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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(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:
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<PAGE>
___ 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
MUNICIPAL MORTGAGE AND EQUITY, L.L.C.
Baltimore, Maryland
May 5, 1999
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" or
"MuniMae"), will be held at the following location, on May 5, 1999, beginning at
9:00 a.m.:
Municipal Mortgage and Equity, L.L.C.
218 N. Charles St., Suite 500
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, 2002;
2. To consider and act upon a proposal to approve an amendment to the
Company's Amended and Restated Certificate of Formation and Operating Agreement
in order to change the name of the Company to "Municipal Mortgage & Equity, LLC"
as adopted and recommended by the Board of Directors;
3. To consider and act upon a proposal to approve an amendment to the
Company's Amended and Restated Certificate of Formation and Operating Agreement
in order to change the name of the Company's Growth Shares to "Common Shares" as
adopted and recommended by the Board of Directors; and
4. 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 March 25, 1999. A review of the Company's operations for the year
ended December 31, 1998 will be presented. The 1998 Annual Report to
Shareholders is enclosed.
By Order of the Board of Directors,
Thomas R. Hobbs
Secretary
Baltimore, Maryland
March 25, 1999
<PAGE>
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" or
"MuniMae") from holders of Growth Shares and Term Growth Shares (the
"Shareholders") for the Annual Meeting of Shareholders to be held on May 5,
1999. 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 March 25, 1999, 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 16,879,147 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 March 25, 1999 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. Under the rules
of the New York Stock Exchange, Inc. (the "Exchange"), brokers holding shares
for beneficial owners have authority to vote on certain matters when they have
not received instructions from the beneficial owners, and do not have such
authority as to certain other matters (so-called "broker non-votes").
An abstention is deemed "present" but is not deemed a "vote cast." As a
result, abstentions and broker "non-votes" are not included in the tabulation of
the voting results on the election of directors or issues requiring approval of
a majority of the votes cast and, therefore, do not have the effect of votes in
opposition. A broker "non-vote" occurs when a nominee holding shares for a
beneficial owner does not vote on a particular proposal because the nominee does
not have discretionary voting power on that item and has not received
instructions from the beneficial owner. Broker "non-votes" and the shares as to
which a stockholder abstains are included in determining whether a quorum is
present.
<PAGE>
This proxy statement and the enclosed proxy are first being sent or given
to Shareholders on approximately March 30, 1999.
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 Relationships and
Related 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. Joseph and Baum, expire in 1999 and both Mr. Joseph and Mr.
Baum, directors since 1996, have been nominated for re-election at the Annual
Meeting.
The names, ages, terms of office and certain other information as of March
12, 1999 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 2002:
Mark K. Joseph, age 60, has served as Chairman of the Board and Chief
Executive 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 57, 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 also been Chief Financial Officer of United Holdings Co., Inc. and its
<PAGE>
predecessors. United Holdings was involved in the metal business until 1990
when it shifted its focus to become a firm which primarily invests in real
estate and securities. Mr. Baum is also a director of Gabelli Asset Management,
Inc. (an investment advisor) and Shapiro Robinson & Associates (a firm which
represents professional athletes).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR THE ELECTION OF THE NOMINEES FOR ELECTION AS DIRECTORS.
Information Concerning Directors whose Terms Expire in 2000:
Richard O. Berndt, age 56, 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. Gallagher, Evelius & Jones provides
corporate and real estate related legal services to the Company.
Robert S. Hillman, age 59, a director of the Company since August 1996,
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 and the U.S.F. Constellation Foundation. He is also president of H & V
Publishing, Inc.
Information Concerning Directors whose Terms Expire in 2001:
William L. Jews, age 47, a director of the Company since August 1996, has
been President and Chief Executive Officer of CareFirst Blue Cross Blue Shield,
since the merger between Blue Cross/Blue Shield of Maryland and Blue Cross/Blue
Shield of National Capital Area on January 16, 1998. Prior to the merger, Mr.
Jews was President and Chief Executive Officer of Blue Cross/Blue Shield of
Maryland since 1993. Mr. Jews serves on the Boards of Directors of National Blue
Cross/Blue Shield Association, Crown Central Petroleum, Inc., The Ryland Group,
The Federal Reserve Bank of Richmond and EcoLab, Inc. He is also a board member
of the Baltimore County Revenue Authority and the Maryland Health Care
Foundation Board of Trustees.
