Document:

EXECUTION COPY

                 THIRD AMENDED AND RESTATED EMPLOYMENT AGREEMENT

         THIS THIRD AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT is dated
as of January 14, 2000,  effective as of January 1, 2000,  by and between  First
Washington Realty Trust, Inc., a Maryland  corporation (the "REIT"), and William
J. Wolfe (the "Employee").

                                    RECITALS

         A. WHEREAS,  the REIT and the Employee executed an Executive Employment
Agreement  dated as of June 26, 1994, and  subsequently  executed an Amended and
Restated Executive  Employment Agreement dated as of June 30, 1996, and a Second
Amended and Restated Employment  Agreement dated as of May 1, 1998 (the "Amended
Agreement");

         B.  WHEREAS,  the REIT and the  Employee  mutually  desire to amend and
restate the Amended Agreement pursuant to the terms set forth herein; and

         C. WHEREAS, the REIT wishes to contract for the managerial and business
skills  possessed by the Employee and the Employee desires to be employed by the
REIT upon the terms and subject to the conditions herein provided.

         NOW,  THEREFORE,  in consideration of the foregoing premises and mutual
covenants and conditions  hereinafter set forth, and for other good and valuable
consideration,  the receipt and adequacy of which are hereby  acknowledged,  the
parties hereby agree as follows:

                                    AGREEMENT

1. Employment and Duties

         (a) Position and Duties.  The Employee shall serve as the President and
Chief  Executive  Officer of the REIT,  with such  duties and  authority  as are
customary  for, and  commensurate  with,  such  position,  including  developing
policy,  supervising  staff,  directing day- to-day  operations,  and such other
duties  as the Board of  Directors  of the REIT (the  "Board")  prescribes.  The
Employee  shall have such other duties and authority as may from time to time be
delegated or assigned to him by the Board.

         (b)  Preclusion of Outside  Business  Activities.  During the Term, the
Employee shall devote substantially all of his professional energies,  interest,
abilities and productive work time to the performance of duties pursuant to this
Agreement.  The Employee  shall not,  without the prior  written  consent of the
Board,  perform other  professional  services of any kind or engage in any other
business activity,  with or without  compensation;  provided,  however, that the
Employee

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shall  be  allowed  (i) to  continue  to  engage  in the  development  of  First
Washington  Management,  Inc.,  a  Maryland  corporation  ("FWM"),  at  a  level
consistent with past duties;  (ii) to engage in  administering  the business and
activities of First Washington  Realty Limited  Partnership,  a Maryland limited
partnership (the "Operating  Partnership");  (iii) to serve as a director on the
boards of up to three (3) non-competing companies; and (iv) to engage in passive
investments  that the  Employee  may  make  from  time to time for his  personal
account, so long as the activities  described in clauses (i) through (iv) do not
detract or adversely  affect the Employee's  duties and  responsibilities  under
this Agreement. The Employee shall not, without the prior written consent of the
Board, engage in any activity adverse to the REIT's interests.

2. Term of Employment

         (a) Term.  This Agreement shall continue in full force and effect until
June 30, 2002, unless sooner terminated or extended as hereinafter provided (the
"Term").

         (b)  Extension of Term.  The  employment  term set forth in a paragraph
2(a) above may be extended by written amendment to this Agreement signed by both
parties.  The parties  agree that they will use their best  efforts to negotiate
the extension of this Agreement,  if both parties desire such an extension,  not
later than twelve months before the scheduled end of the Term.

         (c) Termination by the REIT.

               (i)  Without  Cause.   The  REIT  may  terminate  the  Employee's
          employment  at any time for any  reason  other  than  with  Cause  (as
          hereinafter  defined)  or for no reason at all upon at least two weeks
          prior  written  notice to the  Employee;  provided,  however,  that in
          connection  with such a termination of employment,  the REIT may elect
          to require the  Employee to continue to perform his duties  under this
          Agreement for an additional sixty (60) days commencing on the date the
          Employee receives notice of such  termination.  In connection with the
          termination  of the  Employee's  employment  pursuant to this  Section
          2(c)(i),  the Employee  shall (A) be paid salary and any bonus payable
          to him in  accordance  with  Sections  3(a)  and 3(b)  hereof  accrued
          through  the  effective  date of  termination;  (B) be entitled to the
          benefits set forth in Sections  3(c) through 3(e) hereof in accordance
          with the terms  thereof ; (C) be entitled to the benefits set forth in
          Sections 3(f) through 3(h) hereof  accrued  through the effective date
          of such  termination  in  accordance  with such  plans,  programs  and
          arrangements;  (D) receive the Termination  Compensation  specified in
          Section  5(b)  hereof;  and (E) be  entitled  to the  continuation  of
          benefits specified in Section 5(d) hereof.

               (ii) With Cause. The REIT may terminate the Employee's employment
          with Cause immediately upon delivery of notice thereof.  In connection
          with the  termination  of the Employee's  employment  pursuant to this
          Section 2(c)(ii),  the Employee shall (A) be paid salary and any bonus
          payable  to him in  accordance  with  Sections  3(a) and  3(b)  hereof
          accrued through the effective date of termination;  (B) be entitled to
          the  benefits  set  forth in  Sections  3(c)  through  3(e)  hereof in
          accordance with the terms thereof; and (C) be

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          entitled to the  benefits  set forth in  Sections  3(f)  through  3(h)
          hereof  accrued  through the  effective  date of such  termination  in
          accordance with such plans, programs and arrangements. For purposes of
          this  Agreement,  "Cause"  shall  mean  the  Employee's  (A)  material
          incompetence   in  the   performance  of  his  duties  or  obligations
          hereunder, including, without limitation, those duties and obligations
          specified in Section 1(a) hereof;  (B)  commission of any act which is
          materially  injurious to the REIT;  (C) personal  dishonesty,  willful
          misconduct, or breach of fiduciary duty involving personal profit; (D)
          intentional and material  failure to perform his stated duties for the
          REIT;  (E) willful  violation  of any law which  violation  materially
          adversely  affects his ability to discharge his duties for the REIT or
          has an  adverse  effect on the  REIT's  interest  or (F) breach in any
          material  respect  of  any of  the  terms  of  this  Agreement  or any
          confidentiality  or  proprietary  information  agreement  between  the
          Employee and FWM, the  Operating  Partnership  or the REIT;  provided,
          however,  that  "Cause"  shall  not exist  unless  and until the Board
          provides the Employee with (X) at least 15 days prior  written  notice
          of its intention to terminate his employment with Cause, together with
          a  certified  copy  of the  resolution  of  the  Board  approving  the
          termination of the Employee's employment with Cause by the affirmative
          vote of not less than a majority of the Board, and a written statement
          describing the nature of the Cause,  and (Y) a reasonable  opportunity
          and a reasonable  period of time to cure any curable acts or omissions
          on which the finding of Cause is based. If the Employee cures the acts
          or  omissions  on which the finding of Cause is based,  the REIT shall
          not have Cause to terminate the Employee's employment hereunder.

         (d) Termination by the Employee.

               (i) With Good Reason or After Change of Control. The Employee may
          terminate this Agreement  prior to the expiration of the Term upon two
          weeks  prior  written   notice  to  the  REIT  with  Good  Reason  (as
          hereinafter  defined) at any time (including  within  twenty-four (24)
          months following any Change of Control (as hereinafter defined) of the
          REIT). The Employee shall continue to perform,  at the election of the
          REIT,  his duties under this  Agreement for an additional  thirty (30)
          days  following  the REIT's  receipt of his notice of  termination  in
          accordance with this Section 2(d). In connection  with  termination of
          the Employee's  employment pursuant to this Section 2(d), the Employee
          shall (A) be paid  salary  and any bonus  otherwise  payable to him in
          accordance  with  Sections  3(a) and 3(b) hereof  accrued  through the
          effective  date of such  termination;  (B) be entitled to the benefits
          set forth in Sections 3(c) through 3(e) hereof in accordance  with the
          terms  thereof;  (C) be entitled to the benefits set forth in Sections
          3(f) through 3(h) hereof  accrued  through the effective  date of such
          termination in accordance with such plans,  programs and arrangements;
          (D) receive the  Termination  Compensation  specified  in Section 5(b)
          hereof;  and (E) be entitled to the continuation of benefits specified
          in Section 5(d) hereof.

               (ii) For purposes of this Section 2(d),  "Good Reason" shall mean
          (A) the breach by the REIT of any of its obligations hereunder and the
          failure of the REIT to cure such breach  within  sixty (60) days after
          receipt by the REIT of a written notice of the

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          Employee  specifying  in  reasonable  detail the nature of the alleged
          breach  or (B) any  material  diminution  in the  scope of  Employee's
          responsibilities and duties without his consent.

               (iii) For  purposes of this  Section  2(d), a "Change of Control"
          shall mean the first  occurrence of any of the following  events:  (A)
          any "person" (as such term is used in Sections  13(d) and 14(d) of the
          Securities Exchange Act of 1934, as amended),  other than a trustee or
          other fiduciary  holding  securities under an employee benefit plan of
          the  REIT,  a  corporation   owned   directly  or  indirectly  by  the
          stockholders  of the REIT in  substantially  the same  proportions  as
          their  ownership  of stock of the REIT,  the  Employee  or  William J.
          Wolfe, or any of their respective affiliates,  becomes the "beneficial
          owner"  (as  defined  in Rule  13d-3  under  said  Act),  directly  or
          indirectly, of securities representing 50% or more of the total voting
          power  represented  by the  then  outstanding  securities  which  vote
          generally in the election of directors  (referred to herein as "Voting
          Securities")  of the REIT;  (B) during  any period of two  consecutive
          years,  individuals who at the beginning of such period constitute the
          Board and any new directors  whose election by the Board or nomination
          for election by the REIT's  stockholders  was approved by a vote of at
          least  two-thirds  (2/3) the directors then still in office who either
          were  directors at the  beginning  of the period or whose  election or
          nomination  for election  was  previously  so approved,  cease for any
          reason to constitute a majority of the Board;  (C) the stockholders of
          the REIT approve a merger or  consolidation of the REIT with any other
          entity, other than a merger or consolidation which would result in the
          Voting  Securities of the REIT outstanding  immediately  prior thereto
          continuing to represent  (either by remaining  outstanding or by being
          converted into Voting Securities of the surviving entity) at least 50%
          of the total voting power  represented by the Voting Securities of the
          REIT or such  surviving  entity  outstanding  immediately  after  such
          merger or consolidation; or (D) the stockholders of the REIT approve a
          plan of complete  liquidation of the REIT or an agreement for the sale
          or  disposition  by the REIT of (in one  transaction  or a  series  of
          transactions) all or substantially all of the REIT's assets.

         (e) Termination Due to Death or Disability.  The Employee's  employment
hereunder shall terminate  immediately upon his death prior to the expiration of
the Term.  In the event that by reason of injury,  illness or other  physical or
mental  impairment the Employee  shall be: (i) completely  unable to perform his
services  hereunder  for more  than six  consecutive  months  or (ii)  unable to
perform his services  hereunder for fifty percent or more of the normal  working
day throughout twelve  consecutive months (each of (i) and (ii) constituting the
"Disability" of the Employee for purposes of this Agreement),  then the REIT may
terminate  the  Employee's  employment  hereunder  immediately  upon delivery of
notice  thereof.  In the event of the  termination of the Employee's  employment
pursuant to this Section  2(e),  the Employee or the  Employee's  beneficiaries,
estate, heirs, representatives or assigns, as appropriate,  shall be (A) be paid
the salary and any other bonus  otherwise  payable to the Employee in accordance
with Sections 3(a) and 3(b) hereof  accrued  through the effective  date of such
termination;  (B) be entitled to the benefits set forth in Sections 3(c) through
3(e) hereof in accordance  with the terms thereof;  (C) receive the  Termination
Compensation specified in Section 5(b) hereof; (D) receive the proceeds, if any,
due under any REIT-paid life insurance policy held by the Employee, as

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determined  by and in  accordance  with the  terms of any such  policy;  and (E)
solely  in  the  event  of  the  Employee's  Disability,   be  entitled  to  the
continuation of benefits specified in Section 5(d) hereof.

         (f) Removal as Director.  Notwithstanding  any other  provision of this
Agreement,  if the Employee  shall be removed from (or fail to be re-elected to)
office as a director of the REIT at any time during the Term,  then the Employee
may notify the REIT in writing of his election to terminate  this Agreement upon
written notice to the REIT and such notice shall be effective  immediately  upon
receipt by the REIT. In connection with the Employee's termination of employment
pursuant to this Section 2(f), the Employee shall (A) be paid the salary and any
bonus  payable to him in accordance  with Sections 3(a) and 3(b) hereof  accrued
through the effective date of such termination;  (B) be entitled to the benefits
set forth in Sections  3(c)  through  3(e) hereof in  accordance  with the terms
thereof ; (C) be entitled to the  benefits  set forth in Sections  3(f)  through
3(h) hereof accrued through the effective date of such termination in accordance
with  such  plans,  programs  and  arrangements;  (D)  receive  the  Termination
Compensation  specified  in  Section  5(b)  hereof  and (E) be  entitled  to the
continuation of benefits  specified in Section 5(d) hereof;  provided,  however,
that the Employee  shall not be entitled to the payments and benefits  described
in subsections  (D) and (E) above if he is removed as a director for cause under
the corporation law of the State of Maryland.

3. Compensation and Related Matters.

         (a) Salary.  The Employee's annual base salary during the Term shall be
$300,000 per annum  effective  January 1, 1998. Such salary shall be reviewed by
the Board  annually  during the first  quarter of fiscal year of the REIT during
the Term, and the Employee shall receive such salary  increases,  if any, as the
Board, in its sole discretion,  shall  determine;  provided,  however,  that the
Employee's annual base salary shall not be less than $400,000  effective January
1, 2000 and  thereafter.  Such salary  shall be payable in  accordance  with the
REIT's normal  payment  practices,  but in no event shall such salary be payable
less frequently than monthly in equal installments.

         (b) Bonus. Effective January 1, 1999 and thereafter, the Employee shall
be eligible to receive an Annual Incentive Bonus in accordance with the Plan set
forth on Annex A hereto.

         (c) Options.

               (i)  Provided  that he is  employed  by the REIT as of January 1,
          2000,  effective  as of such date the Employee  shall be granted,  and
          hereby is  granted,  an option to  purchase  250,000  shares of Common
          Stock at an exercise  price equal to the Fair Market Value (as defined
          in the Option Plan) of a share of Common Stock on January 1, 2000 (the
          "Option") subject to the terms and provisions of the 1994 Stock Option
          Plan for Officers,  Directors and Employees of First Washington Realty
          Trust,  Inc.,  First Washington  Realty Limited  Partnership and First
          Washington Management, Inc. (the "Option Plan") (or a successor option
          plan then maintained by the REIT) and a written Stock Option Agreement
          between the Employee and the REIT (the "Stock Option

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          Agreement").  The Stock Option Agreement shall provide that the Option
          shall become exercisable in equal cumulative installments of one-third
          each on each of the  first  three  anniversaries  of the date of grant
          (subject to the  Employee's  continued  employment by the REIT on such
          dates) and shall be subject to  immediate  vesting in the event of the
          Employee's  termination  of  employment  pursuant to Section  2(c)(i),
          2(d), 2(e) or 2(f) (other than in connection  with Employee's  removal
          as a  director  for cause  under the  corporation  law of the State of
          Maryland)  or by  reason of  expiration  of the Term  without  renewal
          (collectively  an "Early  Termination")  and shall be the Stock Option
          Agreement attached hereto as Annex C.

               (ii) If the  Employee's  employment  is  terminated  in an  Early
          Termination  prior to January 1, 2000,  then,  effective as January 1,
          2000, the Employee shall be granted,  and hereby is granted the Option
          to purchase  250,000 shares of Common Stock at an exercise price equal
          to the Fair Market Value of a share of Common Stock on January 1, 2000
          subject,  if permitted by the terms thereof,  to the Option Plan (or a
          successor option plan then maintained by the REIT), and, in any event,
          the written Stock Option Agreement  between the Employee and the REIT.
          The Stock  Option  Agreement  shall  provide  that the Option shall be
          fully exercisable as of the date of grant and shall expire on the date
          specified  in  Section  2(a)  herein  and  shall be the  Stock  Option
          Agreement attached hereto as Annex C.

         (d) Restricted Stock.

               (i)  Provided  that he is  employed  by the REIT as of January 1,
          2000,  effective  as of such date the Employee  shall be granted,  and
          hereby is  granted,  150,000  shares of common  stock of the REIT (the
          "Restricted  Stock")  subject to the terms and conditions of the First
          Washington Realty Trust, Inc. Restricted Stock Plan (the "Stock Plan")
          and a written  Restricted Stock Agreement between the Employee and the
          REIT  (the  "Restricted  Stock   Agreement").   The  Restricted  Stock
          Agreement  shall  provide  that shares of the  Restricted  Stock shall
          become vested in cumulative  installments of one-sixth,  one-third and
          one-half,  respectively,  on each of the first three  anniversaries of
          the date of grant (subject to the Employee's  continued  employment by
          the REIT on such dates) and shall be subject to  immediate  vesting in
          the event of the  Employee's  termination  of  employment  in an Early
          Termination  and  shall be the  Restricted  Stock  Agreement  attached
          hereto as Annex D.

               (ii) If the  Employee's  employment  is  terminated  in an  Early
          Termination prior to January 1, 2000, then effective immediately prior
          to such  termination  the  Employee  shall be  granted,  and hereby is
          granted,  the 150,000 shares of Restricted  Stock subject to the terms
          and  conditions  of the Stock  Plan and,  in any  event,  the  written
          Restricted  Stock  Agreement  between the Employee  and the REIT.  The
          Restricted Stock Agreement shall provide that shares of the Restricted
          Stock  shall be fully  vested  on the date of grant  and  shall be the
          Restricted Stock Agreement attached hereto as Annex D.

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         (e)  Contingent   Stock.  As  provided  in  the  Amended  and  Restated
Contingent  Stock  Agreement dated as of May 1, 1998 by and between the REIT and
the  Employee  attached  hereto  as Annex E, as  amended  from time to time (the
"Contingent Stock Agreement"),  the Employee shall be entitled to receive shares
of  Contingent  Stock  (as  defined  therein)  pursuant  to such  agreement.  In
accordance  with  Section  3.2(a)  of  the  Contingent  Stock   Agreement,   the
Compensation  Committee of the Board has established the "Performance Goals" (as
defined  therein) for fiscal years 2000 through 2003  applicable to the award of
Contingent Stock in the event of the Employee's  termination of employment in an
Early  Termination  during the period beginning on January 1, 2000 and ending on
March 31, 2003 (the "Contingent  Stock Period").  In the event of the Employee's
termination of employment in an Early  Termination  during the Contingent  Stock
Period, the Compensation Committee shall certify in writing, as of the effective
date of such Early  Termination,  whether the REIT's annual operating income for
the portion of the then current fiscal year completed  prior to such date equals
or exceeds  80% of the  product of (1) the REIT's  annual  operating  income for
fiscal year 1999 and (2) the ratio of (A) the number of days elapsed in the then
current fiscal year prior to the date of Early Termination to (B) the number 365
(the "Early Termination Performance Goal"). If the Early Termination Performance
Goal has been met, the  Employee  shall  receive,  within 5 days  following  the
effective  date of such Early  Termination,  that number of shares of Contingent
Stock  equal to (x) 75,000  minus (y) the number of shares of  Contingent  Stock
awarded to the Employee  under  Section 3.2 of the  Contingent  Stock  Agreement
prior to such date.

         (f)  Benefits.  During  the Term the  Employee  shall  be  entitled  to
participate  in or receive  benefits  under any  employee  benefit plan or other
arrangement  (including,  but not limited to, any medical,  dental,  retirement,
disability,  life insurance,  sick leave and vacation plans or arrangements  and
the REIT's executive  deferred  compensation plan) made available by the REIT to
any of its  employees,  subject  to and on a basis  consistent  with the  terms,
conditions and overall administration of such plans or arrangements.

         (g)  Expenses.  The REIT shall  promptly pay directly or reimburse  the
Employee for all reasonable  travel and other business  expenses incurred by the
Employee in the performance of his duties to the REIT under this Agreement.

         (h) Vacation.  The Employee  shall be entitled to vacation  benefits in
accordance  with the REIT's normal vacation  policies,  but in no event shall he
receive  less than four weeks of paid  vacation  each  calendar  year during the
Term.

         (i) Professional  Memberships.  The REIT shall promptly pay directly or
reimburse the Employee for all reasonable expenses incurred by the Employee with
respect to professional memberships maintained by him during the Term.

         (j) Automobile  Allowance.  During the Term, the REIT shall provide the
Employee  with an automobile  allowance  for a company  automobile of comparable
quality  as  automobiles  customarily  provided  to  executive  officers  in the
industry.  Expenses  relating to such automobile will be paid in accordance with
the normal and customary practices of the REIT.

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         (k) Deductions and  Withholdings.  All amounts  payable or which become
payable under any provision of this Agreement shall be subject to all deductions
authorized by the Employee and to all  deductions and  withholdings  required by
law.

4. Covenant Not to Compete or Solicit

         (a) Non-Competition.

               (i) The Employee agrees that during the Term he will not directly
          or  indirectly   engage  in  (whether  as  an  employee,   consultant,
          proprietor,  partner,  director,  member  or  otherwise),  or have any
          ownership  interest in, or participate  in the  financing,  operation,
          management or control of, any person,  firm,  corporation  or business
          that  engages  in or  intends  to  engage  in a  Restricted  Business.
          "Restricted  Business"  shall mean any business  that is engaged in or
          (to the Employee's knowledge after due inquiry) preparing to engage in
          the real estate business of the acquisition,  development,  management
          and  operation  of  principally  retail  shopping  centers;  provided,
          however,  that  "Restricted  Business" shall not include the operation
          and management of those properties listed on Annex B hereto.

               (ii) The Employee further agrees that for the eighteen (18) month
          period  following  the  end of the  Term,  he  will  not  directly  or
          indirectly engage in (whether as an employee, consultant,  proprietor,
          partner,  director,  member  or  otherwise),  or  have  any  ownership
          interest in, or participate in the financing, operation, management or
          control of, any person, firm,  corporation or business that engages in
          or  intends  to  engage  in  a  Post-Employment  Restricted  Business.
          "Post-Employment  Restricted Business" shall mean any business that is
          engaged  in  or  (to  the  Employee's  knowledge  after  due  inquiry)
          preparing  to engage in the real estate  business of the  acquisition,
          development,  management and operation of principally  retail shopping
          centers  within  twenty-five  (25) miles of a retail  property  owned,
          directly  or through one or more  subsidiaries  or  otherwise,  by the
          REIT,  the  Operating  Partnership  or  FWM at  the  end of the  Term;
          provided,  however, that  "Post-Employment  Restricted Business" shall
          not include the operation and management of those properties listed on
          Annex B hereto.

               (iii)  Ownership  of (A) no more  than  one  percent  (1%) of the
          outstanding  voting stock of a publicly traded entity or (B) any stock
          owned by the  Employee  as of June 26,  1994  shall not  constitute  a
          violation of this Section 4(a).

