<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
FIRST UNION REAL ESTATE EQUITY AND
MORTGAGE INVESTMENTS
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
PAUL F. LEVIN
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
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<PAGE> 2
FIRST UNION
REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS
55 PUBLIC SQUARE - SUITE 1900 - CLEVELAND, OHIO
44113-1937
NOTICE OF
1996 ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS:
Notice is hereby given that the 1996 Annual Meeting of the Shareholders of
First Union Real Estate Equity and Mortgage Investments ("First Union" or the
"Trust") will be held in the National City Bank Auditorium, on the fourth floor
of the National City Center Annex Building, 1900 East Ninth Street, Cleveland,
Ohio, on Tuesday, April 9, 1996, at 10:00 A.M., Eastern Daylight Time, for the
following purposes:
1. To elect three Trustees.
2. To consider and take action upon a shareholder proposal concerning the
tabulation of proxies.
3. To consider and take action upon such other matters as may properly come
before the meeting or any adjournment thereof.
Shareholders of record at the close of business on February 9, 1996, are
entitled to notice of and to vote at the meeting. Only such shareholders will be
permitted to attend.
By order of the Board of Trustees
PAUL F. LEVIN
Senior Vice President -- General
Counsel and Secretary
March 8, 1996
***************************************************************************
* *
* PLEASE FILL IN, DATE, SIGN AND RETURN THE ENCLOSED FORM OF PROXY *
* WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING. A *
* SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. *
* *
***************************************************************************
<PAGE> 3
FIRST UNION
REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS
55 PUBLIC SQUARE - SUITE 1900 - CLEVELAND, OHIO 44113-1937
------------------
PROXY STATEMENT
------------------
ANNUAL MEETING OF SHAREHOLDERS
APRIL 9, 1996
GENERAL INFORMATION
The accompanying proxy is solicited by the Board of Trustees of First Union
for use at the 1996 Annual Meeting to be held on April 9, 1996 and at any
adjournment of that meeting. The Shares of Beneficial Interest, par value $1 per
share ("Shares"), represented by each valid proxy will be voted at the meeting
or any adjournment thereof, and, if a choice is specified in the proxy, the
Shares will be voted in accordance with such specification. If no specification
is made, such Shares will be voted for the Board of Trustees' nominees for
Trustees specified in the proxy card and against the shareholder proposal
concerning tabulation of proxies. A shareholder may revoke his proxy, without
affecting any vote previously taken, by giving notice to First Union in writing
or in open meeting. The approximate date on which this Proxy Statement and the
accompanying proxy were sent to shareholders is March 8, 1996.
First Union will bear the cost of preparing and mailing this statement, the
accompanying proxy and any other related materials. First Union has engaged
Corporate Investor Communication Inc. ("CIC") to assist in the solicitation of
proxies from shareholders, at a fee of $5,000, plus reimbursement of its
out-of-pocket expenses. First Union will also pay the standard charges and
expenses of brokerage houses, or other nominees or fiduciaries, for forwarding
such materials to, and obtaining the proxies from, shareholders and
beneficiaries for whose account they hold registered title to Shares of First
Union. In addition to use of the mail, proxies may be solicited personally, by
telephone or by telegram, by Trustees, officers and regular employees of First
Union without receiving additional compensation, as well as by employees of CIC.
First Union will pay the expense of such solicitation.
The record date for determination of shareholders entitled to vote at the
Annual Meeting is February 9, 1996. On that date, 17,485,057 Shares were
outstanding. Each Share has one vote.
ELECTION OF TRUSTEES
Under the Declaration of Trust, as amended (the "Declaration of Trust") of
First Union, the Board of Trustees is divided into three classes, with each
class as nearly equal in number to the other classes as possible. The term of
office of each class expires in successive years. Accordingly, at each Annual
Meeting successors to the Trustees whose terms expire at that meeting are
elected to three-year terms. In addition, under the Declaration of Trust, the
number of Trustees may be fixed or changed from time to time by the
shareholders, provided that the number in
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<PAGE> 4
each class is not set at fewer than one nor more than five. In the event of an
increase or decrease in the number of Trustees, the additional or remaining
Trustees, as the case may be, are to be allocated to classes so as to make the
classes as nearly equal as possible. Any vacancy occurring in a class of
Trustees may be filled by a majority vote of the Trustees remaining in office,
effective for the remainder of the term for such class.
NOMINEES
Currently, the Board of Trustees is composed of nine Trustees and is
divided into equal classes known as Class I, II and III whose terms expire in
1997, 1998 and 1996, respectively. It is proposed that three Trustees be elected
to Class III of the Board of Trustees at the Annual Meeting.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS, PERIOD OF EXPIRATION
BUSINESS EXPERIENCE SERVICE AS OF
NAME AND AGE AND AFFILIATIONS TRUSTEE TERM
------------ ---------------------- ----------- -----------
<S> <C> <C> <C>
CLASS III
Daniel G. DeVos (38) Mr. DeVos is Chairman, President and Chief Executive 1994 to 1999
Officer of Landquest International, L.L.C., a private Date
real estate investment, development and management com-
pany. He is also Vice President, Corporate Affairs of
Amway Corporation, a direct sales consumer product
business; Vice Chairman, Governing Board of the Or-
lando Magic, a professional NBA basketball franchise;
President and Chief Executive Officer of the Grand
Rapids Griffins, a professional International Hockey
League franchise in Grand Rapids, Michigan; and Chair-
man and Chief Executive Officer of Georgian
Enterprises, Ltd., Barrie, Ontario, Canada, a group of
related companies involved in automobile sales,
aircraft leasing, charter and sales, real estate
development and management; LTS Finished Surfaces,
Grand Rapids, Michigan, a wholesale distributor of
floor products; and Appliance Distributors, Inc.,
Detroit, Michigan, a wholesale distributor of high-end
appliances. Mr. DeVos is a director of Genmar
Industries, Inc., Minneapolis, Minnesota, a boat
manufacturer. He is also a trustee of Butterworth
Hospital, Grand Rapids, Michigan, and a member of the
Boards of the Family Outreach Center, Grand Rapids,
Michigan, the Grand Rapids Symphony, and the Mercy
Respite Center.