Carl W. Stearn, age 66, has been a director of the Company since August
1996. Mr. Stearn is Chairman of the Executive Committee of Provident Bankshares
Corporation. Prior to his retirement on April 15, 1998, Mr Stearn was the
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 University of Maryland School of
Medicine Board of Visitors, Project Life and the Maryland Academy of Sciences.
<PAGE>
During 1998, the Board of Directors held two special meetings (one
telephonic) and six regular meetings. There were four committee (two telephonic)
meetings during 1998. Each director attended at least 75% of the aggregate of
the total number of meetings held by the Board of Directors and the total number
of meetings held by all committees of the Board of Directors on which he served.
The Board has established certain committees as follows:
1. Compensation Committee. The Compensation Committee, composed of Messrs.
Hillman (Chairman), Stearn, Baum and Joseph, met two times during 1998. 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, met two times during 1998. Its duties
are to select an independent accountant for the Company and to oversee the work
of such independent accountant. Effective June 3, 1998, Mr. Joseph resigned from
the Audit Committee in order to comply with Exchange rules concerning the
composition of its listed companies' audit committees, which were different then
the American Stock Exchange (the "AMEX") rules.
3. Share Incentive Committee. The Share Incentive Committee, a
subcommittee of the Compensation Committee, met immediately following each
Compensation Committee meeting. Its functions are to determine awards under the
Company's Share Incentive Plans.
The Company does not have a standing nominating committee of the Board of
Directors, or any committee performing a similar function.
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.
<PAGE>
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 "1996 Directors' Plan")
and the 1998 Non-Employee Directors' Share Plan(the "1998 Directors' Plan," and
collectively with the 1996 Directors' Plan, the "Directors' Plans"). Under the
1996 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 Directors' Plans provide 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' Plans also permit 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 dividingthe 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 grants
under the 1996 Directors' Plan and a total of 50,000 Growth Shares are reserved
for grants under the 1998 Directors' Plan. The number and kind of shares
reserved and automatically granted under the Directors' Plans 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 Company
Name and Age and Past Business Experience
Mark K. Joseph, 60 Chairman of the Board and Chief Executive Officer of
the Company since August 1996. (See description of past
business experience in the preceding section.)
Michael L. Falcone, 37 President and Chief Operating Officer of the Company
since December 1997. Prior to his appointment as
President and Chief Operating Officer, Mr. Falcone
served as Executive Vice President from November
1996 to December 1997 and Senior Vice President
from August 1996 to November 1996. Mr. Falcone is
responsible for the day-to-day activities of the
Company. Prior to joining the Company, he was a Senior
Vice President of Shelter Development Corporation where
he was employed from 1983 to 1996. He is currently a
board member of and shareholder in Shelter Development
LLC and Shelter Properties LLC.
<PAGE>
Thomas R. Hobbs, 58 Senior Vice President and Secretary of the Company
since August 1996. Mr. Hobbs directs the
administrative, board relations and investor services
of the Company. He chairs the Credit Committee,
providing direction on loan policy and product
development. Previously, from 1986 to 1996, Mr. Hobbs
was Senior Vice President and General Manager of the
managing general partner of the Predecessor.
Gary A. Mentesana, 34 Senior Vice President of the Company since May 1997 and
Chief Financial Officer since January 1998. Before
being appointed Senior Vice President and Chief
Financial Officer, Mr. Mentesana served as Vice
President from August 1996 to May 1997. Mr. Mentesana
is responsible for the financial operations of the
Company. He manages the capital market activities of
the Company. Between 1988 and 1996, he performed
similar functions for the managing general partner
of the Predecessor. Mr. Mentesana is a certified public
accountant.
Earl W. Cole, III, 45 Senior Vice President of the Company since November
1998. Before being appointed Senior Vice President,
Mr. Cole served as Vice President of the Company from
August 1996 to November 1998. Mr.Cole directs the
portfolio management, loan servicing and underwriting
operations of the Company. He served in a similar
capacity for the managing general partner of the
Predecessor from 1989 to 1996.
Jesse M. Chancellor, 41 Vice President of the Company since March 1997. Mr.
Chancellor is responsible for the origination of
investments in tax-exempt multifamily bonds. Prior to
joining the Company, Mr. Chancellor was the Director of
Field Operations for The Enterprise Foundation from
1994 to 1997, where he was responsible for all local
Enterprise office activities including ensuring
effective program delivery, strategic planning, and
budgeting.
