Document:

Q1 2014 Ex 10.47 - STIP

Exhibit 10.47
WASHINGTON REAL ESTATE INVESTMENT TRUST
SHORT-TERM INCENTIVE PLAN
(Effective January 1, 2014)

ARTICLE I.  INTRODUCTION

1.1Purpose.  The purposes of the Washington Real Estate Investment Trust Short-Term Incentive Plan (the “Plan”) contained herein are to allow Washington Real Estate Investment Trust (the “Trust”) to attract and retain talented executives, to provide incentives to executives to achieve certain performance targets, and to link executive compensation to shareholder results by rewarding competitive and superior performance.  In furtherance of those purposes, the Plan is designed to provide short-term incentive compensation to officers of the Trust, the amount of which is dependent on the degree of attainment of certain performance goals of the Trust over one-year performance periods beginning on or after January 1, 2014.

1.2Background.  The Plan replaces the Short-Term Incentive Plan that became effective January 1, 2012 (the “Prior Plan”) with respect to one-year performance periods beginning on or after January 1, 2014.  The Prior Plan remains in effect with respect to the one-year performance periods that began January 1, 2012 and January 1, 2013.

1.3Overview.  Each award under the Plan is comprised fifty percent (50%) of cash and fifty percent (50%) of restricted common shares of the Trust, which restricted common shares will have a value equal to the cash component of the award.  The cash and the restricted shares are each initially expressed as a dollar amount that is a multiple of the participant’s annual base salary, which multiple varies depending on the participant’s job position and the degree of achievement of the performance goals over the one-year performance period under the Plan.  The cash component of the award is paid following completion of the one-year performance period.  The dollar amount attributable to the restricted shares is converted into a number of restricted common shares.  The restricted shares are subject to a ratable vesting schedule that normally runs for three years from the January 1 following completion of the one-year performance period.  Grants of restricted common shares under the Plan are made pursuant to and from the common share reserve established under the Trust’s 2007 Omnibus Long-Term Incentive Plan.

1.4Effective Date.  This Plan is effective as of January 1, 2014 (the “Effective Date”), and was approved by the Compensation Committee of the Board of Trustees of the Trust (the “Committee”) and by the Board of Trustees of the Trust (the “Board”) on March 27, 2014.

ARTICLE II.  DEFINITIONS

2.1“Award” means an award of cash and Common Shares subject to vesting under the Plan.

2.2“Cause” means 

(a)commission by the Participant of a felony or crime of moral turpitude; 
(b)conduct by the Participant in the performance of the Participant’s duties to the Trust which is illegal, dishonest, fraudulent or disloyal; 

(c)the breach by the Participant of any fiduciary duty the Participant owes to the Trust; or 

(d)gross neglect of duty which is not cured by the Participant to the reasonable satisfaction of the Trust within thirty (30) days of the Participant’s receipt of written notice from the Trust advising the Participant of said gross neglect.

2.3“Change in Control” means an event or occurrence set forth in any one or more of subsections (a) through (d) below (including any event or occurrence that constitutes a Change in Control under one of such subsections but is specifically exempted from another such subsection):

(a)the acquisition by an individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership of any shares of beneficial interest in the Trust if, after such acquisition, such Person beneficially owns (within the meaning of rule 13d-3 promulgated under the Exchange Act) forty percent (40%) or more of either (1) the then-outstanding shares of beneficial interest in the Trust (the “Outstanding Trust Shares”) or (2) the combined voting power of the then-outstanding shares of beneficial interest the Trust entitled to vote generally in the election of trustees (the “Outstanding Trust Voting Shares”); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change in Control: (A) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Trust or any corporation controlled by the Trust, or (B) any acquisition by any corporation pursuant to a transaction which complies with clauses (1) and (2) of subsection (c) of this Section; or

(b)such time as the Continuing Trustees (as defined below) do not constitute a majority of the Board (or, if applicable, the board of directors or trustees of a successor corporation or other entity to the Trust), where the term “Continuing Trustee” means at any date a member of the Board (1) who was a member of the Board on the date hereof or (2) who was nominated or elected subsequent to the date hereof with the approval of other Board members who themselves constitute Continuing Trustees at the time of such nomination or election; provided, however, that there shall be excluded from this clause (2) any individual whose initial assumption of office occurred as a result of an actual or threatened election contest with respect to the election or removal of trustees or other actual or threatened solicitation of proxies or consents, by or on behalf of a person other than the Board; or

(c)the consummation of a merger, consolidation, reorganization, recapitalization or statutory share exchange involving the Trust or a sale or other disposition of all or substantially all of the assets of the Trust in one or a series of transactions (a “Business Combination”), unless, immediately following such Business Combination, each of the 