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS, PERIOD OF EXPIRATION
BUSINESS EXPERIENCE SERVICE AS OF
NAME AND AGE AND AFFILIATIONS TRUSTEE TERM
------------ ---------------------- ----------- -----------
<S> <C> <C> <C>
Allen H. Ford (67) Mr. Ford is a consultant and was, from 1981 to 1986, 1983 to 1999
Senior Vice President -- Finance and Administration of Date
The Standard Oil Company (BP America), an integrated
domestic petroleum company engaged in all phases of the
petroleum business. Mr. Ford was Corporate Executive
Vice President and Unit President from 1976 to 1980,
Vice President, Finance, from 1969 to 1976, and
Treasurer during 1969 of Diamond Shamrock Corporation,
a producer of chemicals, petroleum and related
products. Mr. Ford is a director of Gliatech, Inc. and
Parker Hannifin Corporation, and is a trustee and
former Chairman of Case Western Reserve University, a
trustee of the Musical Arts Association (Cleveland
Orchestra), University Hospitals of Cleveland, the
Western Reserve Historical Society, and University
Circle, Inc. He is also a trustee and former Chairman
of the Edison BioTechnology Center.
Spencer H. Heine (53) Mr. Heine has been Executive Vice President, Secretary New 1999
and General Counsel of Montgomery Ward Holding Corp. a Member
national retail chain, since September 1991, and has
been a director of the company since May 1992. Prior
thereto, he was Senior Vice President, Secretary and
General Counsel of the company from June 1988 through
September 1991. Mr. Heine has been Executive Vice
President, Secretary and General Counsel of Montgomery
Ward & Co., Incorporated, a subsidiary of Montgomery
Ward Holding Corp., since April 1994, and has been
director of that company since May 1992. He has also
been President of Montgomery Ward Properties, a sub-
sidiary of Montgomery Ward & Co., Incorporated, since
April 1994. Prior thereto, Mr. Heine served as
Executive Vice President, Legal and Financial Services
of Montgomery Ward & Co., Incorporated, from September
1991 through April 1994. Mr. Heine was Chairman and
Chief Executive Officer of Signature, a subsidiary of
Montgomery Ward & Co., Incorporated, from March 1993
through April 1994. Prior thereto, he also served as
President of Signature from September 1991.
</TABLE>
While the Trustees do not anticipate that any of the nominees will be
unable to serve, if any is not available for election, proxies may be voted for
a substitute as well as for the other persons named.
REMAINING TRUSTEES
The remaining Trustees, whose present terms of office as Trustees will
continue after the meeting and will expire in the year set forth opposite his
name and upon the election and qualification of his successor, and certain
additional information with respect to each of them, are as follows:
3
<PAGE> 6
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS, PERIOD OF EXPIRATION
BUSINESS EXPERIENCE SERVICE AS OF
NAME AND AGE AND AFFILIATIONS TRUSTEE TERM
------------ ---------------------- ----------- -----------
<S> <C> <C> <C>
CLASS I
Kenneth K. Chalmers (66) Mr. Chalmers is a consultant with Kennedy & Co., Chi- 1994 to 1997
cago, Illinois, responsible for the Bank of America Date
Illinois account. He was Executive Vice President of
Continental Bank, Chicago, Illinois, and its successor,
Bank of America Illinois, a commercial bank, from 1984
to 1994. Previously he was Senior Vice President --
Group Head of the bank from 1977 to 1984 and Vice
President -- Division Head from 1972 to 1977. He is a
director of Learning Insights, L.L.C. and Catholic
Health Partners; Vice Chairman and a member of the
Executive Committee of St. Joseph Health Care
Foundation, Chicago, Illinois, and serves on the
Advisory Board of the Kellogg Graduate School of
Management, Northwestern University.
William E. Conway (68) Mr. Conway has been Chairman and Chief Executive 1985 to 1997
Officer of Fairmount Minerals, Ltd., a miner and Date
processor of industrial minerals, since 1978. Mr.
Conway was a Group Vice President of Midland-Ross
Corporation, a diversified capital goods manufacturer,
from 1974 to 1978, and was Executive Vice President,
Administration of Diamond Shamrock Corporation, a
producer of chemicals, petroleum and related products,
from 1970 to 1974. Mr. Conway is a director of The
Huntington National Bank of Ohio and a trustee of The
Cleveland Clinic Foundation and University School, and
serves on the Advisory Board of the Weatherhead School
of Management of Case Western Reserve University.
Russell R. Gifford (55) Mr. Gifford is President of CNG Energy Services 1991 to 1997
Corporation, an unregulated energy marketing company Date
providing gas and electric energy services throughout
North America. He was President and Chief Executive
Officer of The East Ohio Gas Company, Cleveland, Ohio,
a distributor of natural gas, from 1988 to 1994. He was
also President of West Ohio Gas Company, Lima, Ohio,
and River Gas Company, Marietta, Ohio. CNG, East Ohio,
West Ohio and River are subsidiaries of Consolidated
Natural Gas Co. of Pittsburgh, Pennsylvania. Mr.
Gifford was Senior Vice President of The East Ohio Gas
from 1985 to 1988. Mr. Gifford is a director of
National City Bank and Bearings, Inc., a trustee of
Baldwin Wallace College, and a member of the National
Board of Governors of the American Red Cross. Mr.
Gifford also served as Chairman of the Greater
Cleveland Growth Association until March 1, 1995.
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS, PERIOD OF EXPIRATION
BUSINESS EXPERIENCE SERVICE AS OF
NAME AND AGE AND AFFILIATIONS TRUSTEE TERM
------------ ---------------------- ----------- -----------
<S> <C> <C> <C>
CLASS II
Stephen R. Hardis (60) Mr. Hardis has been Chairman and Chief Executive Of- 1992 to 1998
ficer of Eaton Corporation, a manufacturer of highly Date
engineered products serving the automotive, industrial,
commercial and defense markets, since January 1996. He
was Vice Chairman and Chief Executive Officer from
September 1995 to December 1995, Vice Chairman and
Chief Financial and Administrative Officer from 1986 to
September 1995 and Executive Vice President -- Finance
and Administration from 1979 to 1986. He has been a
member of the Board of Directors of Eaton since 1983.
Mr. Hardis was Executive Vice President -- Finance and
Planning of the Sybron Corporation from 1961 to 1979
and was Assistant to the Controller of General Dynamics
Corporation from 1960 to 1961. Mr. Hardis is a director
of Progressive Companies, Key Corp, Society National
Bank and Nordson Corporation, is a trustee of The
Cleveland Clinic Foundation, University Circle, Inc.,
Playhouse Square Foundation, and the Musical Arts As-
sociation (Cleveland, Orchestra).
E. Bradley Jones (68) Mr. Jones was Chairman and Chief Executive Officer of 1986 to 1998
LTV Steel Company, an integrated steel company, from Date
July 1984 to December 1984. Prior to that he was Chair-
man and Chief Executive Officer from 1982 to 1984 and
President and Chief Operating Officer from 1980 to
1982, of Republic Steel Corporation. Mr. Jones is a
director of TRW Inc., Consolidated Rail Corporation,
Cleveland- Cliffs, Inc., Birmingham Steel Corporation,
and RPM, Inc., and is a trustee of Fidelity Funds. He
is also trustee of The Cleveland Clinic Foundation.
