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
(as filed with the Securities and Exchange Commission on June 11, 1999)
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement |_| Confidential, for Use of the
|_| Definitive Proxy Statement Commission Only (as permitted
|_| Definitive Additional Materials by Rule 14a-6(e)(2))
|_| Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
Municipal Mortgage & Equity, LLC
(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.
|_| 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 & EQUITY, LLC
Dear Preferred or Term Growth Shareholder:
We are writing you to seek your consent to make amendments to the company's
operating agreement. The operating agreement is the contract among the
shareholders that determines how the Company operates and describes your rights
as a shareholder. The Board of Directors of the Company believes that the
proposed amendments are fair to shareholders and in the best interests of the
Company. If adopted, the amendments will allow you to elect, twice each year, to
convert your shares into the Company's Common Shares (formerly known as Growth
Shares) or receive cash for them. Once you decide to convert, the Company will
decide whether you will receive cash or Common Shares. This means that you have
the option to exchange your shares, but the Company chooses whether you receive
Common Shares or cash. In addition to the two times each year you may choose to
exchange your shares, the Company will be permitted to require you to make an
exchange at any time. As with the optional exchange, the Company will decide
whether the exchange will be for Common Shares or cash. The final part of the
amendment will allow the Company to repurchase its Common Shares from time to
time, so long as the Company meets a minimum equity ratio.
The Board of Directors believes that these amendments will provide
liquidity to shareholders who currently hold a highly illiquid investment while
allowing the Company to control its equity structure and deploy its resources
more effectively. In the past two years third parties have tendered for
preferred shares at prices significantly below book value. The Company has
responded to those tenders with a higher offer of 80% of book value. In the
event of a tender by the Company, these amendments will allow preferred holders
to receive an amount equal to 110% of book value for redemptions in 1999, with
the redemption price declining 2% annually to 100% of book value for redemptions
in 2004 and thereafter. Preferred holders who exercise their semiannual right to
convert their shares will not receive this premium, but will receive an amount
equal to 100% of book value. The Company believes that book value is equal to
the fair value of the preferred shares. Term Growth Share holders will receive
an appraised fair value. The enclosed materials describe the amendments, the
Company and the Common Shares more fully. The Company has developed into a solid
growing company. These amendments will allow us to continue to grow. We would
appreciate your cooperation in promptly tendering your consent to us.
Sincerely,
Mark K. Joseph
Chairman and Chief Executive Officer
<PAGE>
MUNICIPAL MORTGAGE & EQUITY, LLC
218 North Charles Street, Suite 500
Baltimore, Maryland 21201
CONSENT SOLICITATION STATEMENT
This consent solicitation statement is furnished in connection with the
solicitation of consents by Municipal Mortgage & Equity, LLC (hereinafter the
"Company") from holders (the "Shareholders") of its Preferred Shares, Preferred
Capital Distribution Shares and Term Growth Shares (collectively, the "Shares")
for the purpose of approving certain amendments to the Company's Amended and
Restated Certificate of Formation and Operating Agreement (the "Operating
Agreement"). The Company will bear the cost of soliciting the consents. The
Company has retained Corporate Investor Communications, Inc. to assist in the
solicitation of consents for a fee not to exceed $20,000, plus reasonable
out-of-pocket expenses. The Company will reimburse brokers and others for their
reasonable expenses in forwarding consent materials to Shareholders who have a
beneficial interest in Shares registered in the names of nominees.
Consents must be received by 5:00 P.M. local time on July 15, 1999, unless
extended by the Board of Directors, to be counted in the vote on the amendments.
All consents should be mailed to Corporate Investor Communications, Inc., 111
Commerce Road, Carlstadt, New Jersey 07072-2586. We have provided an addressed
envelope for your convenience.
If consents in the accompanying form are properly executed and returned,
the Shares represented by them will be voted as instructed in the consent. A
consent may be withdrawn or changed at any time prior to July 15, 1999 (or to
such date as extended by the Board of Directors) by completing, executing and
returning a written consent indicating the changed vote. Any such withdrawal
will be effective when Corporate Investor Communications, Inc. receives a
signed, written consent with a later date. Failure to submit a consent,
abstentions and broker non-votes by brokers who do not receive instructions from
the beneficial holders have the same effect as a vote of "No" on the amendments.
