------------------------------------|--------|----------|-----------|----------|--------|
| CASH  FLOWS FROM OPERATING ACTIVITIES:                                           |   |     |      |     |   |
| Net loss                                                                         |   | $        | (224,915  | )        | $      | (498,887 | ) |
| Adjustments to reconcile  net loss to net cash provided by operating activities: |   |     |      |     |   |
| Provision for estimated  losses on asset valuations                              |   | —   |      | 82,998   |   |
| Depreciation and  amortization                                                   |   | 723,400  |      | 750,165  |   |
| Amortization of deferred  rent concessions                                       |   | 65,600   |      | 65,600   |   |
| Interest earned on restricted escrows                                            |   | (16,393  | )         | (20,868  | )      |
| Decrease (increase) in  accounts receivable - Arlington Square Project           |   | (28,267  | )         | 1,889    |   |
| Decrease in other assets                                                         |   | 62,047   |      | 99,769   |   |
| Decrease in accrued  interest payable                                            |   | (2,975   | )         | (2,888   | )      |
| Decrease in accounts  payable and other liabilities                              |   | (62,683  | )         | (123,823 | )      |
| Net cash provided by  operating activities                                       |   | 515,814  |      | 353,955  |   |
|                                                                             |   |     |      |     |   |
| CASH FLOWS FROM  INVESTING ACTIVITIES:                                           |   |     |      |     |   |
| Purchase of fixed assets                                                         |   | (34,510  | )         | (32,778  | )      |
| Withdrawals from  restricted escrows                                             |   | 252,177  |      | 241,860  |   |
| Deposits to restricted  escrows                                                  |   | (391,860 | )         | (391,860 | )      |
| Net cash used in  investing activities                                           |   | (174,193 | )         | (182,778 | )      |
|                                                                             |   |     |      |     |   |
| CASH FLOWS FROM  FINANCING ACTIVITIES:                                           |   |     |      |     |   |
| Curtailments of  installment obligation - Arlington Square Project               |   | (519,554 | )         | (485,211 | )      |
| Net cash used in  financing activities                                           |   | (519,554 | )         | (485,211 | )      |
|                                                                             |   |     |      |     |   |
| NET CHANGE IN CASH AND  CASH EQUIVALENTS                                         |   | (177,933 | )         | (314,034 | )      |
|                                                                             |   |     |      |     |   |
| CASH AND CASH  EQUIVALENTS, BEGINNING OF PERIOD                                  |   | 426,367  |      | 740,401  |   |
|                                                                             |   |     |      |     |   |
|                                                                             |   |     |      |     |   |
| CASH AND CASH  EQUIVALENTS, END OF PERIOD                                        |   | $        | 248,434   |     | $      | 426,367 |   |
|                                                                             |   |     |      |     |   |
| SUPPLEMENTAL CASH FLOW  INFORMATION                                              |   |     |      |     |   |
| Interest paid during the  year                                                   |   | $        | 1,518,005 |     | $      | 1,552,347 |   |

 

The accompanying Notes to Consolidated Financial Statements are  an integral part of these financialstatements.

 

19

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NOTES TOCONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1

ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

 

The accompanying consolidated statements include the accounts of TheWashington Corporation (“TWC”) and all entities over 50% owned by TWC(collectively, the “Company”).  Allsignificant intercompany transactions have been eliminated inconsolidation.  The Company considersits operating activities to be all within one operating segment.

 

REVENUE RECOGNITION AND DEFERRED RENTAL CONCESSIONS

 

Profit on the sale of real estate is recognized at the time the sale issettled.  Rental income from leases,with scheduled rental increases during their lease terms, is recognized forfinancial reporting purposes on a straight–line basis net of amortizationof deferred rental concessions.

 

REAL ESTATE AND DEVELOPMENT PROPERTY EXPENSES

 

The Company records its real estate and development property at thelower of accumulated cost or estimated net realizable value.  The Company follows the policy of charging,as current expenses, the holding costs of real estate such as taxes, insuranceand interest, to the extent the properties are not currently beingdeveloped.  Direct development andengineering costs are capitalized as part of property cost.  No interest was capitalized during either ofthe years ended December 31, 2001 and 2000.

 

OPERATING PROPERTY AND EQUIPMENT

 

Depreciation is calculated using the straight-line method over theestimated useful lives of the assets. Buildings and related improvements are depreciated over 31.5 and 39years, respectively.  Tenantimprovements are amortized using the straight–line method over the lesserof the term of the life of the respective lease or the useful life of theimprovements.  Deferred rentalconcessions are amortized over the term of the lease.

 

CASH AND CASH EQUIVALENTS

 

For purposes of the statements of cash flows, the Company considers allhighly liquid instruments purchased with a maturity of three months or less tobe cash equivalents.  The Company periodicallyhas cash balances which may exceed federally insured limits. The Company doesnot believe that this results in any significant credit risk.

 

FINANCIAL INSTRUMENTS

 

Management believes the fair market value of all financial instrumentsapproximates the amounts reported on the accompanying balance sheets.

 

MANAGEMENT ESTIMATES

 

The preparation of financial statements in conformity with generallyaccepted accounting principles requires management to make estimates andassumptions that affect the reported amounts of

 

20

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assets and liabilities and disclosure of contingent assets andliabilities at the date of the financial statements and the reported amounts ofrevenues and expenses during the reporting period.  Actual results could differ from those estimates.

 

ASSET IMPAIRMENT

 

It is the Company’s policy to review long-lived assets and certainidentifiable intangibles for impairment whenever events or changes incircumstances indicate that the carrying amount of an asset may not berecoverable.

 

NOTE 2

REAL ESTATE AND DEVELOPMENT PROPERTY

 

Residential development efforts in the past included the acquisition ofraw land for the development of planned sites or finished building lots forsale to homebuilders.  The Company,through a wholly-owned subsidiary, owned 363 acres known as Timberlake inCharles County, Maryland.  In February,1999, 313 acres of this project was foreclosed upon by the lender.  Upon foreclosure, the recorded value of theproperty was reduced by $1,057,449 which represented the outstanding principalbalance of $880,000 plus accrued interest of $177,449.  Management estimated the net realizablevalue of the property’s remaining 48 acres to be  $200,000, resulting in an estimated loss on asset valuation of$97,771 for the year ended December 31, 1999. Management made an additional adjustment to the net realizable value ofthe property during 2000 due to poor results from land development zoning testson several of the remaining lots.  Thisresulted in a provision for estimated loss on asset valuation of $75,000 forthe year ended December 31, 2000.  Noadditional provision was considered necessary in 2001.