James C. Mastandrea (52) Mr. Mastandrea has been Chairman, President and Chief 1994 to 1998
Executive Officer of the Trust since January 1994. On Date
February 12, 1996 he also assumed the title of Chief
Financial Officer. He was President and Chief Operating
Officer of the Trust from July 1993 through December
1993. Mr. Mastandrea was President and Chief Executive
Officer of Triam Corporation, Chicago, Illinois, an
investment adviser to various real estate investment
funds from 1991 to 1993. He was Chairman, President and
Chief Executive Officer of Midwest Development
Corporation, Buffalo Grove, Illinois, from 1978 to
1991. From 1971 to 1978 Mr. Mastandrea served in
various capacities in the field of commercial and real
estate lending, including Vice President of Continental
Bank, Chicago, Illinois, and with Mellon Bank,
Pittsburgh, Pennsylvania. He is Chairman of the
Downtown Development Corporation (DDC), Vice Chairman,
Inner City Committee, Urban Land Institute (ULI) Retail
Council, and a board member of the Convention and
Visitors Bureau of Greater Cleveland
</TABLE>
5
<PAGE> 8
COMPENSATION OF TRUSTEES
Trustees, other than Mr. Mastandrea, receive an annual retainer fee of
$12,000 and are paid an attendance fee of $500 for meetings of the Board and
committees, except for certain committee meetings for which an attendance fee of
$250 is paid.
ORGANIZATION OF BOARD OF TRUSTEES
The Board of Trustees held five Board meetings during 1995. Each of the
present Trustees attended at least 80% of the aggregate of the meetings of the
Board and the committees of the Board on which he served. The Board has standing
Executive; Audit; Management, Organization and Compensation; and Nominating
Committees.
EXECUTIVE COMMITTEE
The Executive Committee exercises all of the powers and authority of the
Board during intervals between meetings of the Board except the declaration of
dividends and the filling of vacancies among the Trustees or the Executive
Committee and except as its powers and duties may be limited or proscribed by
the Trustees from time to time. Present members are Otes Bennett, Jr., Kenneth
K. Chalmers, William E. Conway, Daniel G. DeVos, Allen H. Ford, Russell R.
Gifford, Stephen R. Hardis, E. Bradley Jones and James C. Mastandrea (Chairman).
The Executive Committee held three meetings during 1995.
AUDIT COMMITTEE
The Audit Committee, composed entirely of Trustees who are not employees of
First Union, recommends to the Board the appointment of auditors to examine and
report on the combined financial statements, reviews with the independent
auditors the arrangements for and results of the audit engagement, reviews the
independence of the auditors, considers the range of audit and non-audit fees
and reviews the reports of First Union's internal auditor and its system of
internal accounting controls. Present members are Otes Bennett, Jr., Kenneth K.
Chalmers and Stephen R. Hardis (Chairman). The Audit Committee held three
meetings during 1995.
MANAGEMENT, ORGANIZATION AND COMPENSATION COMMITTEE
The Management, Organization and Compensation Committee, composed entirely
of Trustees who are not employees of First Union, makes recommendations to the
Board on matters involving management succession, the compensation of officers
with salaries of $75,000 per year or more and the retainer and attendance fees
for Trustees, makes recommendations and determinations concerning First Union's
Share option plans and the 1994 Long Term Incentive Performance Plan, and
reviews compensation arrangements as they relate to key employees. Present
members are William E. Conway (Chairman), Daniel G. DeVos and Russell R.
Gifford. The Management, Organization and Compensation Committee held two
meetings in 1995.
NOMINATING COMMITTEE
The Nominating Committee recommends qualified candidates for election as
Trustees and considers the performance of incumbent Trustees to determine
whether to recommend them for
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<PAGE> 9
nomination to stand for re-election. Present members are Allen H. Ford, E.
Bradley Jones and James C. Mastandrea (Chairman). The Committee held one meeting
in 1995. The Nominating Committee will consider persons for election as Trustees
who are recommended to it in writing by any shareholder. Any shareholder wishing
to submit a recommendation to the Committee should send a signed letter of
recommendation to the following address: First Union Real Estate Equity and
Mortgage Investments, Suite 1900, 55 Public Square, Cleveland, Ohio, 44113-1937,
Attention: Chairman. Recommendation letters should state the reasons for the
recommendation and contain the full name and address of each proposed nominee as
well as a brief biographical history setting forth past and present
directorships, employment and civic activities.
SECURITY OWNERSHIP OF TRUSTEES AND OFFICERS AND OTHERS
The table below sets forth, with respect to Trustees and nominees, certain
named executive officers, and as to all Trustees and executive officers as a
group, information relating to their beneficial ownership of Shares of First
Union as of January 1, 1996:
<TABLE>
<CAPTION>
NAME OF INDIVIDUAL SHARES BENEFICIALLY PERCENT
OR IDENTITY OF GROUP OWNED(1) OF CLASS
-------------------- ------------------- --------
<S> <C> <C>
TRUSTEES
Otes Bennett, Jr. 5,000 .027%
Kenneth K. Chalmers 5,000 .027%
William E. Conway 14,647 .079%
Daniel G. DeVos 13,000 .071%
Allen H. Ford 25,000 .136%
Russell R. Gifford 1,250 .007%
Stephen R. Hardis 2,000 .011%
Spencer H. Heine (nominee) -- 0 -- .000%
E. Bradley Jones 13,331 .072%
James C. Mastandrea (also an 328,701(2) 1.756%
Executive Officer)
EXECUTIVE OFFICERS
Gregory D. Bruhn 56,135(3) .304%
Paul F. Levin 49,209(4) .266%
Steven M. Edelman 64,464(5) .349%
John J. Dee 61,561(6) .333%
All Trustees and executive officers
(14 in number) as a group 639,298(7) 3.374%
</TABLE>
- ---------------
(1) Pursuant to Rule 13d-3 of the Securities Exchange Act of 1934, a person is
deemed to be a beneficial owner if he has or shares voting power or
investment authority in respect of such security or has the right to acquire
beneficial ownership within 60 days. The amounts shown in the above table do
not purport to represent beneficial ownership except as determined in
accordance with this Rule. Each Trustee and executive officer has sole
voting and investment power with respect to the amounts shown or shared
voting and investment powers with his spouse.
