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 (Amendment No. )
Filed by the Registrant X
Filed by a Party other than the Registrant ___
Check the appropriate box:
___ Preliminary Proxy Statement ___ Confidential. For
Use of the Commission
Only (as permitted by
Rule 14a-6(e)(2))
X Definitive Proxy Statement
___ Definitive Additional Materials
___ Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
MUNICIPAL MORTGAGE AND EQUITY, L.L.C.
________________________________________________________________________
(Name of Registrant as Specified in Its Charter)
________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, If Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
X No fee required.
___ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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 (set forth the amount on which the filing fee is
calculated and state how it was determined):
______________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
______________________________________________________________________________
(5) Total fee paid:
______________________________________________________________________________
___ Fee paid previously with preliminary materials:
___ 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:
______________________________________________________________________________
<PAGE>
MUNICIPAL MORTGAGE AND EQUITY, L.L.C.
Baltimore, Maryland
May 28, 1997
NOTICE OF ANNUAL MEETING
NOTICE IS HEREBY GIVEN that the Annual Meeting of the holders
of Growth Shares and Term Growth Shares (the "Shareholders") of Municipal
Mortgage and Equity, L.L.C., a Delaware limited liability company (the
"Company"), will be held at the following location, beginning at 9 a.m.:
Johns Hopkins University School of Continuing Studies
Downtown Center
One Charles Plaza, Second Level
Charles and Saratoga Streets
Baltimore, Maryland 21201
THE PURPOSE of the Annual Meeting will be:
1. To elect two members of the Board of Directors to hold office for
three-year terms expiring at the annual meeting for the fiscal year ending
December 31, 2000; and
2. To consider and act upon any other matter which may properly come
before the meeting or any adjournment thereof.
All Shareholders are cordially invited to attend the Annual Meeting. The
record date for determining those Shareholders entitled to vote at the Annual
Meeting is April 8, 1997. A review of the Company's operations for the year
ended December 31, 1996 will be presented. The 1996 Annual Report to
Shareholders is enclosed.
By Order of the Board of Directors,
Thomas R. Hobbs
Secretary
Baltimore, Maryland
April 22, 1997
IMPORTANT - Whether or not you plan to attend the meeting in person,
you can help in the preparation for the meeting by filling in and signing the
enclosed proxy and promptly returning it in the enclosed envelope. If you
are unable to attend, your shares will be voted as directed by your proxy.
If you do attend the meeting, you may vote your shares even though you
have sent in your proxy.
<PAGE>
MUNICIPAL MORTGAGE AND EQUITY, L.L.C.
Corporate Office and Mailing Address:
218 North Charles Street, Suite 500
Baltimore, Maryland 21201
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation of
proxies by Municipal Mortgage and Equity, L.L.C. (hereinafter the
"Company") from holders of Growth Shares and Term Growth Shares (the
"Shareholders") for the Annual Meeting of Shareholders to be held on May
28, 1997. The cost of soliciting such proxies will be borne by the Company.
Brokers and other persons will be reimbursed for their reasonable expenses
in forwarding proxy materials to Shareholders who have a beneficial interest
in Growth Shares registered in the names of nominees.
The enclosed proxy, if executed and returned, may be revoked at any
time prior to the meeting by executing a proxy bearing a later date or by
written notice to the Secretary of the Company. The power of the proxy
holders will also be revoked if the Shareholder executing the proxy appears
at the meeting and elects to vote in person. Executed proxies confer upon the
persons appointed as proxies discretionary authority to vote on all matters
which may properly come before the meeting including motions to adjourn the
meeting for any reason.
In accordance with the Company's By-Laws, the stock transfer records
were compiled on April 8, 1997, the record date set by the Board of Directors
for determining the Shareholders entitled to notice of, and to vote at, this
meeting and any adjournment thereof. On that date, there were 11,092,591
outstanding Growth Shares (no par value) and 2,000 outstanding Term
Growth Shares. The holders of the outstanding Growth Shares and Term
Growth Shares at the close of business on April 8, 1997 will be entitled to one
vote for each share held by them as of such date.
The presence of the holders of a majority of the issued and outstanding
Growth Shares and Term Growth Shares entitled to vote at the Annual
Meeting, either in person or represented by properly executed proxies, is
necessary to constitute a quorum for the transaction of business at the Annual
Meeting. If there are not sufficient shares represented in person or by proxy
at the meeting to constitute a quorum, the meeting may be postponed or
adjourned in order to permit further solicitation of proxies by the Company.
Proxies given pursuant to this solicitation and not revoked will be voted at any
postponement or adjournment of the Annual Meeting in the manner described
above.
This proxy statement and the enclosed proxy are first being sent or given
to Shareholders on approximately April 22, 1997.
<PAGE>
ELECTION OF DIRECTORS
(Proposal No. 1)
The Company's Amended and Restated Certificate of Formation and
Operating Agreement (the "Operating Agreement") generally provides that
the Board of Directors shall consist of at least five and no more than 15
members, with the number of seats on the Board to be determined from time
to time by resolution of the Board. The number of directors on the Board is
currently set at seven, with (i) six of the directors divided into three
classes, the members of which are elected by the holders of the Growth Shares
and Term Growth Shares for staggered three-year terms, and (ii) one director
(the "Specially Appointed Director") who may be appointed by the Dissolution
Shareholder (see "Certain Transactions"). As of the date of this proxy
statement, the seat reserved for the Specially Appointed Director is vacant.