 

The Company also owns 16.6 acres, known as River Oaks, that wasintended to be a retail development site in Prince William County,Virginia.  Pursuant to its Chapter 11reorganization plan, the lender has released its debt and security interest onthe property in exchange for the Company’s release of the lender’s developmentobligations.  The property had beenrevalued in “fresh start” accounting to $200,000.

 

In addition, the Company owns 23.21 acres in Memphis, Tennessee zonedfor multi-family garden apartments and seven townhome lots in Dumfries,Virginia.  Management has estimated thenet realizable value of these properties as being almost worthless, resultingin a provision for estimated loss on asset valuation of $7,998 for the yearended December 31, 2000.  No additionalprovision was considered necessary in 2001.

 

NOTE 3

LAND LEASE

 

The Company owns a fee simple interest in land underlying a hotellocated in Ft. Washington, Pennsylvania. The property had an original cost and current value of $400,000.  The minimum annual rent under the lease,which expires in 2024, is $66,000 plus one percent of gross room sales of theproperty, but not less than $1,000 a month. As of December 31, 2001, the minimum lease payments due pursuant to thislease through expiration are as follows:

 

| 2002       |   | 78,000    |      |
|------------|--------|-----------|-----------|
| 2003       |   | 78,000    |      |
| 2004       |   | 78,000    |      |
| 2005       |   | 78,000    |      |
| 2006       |   | 78,000    |      |
| Thereafter |   | 1,423,500 |      |
|       |   | $         | 1,813,500 |   |
|            |        |           |           |  |

 

21

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NOTE 4

OTHER ASSETS

 

Other assets includes prepaid expenses, security deposits and prepaidmanagement fees.

 

NOTE 5

ESCROW DEPOSITS

 

At December 31, 2001 and 2000, deposited funds of $574,909 and$418,833, primarily for the Arlington Square Project, were restricted forreplacement reserve, and tax and insurance escrows.

 

NOTE 6

INSTALLMENT OBLIGATIONS - ARLINGTON SQUARE PROJECT

 

From November 1997 to November 25, 1998, Arlington Square LimitedPartnership (ASLP)’s property was encumbered by two mortgage notes to AlliedCapital Commercial Corporation (Allied) in the amount of $24,300,000.  The outstanding principal balance on themortgage loans accrued interest at a blended rate of 10%, based on theLIBOR.  The notes were cash-flowmortgages with all excess cash flow, as defined, being applied to reduce theprincipal balance and to fund the required escrows.  One of the mortgage agreements provided for the lender to receivea participation interest of 30% in the net cash flow and a 30% equity value inthe property if and when it is sold, with such provision to survive any payoffof the mortgage.

 

On November 25, 1998, ASLP refinanced the above described mortgageswith a new mortgage with MetLife in the amount of $21,500,000, secured by afirst deed of trust on the land and building. This note bears interest at 6.8% and both principal and interest arepayable in monthly installments of $147,058 beginning in January 1999, with theoutstanding principal of approximately $15.9 million balance due on December 1,2010.

 

On December 1, 1998, ASLP entered into a forbearance agreement withAllied whereby Allied gave notice of demand for full payment of its participationinterest in the equity value of the property and established the value of thatinterest at $1,850,000, including Allied’s cash flow interest for the periodOctober 1 through December 31, 1998. Under the agreement, the partnership is to pay Allied its participationinterest in equal monthly installments of $22,739, including interest at 7.5%over a term of 9 1⁄2 years.  Allied’sparticipation interest is collaterized by a deed of trust in the real estate andis guaranteed by all of the partners.  Each partner’s guarantee is secured by a pledge of its interest inthe partnership.  Allied agreed toforebear on certain of its surviving rights from the mortgage note, includingan abatement of its right to the property’s net cash flow, provided all paymentsunder the agreement are paid when due. In addition, Allied subordinated its deed of trust to the deed of trustof MetLife.  On December 31, 1999, theparties to the forbearance agreement entered into a termination of theforbearance agreement, since all further payment obligations of the parties arecontained in the Amended and Restated Promissory Note dated as of December 1,1998.

 

At December 31, 2001, the scheduled future maturities of theobligations are as follows:

 

22

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| **Year Ending December 31** |   | **Amount** |       |
|-----------------------------|--------|------------|------------|
| 2002                        |   | $          | 556,491    |   |
| 2003                        |   | 596,833    |       |
| 2004                        |   | 640,106    |       |
| 2005                        |   | 686,523    |       |
| 2006                        |   | 736,313    |       |
| Thereafter                  |   | 18,677,839 |       |
|                        |   | $          | 21,894,105 |   |

 

 

NOTE 7

OPERATING PROPERTY AND EQUIPMENT - ARLINGTON SQUARE PROJECT

 

At December 31, 2001 and 2000, operating property and equipment isstated at the net “fresh start” value of $23,000,000, less related accumulateddepreciation and amortization of related intangibles.  For “fresh start” reporting purposes, the Arlington SquareProject was revalued to an amount equal to the original amount of thenon-recourse debt secured by the property.

