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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
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Date of Report May 18, 1998
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First Union Real Estate Equity and Mortgage Investments
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(Exact name of registrant as specified in its charter)
Ohio 1-6249 34-6513657
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State or other jurisdiction (Commission File Number) (I.R.S. Employer
Identification No.)
Suite 1900, 55 Public Square
Cleveland, Ohio 44113-1937
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 781-4030
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Former name or former address, if changed since last report.
Total number of pages in report 2.
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ITEM 5. OTHER EVENTS
On May 18, 1998, Registrant, First Union Real Estate Equity and Mortgage
Investments, an Ohio real estate investment trust, announced that its Board of
Trustees had terminated the employment of its Chairman, President and Chief
Executive Officer, James C. Mastandrea.
Exhibit
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(99a) Press Release announcing termination of employment of James C.
Mastandrea.
(99b) Term Sheet for Termination of Employment of James C. Mastandrea.
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
First Union Real Estate Equity
and Mortgage Investments
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(Registrant)
Date: May 18, 1998 By: /s/ Paul F. Levin
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Paul F. Levin
Senior Vice President
Secretary and General Counsel
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Exhibit (99a)
[FIRST UNION REAL ESTATE INVESTMENTS LETTERHEAD]
AT THE COMPANY
Thomas T. Kmiecik
Senior Vice President and Treasurer
(216) 781-4030
FOR IMMEDIATE RELEASE
FIRST UNION'S BOARD TERMINATES CEO
CLEVELAND, OHIO, MAY 18, 1998 -- FIRST UNION REAL ESTATE INVESTMENTS (NYSE:FUR)
announced today that its Board of Trustees has terminated the employment of
James C. Mastandrea. Prior to his termination, Mr. Mastandrea had been Chairman
of the Board, Chief Executive Officer, and President of the Trust. Steven M.
Edelman, Executive Vice President and Chief Financial Officer, has been
appointed as interim Chief Executive Officer until a permanent replacement is
found.
Russell R. Gifford, Chairman of the Independent Special Committee of First
Union's Board of Trustees, said, "Over the years, Jim has made a substantial
contribution to the Trust. He has upgraded the Trust's portfolio through the
re-development of existing properties, acquisitions, and the sale of
underperforming properties. Among other things, Jim was responsible for the
Marathon acquisition, which was the largest and most profitable acquisition in
the Trust's history.
"Proposed tax legislation, which would eliminate the favorable tax status of the
stapled-stock and paired-share REITs such as First Union, and the proxy contest
with Gotham have, however, profoundly changed the future for the Trust," Mr.
Gifford said. "We were unable to access the capital markets in the spring, which
curtailed Jim's plans for further investment and growth, particularly in the
parking business."
Mr. Gifford continued, "The character of our shareholders has also changed
dramatically. Our largest shareholders now include Gotham Partners, Apollo Real
Estate Investments, Franklin Mutual Advisors, Inc., Cerberus Partners, and their
affiliates, and we suspect that a large portion of our other shareholders are
like-minded investors who have followed Gotham into First Union shares. Gotham
has gone so far as to initiate a proxy contest to take control of the Trust's
Board of Trustees at tomorrow's Annual Meeting. Whether or not Gotham succeeds
in the proxy contest, we believe that it is in the best interests of the Trust
and its shareholders for Jim to step down in order to facilitate the appointment
of a new Chief Executive Officer who is more acceptable to our shareholder
base."
First Union Real Estate Investments is a real estate investment trust (REIT)
headquartered in Cleveland, Ohio, and traded on the NYSE.
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Exhibit (99b)
FIRST UNION REAL ESTATE
EQUITY AND MORTGAGE INVESTMENTS
TERM SHEET FOR
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TERMINATION OF EMPLOYMENT OF
JAMES C. MASTANDREA
May 18, 1998
1. James C. Mastandrea ("JCM") and First Union Real Estate Equity and
Mortgage Investments ("FUR") acknowledge that JMC was terminated as an
officer and employee of FUR effective May 17, 1998. The termination was
without "Cause," within the meaning of the Employment Agreement between
the Trust and JCM.