The terms of two directors, Messrs. Hillman and Berndt, expire in 1997 and
both Mr. Hillman and Mr. Berndt, directors since 1996, have been nominated
for re-election at the Annual Meeting.
During 1996, the Board of Directors held one special meeting and two
regular meetings. There were no committee meetings during 1996. Only one
member of the Board of Directors, Mr. Hillman, attended fewer than 75% of
the total number of meetings of the Board of Directors. The Board has
established certain committees as follows:
1. Compensation Committee. The Compensation Committee, composed
of Messrs. Hillman (Chairman), Stearn, Baum and Joseph, did not meet during
1996. Its functions are to determine the compensation of certain officers of
the Company, including but not limited to base compensation, incentive
compensation and bonus compensation.
2. Audit Committee. The Audit Committee, composed of Messrs.
Stearn (Chairman), Jews, Berndt, Baum and Joseph, did not meet during
1996. Its duties are to select an independent accountant for the Company and
to oversee the work of such independent accountant.
The names, ages, terms of office and certain other information as of April
22, 1997 with respect to the persons nominated for election as directors and
other persons serving as directors are as follows:
Information Concerning Nominees for Terms Expiring in 2000:
Richard O. Berndt, age 54, a director of the Company since August
1996, has been the managing partner of the law firm of Gallagher, Evelius &
Jones located in Baltimore, Maryland since 1976. Mr. Berndt has extensive
experience in corporate and real estate law. Mr. Berndt serves on the Boards
of Mercantile Bankshares Corporation, Financial Administration for the
Archdiocese of Baltimore and Mercy Medical Center, Inc. Mr. Berndt is also
a member of the University of Maryland Board of Regents. Gallagher,
Evelius & Jones provides corporate and real estate related legal services to the
Company.
Robert S. Hillman, age 57, a director of the Company since August 1996,
and has been a member of the law firm of Whiteford, Taylor and Preston,
L.L.P., which has offices in Baltimore, Maryland and Washington, D.C., since
1986. Formerly the Executive Partner of the 135-attorney firm, Mr. Hillman
has extensive experience in municipal finance, real estate, labor and
employment law. He is presently on the Boards of the B&O Railroad
Museum, the Babe Ruth Museum, the U.S.F. Constellation Foundation and
the J.L. Wickham Co., Inc.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR THE ELECTION OF THE NOMINEES FOR ELECTION AS
DIRECTORS.
Information Concerning Directors whose Terms Expire in 1998:
William S. Jews, age 44, a director of the Company since August 1996,
has been President and Chief Executive Officer of Blue Cross/Blue Shield of
Maryland which employs approximately 3,200 people, insures 1.4 million
people and has annual revenues of approximately $1.9 billion, since 1993.
Before joining Blue Cross, Mr. Jews served as President and Chief Executive
Officer of Dimensions Health Corporation, a multi-faceted health care
corporation with two full-service acute care hospitals, a free-standing
emergency surgical center, two nursing homes and a for profit venture
partnership. Mr. Jews serves on the Boards of Directors of NationsBank,
Crown Central Petroleum, Inc. and The Ryland Group. He is also a board
member of the Abell Foundation and the Greater Baltimore Committee.
Carl W. Stearn, age 64, a director of the Company since August 1996,
has been Chairman and Chief Executive Officer of Provident Bankshares
Corporation, and Chief Executive Officer of Provident Bank of Maryland
since 1990. Mr. Stearn serves on the Boards of Directors of the City Revenue
Task Force, University of Maryland School of Medicine Board of Visitors and
Project Life. He is Chairman of the Maryland Governor's Work Force
Investment Board, Vice Chairman of the Maryland Academy of Sciences, and
President of the Greater Baltimore Committee Economic Development
Council.
Information Concerning Directors whose Terms Expire in 1999:
Mark K. Joseph, age 58, has served as Chairman of the Board, Chief
Executive Officer and Chief Financial Officer of the Company since August
1996. He also served as the President and a director of the Managing General
Partner of the SCA Tax Exempt Fund Limited Partnership, the Company's
predecessor (the "Predecessor"), from 1986 through 1996. Mr. Joseph is
Chairman of the Board and founder of The Shelter Group, a real estate
development and property management company. Mr. Joseph serves on the
Boards of the Greater Baltimore Committee, Provident Bankshares
Corporation and the Associated Jewish Charities. Mr. Joseph is also the
President and one of five directors of the Shelter Foundation, a public
non-profit foundation that provides housing and related services to families of
low and moderate income.
Charles C. Baum, age 55, a director of the Company since August 1996,
has been Chairman and CEO of the Morgan Group, Elkhart, Indiana, since
1992. Morgan is the nation's leader in providing transportation and other
services to the manufactured housing and recreational vehicle industries.
Since 1973, Mr. Baum has been Chief Financial Officer of United Holdings
Co. II, Inc. and its predecessors. United Holdings was involved in the metal
business until 1990 when it shifted its focus to become a firm which invests
in real estate and securities. Mr. Baum is also a director of Gabelli Funds,
Inc. (an investment advisor) and Shapiro Robinson & Associates (a firm which
represents professional athletes).