               (iv) This  Section  4(a) shall not  prohibit  the  Employee  from
          working for a division or subsidiary  of a company  which  division or
          subsidiary   does  not   engage  in  a   Restricted   Business   or  a
          Post-Employment  Restricted  Business,  even though other divisions or
          subsidiaries  of such  company do engage in a  Restricted  Business or
          Post- Employment Restricted Business,  provided that the REIT receives
          adequate  assurances  as it  may  request  that  the  Employee  has no
          involvement  with  the  divisions  or  subsidiaries   engaged  in  the
          Restricted Business or Post-Employment Restricted Business.

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         (b) Non-Solicitation.  The Employee agrees that during the Term he will
not (i) solicit,  encourage or take any other action which is intended to induce
any other employee of the REIT to terminate his or her employment  with the REIT
or (ii)  interfere  in any  manner  with the  contractual  or  other  employment
relationship between the REIT and any such employee of the REIT.

         (c)  Severability.  The parties intend that the covenants  contained in
the  preceding  paragraphs  of this  Section 4 shall be construed as a series of
separate  covenants,  one for each county of Maryland,  Virginia,  Pennsylvania,
North  Carolina,  South Carolina and Delaware,  and to the District of Columbia,
each  state of the  United  States  of  America  and  each  nation.  Except  for
geographic  coverage,  each such separate  covenant shall be deemed identical in
terms to the covenant contained in the preceding paragraphs. If, in any judicial
proceeding,  a court shall refuse to enforce any of the separate  covenants  (or
any part thereof) deemed included in said  paragraphs,  then such  unenforceable
covenant (or such part) shall be deemed  eliminated  from this Agreement for the
purpose of those  proceedings  to the extent  necessary to permit the  remaining
separate  covenants (or portions thereof) to be enforced.  In the event that the
provisions of this Section 4 should ever be deemed to exceed the time,  scope or
geographic limitation permitted by applicable law, then such provisions shall be
reformed to the maximum time, scope or geographic  limitations,  as the case may
be, permitted by applicable law.

5. Termination.

         (a) If the Employee's  employment is terminated by reason of expiration
of the Term without  renewal,  then the Employee  shall be paid,  within 90 days
following  the  date  of  expiration  of  the  Term,  a  lump  sum  amount  (the
"Termination  Compensation") equal to 300% of the sum of (i) the Employee's rate
of annual base salary at the time of such  expiration of the Term (as determined
pursuant to Section 3(a)) and (ii) the average annual bonus (if any) paid to the
Employee (or, if not yet paid, to which the Employee was entitled)  with respect
to the last three calendar years of the Term.

         (b) If the Employee's  employment is terminated in an Early Termination
other  than by  reason  of  expiration  of the Term  without  renewal,  then the
Employee  shall  be  paid,  within  90  days  of  the  effective  date  of  such
termination,  a lump sum amount (the "Severance  Compensation") equal to the sum
of:

               (i) an amount  equal to, and  computed in the same manner as, the
          Termination  Compensation  set  forth  in  Section  5(a),  as  if  the
          Employee's  employment  were terminated by reason of the expiration of
          the Term without renewal, and

               (ii) an amount equal to the greater of:

                    (A)  200% of the sum of (I) the  Employee's  rate of  annual
               base  salary  at the  time of  such  termination  (as  determined
               pursuant to Section  3(a)) and (II) the average  annual bonus (if
               any) paid to the  Employee  (or,  if not yet  paid,  to which the
               Employee was  entitled)  with respect to the last three  calendar
               years of the Term; or

                                      - 9 -

<PAGE>

                    (B) the sum of (I) the  aggregate  annual  base  salary  (as
               determined pursuant to Section 3(a)) the Employee would otherwise
               be  entitled  to  receive  from  the   effective   time  of  such
               termination  through the scheduled end of the Term (as determined
               pursuant to Section  2(a)) and (II) the average  annual bonus (if
               any) paid to the  Employee  (or,  if not yet  paid,  to which the
               Employee was  entitled)  with respect to the last three  calendar
               years of the Term.

         (c) No  Termination  Compensation  shall  be  paid  if  the  Employee's
employment is terminated  during the Term (i) by the REIT with Cause pursuant to
Section  2(c)(ii)  hereof or (ii) by the Employee other than in accordance  with
Section 2(d) or Section 2(e) or Section 2(f) in connection  with the  Employee's
failure to be  re-elected  as a director  or his  removal as a director  without
cause.

         (d) If the Employee's  employment is terminated prior to the expiration
of the Term for any reason other than  pursuant to Section  2(c)(ii) or pursuant
to Section  2(f) in  connection  with the  Employee's  removal as a director for
cause under the corporation law of the State of Maryland, the REIT will continue
to provide to the Employee  comparable  medical,  disability  and life insurance
benefits  as were in effect at the time of  termination  until  such time as the
Term would  otherwise have expired if the Employee had not been  terminated (but
in no event for a period of less than twenty-four months).

         (e)  Survival.  The  expiration  or  termination  of the Term shall not
impair the rights or  obligations  of any party  hereto which shall have accrued
hereunder  prior to such  expiration,  nor shall such  expiration or termination
impair the rights and obligations of any party hereto that are intended by their
terms to survive such expiration or termination.

         (f)  Mitigation  of  Damages.  In the event of any  termination  of the
Employee's  employment  with the REIT for any reason,  the Employee shall not be
required to seek other employment to mitigate damages,  and any income earned by
the  Employee  from  other  employment  or  self-employment  shall not be offset
against any obligations of the REIT to the Employee under this Agreement.

6. Excise Taxes

         (a) If it is determined  (as hereafter  provided) that by reason of any
payment or  distribution to the Employee,  including,  without  limitation,  any
stock option or award of stock or similar right,  or the lapse or termination of
any restriction on, or the vesting of, any of the foregoing,  occurring pursuant
to the terms of this Agreement (or otherwise under any other agreement,  plan or
program)  (collectively a "Payment") the Employee would be subject to the excise
tax imposed by Section  4999 of the Internal  Revenue  Code of 1986,  as amended
(the "Code) by reason of being  considered  "contingent on a change in ownership
or  control"  of the REIT  within  the  meaning of Code  Section  280G or to any
similar tax  imposed by state or local law or any  interest  or  penalties  with
respect to such tax (such taxes,  together with any such interest and penalties,
the "Excise Tax"), then the Employee shall be entitled to receive an

                                     - 10 -

<PAGE>

additional  payment or payments (a  "Gross-Up  Payment") in an amount such that,
after  payment by the Employee of all taxes  (including  any Excise Tax) imposed
upon the  Gross-Up  Payment,  the  Employee  retains  an amount of the  Gross-Up
Payment equal to the Excise Tax imposed upon the Payment.

         (b)  Subject  to  the   provisions   of  Section   6(f)   hereof,   all
determinations  required to be made under this Section 6,  including  whether an
Excise  Tax is  payable by the  Employee  and the amount of such  Excise Tax and
whether a Gross-Up Payment is required and the amount of such Gross-Up  Payment,
shall be made by a nationally  recognized firm of certified  public  accountants
(the  "Accounting  Firm")  selected by the REIT.  The  Accounting  Firm shall be
directed by the REIT or the Employee to submit its preliminary determination and
detailed  supporting  calculations  to both the REIT and the Employee  within 15
calendar days after the  determination  date. If the Accounting  Firm determines
that any Excise Tax is payable by the Employee,  the REIT shall pay the required
Gross-Up  Payment to, the Employee  within five  business  days after receipt of
such  determination and calculations.  If the Accounting Firm determines that no
Excise Tax is payable by the  Employee,  it shall,  at the same time as it makes
such  determination,  furnish the Employee with an opinion that the Employee has
substantial authority not to report any Excise Tax on his federal tax return. As
a result of the  uncertainty in the application of Code Section 4999 at the time
of any  determination  by the  Accounting  Firm  hereunder,  it is possible that
Gross-Up Payments that will not have been made by the REIT should have been made
(an  "Underpayment"),  consistent  with  the  calculations  required  to be made
hereunder.  In the event that the REIT  exhausts or fails to pursue its remedies
pursuant to Section 6(f) hereof and the Employee  thereafter is required to make
a payment of any Excise Tax, the Employee  shall direct the  Accounting  Firm to
determine  the amount of the  Underpayment  that has  occurred and to submit its
determination  and  detailed  supporting  calculations  to both the REIT and the
Employee as promptly as possible.  Any such Underpayment  shall be promptly paid
by the REIT to, or for the benefit of, the Employee  within five  business  days
after receipt of such determination and calculations.

         (c) The REIT and the Employee  shall each provide the  Accounting  Firm
access to and copies of any books,  records and  documents in the  possession of
the  REIT or the  Employee,  as the  case may be,  reasonably  requested  by the
Accounting Firm, and otherwise  cooperate with the Accounting Firm in connection
with the preparation and issuance of the  determination  contemplated by Section
6(b) hereof. Any final  determination by the Accounting Firm as to the amount of
the Gross-Up Payment shall be binding upon the REIT and Employee.

         (d) The federal,  state and local income or other tax returns  filed by
the Employee (or any filing made by a consolidated  tax group which includes the
REIT) shall be prepared and filed on a basis  consistent with the  determination
of the  Accounting  Firm with respect to the Excise Tax payable by the Employee.
The Employee  shall make proper  payment of the amount of any Excise Tax, and at
the request of the REIT,  provide to the REIT true and correct  copies (with any
amendments) of his federal income tax return as filed with the Internal  Revenue
Service and  corresponding  state and local tax returns,  if relevant,  and such
other documents  reasonably  requested by the REIT,  evidencing such payment. If
prior  to  the  filing  of  the  Employee's   federal  income  tax  return,   or
corresponding state or local return, if relevant, the Accounting Firm

                                     - 11 -

<PAGE>

determines  in good  faith  that the amount of the  Gross-Up  Payment  should be
reduced, the Employee shall within five business days pay to the REIT the amount
of such reduction.

         (e) The fees and  expenses of the  Accounting  Firm for its services in
connection with the determinations and calculations contemplated by Section 6(b)
hereof shall be borne by the REIT.

         (f) In the event that the Internal  Revenue Service or any other taxing
authority  claims that any payment or benefit  received by the Employee from the
REIT  constitutes  an "excess  parachute  payment"  within  the  meaning of Code
Section 280G(b)(1), the Employee shall notify the REIT in writing of such claim.
Such  notification  shall be given as soon as practicable  but not later than 10
business  days after the Employee is informed in writing of such claim and shall
apprize the REIT of the nature of such claim and the date on which such claim is
requested  to be  paid.  The  Employee  shall  not pay such  claim  prior to the
expiration of the 30 day period  following the date on which the Employee  gives
such  notice  to the REIT (or such  shorter  period  ending on the date that any
payment of taxes with  respect to such claim is due).  If the REIT  notifies the
Employee in writing  prior to the  expiration  of such period that it desires to
contest  such  claim,  the  Employee  shall  (i) give  the REIT any  information
reasonably  requested by the REIT relating to such claim;  (ii) take such action
in connection with contesting such claim as the REIT shall reasonably request in
writing  from  time to  time,  including  without  limitation,  accepting  legal
representation  with respect to such claim by an attorney reasonably selected by
the REIT and reasonably  satisfactory to the Employee;  (iii) cooperate with the
REIT in good faith in order to effectively  contest such claim;  and (iv) permit
the REIT to participate  in any  proceedings  relating to such claim;  provided,
however,  that the REIT  shall  bear and pay  directly  all costs  and  expenses
(including,  but not limited to,  additional  interest and penalties and related
legal,  consulting  or other  similar  fees)  incurred in  connection  with such
contest and shall  indemnify  and hold the  Employee  harmless,  on an after-tax
basis,  for and against for any Excise Tax or income tax or other tax (including
interest  and  penalties  with  respect  thereto)  imposed  as a result  of such
representation and payment of costs and expenses.

         (g) The REIT shall control all  proceedings  taken in  connection  with
such  contest  and,  at its  sole  option,  may  pursue  or  forgo  any  and all
administrative  appeals,  proceedings,  hearings and conferences with the taxing
authority  in respect of such claim and may, at its sole option,  either  direct
the Employee to pay the tax claimed and sue for a refund or contest the claim in
any  permissible  manner and the Employee  agrees to prosecute such contest to a
determination  before  any  administrative  tribunal,  in  a  court  of  initial
jurisdiction and in one or more appellate  courts,  as the REIT shall determine;
provided,  however,  that if the REIT directs the Employee to pay such claim and
sue for a refund,  the REIT  shall  advance  the  amount of such  payment to the
Employee on an  interest-free  basis,  and shall indemnify and hold the Employee
harmless,  on an after tax basis,  from any  Excise Tax (or other tax  including
interest  and  penalties  with  respect  thereto)  imposed  with respect to such
advance or with respect to any imputed income with respect to such advance;  and
provided,  further,  that if the  Employee  is  required to extend the statue of
limitations  to enable the REIT to contest  such claim,  the  Employee may limit
this  extension  solely to such  contested  amount.  The  REIT's  control of the
contest  shall be limited  to issues  with  respect to which a Gross-Up  Payment
would be payable hereunder and the Employee

                                     - 12 -

<PAGE>

shall be  entitled  to settle or  contest,  as the case may be, any other  issue
raised by the  Internal  Revenue  Service  or any  other  taxing  authority.  In
addition,  no position may be taken nor any final resolution be agreed to by the
REIT  without  the  Employee's  consent if such  position  or  resolution  could
reasonably  be expected to adversely  affect the  Employee  unrelated to matters
covered hereto.

         (h) If, after the receipt by Employee of an amount advanced by the REIT
in connection  with the contest of the Excise Tax claim,  the Employee  receives
any refund with respect to such claim,  the Employee  shall  promptly pay to the
REIT the amount of such  refund  (together  with any  interest  paid or credited
thereon after taxes applicable  thereto);  provided,  however,  if the amount of
that refund exceeds the amount advanced by the REIT the Employee may retain such
excess.  If, after the receipt by the Employee of an amount advanced by the REIT
in  connection  with an  Excise  Tax  claim,  a  determination  is made that the
Employee  shall not be entitled to any refund with respect to such claim and the
REIT does not notify the Employee in writing of its intent to contest the denial
of such refund prior to the expiration of 30 days after such  determination such
advance  shall be forgiven  and shall not be  required  to be repaid,  and shall
offset,  to the extent thereof,  the amount of Gross-Up  Payment  required to be
paid by the REIT to Employee pursuant to this Section 6.

7. The Employee's  Representations.  The Employee represents and warrants to the
   REIT as follows:

         (a) The Employee is familiar  with and approves  the  covenants  not to
compete  and  not  to  solicit  set  forth  in  Section  4,  including,  without
limitation,  the  reasonableness  of the  length of time,  scope and  geographic
coverage of these covenants.

         (b)  Notwithstanding  any "what-if"  scenarios of the future results of
operations  and stock  prices of the REIT under  certain  assumptions  which the
parties may have discussed, the Employee has not relied on any such scenarios or
any forecasts or projections  provided by the REIT and understands  that neither
the REIT nor FWM has made any  representation or warranty  whatsoever  regarding
any forecasts or projections to the Employee.

8. Miscellaneous.

         (a)  Notices.  Any notice,  report or other  communication  required or
permitted  to be given  hereunder  shall be in writing and shall be deemed given
and  received on the date of delivery,  if  delivered  in person,  or three days
after mailing,  if mailed  first-class mail,  postage prepaid,  to the following
addresses:

                           If to the Employee:
                           4350 East-West Highway, Suite 400
                           Bethesda, Maryland 20814
                           Attn:    William J. Wolfe

                                     - 13 -

<PAGE>

                           If to the REIT:
                           4350 East-West Highway, Suite 400
                           Bethesda, Maryland 20814
                           Attn:    General Counsel

or to such other  address as any party  hereto may  designate by notice given as
herein provided.

         (b) Entire Agreement.  This Agreement contains the entire understanding
and sole and entire  agreement  between the parties  with respect to the subject
matter hereof,  and supersedes any and all prior  agreements,  negotiations  and
discussions  between the  parties  hereto  with  respect to the  subject  matter
covered   hereby.   Each   party  to  this   Agreement   acknowledges   that  no
representations,  inducements,  promises or agreements,  oral or otherwise, have
been made by any party,  or anyone acting on behalf of any party,  which are not
embodied herein, and that no other agreement, statement or promise not contained
in this Agreement shall be valid or binding.  This Agreement may not be modified
or amended by oral agreement,  but only by an agreement in writing signed by the
REIT and by the  Employee,  and which  states the intent of the parties to amend
this Agreement.

         (c)  Assignment  and Binding  Effect.  Neither this  Agreement  nor the
rights or obligations  hereunder  shall be assignable by the Employee.  The REIT
may assign this Agreement to any successor of the REIT, and upon such assignment
any such successor  shall be deemed  substituted for the REIT upon the terms and
subject to the conditions hereof, provided, that substantially all of the assets
of the REIT are also transferred to the same party.

         (d)  Successor  to the REIT.  The REIT will  require any  successor  or
assign  (whether  direct or indirect,  by  purchase,  merger,  consolidation  or
otherwise) to all or  substantially  all the business and/or assets of the REIT,
as the case may be, by agreement in form and substance  reasonably  satisfactory
to the Employee,  expressly,  absolutely and unconditionally to assume and agree
to perform  this  Agreement  in the same  manner and to the same extent that the
REIT would be required to perform it if no such  succession  or  assignment  had
taken  place.  Any  failure of the REIT to obtain  such  agreement  prior to the
effectiveness of any such succession or assignment shall be a material breach of
this Agreement.  This Agreement shall inure to the benefit of and be enforceable
by the Employee's personal and legal representatives, executors, administrators,
successors,  heirs, distributees,  devisees and legatees. If the Employee should
die while any  amounts are still  payable to the  Employee  hereunder,  all such
amounts,  unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to the Employee's devisee, legatee or other designee or,
if there be no such designee, to the Employee's estate.

         (e) Arbitration. The parties agree that any and all disputes (contract,
tort or  statutory,  whether  under  federal,  state or local law)  between  the
Employee and the REIT (including other REIT employees,  officers,  directors and
representatives)  arising out of the  Employee's  employment  with the REIT, the
termination of that  employment or this  Agreement,  shall be submitted to final
and  binding  arbitration.  The  arbitration  shall  take place in the County of
Montgomery, State of Maryland and may be compelled and enforced according to the
Maryland  Arbitration  Act.  Unless the parties  mutually agree  otherwise,  the
arbitration shall be conducted

                                     - 14 -

<PAGE>

before  the  American  Arbitration  Association,  according  to  its  Commercial
Arbitration  Rules.  Judgment on the award the arbitrator renders may be entered
in any  court  having  jurisdiction  over  the  parties.  Arbitration  shall  be
initiated in accordance  with the Commercial  Arbitration  Rules of the American
Arbitration Association.

         (f) Amendments;  Waivers. This Agreement may not be modified,  amended,
or  terminated  except by an  instrument  in writing,  approved by the Board and
signed by the  Employee  and the REIT.  By an  instrument  in writing  similarly
executed,  the Employee or the REIT may waive  compliance  by the other party or
parties  with any  provision of this  Agreement  that such other party was or is
obligated to comply with or perform;  provided,  however, that such waiver shall
not operate as a waiver of, or estoppel with respect to, any other or subsequent
failure.  No failure to exercise and no delay in exercising any right, remedy or
power  hereunder  shall preclude any other,  or further,  exercise of any right,
remedy or power provided herein or by law or equity.

         (g) Governing  Law. This  Agreement  shall be governed by and construed
and enforced in accordance  with the laws of the State of Maryland as applied to
agreements made and performed in Maryland by residents of Maryland.

         (h) Effectiveness.  This Agreement shall become effective on January 1,
2000.

         (i) Attorneys' Fees. In the event of any arbitration or legal action or
proceeding to enforce or interpret the provisions  hereof,  the prevailing party
shall be entitled to reasonable  attorneys' fees,  whether or not the proceeding
results in a final judgment.

         (j)   Counterparts.   This   Agreement   may  be  executed  in  several
counterparts,  each of which  shall be an  original,  but all of which  together
shall constitute one and the same agreement.

         (k) Effect of Headings. The section headings herein are for convenience
only and shall not affect the construction or interpretation of this Agreement.

         (l)  Severability.  The provisions of this Agreement are severable.  If
any  provision  of this  Agreement  shall  be held to be  invalid  or  otherwise
unenforceable  in  whole  or  in  part,  the  remainder  of  the  provisions  or
enforceable  parts hereof shall not be affected thereby and shall be enforced to
the fullest extent permitted by law.

                                     - 15 -

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have executed this Third Amended
and Restated Executive Employment Agreement as of the date first written above.

ATTEST:                                     FIRST WASHINGTON REALTY TRUST, INC.,
                                            a Maryland corporation

/s/ Jeffrey S. Distenfeld                       By: /s/ Stuart D. Halpert
-------------------------------                    -----------------------------
Jeffrey S. Distenfeld, Secretary                    Stuart D. Halpert
                                                    Chairman

                                                    EMPLOYEE:

                                                    /s/ William J. Wolfe
                                                    ----------------------------
                                                    William J. Wolfe
                                                    6211 Kennedy Drive
                                                    Chevy Chase, Maryland  20815

                                     - 16 -

<PAGE>

                                                                         ANNEX A

                    SENIOR EXECUTIVE INCENTIVE BONUS PROGRAM
           APPENDIX TO THIRD AMENDED AND RESTATED EMPLOYMENT AGREEMENT

1. PURPOSE

         The senior executive  incentive bonus program (the "Incentive Plan") is
designed to provide meaningful quantitative  performance standards and to ensure
that the bonuses paid  hereunder  are  deductible  without  limit under  Section
162(m) of the Internal  Revenue Code of 1986, as amended (the  "Code"),  and the
regulations and interpretations promulgated thereunder.

2. THE COMMITTEE

         The  "Committee"  shall be the  Compensation  Committee of the Board or
another  committee  appointed by and serving at the  pleasure of the Board,  and
shall  consist of at least two  members  of the Board who shall each  qualify as
both "outside  directors"  under Section 162(m) of the Code and as "non-employee
directors" as defined under Rule 16b-3 promulgated under the Securities Exchange
Act of 1934,  as  amended.  The  Committee  shall have the sole  discretion  and
authority to administer and interpret the Incentive Plan.

3. BONUS DETERMINATIONS

         The Executive  may receive a bonus  payment  under the  Incentive  Plan
based upon the attainment of performance objectives which are established by the
Committee and relate to one or more of the following  company  performance goals
(the "Performance Goals"): funds from operations,  total return (measured as the
sum of the annual  dividend  plus  increases  in the market  price of the Common
Stock);  portfolio  growth  (measured as increases in the aggregate value of the
real  property in the REIT's  portfolio,  based upon the  original  cost of such
property);  stock price;  operating  income;  cost  reductions and savings;  and
earnings before any one or more of the following:  interest, taxes, depreciation
or amortization.