(2) Includes 225,000 Shares of restricted stock over which Mr. Mastandrea has
sole voting power but no investment power and 62,500 shares that Mr.
Mastandrea has the vested right to acquire through the exercise of options.
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<PAGE> 10
(3) Includes 40,000 Shares of restricted stock over which Mr. Bruhn has sole
voting power but no investment power, and 12,917 shares that Mr. Bruhn has
the vested right to acquire through the exercise of options.
(4) Includes 20,000 Shares of restricted stock over which Mr. Levin has sole
voting power but no investment power and 28,284 shares that Mr. Levin has
the vested right to acquire through the exercise of options.
(5) Includes 20,000 Shares of restricted stock over which Mr. Edelman has sole
voting power but no investment power and 38,419 shares that Mr. Edelman has
the vested right to acquire through the exercise of options.
(6) Includes 20,000 Shares of restricted stock over which Mr. Dee has sole
voting power but no investment power and 40,499 shares that Mr. Dee has the
vested right to acquire through the exercise of options.
(7) Includes 182,619 Shares which executive officers have the vested right to
acquire through the exercise of options and 325,000 Shares of restricted
stock.
The following table sets forth, as of the record date, information
concerning each person known by First Union to be the beneficial owner of more
than 5% of the Shares of First Union:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER OWNERSHIP CLASS
------------------- ----------------- ----------
<S> <C> <C>
Maxus Investment Group(1)
(Incorporated as Resource 912,800 5.22%
Management Inc.)
Richard Barone
Maxus Asset Management Inc.
Maxus Securities Corp.
Maxus Equity Fund
28601 Chagrin Boulevard
Cleveland, Ohio 44122
<FN>
- ---------------
(1) The information regarding this holder was received by First Union through
the filing of a schedule 13-D with the Securities and Exchange Commission on
or about September 20, 1995.
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the past year, and until January 10, 1996, Turkey Vulture Fund XIII,
Ltd. ("Turkey Vulture") and Richard M. Osborne ("Osborne"), its Managing Member,
were beneficial owners of more than five percent of the outstanding Shares of
First Union. On December 13, 1995, First Union entered into two separate
agreements with Turkey Vulture and Osborne.
Settlement and Standstill Agreement. Pursuant to this agreement,
First Union, Turkey Vulture and Osborne agreed to settle, dismiss and
release certain claims between and among them then pending in the
United States District Court for the Northern District of Ohio and the
Common Pleas Court of Cuyahoga County, Ohio. In connection with the
settlement, Turkey Vulture and Osborne agreed to sell to First Union,
and First Union agreed to purchase from Turkey Vulture and Osborne,
950,000 Shares of First Union. The purchase price for the Shares was
the average of the composite trading prices for the Shares on the New
York Stock Exchange during the period from January 3, 1995 through
December 8, 1995, which price was determined and agreed by the parties
to be $7.50 per Share. The Shares were purchased on
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<PAGE> 11
January 10, 1996, for a total amount of $7,125,000. The Shares were
retired by First Union.
Agreement to Purchase Office Building. Pursuant to this
agreement, First Union agreed to sell to Bedford Retirement Village
Limited Liability Company ("Bedford") certain real property owned by
First Union, known as Ninth Street Plaza, 601 Rockwell Building and
the Rockwell Garage, all located in Cleveland, Ohio. Bedford is a
company controlled by Osborne. The purchase price for the three
buildings was $8,825,000. First Union received $1,825,000 in cash at
closing on February 9, 1996, and a promissory note for $7,000,000
payable three years from closing and bearing interest at 8% for three
years but extendible for an additional two years at an interest rate
of 9%. The note is secured by a first mortgage on the real property,
standard assignments of leases, rents and financing statements, and
personally guaranteed by Osborne. The purchase price was determined on
the basis of arm's length negotiations with a prior potential
purchaser, which purchase was not completed for other, non-related
reasons. The interest rate on the promissory note is considered to be
at or above market rate.
------------------------
Mr. Heine, a nominee for election to the Board of Trustees, is an Executive
Officer of Montgomery Ward Holding Corp. and its subsidiary, Montgomery Ward &
Co. Incorporated, which owns or leases space at four of First Union's
properties. First Union recorded rental income and operating expense
reimbursement of $643,100 for these spaces in 1995. The operating agreements or
leases existed prior to Mr. Heine's nomination and are considered arm's-length.
9
<PAGE> 12
EXECUTIVE COMPENSATION
The table below sets forth the compensation paid or earned for services to
First Union during each of the last three years by the individual who was First
Union's Chief Executive Officer during 1995 and each of the remaining four
highest compensated executive officers of the Trust at December 31, 1995.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
-------------------------------------- ------------------------
OTHER RESTRICTED
NAME AND PRINCIPAL ANNUAL STOCK ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION OPTIONS AWARDS(1) COMPENSATION(2)
- ------------------------------- -------- -------- ------------ ------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
James C. Mastandrea 1995 $283,333 $ 99,876 $ 6,536 112,500 $871,875 $18,760
Chairman, President 1994 250,000 110,610 5,151 162,500 717,188 35,630
and Chief Executive 1993* 91,026 40,000 25,000
Officer
Gregory D. Bruhn# 1995 155,987 41,328 20,000 155,000 7,164
Executive Vice 1994** 111,372 46,456 57,219(3) 45,000 127,500
President and Chief
Financial Officer
Steven M. Edelman 1995 116,667 25,830 10,000 77,500 6,823
Executive Vice 1994 87,500 27,652 10,000 63,750 5,064
President - Chief 1993 72,000 27,206 0 4,785
Investment Officer
Paul F. Levin 1995 112,500 24,754 10,000 77,500 6,573
Senior Vice 1994 93,000 27,652 10,000 63,750 5,006
President - General 1993 82,700 20,735 0 3,955
Counsel and Secretary
John J. Dee 1995 110,000 24,108 10,000 77,500 6,257
Senior Vice 1994 86,667 24,887 10,000 63,750 5,014
President - Controller 1993 72,000 27,206 0 4,785
<FN>
- ---------------
(1) The Trust's Long Term Incentive Performance Plan was implemented in 1994.
Shares are awarded only as targeted financial goals are met or exceeded, and
restrictions are removed when the market price of shares attains $21.00 for
twenty consecutive trading days or after eight years. Shares awarded under
the plan are entitled to dividends at the same rate and on the same terms as
unrestricted shares of the same class. The aggregate number and value of
restricted shares held by the individuals listed above, valued as of
December 29, 1995, are as follows: James C. Mastandrea 225,000 shares
($1,575,000); Gregory D. Bruhn, 40,000 shares ($280,000); Paul F. Levin,
20,000 shares ($140,000); Steven M. Edelman, 20,000 shares ($140,000); and
John J. Dee, 20,000 shares ($140,000).