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following two conditions is satisfied: (1) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Trust Shares and Outstanding Trust Voting Shares immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of the then-outstanding shares of beneficial interest or stock, as the case may be, and the combined voting power of the then-outstanding shares or stock, as the case may be, entitled to vote generally in the election of trustees, or directors, as the case may be, respectively, of the resulting or acquiring corporation or other entity in such Business Combination (which shall include, without limitation, a corporation or other entity which as a result of such transaction owns the Trust or substantially all of the Trust’s assets either directly or through one or more subsidiaries) (such resulting or acquiring corporation or other entity  referred to herein as the “Acquiring Entity”) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding Trust Shares and Outstanding Trust Voting Shares, respectively; and (2) no Person (excluding the Acquiring Entity or any employee benefit plan (or related trust) maintained or sponsored by the Trust or by the Acquiring Entity) beneficially owns, directly or indirectly, 40% or more of the then outstanding shares of beneficial interest or stock, as the case may be, of the Acquiring Entity, or of the combined voting power of the then-outstanding shares of  such corporation or other entity entitled to vote generally in the election of trustees or directors, as the case may be; or

(d)    a liquidation or dissolution of the Trust.

Notwithstanding the foregoing, no Change in Control shall be deemed to have occurred unless the event also constitutes a “change in the ownership or effective control of the corporation or in the ownership of a substantial portion of the assets of the corporation” within the meaning of Section 409A(a)(2)(v) of the Internal Revenue Code. 
2.4“Common Shares” means common shares of the Trust.

2.5“Core FAD” means core funds available for distribution of the Trust for the Performance Period, as adjusted and calculated in accordance with the Trust’s accounting principles.

2.6“Core FFO” means core funds from operations of the Trust for the Performance Period, as adjusted and calculated in accordance with the Trust’s accounting principles.

2.7“Disability” means any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, as a result of which the Participant is receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Trust.  The determination of whether the Participant’s physical or mental impairment satisfies the conditions set forth in this Section shall be made under a disability insurance program covering employees of the Trust; provided, however, that if the Participant is determined to be totally disabled by the Social Security Administration, his physical or mental impairment shall be deemed to satisfy the conditions of this Section.

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2.8“Good Reason” means the occurrence of an event listed in Subsection (a), (b) or (c) below:

(a)the Trust materially diminishes the Participant’s job responsibilities such that the Participant would no longer have responsibilities substantially equivalent to those of other officers holding an equivalent job position to that held by the Participant before the diminution at companies with similar revenues and market capitalization;

(b)the Trust reduces the Participant’s annual base salary (except for a reduction that is a uniform percentage of annual base salary for each officer of the Trust and does not exceed ten percent (10%) of annual base salary) or annual bonus opportunity at high, target or threshold performance as a percentage of annual base salary; or

(c)the Trust requires the Participant to relocate the Participant’s primary place of employment to a new location that is more than fifty (50) miles from its current location (determined using the most direct driving route), without the Participant’s consent;

provided however, as to each event in Subsection (a), (b) or (c), 
(i)the Participant gives written notice to the Trust within thirty (30) days following the event or receipt of notice of the event of his objection to the event;

(ii)the Trust fails to remedy the event within thirty (30) days following the Participant’s written notice; and

(iii)the Participant terminates his employment within thirty (30) days following the Trust’s failure to remedy the event.

2.9“Participant” means a person who participates in the Plan pursuant to Section 3.1.

2.10“Performance Period” means the period from and including January 1 through the earlier of December 31 of that year or the date of a Change in Control.

2.11“Retire” means a Participant resigns upon or after reaching (a) age 55 and being employed by the Trust for at least twenty (20) years, or (b) age 65.

2.12“Same Store NOI Growth” means the growth in same store net operating income of the Trust for the Performance Period as compared to the prior Performance Period, as adjusted and calculated in accordance with the Trust’s accounting principles.

ARTICLE III.  ELIGIBILITY AND ADMINISTRATION

3.1Eligibility.  Officers of the Trust at the level of President and Chief Executive Officer, Executive Vice President and Senior Vice President who are employees of the Trust as of the first day of the Performance Period shall be the initial Participants.  The Committee may designate 

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additional employees as Participants during the Performance Period.  If the Committee adds Participants after the first day of the Performance Period, the Participant’s Award opportunity will be as established by the Committee by written notice to the Participant in lieu of the level specified in Section 4.1.  Unless otherwise specified by the Committee, the Award for any Participant who is not a Participant on the first day of the Performance Period shall be prorated in the proportion that the number of days the Participant is employed by the Trust during the Performance Period bears to the number of days in the Performance Period.  Once a person becomes a Participant in the Plan, the Participant shall remain a Participant until any Award payable hereunder has been paid and is vested or forfeited.

3.2Administration.  The Plan shall be administered by the Committee, which shall have discretionary authority to interpret and make all determinations relating to the Plan.  Any interpretation or determination by the Committee shall be binding on all parties.