         Any bonus  payable to the Executive  under the Incentive  Plan shall be
based upon objectively  determinable bonus formulas that tie such bonuses to one
or more objective  performance criteria relating to the Performance Goals. Bonus
formulas  for each fiscal year  commencing  on or after  January 1, 1999 through
December 31, 2002 shall be established by the Committee no later than the latest
time permitted by Section 162(m) of the Code (generally, for performance periods
of one year or  more,  no  later  than 90 days  after  the  commencement  of the
performance  period). No bonuses shall be paid to the Executive unless and until
the Committee makes a certification in writing with respect to the attainment of
the performance  objectives as required by Section 162(m) of the Code.  Although
the Committee may in its sole discretion reduce a bonus payable to the Executive
pursuant to the applicable bonus formula, the Committee shall have no discretion
to  increase  the  amount  of the  Executive's  bonus as  determined  under  the
applicable bonus formula.

<PAGE>

         The target annual  incentive  bonus payable to the Executive  under the
Incentive  Plan with  respect to any fiscal year of the REIT shall be 50% of his
base  salary as in effect at the  start of the  applicable  year,  and shall not
exceed 100% of such base salary.

         The payment of a bonus to the  Executive  with respect to a performance
period shall be conditioned  upon the Executive's  employment by the REIT on the
last day of the performance period;  provided,  however,  that the Committee may
make exceptions to this requirement,  in its sole discretion, in the case of the
Executive's retirement, death or disability.

4. AMENDMENT AND TERMINATION

         The  Incentive  Plan  may be  amended  or  terminated  only by  written
agreement executed by the Employee and the REIT. Any amendments to the Incentive
Plan shall require  stockholder  approval only to the extent required by Section
162(m) of the Code.

5. STOCKHOLDER APPROVAL

         No bonuses shall be paid under the Incentive  Plan unless and until the
REIT's  stockholders  shall have approved the Incentive Plan and the Performance
Goals as required by Section  162(m) of the Code. So long as the Incentive  Plan
shall not have been previously  terminated by the Board, it shall be resubmitted
for  approval  by the REIT's  stockholders,  to the extent  required  by Section
162(m) of the Code,  if it is amended in any way which  materially  modifies the
Performance  Goals or increases  the maximum  bonus  payable under the Incentive
Plan.

                                        2

<PAGE>

                                                                         ANNEX B

LIST OF PROPERTIES AND ENTITIES  EMPLOYEE MAY CONTINUE TO OWN AND PARTICIPATE IN
THE OPERATION AND MANAGEMENT OF:

1. 727 15th Street

2. Properties currently owned by Mid-Atlantic Centers Limited Partnership

         a. Tarrytown Mall
         b. Quality Center

<PAGE>

                                                                         ANNEX C

                        INCENTIVE STOCK OPTION AGREEMENT

         THIS INCENTIVE STOCK OPTION AGREEMENT, dated as of May 1, 1998, is made
by and between First Washington Realty Trust, Inc., a Maryland  corporation (the
"Company"), and William J. Wolfe (the "Optionee"), an employee of the Company:

         WHEREAS,  the Company has adopted The Amended and  Restated  1994 Stock
Option Plan for Officers,  Directors and  Employees of First  Washington  Realty
Trust,  Inc., First Washington  Realty Limited  Partnership and First Washington
Management,  Inc., as amended from time to time (the "Plan"), for the benefit of
its eligible employees and directors; and

         WHEREAS,  the Company wishes to afford the Optionee the  opportunity to
purchase shares of its Common Stock; and

         WHEREAS,  the Company  wishes to carry out the Plan (the terms of which
are hereby incorporated by reference and made a part of this Agreement); and

         WHEREAS,  the Committee appointed to administer the Plan has determined
that it would be to the  advantage  and best  interest  of the  Company  and its
stockholders  to grant the  Incentive  Stock  Option  provided for herein to the
Optionee to enable the Company to obtain and retain the services of the Optionee
considered  essential to the long-range success of the Company and to provide an
additional  incentive  for the Optionee to further the growth,  development  and
financial  success of the Company by  rewarding  the  Optionee  for such growth,
development and financial success through the ownership of Company stock;

         NOW,  THEREFORE,  in  consideration  of  the  mutual  covenants  herein
contained and other good and valuable consideration,  receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

         The masculine  pronoun  shall include the feminine and neuter,  and the
singular the plural, unless the context clearly indicates otherwise. Capitalized
terms used herein and not otherwise  defined shall have the meanings ascribed to
them in the Plan. Whenever the following terms are used in this Agreement,  they
shall have the meaning  specified below unless the context clearly  indicates to
the contrary.

<PAGE>

SECTION 1.1 - EMPLOYMENT AGREEMENT

         "Employment  Agreement"  shall mean that  certain  Second  Amended  and
Restated  Employment  Agreement between the Optionee and the Company dated as of
May 1, 1998.

SECTION 1.2 - OFFICER

         "Officer"  shall  mean an officer  of the  Company,  as defined in Rule
16a-1(f) under the Exchange Act, as such Rule may be amended in the future.

SECTION 1.3 - OPTION

         "Option" shall mean the incentive stock option to purchase Common Stock
of the Company granted under this Agreement, which option is intended to qualify
as an "incentive stock option" under Section 422 of the Code.

SECTION 1.4 - SECRETARY

         "Secretary" shall mean the Secretary of the Company.

SECTION 1.5 - TERMINATION OF EMPLOYMENT

         "Termination   of   Employment"   shall   mean   the   time   when  the
employee-employer relationship between the Optionee and the Company or a Company
Subsidiary is terminated for any reason, with or without cause,  including,  but
not by way of  limitation,  a  termination  by  resignation,  discharge,  death,
permanent and total disability or retirement,  but excluding (i) any termination
where there is a  simultaneous  reemployment  or  continuing  employment  by the
Company or a Company Subsidiary and (ii) at the sole and absolute  discretion of
the  Committee,  a  termination  that  results in a temporary  severance  of the
employee-employer relationship that does not exceed one (1) year. The Committee,
in its sole and absolute  discretion,  shall  determine  the effect of all other
matters and questions relating to Termination of Employment,  including, but not
by way of  limitation,  all  questions of whether a particular  leave of absence
constitutes a Termination  of  Employment;  provided,  however,  that a leave of
absence shall constitute a Termination of Employment if, and to the extent that,
such leave of absence interrupts employment for purposes of Section 422(a)(2) of
the Code and the then  applicable  regulations  and rulings  under said Section.
Notwithstanding any other provision of the Plan, the right of the Company or any
Company  Subsidiary  to terminate  the  Optionee's  employment is subject to the
terms of the Employment Agreement.

                                      - 2 -

<PAGE>

                                   ARTICLE II
                                 GRANT OF OPTION

SECTION 2.1 - GRANT OF OPTION

         In partial consideration of the Optionee's past services to the Company
and/or the  Optionees'  agreement  to remain in the  employ of the  Company or a
Company Subsidiary  pursuant to the Employment  Agreement and for other good and
valuable consideration, provided that the Optionee is employed by the REIT as of
January 1, 2000, then the Company shall irrevocably  grant to the Optionee,  and
hereby does grant to the Optionee,  effective as of January 1, 2000,  the option
to  purchase  any part or all of an  aggregate  of  two-hundred  fifty  thousand
(250,000)  shares of its Common Stock upon the terms and conditions set forth in
this Agreement.

SECTION 2.2 - PURCHASE PRICE

         The purchase  price of the shares of stock  covered by the Option shall
be a price per share equal to the Fair Market  Value (as defined in the Plan) of
a share of Common Stock on January 1, 2000, without commission or other charge.

SECTION 2.3 - CONSIDERATION TO COMPANY

         In  consideration  of the granting of this Option by the  Company,  the
Optionee  agrees to render  faithful and efficient  services to the Company or a
Company Subsidiary, with such duties and responsibilities as the Company or such
Company Subsidiary shall from time to time prescribe, pursuant to the Employment
Agreement.  Nothing  in this  Agreement  or in the Plan  shall  confer  upon the
Optionee  any right to  continue  in the employ of the  Company  or any  Company
Subsidiary.

SECTION 2.4 - ADJUSTMENTS IN OPTION

         In the event that the  outstanding  shares of the stock  subject to the
Option are changed into or exchanged for a different number or kind of shares of
the  Company  or  other   securities   of  the  Company  by  reason  of  merger,
consolidation,   recapitalization,   reclassification,  stock  split  up,  stock
dividend or combination of shares,  the Committee  shall make an appropriate and
equitable adjustment in the number and kind of shares as to which the Option, or
portions thereof then unexercised,  shall be exercisable,  to the end that after
such event the Optionee's  proportionate  interest shall be maintained as before
the  occurrence  of such  event.  Such  adjustment  in the Option  shall be made
without change in the total price  applicable to the unexercised  portion of the
Option (except for any change in the aggregate price resulting from rounding-off
of share quantities or prices) and with any necessary  corresponding  adjustment
in the Option  price per share;  provided,  however,  that each such  adjustment
shall be made in such manner as not to  constitute a  "modification"  within the
meaning  of  Section  424(h)(3)  of the Code.  Any such  adjustment  made by the
Committee  shall be final and  binding  upon the  Optionee,  the Company and all
other interested persons.

                                      - 3 -

<PAGE>

                                   ARTICLE III
                            PERIOD OF EXERCISABILITY

SECTION 3.1 - COMMENCEMENT OF EXERCISABILITY

         (a)  Subject  to  Sections   3.4  and  5.6,  the  Option  shall  become
exercisable in three (3) cumulative installments as follows:

               (1) The first  installment  shall  consist  of  thirty-three  and
          one-third  percent  (33-  1/3%) of the  shares  covered  by the Option
          (rounded  down  to  the  nearest  one  (1)  share)  and  shall  become
          exercisable  on the first  anniversary  of the date that the Option is
          granted.

               (2) The second  installment  shall  consist of  thirty-three  and
          one-third  percent  (33-1/3%)  of the  shares  covered  by the  Option
          (rounded  down  to  the  nearest  one  (1)  share)  and  shall  become
          exercisable  on the second  anniversary of the date that the Option is
          granted.

               (3) The third  installment  shall  consist of the  balance of the
          shares covered by the Option and shall become exercisable on the third
          anniversary of the date that the Option is granted.

         (b) Except to the extent  expressly  provided  otherwise  elsewhere  in
writing,  no portion of the  Option  that is  unexercisable  at  Termination  of
Employment shall thereafter become exercisable.

SECTION 3.2 - DURATION OF EXERCISABILITY

         The installments provided for in Section 3.1 are cumulative.  Each such
installment  that  becomes  exercisable  pursuant  to Section  3.1 shall  remain
exercisable until it becomes unexercisable under Section 3.3.

SECTION 3.3 - EXPIRATION OF OPTION

         The Option may not be exercised to any extent by anyone after the first
to occur of the following events:

         (a) The  expiration of ten (10) years from the date that the Option was
granted; or

         (b) If the Optionee  owned (within the meaning of Section 424(d) of the
Code),  at the time the Option was granted,  more than ten percent  (10%) of the
total  combined  voting  power of all  classes  of stock of the  Company  or any
Company  Subsidiary,  the  expiration  of five (5) years  from the date that the
Option was granted.

                                      - 4 -

<PAGE>

SECTION 3.4 - DURATION OF EXERCISABILITY

          This  Option  shall be  exercisable  as to all of the  shares  covered
hereby,  notwithstanding  that  this  Option  may  not  yet  have  become  fully
exercisable   under   Section  3.1  (a)  in  the  event  the   employee-employer
relationship  between  the  Optionee  and the Company is  terminated  (i) by the
Company  pursuant to Section  2(c)(i) of the Employment  Agreement;  (ii) by the
Optionee  pursuant to Section  2(d) of the  Employment  Agreement;  (iii) by the
Optionee  pursuant  to Section  2(e) of the  Employment  Agreement;  (iv) by the
Optionee  pursuant to Section 2(f) of the  Employment  Agreement  (other than in
connection with Optionee's removal as a director for cause under the corporation
law of the  State  of  Maryland);  or (v) due to the fact  that  the  Employment
Agreement expires and its not renewed pursuant to Section 2(b) of the Employment
Agreement; provided, however, that this acceleration of exercisability shall not
take place if:

         (a) This Option becomes  unexercisable  under Section 3.3 prior to said
effective date; or

         (b) In  connection  with  such  an  event,  provision  is  made  for an
assumption  of this  Option or a  substitution  therefor  of a new  option by an
employer  corporation,  or a parent or subsidiary of such  corporation,  so that
such assumption or  substitution  complies with the provisions of Section 424(a)
of the Code; and

provided,  further,  that  nothing in this  Section  3.4 shall make this  Option
exercisable if it is otherwise unexercisable by reason of Section 5.6.

         The  Committee  may make such  determinations  and adopt such rules and
conditions as it, in its absolute  discretion,  deems  appropriate in connection
with  such  acceleration  of  exercisability,  including,  but  not  by  way  of
limitation,  provisions  to  ensure  that any such  acceleration  and  resulting
exercise  shall  be  conditioned  upon  the  consummation  of  the  contemplated
corporate  transaction,   and  terminations  regarding  whether  provisions  for
assumption or substitution have been made as defined in subsection (b) above.

SECTION 3.5 - TERMINATION OF EMPLOYMENT PRIOR TO JANUARY 1, 2000

         Notwithstanding  anything  to the  contrary  contained  herein,  if the
Optionee's employment with the Company is terminated in an Early Termination (as
defined in the Employment  Agreement) prior to January 1, 2000, then the Company
shall irrevocably grant to the Optionee,  and hereby does grant to the Optionee,
effective  as of January 1, 2000,  the Option to purchase

                                      -5-

<PAGE>

any part or all of the 250,000  shares of Common  Stock,  and this Option  shall
become  fully  exercisable  as of the date of grant and shall expire on December
31, 2002.

SECTION 3.6 - SPECIAL TAX CONSEQUENCES

         (a) The Optionee  acknowledges  that,  to the extent that the aggregate
fair  market  value of stock with  respect to which  "incentive  stock  options"
(within the meaning of Section  422 of the Code,  but without  regard to Section
422(d) of the Code), including the Option, are exercisable for the first time by
the Optionee  during any calendar  year (under the Plan and all other  incentive
stock option plans of the Company and any Company  Subsidiary) exceeds $100,000,
such options  shall be treated as not  qualifying  under Section 422 of the Code
but rather shall be treated as  non-qualified  options to the extent required by
Section 422 of the Code.  The Optionee  further  acknowledges  that the rule set
forth in the preceding  sentence shall be applied by taking options into account
in the order in which they were granted.  For purposes of these rules,  the fair
market value of stock shall be determined as of the time the option with respect
to such stock is granted.

         (b) The Optionee  acknowledges that if any portion of the Option is not
exercised within the applicable time period specified in Section 422 of the Code
following a Termination of Employment, then such portion shall be treated as not
qualifying  under  Section  422 of the  Code but  rather  shall  be  treated  as
non-qualified options to the extent required under Section 422 of the Code.

                                   ARTICLE IV
                               EXERCISE OF OPTION

SECTION 4.1 - PERSON ELIGIBLE TO EXERCISE

         During the lifetime of the  Optionee,  only he or his guardian or legal
representative  may exercise the Option or any portion thereof.  After the death
of the Optionee,  any  exercisable  portion of the Option may, prior to the time
when the Option  becomes  unexercisable  under  Section 3.3, be exercised by his
Beneficiary.

SECTION 4.2 - PARTIAL EXERCISE

         Any exercisable installment of the Option or the entire Option, if then
wholly  exercisable,  may be  exercised in whole or in part at any time prior to
the time when the Option or portion thereof becomes  unexercisable under Section
3.3;  provided,  however,  that each partial exercise shall be for not less than
1,000 shares (or the minimum  installment set forth in Section 3.1, if a smaller
number of shares) and shall be for whole shares only.

SECTION 4.3 - MANNER OF EXERCISE

         The Option, or any exercisable  portion thereof,  may be exercised only
on the first  business  day of a calendar  month and solely by  delivery  to the
Secretary  or his  office  of all of the  following  prior to the time  when the
Option or such portion becomes unexercisable under Section 3.3:

               (a) Notice in writing  signed by the Optionee or the other person
          then  entitled to exercise  the Option or  portion,  stating  that the
          Option or portion is thereby exercised, such notice complying with all
          applicable rules established by the Committee; and

                                      - 6 -

<PAGE>

               (b) Full payment for the shares with respect to which such Option
          or portion thereof is exercised, by:

                    (1) Cash or check; or

                    (2) With the  consent  of the  Committee,  (A) shares of the
               Company's  Common Stock owned by the Optionee  duly  endorsed for
               transfer  to the  Company or (B) shares of the  Company's  Common
               Stock issuable to the Optionee upon exercise of the Option,  with
               a fair market  value (as  determined  under  Section  1.15 of the
               Plan)  on the date of  Option  exercise  equal  to the  aggregate
               purchase price of the shares with respect to which such Option or
               portion is exercised; or

                    (3) With the consent of the  Committee,  any  combination of
               the consideration provided in the foregoing subparagraphs (1) and
               (2) or through delivery of property of any kind which constitutes
               good and valuable  consideration,  consistent with the provisions
               of the Plan; and

               (c) A bona fide written  representation and agreement,  in a form
          satisfactory to the Committee,  signed by the Optionee or other person
          then entitled to exercise such Option or portion, stating that:

                    (1) the  shares  of stock  are  being  acquired  for his own
               account,  for  investment  and without any present  intention  of
               distributing  or  reselling  said shares or any of them except as
               may be permitted  under the  Securities  Act and then  applicable
               rules and regulations thereunder; and

                    (2) that the  Optionee  or other  person  then  entitled  to
               exercise  such  Option or  portion  will  indemnify  the  Company
               against  and hold it free and  harmless  from any  loss,  damage,
               expense  or  liability  resulting  to the  Company if any sale or
               distribution  of the  shares by such  person is  contrary  to the
               representation  and  agreement  referred to above.  The Committee
               may, in its absolute discretion, take whatever additional actions
               it deems  appropriate to insure the observance and performance of
               such  representation  and agreement and to effect compliance with
               the Securities Act and any other federal or state securities laws
               or regulations. Without limiting the generality of the foregoing,
               the Committee may require an opinion of counsel  acceptable to it
               to the effect that any subsequent  transfer of shares acquired on
               an Option  exercise does not violate the Securities  Act, and may
               issue   stop-transfer   orders   covering   such  shares.   Share
               certificates

                                      - 7 -

<PAGE>

               evidencing  stock issued on exercise of this Option shall bear an
               appropriate legend referring to the provisions of this subsection
               (c) and the agreements  herein.  The written  representation  and
               agreement  referred to in the first  sentence of this  subsection
               (c) shall,  however,  not be  required if the shares to be issued
               pursuant  to  such  exercise  have  been  registered   under  the
               Securities  Act,  and  such  registration  is then  effective  in
               respect of such shares; and

               (d) In the  event  the  Option  or  portion  shall  be  exercised
          pursuant  to  Section  4.1 by any  person or  persons  other  than the
          Optionee,  appropriate proof of the right of such person or persons to
          exercise the Option.

SECTION 4.4 - CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES

         The shares of stock deliverable upon the exercise of the Option, or any
portion  thereof,  may be either  previously  authorized but unissued  shares or
issued shares that have then been  reacquired by the Company.  Such shares shall
be fully paid and  nonassessable.  The Company shall not be required to issue or
deliver any certificate or  certificates  for shares of stock purchased upon the
exercise of the Option or portion  thereof  prior to  fulfillment  of all of the
following conditions:

               (a)  The  admission  of  such  shares  to  listing  on all  stock
          exchanges on which such class of stock is then listed; and

               (b) The completion of any registration or other  qualification of
          such  shares  under  any  state or  federal  law or under  rulings  or
          regulations of the Securities and Exchange  Commission or of any other
          governmental  regulatory  body, that the Committee  shall, in its sole
          and absolute discretion, deem necessary or advisable; and

               (c) The  obtaining  of any approval or other  clearance  from any
          state or federal  governmental agency that the Committee shall, in its
          sole and absolute discretion,  determine to be necessary or advisable;
          and

                                      -8-

<PAGE>

               (d) The payment to the Company (or other employer corporation) of
          all  amounts  that,  under  federal,  state  or local  tax law,  it is
          required to withhold upon exercise of the Option; and

               (e) The lapse of such  reasonable  period of time  following  the
          exercise  of the  Option  as the  Committee  may  from  time  to  time
          establish for reasons of administrative convenience.

SECTION 4.5 - RIGHTS AS STOCKHOLDER

         The  holder of the  Option  shall not be, nor have any of the rights or
privileges of, a stockholder of the Company in respect of any shares purchasable
upon the  exercise  of any part of the  Option  unless  and  until  certificates
representing such shares shall have been issued by the Company to such holder.

SECTION 4.6 - OWNERSHIP AND TRANSFER RESTRICTIONS

         Shares  acquired  through the exercise of an Option shall be subject to
the  restrictions  on ownership and transfer set forth in the Company's  Amended
and Restated Charter, as in effect from time to time.

SECTION 4.7 - RESTRICTIONS ON EXERCISE OF OPTION

         An Option is not  exercisable  if the  exercise  of such  Option  would
likely result in any of the following:

               (a) the Optionee's  ownership of Capital Stock being in violation
          of the Stock  Ownership  Limit set forth in the Company's  Amended and
          Restated Charter, as in effect from time to time.

               (b) income to the Company that could impair the Company's  status
          as a real estate investment  trust,  within the meaning of Section 856
          through 860 of the Code; or

               (c) a transfer,  at any one time,  of more than  one-tenth of one
          percent (0.1%) (measured in value or in number of shares, whichever is
          more  restrictive)  of the  Company's  total  Capital  Stock  from the
          Company to First  Washington  Management,  Inc. or to the  Partnership
          pursuant to Section 5.5(a) or 5.6(a)(i) of the Plan, respectively.

                                      -9-

<PAGE>

          Notwithstanding  any other provision of this  Agreement,  the Optionee
          shall  have no rights  under  this  Agreement  or the Plan to  acquire
          Common Stock that would  otherwise be  prohibited  under the Company's
          Amended and Restated Charter, as in effect from time to time.

                                    ARTICLE V
                                OTHER PROVISIONS

SECTION 5.1 - ADMINISTRATION

         The  Committee  shall  have the  power to  interpret  the Plan and this
Agreement  and to adopt such rules for the  administration,  interpretation  and
application of the Plan as are  consistent  therewith and to interpret or revoke
any such rules.  All actions taken and all  interpretations  and  determinations
made by the  Committee  in good  faith  shall  be  final  and  binding  upon the
Optionee,  the  Company  and all  other  interested  persons.  No  member of the
Committee  shall  be  personally   liable  for  any  action,   determination  or
interpretation made in good faith with respect to the Plan or the Option.