Vote Required for Approval
The affirmative vote of a majority of the holders of the outstanding
Growth Shares and Term Growth Shares (voting together as one class)
present in person or represented by duly executed proxies at the Annual
Meeting is necessary for the election of a nominee as a director of the
Company. Shares represented by an executed proxy in the form enclosed will,
unless otherwise directed, be voted for the election of the two persons
nominated to serve as directors. Shares represented by proxies which are
marked "WITHHOLD" will be excluded entirely from the vote and will have
no effect.
Compensation of Directors
The Company pays its directors who are not officers of the Company
fees for their services as directors. Such directors receive annual
compensation of $12,000 plus a fee of $500 for attendance at each meeting
of the Board of Directors (including telephonic board meetings) and, effective
April 15, 1997, each committee meeting. This compensation may be changed
by the Board of Directors. Officers of the Company who are directors are not
paid any director fees.
In addition, non-employee directors are granted options for Growth
Shares and may elect to receive Growth Shares or deferred Growth Shares in
lieu of fees under the 1996 Non-Employee Directors' Share Plan (the
"Directors' Plan"). Under the Directors' Plan, each non-employee director
was granted an option to purchase 2,500 Growth Shares following the merger
of the Predecessor with the Company, and the Plan provides that each such
non-employee director will receive an option to purchase 2,500 Growth
Shares (i) upon his initial election or appointment, and (ii) on the date of
each Annual Meeting of Shareholders. Such options have and will have exercise
prices equal to the fair market value of Growth Shares on the date of grant,
and expire and will expire at the earlier of 10 years after the date of grant or
one year after the optionee ceases serving as a director. Such options become
and generally will become exercisable one year after grant, subject to earlier
exercisability in the event of death, disability, or a change in control (as
defined), and will be forfeited in the event of cessation of service as a
director within 10 months after the date of grant. The Directors' Plan also
permits a non-employee director to elect to be paid any directors' fees in the
form of Growth Shares or deferred Growth Shares ("Deferred Shares"). A director
who makes the election to receive Growth Shares will receive Growth Shares
having a fair market value equal to the amount of fees he has elected to forgo,
with such shares issuable at the time the fees otherwise would have been paid.
At any date on which fees are payable to a director who elected to defer fees
in the form of Deferred Shares, the Company will credit such director's
deferral account with a number of Deferred Shares equal to the number of
Growth Shares having an aggregate fair market value at that date equal to the
fees that otherwise would have been payable at such date. Whenever
dividends are paid or distributions are made, the deferral account of a director
who elected to receive Deferred Shares will be credited with dividend
equivalents having a value equal to the amount of the dividend paid on a
single Growth Share multiplied by the number of Deferred Shares credited to
his deferral account as of the record date for such dividend. Such dividend
equivalents will be credited to the deferral account as a number of Deferred
Shares determined by dividing the aggregate value of such dividend
equivalents by the fair market value of a Growth Share at the payment date
of the dividend. A total of 50,000 Growth Shares are reserved for grant
under the Directors' Plan. The number and kind of shares reserved and
automatically granted under the Directors' Plan are subject to adjustment in
the event of stock splits, stock dividends, and other extraordinary events.
IDENTIFICATION OF EXECUTIVE OFFICERS
The following table identifies the executive officers of the Company and
provides certain information about each of them.
Current Position(s) with the
Name and Age and Past Business Experience
- -------------------- --------------------------------------------
Mark K. Joseph, 58 Chairman of the Board, Chief Executive
Officer and Chief Financial Officer of the
Company since August 1996. (See description
of past business experience in the preceding
section.)
Michael L. Falcone, 35 Executive Vice President of the Company
since November 1996. Prior to his
appointment as Executive Vice President, Mr.
Falcone served as Senior Vice President from
August 1996 to November 1996. Mr. Falcone
is Chairman of the Company's Operations
Committee, coordinates the day-to-day
activities of the Company. He directs the
business planning and product development
activities of the Company and provides
strategic direction for the capital markets and
asset management activities of the Company.
Prior to joining the Company, he was a Senior
Vice President of Shelter Development
Corporation ("Shelter") from 1983 to 1996.
Shelter was responsible for the development,
acquisition or rehabilitation of nearly 2,000
units of rental housing. He is currently a board
member of and shareholder in Shelter
Development LLC and Shelter Properties LLC.
Thomas R. Hobbs, 56 Senior Vice President and Secretary of the
Company since August 1996. Mr. Hobbs
directs the administrative, board relations,
investor services and financial accounting
operations of the Company. He chairs the
Credit Committee, providing direction on loan
policy and product development and is a
member of the Operations Committee.
Previously, from 1986 to 1996, Mr. Hobbs
was Senior Vice President and General
Manager of the managing general partner of
the Predecessor. In that capacity he managed
all aspects of the $300 million public fund,
including acquisition of mortgage revenue
bonds, the management of assets and the
management of all of the Predecessor's
activities.