2. By signing this Term Sheet, JCM resigns as a Trustee, effective
immediately. JCM will be withdrawn as a nominee of FUR's Board of
Trustees for election as a Trustee at the 1998 Annual Meeting.
3. Payments and benefits upon signing of Release and Term Sheet:
<TABLE>
<CAPTION>
<S> <C> <C>
i. Spread on vested options (based on closing
market price of $10.625 per share): $1,248,120.75
ii. Present value of continuation of salary and
benefits for three years: $2,199,854.84
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TOTAL CASH PAYMENT TO JCM $3,447,975.59 (1)
==============
The cash payment, less applicable withholding, will be made by
delivery of a good check of FUR on Monday, May 18, 1998.
iii. 128,017 shares of restricted stock that vest upon a
termination without Cause, less shares surrendered in payment
of withholding tax2.
Unrestricted certificates will be issued to JCM
</TABLE>
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1 Net of withholding tax at 34.95%, this amount is $2,242,908.12.
2 Net of withholding tax at 34.95%, this number is 83,275. FUR will
report JCM's income relating the shares based on $10.625 per share.
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forthwith against receipt of restricted certificates now held
by JCM. By signing this Term Sheet, JCM waives any claim that
he may have to additional shares of restricted stock, whether
as "reloads" or based on future appreciation in the market
price per share.
iv. FUR will "gross up" JCM, on the terms set forth in the
Employment Agreement, for any excise tax under Section 4999 of
the Internal Revenue Code resulting from the receipt by JCM of
the cash payment and unrestricted stock under this Term Sheet.
v. Benefits under FUR's money purchase pension plan and 401(k)
plan, payable in accordance with the terms of the plans.
vi. Unpaid accrued vacation (in the amount of $11,106), unpaid
salary through the date of termination, outstanding
unreimbursed business expenses (not to exceed $1,000), and
continuation of health benefits (COBRA).
4. JCM will not return to FUR's offices, except that he may, if
accompanied by a representative of the Special Committee, return to his
office after normal business hours, in order to retrieve his personal
belongings.
5. FUR will issue the press release attached as Exhibit II.
6. Any dispute, claim, question, or disagreement arising out of or
relating to this Term Sheet or the Release will be resolved in
accordance with the Dispute Resolution Procedures set forth in Exhibit
III.
7. FUR will indemnify and hold JCM harmless from and against any loss,
cost, liability, or expense (including reasonable attorneys' fees and
other costs of litigation) incurred by JCM in connection with, or as a
result of, any claim, action, or proceeding commenced by anyone other
than JCM seeking to declare all or any part of this Term Sheet or the
Release invalid or unenforceable.
8. JCM will have full rights and protections under or with respect to
Section 3.3 of FUR's Declaration of Trust ("Trustee's Liability to
Trust and Beneficiaries --
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Indemnification and Expense -- Bond and Security"). If FUR maintains
liability insurance for any of its trustees and officers during the
period beginning on the date of this Term Sheet and ending May 17,
2006, such insurance will cover JCM to the same extent as any other
present or former trustee or officer.
IN WITNESS WHEREOF, the parties have signed this Term Sheet on
the date or dates indicated below.
FIRST UNION REAL ESTATE
EQUITY AND MORTGAGE INVESTMENTS
By:
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Russell R. Gifford, Chairman of
Special Committee of Board of Trustees
Date: May ___, 1998
Accepted:
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James C. Mastandrea
Date: May ___, 1998
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Exhibit I
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RELEASE AGREEMENT
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This Release Agreement (this "Release") is being signed by
James C. Mastandrea ("JCM") in exchange for the payments and benefits to be
provided to JCM under a First Union Real Estate Mortgage and Equity Investment
("FUR") Term Sheet for Termination of James C. Mastandrea (the "Term Sheet")
that is being signed by JCM concurrently with this Release.