(2) Amounts shown are composed solely of annual contributions made to a defined
contribution pension plan, except the amount for Mr. Mastandrea, which also
included term life insurance premiums. The pension plan contribution for
each participant is equal to the sum of (i) 3% of the participant's total
cash compensation paid for such year up to a maximum of $150,000, and (ii)
3% of the portion of the participant's cash compensation paid for such year
which is in excess of that year's Social Security taxable wage base up to a
maximum of $150,000. The contributions made by First Union on behalf of the
above named individuals are based on salary earned and paid in that year,
plus executive incentive compensation paid in that year. The insurance
premiums of $11,596 in 1995 and $35,630 in 1994 for Mr. Mastandrea are net
of the amount recoverable by First Union upon his termination or death. The
policy provides a death benefit of $2.5 million to Mr. Mastandrea's
beneficiary.
(3) Includes reimbursement of taxes of $31,961 for relocation expenses,
reimbursement for relocation expenses of $23,500 above the standard First
Union policy and health benefit costs paid by First Union.
* Employed July 19, 1993.
** Employed March 15, 1994.
# Employment terminated effective February 12, 1996.
</TABLE>
10
<PAGE> 13
EMPLOYMENT AND CONSULTING AGREEMENTS
As of September 1, 1991, the Trust entered into an Employment and
Consulting Agreement with Donald S. Schofield, the former Chairman and Chief
Executive Officer. Mr. Schofield retired from active employment with the Trust
effective December 31, 1993. He was retained as a consultant during 1994 and
1995 at an annual fee of $250,000. The Consulting Agreement terminated as of
December 31, 1995.
In July 1994, the Trust entered into an Employment Agreement with Mr.
Mastandrea. The Agreement has an initial three-year term and is extended
automatically for additional one-year terms unless one of the parties gives
notice of an intention not to renew.
The agreement with Mr. Mastandrea provides that he will have the titles,
and perform the duties, of Chairman of the Board of Trustees, Chairman of the
Executive Committee of the Board of Trustees, and President and Chief Executive
Officer of the Trust. Under the agreement, Mr. Mastandrea receives an annual
base salary of not less than $250,000, subject to annual review and adjustment
by the Board of Trustees; the continuation of the health and welfare benefits
previously provided to him; participation in Trust's 1994 Long Term Incentive
Performance Plan; and split dollar life insurance in the benefit amount of
$2,500,000.
The premiums on the split dollar life insurance were set with the
expectation that, if Mr. Mastandrea continues to work for the Trust until he
attains age 65, the cash surrender value of the policy will be sufficient to
fund (1) the return to the Trust of all premiums paid by it and (2) paid-up
insurance on the life of Mr. Mastandrea in the amount of $2,500,000. When the
Trust's obligation to pay premiums ceases, whether upon funding in full of the
policy or termination of Mr. Mastandrea's employment, the Trust will be entitled
to a return of all premiums paid by it (up to the cash surrender value of the
policy), and Mr. Mastandrea will own the policy.
The Agreement also provides that, in the event Mr. Mastandrea becomes
disabled, the Trust will continue to pay his base salary and bonus and to
provide health and welfare benefits for three years, unless he earlier recovers
from the disability, dies, or attains age 65.
The employment of Mr. Mastandrea may be terminated at any time. However, if
the Trust terminates the employment of Mr. Mastandrea without cause (as defined
in the Agreement), or if he terminates his employment for good reason (as
defined), the Trust is required to continue to pay his base salary and bonus and
to provide benefits, including pension contributions and vesting of options, for
a period of three years, unless he earlier dies or attains age 65. A portion of
the Shares of restricted stock previously granted to Mr. Mastandrea would also
vest. Notification by the Trust that it does not intend to renew the Agreement
beyond the three-year initial term is treated, for this purpose, as a
termination by the Trust.
In the event of a change in control or shift in ownership of the Trust (as
defined), the Trust is required to deposit, in an irrevocable escrow account, an
amount sufficient to fund all payments that would be due to Mr. Mastandrea upon
termination without cause or resignation for good reason. In addition, if
termination without cause or resignation for good reason occurs after a change
in control or shift in ownership, the base salary, bonus, and pension
contributions payable to him upon termination becomes due immediately in lump
sum.
In the event a change in the ownership or control occurs within the meaning
of Section 280G of the Internal Revenue Code, the aggregate amount payable to
Mr. Mastandrea will be limited to
11
<PAGE> 14
the maximum amount that may be deducted for Federal income tax purposes without
constituting "excess parachute payments" under Section 280G. In addition, Mr.
Mastandrea has agreed to defer the receipt of payments that would otherwise not
be deductible due to the $1,000,000 limit under Section 162(m) of the Internal
Revenue Code.
In July 1994, the Trust also entered into an Employment Agreement with Mr.
Bruhn, the former Executive Vice President and Chief Financial Officer. Mr.
Bruhn's employment was terminated effective February 12, 1996. Pursuant to the
terms of the Agreement, the Trust will continue to pay Mr. Bruhn's base salary
and bonus, at the rate in effect on the termination date (base salary $160,000
and bonus $41,328) for a period of three years unless he dies earlier. It will
also provide health and welfare benefits, including contribution to any Pension
Plan, in the same manner and amount as was in effect immediately prior to
termination, for the same three-year period. Share options previously granted
will continue to vest for the three-year period, and a portion of the restricted
shares previously granted will vest in accordance with a formula established in
the Agreement with the remaining shares forfeited.
12
<PAGE> 15
<TABLE>
<CAPTION>
OPTION GRANTS
IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
-------------------------------------------------------- ANNUAL RATES OF SHARE
% OF TOTAL PRICE APPRECIATION
OPTIONS FOR 8 YEAR
GRANTED EXERCISE OPTION TERM(2)
OPTIONS TO EMPLOYEES PRICE PER EXPIRATION ---------------------
NAME GRANTED(1) IN 1994 SHARE DATE 5% 10%
- ------------------------------- ---------- ------------ --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
James C. Mastandrea............ 112,500 46.4% $ 7.75 04-03-2003 $416,281 $997,066
Gregory D. Bruhn............... 20,000 8.2% 7.75 04-03-2003 74,006 177,256
Paul F. Levin.................. 10,000 4.1% 7.75 04-03-2003 37,003 88,628
Steven M. Edelman.............. 10,000 4.1% 7.75 04-03-2003 37,003 88,628
John J. Dee.................... 10,000 4.1% 7.75 04-03-2003 37,003 88,628
<FN>
- ---------------
(1) Options granted under the 1994 Long Term Incentive Performance Plan (the
"1994 Plan") may be in the form of Incentive Stock Options (qualifying as
such under Section 422A of the Internal Revenue Code, as amended) and
Nonstatutory Stock Options. Options granted are at prices not less than the
fair market value of the Shares at the date of grant and expire not later
than eight years after the date granted. Options are exercisable only after
the optionee has been continuously employed by the Trust for twelve months
from the date of grant and thereafter to the extent of one-third during the
second year, two-thirds during the third year and in full during the fourth
through eighth years. In the event of any change in control of the Trust, a
defined term in the 1994 Plan, including liquidation or dissolution of the
Trust, or a merger or consolidation with respect to which the Trust shall
not be the surviving entity, all options become exercisable immediately.