 

At December 31, 2001 and 2000, operating property and equipmentconsisted of:

 
|                               |   | **2001**    |       | **2000**   |   |
|------------------------------------|--------|-------------|------------|------------|--------|
| Land,  building and equipment      |   | $           | 23,629,941 |       | $      | 23,595,431 |   |
| Tenant improvements                |   | 1,603,452   |       | 1,603,452  |   |
| Deferred rental concessions, net   |   | 442,800     |       | 508,400    |   |
| Deferred loan closing costs, net   |   | 214,972     |       | 246,820    |   |
|                               |   | 25,891,165  |       | 25,954,103 |   |
| Less depreciation and amortization |   | (10,235,011 | )          | (9,543,459 | )      |
|                               |   | $           | 15,656,154 |       | $      | 16,410,644 |   |

 

NOTE 8

INCOME TAXES

 

As of December 31, 2001, the Company had tax net operating losscarryforwards of approximately $19,885,000. The deferred tax asset associated with these net operating losscarryforwards of approximately $7,300,000 is offset by a valuation allowanceapplied to the deferred tax asset.  Thenet operating losses for income tax reporting purposes will expire as follows:

 
| 2004 — |   | $         | 1,309,000 |        | 2008 — |      | $      | 1,429,000 |   | 2021 — |   | $ | 29,000 |   |
|-------------|--------|-----------|-----------|-------------|-------------|-----------|--------|-----------|--------|-------------|--------|---|--------|--------|
| 2005 — |   | 5,652,000 |      | 2018 — |        | 91,000    |   |      |   |        |   |
| 2006 — |   | 155,000   |      | 2019 — |        | 1,565,000 |   |      |   |        |   |
| 2007 — |   | 9,405,000 |      | 2020 — |        | 250,000   |   |      |   |        |   |

 

23

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NOTE 9

RELATED PARTY TRANSACTIONS

 

During 2001 and 2000, the Company engaged a law firm in which onecurrent director of the Company serves as partner in the firm.  During 2001 and 2000, the Company paid$1,830 and $9,366, respectively, in fees to this law firm.  During the year ended December 31, 2001 and2000, the Company paid $2,131 and $16,867, respectively, of consulting fees forconstruction services to an entity affiliated with another current director.

 

NOTE 10

COMMON STOCK AND DISTRIBUTIONS

 

In connection with a reorganization in 1992, the equity interests ofthe Company have been restructured as follows:

 

Unsecured creditors with pre-confirmation claims totaling approximately$11,000,000 exchanged their interests for 1,675,163 shares of the Class ACommon Stock, representing 100% of such class.

 

Pre-confirmation shareholders of the Company (other than controllingshareholders as defined in the Plan) exchanged 610,736 shares of Old CommonStock for 24,429 shares of the Class B Common Stock, representing 100% of suchclass.

 

Controlling shareholders of the Company exchanged their 1,134,225,shares of Old Common Stock for 45,369 shares of the Class C Common Stock,representing 100% of such class.

 

Under the terms of the Plan, holders of the Class A Common Stock willreceive 100% of all dividends paid by the Company in respect of its capitalstock until such time as the cumulative dividends and other distributions paidto holders of Class A Common Stock equal 50% of the allowed Class 7 bankruptcyclaims of approximately $11,000,000 (the “First Trigger”).

 

Following the First Trigger, the holders of the Class A Common Stockwill receive approximately 98.6% (with Class B stockholders receiving 1.4%) ofall dividends paid in respect of the Company’s capital stock until such time asthe cumulative dividends and other distributions paid to holders of Class ACommon Stock equal 100% of the allowed Class 7 bankruptcy claims (the “SecondTrigger”).

 

Following the Second Trigger, all outstanding shares of Class A CommonStock, Class B Common Stock and Class C Common Stock will automatically convertinto a single class of common stock.

 

The holders of Class A Common Stock also have an aggregate liquidationpreference of an amount equal to the amount of Class 7 bankruptcy claimsallowed in the Company’s Chapter 11 case. All dividends or distributions made with respect to the Class A CommonStock shall reduce the liquidation preference dollar for dollar.

 

As of December 31, 2001, the number of common shares outstanding is asfollows:

 

| Class A |   | 1,640,327 |   |
|---------|--------|-----------|--------|
| Class B |   | 21,476    |   |
| Class C |   | 45,119    |   |

 

24

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NOTE 11

LESSOR ARRANGEMENTS

 

The Company, through its 74% interest in ASLP, owns a building andparking garage which is 100% leased to an agency of the U.S. Government under aten year lease expiring in September, 2008. During the years ended December 31, 2001 and 2000, the Company realizedincome from this lease of approximately $3,316,000 and $3,288,000, net ofrental concessions, respectively, or 97% and 95% of total revenues,respectively. The terms of the lease require the tenant to pay base rent plusits proportionate share of increases in certain operating expenses.  Also, the lease requires the tenant to paybase rent on the parking garage subject to 5% annual increases.

 

The minimum lease payments due pursuant to this lease at December 31,2001 are as follows:

 

| 2002       |   | $         | 3,271,308  |   |
|------------|--------|-----------|------------|--------|
| 2003       |   | 3,299,277 |       |
| 2004       |   | 3,363,184 |       |
| 2005       |   | 3,374,491 |       |
| 2006       |   | 3,386,364 |       |
| Thereafter |   | 5,955,224 |       |
| Total      |   | $         | 22,649,848 |   |

 

NOTE 12

OFFICE LEASE

 

The Company is obligated under an operating lease for its office spacewhich expires January 31, 2004.  Therent increases annually by 3%.  Thefuture annual rents under this lease are:

 

| 2002  |   | 25,006 |   |
|-------|--------|--------|--------|
| 2003  |   | 25,750 |   |
| 2004  |   | 2,151  |   |
| Total |   | $      | 52,907 |   |
|       |        |        |        |  |

 

Rental expense under the Company’s office lease agreements was $24,938and $25,963 for 2001  and 2000,respectively.

 

NOTE 13

GOING CONCERN

 

The Company has continued to incur losses and has been unable toliquidate certain of its real estate assets in a timely manner and is facingcertain liquidity problems in the near future if these assets cannot bedisposed.  These factors raisesubstantial doubt about the Company’s ability to continue as a goingconcern.  Management does not have aformal plan to address these possible liquidity problems although they willcontinue to monitor and reduce administrative costs and/or attempt to delaypayment for certain services until properties are sold.  If these attempts are not successful, theCompany may be forced to sell its remaining properties for significantly lessthan the recorded values.  The eventual

 

25

----

 

outcome of these matters cannot be determined.  The accompanying financial statements do notinclude any adjustments to assets or recorded liabilities of the Company if itis forced to liquidate prematurely and sales of assets and settlement ofliabilities are not conducted in the normal course of business.