Mary K. Reilly, 45 Senior Vice President of the Company since
November 1996. Ms. Reilly has primary
responsibility for the underwriting and
acquisition of new bond assets for the
portfolio. Ms. Reilly is a member of the
Operations Committee of the Company. From
1994 to 1996, Ms. Reilly was a Senior Fellow
in the School of Public Affairs at the
University of Maryland. Prior to her
appointment at the University, Ms. Reilly was
an investment banker, directing the housing
group in the public finance departments, first
at Mellon Bank from 1983 to 1988 and later at
Alex. Brown & Sons, Inc. from 1988 to 1993
where she managed or served as advisor on
approximately $2 billion of housing bond
transactions.
Earl W. Cole, III, 43 Vice President of the Company since August
1996. Mr. Cole directs the asset management
and loan servicing operations of the Company.
He served in a similar capacity for the
managing general partner of the Predecessor
from 1989 to 1996. Mr. Cole is a member of
the Operations Committee of the Company.
Gary A. Mentesana, 32 Vice President of the Company since August
1996. Mr. Mentesana is responsible for the
financial operations of the Company. He
manages the capital market activities of the
Company and reviews opportunities related to
portfolio acquisitions. Between 1988 and
1996, he performed similar functions for the
managing general partner of the Predecessor.
Mr. Mentesana is a member of the Operations
Committee of the Company and is a certified
public accountant.
Angela A. Barone, 36 Controller of the Company since August 1996.
Ms. Barone has overall responsibility for
financial and tax reporting, SEC and AMEX
compliance and management of the Company's
temporary investments. Ms. Barone is a
member of the Operations Committee of the
Company. Prior to joining the Company, Ms.
Barone performed similar functions for the
Predecessor beginning in 1994. Between 1992
and 1994, Ms. Barone was the Corporate
Accounting Manager for Kirschner Medical
Corporation, a publicly traded international
medical products company and was the
Accounting Manager, Orthopedic Division
from 1988 to 1992. Ms. Barone is a certified
public accountant.
<PAGE>
EXECUTIVE COMPENSATION
The Compensation Committee did not meet during 1996 and has not
determined executive compensation since the Company was established. The
Company paid compensation to Messrs. Joseph, Falcone and Hobbs for the
1996 fiscal year in accordance with their employment agreements entered into
at the time of, and described in the consent solicitation statement related to,
the merger with the Predecessor and, described below. Currently, the
executive compensation program is expected to comprise salary, annual
incentives and share incentives. The Compensation Committee has retained
a compensation consultant to assist it in determining competitive levels of
compensation for each of the officers.
Incentive Compensation Plan
The Company paid no incentive compensation to the officers listed above
during 1996. The Company plans to establish, subject to the approval of the
Compensation Committee, and bear all of the costs associated with, an
incentive compensation plan for officers and key employees of the Company.
This plan is expected to provide for the payment of a cash bonus to
participating officers and key employees if certain performance objectives
established for each individual are achieved.
1996 Share Incentive Plan
The Company established the 1996 Share Incentive Plan (the "Plan")
prior to the merger with the Predecessor in August 1996. The Plan provides
a means to attract, retain and reward executive officers and other key
employees of the Company, to link employee compensation to measures of
the Company's performance, and to promote ownership of a greater
proprietary interest in the Company. The Plan authorizes grants of a broad
variety of awards, including non-qualified stock options, stock appreciation
rights, restricted shares, deferred shares, and shares granted as a bonus or in
lieu of other awards. Any restricted share or deferred share awards would
need to be approved or ratified by the Share Incentive Committee (the
"Committee"). Initially, 883,033 Growth Shares are reserved for issuance in
connection with awards under the Plan, except that shares issued as restricted
shares and shares issued as awards other than options (including restricted
shares) are limited to 20% and 40% of the total number of Growth Shares
reserved under the Plan, respectively. Shares subject to forfeited or expired
awards, or relating to awards settled in cash or otherwise terminated without
issuance of shares to the participant again become available under the Plan.
The Plan will be administered by the Committee, which will consist of
two or more independent directors. As of the date hereof, the Board has not
appointed members of the Committee. This Committee is authorized to select
from among the eligible employees of the Company the individuals to whom
awards are to be granted and to determine the number of shares to be subject
thereto and the terms and conditions thereof. The Committee may condition
the grant, vesting, exercisability or settlement of any award on the
achievement of specified performance objectives. Awards may be settled in
cash, Growth Shares, other awards or other property, in the discretion of the
Committee. The Committee is also authorized to adopt, amend and rescind
rules relating to the administration of the Plan. The exercise price of stock
options granted will be at least equal to 100% of the fair market value of
Growth Shares on the grant date. No member of the Committee will be
eligible to participate in the Plan. The Committee may adjust the number of
shares reserved under the Plan and the number of shares relating to
outstanding awards and related terms to reflect stock splits, dividends, and
other extraordinary corporate events.
Employment Agreements
Each of Mark K. Joseph, Michael L. Falcone and Thomas R. Hobbs
entered into an employment agreement with the Company for a term of three
years. The agreements provide for annual compensation in the amounts of
$150,000, $125,000 and $125,000, respectively. Each of the employment
agreements provides for certain severance payments equal to base
compensation for the longer of the balance of the employment term or 18
months in the event of disability or termination by the Company without cause
or by the employee with "good reason," and contains provisions which will
provide such officers with substantial payments should their employment
terminate as a result of a change in control.