ARTICLE IV.  AWARDS

4.1Award Opportunity.  Each Participant’s total Award under the Plan with respect to a Performance Period shall be divided into a cash component and a restricted Common Shares component, each of which shall initially be stated as a percentage of the Participant’s annual base salary determined as of the first day of that Performance Period, which percentage shall depend upon the Participant’s position and the degree of achievement of threshold, target, and high performance goals for the Performance Period as set forth in the table below: 

	
									
	 
	 
	Cash Component (50%)
	Restricted Share Component (50%)
	 

	 
	 
	Threshold
	Target
	High
	Threshold
	Target
	High
	 

	 
	President and Chief Executive Officer
	58%
	113%
	195%
	58%
	113%
	195%
	 

	 
	 
	 
	 
	 
	 
	 
	 
	 

	 
	Executive Vice President
	48%
	93%
	160%
	48%
	93%
	160%
	 

	 
	 
	 
	 
	 
	 
	 
	 
	 

	 
	Senior Vice President
	35%
	65%
	115%
	35%
	65%
	115%
	 

4.2Performance Goals.  The initial performance goals under the Plan are, and are weighted, as follows:

(a)Aggregate financial performance goal (75% weighting in the aggregate and not 25% per metric), comprised of the following performance metrics:

(i)    Core FFO per share;

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(ii)    Core FAD per share; and
(iii)    Same Store NOI Growth; and
(b)Individual objectives goal (25% weighting).

The Committee shall establish guideline expectations for each performance metric comprising the aggregate financial performance goal for each Performance Period, but shall not establish specific threshold, target or high performance levels for such performance metrics.  Upon or following completion of the Performance Period, (1) the degree of achievement of the aggregate financial performance goal shall be determined by the Committee in its discretion (taking into account absolute performance, performance relative to other companies in the industry, the challenges faced by the Trust and/or the positive external circumstances that may have beneficially impacted the Trust’s performance, input from the Board and a written presentation on satisfaction of such aggregate financial performance goal to be provided by the Chief Executive Officer), and (2) the Committee shall evaluate the degree of achievement of the aggregate financial performance goal on a scale of below 1 (below threshold), 1 (threshold), 2 (target) or 3 (high) or any fractional number between 1 and 3.  If the Committee determines that the degree of achievement of the aggregate financial performance goal performance is a fractional number between 1 and 3, the portion of the Award that is dependent upon the aggregate financial performance goal shall be determined by linear interpolation.  If the degree of achievement of the aggregate financial performance goal falls below threshold, the portion of the Award that is dependent on the aggregate financial performance goal shall not be paid.

Upon or following completion of the Performance Period, (1) the degree of achievement of the individual objectives goal shall be determined by the Committee in its discretion with respect to the Chief Executive Officer, and by the Chief Executive Officer or other immediate supervisor in his or her discretion with respect to all other Participants (subject to final approval by the Committee), and (2) the Committee shall evaluate the degree of achievement of the individual objectives goal on a scale of below 1 (below threshold), 1 (threshold), 2 (target) or 3 (high) or any fractional number between 1 and 3.  If the Committee determines that the degree of achievement of the individual objectives goal is a fractional number between 1 and 3, the portion of the Award that is dependent upon the individual objectives goal shall be determined by linear interpolation.  If the degree of achievement of the individual objectives goal falls below threshold, the portion of the Award that is dependent on the individual objectives goal shall not be paid.

While the aggregate financial performance goal and the individual objectives goal shall apply as of the Effective Date, such goals shall be re-evaluated by the Committee (taking into account input from the Chief Executive Officer and the Board) on an annual basis as to their appropriateness for use with respect to the 2015 Performance Period and subsequent Performance Periods under the Plan based on potential future changes in the Trust’s business goals and strategy.  Any modification to the performance goals shall be approved by the Committee and the Board no later than the first ninety (90) days of the Performance Period in which the modification is to take effect.

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4.3Eligibility for, Timing and Form of Payment of Award.  Except as provided in Section 4.3(d) or Sections 4.4 through 4.6, the Participant must be employed by the Trust on the last day of the Performance Period to receive an Award, and the Award shall be paid as follows:

(a)Upon or following the end of the Performance Period, the dollar amount payable in cash and the dollar amount payable in restricted Common Shares pursuant to Sections 4.1 and 4.2 shall be determined for each Participant;

(b)The dollar amount payable in cash for each Participant shall be paid in the year following the Performance Period but no later than the fifteenth day of the third month following the end of the Performance Period (except to the extent that the Participant has made an election to defer the Award pursuant to Section 4.8);

(c)The dollar amount payable in restricted Common Shares for each Participant shall be converted into a number of Common Shares by dividing the dollar amount by the closing price per Common Share on the January 1 following the Performance Period (or if such January 1 is not a trading day, the first trading day preceding such January 1) on the exchange on which Common Shares are traded (the “Restricted Shares”); and

(d)The Restricted Shares shall be issued in the year following the Performance Period by no later than the fifteenth day of the third month following the end of the Performance Period and shall be subject to vesting as described in Section 4.4.