SECTION 5.2 - OPTION NOT TRANSFERABLE

         Neither the Option nor any  interest or right  therein or part  thereof
shall be liable for the debts,  contracts or  engagements of the Optionee or his
successors  in  interest  or  shall  be  subject  to  disposition  by  transfer,
alienation,  anticipation,  pledge,  encumbrance,  assignment or any other means
whether such  disposition  be voluntary or involuntary or by operation of law by
judgment,  levy,  attachment,  garnishment  or  any  other  legal  or  equitable
proceedings (including bankruptcy),  and any attempted disposition thereof shall
be null and void and of no effect; provided, however, that, subject to the Stock
Ownership Limit,  this Section 5.2 shall not prevent transfers by will or by the
applicable laws of descent and distribution.

SECTION 5.3 - SHARES TO BE RESERVED

         The Company  shall at all times  during the term of the Option  reserve
and keep  available  such  number of shares  of stock as will be  sufficient  to
satisfy the requirements of this Agreement.

SECTION 5.4 - NOTICES

         Any  notice  to be  given  by the  Optionee  under  the  terms  of this
Agreement  to the  Company  shall be  addressed  to the  Company  in care of its
Secretary,  and any notice to be given to the Optionee shall be addressed to him
at the address given beneath his signature hereto. By a notice given pursuant to
this Section 5.4, either party may hereafter  designate a different  address for
notices  to be given to him.  Any  notice  that is  required  to be given to the
Optionee  shall,  if the Optionee is then  deceased,  be given to the Optionee's
personal  representative  if such  representative  has  previously  informed the
Company of his status and address by written  notice under this Section 5.4. Any
notice shall be deemed duly given when enclosed in a properly sealed envelope or
wrapper  addressed as  aforesaid,  deposited  (with  postage  prepaid) in a post
office or branch post office  regularly  maintained  by the United States Postal
Service.

SECTION 5.5 - TITLES

         Titles are provided herein for convenience only and are not to serve as
a basis for interpretation or construction of this Agreement.

SECTION 5.6 - STOCKHOLDER APPROVAL

         The Plan will be submitted for approval by the  Company's  stockholders
within twelve (12) months after the date that the Plan was initially  adopted by
the Board. This Option may not be exercised to any extent by anyone prior to the
time when the Plan is approved by the stockholders, and if such approval has not
been obtained by the end of said twelve-month period,

                                     - 10 -

<PAGE>

this Option shall  thereupon  be canceled and become null and void.  The Company
shall take such actions as may be necessary to satisfy the  requirements of Rule
16b-3(b).

SECTION 5.7 - NOTIFICATION OF DISPOSITION

         The Optionee shall give prompt notice to the Company of any disposition
or other  transfer of any shares of stock  acquired under this Agreement if such
disposition  or  transfer  is made (a)  within  two (2)  years  from the date of
granting the Option with respect to such shares or (b) within one (1) year after
the transfer of such shares to him.  Such notice shall  specify the date of such
disposition or other transfer and the amount realized,  in cash, other property,
assumption  of  indebtedness  or other  consideration,  by the  Optionee in such
disposition or other transfer.

SECTION 5.8 - GOVERNING LAW

         This Agreement  shall be  administered,  interpreted and enforced under
the internal laws of the State of Maryland  without  regard to conflicts of laws
thereof.

                                     - 11 -

<PAGE>

SECTION 5.9 - CONFORMITY TO SECURITIES LAWS

         The Optionee  acknowledges  that the Plan is intended to conform to the
extent  necessary with all provisions of the Securities Act and the Exchange Act
and any and all regulations and rules promulgated by the Securities and Exchange
Commission thereunder,  including without limitation Rule 16b-3. Notwithstanding
anything herein to the contrary, the Plan shall be administered,  and the Option
is  granted  and may be  exercised,  only in such a manner as to conform to such
laws, rules and regulations. To the extent permitted by applicable law, the Plan
and this Agreement shall be deemed amended to the extent necessary to conform to
such laws, rules and regulations.

         IN WITNESS  WHEREOF,  this Agreement has been executed and delivered by
the parties hereto.

                                    FIRST WASHINGTON REALTY TRUST, INC.,
                                    a Maryland corporation

                                    By:_______________________________________
                                       Title:  Secretary

------------------------------------------
         Optionee

------------------------------------------

------------------------------------------
         Address

Optionee's Taxpayer Identification Number:

------------------------------------------

                                     - 12 -

<PAGE>

                                                                         ANNEX D

                           RESTRICTED STOCK AGREEMENT

         THIS RESTRICTED  STOCK  AGREEMENT,  dated as of May 1, 1998, is made by
and between First  Washington  Realty Trust,  Inc., a Maryland  corporation (the
"Company"), and William J. Wolfe, an officer of the Company (the "Employee"):

         WHEREAS,  the Company has established the First Washington  Trust, Inc.
Restricted Stock Plan, as amended from time to time, (the "Plan"); and

         WHEREAS,  the Company  wishes to carry out the Plan (the terms of which
are hereby incorporated by reference and made a part of this Agreement); and

         WHEREAS,  the Plan provides for the issuance of shares of the Company's
Common  Stock (as  defined  herein)  subject  to  certain  restrictions  thereon
(hereinafter referred to as the "Restricted Stock"); and

         WHEREAS, the Compensation Committee of the Company's Board of Directors
(the  "Committee"),  has determined that it would be to the advantage and in the
best interest of the Company and its stockholders to issue certain shares of the
Company's  Common Stock,  par value $0.01 per share (the "Common  Stock") to the
Employee in partial  consideration  of past services to the Company and/or as an
incentive to remain as an employee of the Company,  subject to the  restrictions
set forth herein, and has advised the Company thereof.

         NOW,  THEREFORE,  in  consideration  of  the  mutual  covenants  herein
contained and other good and valuable consideration,  receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

SECTION 1.1  -"EMPLOYMENT  AGREEMENT" shall mean that certain Second Amended and
Restated Executive  Employment  Agreement between Employee and the Company dated
as of May 1, 1998.

SECTION  1.2 - "FAIR  MARKET  VALUE" of a share of the  Company's  stock as of a
given date shall be: (i) the closing  price of the Common  Stock on the New York
Stock Exchange on such date, or, if shares were not traded on such date, then on
the next  preceding  trading day during which a sale  occurred;  or (ii) if such
stock is not  traded on an  exchange  but is  quoted  on  Nasdaq or a  successor
quotation  system,  (1) the last sales  price (if the stock is then  listed as a
National  Market Issue under the NASD  National  Market  System) or (2) the mean
between the closing representative bid and asked prices (in all other cases) for
the  stock on the day  previous  to such  date as  reported  by  Nasdaq  or such
successor  quotation system; or (iii) if such stock is not publicly traded on an
exchange  and not quoted on Nasdaq or a  successor  quotation  system,  the mean
between the

<PAGE>

closing bid and asked prices for the stock, on the day previous to such date, as
determined in good faith by the Committee; or (iv) if the Company's stock is not
publicly  traded,  the fair market value  established by the Committee acting in
good faith. In determining  the Fair Market Value of the Company's  Common Stock
under  Paragraph  (i) of this Section 1.2, the Committee may rely on the closing
price  as  reported  in the  New  York  Stock  Exchange  composite  transactions
published in the Wall Street Journal.

SECTION 1.3 - "RESTRICTED  STOCK" shall mean Common Stock of the Company  issued
under this Agreement and subject to the Restrictions imposed hereunder.

SECTION 1.4 - "RESTRICTIONS"  shall mean the reacquisition  and  transferability
restrictions imposed upon Restricted Stock under this Agreement.

SECTION  1.5 - "RULE  16B-3"  shall  mean  that  certain  Rule  16b-3  under the
Securities  Exchange Act of 1934, as amended (the "Exchange  Act"), as such Rule
may be amended in the future.

                                   ARTICLE II
                          ISSUANCE OF RESTRICTED STOCK

SECTION  2.1 -  ISSUANCE  OF  RESTRICTED  STOCK.  In  partial  consideration  of
Employee's past services to the Company and/or Employee's agreement to remain in
the employ of the Company  pursuant to the  Employment  Agreement  and for other
good and valuable  consideration  which the Committee has determined to be equal
to the par value of its Common Stock  provided  that the Employee is employed by
the REIT as of January 1, 2000,  then the Company  shall issue to the  Employee,
and hereby  does issue to the  Employee,  effective  as of January 1, 2000,  one
hundred fifty thousand  (150,000)  shares of its Common Stock upon the terms and
conditions set forth in this Agreement.

                                   ARTICLE III
                                  RESTRICTIONS

SECTION 3.1 - REACQUISITION  OF RESTRICTED  STOCK;  ACCELERATION;  VESTING.  (a)
Reacquisition. All shares of Restricted Stock issued to the Employee pursuant to
Section 2.1 are initially subject to reacquisition by the Company immediately if
the  employee-employer  relationship  between  the  Employee  and the Company is
terminated:  (i) by the Company  pursuant to Section  2(c)(ii) of the Employment
Agreement  or (ii) by Employee  other than (A)  pursuant to Section  2(d) of the
Employment  Agreement,  (B) pursuant to Section 2(e) of the Employment Agreement
or (C)  pursuant  to Section  2(f) of the  Employment  Agreement  (other than in
connection with Employee's removal as a director for cause under the corporation
laws of the  State  of  Maryland),  or (D) due to the fact  that the  Employment
Agreement expired and was not renewed pursuant to Section 2(b) of the Employment
Agreement.  Following  such a  reacquisition  by the Company,  the Company shall
promptly  pay to the  Employee an amount  equal to the product of $.01 times the
number of shares of  Restricted  Stock  reacquired.  The  restriction  that such
shares of

                                        2

<PAGE>

Restricted  Stock be subject to  reacquisition by the Company shall not apply to
any "Vested Shares" held by the Employee.

         (b)  Acceleration.  All shares of  Restricted  Stock shall  immediately
fully vest and all Restrictions  with respect to such shares of Restricted Stock
shall  immediately  expire if the  employee-employer  relationship  between  the
Employee and the Company is  terminated  (i) by the Company  pursuant to Section
2(c)(i) of the Employment  Agreement;  (ii) by the Employee  pursuant to Section
2(d) of the Employment Agreement; (iii) by the Employee pursuant to Section 2(e)
of the Employment Agreement; or (iv) by the Employee pursuant to Section 2(f) of
the Employment  Agreement (other than in connection with Employee's removal as a
director for cause under the corporation  law of the State of Maryland);  or (v)
due to the  fact  that  the  Employment  Agreement  expires  and is not  renewed
pursuant to Section 2(b) of the Employment Agreement.

         (c)  Vesting.  The  shares of  Restricted  Stock  shall  vest,  and all
Restrictions  with respect to such shares shall expire,  in accordance  with the
schedule set forth below.  "Vested  Shares"  shall mean that number of shares of
Restricted Stock which have vested and are no longer subject to Restrictions.

                                 Number of                  Aggregate Number of
  Vesting Date                 Vested Shares                   Vested Shares
  ------------                 -------------                   -------------
  January 1, 2001                25,000                          25,000
  January 1, 2002                50,000                          75,000
  January 1, 2003                75,000                         150,000

SECTION 3.2 - LEGEND. (a) Certificates  representing  shares of Restricted Stock
issued pursuant to this Agreement shall,  until all  restrictions  lapse and new
certificates are issued pursuant to Section 3.3, bear the following legend:

         "THE SECURITIES  REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
         VESTING REQUIREMENTS AND MAY BE SUBJECT TO REACQUISITION BY THE COMPANY
         UNDER THE  TERMS OF THAT  CERTAIN  RESTRICTED  STOCK  AGREEMENT  BY AND
         BETWEEN FIRST  WASHINGTON  REALTY TRUST,  INC. (THE  "COMPANY") AND THE
         HOLDER  OF  THE  SECURITIES.  PRIOR  TO  VESTING  OF  OWNERSHIP  IN THE
         SECURITIES,   THEY  MAY  NOT  BE,  DIRECTLY  OR  INDIRECTLY,   OFFERED,
         TRANSFERRED,   SOLD,  ASSIGNED,  PLEDGED,   HYPOTHECATED  OR  OTHERWISE
         DISPOSED  OF UNDER ANY  CIRCUMSTANCES.  COPIES OF THE ABOVE  REFERENCED
         AGREEMENT  ARE ON FILE AT THE OFFICES OF THE COMPANY AT 4350  EAST-WEST
         HIGHWAY, SUITE 400, BETHESDA, MARYLAND 20814."

         (b) Unless  such  shares  shall  have been  registered  pursuant  to an
effective  registration  statement under the Securities Act of 1933, as amended,
certificates representing

                                        3

<PAGE>

          shares of Restricted  Stock issued  pursuant to this  Agreement  shall
          also bear the following legend :

         "THE  SECURITIES   REPRESENTED  BY  THIS   CERTIFICATE  HAVE  NOT  BEEN
         REGISTERED   UNDER  THE   SECURITIES  ACT  OF  1933,  AS  AMENDED  (THE
         "SECURITIES   ACT").   NO  SALE,   HYPOTHECATION,   TRANSFER  OR  OTHER
         DISPOSITION OF THESE  SECURITIES MAY BE MADE UNLESS EITHER (A) PURSUANT
         TO AN EFFECTIVE  REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (B)
         PURSUANT TO AN  EXEMPTION  FROM THE  REGISTRATION  REQUIREMENTS  OF THE
         SECURITIES ACT."

SECTION  3.3 -  LAPSE  OF  RESTRICTIONS.  Upon  the  vesting  of the  shares  of
Restricted  Stock as provided in Section  3.1 and  subject to Section  4.3,  the
Company  shall cause new  certificates  to be issued with respect to such Vested
Shares and delivered to the Employee or his legal representative,  free from the
legend  provided for in Section 3.2(a) and any of the other  Restrictions.  Such
Vested Shares shall cease to be considered Restricted Stock subject to the terms
and conditions of this Agreement.

SECTION   3.4  -   TERMINATION   OF   EMPLOYMENT   PRIOR  TO  JANUARY  1,  2000.
Notwithstanding  anything to the contrary  contained  herein,  if the Employee's
employment with the Company is terminated in an Early Termination (as defined in
the Employment Agreement) prior to January 1, 2000, then the Company shall issue
to the Employee, and hereby does issue to the Employee, effective as of the date
immediately  prior to such Early  Termination,  the 150,000 shares of Restricted
Stock,  and all of such shares of Restricted  Stock shall be fully vested on the
date of such issuance.

                                   ARTICLE IV
                                  MISCELLANEOUS

SECTION 4.1 -  ADMINISTRATION.  The Committee  shall have the power to interpret
the Plan,  this Agreement and all other documents  relating to Restricted  Stock
and to adopt such rules for the  administration,  interpretation and application
of this Agreement as are consistent  herewith and to interpret,  amend or revoke
any such rules.  All actions taken and all  interpretations  and  determinations
made by the  Committee  in good  faith  shall  be  final  and  binding  upon the
Employee,  the  Company  and all  other  interested  persons.  No  member of the
Committee  shall  be  personally   liable  for  any  action,   determination  or
interpretation  made in good  faith with  respect to the Plan or the  Restricted
Stock and all members of the Committee  shall be fully  protected by the Company
in respect to any such action, determination or interpretation.  The Board shall
have no right to exercise any of the rights or duties of the Committee under the
Plan and this Agreement.

SECTION 4.2 - RESTRICTED  STOCK NOT  TRANSFERABLE.  No  Restricted  Stock or any
interest  or right  therein  or part  thereof  shall be  liable  for the  debts,
contracts or  engagements of the Employee or his successors in interest or shall
be  subject  to  disposition  by  transfer,  alienation,  anticipation,  pledge,
encumbrance, assignment or any other means whether such disposition be voluntary
or involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal

                                        4

<PAGE>

or equitable proceedings  (including bankruptcy) unless and until any such share
of Restricted  Stock is a Vested Share,  and any attempted  disposition  thereof
prior to such  vesting,  shall be null  and  void  and of no  effect;  provided,
however,  that  this  Section  4.2  shall not  prevent  transfers  by will or by
applicable laws of descent and distribution.

SECTION 4.3 - CONDITIONS  TO ISSUANCE OF STOCK  CERTIFICATES.  The Company shall
not be required to issue or deliver any certificate or  certificates  for shares
of stock pursuant to this Agreement prior to fulfillment of all of the following
conditions:

         (a) The  admission of such shares to listing on all stock  exchanges on
which such class of stock is then listed; and

         (b) The completion of any  registration or other  qualification of such
shares  under any state or Federal law or under  rulings or  regulations  of the
Securities and Exchange Commission or of any other governmental regulatory body,
which the  Committee  shall,  in its  absolute  discretion,  deem  necessary  or
advisable; and

         (c) The obtaining of any approval or other  clearance from any state or
Federal   governmental  agency  which  the  Committee  shall,  in  its  absolute
discretion, determine to be necessary or advisable; and

         (d) The payment by the Employee of all amounts required to be withheld,
under  federal,  state and  local tax laws,  with  respect  to the  issuance  of
Restricted Stock and/or the lapse or removal of any of the Restrictions; and

         (e) The lapse of such  reasonable  period of time as the  Committee may
from time to time establish for reasons of administrative convenience.

SECTION 4.4 - ESCROW.  The  Secretary of the Company or such other escrow holder
as the Committee may appoint shall retain physical  custody of the  certificates
representing Restricted Stock until all of the Restrictions expire or shall have
been  removed;  provided,  however,  that in no event shall the Employee  retain
physical  custody of any  certificates  representing  Restricted Stock issued to
him.

SECTION 4.5 - NOTICES.  Any notice to be given under the terms of this Agreement
to the Company shall be addressed to the Company in care of its  Secretary,  and
any notice to be given to the Employee  shall be addressed to him at the address
given beneath his signature  hereto.  By a notice given pursuant to this Section
4.5, either party may hereafter  designate a different address for notices to be
given to it or him.  Any notice  which is required  to be given to the  Employee
shall,  if the Employee is then deceased,  be given to the  Employee's  personal
representative if such representative has previously informed the Company of his
status and address by written  notice  under this  Section 4.5. Any notice shall
have been  deemed  duly given when  enclosed  in a properly  sealed  envelope or
wrapper  addressed as  aforesaid,  deposited  (with  postage  prepaid) in a post
office or branch post office  regularly  maintained  by the United States Postal
Service.

                                        5

<PAGE>

SECTION 4.6 - RIGHTS AS  STOCKHOLDER.  Upon delivery of the shares of Restricted
Stock from the escrow  holder  pursuant to Section 4.4, the Employee  shall have
all the rights of a  stockholder  with  respect to said  shares,  subject to the
restrictions  herein,  including the right to vote the shares and to receive all
dividends or other distributions paid or made with respect to the shares.

SECTION 4.7 - TITLES.  Titles are provided herein for  convenience  only and are
not to serve as a basis for interpretation or construction of this Agreement.

SECTION 4.8 -  CONFORMITY  TO  SECURITIES  LAWS.  This  Agreement is intended to
conform to the extent  necessary  with all  provisions of the  Securities Act of
1933,  as amended,  and the Exchange Act and any and all  regulations  and rules
promulgated  by the  Securities and Exchange  Commission  thereunder,  including
without limitation Rule 16b-3.  Notwithstanding anything herein to the contrary,
this Agreement shall be administered,  and the Restricted Stock shall be issued,
only in such a manner as to conform to such laws, rules and regulations.  To the
extent  permitted by applicable  law, this  Agreement and the  Restricted  Stock
issued  hereunder shall be deemed amended to the extent  necessary to conform to
such laws, rules and regulations.

SECTION  4.9 -  AMENDMENT.  This  Agreement  may be  amended  only by a  writing
executed by the parties  hereto  which  specifically  states that it is amending
this Agreement.

SECTION 4.10 - APPROVAL OF PLAN BY STOCKHOLDERS.  The Plan will be submitted for
the approval of the Company's  stockholders  within twelve months after the date
of the Board's initial  adoption of the Plan.  Restricted Stock issued following
the adoption of the Plan but prior to such  stockholder  approval shall not vest
prior to the time when the Plan is approved by the stockholders;  provided, that
if such  approval has not been obtained at the end of said twelve- month period,
all  Restricted  Stock issued during such time period under the Agreement  shall
thereupon  be cancelled  and become null and void.  The Company and the Employee
shall take such action  with  respect to the Plan and this  Agreement  as may be
necessary to satisfy the requirements of Rule 16b-3(b).

SECTION 4.11 - TAX WITHHOLDING. The Company's obligation (i) to issue or deliver
to the Employee any certificate or certificates for unrestricted shares of stock
or (ii) to pay to the Employee  any  dividends  or make any  distributions  with
respect to the Restricted Stock, is expressly  conditioned upon receipt from the
Employee, on or prior to the date the same is required to be withheld, of:

         (a) Full  payment  (in cash or by  check)  of any  amount  that must be
withheld by the Company for federal, state and/or local tax purposes; or

         (b)  Subject to the  Committee's  consent  and  Section  4.10(c),  full
payment by  delivery  to the  Company of  unrestricted  shares of the  Company's
Common Stock  previously owned by the Employee duly endorsed for transfer to the
Company by the Employee  with an aggregate  Fair Market  Value  (determined,  as
applicable, as of the date of the lapse of the restrictions or vesting, or as of
the date of the  distribution)  equal to the amount that must be withheld by the
Company for federal, state and/or local tax purposes; or

                                        6

<PAGE>

         (c) With respect to the withholding obligation for shares of Restricted
Stock  that  become  unrestricted  shares  of stock as of a  certain  date  (the
"Vesting  Date"),   subject  to  the  Committee's  consent  and  to  the  timing
requirements set forth in this Section 4.10(c), full payment by retention by the
Company  of  a  portion  of  such  shares  of  Restricted   Stock  which  become
unrestricted or vested with an aggregate Fair Market Value (determined as of the
Vesting  Date)  equal to the amount  that must be  withheld  by the  Company for
federal, state and/or local tax purposes; or

         (d) Subject to the  Committee's  consent,  any  combination of payments
provided for in the foregoing subsections (a), (b) or (c).

SECTION 4.12 - CHANGES IN COMPANY'S  SHARES.  In the event that the  outstanding
shares of Common  Stock of the Company are  hereafter  changed into or exchanged
for a different number or kind of shares or other securities of the Company,  or
of another  corporation,  by reason of  reorganization,  merger,  consolidation,
recapitalization,  reclassification,  or the  number of shares is  increased  or
decreased by reason of a stock split-up,  stock dividend,  combination of shares
or any other  increase or decrease in the number of such shares of Common  Stock
effected  without receipt of consideration  by the Company  (provided,  however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of  consideration"),  the Committee shall
make  appropriate  adjustments  in the number  and kind of shares of  Restricted
Stock which may be issued.

SECTION 4.13 - GOVERNING LAW. The laws of the State of Maryland shall govern the
interpretation,  validity,  administration,  enforcement  and performance of the
terms of this  Agreement  regardless  of the law that  might  be  applied  under
principles of conflicts of laws.

                                        7

<PAGE>

         IN WITNESS  HEREOF,  this  Agreement has been executed and delivered by
the parties hereto.

                                    FIRST WASHINGTON REALTY TRUST, INC.