Richard A. Monfred, 38 Vice President of the Company since March 1998. Mr.
Monfred is responsible for the origination of
investments in tax-exempt multifamily bonds. Prior to
joining the Company, Mr. Monfred was a principal at
Neuberger, Gielen, Rubin & Gibber, P.A., a local
Baltimore law firm from 1989 to March 1998, where he
specialized in commercial real estate acquisitions,
dispositions, development, finance and leasing.
<PAGE>
Angela A. Barone, 38 Controller of the Company since August 1996. In April,
1998, Ms. Barone was appointed Assistant Secretary.
Ms. Barone has overall responsibility for financial and
tax reporting, SEC and Exchange compliance and
management of the Company's temporary investments.
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. Ms. Barone is a certified public
accountant.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee met two times during 1998 and determined
executive compensation in accordance with recommendations of an independent
consultant hired to perform such services. The recommendations were based on
survey data prepared by nationally recognized real estate compensation
consultants and included data from companies considered to be in MuniMae's peer
group. The Company's executive officer compensation program is comprised of base
salary, annual cash incentive compensation, long-term incentive compensation in
the form of share options, deferred shares and various benefits, including
medical and life insurance plans generally available to all employees of the
Company.
Executive Compensation
The Company is committed to establishing and maintaining an organization
and culture where all employees are equitably rewarded for their contribution to
the success of the Company. The compensation program created has as its basis a
strong pay-for-performance approach designed to foster and reward individual
entrepreneurial action and resourcefulness within a team environment. The
Company's overall compensation policy is designed to provide a reward structure
that will motivate the executives to assist in achieving strategic and financial
goals, retain and attract competent personnel and link the interests of
management and shareholders through equity-based compensation.
Base Salary. The Company generally establishes base salaries for executive
officers, including the CEO, at amounts that fall at or below the market median
determined by the consultants. This conservative position has allowed the
Company to create long-term incentive opportunities that are at or somewhat
above average. The Company provides for individual adjustments to base salary
for changes in the market, expansion of job responsibilities and/or the
executive's contribution to the financial success of the Company. The executive
officers fall between the 25th percentile and the median, and lower for the CEO.
Annual cash compensation (base salary and bonus) for all other officers is
currently within the competitive ranges of the Company's peer groups. The
Company has and will continue to periodically review the benchmark salary
ranges to determine continued market competitiveness.
<PAGE>
Annual Incentive. The Company paid incentive compensation to the officers
listed above during 1998. The incentive compensation plan provides incentives to
executive officers based on the achievement of qualifying operating profit
goals. The Compensation Committee awards annual bonuses to officers other than
the CEO based on the recommendations of the CEO; for the CEO, annual bonuses are
determined solely by the Compensation Committee. Based on the consultant's
report, the Compensation Committee established three profit ranges, threshold,
target and superior, to be used to determine bonus awards.
The threshold performance range signifies a solid achievement but falls
short of budget expectations. The target performance range signifies a stretch
achievement that means achieving the business plan and internal budget goals.
Finally, the superior performance range signifies an exceptional achievement
toward realizing the long-term objectives of the Company and would significantly
exceed budget expectations. The threshold, target and superior ranges are based
exclusively on achievement of cash flow per share goals, taking into account the
payment of all bonuses. The plan provides for incentive ranges as a percentage
of base salary to determine annual bonuses within each profit range.
For 1998, the Company achieved superior performance, and therefore, annual
bonuses were paid to the executives, as well as employees, for performance under
the plan in the superior performance range, as disclosed in the Summary
Compensation Table.
Long-term Incentive. The Company established the 1996 Share Incentive Plan
(the "1996 Plan") prior to the merger with the Predecessor in August 1996. In
June 1998, the Shareholders approved the 1998 Share Incentive Plan (the "1998
Plan" and collectively with the 1996 Plan, the "Plans"). The Plans provide 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 need to be approved or ratified by the
Share Incentive Committee (the "Committee"). Initially, 883,033 Growth Shares
and 839,000 Growth Shares are reserved for issuance in connection with awards
under the 1996 Plan and the 1998 Plan, respectively, 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 Plans, 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
Plans.
<PAGE>
The Plans are administered by the Committee, which consists of two or more
independent directors. As of the date hereof, the Board has appointed Mr.