 

NOTE 14

NET LOSS PER SHARE

 

The following is a reconciliation of the numerators and denominators ofthe basic net loss per share computations for 2001 and 2000:

 
|                     |   | **2001**              |     |
|--------------------------|--------|-----------------------|----------|
|                     |   | **Loss  (Numerator)** |     | **Shares  (Denominator)** |   | **Per Share  Amount** | ** ** |
| Basic net loss per share |   |                  |     |   |   |   |   |
| Net loss                 |   | $                     | (224,915 | ) | 1,706,922 |   | $ | (.13 | ) |
|                     |   |                  |     |   |   |   |   |
|                     |   | **2000**              |     |
|                     |   | **Loss  (Numerator)** |     | **Shares  (Denominator)** |   | **Per Share  Amount** | ** **

  |
| Basic net loss per share |   |                  |     |   |   |   |   |
| Net Loss                 |   | $                     | (498,887 | ) | 1,706,922 |   | $ | (.29 | ) |

 

26

----

 

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIALDISCLOSURE

 

None.

 

27

----

 

PART III

 

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCEWITH SECTION 16(A) OF THE EXCHANGE ACT

 

Executive Officers and Directors of the Company

 

TWC’s Bylaws require no less than two (2) directors, at least one ofwhich is a Class A Director, shall constitute a quorum for a Board of Directorsmeeting and the vote of a majority of the Class A Directors participating atsuch meeting is necessary for the Board to act.  The Board of Directors is composed of one (1) Class A Directorand two (2) Class B and C Directors.  OnOctober 25, 1996, William N. Demas, formerly a Class B and Class C Director waselected as a Class A Director and Jose Ma. C. Castro was elected as a Class Band Class C Director to fill the position held by Mr. Demas.  In December of 2000, Jose Ma. C. Castroresigned as a Class B Director of the Company. In January of 2002, Jonathan C. Kinney resigned as a Class B Director ofthe Company.  TWC is currently searchingfor Class B and C Directors.  Directorsare elected to serve until the next annual meeting of shareholders or the nextspecial meeting of shareholders called for the election of directors, and untiltheir successors have been elected and qualified.  TWC did not hold an annual or special meeting of shareholders in2001.  See “Description of Business -Business Development - Recent Developments.”

 

TWC’s executive officers and directors are:

 

| **NAME**         |   | **AGE** |   | **POSITION**                                                               |
|------------------|--------|---------|--------|----------------------------------------------------------------------------|
| William N. Demas |   | 65      |   | Chairman of the Board of Directors,  Chief Executive Officer and President |
|             |   |    |   |                                                                       |
| Geraldine Piatt  |   | 66      |   | Secretary                                                                  |

 

William N. Demas has been Chairman of theBoard of Directors, Chief Executive Officer and President of TWC since it wasestablished in 1979.  Mr. Demas servedas Chairman of the Board of Directors and Chief Executive Officer of CapitalMortgage Investors, TWC’s predecessor, from 1969 to 1979.  Mr. Demas also manages properties unrelatedto TWC.

 

Geraldine Piatt has served as the Secretaryof the Company since 1992.  Ms. Piattalso serves as property management administrator since 1989.

 

Compliance with Section 16(a) of theSecurities Exchange Act of 1934, as amended

 

Section 16(a) of the Securities Exchange Actof 1934, as amended (the “Exchange Act”), requires that directors and officersof a registrant and persons owning more than ten percent of such registrant’sequity securities registered under Section 12 of the Securities Exchange Actfile reports of ownership and changes in ownership (“Section 16 Filings”) withthe Securities and Exchange Commission (the “SEC”).  The SEC requires that copies of all such Section 16 Filings befurnished by the filers to the registrant. TWC has not received any Section 16 Filings during Fiscal 2001.

 

28

----

 

ITEM 10. EXECUTIVE COMPENSATION

 

Summary Compensation Table

 

The following table sets forth informationconcerning the annual compensation earned by the President and Chief ExecutiveOfficer of TWC  (the “Named ExecutiveOfficer”) for services rendered to TWC in all capacities for the fiscal yearsended December 31, 2001 (“Fiscal 2001”), December 31, 2000 (“Fiscal 2000”) andDecember 31, 1999 (“Fiscal 1999”):

 

SUMMARY COMPENSATION TABLE

 
|                                                     |   | **Annual Compensation** |   |                      |   |
|----------------------------------------------------------|--------|-------------------------|--------|---------------------------|--------|
| **Name and Principal Position**                          |   | **Year**                |   | **Salary**                |   | **Bonus** | ** ** | **Other  Annual  Compensation** | ** ** | **All  Other  Compensation** | ** ** |
| William N. Demas, Chief Executive Officer  and President |   | 2001   2000   1999      |   | 96,546   123,631   74,000 |   | —   —   — |   | 20,570   —   — | (1) | 24,852   24,852   24,852 | (2) (2) (2) |

 

----

1  Auto allowance

 

2  Since August 1993, TWC haspaid the premiums on a life insurance policy for Mr. Demas (“the DemasPolicy”).  The amounts shown representTWC’s total annual payments therefor in Fiscal 2001, Fiscal 2000 and Fiscal1999.  In all three years, TWC reducedMr. Demas’s base salary by the amount equal to the costs of the Demas Policy.

 

TWC has not granted stock options, restricted stock awards, or shareappreciation rights during Fiscal 2001, Fiscal 2000, and Fiscal 1999.  Since its reorganization in 1992, TWC hasnot had a long-term incentive plan or pension plan.  However, in 1992, TWC established a noncontributory SalaryReduction SEP on behalf of its employees (including Mr. Demas), pursuant towhich employees, at their election, may defer a percentage of their annualsalaries.

 

Employment Agreement with William N. Demas

 

On July 30, 1992, William N. Demas entered into an agreement with TWCproviding for his employment as President and Chief Executive Officer of TWC(the “Employment Agreement”).  TheEmployment Agreement expired on July 30, 1995.

 

Since the expiration of the Employment Agreement on July 30, 1995, Mr.Demas has been acting as the President and Chief Executive Officer of TWCwithout a written employment agreement. Mr. Demas has been serving in such positions for a base salary ofapproximately $87,000 per year and performs such services on a part-time basis,not to exceed 25 hours per week.  Inaddition, Mr. Demas receives as benefits health insurance and reimbursement ofexpenses incurred on behalf of TWC.