Pursuant to the employment agreements, the Company generally will have
"cause" to terminate Messrs. Joseph, Falcone or Hobbs if such person: (i)
engages in acts or omissions with respect to the Company which constitute
intentional misconduct or a knowing violation of law; (ii) personally receives
a benefit of money, property or services from the Company or from another
person dealing with the Company in violation of law; (iii) breaches his
noncompetition agreement with the Company; (iv) breaches his duty of loyalty
to the Company; (v) engages in gross negligence in the performance of his
duties; or (vi) repeatedly fails to perform services that have been reasonably
requested of him by the Board of Directors following applicable notice and
cure periods and which are consistent with the terms of his employment
agreement.
Each of Mr. Joseph, Mr. Falcone and Mr. Hobbs will have "good reason"
to terminate his employment with the Company in the event of any reduction
in his base compensation without his consent, any material breach or default
by the Company under his employment agreement, any substantial diminution
in his duties, any requirement to perform an act which would violate criminal
law, or any requirement to perform an act not in the best interests of the
Company and its Shareholders.
As part of their employment agreements, each of Messrs. Joseph, Falcone
and Hobbs are bound by a limited noncompetition covenant with the
Company which prohibits them from engaging in or carrying on, directly or
indirectly, whether as an advisor, principal, agent, partner, officer, director,
employee, shareholder, associate or consultant of or to any person,
partnership, corporation or any other business entity which is engaged in the
business of financing or asset management of multifamily apartment properties
financed by tax-exempt bonds, except by or through the Company for 12
months following the termination of employment with the Company, without
prior written consent of the Board of Directors; provided, however, if such
person's employment is terminated by the Company without "cause" or by the
employee for "good reason," the agreement not to compete will terminate
upon termination of employment. Certain of the agreements may contain
other exceptions.
Summary Compensation Table
The following table sets forth the annual compensation paid or accrued by
the Company from inception (August 1, 1996) through December 31, 1996
to the Chief Executive Officer and to each of the Company's other three most
highly compensated officers.
<PAGE>
<TABLE>
<CAPTION>
Annual
Compensation (1)
-------------
All Other
Name and Principal Position Year (1) Salary($) Compensation($)
- ------------------------------ ------------ ------------- ----------------
<S> <C> <C> <C>
Mark K. Joseph . . . . . . . . 1996 $62,589 $795 (2)
Chairman, Chief Executive
Officer and Chief Financial
Officer
Michael L. Falcone . . . . . . 1996 52,469 1,193 (3)
Executive Vice President
Thomas R. Hobbs . . . . . . . . 1996 52,309 1,353 (4)
Senior Vice President and
Secretary
Mary K. Reilly . . . . . . . . 1996 8,143 -
Senior Vice President
(1) The amounts indicated are for the period August 1, 1996 through December 31, 1996, except
for Ms. Reilly's amounts, which began November 4, 1996, when she was hired by the Company.
In January 1997, Ms. Reilly began full-time employment with the Company. Annual salaries for
1996 for Mr. Joseph and each of the other three most highly compensated officers were as follows:
Mark K. Joseph $150,000
Michael L. Falcone $125,000
Thomas R. Hobbs $125,000
Mary K. Reilly $100,000
(2) The amount indicated represents tax adjustments related to the change in tax reporting status as
a result of direct share ownership.
(3) The amount indicated includes $636 for employer contributions under the Company's 401(k)
Savings and Retirement Plan; $529 for tax adjustments related to the change in tax reporting
status as a result of direct share ownership; and $27 for the dollar value of insurance premiums
paid by the Company with respect to term life insurance that benefits Mr. Falcone.
(4) The amount indicated includes $636 for employer contributions under the Company's 401(k)
Savings and Retirement Plan; $529 for tax adjustments related to the change in tax reporting
status as a result of direct share ownership; and $187 for the dollar value of insurance premiums
paid by the Company with respect to term life insurance that benefits Mr. Hobbs.
</TABLE>
<PAGE>
Compensation Committee Interlocks and Insider Participation
No person who served as a member of the Compensation Committee
during the 1996 fiscal year has ever been an officer or employee of the
Company or any of its subsidiaries, except for Mark K. Joseph who serves as
Chairman of the Board, Chief Executive Officer and Chief Financial Officer
of the Company. During fiscal year 1996, no executive officer of the
Company served as a director or member of the compensation committee of
another entity, one of whose directors or executive officers served as a
director or member of the Compensation Committee of the Company.
CERTAIN TRANSACTIONS
On August 1, 1996, the Company completed a merger (the "Merger") in
which the Company succeeded to the business of the Predecessor. The
former general partners of the Predecessor were responsible for initiating and
structuring the Merger. Mark K. Joseph, Chairman of the Board, Chief
Executive Officer and Chief Financial Officer and Thomas R. Hobbs,
Secretary and Senior Vice President of the Company were stockholders,
directors or officers of the former general partners of the Predecessor.