(2) The appreciation calculation is a required disclosure. The appreciation
examples shown above do not reflect past experience of the Trust's options
granted, nor can they be expected to predict future performance.
</TABLE>
<TABLE>
<CAPTION>
AGGREGATED SHARE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
VALUE OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED AT FISCAL YEAR END AT FISCAL YEAR END
ON VALUE ------------------------------- -------------------------------
NAME EXERCISE REALIZED UNEXERCISABLE EXERCISABLE UNEXERCISABLE EXERCISABLE
- ------------------------- --------- -------- -------------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
James C. Mastandrea...... 0 $ 0 237,500 62,500 $ 46,875 $ 23,438
Gregory D. Bruhn......... 0 0 52,083 12,917 8,333 4,167
Paul F. Levin............ 0 0 17,666 28,284 4,166 2,084
Steven M. Edelman........ 0 0 18,541 38,419 4,166 2,084
John J. Dee.............. 0 0 18,541 40,499 4,166 2,084
</TABLE>
MANAGEMENT, ORGANIZATION AND COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Board of Trustees is responsible for fixing the compensation of
executive officers. However, the Board acts on the basis of recommendations of
its Management, Organization and Compensation Committee (the "Committee"). The
Committee makes recommendations to the Board with respect to (i) the
compensation of all officers with annual salaries of $75,000 or
13
<PAGE> 16
more, (ii) grants of options under the Trust's 1981 Employee Share Option Plan
and (iii) awards to employees under the 1994 Long Term Incentive Performance
Plan. The Committee is made up of three independent, non-management Trustees,
Messrs. William E. Conway (Chairman), Daniel G. DeVos and Russell R. Gifford.
GENERAL APPROACH TO EXECUTIVE COMPENSATION
Compensation for executive officers consists of four principal elements:
base salaries, annual cash/stock bonus awards, stock options, and restricted
stock.
The Committee seeks to structure executive compensation to attract and
retain highly qualified, experienced management personnel and to use the four
principal components of the Trust's executive compensation program to align the
interests of management and shareholders and to use the non-salary compensation
components to reward performance beyond regular, competent job performance as
measured by individual performance goals and corporate performance targets.
In establishing each component of executive compensation, the Committee
compared the level of compensation of its executive officers with compensation
paid by organizations of similar size in comparable industries. In making these
comparisons, the Committee utilized data gathered and compiled by its
independent compensation consultant in 1994. The Committee did not have and,
therefore, did not separately consider data relating to corporate performance of
the companies included in its compensation consultant's comparisons. However,
certain companies included in such compensation comparisons are also included in
the NAREIT All REITs Index. The Performance Graph in this proxy statement
compares corporate performance (based upon five year cumulative total
shareholder return) of the Trust versus that of companies included in the NAREIT
All REITs Index and in the NYSE Composite Index.
Base Salaries. The Committee examined base compensation of executive
officers at other real estate investment trusts located in the Midwest that have
market capitalizations between approximately $60 million and $360 million (the
"comparable REITs"). The base salaries of the Trust's chief executive officer
and other named executive officers for 1995 were, on average, below the average
base salary of such officers at comparable REITs. Base salary amounts were
determined without reference to corporate performance.
Annual Cash/Stock Bonus Awards. The primary goals of the annual cash/stock
bonus awards are to provide a direct link between compensation and annual
performance, to provide a strong incentive to attain Trust and operating unit
goals, to recognize and reward employees for performance beyond regular,
competent job performance, and to build and reinforce the concept of a team by
focusing on the key measure of the Trust's performance--funds from operations
for the current year. Awards are designed to be comparable in amount to the
average of awards paid by organizations of similar size in comparable industries
when target performance is met; awards will be above this average when the
target is exceeded, or below this average when the target is not achieved.
Awards are paid partially in stock in order to encourage Share ownership.
The Trust's annual cash/stock bonus awards are intended to be the method
for compensating executive officers for achieving performance goals for a
particular fiscal year. Performance goals are expressed in terms of threshold,
target and maximum performance goals. Threshold
14
<PAGE> 17
goals are the minimum necessary performance levels required for an executive
officer to earn an annual bonus award. In 1995 threshold performance goals were
based upon an executive officer achieving 80% of such executive officer's target
goal. Maximum performance goals were based upon an executive officer achieving
120% of such executive officer's target goal. If a threshold, target or maximum
performance goal was achieved, the executive officer received 50%, 100% or 150%,
respectively, of such executive officer's bonus potential. If the threshold 80%
is not met, no bonus is paid. Bonuses for achievement of performance goals at a
level between an executive officer's threshold and target goals or target and
maximum goals were calculated based upon straight line interpolation. Annual
cash/stock bonus awards are paid 20% in Shares of the Trust and 80% in cash. For
1995 the chief executive officer and all named executive officers had a single
performance goal based upon achieving the Trust's funds from operations target.
Stock Options. The primary goal of the stock options is to link shareholder
and employee interest by providing a way for both to gain from appreciation in
the market price of Shares over time. Stock options are granted to executive
officers as well as others in the organization on the theory that the best
performance for shareholders will be attained when a broad group of employees
has a mutual interest with the shareholders.
Restricted Stock. The restricted stock awards are designed to encourage
senior executives to think and act like shareholders and, as a result, to
promote the long term growth and performance of the Trust and increase the
market price of the Shares. The awards are intended to act as long term
performance incentives by creating a strong positive correlation between stock
price appreciation and dividend growth, on the one hand, and compensation levels
on the other. The level of the awards are recognized to be above average for
organizations of similar size in comparable industries, but the goal required to
earn the restricted stock in less than eight years is challenging (the market
price of the Shares has to attain $21 per Share for 20 consecutive trading
days). Restricted stock is granted only to the most senior officers--those who
have the greatest impact on the performance of the Trust.