 

In addition, since August 1993, in lieu of paying Mr. Demas’ fullsalary, TWC has paid the monthly premiums on a life insurance policy for Mr.Demas.

 

Compensation of Directors

 

In accordance with TWC’s Bylaws, directors may be reimbursed for anyreasonable

 

29

----

 

expenses incurred in connection with their service on the Board ofDirectors.  There are no otherarrangements pursuant to which directors of TWC are compensated for services asdirector.  Messrs. Demas and Kinney didnot seek or receive any reimbursement for their expenses in Fiscal 2001.

 

ITEM 11.  SECURITY OWNERSHIP OFCERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

Principal Shareholders

 

The following table shows with respect to each person or entity knownby TWC to be the beneficial owner of more than 5% of any class of TWC’s votingsecurities as of December 31, 2001, (i) the number of shares so owned, and (ii)the percentage of all shares represented by such ownership (based upon thenumber of shares outstanding in the class) as of December 31, 2001.

 
|                     |   | **Shares  Beneficially Owned**                                                                                                                          |
|--------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Title of  Class** |   |                                                                                                                                                    |   | **# of  Shares** |   | **% of  Class(1)** |
| Class A  Common Stock    |   | Kevin E. Foley,  Deputy Superintendent of Insurance of the State of New York, as  Agent of the Rehabilitator of Executive Life Insurance of New York(2) |   | 410,618 |   | 24.7 |
|                     |
| Class A  Common Stock    |   | AIF II, L.P.(3)                                                                                                                                         |   | 325,242 |   | 19.6 |
|                     |
| Class A  Common Stock    |   | Lion Advisors, L.P.(3)                                                                                                                                  |   | 325,242 |   | 19.6 |
|                     |
| Class C  Common Stock    |   | The Antonelli Creditors Liquidating Trust                                                                                                               |   | 18,206 |   | 40.1 |
|                     |
| Class C  Common Stock    |   | Andrea Kinney Greene                                                                                                                                    |   | 4,116 |   | 9.1 |
|                     |
| Class C  Common Stock    |   | David B. Kinney                                                                                                                                         |   | 5,326 |   | 11.7 |
|                     |
| Class C  Common Stock    |   | David H. Kinney                                                                                                                                         |   | 4,154 |   | 9.2 |
|                          |        |                                                                                                                                                         |  |  |  |  |  |

 

----

1  For purposes of this tableand the table set forth immediately below, under the heading “Directors andExecutive Officers”, the percentage of shares owned by each shareholder listedis based on the number of Class A Common Stock, Class B Common Stock and ClassC Common Stock (the “New Shares”) that have been authorized pursuant to TWC’splan of reorganization.  The authorizedNew Shares  equal the number of New Sharesissued and outstanding.  Under the planof reorganization, shareholders could claim their New Shares until July 30,1995, after which date TWC would have the right to cancel any and all of theunclaimed New Shares.  Because the NewShares have not been registered under the Securities Act of 1933, shareholdersare not required to file statements with the SEC under section 13(d) and 13(g)concerning their beneficial ownership of such shares.  The information set forth in the table is based principally uponinformation provided by the Company’s transfer agent and plan of reorganization.

 

2  Mr. Foley’s address is 123Williams Street, New York, NY 10038-3889.

 

3  The address for AIF II, L.P.and Lion Advisors, L.P. c/o Apollo Advisors, L.P. is 1999 Avenue of the Stars,Suite 1050, Los Angeles, CA  90067.

 

4  The address for the trust isthe Antonelli Liquidating Trust  c/oBailey Realty Corporation, 1130 Connecticut Avenue, N.W., Washington, D.C.  20036.

 

5  Andrea Kinney Greene, thesister of Jonathan Kinney  who was adirector of TWC, owns approximately 4,116 shares of Class C Common Stock.  In addition, Andrea Kinney Greene, ascustodian for her children, holds approximately 132 shares of Class B CommonStock.  The address provided to TWC byAndrea Kinney Greene is Route 2, Box 782, Purcellville, VA 22132.

 

6  This total includes approximately584 shares of Class C Common Stock over which David B. Kinney has voting andinvestment powers in his capacity as general partner of K-F Associates, aVirginia limited partnership, which interests are owned by members of theKinney Family.  David B. Kinney is thefather of Jonathan C. Kinney.  Theaddress provided to TWC by David B. Kinney is 754 Walker Road, 2ndFloor, Great Falls, VA 22066.

 

7  Mr. David H. Kinney is thebrother of Jonathan C. Kinney.  Theaddress provided to TWC by David H. Kinney is 1056 Manning Street, Great Falls,VA 22066.

 

30

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Directors and Executive Officers 

 

The following table sets forth, as of December 31, 2001, informationwith respect to beneficial ownership of TWC’s capital stock by (i) the NamedExecutive Officers, (ii) each director and (iii) all directors and executiveofficers of TWC as a group.

 
| **Name and Address of  Beneficial Owner(1)** |   | **Title of  Class**  |   | **Amount and  Nature of Percentage of Class** |   |
|----------------------------------------------|--------|----------------------|--------|-----------------------------------------------|--------|
| **Beneficial  Ownership**                    |   | **Outstanding**      |   |
| William N. Demas                             |   | Class A Common Stock |   | 7,608                                         |   | * |   |
|                                         |   | Class C Common Stock |   | 8,982                                         | (2)    | 19.8 |   |
|                                         |   |                 |   |                                          |   |   |   |
| Jonathan C. Kinney                           |   | Class A Common Stock |   | 523                                           | (3)    | * |   |
|                                         |   | Class C Common Stock |   | 4,564                                         | (4)    | 10.1 |   |
|                                         |   |                 |   |                                          |   |   |   |
| Directors and Officers as a Group            |   | Class A Common Stock |   | 8,131                                         |   | * |   |
| (2 persons)                                  |   | Class C Common Stock |   | 13,546                                        |   | 29.9 |   |

 

----

*   Less than 1% of outstandingshares of the Class

 

1  The address for each directorand officer is c/o TWC, 4550 Montgomery Avenue, Suite 220 North, Bethesda, Maryland20814.