Hillman and Mr. Baum as 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 Plans. 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 Plans
and the number of shares relating to outstanding awards and related terms to
reflect stock splits, dividends, and other extraordinary corporate events.
CEO Compensation
In determining the CEO's base salary and incentive compensation, the
Compensation Committee evaluates the compensation paid to chief executive
officers considered in the Company's peer group. As a result of survey data
gathered in 1997, the Compensation Committee determined that the CEO's base
salary of $150,000 ranked in the lowest quartile among the Company's peer group.
An increase in base salary was recommended; however, in 1997, 10,769 deferred
Growth Shares were awarded in lieu of a salary increase. The amount of the
deferred Growth Share awards approximates the base salary foregone. The
independent consultants concurred with the Company's decision. Also, in 1998,
survey data indicated that the CEO's base salary continued to rank in the lowest
quartile among the Company's peer group. The CEO is eligible to receive awards
under the Company's share incentive plan and incentive compensation plan.
For the year ended December 31, 1998, the CEO received total cash payments
of $265,769 in salary and bonus (as shown in the Summary Compensation Table on
page __). The Compensation Committee considered these 1998 payments appropriate
in light of Mr. Joseph's leadership and contributions to the overall long-term
strategy and growth of the Company. As also shown in the Long-Term Incentive
Plans Table, Mr. Joseph was granted an additional 32,000 deferred shares that
vest over five years for so long as Mr. Joseph remains in the continuous employ
of the Company.
RESPECTFULLY SUBMITTED,
COMPENSATION COMMITTEE
Mr. Robert S. Hillman, Chairman
Mr. Carl W. Stearn
Mr. Charles C. Baum
Mr. Mark K. Joseph
Aggregate Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
<PAGE>
The following table sets forth for the CEO and the other four most highly
compensated executive officers of the Company: (i) the number of shares of the
Company's Growth Shares acquired upon exercise of options during fiscal year
1998; (ii) the aggregate dollar value realized upon exercise; (iii) the total
number of unexercised options held at the end of fiscal year 1998; and (iv) the
aggregate dollar value of in-the-money unexercised options held at the end of
fiscal year 1998.
<TABLE>
<CAPTION>
Value of Unexercised
Shares Number of Unexercised Options In-The-Money Options
Acquired on Value Held at Fiscal Y/E (#) @ 12/31/98 ($) (1)
---------------------------------- ------------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ----------------------------- --------------- ------------- -------------- ------------------ ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Mark K. Joseph - $ - 59,938 119,877 $ - $ -
Michael L. Falcone - - 44,954 89,908 - -
Thomas R. Hobbs - - 22,477 44,954 - -
Gary A. Mentesana - - 22,477 44,954 - -
Earl W. Cole, III - - 14,984 29,970 - -
(1) Value of unexercised "in-th-money" options is the defference between the market price of the shares on December 31, 1998
($16.75 per share) and the exercise price of the option, multiplied by the number of shares subject to the option. Options
are only "in-the-money" if the fair market value of the underlying security exceeds the price of the option.
</TABLE>
<PAGE>
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, with allowance for cost of living adjustments. As a
result of the compensation study, effective July 1, 1997 Mr. Falcone's agreement
was amended to adjust his annual compensation to $175,000. 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. The employment agreements also provide for normal cost
of living adjustments.
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.