In determining the amount of all incentive compensation arrangements (i.e.,
target bonus compensation, stock option grants and restricted stock awards) for
executive officers of the Trust, the Committee considered data presented by its
compensation consultant in 1994 with respect to incentive compensation paid at
approximately 125 other financial services companies, including REITs and
banking and insurance institutions, with average sales of $356 million and
average assets of approximately $200 million ("comparable companies"). Target
bonus compensation was fixed by the Committee so that executive officers
achieving their target performance goals would receive bonus compensation in the
median range for corresponding positions at comparable companies. Likewise,
option grants were fixed by the Committee so that executive officers (other than
the chief executive officer) would receive incentive stock options in the median
range for corresponding positions at comparable companies. In contrast, however,
the amount of restricted stock awards granted to executive officers, (including
the chief executive officer) were fixed by the Committee with reference to data
from comparable companies but so that executive officers achieving their long
term incentive goals would receive restricted stock compensation higher than the
average awards granted to executive officers in corresponding positions at
comparable companies. The number of stock options and shares of restricted stock
granted to Mr. Mastandrea was determined in connection with the negotiation of
Mr. Mastan-
15
<PAGE> 18
drea's Employment Agreement as chief executive officer of the Trust with the
Committee in consultation with its compensation consultant.
The Trust's stock option grants and restricted stock awards to executive
officers were based upon corporate performance during the immediately preceding
fiscal year, and such compensation was structured in a manner the Committee
believes will maximize future performance by executive officers by linking the
vesting of restricted stock and such officers' eligibility to receive future
option and restricted stock awards until certain funds from operations targets
are achieved. The Committee did not utilize incentive compensation data from
comparable REITs in fixing the executive officer's incentive compensation
because a high standard deviation made such data inherently unreliable for
comparison purposes. The small number of options and the absence of shares of
restricted stock previously granted to executive officers were considered by the
Committee in determining the size and structure of such grants.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
During 1995, Mr. Mastandrea served as Chairman of the Board of Trustees,
Chairman of the Executive Committee of the Board of Trustees, and President and
Chief Executive Officer of the Trust. For the year ended December 31, 1995, he
received a base salary of $283,333, and an annual bonus of $99,876, options to
purchase 112,500 Shares, and 112,500 Shares of restricted stock under the 1994
Long Term Incentive Performance Plan. See the tables entitled "Summary
Compensation Table" and "Option Grants in Last Fiscal Year."
The Committee believes that Mr. Mastandrea's compensation is consistent
with its general approach to executive compensation, which is described above,
as well as Mr. Mastandrea's position and responsibilities with the Trust and his
individual performance during 1995. Mr. Mastandrea's compensation is also
consistent with commitments made to him when he was hired by the Trust in July
1993, which are reflected in an employment agreement discussed above under the
heading "Employment and Consulting Agreements."
COMPENSATION OF OTHER NAMED EXECUTIVE OFFICERS
As is the case with Mr. Mastandrea, the Committee believes that the
compensation provided to other executive officers named in the "Summary
Compensation Table" is consistent with the Committee's general approach to
executive compensation, which is described above, as well as the position and
responsibilities with the Trust and individual performance of each of these
executive officers during 1995.
Mr. Bruhn's compensation and other payments to him are also consistent with
commitments made to him when he was hired by the Trust in March 1994, which are
reflected in an Employment Agreement with him, discussed above, under the
heading "Employment and Consulting Agreements."
WILLIAM E. CONWAY (CHAIRMAN) DANIEL G. DEVOS RUSSELL R. GIFFORD
MEMBERS OF THE COMMITTEE
16
<PAGE> 19
PERFORMANCE GRAPH
The performance graph assumes $100 invested on December 31, 1990 in First
Union Shares, All REITs and the NYSE Composite, with dividends reinvested when
paid and share prices as of the last day of each calendar year. The total return
for All REITS was compiled by the National Association of Real Estate Investment
Trusts (NAREIT).
FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
MEASUREMENT PERIOD NYSE
(FISCAL YEAR COVERED) FIRST UNION ALL REITS COMPOSITE
<S> <C> <C> <C>
1990 100 100 100
1991 105 136 127
1992 149 152 133
1993 168 180 144
1994 122 182 139
1995 137 215 183
</TABLE>
PROPOSAL 2
SHAREHOLDER PROPOSAL
Statement in Support and Proposal
Allen Wolff, D.V.M., Trustee, 4241 Center Road, Brunswick, Ohio 44212-0474,
who is the beneficial owner of 1,520 Shares of Beneficial Interest, has advised
the Trust that he intends to present at the Annual Meeting the following
proposal, for which the Board of Trustees and the Trust accept no
responsibility:
Throughout corporate America, I feel there are about five things that need
to be changed to have ALL managers more responsive to the shareholder; this
stockholder resolution is but the first step.
17
<PAGE> 20
Although First Union's proxy card resembles almost every other proxy card I
have seen (other than street name-holders), it is confusing to the average
stockholder.
I am particularly dismayed at the statement on proxies that "Proxies
signed, but not specifically marked, will be voted as management has suggested"
Management says that stockholders clearly understand how their votes will
be counted if they don't put Xs in the boxes; yet many shareholders don't! THEY
say that this process allows the stockholder not to be burdened with marking TWO
to FOUR Xs, and that allowing management to have these proxies is in the best
interest of the corporation. How many shareholders are even able to read through
the gobbleygook to understand what they are being asked to vote upon?
Managements are using this skewed method of counting proxies to get
"shareholder approval" oftentimes of questionable "motions", usually executive
and Board compensation.
As a REIT, First Union is required to pay out 95% of its profits to the
shareholders. But, increased compensation cuts the profits and awards of stock,
gratis or below market costs, dilutes the ownership and causes the 95% to be
divided among more people and spending one half of the potential net to protect
the incumbent's turf (as done last year) is probably NOT in the best interest of
the stockholders -- only shareholders were hurt by this action.
Besides the numbers on the P&L statement, one way of measuring success is
by investor confidence. My original investment having currently depreciated by
77% does not indicate investor confidence. A formula needs to be in place using
actual (real) profits and returns to the shareholder as two of the measures of
success. The BASE year for determining executive bonuses SHOULD NOT be the year
of greatest losses.
If there were an OBJECTIVE, rather than a SUBJECTIVE, way for determining
bonuses, I would not object, but I have yet to hear of a truly objective plan.
But, one cannot say the losing 50 million dollars compared to losing 100 million
dollars represents a 50% better success ratio. Good management will show profits
even under bad conditions.
RESOLVED THAT IN THE FUTURE PROXIES OF THIS CORPORATION, THAT THERE BE NO
DISCRETIONARY VOTING BY THE NAMED PROXY-HOLDER.