 

2  This total includes 1,340shares of Class C Common Stock which Mr. Demas owns with his wife in jointtenancy; however, it does not include approximately 440 shares of Class CCommon Stock beneficially owned by Mr. Demas’ daughter Edith Demas.  In addition, Mr. Demas, as custodian for hischildren, Amy, James and Sarah Demas, holds 164 shares of Class B Common Stock.

 

3  Mr. Kinney disclaimsbeneficial ownership of these shares of Class A Common Stock which are held byBean, Kinney & Korman, P.C., a law firm in which Mr. Kinney is astockholder.  In January of 2002, Mr.Kinney resigned as a Director of the Company.

 

4 This total includes 8 shares of Class C Common Stock which are held byMr. Kinney’s wife and 146 shares of Class C Common Stock held by Mr. Kinney asa limited partner in K-F Associates, a limited partnership which interests areowned by members of the Kinney Family. Mr. Kinney disclaims beneficial ownership of shares held by K-F Associates.In addition, Mr. Kinney, as custodian for his children, David N.A. and RachaelW.K. Kinney, holds 232 shares of Class B Common Stock.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

Mr. Kinney and certain members of Mr. Kinney’s family (collectively,the “Kinney Family”) have a 16% ownership interest (6% of which is Mr. Kinney’spersonal holding) in ASLP, which owns the Arlington Square Project.  Mr. Demas has a 7% ownership interest inASLP. ­ The Company owns 74% of the equity directly and indirectly, of ASLP andis its general partner.  In Fiscal 2001,Messrs. Demas and Kinney and the Kinney Family received partnershipdistributions from their limited partnership inter­ests of $4,900, $4,200, and$7,000 respectively.  Messrs. Demas andKinney and the Kinney Family expect to receive similar distributions in fiscalyear 2002.  See “Description ofProperties - Arlington Square Project.

 

In Fiscal 2001 and Fiscal 2000, the Company paid legal fees ofapproximately $1,830 and $9,366 respectively to Bean, Kinney & Korman,P.C., the law firm in which Mr. Kinney is partner and stockholder.

 

31

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ITEM 13.  EXHIBITS LIST ANDREPORTS ON FORM 8-K