All such Common Shares shall be awarded under and in accordance with the Trust’s 2007 Omnibus Long Term Incentive Plan.
4.4Common Shares subject to Vesting.  The Restricted Shares shall vest (1) as to one-third of the shares on each of the first three anniversaries of the last day of the Performance Period, subject to the Participant remaining employed by the Trust through the applicable vesting date, (2) as to all of the shares, if during the period from the last day of the Performance Period through the third anniversary of the last day of the Performance Period, the Participant’s employment is terminated by the Trust without Cause, or the Participant resigns for Good Reason, Retires, dies or becomes subject to a Disability while employed by the Trust, or a Change in Control occurs while the Participant is employed by the Trust, or (3) if, and to the extent determined under Section 4.5 or 4.6, if applicable.

4.5Qualifying Termination during the Performance Period.  If during the Performance Period, the Participant’s employment is terminated by the Trust without Cause, or the Participant resigns with Good Reason, Retires, dies or becomes subject to a Disability while employed by the Trust, the Participant shall receive an Award calculated based on the actual levels of achievement of the performance goals for the entire Performance Period, but the Award shall be prorated in the proportion that the number of days elapsed from the beginning of the Performance Period through the date the Participant ceases to be an employee of the Trust bears to the total number of days in the Performance Period.  In such event, the Restricted Shares issued to the Participant with respect to such Performance Period shall be fully vested.  

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4.6Change in Control during the Performance Period.  If a Change in Control occurs while the Participant is employed by the Trust during the Performance Period, the Participant shall receive an Award calculated based on the actual levels of achievement of the prorated performance goals as of the date of the Change in Control, but the Award shall be prorated in the proportion that the number of days elapsed from the beginning of the Performance Period through the date of the Change in Control bears to 365.  In such event, the Restricted Shares issued to the Participant with respect to such Performance Period shall be fully vested and the number of shares shall be calculated based on the closing price per Common Share on the exchange on which Common Shares are traded on the trading day coinciding with (or if that is not a trading day, immediately preceding) the date of the Change in Control, or if Common Shares are no longer traded on an exchange as of such date, based on the value determined by the Committee in its reasonable discretion based on the actual or implied price paid in the Change in Control transaction.  The Award shall be issued on the date of the Change in Control.

4.7Forfeiture.  Except as otherwise provided in this Article, any Award that is not vested as of the earlier of termination of employment or the third anniversary of the last day of the Performance Period in the case of the Restricted Shares, shall be forfeited.

4.8Deferral Election as to Cash Portion of Award.  Each Participant who is eligible under the Trust’s Deferred Compensation Plan for Officers (the “DCP”) may elect to defer the cash portion of the Award, to the extent permitted under the DCP, by making a timely deferral election under the DCP.  Elections must be made by December 15 of the year prior to the Performance Period, unless otherwise permitted by the DCP.  If a Participant makes deferral election, the deferral will be converted into restricted share units and held pursuant to the DCP.  The deferred restricted share units will be matched twenty-five percent (25%) by the Trust in accordance with the terms of the DCP.

ARTICLE V.  MISCELLANEOUS

5.1Dividends on Unvested Shares.  Dividends declared with respect to unvested  Common Shares shall be paid currently.

5.2Payroll Withholding on Cash Portion of Award.  The cash portion of the Award shall be reduced by all required tax withholding and all other applicable payroll deductions.

5.3Tax Withholding on Common Shares Portion of Award.  In order to satisfy applicable tax withholding, the portion of the Award payable in Common Shares shall be reduced by that whole number of vested Common Shares which have a value equal to the minimum amount of the required tax obligations imposed on the Trust, and to the extent any remainder of the required tax withholding remains unsatisfied because no fraction of a Common Share is reduced, the Trust shall deduct the remainder from other cash payable to the Participant or if no cash is payable to the Participant, the Trust may require the Participant to remit the remainder.

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5.4Restrictions on Transfer.  Except for the transfer by bequest or inheritance, the Participant shall not have the right to make or permit to exist any transfer or hypothecation, whether outright or as security, with or without consideration, voluntary or involuntary, of all or any part of any right, title or interest in or to an Award until such date as, and only to the extent that, cash has been paid or vested shares have been issued.  Any such disposition not made in accordance with this Plan shall be deemed null and void.  Any permitted transferee under this Section shall be bound by the terms of this Plan.

5.5Change in Capitalization.  The number and kind of shares issuable under this Plan shall be subject to adjustment pursuant to the provisions of the Trust’s 2007 Omnibus Long-Term Incentive Plan.

5.6Successors.  This Plan shall be binding upon and inure to the benefit of the heirs, legal representatives, successors, and permitted assigns of the parties.

5.7Notice.  Except as otherwise specified herein, all notices and other communications under this Plan shall be in writing and shall be deemed to have been given if personally delivered or if sent by registered or certified United States mail, return receipt requested, postage prepaid, addressed to the proposed recipient at the last known address of the recipient.  Any party may designate any other address to which notices shall be sent by giving notice of the address to the other parties in the same manner as provided herein.