A similar proposal submitted last year garnered 30% of the vote; less than
72% of the outstanding shares were represented at the meeting. Over 3 million
shares ABSTAINED and among the votes counted against were unmarked proxies --
the number of which were not revealed, although asked for. In every case,
managements trivialize the importance of the UNMARKED proxies but are not
willing to give them up, why not?
Beware that if you sign your proxy card, but leave this issue unmarked, the
Company will count you as voting AGAINST.
BOARD OF TRUSTEES' RECOMMENDATION AND STATEMENT
The Board of Trustees recommends that the beneficiaries vote AGAINST this
proposal for the following reasons:
18
<PAGE> 21
This is substantially the same proposal as one presented by Mr. Wolff last
year, and rejected by the shareholders then.
This proposal seeks to eliminate the right and ability of First Union's
beneficiaries to have their Shares voted by simply signing and returning a proxy
card. This right is explicitly provided for in Rule 14a-4(b) (1) (the "Rule")
under the Securities Exchange Act, which provides: "A proxy may confer
discretionary authority with respect to matters as to which a choice is not
specified by the Security holder provided that the form of proxy states in
boldface type how it is intended to vote the shares represented by the proxy in
each such case." Thus, the practice is specifically approved by the Rule. As a
convenience, First Union provides its beneficiaries with the opportunity to
return a signed and dated but unmarked proxy card, thereby authorizing the
designated proxies to vote in accordance with the recommendations of the Board.
In such a case, the beneficiaries actually vote their Shares in accordance with
the recommendations of the Board, but are permitted to do so by simply signing
the card, and are not required to specifically mark each item listed on the
proxy card. As required by the Rule, beneficiaries are advised, in bold letters
on each proxy card, as to the effect of returning such an unmarked proxy card.
We credit all beneficiaries with the ability to read and understand this
procedure. In addition, all beneficiaries continue to have the opportunity, if
they so desire, to submit a proxy card with separate instructions for each item
by marking the appropriate FOR, AGAINST, or ABSTAIN box for each issue as
applicable.
Moreover, the proponent has interjected in his proposal extraneous material
and an unsupported assertion that "managements are using this skewed method" to
obtain shareholder approval of "questionable 'motions'", relating to executive
and Board compensation. Not only does this statement impugn the motives of
management, but it is also inherently untrue with respect to First Union, since
in each case where matters of compensation were before the shareholders for
approval, shareholders were clearly advised, in accordance with the Rule, that
proxies signed but not marked would be voted as recommended by management. Thus,
these shareholders did, in effect, vote for the proposals.
The proposal will not serve to provide shareholders with any new rights or
powers. To the contrary, it will simply deprive First Union's shareholders of a
convenient method of participating in annual or special meetings.
VOTE REQUIRED. Approval of this proposal will require the affirmative vote
of the holders of a majority of the Shares present in person or by proxy and
voting at the meeting.
SELECTION OF AUDITORS
Arthur Andersen LLP has been selected as auditors of First Union for the
ensuing year. Arthur Andersen LLP has been First Union's auditors since the
founding of the Trust in 1961. Representatives of Arthur Andersen LLP are
expected to be present at the 1996 Annual Meeting with the opportunity to make a
statement if they so desire and to respond to shareholder questions.
19
<PAGE> 22
VOTING
The affirmative vote of the holders of a majority of the Shares present in
person or by proxy and voting at the meeting is required for approval of the
matters described in this Proxy Statement. If the requisite approval is not
obtained with respect to a particular matter, the proposal referred to in such
matter will not be implemented.
As far as the Trustees are aware, no matters other than those outlined in
this Proxy Statement will be presented to the meeting for action on the part of
the shareholders. If any other matters are brought before the meeting, it is the
intention of the persons named in the accompanying proxy to vote the Shares to
which the proxy relates in accordance with their best judgment.
SHAREHOLDER PROPOSALS
Any shareholder proposals intended to be presented at the 1997 Annual
Meeting of Shareholders must be received by First Union for inclusion in First
Union's proxy statement and form of proxy relating to that meeting on or before
November 9, 1996. Any such proposals should be sent to the following address:
First Union Real Estate Equity and Mortgage Investments, Suite 1900, 55 Public
Square, Cleveland, Ohio, 44113-1937, Attention: Paul F. Levin, Secretary.
FIRST UNION REAL ESTATE EQUITY
AND MORTGAGE INVESTMENTS
PAUL F. LEVIN
Senior Vice President -- General
Counsel and Secretary
March 8, 1996
20
<PAGE> 23
FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS -- PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES.
E. Bradley Jones and James C. Mastandrea, or either of them,
are hereby authorized, with full power of substitution, to represent and to
vote the shares which the undersigned may be entitled to vote, including
reinvestment shares, if any, at the Annual Meeting of Shareholders of First
Union Real Estate Equity and Mortgage Investments to be held on April 9,
1996, or at any adjournment thereof, as follows:
THE BOARD OF TRUSTEES RECOMMENDS A VOTE "FOR" ALL NOMINEES IN PROPOSAL 1
<TABLE>
<S> <C>
1. ELECTION OF TRUSTEES WITHHOLD AUTHORITY / /
FOR all nominees listed below / / to vote for all nominees listed below
(except as indicated to the contrary below)
</TABLE>
Daniel G. DeVos, Allen H. Ford, Spencer H. Heine
INSTRUCTION: (TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW)
-----------------------------------------------------------------------------
THE BOARD OF TRUSTEES RECOMMENDS A VOTE "AGAINST" PROPOSAL 2
2. SHAREHOLDER PROPOSAL CONCERNING TABULATION OF PROXIES
/ / FOR / / AGAINST / / ABSTAIN
3. In their discretion, as to such other business as may properly come before
the meeting or at any adjournment thereof.
(CONTINUED, AND TO BE SIGNED ON OTHER SIDE)
PROXY NO. SHARES
(Continued from the other side)
IF NO SPECIFICATION IS MADE, AUTHORITY IS GRANTED TO CAST THE VOTE OF THE
UNDERSIGNED IN FAVOR OF PROPOSAL 1 AND AGAINST PROPOSAL 2.
Dated................, 1996
...........................
...........................
Please sign as name appears
on the share certificates
(as indicated on this
card). When shares are held
by joint tenants, both
should sign. When signing
as attorney, executor,
administrator, trustee or
guardian, please give your
full title as such. If the
share certificate is issued
in the name of a
corporation, please sign in
full corporation name by a
duly authorized officer. If
a partnership, please sign
in partnership name by a
duly authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