JCM acknowledges that the payments and benefits to be provided
to JCM under the Term Sheet are more certain and secure than the payments and
benefits to be provided to JCM under the Employment Agreement, dated July 13,
1994, between JCM and FUR (the "Employment Agreement") and, therefore, represent
valid consideration for this Release.
JCM hereby releases and discharges FUR and its subsidiaries,
affiliates, officer, trustees, employees, shareholders, agents, advisors,
employee benefit plans and their fiduciaries, and other representatives of FUR,
and their successors and assigns (collectively the "FUR Released Parties") from
any and all liability, claims, causes of action, demands, and damages that JCM
may have against the FUR Released Parties, including but not limited to any
claim arising out of the Employment Agreement or any plan or benefit referred to
therein or otherwise relating to JCM's employment by FUR, his position as
officer or Trustee of FUR, his termination as an officer and employee of FUR, or
his resignation as a Trustee, whether such claims are known or unknown,
contingent or matured, and JCM agrees not to sue any of the FUR Released Parties
in any court or bring any other kind of legal proceeding against the FUR
Released Parties regarding any of the matters referred to in this paragraph. The
foregoing release does not cover any claims that may arise out of events or
conditions arising after the execution of this Release by JCM or claims for
enforcement of this Release or the Term Sheet.
In exchange for the foregoing release of the FUR Released
Parties, FUR hereby releases and discharges JCM and his spouse, dependents,
children, heirs, successors, agents, advisors, and assigns and their legal
representatives (collectively the "JCM Released Parties") from any and all
liability, claims, causes of action, demands, and damages that FUR may have
against the JCM Released Parties, including but not limited to any claim arising
out the Employment Agreement or any plan or benefit referred to therein or
otherwise relating to JCM's employment by FUR, his position as officer or
Trustee of FUR, his termination as an officer and employee of FUR, or his
resignation as a Trustee, whether such claims are known or unknown, contingent
or matured, and FUR agrees not to sue any of the JCM Released Parties in any
court or bring any other kind of legal proceeding against the JCM Released
Parties regarding any of the matters as covered by this Release. The foregoing
release does not cover any claims that may arise out of events
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or conditions arising after the execution of this Release by FUR or claims for
enforcement of this Release or the Term Sheet.
JCM understands that, by signing this Release, he waives and
releases any and all claims for compensation and benefits that he may have
pursuant to the Employment Agreement and that he will not receive any
compensation or benefits pursuant to that Employment Agreement in the future.
JCM and FUR acknowledge that, in executing this Release,
neither of them has relied upon any representation or statement made by the
other, except for the representations set forth in this Release.
JCM and FUR understand that this Release is final and binding
and agree not to challenge its enforceability.
JCM and FUR agree that, if any provision of this Release is
adjudicated to be invalid or unenforceable, or if compliance with any provision
of this Release is restrained pending a final determination as to its legality,
such adjudication or restraint will apply only to the provision or provisions
deemed invalid, unenforceable, or restrained, and the remaining provisions will
be valid and enforceable.
JCM agrees that this Release will also be binding upon his
spouse, dependents, children, heirs, successors, and assigns and their legal
representatives and will inure to the benefit of and release the successors and
assigns of the FUR Released Parties, and FUR agrees that this Release will also
be binding upon its successors and assigns and will inure to the benefit of and
release JCM's spouse, dependents, children, heirs, successors, and assigns and
their legal representatives.
In the event that any legal action, arbitration, or other
proceeding is brought against JCM and it is ultimately determined that the
subject matter of the legal action was released by this Release, FUR will
reimburse JCM for the costs (including reasonable attorney's fees) incurred by
him in defending against the action, arbitration, or other proceeding.
JCM acknowledges that he (a) has been advised by counsel in
connection with this Release and the Term Sheet; (b) has been given a reasonable
period of time to review and consider this Release; (c) understands the
provisions of this Release; and (d) has executed this Release voluntarily.
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IN WITNESS WHEREOF, the parties have signed this Release on
the date or dates indicated below.