As a result of the Merger, the former general partners (and their affiliates)
received certain economic benefits, including 1,000 Term Growth Shares in
exchange for their general partnership interests in the Predecessor and
883,033 Growth Shares in exchange for the contribution of their mortgage
acquisition and servicing activities that generate fees from the operating
partnerships that are the ultimate debtors on the Company's bond investments
(the "Operating Partnership"). In connection with the Merger, the former
general partners retained Robert A. Stanger & Co., Inc., an independent third
party, to render an opinion that the allocation of the Growth Shares and Term
Growth Shares among the former general partners and the BAC holders was
fair from a financial point of view.
At the time of the Merger, the Company designated Shelter Development
Holdings, Inc. ("Shelter Development") as the shareholder which has personal
liability for the obligations of the Company (the "Special Shareholder") and
whose death, retirement, resignation, expulsion, bankruptcy or dissolution
would result in the dissolution of the Company (the "Dissolution
Shareholder") to preserve its pass-through tax status under the tax laws in
existence at that time. Mr. Joseph has a controlling interest in Shelter
Development. In connection with the Merger, Shelter Development received
26,729 Growth Shares for its agreement to serve as the Special Shareholder
and Dissolution Shareholder. The Company does not compensate Shelter
Development annually for serving as the Special Shareholder or Dissolution
Shareholder. Nevertheless, the Dissolution Shareholder has the right to
appoint one director to the Company's Board of Directors so long as the size
of the Board is 10 persons or less, and two directors if the size of the Board
is more than 10 persons. In addition, if certain change-in-control transactions
occur that the Special Shareholder has not approved, the Special Shareholder
has the right to receive $1 million if it exercises its right to withdraw as the
Special Shareholder of the Company.
As noted above, the former general partners of the Predecessor received
883,033 Growth Shares in exchange for the contribution of their acquisition
and mortgage servicing activities. Prior to the Merger, an affiliate of the
former general partners of the Predecessor received project selection and
acquisition fees from a partnership (MLP II), formed by the Predecessor to
invest the proceeds from the Predecessor's February 1995 financing, in
amounts equal to one percent of the gross proceeds permanently invested. In
addition, prior to the Merger, the former general partners (and their
affiliates) received mortgage servicing fees from the Operating Partnerships.
As a result of the Merger, the Company receives (i) mortgage servicing fees from
the Operating Partnerships controlled by non-affiliates and (ii) additional bond
interest for bonds collateralized by properties owned by the 16 Operating
Partnerships controlled by Mr. Joseph. For the five months ended December
31, 1996, the Company received approximately $206,000 in mortgage
servicing fees and $616,000 in additional bond interest as a result of the
contribution of the mortgage servicing fee activities to the Company.
Mr. Joseph controls the general partners of 16 of the original 22 Operating
Partnerships whose property collateralizes the Company's bonds and Mr.
Hobbs serves as an officer of such general partners. The mortgage revenue
bonds relating to the 16 Operating Partnerships have an aggregate principal
face amount of approximately $124 million and have interest rates ranging
from 3% to 16% (excluding contingent interest not to exceed 16% on those
bonds with stated rates equal to or less than 16%). These Operating
Partnerships were created as successors to the original borrowers to preserve
the loan obligations and the participation in cash flow for the Predecessor and
thereby assure that the Predecessor, and now the Company, will continue to
recognize tax-exempt income.
On September 1, 1996, 11 of the 16 Operating Partnerships controlled by
Mr. Joseph revised the terms of certain notes held by the Company to defer
principal amortization on such notes. As a result of this transaction,
additional interest income recognized by the Company was $313,000 for the
year ended December 31, 1996.
Mr. Joseph controls and is an officer of, and Mr. Falcone has an interest in
and is an officer of, an entity which is responsible for a full range of
property management functions for certain properties that serve as collateral
for the Company's bond investments. For these services, the affiliate receives
property management fees pursuant to management contracts with the
Operating Partnerships controlled by Mr. Joseph. The Company's
management believes that these contracts provide for fees which are at or
below market rates for property management fees. During the years ended
December 31, 1996, 1995 and 1994, these fees approximated $638,000,
$589,000 and $410,000, respectively. The Company's management believes
that the property management agreements with the affiliate will continue to
be renewed by the Operating Partnerships only if (i) the affiliate is providing
such property management services at a price competitive with the price
which would be charged for such goods and services by independent parties
for comparable goods and services in the same geographic location, and (ii)
and in the case of any such management agreement with an affiliate of any
member of the Company's Board of Directors, such agreement is approved by
the independent directors of the Board.
On November 12, 1996, the Company committed to purchase a $33.9
million mortgage revenue bond. This commitment, which was approved by
the independent members of the Board of Directors, will result in the
Company's acquisition of the bond once certain conditions are met by the
borrower. During the interim period prior to acquisition of the bond, which
is anticipated to last until late 1997 or early 1998, the Company has
guaranteed a bridge financing for a fee of 1.0% of the loan amount ($339,000)
and an annual fee of 1.0%. The borrower of the funds to be provided by the
bond will be the Shelter Foundation, a public non-profit foundation that
provides housing and related services to families of low and moderate income.
Mr. Joseph is the President and one of five directors of the Shelter
Foundation. In addition, companies in which Mr. Joseph owns an indirect
minority interest and Mr. Falcone owns a direct minority interest, will receive
a consulting fee of 1.0% of the loan amount and will serve as property
manager of the related apartment project for a fee of $13,750 per month.