<PAGE>
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, 1998 to the
Chief Executive Officer and to each of the Company's other four most highly
compensated officers.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation Awards
------------------------------------ ------------------------------------------
Restricted Securities
Name and Other Annual Share Underlying Share All Other
Principal Position Year (1) Salary ($) Bonus ($) Compensation (2) Awards ($)(3) Options/SARs (#) Options (#) Compensation ($)
- ------------------------- -------- --------- ---------- ---------------- ------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mark K. Joseph . . . . . . 1998 $ 157,769 $108,000 $ 7,253 $ - - - $ 176 (4)
Chairman of the Board and 1997 150,000 50,000 6,230 - - 179,815 -
Chief Executive Officer 1996 62,589 - 795 - - - -
Michael L. Falcone . . . . 1998 183,885 73,000 7,554 - - - 2,017 (6)
President and Chief 1997 148,077 40,000 6,228 - - 134,862 1,866 (6)
Operating Officer (5) 1996 52,469 - 529 - - - 663 (6)
Thomas R. Hobbs . . . . . 1998 138,277 54,000 6,713 - - - 2,070 (7)
Senior Vice President 1997 127,558 29,000 6,347 - - 67,431 2,331 (7)
and Secretary 1996 52,309 - 529 - - - 823 (7)
Gary A. Mentesana . . . . 1998 109,231 48,000 6,245 - - - 1,569 (9)
Senior Vice President and 1997 88,693 25,000 5,356 - - 67,431 1,134 (9)
Chief Financial Officer (8) 1996 29,456 - 295 - - - 443 (9)
Earl W. Cole, III. . . . . . 1998 110,933 44,000 6,177 - - - 44 (11)
Senior Vice President (10) 1997 89,897 20,000 - - - 44,954 66 (11)
1996 30,612 15,000 - - - - 234 (11)
</TABLE>
<PAGE>
(1) The amounts indicated for 1996 are for the period August 1, 1996
(the date the Company commenced operations) through December 31,
1996.
(2) The amounts indicated for each officer are reimbursements during the
fiscal year for the payment of taxes.
(3) 1998 awards of Deferred Shares are properly reflected on the
Long-Term Incentive Plans - Awards in Last Fiscal Year Table located
on page ____.
(4) The amount indicated represents the dollar value of insurance
premiums paid by the Company with respect to term life insurance that
benefits Mr. Joseph.
(5) Effective December 1997, Mr. Falcone was promoted to President and
Chief Operating Officer. Prior to that time, Mr. Falcone was the
Executive Vice President.
(6) The amounts indicated include $2,000, $1,800 and $636 for 1998, 1997
and 1996, respectively, related to the Company's contribution to Mr.
Falcone's individual retirement account and $17, $66 and $27 for
1998, 1997 and 1996, respectively, for the dollar value of insurance
premiums paid by the Company with respect to term life insurance that
benefits Mr. Falcone.
(7) The amounts indicated include $1,957, $1,881 and $636 for 1998, 1997
and 1996, respectively, related to the Company's contribution to Mr.
Hobbs' individual retirement account and $113, $450 and $187 for
1998, 1997 and 1996, respectively, for the dollar value of insurance
premiums paid by the Company with respect to term life insurance that
benefits Mr. Hobbs.
(8) Effective May 1997, Mr. Mentesana was promoted to Senior Vice
President from Vice President. In January 1998, in addition to his
title as Senior Vice President, Mr. Mentesana now holds the title of
Chief Financial Officer.
(9) The amounts indicated include $1,555, $1,080 and $423 for 1998, 1997
and 1996, respectively, related to the Company's contribution to Mr.
Mentesana's individual retirement account and $14, $54 and $20 for
1998, 1997 and 1996, respectively, for the dollar value of insurance
premiums paid by the Company with respect to term life insurance that
benefits Mr. Mentesana.
(10) Effective November 1998, Mr. Cole was promoted to Senior Vice
President from Vice President.
(11) The amounts indicated include $44, $66 and $102 for 1998, 1997 and
1996, respectively, for the dollar value of insurance premiums paid
by the Company with respect to term life insurance that benefits Mr.
Cole and $132 for 1996 related to the Company's contribution to Mr.
Cole's individual retirement account.
<PAGE>
Long-Term Incentive Plans - Awards in Last Fiscal Year
The following table sets forth for the CEO and the other four most highly
compensated executive officers of the Company: (i) the number of shares awarded
during fiscal year 1998; (ii) the performance or other time period until payout
or maturation of the award; and (iii) the estimated future payouts under
non-stock price-based plans.
<TABLE>
<CAPTION>
Performance Estimated Future
or Other Payouts under
Number of Shares, Period Until Non-stock
units or other Maturation Price-based
Name rights (#) (1) or Payout (2) Plans ($) (3)
- ----------------------------- --------------------- -------------- -------------------
<S> <C> <C> <C>
Mark K. Joseph 32,000 5 years $ 544,000
Michael L. Falcone 25,000 5 years 425,000
Thomas R. Hobbs 5,000 5 years 85,000
Gary A. Mentesana 15,000 5 years 255,000
Earl W. Cole, III 5,000 5 years 85,000
</TABLE>
(1) A total of 96,000 Deferred Growth Shares were awarded in fiscal 1998,
each with vesting occurring from three to five years beginning
January 1, 1999. As of the end of fiscal 1998, the aggregate Deferred
Growth Share holdings consisted of 199,799 shares worth $3,346,633 at
the then current market value (as represented by the closing price of
the Company's Growth Shares on December 31, 1998). Such amounts
included $1,305,730 for Mr. Joseph (77,954 shares); $839,812 for Mr.