In accordance with the Company's By-laws, the stock transfer records were
compiled on June 15, 1999, the record date (the "Record Date") set by the Board
of Directors for determining the Shareholders entitled to vote by written
consent on the amendments. At the close of business on the Record Date, there
were 22,159 Preferred Shares outstanding, 10,962 Preferred Capital Distribution
Shares outstanding and 2,000 Term Growth Shares outstanding. The holders of the
outstanding Shares at the close of business on the Record Date will be entitled
to one vote for each Share then held by them.
The Company is first sending or giving this consent solicitation statement
and the enclosed consent to Shareholders on June __, 1999.
<PAGE>
Introduction
This consent solicitation statement seeks your consent to make changes to
the Operating Agreement. The changes to the Operating Agreement would result in
a new paragraph (d) of Section 5.2 and the addition of a new clause at the end
of Section 5.3(a). The amendments are to be voted on as two separate proposals.
Annex A contains the exact text of these amendments.
Amendment No. 1 relates to new redemption and exchange features for the
Shares. The first part of the proposal would permit Shareholders to elect to
exchange their Shares for cash or Common Shares or a combination thereof. The
choice of whether to convert tendered Shares to Common Shares or purchase them
for cash, or both, would be made by the Company. The Operating Agreement does
not currently permit holders of Preferred Shares, Preferred Capital Distribution
Shares or Term Growth Shares to sell their Shares to the Company or convert
their Shares into Common Shares until June 2004. The second part of Amendment
No. 1 would allow the Company to redeem the Preferred Shares, the Preferred
Capital Distribution Shares and the Term Growth Shares at any time. These
conversions would be at the Company's option and would be mandatory for
Shareholders. Any mandatory redemption of Preferred Shares or Preferred Capital
Distribution Shares at the election of the Company would be based on a
percentage of the book value per Preferred Share or Preferred Capital
Distribution Share (110% of book value for redemptions in 1999 declining 2% per
year to 100% of book value for redemptions in 2004 and thereafter), as of the
end of the most recent fiscal quarter for which public information has been made
available, adjusted for any distributions to holders of Preferred Shares or
Preferred Capital Distribution Shares declared since the end of such quarter and
for any sales or refinancing of assets. Any conversion of Preferred Shares or
Preferred Capital Distribution Shares at the election of the shareholder would
be based on 100% of the book value of such shares, as of the end of the most
recent fiscal quarter for which public information has been made available,
adjusted for any distributions to holders of Preferred Shares or Preferred
Capital Distribution Shares declared since the end of such quarter and for any
sales or refinancing of assets. Any redemption or conversion of Term Growth
Shares would be based on their appraised value prior to the adoption of these
amendments (based on estimated cash flow attributable to the Term Growth Shares)
adjusted for any distributions to the holders since the adoption of this
amendment.
Amendment No. 2 would allow the Company to repurchase or redeem shares of
any class of its outstanding equity provided that a minimum equity test is met.
Currently, the Operating Agreement could be interpreted not to permit the
Company to redeem its equity securities, other than Preferred Shares or
Preferred Capital Distribution Shares, while Preferred Shares and Preferred
Capital Distribution Shares are outstanding. The Company, like many other public
companies with stock repurchase programs, may want to buy Common Shares when
they are undervalued in the marketplace. The proposed minimum equity ratio is
intended to ensure that the holders of the Company's Preferred and Preferred
Capital Distribution Shares have at least as much equity coverage as they did
when the Company first issued the Preferred and Preferred Capital Distribution
Shares in 1996.
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Amendment No. 1
This amendment seeks to approve a change to the Company's Operating Agreement in
order to add a subsection concerning:
(1) Conversions or redemptions of Shares at the option of Shareholders;
and
(2) Mandatory conversions or redemptions of Shares at the option of the
Company.
Summary. The following discussion of the proposal is only a summary.