 
| **(a)** |   | **Exhibits**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|---------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 3.1     |   | The Company’s Amended and Restated Charter, filed with the Maryland  Department of Assessments and Taxation on July 30, 1992, which was filed as  Exhibit 2.2 to the Company’s Registration Statement on Form 8-A filed with  the Commission on August 10, 1992, is incorporated herein by reference.                                                                                                                                                                                                                                                                                    |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 3.2     |   | The Company’s Bylaws, dated as of July 30, 1992, which were filed as  Exhibit 2.3 to the Company’s Registration Statement on Form 8-A filed with  the Commission on August 10, 1992, are incorporated by reference.                                                                                                                                                                                                                                                                                                                                                                      |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 4.1     |   | The Second Amended Joint Plan of Reorganization of The Washington  Corporation, Carlin Springs Associates Limited Partnership, Second Fair Ridge  Associates Limited Partnership and Wilson-Randolph Limited Partnership, dated  May 28, 1992, as modified, which was filed as Exhibit 2.1 to the Company’s  Report on Form 8-K filed with the Commission on July 29, 1992, Commission  File No. 0-20518, is incorporated herein by reference.                                                                                                                                                |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 4.2     |   | The Registration Rights Agreement, dated as of July 30, 1992, by and  among the Company and certain holders of the Company’s Class A Common Stock which  was filed as Exhibit 4.4 to the Company’s Form 10-Q filed with the Commission  on August 14, 1992, Commission File No. 0-20518, is incorporated herein by  reference.                                                                                                                                                                                                                                                           |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.1    |   | Agreement of Limited Partnership of Arlington Square Limited  Partnership dated September 17, 1985, by and among TWC Properties Partnership  and the limited partners, which was filed as Exhibit 10.1 to the Company’s  report on Form 10-KSB filed with the Commission April 6, 1995, is  incorporated herein by reference.                                                                                                                                                                                                                                                                 |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.2    |   | The U. S. Government Lease of Real Property (Arlington Square  Project) dated May 13, 1988 including Riders 1, 2 and 3 which was filed as  Exhibit 10 to the Company’s Form 10-K filed with the Commission on March 29,  1990, Commission File No. 0-20518, is incorporated herein by reference.                                                                                                                                                                                                                                                                                              |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.3    |   | The Lease Agreement dated March 24, 1974 between the Company and Fort  Washington Inn Associates, which was filed as Exhibit 10.5 to the Company’s  Form 10-KSB filed with the Commission April 6, 1993, is incorporated herein by  reference.                                                                                                                                                                                                                                                                                                                                                |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.4    |   | The Stock Purchase Agreement dated November 1, 1994 relating to the  sale of 2900 South Glebe, Inc, between The Washington Corporation and William  N. Demas, which was filed as Exhibit 10.5 to the Company’s Form 10-KSB filed  with the Commission on April 6, 1995, is incorporated herein by reference.                                                                                                                                                                                                                                                                                  |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.5    |   | The First Amendment to Agreement of Limited Partnership of Arlington  Square Limited Partnership dated December 14, 1990, by and among TWC  Properties Partnership, William N. Demas, John D. Wolf and The Ballston  Corporation, which was filed as Exhibit 10.8 to the Company’s report on Form  10-KSB filed with the Commission April 6, 1995, is incorporated herein by  reference.                                                                                                                                                                                                      |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.6    |   | The Second Amendment to Agreement of Limited Partnership of Arlington  Square Limited Partnership dated March 8, 1991, by and among TWC Properties  Partnership, William N. Demas, John D. Wolf, The Ballston Corporation and  Arlington Square, Inc., which was filed as Exhibit 10.9 to the Company’s  report on Form 10-KSB filed with the Commission April 6, 1995, is  incorporated herein by reference.                                                                                                                                                                                 |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.7    |   | The Third Amendment to Agreement of Limited Partnership of Arlington  Square Limited Partnership dated March 8, 1991, between TWC Properties  Partnership, William N. Demas, John D. Wolf, The Ballston Corporation,  Arlington Square Incorporated, Jonathan C. Kinney, David B. Kinney and  Barbara A. Kinney evidencing the transfer of a 16% partnership interest in  ASLP to Jonathan C. Kinney, David B. Kinney and Barbara A. Kinney, which was  filed as Exhibit 10.1 to the Company’s Form 10-KSB filed with the Commission  on April 13, 1993, is incorporated herein by reference. |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.8    |   | The Fourth Amendment to Agreement of Limited Partnership of Arlington  Square Limited Partnership dated January 1, 1993, by and among TWC Properties  Partnership, Arlington Square, Inc., and The Washington Corporation, is  incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                   |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.9    |   | Promissory Note in the original principal amount of $23,000,000 dated  November 20, 1997 between Arlington Square Limited Partnership and Allied  Capital Commercial Corporation, which was filed as Exhibit 10.9 to the  Company’s Form 10-KSB filed with the Commission on May 8, 1998, is  incorporated herein by reference.                                                                                                                                                                                                                                                               |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.10   |   | Promissory Note in the original principal amount of $1,000,000 dated  November 20, 1997 between Arlington Square Limited Partnership and Allied  Capital Commercial Corporation, which was filed as Exhibit 10.10 to the  Company’s Form 10-KSB filed with the Commission on May 8, 1998, is  incorporated herein by reference.                                                                                                                                                                                                                                                               |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.11   |   | Loan Agreement in the amount of $24,300,000 dated November 20, 1997  between Arlington Square Limited Partnership and Allied Capital Commercial  Corporation, which was filed as Exhibit 10.11 to the Company’s Form 10-KSB  filed with the Commission on May 8, 1998, is incorporated herein by  reference.                                                                                                                                                                                                                                                                                  |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.12   |   | Amended and Restated Agreement of Limited Partnership of Arlington  Square Limited Partnership, which was filed as Exhibit 10.12 to the Company’s  Form 10-KSB filed with the Commission on May 8, 1998, is incorporated herein  by reference.                                                                                                                                                                                                                                                                                                                                                |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.13   |   | Assignment of Leases and Rents dated November 20, 1997 by Arlington  Square Limited Partnership to Allied Capital Commercial Corporation, which  was filed as Exhibit 10.13 to the Company’s Form 10-KSB filed with the  Commission on May 8, 1998, is incorporated herein by reference.                                                                                                                                                                                                                                                                                                      |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.14   |   | Assignment of Leases and Rents (GSA) dated November 20, 1997 by  Arlington Square Limited Partnership to Allied Capital Commercial  Corporation, which was filed as Exhibit 10.14 to the Company’s Form 10-KSB  filed with the Commission on May 8, 1998, is incorporated herein by  reference.                                                                                                                                                                                                                                                                                               |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.15   |   | Guaranty by Arlington Square Limited Partnership to Allied Capital  Commercial Corporation, on May 8, 1998, is incorporated herein by reference.  which was filed as Exhibit 10.15 to the Company’s Form 10-KSB filed with the  Commission.                                                                                                                                                                                                                                                                                                                                                   |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.16   |   | Indemnity Agreement dated November 20, 1997 between Arlington Square  Limited Partnership and Allied Capital Commercial Corporation, which was  filed as Exhibit 10.16 to the Company’s Form 10-KSB filed with the Commission  on May 8, 1998, is incorporated herein by reference.                                                                                                                                                                                                                                                                                                           |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.17   |   | Deed of Trust and Security Agreement “A” dated November 20, 1997  between Arlington Square Limited Partnership and Allied Capital Commercial  Corporation, which was filed as Exhibit 10.17 to the Company’s Form 10-KSB  filed with the Commission on May 8, 1998, is incorporated herein by  reference.                                                                                                                                                                                                                                                                           |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.18   |   | Deed of Trust and Security Agreement “B” dated November 20, 1997  between Arlington Square Limited Partnership and Allied Capital Commercial  Corporation, which was filed as Exhibit 10.18 to the Company’s Form 10-KSB  filed with the Commission on May 8, 1998, is incorporated herein by  reference.                                                                                                                                                                                                                                                                           |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.19   |   | Assignment of Limited Partnership interest of Ashton Glen Associates  dated December 11, 1997 from The Washington Corporation to K-F Associates,  which was filed as Exhibit 10.19 to the Company’s Form 10-KSB filed with the  Commission on May 8, 1998, is incorporated herein by reference.                                                                                                                                                                                                                                                                                               |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.20   |   | First Amendment to the Limited Partnership Agreement of Ashton Glen  Associates dated December 11, 1997 which was filed as Exhibit 10.20 to the  Company’s Form 10-KSB filed with the Commission on May 8, 1998, is  incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                        |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.21   |   | Promissory Note dated November 25, 1998 in the original principal  amount of $21,500,000 with Arlington Square Limited Partnership as borrower  and Metropolitan Life Insurance Company as holder, which was filed as Exhibit  10.21 to the Company’s Form 10-KSB filed with the Commission on June 2, 1999,  is incorporated herein by reference.                                                                                                                                                                                                                                            |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.22   |   | Deed of Trust, Security Agreement and Fixture Filing from Arlington  Square Limited Partnership to Keith J. Willner and Scott A. Morehouse as  Trustees for the benefit of Metropolitan Life Insurance Company, dated  November 25, 1998, which was filed as Exhibit 10.22 to the Company’s Form  10-KSB filed with the Commission on June 2, 1999, is incorporated herein by  reference.                                                                                                                                                                                                     |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.23   |   | Assignment of Leases between Arlington Square Limited Partnership and  Metropolitan Life Insurance Company dated November 25, 1998, which was filed  as Exhibit 10.23 to the Company’s Form 10-KSB filed with the Commission on  June 2, 1999, is incorporated herein by reference.                                                                                                                                                                                                                                                                                                           |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.24   |   | Assignment of Contracts and Agreements between Arlington Square  Limited Partnership and Metropolitan Life Insurance Company dated November  25, 1998, which was filed as Exhibit 10.24 to the Company’s Form 10-KSB filed  with the Commission on June 2, 1999, is incorporated herein by reference.                                                                                                                                                                                                                                                                                         |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.25   |   | Unsecured Indemnity Agreement among Arlington Square Limited  Partnership, Metropolitan Life Insurance Company and The Washington Corporation  dated November 25, 1998, which was filed as Exhibit 10.25 to the Company’s  Form 10-KSB filed with the Commission on June 2, 1999, is incorporated herein  by reference.                                                                                                                                                                                                                                                                       |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.26   |   | Financing Statement dated November 25, 1998 executed by Arlington  Square Limited Partnership as debtor and Metropolitan Life Insurance Company  as secured party, which was filed as Exhibit 10.26 to the Company’s Form  10-KSB filed with the Commission on June 2, 1999, is incorporated herein by  reference.                                                                                                                                                                                                                                                                            |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.27   |   | Subordination of Management Agreement dated November 25, 1998 by and  among The Washington Corporation, Arlington Square Limited Partnership and  Metropolitan Life Insurance Company, which was filed as Exhibit 10.27 to the  Company’s Form 10-KSB filed with the Commission on June 2, 1999, is  incorporated herein by reference.                                                                                                                                                                                                                                                        |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.28   |   | Guaranty Agreement dated November 25, 1998 by and between The  Washington Corporation, Arlington Square Limited Partnership and Metropolitan  Life Insurance Company, which was filed as Exhibit 10.28 to the Company’s  Form 10-KSB filed with the Commission on June 2, 1999, is incorporated herein  by reference.                                                                                                                                                                                                                                                                         |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.29   |   | Subordination Agreement dated November 25, 1998, by and among  Arlington Square Limited Partnership, Metropolitan Life Insurance Company and  Allied Capital Commercial Corporation, which was filed as Exhibit 10.29 to  the Company’s Form 10-KSB filed with the Commission on June 2, 1999, is  incorporated herein by reference.                                                                                                                                                                                                                                                          |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.30   |   | Subordination, Non-Disturbance and Attornment Agreement among  Metropolitan Life Insurance Company, Arlington Square Limited Partnership and  United States of America - General Services Administration dated November 25,  1998, which was filed as Exhibit 10.30 to the Company’s Form 10-KSB filed  with the Commission on June 2, 1999, is incorporated herein by reference.                                                                                                                                                                                                             |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.31   |   | Subordination, Non-Disturbance and Attornment Agreement among  Metropolitan Life Insurance Company, U.S. Fish and Wildlife Service, and  Arlington Square Limited Partnership, dated November 25, 1998, which was  filed as Exhibit 10.31 to the Company’s Form 10-KSB filed with the Commission  on June 2, 1999, is incorporated herein by reference.                                                                                                                                                                                                                                       |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.32   |   | Forbearance Agreement dated December 1, 1998, by and among Arlington  Square Limited Partnership, Arlington Square, Inc., The Washington  Corporation, and Allied Capital Corporation, which was filed as Exhibit 10.32  to the Company’s Form 10-KSB filed with the Commission on June 2, 1999, is  incorporated herein by reference.                                                                                                                                                                                                                                                        |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.33   |   | Amended and Restated Promissory Note dated December 1, 1998, in the  original principal amount of   $1,850,000 with Arlington Square Limited Partnership as borrower and  Allied  Capital Corporation as holder,  which was filed as Exhibit 10.33 to the Company’s Form 10-KSB filed with the  Commission on June 2, 1999, is incorporated herein by reference.                                                                                                                                                                                                                    |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.34   |   | Termination of Forbearance Agreement dated December 31, 1999, by and  among Arlington Square Limited Partnership,   Arlington Square, Inc., The Washington Corporation, and Allied Capital  Corporation, which was filed as Exhibit 10.34 to the Company’s Form 10-KSB  filed with the Commission on June 2, 1999, is incorporated herein by  reference.                                                                                                                                                                                                                                 |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.35   |   | First Modification to Deed of Trust and Security Agreement “B” dated  November 24, 1998, by and between Arlington Square Limited Partnership and  Allied Capital Corporation, which was filed as Exhibit 10.35 to the Company’s  Form 10-KSB filed with the Commission on June 2, 1999, is incorporated herein  by reference.                                                                                                                                                                                                                                                       |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.36   |   | Second Modification to Deed of Trust and Security Agreement “B” dated  December 31, 1999, by and between Arlington Square Limited Partnership and  Allied Capital Corporation, which was filed as Exhibit 10.36 to the Company’s  Form 10-KSB filed with the Commission on June 2, 1999, is incorporated herein  by reference.                                                                                                                                                                                                                                                      |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.37   |   | Guarantor’s Consent and Acknowledgment dated November 24, 1998, by  and between Arlington Square Limited Partnership and Allied Capital  Corporation, which was filed as Exhibit 10.37 to the Company’s Form 10-KSB  filed with the Commission on June 2, 1999, is incorporated herein by  reference.                                                                                                                                                                                                                                                                                    |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 11.     |   | Computation of per share earnings for the years ended December 31,  2001 and 2000 is attached hereto.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 21.     |   | Subsidiaries of the Registrant as of December 31, 2001 is attached  hereto.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| (b)     |   | Reports on Form 8-K.  The Company filed no report on Form 8-K  during fourth quarter of 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

 

32

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SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, theregistrant caused this report to be signed on its behalf by the undersigned,thereunto duly authorized.

 
|   | THE WASHINGTON CORPORATION          |
|--------|-------------------------------------|
|   |                                |
| Date:  | 4/4/02                              |   | By: | /s/ William N. Demas |   |
|   | William N. Demas                    |
|   | Chairman of the Board of Directors/ |
|   | President                           |
|        |                                     |  |  |  |  |  |

 

In accordance with the Exchange Act, this report has been signed belowby the following persons on behalf of the registrant and in the capacities andon the dates indicated.

 
| Date:  | 4/4/02                              |   | By: | /s/ William N. Demas |   |
|--------|-------------------------------------|--------|-----|----------------------|--------|
|   | William N. Demas                    |
|   | Chairman of the Board of Directors/ |
|   | President                           |

 

33

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