Falcone (50,138 shares); $294,281 for Mr. Hobbs (17,569 shares);
$461,781 for Mr. Mentesana (27,569 shares); and $168,271 for Mr. Cole
(10,046 shares). Distributions are paid only with respect to the
portion of the shares which have vested and become nonforfeitable in
accordance with the share agreements. The Deferred Growth Share
agreements also provide for accelerations of vesting on a
discretionary basis, upon a change in control and death or
disability.
(2) The shares become vested and nonforfeitable cumulatively to the
extent of 20% of such Deferred Growth Shares on January 1, 1999 (the
"Vesting Date") and 20% for each of the remaining four anniversaries
of the Vesting Date for so long as the officers remain in the
continuous employ of the Company.
(3) The amounts indicated represent the fair market value of the Deferred
Growth Shares awarded on December 9, 1998 at the then closing price
of the Company's Growth Shares on such date.
Compensation Committee Interlocks and Insider Participation
No person who served as a member of the Compensation Committee during the
1998 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
and Chief Executive Officer of the Company. During fiscal year 1998, 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.
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED 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 and Chief Executive 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 Partnerships"). 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 owns 100% of 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 18 Operating Partnerships controlled
by Mr. Joseph. For the year ended December 31, 1998, the Company received
approximately $0.4 million in mortgage servicing fees and $1.5 million in
additional bond interest as a result of the contribution of the mortgage
servicing fee activities to the Company.
<PAGE>
Mr. Joseph owns an indirect interest in the general partners of the
Southgate Crossings operating partnership. Also, Mr. Joseph controls the general
partners of 18 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 18 Operating
Partnerships have an aggregate principal face amount of approximately $155
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%). In order to preserve the loan obligations and the participation in
cash flow for the Company and thereby assure that the Company will continue to
recognize tax-exempt ie, 12 of the 18 operating partnerships were created as
successors to the original borrowers.
On September 1, 1996, 11 of the 18 Operating Partnerships controlled by Mr.
Joseph entered into an agreement with the Company whereby the terms of certain
notes held by the Company were amended to defer principal amortization on such
notes. As a result of this transaction, additional interest income recognized by
the Company was $0.9 million for the year ended December 31, 1998. Additionally,
on July 1, 1997, nine of the eleven operating partnerships entered into an
agreement with the Company whereby the principal amortization on one of these
notes was increased. The increase in the principal payments on these notes was
equal to the amount of principal payments suspended on the other notes. This
action did not change the total cash payments received from the operating
partnerships, nor did it change total income, but did result in a
reclassification of interest income on bonds to interest earned on related notes
of $0.9 million for the year ended December 31, 1998. On December 30, 1998, the
Company amended, consolidated and sold notes relating to three Operating
Partnerships in the aggregate principal face amount of $7.4 million. In order to
facilitate the sales of the notes, the Company provided a guarantee on behalf of
the operating partnerships for the full and punctual payment of interest and
principal due under the notes.
Mr. Joseph controls and is an officer of, and Mr. Falcone has an ownership
interest in and is a board member 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 year ended December 31, 1998
these fees approximated $1.0 million. 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) 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.
<PAGE>
This entity also provides the Company with certain administrative services
(primarily computer network related) for which the entity receives direct
reimbursement from the Company on a monthly basis. For the year ended December
31, 1998, the Company paid $0.2 million to the affiliate for these
administrative services. Also, prior to November 1998, the Company reimbursed an
entity controlled by Mr. Joseph for the rental cost of the Company's office
space. In November 1998, the Company assumed the lease agreement for the
Company's office space from this entity at market rates. Mr. Joseph and Mr.
Berndt have ownership interests in the partnership that leases the office space
to the Company. For the year ended December 31, 1998, the Company paid $30,000
in rental lease payments under the lease agreement.
At December 31, 1998, the Company owned all of the interests in a trust that
holds a $33.9 million bond collateralized by the Village of Stone Mountain. The
borrower of the $33.9 million mortgage revenue bond is 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, received a consulting fee of 1.0% of the loan amount and serve as
property manager of the related apartment project for a fee of $13,750 per month
payable out of available cash flow.