FIRST UNION REAL ESTATE
EQUITY AND MORTGAGE INVESTMENTS
By:
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James C. Mastandrea Russell R. Gifford, Chairman of
Date: May ___, 1998 Special Committee of Board of Trustees
Date: May ___, 1998
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Exhibit II
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FIRST UNION REAL ESTATE INVESTMENTS
TERMINATES EMPLOYMENT OF CHIEF EXECUTIVE OFFICER
CLEVELAND, OHIO, MAY 18, 1998 -- FIRST UNION REAL ESTATE
INVESTMENTS (NYSE:FUR) announced today that it had terminated the employment of
James C. Mastandrea. Prior to his termination, Mr. Mastandrea had been Chairman
of the Board, Chief Executive Officer, and President of the Trust. Steven M.
Edelman, Executive Vice President - Chief Investment Officer, has been appointed
as interim Chief Executive Officer until a permanent replacement is found.
Russell R. Gifford, Chairman of the independent Special
Committee of FUR's Board of Trustees, said, "Over the years, Jim has made a
substantial contribution to the Trust. He has upgraded the Trust's portfolio
through the development of existing properties, acquisitions, and the sale of
underperforming properties. Among other things, Jim is responsible for the
Marathon acquisition, which is the biggest and most profitable acquisition in
the Trust's history."
"Proposed tax legislation, which would eliminate the favorable
tax status of paired-share REITs such as FUR, and the proxy contest with Gotham
have, however, profoundly changed the future for the Trust," Mr. Gifford said.
"We were unable to access capital markets in the Spring, which curtailed Jim's
plans for further investment and growth, particularly of the parking business.
The character of our shareholders has changed dramatically. Our largest
shareholders now include Gotham Partners, Apollo Real Estate Investments,
Cerberus Partners, and their affiliates, and we suspect that a large portion of
our other shareholders are like-minded investors who followed Gotham into our
stock. Gotham has gone so far as to initiate a proxy contest to take control of
the Trust's Board of Trustees at tomorrow's Annual Meeting. Whether or not
Gotham succeeds in the proxy contest, we believe that it is in the best
interests of the Trust and its shareholders for Jim to step down in order to
facilitate the appointment of a new Chief Executive Officer who is more
acceptable to our shareholder base."
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Exhibit III
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DISPUTE RESOLUTION PROCEDURES
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1. In the event of any dispute, claim, question, or
disagreement arising out of or relating to the Term Sheet or the Release (a
"dispute"), the parties will use reasonable efforts to settle the dispute. To
this end, they will consult and negotiate with each other, in good faith, and,
recognizing their mutual interests, attempt to reach a just and equitable
solution satisfactory to both parties. If settlement is not reached within
thirty (30) days after written notice of the dispute is first given by one party
to the other party, either party may submit the dispute to binding arbitration
conducted in accordance with the Rules for Non-Administered Arbitration of
Business Disputes of the Center for Public Resources, New York City (the "CPR
Rules"). Any dispute will be arbitrated by a single arbitrator either mutually
agreed upon by the parties or, absent agreement, appointed in accordance with
the CPR Rules. The arbitration will be governed by the United States Arbitration
Act, 9 USC ss.ss.1-16, and judgment upon the award may be entered by any court
having jurisdiction thereof. The arbitrator will have case management authority
and will resolve the controversy in a final award within 180 days from
commencement of the arbitration. All questions of arbitrability will be resolved
by the arbitrator appointed pursuant to this clause. The prevailing parties will
be entitled to receive an award of attorneys' fees incurred in connection with
the arbitration and judicial proceedings related thereto. There will be no
appeal from the arbitral award, except for fraud committed by the arbitrator in
carrying out his duties under the CPR Rules; otherwise the parties irrevocably
waive their rights to judicial review of the claim or controversy.
2. Unless otherwise agreed by the parties, the situs for
dispute resolution will be Cleveland, Ohio.
3. In the event that the Center for Public Resources no longer
promulgates rules as set forth above, then the arbitration will be administered
under the rules of the American Arbitration Association or such other recognized
rules for resolution of disputes as the parties may agree.
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