5.8Severability.  In the event that any one or more of the provisions or portion thereof contained in this Plan shall for any reason be held to be invalid, illegal, or unenforceable in any respect, the same shall not invalidate or otherwise affect any other provisions of this Plan, and this Plan shall be construed as if the invalid, illegal or unenforceable provision or portion thereof had never been contained herein.

5.9No Right to Continued Retention.  Neither the establishment of the Plan nor the Award hereunder shall be construed as giving any Participant the right to continued service with the Trust.

5.10Interpretation and IRC Section 409A.  Section headings used herein are for convenience of reference only and shall not be considered in construing this Plan.  Sections 1.1 through 1.3 are intended to introduce and summarize the Plan only and shall not apply for purposes of determining a Participant’s rights under the Plan.  Termination of employment under the Plan shall be considered to have occurred for purposes of Sections 4.4 and 4.5 only if the Participant has a termination of employment that constitutes a “separation from service” within the meaning of Section 409A of the Internal Revenue Code.  Awards under the Plan that are not deferred under the DCP are intended to be exempt from Section 409A as “short-term deferrals” within the meaning of the Treasury Regulations under Section 409A, but in any event Awards under the Plan are payable on a specified date or upon a Change in Control in compliance with Section 409A, and the Plan shall be interpreted in a manner to be exempt from or otherwise in compliance with Section 409A.

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5.11Amendment and Termination of the Plan.  The Committee reserves the right to amend or terminate the Plan at any time, provided that no amendment shall deprive a Participant of any Award that is earned up to the date of the amendment or termination or result in the acceleration of any award payable under the Plan if such acceleration would result in any Participants incurring a tax under Section 409A of the Internal Revenue Code.

5.12Governing Laws.  The laws of the State of Maryland shall govern the Plan, to the extent not preempted by federal law, without reference to the principles of conflict of laws; provided, however, no Common Shares shall be issued except, in the reasonable judgment of the Committee, in compliance with exemptions under applicable securities laws.

	
							
	 
	 

	 
	 
	 
	 
	 
	 
	 

	 
	 
	 
	WASHINGTON REAL ESTATE INVESTMENT TRUST
	 

	 
	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 
	 

	 
	 
	By:
	/s/ Laura M. Franklin
	 

	 
	 
	 
	 
	Laura M. Franklin
	 
	 

	 
	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 
	 

	 
	 
	 
	Title:
	Executive Vice President Accounting and
	 

	 
	 
	 
	 
	Administration
	 

	 
	 
	 
	 
	 
	 
	 

        

10Q1 2014 10-Q Ex 10.48 - Bakke

Exhibit 10.48
CHANGE IN CONTROL AGREEMENT FOR
EXECUTIVE VICE PRESIDENT AND CHIEF OPERATING OFFICER

THIS CHANGE IN CONTROL AGREEMENT (“Agreement”) is made and entered into as of April 21, 2014, by and between Washington Real Estate Investment Trust, a real estate investment trust organized under the laws of the State of Maryland (the “Trust”), and Thomas Q. Bakke (“Employee”).
WHEREAS, Employee currently is employed in a key position with the Trust; and
WHEREAS, subject to the terms and conditions of this Agreement, the Trust has agreed to continue Employee’s compensation and certain health benefits for a period of time should Employee’s employment be terminated under certain conditions described herein;
NOW, THEREFORE, in consideration of the promises contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereby agree to the following terms:
		
	1.
	Definitions:  For the purposes of this Agreement, the following words and phrases shall have the meanings set forth below:

A.Change in Control:  “Change in Control” means an event or occurrence set forth in any one or more of subsections (i) through (iv) below (including any event or occurrence that constitutes a Change in Control under one of such subsections but is specifically exempted from another such subsection):

(i)the acquisition by an individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership of any shares of beneficial interest in the Trust if, after such acquisition, such Person beneficially owns (within the meaning of rule 13d-3 promulgated under the Exchange Act) 40% or more of either (A) the then-outstanding shares of beneficial interest in the Trust (the “Outstanding Trust Shares”) or (B) the combined voting power of the then-outstanding shares of beneficial interest the Trust entitled to vote generally in the election of trustees (the “Outstanding Trust Voting Shares”); provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change in Control: (A) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Trust or any corporation controlled by the Trust, or (B) any acquisition by any corporation pursuant to a transaction which complies with clauses (A) and (B) of subsection (iii) of this Section 1(A); or

(ii)such time as the Continuing Trustees (as defined below) do not constitute a majority of the Board (or, if applicable, the Board of Directors or Trustees of a successor corporation or other entity to the Trust), where the term “Continuing Trustee” means at any date a member of the Board (A) who was a member of the Board on the date hereof or (B) who was nominated or elected subsequent to the date hereof with the approval of other Board members who themselves 

constitute Continuing Trustees at the time of such nomination or election; provided, however, that there shall be excluded  from this clause (B) any individual whose initial assumption of office occurred as a result of an actual or threatened election contest with respect to the election or removal of trustees or other actual or threatened solicitation of proxies or consents, by or on behalf of a person other than the Board; or