Richard O. Berndt, a director since 1996, is the managing partner of the law
firm Gallagher, Evelius and Jones ("GEJ"), which provides corporate and real
estate related legal services to the Company. For the year ended December 31,
1998, GEJ received $650,000 in legal fees generated by transactions structured
by the Company of which $152,000 was directly incurred by the Company. The total
amount of $650,000 represented 7.0% of GEJ's total revenues for 1998.
An affiliate of Merrill Lynch Pierce Fenner & Smith Incorporated ("Merrill
Lynch") owns 1,250 Term Growth Shares of the Company and 128,367 Growth Shares.
The Company may from time to time enter into various investment banking,
financial advisory and other commercial services with Merrill Lynch for which
Merrill Lynch receives and will receive (in the future) customary compensation.
The Company also enters into various investments and interest rate swap
transactions with Merrill Lynch on terms generally available in the marketplace.
Performance Graph
The following table compares total shareholder returns for the Company at
December 31, 1998 to the Standard and Poors 500 Index ("S&P 500"), the NAREIT
Index ("NAREIT") and the Lipper Municipal Bond High Yield Index ("Lipper Bond")
assuming a $100 investment made on December 31, 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 Lipper 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 Lipper Bond index, which
represents the performance of municipal bond issues.
Comparative Price Performance
Indexed Closing Prices
(Values Indexed to 100 as of December 31, 1996)
<TABLE>
<CAPTION>
Dec-96 Jun-97 Dec-97 Jun-98 Dec-9
<S> <C> <C> <C> <C> <C>
MuniMae 100.00 109.40 132.90 154.90 122.30
S&P 500 100.00 120.60 133.30 156.90 171.30
NAREIT 100.00 125.74 141.03 133.77 114.49
Lipper Bond 100.00 103.29 109.78 113.06 115.88
</TABLE>
<PAGE>
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 March 12,
1999, 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.
<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 1,063,240 (1) 6.33 740 37.00
Michael L. Falcone 123,433 (2) * - -
Thomas R. Hobbs 49,819 (2) * - -
Gary A. Mentesana 56,218 (2) * - -
Earl W. Cole, III 31,979 (2) * - -
Jesse M. Chancellor 20,226 (2) * - -
Angela A. Barone 15,488 (2) * - -
Charles C. Baum 14,000 (3) * - -
Richard O. Berndt 5,000 (3) * - -
Robert S. Hillman 7,500 (3) * - -
William L. Jews 5,550 (3) * - -
Carl W. Stearn 41,244 (3) * - -
Two Broadway Associates IV 128,367 * 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) 1,433,697 8.54 740 37.00
- --------------------------
*Less than one percent.
(1) Included in Mr. Joseph's beneficial ownership of Growth Shares are: (a) 119,876 Growth Shares subject
to options granted under the 1996 Share Incentive Plan and (b) Growth Shares held by certain entities
controlled by Mr. Joseph (detailed below). 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. Accordingly, these shares are not included in
each officers' beneficial ownership above.
Michael L. Falcone 44,861 Growth Shares
Thomas R. Hobbs 31,819 Growth Shares
Earl W. Cole, III 9,618 Growth Shares
Gary A. Mentesana 11,758 Growth Shares
The Term Growth Shares reported herein are helf by SCA Associates 86 II Limited Partnership (365 shares)
and SCA Realty I, Inc. (375 shares) which are controlled by Mr. Joseph.