                                    By: ________________________________

                                    Its: _______________________________

___________________________
          Employee

___________________________

___________________________
           Address

                                        8EXECUTION COPY

                 THIRD AMENDED AND RESTATED EMPLOYMENT AGREEMENT

         THIS THIRD AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT is dated
as of January 14, 2000,  effective as of January 1, 2000,  by and between  First
Washington Realty Trust, Inc., a Maryland  corporation (the "REIT"),  and Stuart
D. Halpert (the "Employee").

                                    RECITALS

         A. WHEREAS,  the REIT and the Employee executed an Executive Employment
Agreement  dated as of June 26, 1994, and  subsequently  executed an Amended and
Restated Executive  Employment Agreement dated as of June 30, 1996, and a Second
Amended and Restated Employment  Agreement dated as of May 1, 1998 (the "Amended
Agreement");

         B.  WHEREAS,  the REIT and the  Employee  mutually  desire to amend and
restate the Amended Agreement pursuant to the terms set forth herein; and

         C. WHEREAS, the REIT wishes to contract for the managerial and business
skills  possessed by the Employee and the Employee desires to be employed by the
REIT upon the terms and subject to the conditions herein provided.

         NOW,  THEREFORE,  in consideration of the foregoing premises and mutual
covenants and conditions  hereinafter set forth, and for other good and valuable
consideration,  the receipt and adequacy of which are hereby  acknowledged,  the
parties hereby agree as follows:

                                    AGREEMENT

1. Employment and Duties

         (a)  Position and Duties.  The Employee  shall serve as the Chairman of
the Board of the REIT,  with such duties and authority as are customary for, and
commensurate  with,  such position,  including  developing  policy,  supervising
staff,  directing day-to-day  operations,  and such other duties as the Board of
Directors of the REIT (the  "Board")  prescribes.  The Employee  shall have such
other duties and  authority as may from time to time be delegated or assigned to
him by the Board.

         (b)  Preclusion of Outside  Business  Activities.  During the Term, the
Employee shall devote substantially all of his professional energies,  interest,
abilities and productive work time to the performance of duties pursuant to this
Agreement.  The Employee  shall not,  without the prior  written  consent of the
Board,  perform other  professional  services of any kind or engage in any other
business activity,  with or without  compensation;  provided,  however, that the
Employee shall be allowed (i) to continue to engage in the  development of First
Washington  Management,  Inc.,  a  Maryland  corporation  ("FWM"),  at  a  level
consistent with past duties; (ii) to engage in

<PAGE>

administering  the business and  activities of First  Washington  Realty Limited
Partnership, a Maryland limited partnership (the "Operating Partnership"); (iii)
to serve as a director on the boards of up to three (3) non-competing companies;
and (iv) to engage in passive  investments  that the Employee may make from time
to time for his personal account, so long as the activities described in clauses
(i) through (iv) do not detract or adversely  affect the  Employee's  duties and
responsibilities under this Agreement. The Employee shall not, without the prior
written  consent  of the  Board,  engage in any  activity  adverse to the REIT's
interests.

2. Term of Employment

         (a) Term.  This Agreement shall continue in full force and effect until
December 31, 2002, unless sooner terminated or extended as hereinafter  provided
(the "Term").

         (b)  Extension of Term.  The  employment  term set forth in a paragraph
2(a) above may be extended by written amendment to this Agreement signed by both
parties.  The parties  agree that they will use their best  efforts to negotiate
the extension of this Agreement,  if both parties desire such an extension,  not
later than twelve months before the scheduled end of the Term.

         (c)      Termination by the REIT.

               (i)  Without  Cause.   The  REIT  may  terminate  the  Employee's
          employment  at any time for any  reason  other  than  with  Cause  (as
          hereinafter  defined)  or for no reason at all upon at least two weeks
          prior  written  notice to the  Employee;  provided,  however,  that in
          connection  with such a termination of employment,  the REIT may elect
          to require the  Employee to continue to perform his duties  under this
          Agreement for an additional sixty (60) days commencing on the date the
          Employee receives notice of such  termination.  In connection with the
          termination  of the  Employee's  employment  pursuant to this  Section
          2(c)(i),  the Employee  shall (A) be paid salary and any bonus payable
          to him in  accordance  with  Sections  3(a)  and 3(b)  hereof  accrued
          through  the  effective  date of  termination;  (B) be entitled to the
          benefits set forth in Sections  3(c) through 3(e) hereof in accordance
          with the terms  thereof ; (C) be entitled to the benefits set forth in
          Sections 3(f) through 3(h) hereof  accrued  through the effective date
          of such  termination  in  accordance  with such  plans,  programs  and
          arrangements;  (D) receive the Termination  Compensation  specified in
          Section  5(b)  hereof;  and (E) be  entitled  to the  continuation  of
          benefits specified in Section 5(d) hereof.

               (ii) With Cause. The REIT may terminate the Employee's employment
          with Cause immediately upon delivery of notice thereof.  In connection
          with the  termination  of the Employee's  employment  pursuant to this
          Section 2(c)(ii),  the Employee shall (A) be paid salary and any bonus
          payable  to him in  accordance  with  Sections  3(a) and  3(b)  hereof
          accrued through the effective date of termination;  (B) be entitled to
          the  benefits  set  forth in  Sections  3(c)  through  3(e)  hereof in
          accordance with the terms thereof; and (C) be entitled to the benefits
          set forth in Sections  3(f)  through 3(h) hereof  accrued  through the
          effective  date of such  termination  in  accordance  with such plans,
          programs and

                                        2

<PAGE>

               arrangements.  For purposes of this Agreement, "Cause" shall mean
          the Employee's  (A) material  incompetence  in the  performance of his
          duties or obligations hereunder,  including, without limitation, those
          duties  and  obligations   specified  in  Section  1(a)  hereof;   (B)
          commission of any act which is materially  injurious to the REIT;  (C)
          personal dishonesty,  willful misconduct,  or breach of fiduciary duty
          involving  personal  profit;  (D) intentional and material  failure to
          perform his stated duties for the REIT;  (E) willful  violation of any
          law which  violation  materially  adversely  affects  his  ability  to
          discharge  his  duties  for the REIT or has an  adverse  effect on the
          REIT's  interest or (F) breach in any  material  respect of any of the
          terms  of  this  Agreement  or  any   confidentiality  or  proprietary
          information  agreement  between the Employee  and FWM,  the  Operating
          Partnership  or the REIT;  provided,  however,  that "Cause" shall not
          exist unless and until the Board  provides  the  Employee  with (X) at
          least 15 days prior  written  notice of its intention to terminate his
          employment  with  Cause,   together  with  a  certified  copy  of  the
          resolution of the Board  approving the  termination  of the Employee's
          employment  with  Cause by the  affirmative  vote of not  less  than a
          majority of the Board, and a written  statement  describing the nature
          of the Cause, and (Y) a reasonable opportunity and a reasonable period
          of time to cure any curable  acts or omissions on which the finding of
          Cause is based.  If the Employee  cures the acts or omissions on which
          the  finding  of Cause is  based,  the REIT  shall  not have  Cause to
          terminate the Employee's employment hereunder.

         (d) Termination by the Employee.

               (i) With Good Reason or After Change of Control. The Employee may
          terminate this Agreement  prior to the expiration of the Term upon two
          weeks  prior  written   notice  to  the  REIT  with  Good  Reason  (as
          hereinafter  defined) at any time (including  within  twenty-four (24)
          months following any Change of Control (as hereinafter defined) of the
          REIT). The Employee shall continue to perform,  at the election of the
          REIT,  his duties under this  Agreement for an additional  thirty (30)
          days  following  the REIT's  receipt of his notice of  termination  in
          accordance with this Section 2(d). In connection  with  termination of
          the Employee's  employment pursuant to this Section 2(d), the Employee
          shall (A) be paid  salary  and any bonus  otherwise  payable to him in
          accordance  with  Sections  3(a) and 3(b) hereof  accrued  through the
          effective  date of such  termination;  (B) be entitled to the benefits
          set forth in Sections 3(c) through 3(e) hereof in accordance  with the
          terms  thereof;  (C) be entitled to the benefits set forth in Sections
          3(f) through 3(h) hereof  accrued  through the effective  date of such
          termination in accordance with such plans,  programs and arrangements;
          (D) receive the  Termination  Compensation  specified  in Section 5(b)
          hereof;  and (E) be entitled to the continuation of benefits specified
          in Section 5(d) hereof.

               (ii) For purposes of this Section 2(d),  "Good Reason" shall mean
          (A) the breach by the REIT of any of its obligations hereunder and the
          failure of the REIT to cure such breach  within  sixty (60) days after
          receipt by the REIT of a written notice of the Employee  specifying in
          reasonable detail the nature of the alleged breach or (B) any

                                        3

<PAGE>

          material  diminution in the scope of Employee's  responsibilities  and
          duties without his consent.

               (iii) For  purposes of this  Section  2(d), a "Change of Control"
          shall mean the first  occurrence of any of the following  events:  (A)
          any "person" (as such term is used in Sections  13(d) and 14(d) of the
          Securities Exchange Act of 1934, as amended),  other than a trustee or
          other fiduciary  holding  securities under an employee benefit plan of
          the  REIT,  a  corporation   owned   directly  or  indirectly  by  the
          stockholders  of the REIT in  substantially  the same  proportions  as
          their  ownership  of stock of the REIT,  the  Employee  or  William J.
          Wolfe, or any of their respective affiliates,  becomes the "beneficial
          owner"  (as  defined  in Rule  13d-3  under  said  Act),  directly  or
          indirectly, of securities representing 50% or more of the total voting
          power  represented  by the  then  outstanding  securities  which  vote
          generally in the election of directors  (referred to herein as "Voting
          Securities")  of the REIT;  (B) during  any period of two  consecutive
          years,  individuals who at the beginning of such period constitute the
          Board and any new directors  whose election by the Board or nomination
          for election by the REIT's  stockholders  was approved by a vote of at
          least  two-thirds  (2/3) the directors then still in office who either
          were  directors at the  beginning  of the period or whose  election or
          nomination  for election  was  previously  so approved,  cease for any
          reason to constitute a majority of the Board;  (C) the stockholders of
          the REIT approve a merger or  consolidation of the REIT with any other
          entity, other than a merger or consolidation which would result in the
          Voting  Securities of the REIT outstanding  immediately  prior thereto
          continuing to represent  (either by remaining  outstanding or by being
          converted into Voting Securities of the surviving entity) at least 50%
          of the total voting power  represented by the Voting Securities of the
          REIT or such  surviving  entity  outstanding  immediately  after  such
          merger or consolidation; or (D) the stockholders of the REIT approve a
          plan of complete  liquidation of the REIT or an agreement for the sale
          or  disposition  by the REIT of (in one  transaction  or a  series  of
          transactions) all or substantially all of the REIT's assets.

         (e) Termination Due to Death or Disability.  The Employee's  employment
hereunder shall terminate  immediately upon his death prior to the expiration of
the Term.  In the event that by reason of injury,  illness or other  physical or
mental  impairment the Employee  shall be: (i) completely  unable to perform his
services  hereunder  for more  than six  consecutive  months  or (ii)  unable to
perform his services  hereunder for fifty percent or more of the normal  working
day throughout twelve  consecutive months (each of (i) and (ii) constituting the
"Disability" of the Employee for purposes of this Agreement),  then the REIT may
terminate  the  Employee's  employment  hereunder  immediately  upon delivery of
notice  thereof.  In the event of the  termination of the Employee's  employment
pursuant to this Section  2(e),  the Employee or the  Employee's  beneficiaries,
estate, heirs, representatives or assigns, as appropriate,  shall be (A) be paid
the salary and any other bonus  otherwise  payable to the Employee in accordance
with Sections 3(a) and 3(b) hereof  accrued  through the effective  date of such
termination;  (B) be entitled to the benefits set forth in Sections 3(c) through
3(e) hereof in accordance  with the terms thereof;  (C) receive the  Termination
Compensation specified in Section 5(b) hereof; (D) receive the proceeds, if any,
due  under  any  REIT-paid  life  insurance  policy  held  by the  Employee,  as
determined  by and in  accordance  with the  terms of any such  policy;  and (E)
solely in the event of

                                        4

<PAGE>

the Employee's Disability, be entitled to the continuation of benefits specified
in Section 5(d) hereof.

         (f) Removal as Director.  Notwithstanding  any other  provision of this
Agreement,  if the Employee  shall be removed from (or fail to be re-elected to)
office as a director of the REIT at any time during the Term,  then the Employee
may notify the REIT in writing of his election to terminate  this Agreement upon
written notice to the REIT and such notice shall be effective  immediately  upon
receipt by the REIT. In connection with the Employee's termination of employment
pursuant to this Section 2(f), the Employee shall (A) be paid the salary and any
bonus  payable to him in accordance  with Sections 3(a) and 3(b) hereof  accrued
through the effective date of such termination;  (B) be entitled to the benefits
set forth in Sections  3(c)  through  3(e) hereof in  accordance  with the terms
thereof ; (C) be entitled to the  benefits  set forth in Sections  3(f)  through
3(h) hereof accrued through the effective date of such termination in accordance
with  such  plans,  programs  and  arrangements;  (D)  receive  the  Termination
Compensation  specified  in  Section  5(b)  hereof  and (E) be  entitled  to the
continuation of benefits  specified in Section 5(d) hereof;  provided,  however,
that the Employee  shall not be entitled to the payments and benefits  described
in subsections  (D) and (E) above if he is removed as a director for cause under
the corporation law of the State of Maryland.

3. Compensation and Related Matters.

         (a) Salary.  The Employee's annual base salary during the Term shall be
$300,000 per annum  effective  January 1, 1998. Such salary shall be reviewed by
the Board  annually  during the first  quarter of fiscal year of the REIT during
the Term, and the Employee shall receive such salary  increases,  if any, as the
Board, in its sole discretion,  shall  determine;  provided,  however,  that the
Employee's annual base salary shall not be less than $400,000  effective January
1, 2000 and  thereafter.  Such salary  shall be payable in  accordance  with the
REIT's normal  payment  practices,  but in no event shall such salary be payable
less frequently than monthly in equal installments.

         (b) Bonus. Effective January 1, 1999 and thereafter, the Employee shall
be eligible to receive an Annual Incentive Bonus in accordance with the Plan set
forth on Annex A hereto.

         (c) Options.

               (i)  Provided  that he is  employed  by the REIT as of January 1,
          2000,  effective  as of such date the Employee  shall be granted,  and
          hereby is  granted,  an option to  purchase  250,000  shares of Common
          Stock at an exercise  price equal to the Fair Market Value (as defined
          in the Option Plan) of a share of Common Stock on January 1, 2000 (the
          "Option") subject to the terms and provisions of the 1994 Stock Option
          Plan for Officers,  Directors and Employees of First Washington Realty
          Trust,  Inc.,  First Washington  Realty Limited  Partnership and First
          Washington Management, Inc. (the "Option Plan") (or a successor option
          plan then maintained by the REIT) and a written Stock Option Agreement
          between the Employee and the REIT (the "Stock Option Agreement").  The
          Stock Option Agreement shall provide that the Option shall become

                                        5

<PAGE>

          exercisable in equal cumulative installments of one-third each on each
          of the first three  anniversaries of the date of grant (subject to the
          Employee's  continued  employment by the REIT on such dates) and shall
          be  subject  to  immediate  vesting  in the  event  of the  Employee's
          termination of employment  pursuant to Section 2(c)(i),  2(d), 2(e) or
          2(f) (other than in connection with  Employee's  removal as a director
          for cause under the  corporation  law of the State of  Maryland) or by
          reason of  expiration  of the Term without  renewal  (collectively  an
          "Early  Termination") and shall be the Stock Option Agreement attached
          hereto as Annex C.

               (ii) If the  Employee's  employment  is  terminated  in an  Early
          Termination  prior to January 1, 2000,  then,  effective as January 1,
          2000, the Employee shall be granted,  and hereby is granted the Option
          to purchase  250,000 shares of Common Stock at an exercise price equal
          to the Fair Market Value of a share of Common Stock on January 1, 2000
          subject,  if permitted by the terms thereof,  to the Option Plan (or a
          successor option plan then maintained by the REIT), and, in any event,
          the written Stock Option Agreement  between the Employee and the REIT.
          The Stock  Option  Agreement  shall  provide  that the Option shall be
          fully exercisable as of the date of grant and shall expire on the date
          specified  in  Section  2(a)  herein  and  shall be the  Stock  Option
          Agreement attached hereto as Annex C.

         (d) Restricted Stock.

               (i)  Provided  that he is  employed  by the REIT as of January 1,
          2000,  effective  as of such date the Employee  shall be granted,  and
          hereby is  granted,  150,000  shares of common  stock of the REIT (the
          "Restricted  Stock")  subject to the terms and conditions of the First
          Washington Realty Trust, Inc. Restricted Stock Plan (the "Stock Plan")
          and a written  Restricted Stock Agreement between the Employee and the
          REIT  (the  "Restricted  Stock   Agreement").   The  Restricted  Stock
          Agreement  shall  provide  that shares of the  Restricted  Stock shall
          become vested in cumulative  installments of one-sixth,  one-third and
          one-half,  respectively,  on each of the first three  anniversaries of
          the date of grant (subject to the Employee's  continued  employment by
          the REIT on such dates) and shall be subject to  immediate  vesting in
          the event of the  Employee's  termination  of  employment  in an Early
          Termination  and  shall be the  Restricted  Stock  Agreement  attached
          hereto as Annex D.

               (ii) If the  Employee's  employment  is  terminated  in an  Early
          Termination prior to January 1, 2000, then effective immediately prior
          to such  termination  the  Employee  shall be  granted,  and hereby is
          granted,  the 150,000 shares of Restricted  Stock subject to the terms
          and  conditions  of the Stock  Plan and,  in any  event,  the  written
          Restricted  Stock  Agreement  between the Employee  and the REIT.  The
          Restricted Stock Agreement shall provide that shares of the Restricted
          Stock  shall be fully  vested  on the date of grant  and  shall be the
          Restricted Stock Agreement attached hereto as Annex D.

         (e)  Contingent   Stock.  As  provided  in  the  Amended  and  Restated
Contingent  Stock  Agreement dated as of May 1, 1998 by and between the REIT and
the Employee attached hereto

                                        6

<PAGE>

as Annex E, as amended from time to time (the "Contingent Stock Agreement"), the
Employee  shall be entitled to receive  shares of  Contingent  Stock (as defined
therein)  pursuant to such  agreement.  In accordance with Section 3.2(a) of the
Contingent  Stock  Agreement,  the  Compensation  Committee  of  the  Board  has
established the  "Performance  Goals" (as defined therein) for fiscal years 2000
through 2003  applicable  to the award of  Contingent  Stock in the event of the
Employee's  termination of employment in an Early Termination  during the period
beginning on January 1, 2000 and ending on March 31, 2003 (the "Contingent Stock
Period").  In the event of the Employee's  termination of employment in an Early
Termination during the Contingent Stock Period, the Compensation Committee shall
certify in writing, as of the effective date of such Early Termination,  whether
the REIT's annual  operating  income for the portion of the then current  fiscal
year  completed  prior to such date  equals or exceeds 80% of the product of (1)
the REIT's annual operating income for fiscal year 1999 and (2) the ratio of (A)
the number of days elapsed in the then current  fiscal year prior to the date of
Early  Termination  to (B) the number 365 (the  "Early  Termination  Performance
Goal").  If the Early  Termination  Performance  Goal has been met, the Employee
shall  receive,  within  5 days  following  the  effective  date of  such  Early
Termination, that number of shares of Contingent Stock equal to (x) 75,000 minus
(y) the  number of shares of  Contingent  Stock  awarded to the  Employee  under
Section 3.2 of the Contingent Stock Agreement prior to such date.

         (f)  Benefits.  During  the Term the  Employee  shall  be  entitled  to
participate  in or receive  benefits  under any  employee  benefit plan or other
arrangement  (including,  but not limited to, any medical,  dental,  retirement,
disability,  life insurance,  sick leave and vacation plans or arrangements  and
the REIT's executive  deferred  compensation plan) made available by the REIT to
any of its  employees,  subject  to and on a basis  consistent  with the  terms,
conditions and overall administration of such plans or arrangements.

         (g)  Expenses.  The REIT shall  promptly pay directly or reimburse  the
Employee for all reasonable  travel and other business  expenses incurred by the
Employee in the performance of his duties to the REIT under this Agreement.

         (h) Vacation.  The Employee  shall be entitled to vacation  benefits in
accordance  with the REIT's normal vacation  policies,  but in no event shall he
receive  less than four weeks of paid  vacation  each  calendar  year during the
Term.

         (i) Professional  Memberships.  The REIT shall promptly pay directly or
reimburse the Employee for all reasonable expenses incurred by the Employee with
respect to professional memberships maintained by him during the Term.

         (j) Automobile  Allowance.  During the Term, the REIT shall provide the
Employee  with an automobile  allowance  for a company  automobile of comparable
quality  as  automobiles  customarily  provided  to  executive  officers  in the
industry.  Expenses  relating to such automobile will be paid in accordance with
the normal and customary practices of the REIT.

                                        7

<PAGE>

         (k) Deductions and  Withholdings.  All amounts  payable or which become
payable under any provision of this Agreement shall be subject to all deductions
authorized by the Employee and to all  deductions and  withholdings  required by
law.

4. Covenant Not to Compete or Solicit

         (a) Non-Competition.

               (i) The Employee agrees that during the Term he will not directly
          or  indirectly   engage  in  (whether  as  an  employee,   consultant,
          proprietor,  partner,  director,  member  or  otherwise),  or have any
          ownership  interest in, or participate  in the  financing,  operation,
          management or control of, any person,  firm,  corporation  or business
          that  engages  in or  intends  to  engage  in a  Restricted  Business.
          "Restricted  Business"  shall mean any business  that is engaged in or
          (to the Employee's knowledge after due inquiry) preparing to engage in
          the real estate business of the acquisition,  development,  management
          and  operation  of  principally  retail  shopping  centers;  provided,
          however,  that  "Restricted  Business" shall not include the operation
          and management of those properties listed on Annex B hereto.

               (ii) The Employee further agrees that for the eighteen (18) month
          period  following  the  end of the  Term,  he  will  not  directly  or
          indirectly engage in (whether as an employee, consultant,  proprietor,
          partner,  director,  member  or  otherwise),  or  have  any  ownership
          interest in, or participate in the financing, operation, management or
          control of, any person, firm,  corporation or business that engages in
          or  intends  to  engage  in  a  Post-Employment  Restricted  Business.
          "Post-Employment  Restricted Business" shall mean any business that is
          engaged  in  or  (to  the  Employee's  knowledge  after  due  inquiry)
          preparing  to engage in the real estate  business of the  acquisition,
          development,  management and operation of principally  retail shopping
          centers  within  twenty-five  (25) miles of a retail  property  owned,
          directly  or through one or more  subsidiaries  or  otherwise,  by the
          REIT,  the  Operating  Partnership  or  FWM at  the  end of the  Term;
          provided,  however, that  "Post-Employment  Restricted Business" shall
          not include the operation and management of those properties listed on
          Annex B hereto.