(iii)the consummation of a merger, consolidation, reorganization, recapitalization or statutory share exchange involving the Trust or a sale or other disposition of all or substantially all of the assets of the Trust in one or a series of transactions (a “Business Combination”), unless, immediately following such Business Combination, each of the following two conditions is satisfied: (A) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Trust Shares and Outstanding Trust Voting Shares immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of the then-outstanding shares of beneficial interest or stock, as the case may be, and the combined voting power of the then-outstanding shares or stock, as the case may be, entitled to vote generally in the election of trustees, or directors, as the case may be, respectively, of the resulting or acquiring corporation or other entity in such Business Combination (which shall include, without limitation, a corporation or other entity which as a result of such transaction owns the Trust or substantially all of the Trust’s assets either directly or through one or more subsidiaries) (such resulting or acquiring corporation or other entity  referred to herein as the “Acquiring Entity”) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding Trust Shares and Outstanding Trust Voting Shares, respectively; and (B) no Person (excluding the Acquiring Entity or any employee benefit plan (or related trust) maintained or sponsored by the Trust or by the Acquiring Entity) beneficially owns, directly or indirectly, 40% or more of the then outstanding shares of beneficial interest or stock, as the case may be, of the Acquiring Entity, or of the combined voting power of the then-outstanding shares of  such corporation or other entity entitled to vote generally in the election of trustees or directors, as the case may be; or

(iv)approval by the shareholders of the Trust of a complete liquidation or dissolution of the Trust.

B.Involuntarily Terminated:  Employee’s employment will be deemed to have been involuntarily terminated due to a Change in Control only if, on or after the date on which a Change in Control occurs, (i) Employee’s employment is terminated by the Trust or the successor owner of the Trust without cause or (ii) Employee resigns because Employee’s duties, responsibilities or compensation are materially diminished, provided (A) Employee gives written notice to the Trust within thirty (30) days following the diminution or receipt of notice of the diminution of his objection to the diminution, (B) the Trust fails to remedy the diminution within thirty (30) days following Employee s written notice, and (C) Employee terminates his or her employment within thirty (30) days following the Trust’s failure to remedy the diminution; provided that if a termination otherwise covered by (i) or (ii) occurs during the ninety (90) day period before the date on which a Change in Control occurs, the termination will be presumed to be due to the Change in Control unless the Trust or the successor owner of the Trust can show, through a preponderance of the evidence, that the termination did not occur because of the impending Change in Control.

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C.Termination For Cause:  A termination for cause shall be deemed to occur only if the Trust or the successor owner of the Trust terminates Employee’s employment for any of the following reasons: (1) commission by Employee of a felony or crime of moral turpitude; (2) conduct by Employee in the performance of Employee’s duties which is illegal, dishonest, fraudulent or disloyal; (3) the breach by Employee of any fiduciary duty Employee owes to the Trust; or (4) gross neglect of duty or poor performance which is not cured by Employee to the reasonable satisfaction of the Trust within 30 days of Employee’s receipt of written notice from the Trust advising  Employee of said gross neglect or poor performance.

2.Termination Benefits:  In the event Employee’s employment with the Trust or the successor owner of the Trust is involuntarily terminated due to a Change in Control but not for cause, and such termination occurs within 24 months following the Change in Control or within ninety 90 days before the Change in Control as specified in Section 1(B), the Trust or the successor owner shall provide Employee with the following termination benefits:
A.continuation of Employee’s base salary at the rate in effect as of the termination date for a period of 24 months from the date of termination (in the event of Employee’s death, said salary shall be paid to Employee’s estate);

B.payment of an annual bonus for each calendar year or partial calendar year in which Employee receives salary continuation pursuant to Section 2(A) above, in an amount equal to the average annual bonus received by Employee during the three years prior to the involuntary termination, provided that, if Employee was employed for fewer than three years prior to the termination, the bonus will be based on the average of the bonuses received by Employee in the year or years Employee received a bonus; and provided further, that if Employee receives salary continuation for a partial calendar year pursuant to Section 2(A) above, the bonus will be pro rated to reflect the number of full months Employee receives such salary continuation in such calendar year, rounded to the nearest number of months;

C.the Trust will pay the full cost for Employee to continue coverage under the Trust’s group health insurance plan pursuant to the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) for the  period of time Employee receives salary continuation pursuant to Section 2(A) above up to a maximum of 18 months or until Employee obtains other comparable coverage, whichever is sooner;