(2) Included in each officer's beneficial ownership of Growth Shares are Growth Shares subject to options
granted under the 1996 Share Incentive Plan as follows:
Shares Subject
to Options
--------------
Michael L. Falcone 89,908
Thomas R. Hobbs 44,954
Gary A. Mentesana 44,954
Earl W. Cole, III 29,969
Jesse M. Chancellor 16,667
Angela A. Barone 14,984
(3) Included in each board member's beneficial ownership of Growth Shares are Growth Shares subject to options
granted under the 1996 Non-Employee Directors' share Plan as follows:
Shares Subject
to Options
--------------
Charles C. Baum 5,000
Richard O. Berndt 4,500
Robert S. Hillman 5,000
William L. Jews 5,000
Carl W. Stearn 5,000
</TABLE>
<PAGE>
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Company's audited financial statements for the year ended December 31,
1998, have been provided to the Shareholders as part of the Annual Report to
Shareholders. PricewaterhouseCoopers 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, 1999 at its next scheduled
meeting. A representative of PricewaterhouseCoopers 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 1998. Based solely on a review of copies of such reports of
ownership furnished to the Company, the Company believes that the following
reports were filed late. Late reports on Form 4 were filed by Carl Stearn for
February, April, July, September and December due to travel and correction of
shares received under the Directors' Plans. Late reports on Form 4 were filed by
Gary Mentesana, Earl W. Cole, Thomas Hobbs, Mark Joseph and Jesse Chancellor for
December 1998 in order to properly reflect share awards under the share
incentive plans. Mr. Baum filed Form 4 late for April 1998 to properly reflect
shares received under the Directors' Plans. Late reports on Form 4 for May and
December 1998 were filed by Robert Hillman, Richard Berndt and Charles Baum to
properly reflect shares received under the Directors' Plans. The Company has
developed new procedures to insure timely compliance with Section 16(a) of the
Securities Act of 1934.
<PAGE>
PROPOSAL TO APPROVE AMENDMENT TO THE COMPANY'S OPERATING
AGREEMENT IN ORDER TO CHANGE THE NAME OF THE COMPANY
(Proposal No. 2)
The following is the proposed amendment to the text contained in Section 2.2.
Company Name. of the Company's Operating Agreement. The underscored text will
replace the current name of the Company as defined by this Section 2.2.
2.2. Company Name. The name of the Company is "Municipal Mortgage & Equity,
LLC". The business of the Company shall be conducted under such name or such
other names as the Board of Directors or the Shareholders may from time to
time determine on and pursuant to the terms of this Agreement.
PROPOSAL TO APPROVE AMENDMENT TO THE COMPANY'S OPERATING
AGREEMENT IN ORDER TO CHANGE THE NAME OF THE COMPANY'S
GROWTH SHARES
(Proposal No. 3)
The following is the proposed amendment to the text contained in Section
3.1.(a)(i) shares which are designated "Growth Shares"; of the Company's
Operating Agreement. The underscored text will replace the current name of the
Company's Growth Shares as defined by this Section 3.1.(a)(i). All other text
contained in this section shall remain in its entirety. As a result, all
references to Growth Shares in the Operating Agreement will be changed to read
"Common Shares."
3.1. Classes of Shares.
(a) The Company shall have the authority to issue the following classes and
series of Shares:
(i) shares which are designated "Common Shares";
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.
<PAGE>
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, 1998.
SHAREHOLDER PROPOSALS FOR THE 2000 PROXY STATEMENT
Proposals by Shareholders intended to be presented at the Company's 2000
Annual Meeting, in order to be included in the 2000 Proxy Statement and proxy,
must be received by the Company at its principal corporate offices no later than
December 16, 1999.
MUNICIPAL MORTGAGE AND EQUITY, L.L.C.
218 N. Charles Street, Suite 500
Baltimore, Maryland 21201
Dated: March 25, 1999
<PAGE>
REVOCABLE PROXY
MUNICIPAL MORTGAGE AND EQUITY, L.L.C.
GROWTH SHARES
X Please Mark Votes As In This Example
Proxy for Annual Meeting of Shareholders
Wednesday, May 5, 1999
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 the Company's offices at
218 N. Charlest St., Park Charles Building, Suite 500, Baltimore, Maryland
21201, on May 5, 1999, 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):
MARK K. JOSEPH
CHARLES C. BAUM
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.
2. PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED
CERTIFICATE OF FORMATION AND OPERATING AGREEMENT IN ORDER TO CHANGE THE NAME OF
THE COMPANY TO "MUNICIPAL MORTGAGE & EQUITY, LLC" as adopted and recommended by
the Board of Directors.
For Against Withhold
_______ _______ _______
3. PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED
CERTIFICATE OF FORMATION AND OPERATING AGREEMENT IN ORDER TO CHANGE THE NAME OF
THE COMPANY'S GROWTH SHARES TO "COMMON SHARES" as adopted and recommended by the
Board of Directors.
For Against Withhold
_______ _______ _______
If no choice is indicated above, this proxy shall be deemed to grant authority
to vote FOR the election of director nominees and to vote FOR the proposals. 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