               (iii)  Ownership  of (A) no more  than  one  percent  (1%) of the
          outstanding  voting stock of a publicly traded entity or (B) any stock
          owned by the  Employee  as of June 26,  1994  shall not  constitute  a
          violation of this Section 4(a).

               (iv) This  Section  4(a) shall not  prohibit  the  Employee  from
          working for a division or subsidiary  of a company  which  division or
          subsidiary   does  not   engage  in  a   Restricted   Business   or  a
          Post-Employment  Restricted  Business,  even though other divisions or
          subsidiaries  of such  company do engage in a  Restricted  Business or
          Post- Employment Restricted Business,  provided that the REIT receives
          adequate  assurances  as it  may  request  that  the  Employee  has no
          involvement  with  the  divisions  or  subsidiaries   engaged  in  the
          Restricted Business or Post-Employment Restricted Business.

                                        8

<PAGE>

         (b) Non-Solicitation.  The Employee agrees that during the Term he will
not (i) solicit,  encourage or take any other action which is intended to induce
any other employee of the REIT to terminate his or her employment  with the REIT
or (ii)  interfere  in any  manner  with the  contractual  or  other  employment
relationship between the REIT and any such employee of the REIT.

         (c)  Severability.  The parties intend that the covenants  contained in
the  preceding  paragraphs  of this  Section 4 shall be construed as a series of
separate  covenants,  one for each county of Maryland,  Virginia,  Pennsylvania,
North  Carolina,  South Carolina and Delaware,  and to the District of Columbia,
each  state of the  United  States  of  America  and  each  nation.  Except  for
geographic  coverage,  each such separate  covenant shall be deemed identical in
terms to the covenant contained in the preceding paragraphs. If, in any judicial
proceeding,  a court shall refuse to enforce any of the separate  covenants  (or
any part thereof) deemed included in said  paragraphs,  then such  unenforceable
covenant (or such part) shall be deemed  eliminated  from this Agreement for the
purpose of those  proceedings  to the extent  necessary to permit the  remaining
separate  covenants (or portions thereof) to be enforced.  In the event that the
provisions of this Section 4 should ever be deemed to exceed the time,  scope or
geographic limitation permitted by applicable law, then such provisions shall be
reformed to the maximum time, scope or geographic  limitations,  as the case may
be, permitted by applicable law.

5. Termination.

         (a) If the Employee's  employment is terminated by reason of expiration
of the Term without  renewal,  then the Employee  shall be paid,  within 90 days
following  the  date  of  expiration  of  the  Term,  a  lump  sum  amount  (the
"Termination  Compensation") equal to 300% of the sum of (i) the Employee's rate
of annual base salary at the time of such  expiration of the Term (as determined
pursuant to Section 3(a)) and (ii) the average annual bonus (if any) paid to the
Employee (or, if not yet paid, to which the Employee was entitled)  with respect
to the last three calendar years of the Term.

         (b) If the Employee's  employment is terminated in an Early Termination
other  than by  reason  of  expiration  of the Term  without  renewal,  then the
Employee  shall  be  paid,  within  90  days  of  the  effective  date  of  such
termination,  a lump sum amount (the "Severance  Compensation") equal to the sum
of:

               (i) an amount  equal to, and  computed in the same manner as, the
          Termination  Compensation  set  forth  in  Section  5(a),  as  if  the
          Employee's  employment  were terminated by reason of the expiration of
          the Term without renewal, and

               (ii) an amount equal to the greater of:

                    (A)  200% of the sum of (I) the  Employee's  rate of  annual
               base  salary  at the  time of  such  termination  (as  determined
               pursuant to Section  3(a)) and (II) the average  annual bonus (if
               any) paid to the Employee (or, if not yet paid, to which

                                        9

<PAGE>

               the  Employee  was  entitled)  with  respect  to the  last  three
               calendar years of the Term; or

                    (B) the sum of (I) the  aggregate  annual  base  salary  (as
               determined pursuant to Section 3(a)) the Employee would otherwise
               be  entitled  to  receive  from  the   effective   time  of  such
               termination  through the scheduled end of the Term (as determined
               pursuant to Section  2(a)) and (II) the average  annual bonus (if
               any) paid to the  Employee  (or,  if not yet  paid,  to which the
               Employee was  entitled)  with respect to the last three  calendar
               years of the Term.

         (c) No  Termination  Compensation  shall  be  paid  if  the  Employee's
employment is terminated  during the Term (i) by the REIT with Cause pursuant to
Section  2(c)(ii)  hereof or (ii) by the Employee other than in accordance  with
Section 2(d) or Section 2(e) or Section 2(f) in connection  with the  Employee's
failure to be  re-elected  as a director  or his  removal as a director  without
cause.

         (d) If the Employee's  employment is terminated prior to the expiration
of the Term for any reason other than  pursuant to Section  2(c)(ii) or pursuant
to Section  2(f) in  connection  with the  Employee's  removal as a director for
cause under the corporation law of the State of Maryland, the REIT will continue
to provide to the Employee  comparable  medical,  disability  and life insurance
benefits  as were in effect at the time of  termination  until  such time as the
Term would  otherwise have expired if the Employee had not been  terminated (but
in no event for a period of less than twenty-four months).

         (e)  Survival.  The  expiration  or  termination  of the Term shall not
impair the rights or  obligations  of any party  hereto which shall have accrued
hereunder  prior to such  expiration,  nor shall such  expiration or termination
impair the rights and obligations of any party hereto that are intended by their
terms to survive such expiration or termination.

         (f)  Mitigation  of  Damages.  In the event of any  termination  of the
Employee's  employment  with the REIT for any reason,  the Employee shall not be
required to seek other employment to mitigate damages,  and any income earned by
the  Employee  from  other  employment  or  self-employment  shall not be offset
against any obligations of the REIT to the Employee under this Agreement.

6. Excise Taxes

         (a) If it is determined  (as hereafter  provided) that by reason of any
payment or  distribution to the Employee,  including,  without  limitation,  any
stock option or award of stock or similar right,  or the lapse or termination of
any restriction on, or the vesting of, any of the foregoing,  occurring pursuant
to the terms of this Agreement (or otherwise under any other agreement,  plan or
program)  (collectively a "Payment") the Employee would be subject to the excise
tax imposed by Section  4999 of the Internal  Revenue  Code of 1986,  as amended
(the "Code) by reason of being  considered  "contingent on a change in ownership
or  control"  of the REIT  within  the  meaning of Code  Section  280G or to any
similar tax imposed by state or local

                                       10

<PAGE>

law or any interest or penalties with respect to such tax (such taxes,  together
with any such interest and penalties, the "Excise Tax"), then the Employee shall
be entitled to receive an additional payment or payments (a "Gross-Up  Payment")
in an amount such that,  after  payment by the Employee of all taxes  (including
any Excise Tax)  imposed  upon the Gross-Up  Payment,  the  Employee  retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment.

         (b)  Subject  to  the   provisions   of  Section   6(f)   hereof,   all
determinations  required to be made under this Section 6,  including  whether an
Excise  Tax is  payable by the  Employee  and the amount of such  Excise Tax and
whether a Gross-Up Payment is required and the amount of such Gross-Up  Payment,
shall be made by a nationally  recognized firm of certified  public  accountants
(the  "Accounting  Firm")  selected by the REIT.  The  Accounting  Firm shall be
directed by the REIT or the Employee to submit its preliminary determination and
detailed  supporting  calculations  to both the REIT and the Employee  within 15
calendar days after the  determination  date. If the Accounting  Firm determines
that any Excise Tax is payable by the Employee,  the REIT shall pay the required
Gross-Up  Payment to, the Employee  within five  business  days after receipt of
such  determination and calculations.  If the Accounting Firm determines that no
Excise Tax is payable by the  Employee,  it shall,  at the same time as it makes
such  determination,  furnish the Employee with an opinion that the Employee has
substantial authority not to report any Excise Tax on his federal tax return. As
a result of the  uncertainty in the application of Code Section 4999 at the time
of any  determination  by the  Accounting  Firm  hereunder,  it is possible that
Gross-Up Payments that will not have been made by the REIT should have been made
(an  "Underpayment"),  consistent  with  the  calculations  required  to be made
hereunder.  In the event that the REIT  exhausts or fails to pursue its remedies
pursuant to Section 6(f) hereof and the Employee  thereafter is required to make
a payment of any Excise Tax, the Employee  shall direct the  Accounting  Firm to
determine  the amount of the  Underpayment  that has  occurred and to submit its
determination  and  detailed  supporting  calculations  to both the REIT and the
Employee as promptly as possible.  Any such Underpayment  shall be promptly paid
by the REIT to, or for the benefit of, the Employee  within five  business  days
after receipt of such determination and calculations.

         (c) The REIT and the Employee  shall each provide the  Accounting  Firm
access to and copies of any books,  records and  documents in the  possession of
the  REIT or the  Employee,  as the  case may be,  reasonably  requested  by the
Accounting Firm, and otherwise  cooperate with the Accounting Firm in connection
with the preparation and issuance of the  determination  contemplated by Section
6(b) hereof. Any final  determination by the Accounting Firm as to the amount of
the Gross-Up Payment shall be binding upon the REIT and Employee.

         (d) The federal,  state and local income or other tax returns  filed by
the Employee (or any filing made by a consolidated  tax group which includes the
REIT) shall be prepared and filed on a basis  consistent with the  determination
of the  Accounting  Firm with respect to the Excise Tax payable by the Employee.
The Employee  shall make proper  payment of the amount of any Excise Tax, and at
the request of the REIT,  provide to the REIT true and correct  copies (with any
amendments) of his federal income tax return as filed with the Internal  Revenue
Service and  corresponding  state and local tax returns,  if relevant,  and such
other documents reasonably

                                       11

<PAGE>

requested by the REIT,  evidencing  such payment.  If prior to the filing of the
Employee's federal income tax return, or corresponding state or local return, if
relevant,  the Accounting  Firm  determines in good faith that the amount of the
Gross-Up Payment should be reduced, the Employee shall within five business days
pay to the REIT the amount of such reduction.

         (e) The fees and  expenses of the  Accounting  Firm for its services in
connection with the determinations and calculations contemplated by Section 6(b)
hereof shall be borne by the REIT.

         (f) In the event that the Internal  Revenue Service or any other taxing
authority  claims that any payment or benefit  received by the Employee from the
REIT  constitutes  an "excess  parachute  payment"  within  the  meaning of Code
Section 280G(b)(1), the Employee shall notify the REIT in writing of such claim.
Such  notification  shall be given as soon as practicable  but not later than 10
business  days after the Employee is informed in writing of such claim and shall
apprise the REIT of the nature of such claim and the date on which such claim is
requested  to be  paid.  The  Employee  shall  not pay such  claim  prior to the
expiration of the 30 day period  following the date on which the Employee  gives
such  notice  to the REIT (or such  shorter  period  ending on the date that any
payment of taxes with  respect to such claim is due).  If the REIT  notifies the
Employee in writing  prior to the  expiration  of such period that it desires to
contest  such  claim,  the  Employee  shall  (i) give  the REIT any  information
reasonably  requested by the REIT relating to such claim;  (ii) take such action
in connection with contesting such claim as the REIT shall reasonably request in
writing  from  time to  time,  including  without  limitation,  accepting  legal
representation  with respect to such claim by an attorney reasonably selected by
the REIT and reasonably  satisfactory to the Employee;  (iii) cooperate with the
REIT in good faith in order to effectively  contest such claim;  and (iv) permit
the REIT to participate  in any  proceedings  relating to such claim;  provided,
however,  that the REIT  shall  bear and pay  directly  all costs  and  expenses
(including,  but not limited to,  additional  interest and penalties and related
legal,  consulting  or other  similar  fees)  incurred in  connection  with such
contest and shall  indemnify  and hold the  Employee  harmless,  on an after-tax
basis,  for and against for any Excise Tax or income tax or other tax (including
interest  and  penalties  with  respect  thereto)  imposed  as a result  of such
representation and payment of costs and expenses.

         (g) The REIT shall control all  proceedings  taken in  connection  with
such  contest  and,  at its  sole  option,  may  pursue  or  forgo  any  and all
administrative  appeals,  proceedings,  hearings and conferences with the taxing
authority  in respect of such claim and may, at its sole option,  either  direct
the Employee to pay the tax claimed and sue for a refund or contest the claim in
any  permissible  manner and the Employee  agrees to prosecute such contest to a
determination  before  any  administrative  tribunal,  in  a  court  of  initial
jurisdiction and in one or more appellate  courts,  as the REIT shall determine;
provided,  however,  that if the REIT directs the Employee to pay such claim and
sue for a refund,  the REIT  shall  advance  the  amount of such  payment to the
Employee on an  interest-free  basis,  and shall indemnify and hold the Employee
harmless,  on an after tax basis,  from any  Excise Tax (or other tax  including
interest  and  penalties  with  respect  thereto)  imposed  with respect to such
advance or with respect to any imputed income with respect to such advance;  and
provided,  further,  that if the  Employee  is  required to extend the statue of
limitations  to enable the REIT to contest  such claim,  the  Employee may limit
this

                                       12

<PAGE>

extension  solely to such  contested  amount.  The REIT's control of the contest
shall be limited to issues  with  respect to which a Gross-Up  Payment  would be
payable  hereunder and the Employee  shall be entitled to settle or contest,  as
the case may be, any other issue raised by the Internal  Revenue  Service or any
other  taxing  authority.  In  addition,  no position may be taken nor any final
resolution  be agreed to by the REIT  without  the  Employee's  consent  if such
position or  resolution  could  reasonably  be expected to adversely  affect the
Employee unrelated to matters covered hereto.

         (h) If, after the receipt by Employee of an amount advanced by the REIT
in connection  with the contest of the Excise Tax claim,  the Employee  receives
any refund with respect to such claim,  the Employee  shall  promptly pay to the
REIT the amount of such  refund  (together  with any  interest  paid or credited
thereon after taxes applicable  thereto);  provided,  however,  if the amount of
that refund exceeds the amount advanced by the REIT the Employee may retain such
excess.  If, after the receipt by the Employee of an amount advanced by the REIT
in  connection  with an  Excise  Tax  claim,  a  determination  is made that the
Employee  shall not be entitled to any refund with respect to such claim and the
REIT does not notify the Employee in writing of its intent to contest the denial
of such refund prior to the expiration of 30 days after such  determination such
advance  shall be forgiven  and shall not be  required  to be repaid,  and shall
offset,  to the extent thereof,  the amount of Gross-Up  Payment  required to be
paid by the REIT to Employee pursuant to this Section 6.

7. The Employee's  Representations.  The Employee represents and warrants to the
REIT as follows:

         (a) The Employee is familiar  with and approves  the  covenants  not to
compete  and  not  to  solicit  set  forth  in  Section  4,  including,  without
limitation,  the  reasonableness  of the  length of time,  scope and  geographic
coverage of these covenants.

         (b)  Notwithstanding  any "what-if"  scenarios of the future results of
operations  and stock  prices of the REIT under  certain  assumptions  which the
parties may have discussed, the Employee has not relied on any such scenarios or
any forecasts or projections  provided by the REIT and understands  that neither
the REIT nor FWM has made any  representation or warranty  whatsoever  regarding
any forecasts or projections to the Employee.

8. Miscellaneous.

         (a)  Notices.  Any notice,  report or other  communication  required or
permitted  to be given  hereunder  shall be in writing and shall be deemed given
and  received on the date of delivery,  if  delivered  in person,  or three days
after mailing,  if mailed  first-class mail,  postage prepaid,  to the following
addresses:

                           If to the Employee:
                           4350 East-West Highway, Suite 400
                           Bethesda, Maryland 20814
                           Attn:    Stuart D. Halpert

                                       13

<PAGE>

                           If to the REIT:
                           4350 East-West Highway, Suite 400
                           Bethesda, Maryland 20814
                           Attn:    General Counsel

or to such other  address as any party  hereto may  designate by notice given as
herein provided.

         (b) Entire Agreement.  This Agreement contains the entire understanding
and sole and entire  agreement  between the parties  with respect to the subject
matter hereof,  and supersedes any and all prior  agreements,  negotiations  and
discussions  between the  parties  hereto  with  respect to the  subject  matter
covered   hereby.   Each   party  to  this   Agreement   acknowledges   that  no
representations,  inducements,  promises or agreements,  oral or otherwise, have
been made by any party,  or anyone acting on behalf of any party,  which are not
embodied herein, and that no other agreement, statement or promise not contained
in this Agreement shall be valid or binding.  This Agreement may not be modified
or amended by oral agreement,  but only by an agreement in writing signed by the
REIT and by the  Employee,  and which  states the intent of the parties to amend
this Agreement.

         (c)  Assignment  and Binding  Effect.  Neither this  Agreement  nor the
rights or obligations  hereunder  shall be assignable by the Employee.  The REIT
may assign this Agreement to any successor of the REIT, and upon such assignment
any such successor  shall be deemed  substituted for the REIT upon the terms and
subject to the conditions hereof, provided, that substantially all of the assets
of the REIT are also transferred to the same party.

         (d)  Successor  to the REIT.  The REIT will  require any  successor  or
assign  (whether  direct or indirect,  by  purchase,  merger,  consolidation  or
otherwise) to all or  substantially  all the business and/or assets of the REIT,
as the case may be, by agreement in form and substance  reasonably  satisfactory
to the Employee,  expressly,  absolutely and unconditionally to assume and agree
to perform  this  Agreement  in the same  manner and to the same extent that the
REIT would be required to perform it if no such  succession  or  assignment  had
taken  place.  Any  failure of the REIT to obtain  such  agreement  prior to the
effectiveness of any such succession or assignment shall be a material breach of
this Agreement.  This Agreement shall inure to the benefit of and be enforceable
by the Employee's personal and legal representatives, executors, administrators,
successors,  heirs, distributees,  devisees and legatees. If the Employee should
die while any  amounts are still  payable to the  Employee  hereunder,  all such
amounts,  unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to the Employee's devisee, legatee or other designee or,
if there be no such designee, to the Employee's estate.

         (e) Arbitration. The parties agree that any and all disputes (contract,
tort or  statutory,  whether  under  federal,  state or local law)  between  the
Employee and the REIT (including other REIT employees,  officers,  directors and
representatives)  arising out of the  Employee's  employment  with the REIT, the
termination of that  employment or this  Agreement,  shall be submitted to final
and  binding  arbitration.  The  arbitration  shall  take place in the County of
Montgomery, State of Maryland and may be compelled and enforced according to the
Maryland

                                       14

<PAGE>

Arbitration Act. Unless the parties  mutually agree  otherwise,  the arbitration
shall be conducted before the American Arbitration Association, according to its
Commercial  Arbitration Rules.  Judgment on the award the arbitrator renders may
be entered in any court having jurisdiction over the parties.  Arbitration shall
be initiated in accordance with the Commercial Arbitration Rules of the American
Arbitration Association.

         (f) Amendments;  Waivers. This Agreement may not be modified,  amended,
or  terminated  except by an  instrument  in writing,  approved by the Board and
signed by the  Employee  and the REIT.  By an  instrument  in writing  similarly
executed,  the Employee or the REIT may waive  compliance  by the other party or
parties  with any  provision of this  Agreement  that such other party was or is
obligated to comply with or perform;  provided,  however, that such waiver shall
not operate as a waiver of, or estoppel with respect to, any other or subsequent
failure.  No failure to exercise and no delay in exercising any right, remedy or
power  hereunder  shall preclude any other,  or further,  exercise of any right,
remedy or power provided herein or by law or equity.

         (g) Governing  Law. This  Agreement  shall be governed by and construed
and enforced in accordance  with the laws of the State of Maryland as applied to
agreements made and performed in Maryland by residents of Maryland.

         (h) Effectiveness.  This Agreement shall become effective on January 1,
2000.

         (i) Attorneys' Fees. In the event of any arbitration or legal action or
proceeding to enforce or interpret the provisions  hereof,  the prevailing party
shall be entitled to reasonable  attorneys' fees,  whether or not the proceeding
results in a final judgment.

         (j)   Counterparts.   This   Agreement   may  be  executed  in  several
counterparts,  each of which  shall be an  original,  but all of which  together
shall constitute one and the same agreement.

         (k) Effect of Headings. The section headings herein are for convenience
only and shall not affect the construction or interpretation of this Agreement.

         (l)  Severability.  The provisions of this Agreement are severable.  If
any  provision  of this  Agreement  shall  be held to be  invalid  or  otherwise
unenforceable  in  whole  or  in  part,  the  remainder  of  the  provisions  or
enforceable  parts hereof shall not be affected thereby and shall be enforced to
the fullest extent permitted by law.

                                       15

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have executed this Third Amended
and Restated Executive Employment Agreement as of the date first written above.

ATTEST:                                  FIRST WASHINGTON REALTY TRUST, INC.,
                                         a Maryland corporation

/s/ Jeffrey S. Distenfeld                  By:   /s/ William J. Wolfe
-------------------------------                  --------------------------
Jeffrey S. Distenfeld, Secretary                   William J. Wolfe
                                                   President

                                                     EMPLOYEE:

                                               /s/ Stuard D. Halpert
                                               -------------------------------
                                                    Stuart D. Halpert
                                                    5110 Cape Cod Court
                                                    Bethesda, Maryland  20816

                                       16

<PAGE>

                                                                         ANNEX A

                    SENIOR EXECUTIVE INCENTIVE BONUS PROGRAM
           APPENDIX TO THIRD AMENDED AND RESTATED EMPLOYMENT AGREEMENT

1. PURPOSE

         The senior executive  incentive bonus program (the "Incentive Plan") is
designed to provide meaningful quantitative  performance standards and to ensure
that the bonuses paid  hereunder  are  deductible  without  limit under  Section
162(m) of the Internal  Revenue Code of 1986, as amended (the  "Code"),  and the
regulations and interpretations promulgated thereunder.

2. THE COMMITTEE

         The  "Committee"  shall be the  Compensation  Committee of the Board or
another  committee  appointed by and serving at the  pleasure of the Board,  and
shall  consist of at least two  members  of the Board who shall each  qualify as
both "outside  directors"  under Section 162(m) of the Code and as "non-employee
directors" as defined under Rule 16b-3 promulgated under the Securities Exchange
Act of 1934,  as  amended.  The  Committee  shall have the sole  discretion  and
authority to administer and interpret the Incentive Plan.

3. BONUS DETERMINATIONS

         The Executive  may receive a bonus  payment  under the  Incentive  Plan
based upon the attainment of performance objectives which are established by the
Committee and relate to one or more of the following  company  performance goals
(the "Performance Goals"): funds from operations,  total return (measured as the
sum of the annual  dividend  plus  increases  in the market  price of the Common
Stock);  portfolio  growth  (measured as increases in the aggregate value of the
real  property in the REIT's  portfolio,  based upon the  original  cost of such
property);  stock price;  operating  income;  cost  reductions and savings;  and
earnings before any one or more of the following:  interest, taxes, depreciation
or amortization.