Performance Graph
The following table compares total shareholder returns for the Company
("MMA") since trading began on August 30, 1996 through December 31,
1996 to the Standard and Poors 500 Index ("S&P500"), the NAREIT Index
("NAREIT") and the Lipper Municipal Bond High Yield Index ("BOND")
assuming a $100 investment made on August 30, 1996. The Company does
not believe that there are any other businesses or indices that reflect both the
same industry as that in which the Company operates and the same "pass-through"
tax status as that of the Company. Accordingly, the Company
selected the NAREIT and BOND indices because the NAREIT index consists
of real estate investment trusts which, like the Company, pass-through their
income to their shareholders, although not tax-exempt income, and the BOND
index, which represents the performance of municipal bond issues.
<PAGE>
<TABLE>
<CAPTION>
Total Return Calculations:
August September October November December
1996 1996 1996 1996 1996
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
MMA 100.00 101.68 94.12 107.56 105.04
NAREIT 100.00 101.74 105.00 109.78 120.72
S&P500 100.00 105.63 108.54 116.75 114.43
BOND 100.00 101.19 102.25 103.69 103.61
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Growth Shares and Term Growth Shares as of
April 22, 1997, of (i) each director and nominee as director, (ii) all persons
known by the Company to be beneficial owners of more than 5% of its
Growth Shares and Term Growth Shares and (iii) all the executive officers
and directors of the Company as a group. With respect to shares subject to
options, only those shares subject to options which are immediately
exercisable or exercisable within 60 days are listed below. Unless otherwise
indicated, each Shareholder has sole voting and investment power with
respect to the shares beneficially owned.
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Growth Shares Term Growth Shares
----------------------- -----------------------
Number of Percent of Number of Percent of
Name Shares Class Shares Class
- ---------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Mark K. Joseph (1) 755,825 6.81 740 37.00
Michael L. Falcone 750 * - -
Thomas R. Hobbs 751 * - -
Mary K. Reilly 0 - - -
Earl W. Cole, III 0 - - -
Gary A. Mentesana 750 * - -
Angela A. Barone 0 - - -
Charles C. Baum 4,000 * - -
Robert S. Hillman 300 * - -
William S. Jews 300 * - -
Richard O. Berndt 0 - - -
Carl W. Stearn 18,691 * - -
Two Broadway Associates IV 128,367 1.16 1,250 62.50
2 World Financial Center, South Tower
New York, New York 10080-6123
All directors and officers as
a group (12 persons) 781,367 7.04 740 37.00
* Less than one percent.
(1) Included in Mr. Joseph's beneficial ownership of Growth Shares are Growth Shares held by certain
entities controlled by Mr. Joseph. Certain limited partners in one such entity are officers of the Company.
As a result of their limited partnership interest in that entity, such officers would be entitled to receive the
following allocation of shares:
Michael L. Falcone 44,861 shares
Thomas R. Hobbs 31,819 shares
Earl W. Cole, III 9,618 shares
Gary A. Mentesana 11,758 shares
The Term Growth Shares reported herein are held by SCA Associates 86-II Limited Partnership (365 shares)
and SCA Realty I, Inc. (375 shares) which are controlled by Mr. Joseph.
</TABLE>
<PAGE>
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Company's audited financial statements for the year ended December
31, 1996, have been provided to the Shareholders as part of the Annual
Report to Shareholders. Price Waterhouse LLP has acted as the Company's
independent accountants since the successful completion of the Merger into
the Company in 1996 and also acted as the independent accountants for the
Predecessor since 1986. No election, approval or ratification of independent
accountants by the Shareholders is required. The Audit Committee intends
to select the independent accountants for the fiscal year ended December 31,
1997 at its next scheduled meeting. A representative of Price Waterhouse
LLP will be present at the Annual Meeting with the right to make a statement
if he or she so desires and will be available to respond to appropriate
questions by the Shareholders.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers and
persons who own more than 10% of the Company's outstanding Growth
Shares to file with the Securities and Exchange Commission (the "SEC")
initial reports of ownership, reports of changes in ownership and annual
reports of ownership of Growth Shares. Specific due dates for these records
have been established and the Company is required to report on this proxy
statement any failure to file by these dates in 1996. Late reports on Form 3
were filed by Charles C. Baum, Roberts S. Hillman, William S. Jews and Carl
W. Stearn after their election as directors on August 28, 1996. In addition,
Robert S. Hillman was late in filing a Form 4 report concerning his purchase
of Growth Shares on August 30, 1996. Mark K. Joseph, Chairman and Chief
Executive Officer of the Company, was late in filing a Form 4 report
concerning his purchase of Growth Shares on August 30, 1996. A late report
on Form 3 was filed by Mary K. Reilly after her election as an officer of the
Company on November 4, 1996. Carl W. Stearn was late in filing a Form 4
report for his purchase of Growth Shares on November 15, 1996.
OTHER BUSINESS
The Board of Directors is not aware of any other matters which may come
before the meeting. It is the intention of the persons named in the enclosed
proxy to vote all shares represented by proxies in accordance with their best
judgment if any other matters do properly come before the meeting.