D.immediate vesting in all then unvested options granted to Employee under the Trust’s 2007 Omnibus Long-Term Incentive Plan or other plan under which such grants have been made by the Trust to Employee (the “Omnibus Plan”) and immediate vesting in all unvested accrued dividend equivalent units under the Omnibus Plan, and Employee shall have the right, in Employee’s sole discretion, to exercise all or any of such options and to sell the shares acquired pursuant thereto. In the event that Employee wishes to sell Employee’s shares within 60 days of the involuntary termination, the shares must first be offered to the Trust for purchase at the Trust’s option at the then current fair market value.  The Trust shall respond within one business day to the offer or its rights to purchase the shares shall expire.  Sales occurring more than 60 days after the involuntary termination shall not be subject to this option;

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E.immediate vesting in all then unvested share grants granted to Employee under the Omnibus Plan and Employee shall have the right, in Employee’s sole discretion, to sell the shares acquired pursuant thereto. In the event that Employee wishes to sell Employee’s shares within 60 days of the involuntary termination, the shares must first be offered to the Trust for purchase at the Trust’s option at the then current fair market value.  The Trust shall respond within one business day to the offer or its rights to purchase the shares shall expire.  Sales occurring more than 60 days after the involuntary termination shall not be subject to this option; and

F.if, by virtue of receipt of the Termination Benefits described above and any other payments in the nature of compensation, Employee is subject to excise tax pursuant to Section 4999 of the Internal Revenue Code (the “Code”), the Termination Benefits shall be reduced to the minimum extent necessary to avoid imposition of the excise tax, but only if such reduction would result in Employee retaining a greater amount after taking into account the excise tax that would be owed if no such reduction were made.  If such reduction is required to be made, the Termination Benefits shall be reduced in such manner as required so as not to give rise to there being deemed to be more than one time or form of payment of any amount that constitutes nonqualified deferred compensation under Code Section 409A.  To that end (i) to the extent permissible under Code Section 409A, such reductions shall be made so that the latest payments in time are reduced first, starting with payments under Section 2(B) until those payments have been eliminated if necessary, then payments under Section 2(A) until those payments have been eliminated if necessary, and ending with payments under Section 2(C) (if the payments under Section 2(C) are taxable payments) until those payments have been eliminated if necessary, or (ii) to the extent that is not permissible under Code Section 409A, the reductions shall be made ratably from each payment under Sections 2(B), 2(A), and 2(C) (if the payments under Section 2(C) are taxable payments).  To the extent that the reduction of payments in Section 2(B), 2(A) and 2(C) is not sufficient to avoid imposition of the excise tax, then after making such reductions, accelerated vesting shall be reduced, starting with the vesting that otherwise would occur latest in time, first under Section 2(E) until accelerated vesting has been eliminated under that Section if necessary and last, accelerated vesting under Section 2(D) until accelerated vesting has been eliminated under that Section if necessary.  Any reduction of payments or accelerated vesting required under Section 2(F) shall occur only to the minimum extent necessary to avoid imposition of the excise tax.

3.Mitigation:  If a Change in Control occurs while Employee is employed by the Trust, and Employee’s employment is involuntarily terminated as a result of the Change in Control, Employee shall have no obligation to seek other employment in order to mitigate the payment of the Termination Benefits described in Section 2 hereunder; provided, that should Employee continue to be employed by the Trust or the successor owner of the Trust after a Change in Control occurs, Employee’s entitlement to receive the Termination Benefits described in Sections 2(A) and (B) hereunder shall be reduced for one-half of that period of time (rounded to the nearest month) that Employee continues to be thus employed after the Change in Control occurs without being involuntarily terminated.  For example, should Employee continue to be thus employed for ten (10) months after the Change in Control occurs, Employee’s entitlement to the Termination Benefits described in Sections 2(A) and (B) would be reduced by five (5) months.  If Employee (despite the lack of obligation to seek other employment) does in fact obtain other employment, the compensation to Employee from such other 

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employment shall not be applied as an offset to Employee’s Termination Benefits described in Sections 2(A) and (B) hereunder.

4.Code Section 409A.  It is intended that this Agreement and the payments hereunder will, to the fullest extent possible, be exempt from Code Section 409A, and the Agreement shall be interpreted to that end to the fullest extent possible.   In this regard, it is intended that, to the extent possible, the maximum amount of severance pay possible be exempt from Code Section 409A as separation pay upon involuntary separation from service under Treas. Regs. Section 1.409A-1(b)(9)(iii).  However, to the extent that any payment or benefit (or portion thereof) provided pursuant to this Agreement is determined to be subject to Code Section 409A, this Agreement shall be interpreted in a manner that complies with Code Section 409A to the fullest extent possible.  In furtherance of the foregoing provisions:

A.    the payments in Section 2(A) will commence on the next regular payroll date following termination of employment;
B.    the payment of each average annual bonus amount in Section 2(B) will be made in the year following each calendar year or partial calendar year in which Employee receives salary continuation in Section 2(A), by no later than the fifteenth day of the third month thereof;
C.    the payments in Section 2(C) will commence as of termination of employment and will be made on a monthly basis; and 
D.    the reductions required in Section 3 shall be made in such manner as required so as not to give rise to there being deemed to be more than one time or form of payment of any amount that constitutes nonqualified deferred compensation under Code Section 409A.  To that end, to the extent permissible under Code Section 409A, the reductions required in Section 3 shall be first made from each payment that would otherwise be paid latest in time in Sections 2(A) and 2(B), or to the extent that is not permissible under Code Section 409A, the reductions shall be made ratably from each payment under Sections 2(A) and 2(B) that constitutes nonqualified deferred compensation.
If payment or provision of any amount or benefit hereunder at the time specified in this Agreement would subject such amount or benefit to any tax under Code Section 409A, the payment or provision of such amount or benefit shall be postponed to the earliest commencement date on which the payment or the provision of such amount or benefit could be made without incurring such tax (including paying any severance that is delayed in a lump sum upon the earliest possible payment date which is consistent with Code Section 409A).  A termination of employment shall not be deemed to have occurred for purposes of this Agreement, unless such termination is also a “separation from service” within the meaning of Code Section 409A.  For purposes of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean such “separation from service.”  Notwithstanding anything to the contrary in this Agreement, if at the time of Employee’s separation from service from the Trust, the Trust has shares which are publicly-traded on an established securities market and Employee is a “specified employee” within the meaning of Code Section 409A, then no payment, compensation, benefit or entitlement payable 

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or  provided to the Employee in connection with his separation from service that is determined, in whole or in part, to constitute a payment of nonqualified deferred compensation within the meaning of Code Section 409A shall be paid or provided to Employee before the earlier of (A) Employee’s  death or (B) the day that is six (6) months after the date of his separation from service date (the “New Payment Date”).  The aggregate of any payments, compensation, benefits and entitlements that otherwise would have been paid to Employee during the period between the date of his separation from service date and the New Payment Date shall be paid to Employee in a lump sum on such New Payment Date.  Thereafter, any payments, compensation, benefits and entitlements that remain outstanding as of the day immediately following the New Payment Date shall be paid without delay over the time period originally scheduled, in accordance with the terms of this Agreement. With regard to any provision herein that provides for reimbursement of expenses that are not excluded from Employee’s taxable income and are nonqualified deferred compensation subject to Section 409A, then except as otherwise permitted by Section 409A (i) the right to reimbursement shall not be subject to liquidation or exchange for another benefit; (ii) the amount of expenses eligible for reimbursement provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year; and (iii) such payments shall be made, as soon as practicable, but in any case on or before the last day of Employee’s taxable year following the taxable year in which the expense was incurred.
5.Limitations of Agreement:  Nothing in this Agreement shall be construed to require the Trust or its successor owner to continue to employ Employee for any definite period of time.  Either Employee or the Trust may terminate the employment relationship at any time with or without cause, unless otherwise expressly required by law or contract, and provided that the terms of this Agreement are observed.

6.Arbitration:  Any dispute or controversy arising under or in connection with this Agreement which cannot be resolved informally by the parties shall be submitted to arbitration and adjudicated in Washington, D.C. pursuant to the commercial rules (single arbitrator) of the American Arbitration Association then in effect.  The decision of the arbitrator shall be final and binding on all parties hereto.  Each party shall bear its own costs in any arbitration proceeding held hereunder and the parties shall share the costs of the arbitrator.

7.Severability:  In the event that any provision of this Agreement conflicts with the law under which this Agreement is to be construed, or if any such provision is held invalid or unenforceable by a court of competent jurisdiction or an arbitrator, such provision shall be deleted from this Agreement and the Agreement shall be construed to give full effect to the remaining provisions thereof.

8.Governing Law:  This Agreement shall be interpreted, construed and governed according to the laws of the State of Maryland, without regard to the principles of conflicts of law thereof.

9.Assignability:  Neither this Agreement nor any rights or obligations hereunder may be assigned by either party without the prior written consent of the other.  Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and assigns.

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10.Entire Agreement:  This Agreement contains and represents the entire agreement of the parties and supersedes all prior agreements, representations or understandings, oral or written, express or implied, with respect to the subject matter hereof, which are hereby terminated and of no further force or effect.  This Agreement may not be modified or amended in any way unless in a writing signed by both parties.

11.Counterparts:  This Agreement may be executed in one or more counterparts, each of which shall be considered an original and together which shall constitute one and the same instrument.

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	IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement.

	 
	 
	 
	 
	 
	 

	 
	 
	 
	WASHINGTON REAL ESTATE

	EMPLOYEE
	 
	INVESTMENT TRUST
	 

	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 

	/s/ Thomas Q. Bakke
	 
	By:
	/s/ Laura M. Franklin

	 
	 
	 
	 
	Laura M. Franklin
	 

	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 

	Print Name:
	Thomas Q. Bakke
	 
	Title:
	EVP, Accounting, Administration

	 
	 
	 
	 
	and Corporate Secretary

	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 

	Date:
	April 21, 2014
	 
	Date:
	April 21, 2014
	 

	 
	 
	 
	 
	 
	 

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