         Any bonus  payable to the Executive  under the Incentive  Plan shall be
based upon objectively  determinable bonus formulas that tie such bonuses to one
or more objective  performance criteria relating to the Performance Goals. Bonus
formulas  for each fiscal year  commencing  on or after  January 1, 1999 through
December 31, 2002 shall be established by the Committee no later than the latest
time permitted by Section 162(m) of the Code (generally, for performance periods
of one year or  more,  no  later  than 90 days  after  the  commencement  of the
performance  period). No bonuses shall be paid to the Executive unless and until
the Committee makes a certification in writing with respect to the attainment of
the performance  objectives as required by Section 162(m) of the Code.  Although
the Committee may in its sole discretion reduce a bonus payable to the Executive
pursuant to the applicable bonus formula, the Committee shall have no discretion
to  increase  the  amount  of the  Executive's  bonus as  determined  under  the
applicable bonus formula.

<PAGE>

         The target annual  incentive  bonus payable to the Executive  under the
Incentive  Plan with  respect to any fiscal year of the REIT shall be 50% of his
base  salary as in effect at the  start of the  applicable  year,  and shall not
exceed 100% of such base salary.

         The payment of a bonus to the  Executive  with respect to a performance
period shall be conditioned  upon the Executive's  employment by the REIT on the
last day of the performance period;  provided,  however,  that the Committee may
make exceptions to this requirement,  in its sole discretion, in the case of the
Executive's retirement, death or disability.

4. AMENDMENT AND TERMINATION

         The  Incentive  Plan  may be  amended  or  terminated  only by  written
agreement executed by the Employee and the REIT. Any amendments to the Incentive
Plan shall require  stockholder  approval only to the extent required by Section
162(m) of the Code.

5. STOCKHOLDER APPROVAL

         No bonuses shall be paid under the Incentive  Plan unless and until the
REIT's  stockholders  shall have approved the Incentive Plan and the Performance
Goals as required by Section  162(m) of the Code. So long as the Incentive  Plan
shall not have been previously  terminated by the Board, it shall be resubmitted
for  approval  by the REIT's  stockholders,  to the extent  required  by Section
162(m) of the Code,  if it is amended in any way which  materially  modifies the
Performance  Goals or increases  the maximum  bonus  payable under the Incentive
Plan.

                                        2

<PAGE>

                                                                         ANNEX B

LIST OF PROPERTIES AND ENTITIES  EMPLOYEE MAY CONTINUE TO OWN AND PARTICIPATE IN
THE OPERATION AND MANAGEMENT OF:

1. 727 15th Street

2. Properties currently owned by Mid-Atlantic Centers Limited Partnership

         a. Tarrytown Mall
         b. Quality Center

<PAGE>

                                                                         ANNEX C

                        INCENTIVE STOCK OPTION AGREEMENT

         THIS INCENTIVE STOCK OPTION AGREEMENT, dated as of May 1, 1998, is made
by and between First Washington Realty Trust, Inc., a Maryland  corporation (the
"Company"), and Stuart D. Halpert (the "Optionee"), an employee of the Company:

         WHEREAS,  the Company has adopted The Amended and  Restated  1994 Stock
Option Plan for Officers,  Directors and  Employees of First  Washington  Realty
Trust,  Inc., First Washington  Realty Limited  Partnership and First Washington
Management,  Inc., as amended from time to time (the "Plan"), for the benefit of
its eligible employees and directors; and

         WHEREAS,  the Company wishes to afford the Optionee the  opportunity to
purchase shares of its Common Stock; and

         WHEREAS,  the Company  wishes to carry out the Plan (the terms of which
are hereby incorporated by reference and made a part of this Agreement); and

         WHEREAS,  the Committee appointed to administer the Plan has determined
that it would be to the  advantage  and best  interest  of the  Company  and its
stockholders  to grant the  Incentive  Stock  Option  provided for herein to the
Optionee to enable the Company to obtain and retain the services of the Optionee
considered  essential to the long-range success of the Company and to provide an
additional  incentive  for the Optionee to further the growth,  development  and
financial  success of the Company by  rewarding  the  Optionee  for such growth,
development and financial success through the ownership of Company stock;

         NOW,  THEREFORE,  in  consideration  of  the  mutual  covenants  herein
contained and other good and valuable consideration,  receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

         The masculine  pronoun  shall include the feminine and neuter,  and the
singular the plural, unless the context clearly indicates otherwise. Capitalized
terms used herein and not otherwise  defined shall have the meanings ascribed to
them in the Plan. Whenever the following terms are used in this Agreement,  they
shall have the meaning  specified below unless the context clearly  indicates to
the contrary.

<PAGE>

SECTION 1.1 - EMPLOYMENT AGREEMENT

         "Employment  Agreement"  shall mean that  certain  Second  Amended  and
Restated  Employment  Agreement between the Optionee and the Company dated as of
May 1, 1998.

SECTION 1.2 - OFFICER

         "Officer"  shall  mean an officer  of the  Company,  as defined in Rule
16a-1(f) under the Exchange Act, as such Rule may be amended in the future.

SECTION 1.3 - OPTION

         "Option" shall mean the incentive stock option to purchase Common Stock
of the Company granted under this Agreement, which option is intended to qualify
as an "incentive stock option" under Section 422 of the Code.

SECTION 1.4 - SECRETARY

         "Secretary" shall mean the Secretary of the Company.

SECTION 1.5 - TERMINATION OF EMPLOYMENT

         "Termination   of   Employment"   shall   mean   the   time   when  the
employee-employer relationship between the Optionee and the Company or a Company
Subsidiary is terminated for any reason, with or without cause,  including,  but
not by way of  limitation,  a  termination  by  resignation,  discharge,  death,
permanent and total disability or retirement,  but excluding (i) any termination
where there is a  simultaneous  reemployment  or  continuing  employment  by the
Company or a Company Subsidiary and (ii) at the sole and absolute  discretion of
the  Committee,  a  termination  that  results in a temporary  severance  of the
employee-employer relationship that does not exceed one (1) year. The Committee,
in its sole and absolute  discretion,  shall  determine  the effect of all other
matters and questions relating to Termination of Employment,  including, but not
by way of  limitation,  all  questions of whether a particular  leave of absence
constitutes a Termination  of  Employment;  provided,  however,  that a leave of
absence shall constitute a Termination of Employment if, and to the extent that,
such leave of absence interrupts employment for purposes of Section 422(a)(2) of
the Code and the then  applicable  regulations  and rulings  under said Section.
Notwithstanding any other provision of the Plan, the right of the Company or any
Company  Subsidiary  to terminate  the  Optionee's  employment is subject to the
terms of the Employment Agreement.

                                      - 2 -

<PAGE>

                                   ARTICLE II
                                 GRANT OF OPTION

SECTION 2.1 - GRANT OF OPTION

         In partial consideration of the Optionee's past services to the Company
and/or the  Optionees'  agreement  to remain in the  employ of the  Company or a
Company Subsidiary  pursuant to the Employment  Agreement and for other good and
valuable consideration, provided that the Optionee is employed by the REIT as of
January 1, 2000, then the Company shall irrevocably  grant to the Optionee,  and
hereby does grant to the Optionee,  effective as of January 1, 2000,  the option
to  purchase  any part or all of an  aggregate  of  two-hundred  fifty  thousand
(250,000)  shares of its Common Stock upon the terms and conditions set forth in
this Agreement.

SECTION 2.2 - PURCHASE PRICE

         The purchase  price of the shares of stock  covered by the Option shall
be a price per share equal to the Fair Market  Value (as defined in the Plan) of
a share of Common Stock on January 1, 2000, without commission or other charge.

SECTION 2.3 - CONSIDERATION TO COMPANY

         In  consideration  of the granting of this Option by the  Company,  the
Optionee  agrees to render  faithful and efficient  services to the Company or a
Company Subsidiary, with such duties and responsibilities as the Company or such
Company Subsidiary shall from time to time prescribe, pursuant to the Employment
Agreement.  Nothing  in this  Agreement  or in the Plan  shall  confer  upon the
Optionee  any right to  continue  in the employ of the  Company  or any  Company
Subsidiary.

SECTION 2.4 - ADJUSTMENTS IN OPTION

         In the event that the  outstanding  shares of the stock  subject to the
Option are changed into or exchanged for a different number or kind of shares of
the  Company  or  other   securities   of  the  Company  by  reason  of  merger,
consolidation,   recapitalization,   reclassification,  stock  split  up,  stock
dividend or combination of shares,  the Committee  shall make an appropriate and
equitable adjustment in the number and kind of shares as to which the Option, or
portions thereof then unexercised,  shall be exercisable,  to the end that after
such event the Optionee's  proportionate  interest shall be maintained as before
the  occurrence  of such  event.  Such  adjustment  in the Option  shall be made
without change in the total price  applicable to the unexercised  portion of the
Option (except for any change in the aggregate price resulting from rounding-off
of share quantities or prices) and with any necessary  corresponding  adjustment
in the Option  price per share;  provided,  however,  that each such  adjustment
shall be made in such manner as not to  constitute a  "modification"  within the
meaning  of  Section  424(h)(3)  of the Code.  Any such  adjustment  made by the
Committee  shall be final and  binding  upon the  Optionee,  the Company and all
other interested persons.

                                      - 3 -

<PAGE>

                                   ARTICLE III
                            PERIOD OF EXERCISABILITY

SECTION 3.1 - COMMENCEMENT OF EXERCISABILITY

         (a)  Subject  to  Sections   3.4  and  5.6,  the  Option  shall  become
exercisable in three (3) cumulative installments as follows:

               (1) The first  installment  shall  consist  of  thirty-three  and
          one-third  percent  (33-  1/3%) of the  shares  covered  by the Option
          (rounded  down  to  the  nearest  one  (1)  share)  and  shall  become
          exercisable  on the first  anniversary  of the date that the Option is
          granted.

               (2) The second  installment  shall  consist of  thirty-three  and
          one-third  percent  (33-1/3%)  of the  shares  covered  by the  Option
          (rounded  down  to  the  nearest  one  (1)  share)  and  shall  become
          exercisable  on the second  anniversary of the date that the Option is
          granted.

               (3) The third  installment  shall  consist of the  balance of the
          shares covered by the Option and shall become exercisable on the third
          anniversary of the date that the Option is granted.

         (b) Except to the extent  expressly  provided  otherwise  elsewhere  in
writing,  no portion of the  Option  that is  unexercisable  at  Termination  of
Employment shall thereafter become exercisable.

SECTION 3.2 - DURATION OF EXERCISABILITY

         The installments provided for in Section 3.1 are cumulative.  Each such
installment  that  becomes  exercisable  pursuant  to Section  3.1 shall  remain
exercisable until it becomes unexercisable under Section 3.3.

SECTION 3.3 - EXPIRATION OF OPTION

         The Option may not be exercised to any extent by anyone after the first
to occur of the following events:

         (a) The  expiration of ten (10) years from the date that the Option was
granted; or

         (b) If the Optionee  owned (within the meaning of Section 424(d) of the
Code),  at the time the Option was granted,  more than ten percent  (10%) of the
total  combined  voting  power of all  classes  of stock of the  Company  or any
Company  Subsidiary,  the  expiration  of five (5) years  from the date that the
Option was granted.

                                      - 4 -

<PAGE>

SECTION 3.4 - DURATION OF EXERCISABILITY

          This  Option  shall be  exercisable  as to all of the  shares  covered
hereby,  notwithstanding  that  this  Option  may  not  yet  have  become  fully
exercisable   under   Section  3.1  (a)  in  the  event  the   employee-employer
relationship  between  the  Optionee  and the Company is  terminated  (i) by the
Company  pursuant to Section  2(c)(i) of the Employment  Agreement;  (ii) by the
Optionee  pursuant to Section  2(d) of the  Employment  Agreement;  (iii) by the
Optionee  pursuant  to Section  2(e) of the  Employment  Agreement;  (iv) by the
Optionee  pursuant to Section 2(f) of the  Employment  Agreement  (other than in
connection with Optionee's removal as a director for cause under the corporation
law of the  State  of  Maryland);  or (v) due to the fact  that  the  Employment
Agreement expires and its not renewed pursuant to Section 2(b) of the Employment
Agreement; provided, however, that this acceleration of exercisability shall not
take place if:

         (a) This Option becomes  unexercisable  under Section 3.3 prior to said
effective date; or

         (b) In  connection  with  such  an  event,  provision  is  made  for an
assumption  of this  Option or a  substitution  therefor  of a new  option by an
employer  corporation,  or a parent or subsidiary of such  corporation,  so that
such assumption or  substitution  complies with the provisions of Section 424(a)
of the Code; and

provided,  further,  that  nothing in this  Section  3.4 shall make this  Option
exercisable if it is otherwise unexercisable by reason of Section 5.6.

         The  Committee  may make such  determinations  and adopt such rules and
conditions as it, in its absolute  discretion,  deems  appropriate in connection
with  such  acceleration  of  exercisability,  including,  but  not  by  way  of
limitation,  provisions  to  ensure  that any such  acceleration  and  resulting
exercise  shall  be  conditioned  upon  the  consummation  of  the  contemplated
corporate  transaction,   and  terminations  regarding  whether  provisions  for
assumption or substitution have been made as defined in subsection (b) above.

SECTION 3.5 - TERMINATION OF EMPLOYMENT PRIOR TO JANUARY 1, 2000

         Notwithstanding  anything  to the  contrary  contained  herein,  if the
Optionee's employment with the Company is terminated in an Early Termination (as
defined in the Employment  Agreement) prior to January 1, 2000, then the Company
shall irrevocably grant to the Optionee,  and hereby does grant to the Optionee,
effective  as of January 1, 2000,  the Option to purchase any part or all of the
250,000 shares of Common Stock,  and this Option shall become fully  exercisable
as of the date of grant and shall expire on December 31, 2002.

SECTION 3.6 - SPECIAL TAX CONSEQUENCES

         (a) The Optionee  acknowledges  that,  to the extent that the aggregate
fair  market  value of stock with  respect to which  "incentive  stock  options"
(within the meaning of Section  422 of the Code,  but without  regard to Section
422(d) of the Code), including the Option, are

                                      - 5 -

<PAGE>

exercisable  for the first time by the Optionee  during any calendar year (under
the Plan and all other  incentive  stock  option  plans of the  Company  and any
Company  Subsidiary)  exceeds  $100,000,  such  options  shall be treated as not
qualifying  under  Section  422 of the  Code but  rather  shall  be  treated  as
non-qualified  options to the extent  required by Section  422 of the Code.  The
Optionee further  acknowledges that the rule set forth in the preceding sentence
shall be applied by taking  options into account in the order in which they were
granted.  For purposes of these  rules,  the fair market value of stock shall be
determined as of the time the option with respect to such stock is granted.

         (b) The Optionee  acknowledges that if any portion of the Option is not
exercised within the applicable time period specified in Section 422 of the Code
following a Termination of Employment, then such portion shall be treated as not
qualifying  under  Section  422 of the  Code but  rather  shall  be  treated  as
non-qualified options to the extent required under Section 422 of the Code.

                                   ARTICLE IV
                               EXERCISE OF OPTION

SECTION 4.1 - PERSON ELIGIBLE TO EXERCISE

         During the lifetime of the  Optionee,  only he or his guardian or legal
representative  may exercise the Option or any portion thereof.  After the death
of the Optionee,  any  exercisable  portion of the Option may, prior to the time
when the Option  becomes  unexercisable  under  Section 3.3, be exercised by his
Beneficiary.

SECTION 4.2 - PARTIAL EXERCISE

         Any exercisable installment of the Option or the entire Option, if then
wholly  exercisable,  may be  exercised in whole or in part at any time prior to
the time when the Option or portion thereof becomes  unexercisable under Section
3.3;  provided,  however,  that each partial exercise shall be for not less than
1,000 shares (or the minimum  installment set forth in Section 3.1, if a smaller
number of shares) and shall be for whole shares only.

SECTION 4.3 - MANNER OF EXERCISE

         The Option, or any exercisable  portion thereof,  may be exercised only
on the first  business  day of a calendar  month and solely by  delivery  to the
Secretary  or his  office  of all of the  following  prior to the time  when the
Option or such portion becomes unexercisable under Section 3.3:

         (a) Notice in writing  signed by the  Optionee or the other person then
entitled to exercise  the Option or portion,  stating that the Option or portion
is  thereby   exercised,   such  notice  complying  with  all  applicable  rules
established by the Committee; and

                                      - 6 -

<PAGE>

         (b) Full  payment for the shares  with  respect to which such Option or
portion thereof is exercised, by:

               (1) Cash or check; or

               (2)  With  the  consent  of  the  Committee,  (A)  shares  of the
          Company's  Common  Stock  owned  by the  Optionee  duly  endorsed  for
          transfer to the Company or (B) shares of the  Company's  Common  Stock
          issuable to the  Optionee  upon  exercise  of the Option,  with a fair
          market  value (as  determined  under  Section 1.15 of the Plan) on the
          date of Option  exercise equal to the aggregate  purchase price of the
          shares with respect to which such Option or portion is exercised; or

               (3) With the consent of the  Committee,  any  combination  of the
          consideration  provided in the foregoing  subparagraphs (1) and (2) or
          through  delivery of property of any kind which  constitutes  good and
          valuable  consideration,  consistent  with the provisions of the Plan;
          and

         (c) A  bona  fide  written  representation  and  agreement,  in a  form
satisfactory  to the  Committee,  signed by the  Optionee  or other  person then
entitled to exercise such Option or portion, stating that:

               (1) the shares of stock are being  acquired  for his own account,
          for investment and without any present  intention of  distributing  or
          reselling said shares or any of them except as may be permitted  under
          the  Securities  Act  and  then   applicable   rules  and  regulations
          thereunder; and

               (2) that the Optionee or other  person then  entitled to exercise
          such Option or portion will indemnify the Company  against and hold it
          free  and  harmless  from  any  loss,  damage,  expense  or  liability
          resulting to the Company if any sale or  distribution of the shares by
          such person is contrary to the  representation  and agreement referred
          to above. The Committee may, in its absolute discretion, take whatever
          additional  actions it deems  appropriate to insure the observance and
          performance  of  such  representation  and  agreement  and  to  effect
          compliance  with the  Securities  Act and any other  federal  or state
          securities laws or regulations. Without limiting the generality of the
          foregoing,  the Committee may require an opinion of counsel acceptable
          to it to the effect that any subsequent transfer of shares acquired on
          an Option  exercise does not violate the Securities Act, and may issue
          stop-transfer orders covering such shares. Share certificates

                                      - 7 -

<PAGE>

                  evidencing  stock issued on exercise of this Option shall bear
                  an  appropriate  legend  referring to the  provisions  of this
                  subsection  (c)  and  the  agreements   herein.   The  written
                  representation and agreement referred to in the first sentence
                  of this subsection (c) shall,  however, not be required if the
                  shares  to be  issued  pursuant  to such  exercise  have  been
                  registered under the Securities Act, and such  registration is
                  then effective in respect of such shares; and

                  (d) In the event  the  Option or  portion  shall be  exercised
         pursuant  to  Section  4.1 by any  person  or  persons  other  than the
         Optionee,  appropriate  proof of the right of such person or persons to
         exercise the Option.

SECTION 4.4 - CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES

         The shares of stock deliverable upon the exercise of the Option, or any
portion  thereof,  may be either  previously  authorized but unissued  shares or
issued shares that have then been  reacquired by the Company.  Such shares shall
be fully paid and  nonassessable.  The Company shall not be required to issue or
deliver any certificate or  certificates  for shares of stock purchased upon the
exercise of the Option or portion  thereof  prior to  fulfillment  of all of the
following conditions:

               (a)  The  admission  of  such  shares  to  listing  on all  stock
          exchanges on which such class of stock is then listed; and

               (b) The completion of any registration or other  qualification of
          such  shares  under  any  state or  federal  law or under  rulings  or
          regulations of the Securities and Exchange  Commission or of any other
          governmental  regulatory  body, that the Committee  shall, in its sole
          and absolute discretion, deem necessary or advisable; and

               (c) The  obtaining  of any approval or other  clearance  from any
          state or federal  governmental agency that the Committee shall, in its
          sole and absolute discretion,  determine to be necessary or advisable;
          and

               (d) The payment to the Company (or other employer corporation) of
          all  amounts  that,  under  federal,  state  or local  tax law,  it is
          required to withhold upon exercise of the Option; and

               (e) The lapse of such  reasonable  period of time  following  the
          exercise  of the  Option  as the  Committee  may  from  time  to  time
          establish for reasons of administrative convenience.

                                      - 8 -

<PAGE>

SECTION 4.5 - RIGHTS AS STOCKHOLDER

         The  holder of the  Option  shall not be, nor have any of the rights or
privileges of, a stockholder of the Company in respect of any shares purchasable
upon the  exercise  of any part of the  Option  unless  and  until  certificates
representing such shares shall have been issued by the Company to such holder.

SECTION 4.6 - OWNERSHIP AND TRANSFER RESTRICTIONS

         Shares  acquired  through the exercise of an Option shall be subject to
the  restrictions  on ownership and transfer set forth in the Company's  Amended
and Restated Charter, as in effect from time to time.

SECTION 4.7 - RESTRICTIONS ON EXERCISE OF OPTION

         An Option is not  exercisable  if the  exercise  of such  Option  would
likely result in any of the following:

               (a) the Optionee's  ownership of Capital Stock being in violation
          of the Stock  Ownership  Limit set forth in the Company's  Amended and
          Restated Charter, as in effect from time to time.

               (b) income to the Company that could impair the Company's  status
          as a real estate investment  trust,  within the meaning of Section 856
          through 860 of the Code; or

               (c) a transfer,  at any one time,  of more than  one-tenth of one
          percent (0.1%) (measured in value or in number of shares, whichever is
          more  restrictive)  of the  Company's  total  Capital  Stock  from the
          Company to First  Washington  Management,  Inc. or to the  Partnership
          pursuant to Section 5.5(a) or 5.6(a)(i) of the Plan, respectively.

Notwithstanding  any other provision of this Agreement,  the Optionee shall have
no rights under this  Agreement  or the Plan to acquire  Common Stock that would
otherwise be prohibited under the Company's Amended and Restated Charter,  as in
effect from time to time.

                                    ARTICLE V
                                OTHER PROVISIONS

SECTION 5.1 - ADMINISTRATION

         The  Committee  shall  have the  power to  interpret  the Plan and this
Agreement  and to adopt such rules for the  administration,  interpretation  and
application of the Plan as are  consistent  therewith and to interpret or revoke
any such rules.  All actions taken and all  interpretations  and  determinations
made by the Committee in good faith shall be final and

                                      - 9 -

<PAGE>

binding upon the  Optionee,  the Company and all other  interested  persons.  No
member of the Committee shall be personally liable for any action, determination
or interpretation made in good faith with respect to the Plan or the Option.