Whether or not you attend the Annual Meeting in person, it would be
appreciated if you would fill in, date and sign the enclosed proxy and return
it promptly. If you attend the meeting, you may vote your shares even though
you may have sent in your proxy.
UPON WRITTEN REQUEST OF ANY SHAREHOLDER WHO WAS
A BENEFICIAL OWNER OF THE COMPANY'S GROWTH SHARES ON
THE RECORD DATE FURNISHED TO THE SECRETARY OF THE
COMPANY AT THE ADDRESS SET FORTH BELOW, THE COMPANY
WILL PROVIDE WITHOUT CHARGE A COPY OF ITS ANNUAL
REPORT ON FORM 10-K, INCLUDING THE FINANCIAL
STATEMENTS AND THE SCHEDULES THERETO, AS FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION FOR THE FISCAL
YEAR ENDED DECEMBER 31, 1996.
1998 ANNUAL MEETING
Proposals by Shareholders intended to be presented at the Company's 1998
Annual Meeting, in order to be included in the 1998 Proxy Statement and
proxy, must be received by the Company at its principal corporate offices no
later than December 17, 1997.
MUNICIPAL MORTGAGE AND EQUITY, L.L.C.
218 N. Charles Street, Suite 500
Baltimore, Maryland 21201
Dated: April 22, 1997
<PAGE>
REVOCABLE PROXY
MUNICIPAL MORTGAGE AND EQUITY, LLC
GROWTH
X Please Mark Votes As In This Example
- -----
Proxy for Annual Meeting of Shareholders
Wednesday, May 28, 1997
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Revoking all prior proxies, the undersigned, a Shareholder of
Municipal Mortgage and Equity, L.L.C. (the "Company"), hereby appoints
Thomas R. Hobbs, Michael L. Falcone and Angela A. Barone, and each of
them, attorneys and agents of the undersigned, with full power of
substitution, to vote all growth shares, no par value (the "Shares"), of the
undersigned in the Company at the Annual Meeting of Shareholders of the
Company to be held at Johns Hopkins University School of Continuing
Studies, Downtown Center, One Charles Plaza, Second Level, Charles and
Saratoga Streets, Baltimore, Maryland 21201, on May 28, 1997, at 9:00
a.m., local time, and at any adjournment thereof, as fully and effectively as
the undersigned could do if personally present and voting as indicated
hereon, and at their discretion, upon any other business not now known
which properly may come before the said meeting, all as more fully set
forth in the accompanying proxy statement, receipt of which is
acknowledged.
For Withhold For All Except
1. ELECTION OF DIRECTORS _____ _____ _____
(For a term of 3 years):
RICHARD O. BERNDT
ROBERT S. HILLMAN
INSTRUCTION: To withhold authority to vote for any individual
nominee, mark "For All Except" and write that nominee's name in the space
provided below.
____________________________________________________
If no choice is indicated above, this proxy shall be deemed to grant
authority to vote FOR the election of director nominees. The shareholder's
signature should be exactly as the name appears below. When shares are
held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as such.
If a corporation, please sign in full corporate name by the President or
other authorized officer. If a partnership, please sign in partnership name
by authorized person.
Please be sure to sign and date this Proxy in the box below.
Date __________________
________________________________ ________________________________
Shareholder sign above Co-holder (if any) sign above
<PAGE>
REVOCABLE PROXY
MUNICIPAL MORTGAGE AND EQUITY, LLC
TERM GROWTH
X Please Mark Votes As In This Example
- -----
Proxy for Annual Meeting of Shareholders
Wednesday, May 28, 1997
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Revoking all prior proxies, the undersigned, a Shareholder of
Municipal Mortgage and Equity, L.L.C. (the "Company"), hereby appoints
Thomas R. Hobbs, Michael L. Falcone and Angela A. Barone, and each of
them, attorneys and agents of the undersigned, with full power of
substitution, to vote all term growth shares, no par value (the "Term
Shares"), of the undersigned in the Company at the Annual Meeting of
Shareholders of the Company to be held at Johns Hopkins University
School of Continuing Studies, Downtown Center, One Charles Plaza,
Second Level, Charles and Saratoga Streets, Baltimore, Maryland 21201,
on May 28, 1997, at 9:00 a.m., local time, and at any adjournment thereof,
as fully and effectively as the undersigned could do if personally present
and voting as indicated hereon, and at their discretion, upon any other
business not now known which properly may come before the said
meeting, all as more fully set forth in the accompanying proxy statement,
receipt of which is acknowledged.
For Withhold For All Except
1. ELECTION OF DIRECTORS _____ _____ _____
(For a term of 3 years):
RICHARD O. BERNDT
ROBERT S. HILLMAN
INSTRUCTION: To withhold authority to vote for any individual
nominee, mark "For All Except" and write that nominee's name in the space
provided below.
____________________________________________________
If no choice is indicated above, this proxy shall be deemed to grant
authority to vote FOR the election of director nominees. The shareholder's
signature should be exactly as the name appears below. When term shares
are held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as such.
If a corporation, please sign in full corporate name by the President or
other authorized officer. If a partnership, please sign in partnership name
by authorized person.
Please be sure to sign and date this Proxy in the box below.
Date __________________
________________________________ ________________________________
Shareholder sign above Co-holder (if any) sign above