SECTION 5.2 - OPTION NOT TRANSFERABLE

         Neither the Option nor any  interest or right  therein or part  thereof
shall be liable for the debts,  contracts or  engagements of the Optionee or his
successors  in  interest  or  shall  be  subject  to  disposition  by  transfer,
alienation,  anticipation,  pledge,  encumbrance,  assignment or any other means
whether such  disposition  be voluntary or involuntary or by operation of law by
judgment,  levy,  attachment,  garnishment  or  any  other  legal  or  equitable
proceedings (including bankruptcy),  and any attempted disposition thereof shall
be null and void and of no effect; provided, however, that, subject to the Stock
Ownership Limit,  this Section 5.2 shall not prevent transfers by will or by the
applicable laws of descent and distribution.

SECTION 5.3 - SHARES TO BE RESERVED

         The Company  shall at all times  during the term of the Option  reserve
and keep  available  such  number of shares  of stock as will be  sufficient  to
satisfy the requirements of this Agreement.

SECTION 5.4 - NOTICES

         Any  notice  to be  given  by the  Optionee  under  the  terms  of this
Agreement  to the  Company  shall be  addressed  to the  Company  in care of its
Secretary,  and any notice to be given to the Optionee shall be addressed to him
at the address given beneath his signature hereto. By a notice given pursuant to
this Section 5.4, either party may hereafter  designate a different  address for
notices  to be given to him.  Any  notice  that is  required  to be given to the
Optionee  shall,  if the Optionee is then  deceased,  be given to the Optionee's
personal  representative  if such  representative  has  previously  informed the
Company of his status and address by written  notice under this Section 5.4. Any
notice shall be deemed duly given when enclosed in a properly sealed envelope or
wrapper  addressed as  aforesaid,  deposited  (with  postage  prepaid) in a post
office or branch post office  regularly  maintained  by the United States Postal
Service.

SECTION 5.5 - TITLES

         Titles are provided herein for convenience only and are not to serve as
a basis for interpretation or construction of this Agreement.

SECTION 5.6 - STOCKHOLDER APPROVAL

         The Plan will be submitted for approval by the  Company's  stockholders
within twelve (12) months after the date that the Plan was initially  adopted by
the Board. This Option may not be exercised to any extent by anyone prior to the
time when the Plan is approved by the stockholders, and if such approval has not
been obtained by the end of said twelve-month period,

                                     - 10 -

<PAGE>

this Option shall  thereupon  be canceled and become null and void.  The Company
shall take such actions as may be necessary to satisfy the  requirements of Rule
16b-3(b).

SECTION 5.7 - NOTIFICATION OF DISPOSITION

         The Optionee shall give prompt notice to the Company of any disposition
or other  transfer of any shares of stock  acquired under this Agreement if such
disposition  or  transfer  is made (a)  within  two (2)  years  from the date of
granting the Option with respect to such shares or (b) within one (1) year after
the transfer of such shares to him.  Such notice shall  specify the date of such
disposition or other transfer and the amount realized,  in cash, other property,
assumption  of  indebtedness  or other  consideration,  by the  Optionee in such
disposition or other transfer.

SECTION 5.8 - GOVERNING LAW

         This Agreement  shall be  administered,  interpreted and enforced under
the internal laws of the State of Maryland  without  regard to conflicts of laws
thereof.

                                     - 11 -

<PAGE>

SECTION 5.9 - CONFORMITY TO SECURITIES LAWS

         The Optionee  acknowledges  that the Plan is intended to conform to the
extent  necessary with all provisions of the Securities Act and the Exchange Act
and any and all regulations and rules promulgated by the Securities and Exchange
Commission thereunder,  including without limitation Rule 16b-3. Notwithstanding
anything herein to the contrary, the Plan shall be administered,  and the Option
is  granted  and may be  exercised,  only in such a manner as to conform to such
laws, rules and regulations. To the extent permitted by applicable law, the Plan
and this Agreement shall be deemed amended to the extent necessary to conform to
such laws, rules and regulations.

         IN WITNESS  WHEREOF,  this Agreement has been executed and delivered by
the parties hereto.

                                     FIRST WASHINGTON REALTY TRUST, INC.,
                                     a Maryland corporation

                                     By:_______________________________________
                                        Title:  Secretary

------------------------------------
             Optionee

------------------------------------

------------------------------------
             Address

Optionee's Taxpayer Identification Number:

------------------------------------------

                                     - 12 -

<PAGE>

                                                                         ANNEX D

                           RESTRICTED STOCK AGREEMENT

         THIS RESTRICTED  STOCK  AGREEMENT,  dated as of May 1, 1998, is made by
and between First  Washington  Realty Trust,  Inc., a Maryland  corporation (the
"Company"), and Stuart D. Halpert, an officer of the Company (the "Employee"):

         WHEREAS,  the Company has established the First Washington  Trust, Inc.
Restricted Stock Plan, as amended from time to time, (the "Plan"); and

         WHEREAS,  the Company  wishes to carry out the Plan (the terms of which
are hereby incorporated by reference and made a part of this Agreement); and

         WHEREAS,  the Plan provides for the issuance of shares of the Company's
Common  Stock (as  defined  herein)  subject  to  certain  restrictions  thereon
(hereinafter referred to as the "Restricted Stock"); and

         WHEREAS, the Compensation Committee of the Company's Board of Directors
(the  "Committee"),  has determined that it would be to the advantage and in the
best interest of the Company and its stockholders to issue certain shares of the
Company's  Common Stock,  par value $0.01 per share (the "Common  Stock") to the
Employee in partial  consideration  of past services to the Company and/or as an
incentive to remain as an employee of the Company,  subject to the  restrictions
set forth herein, and has advised the Company thereof.

         NOW,  THEREFORE,  in  consideration  of  the  mutual  covenants  herein
contained and other good and valuable consideration,  receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

SECTION 1.1  -"EMPLOYMENT  AGREEMENT" shall mean that certain Second Amended and
Restated Executive  Employment  Agreement between Employee and the Company dated
as of May 1, 1998.

SECTION  1.2 - "FAIR  MARKET  VALUE" of a share of the  Company's  stock as of a
given date shall be: (i) the closing  price of the Common  Stock on the New York
Stock Exchange on such date, or, if shares were not traded on such date, then on
the next  preceding  trading day during which a sale  occurred;  or (ii) if such
stock is not  traded on an  exchange  but is  quoted  on  Nasdaq or a  successor
quotation  system,  (1) the last sales  price (if the stock is then  listed as a
National  Market Issue under the NASD  National  Market  System) or (2) the mean
between the closing representative bid and asked prices (in all other cases) for
the  stock on the day  previous  to such  date as  reported  by  Nasdaq  or such
successor  quotation system; or (iii) if such stock is not publicly traded on an
exchange  and not quoted on Nasdaq or a  successor  quotation  system,  the mean
between the

<PAGE>

closing bid and asked prices for the stock, on the day previous to such date, as
determined in good faith by the Committee; or (iv) if the Company's stock is not
publicly  traded,  the fair market value  established by the Committee acting in
good faith. In determining  the Fair Market Value of the Company's  Common Stock
under  Paragraph  (i) of this Section 1.2, the Committee may rely on the closing
price  as  reported  in the  New  York  Stock  Exchange  composite  transactions
published in the Wall Street Journal.

SECTION 1.3 - "RESTRICTED  STOCK" shall mean Common Stock of the Company  issued
under this Agreement and subject to the Restrictions imposed hereunder.

SECTION 1.4 - "RESTRICTIONS"  shall mean the reacquisition  and  transferability
restrictions imposed upon Restricted Stock under this Agreement.

SECTION  1.5 - "RULE  16B-3"  shall  mean  that  certain  Rule  16b-3  under the
Securities  Exchange Act of 1934, as amended (the "Exchange  Act"), as such Rule
may be amended in the future.

                                   ARTICLE II
                          ISSUANCE OF RESTRICTED STOCK

SECTION  2.1 -  ISSUANCE  OF  RESTRICTED  STOCK.  In  partial  consideration  of
Employee's past services to the Company and/or Employee's agreement to remain in
the employ of the Company  pursuant to the  Employment  Agreement  and for other
good and valuable  consideration  which the Committee has determined to be equal
to the par value of its Common Stock  provided  that the Employee is employed by
the REIT as of January 1, 2000,  then the Company  shall issue to the  Employee,
and hereby  does issue to the  Employee,  effective  as of January 1, 2000,  one
hundred fifty thousand  (150,000)  shares of its Common Stock upon the terms and
conditions set forth in this Agreement.

                                   ARTICLE III
                                  RESTRICTIONS

SECTION 3.1 - REACQUISITION  OF RESTRICTED  STOCK;  ACCELERATION;  VESTING.  (a)
Reacquisition. All shares of Restricted Stock issued to the Employee pursuant to
Section 2.1 are initially subject to reacquisition by the Company immediately if
the  employee-employer  relationship  between  the  Employee  and the Company is
terminated:  (i) by the Company  pursuant to Section  2(c)(ii) of the Employment
Agreement  or (ii) by Employee  other than (A)  pursuant to Section  2(d) of the
Employment  Agreement,  (B) pursuant to Section 2(e) of the Employment Agreement
or (C)  pursuant  to Section  2(f) of the  Employment  Agreement  (other than in
connection with Employee's removal as a director for cause under the corporation
laws of the  State  of  Maryland),  or (D) due to the fact  that the  Employment
Agreement expired and was not renewed pursuant to Section 2(b) of the Employment
Agreement.  Following  such a  reacquisition  by the Company,  the Company shall
promptly  pay to the  Employee an amount  equal to the product of $.01 times the
number of shares of  Restricted  Stock  reacquired.  The  restriction  that such
shares of

                                        2

<PAGE>

Restricted  Stock be subject to  reacquisition by the Company shall not apply to
any "Vested Shares" held by the Employee.

         (b)  Acceleration.  All shares of  Restricted  Stock shall  immediately
fully vest and all Restrictions  with respect to such shares of Restricted Stock
shall  immediately  expire if the  employee-employer  relationship  between  the
Employee and the Company is  terminated  (i) by the Company  pursuant to Section
2(c)(i) of the Employment  Agreement;  (ii) by the Employee  pursuant to Section
2(d) of the Employment Agreement; (iii) by the Employee pursuant to Section 2(e)
of the Employment Agreement; or (iv) by the Employee pursuant to Section 2(f) of
the Employment  Agreement (other than in connection with Employee's removal as a
director for cause under the corporation  law of the State of Maryland);  or (v)
due to the  fact  that  the  Employment  Agreement  expires  and is not  renewed
pursuant to Section 2(b) of the Employment Agreement.

         (c)  Vesting.  The  shares of  Restricted  Stock  shall  vest,  and all
Restrictions  with respect to such shares shall expire,  in accordance  with the
schedule set forth below.  "Vested  Shares"  shall mean that number of shares of
Restricted Stock which have vested and are no longer subject to Restrictions.

                                       Number of         Aggregate Number of
          Vesting Date               Vested Shares           Vested Shares
          ------------               -------------           -------------
        January 1, 2001                  25,000                 25,000
        January 1, 2002                  50,000                 75,000
        January 1, 2003                  75,000                150,000

SECTION 3.2 - LEGEND. (a) Certificates  representing  shares of Restricted Stock
issued pursuant to this Agreement shall,  until all  restrictions  lapse and new
certificates are issued pursuant to Section 3.3, bear the following legend:

         "THE SECURITIES  REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
         VESTING REQUIREMENTS AND MAY BE SUBJECT TO REACQUISITION BY THE COMPANY
         UNDER THE  TERMS OF THAT  CERTAIN  RESTRICTED  STOCK  AGREEMENT  BY AND
         BETWEEN FIRST  WASHINGTON  REALTY TRUST,  INC. (THE  "COMPANY") AND THE
         HOLDER  OF  THE  SECURITIES.  PRIOR  TO  VESTING  OF  OWNERSHIP  IN THE
         SECURITIES,   THEY  MAY  NOT  BE,  DIRECTLY  OR  INDIRECTLY,   OFFERED,
         TRANSFERRED,   SOLD,  ASSIGNED,  PLEDGED,   HYPOTHECATED  OR  OTHERWISE
         DISPOSED  OF UNDER ANY  CIRCUMSTANCES.  COPIES OF THE ABOVE  REFERENCED
         AGREEMENT  ARE ON FILE AT THE OFFICES OF THE COMPANY AT 4350  EAST-WEST
         HIGHWAY, SUITE 400, BETHESDA, MARYLAND 20814."

         (b) Unless  such  shares  shall  have been  registered  pursuant  to an
effective  registration  statement under the Securities Act of 1933, as amended,
certificates representing

                                        3

<PAGE>

shares of Restricted Stock issued pursuant to this Agreement shall also bear the
following legend :

         "THE  SECURITIES   REPRESENTED  BY  THIS   CERTIFICATE  HAVE  NOT  BEEN
         REGISTERED   UNDER  THE   SECURITIES  ACT  OF  1933,  AS  AMENDED  (THE
         "SECURITIES   ACT").   NO  SALE,   HYPOTHECATION,   TRANSFER  OR  OTHER
         DISPOSITION OF THESE  SECURITIES MAY BE MADE UNLESS EITHER (A) PURSUANT
         TO AN EFFECTIVE  REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (B)
         PURSUANT TO AN  EXEMPTION  FROM THE  REGISTRATION  REQUIREMENTS  OF THE
         SECURITIES ACT."

SECTION  3.3 -  LAPSE  OF  RESTRICTIONS.  Upon  the  vesting  of the  shares  of
Restricted  Stock as provided in Section  3.1 and  subject to Section  4.3,  the
Company  shall cause new  certificates  to be issued with respect to such Vested
Shares and delivered to the Employee or his legal representative,  free from the
legend  provided for in Section 3.2(a) and any of the other  Restrictions.  Such
Vested Shares shall cease to be considered Restricted Stock subject to the terms
and conditions of this Agreement.

SECTION   3.4  -   TERMINATION   OF   EMPLOYMENT   PRIOR  TO  JANUARY  1,  2000.
Notwithstanding  anything to the contrary  contained  herein,  if the Employee's
employment with the Company is terminated in an Early Termination (as defined in
the Employment Agreement) prior to January 1, 2000, then the Company shall issue
to the Employee, and hereby does issue to the Employee, effective as of the date
immediately  prior to such Early  Termination,  the 150,000 shares of Restricted
Stock,  and all of such shares of Restricted  Stock shall be fully vested on the
date of such issuance.

                                   ARTICLE IV
                                  MISCELLANEOUS

SECTION 4.1 -  ADMINISTRATION.  The Committee  shall have the power to interpret
the Plan,  this Agreement and all other documents  relating to Restricted  Stock
and to adopt such rules for the  administration,  interpretation and application
of this Agreement as are consistent  herewith and to interpret,  amend or revoke
any such rules.  All actions taken and all  interpretations  and  determinations
made by the  Committee  in good  faith  shall  be  final  and  binding  upon the
Employee,  the  Company  and all  other  interested  persons.  No  member of the
Committee  shall  be  personally   liable  for  any  action,   determination  or
interpretation  made in good  faith with  respect to the Plan or the  Restricted
Stock and all members of the Committee  shall be fully  protected by the Company
in respect to any such action, determination or interpretation.  The Board shall
have no right to exercise any of the rights or duties of the Committee under the
Plan and this Agreement.

SECTION 4.2 - RESTRICTED  STOCK NOT  TRANSFERABLE.  No  Restricted  Stock or any
interest  or right  therein  or part  thereof  shall be  liable  for the  debts,
contracts or  engagements of the Employee or his successors in interest or shall
be  subject  to  disposition  by  transfer,  alienation,  anticipation,  pledge,
encumbrance, assignment or any other means whether such disposition be voluntary
or involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal

                                        4

<PAGE>

or equitable proceedings  (including bankruptcy) unless and until any such share
of Restricted  Stock is a Vested Share,  and any attempted  disposition  thereof
prior to such  vesting,  shall be null  and  void  and of no  effect;  provided,
however,  that  this  Section  4.2  shall not  prevent  transfers  by will or by
applicable laws of descent and distribution.

SECTION 4.3 - CONDITIONS  TO ISSUANCE OF STOCK  CERTIFICATES.  The Company shall
not be required to issue or deliver any certificate or  certificates  for shares
of stock pursuant to this Agreement prior to fulfillment of all of the following
conditions:

         (a) The  admission of such shares to listing on all stock  exchanges on
which such class of stock is then listed; and

         (b) The completion of any  registration or other  qualification of such
shares  under any state or Federal law or under  rulings or  regulations  of the
Securities and Exchange Commission or of any other governmental regulatory body,
which the  Committee  shall,  in its  absolute  discretion,  deem  necessary  or
advisable; and

         (c) The obtaining of any approval or other  clearance from any state or
Federal   governmental  agency  which  the  Committee  shall,  in  its  absolute
discretion, determine to be necessary or advisable; and

         (d) The payment by the Employee of all amounts required to be withheld,
under  federal,  state and  local tax laws,  with  respect  to the  issuance  of
Restricted Stock and/or the lapse or removal of any of the Restrictions; and

         (e) The lapse of such  reasonable  period of time as the  Committee may
from time to time establish for reasons of administrative convenience.

SECTION 4.4 - ESCROW.  The  Secretary of the Company or such other escrow holder
as the Committee may appoint shall retain physical  custody of the  certificates
representing Restricted Stock until all of the Restrictions expire or shall have
been  removed;  provided,  however,  that in no event shall the Employee  retain
physical  custody of any  certificates  representing  Restricted Stock issued to
him.

SECTION 4.5 - NOTICES.  Any notice to be given under the terms of this Agreement
to the Company shall be addressed to the Company in care of its  Secretary,  and
any notice to be given to the Employee  shall be addressed to him at the address
given beneath his signature  hereto.  By a notice given pursuant to this Section
4.5, either party may hereafter  designate a different address for notices to be
given to it or him.  Any notice  which is required  to be given to the  Employee
shall,  if the Employee is then deceased,  be given to the  Employee's  personal
representative if such representative has previously informed the Company of his
status and address by written  notice  under this  Section 4.5. Any notice shall
have been  deemed  duly given when  enclosed  in a properly  sealed  envelope or
wrapper  addressed as  aforesaid,  deposited  (with  postage  prepaid) in a post
office or branch post office  regularly  maintained  by the United States Postal
Service.

                                        5

<PAGE>

SECTION 4.6 - RIGHTS AS  STOCKHOLDER.  Upon delivery of the shares of Restricted
Stock from the escrow  holder  pursuant to Section 4.4, the Employee  shall have
all the rights of a  stockholder  with  respect to said  shares,  subject to the
restrictions  herein,  including the right to vote the shares and to receive all
dividends or other distributions paid or made with respect to the shares.

SECTION 4.7 - TITLES.  Titles are provided herein for  convenience  only and are
not to serve as a basis for interpretation or construction of this Agreement.

SECTION 4.8 -  CONFORMITY  TO  SECURITIES  LAWS.  This  Agreement is intended to
conform to the extent  necessary  with all  provisions of the  Securities Act of
1933,  as amended,  and the Exchange Act and any and all  regulations  and rules
promulgated  by the  Securities and Exchange  Commission  thereunder,  including
without limitation Rule 16b-3.  Notwithstanding anything herein to the contrary,
this Agreement shall be administered,  and the Restricted Stock shall be issued,
only in such a manner as to conform to such laws, rules and regulations.  To the
extent  permitted by applicable  law, this  Agreement and the  Restricted  Stock
issued  hereunder shall be deemed amended to the extent  necessary to conform to
such laws, rules and regulations.

SECTION  4.9 -  AMENDMENT.  This  Agreement  may be  amended  only by a  writing
executed by the parties  hereto  which  specifically  states that it is amending
this Agreement.

SECTION 4.10 - APPROVAL OF PLAN BY STOCKHOLDERS.  The Plan will be submitted for
the approval of the Company's  stockholders  within twelve months after the date
of the Board's initial  adoption of the Plan.  Restricted Stock issued following
the adoption of the Plan but prior to such  stockholder  approval shall not vest
prior to the time when the Plan is approved by the stockholders;  provided, that
if such  approval has not been obtained at the end of said twelve- month period,
all  Restricted  Stock issued during such time period under the Agreement  shall
thereupon  be cancelled  and become null and void.  The Company and the Employee
shall take such action  with  respect to the Plan and this  Agreement  as may be
necessary to satisfy the requirements of Rule 16b-3(b).

SECTION 4.11 - TAX WITHHOLDING. The Company's obligation (i) to issue or deliver
to the Employee any certificate or certificates for unrestricted shares of stock
or (ii) to pay to the Employee  any  dividends  or make any  distributions  with
respect to the Restricted Stock, is expressly  conditioned upon receipt from the
Employee, on or prior to the date the same is required to be withheld, of:

         (a) Full  payment  (in cash or by  check)  of any  amount  that must be
withheld by the Company for federal, state and/or local tax purposes; or

         (b)  Subject to the  Committee's  consent  and  Section  4.10(c),  full
payment by  delivery  to the  Company of  unrestricted  shares of the  Company's
Common Stock  previously owned by the Employee duly endorsed for transfer to the
Company by the Employee  with an aggregate  Fair Market  Value  (determined,  as
applicable, as of the date of the lapse of the restrictions or vesting, or as of
the date of the  distribution)  equal to the amount that must be withheld by the
Company for federal, state and/or local tax purposes; or

                                        6

<PAGE>

         (c) With respect to the withholding obligation for shares of Restricted
Stock  that  become  unrestricted  shares  of stock as of a  certain  date  (the
"Vesting  Date"),   subject  to  the  Committee's  consent  and  to  the  timing
requirements set forth in this Section 4.10(c), full payment by retention by the
Company  of  a  portion  of  such  shares  of  Restricted   Stock  which  become
unrestricted or vested with an aggregate Fair Market Value (determined as of the
Vesting  Date)  equal to the amount  that must be  withheld  by the  Company for
federal, state and/or local tax purposes; or

         (d) Subject to the  Committee's  consent,  any  combination of payments
provided for in the foregoing subsections (a), (b) or (c).

SECTION 4.12 - CHANGES IN COMPANY'S  SHARES.  In the event that the  outstanding
shares of Common  Stock of the Company are  hereafter  changed into or exchanged
for a different number or kind of shares or other securities of the Company,  or
of another  corporation,  by reason of  reorganization,  merger,  consolidation,
recapitalization,  reclassification,  or the  number of shares is  increased  or
decreased by reason of a stock split-up,  stock dividend,  combination of shares
or any other  increase or decrease in the number of such shares of Common  Stock
effected  without receipt of consideration  by the Company  (provided,  however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of  consideration"),  the Committee shall
make  appropriate  adjustments  in the number  and kind of shares of  Restricted
Stock which may be issued.

SECTION 4.13 - GOVERNING LAW. The laws of the State of Maryland shall govern the
interpretation,  validity,  administration,  enforcement  and performance of the
terms of this  Agreement  regardless  of the law that  might  be  applied  under
principles of conflicts of laws.

                                        7

<PAGE>

         IN WITNESS  HEREOF,  this  Agreement has been executed and delivered by
the parties hereto.

                                       FIRST WASHINGTON REALTY TRUST, INC.

                                       By: _______________________________

                                       Its: ______________________________

_____________________________
          Employee

_____________________________

_____________________________
           Address

                                        8

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