Shareholders are encouraged to read the complete text of the proposal attached
to this consent solicitation statement as Annex A.
o This proposal has two parts: The first change would permit
Shareholders to elect semiannually by April 30 or October 30 to
exchange their Shares. The second change would permit the Company to
redeem Shares at any time.
o After Shares are tendered for exchange, the Company will decide
whether to convert the tendered Shares to Common Shares or redeem them
for cash or a combination of Common Shares and cash.
o Mandatory redemptions of the Preferred Shares and Preferred Capital
Distribution Shares at the option of the Company will be based on a
percentage of the book value per Preferred Share or Preferred Capital
Distribution Share: 110% of book value for redemptions in 1999; 108%
of book value for redemptions in 2000; 106% of book value for
redemptions in 2001; 104% for redemptions of book value in 2002; 102%
of book value for redemptions in 2003; and 100% of book value for
redemptions in 2004. Optional conversions of the Preferred Shares and
the Preferred Capital Distribution Shares at the election of the
holders would be based on 100% of the book value per Preferred Share
or Preferred Capital Distribution Shares.
o The exchange value would be calculated as of the end of the most
recent fiscal quarter for which public information has been made
available, recorded on the Company's books and records, adjusted for
expenses that would be incurred if the assets were actually sold, for
any distributions to holders of Preferred Shares or Preferred Capital
Distribution Shares declared since the end of such quarter or sales or
refinancing of the assets.
o The exchange value for the Term Growth Shares would be based on their
appraised value prior to the adoption of these amendments but adjusted
to reflect cash distributions.
o If the Company elects to convert tendered Shares into Common Shares,
the value of the Common Shares will be based on the average closing
price of the Common Shares on the applicable stock exchange for the 30
trading days ending on the April 30 or October 30 when such Shares
were required to be tendered; if the Common Shares are not then traded
on an exchange, the value will be as determined by the Board of
Directors.
Optional Exchange by Shareholders. This proposed amendment would allow
Shareholders the option to exchange their Shares for Common Shares or cash or a
combination thereof. The choice of whether to issue Common Shares or pay cash,
or both, would be made by the Company. Shareholders who tender their Shares by
April 30 of any year will have their Shares redeemed by the Company by May 15
(or as soon thereafter as commercially practicable) and will not be entitled to
dividend payments on such Shares for the quarterly dividend period which begins
on that April 1. Shareholders who tender their
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Shares by October 30 of any year will have their Shares redeemed by the Company
by November 15 (or as soon thereafter as commercially practicable) and will not
be entitled to dividend payments on such Shares for the quarterly dividend
period which begins on that October 1. This optional exchange right would begin
immediately following the adoption of these amendments. The Operating Agreement
currently permits holders of Preferred Shares and Preferred Capital Distribution
Shares to convert their shares to Common Shares or cash, at the option of the
Board of Directors, every two years. This optional conversion right, however,
begins in 2004. The Operating Agreement does not currently contain a provision
that allows holders of Term Growth Shares to convert their Shares to Common
Shares or cash at any time. The Operating Agreement currently allocates a 0.001%
interest in the cash flow of the Company to the holder of each Term Growth
Share. Holders of Term Growth Shares have no right to receive this cash flow
after all of the Preferred Shares and the Preferred Capital Distribution Shares
have been redeemed because the Term Growth Shares are required to be redeemed
and cancelled at such time. Pursuant to this amendment, the redemption price for
the Term Growth Shares will be based upon the assumption that the Preferred
Shares and the Preferred Capital Distribution Shares remain outstanding through
the estimated date that all of the assets underlying such shares will have been
sold or refinanced. As a result, holders of Term Growth Shares may receive a
higher value in an optional exchange than if all of the Preferred Shares and the
Preferred Capital Distribution Shares were redeemed prior to such date.
Partnerships controlled by Mark K. Joseph, the Chairman and Chief Executive
Officer of the Company, own 37% of the Term Growth Shares.
The Shares are not listed or traded on any stock exchange and there is no
established market for them. Thus, they are illiquid. As a result of this
amendment, Shareholders will have the opportunity to seek liquidity in their
investment by getting Common Shares or cash. The company intends to maintain the
listing of the Common Shares on the New York Stock Exchange. If the Common
Shares were not listed on an exchange or quoted on the Nasdaq National Market,
the Common Shares may not be as liquid.
Mandatory Redemptions. The proposed amendment would also allow the Company
to redeem or convert to Common Shares all or a part of the Preferred Shares,
Preferred Capital Distribution Shares or Term Growth Shares at any time, without
the consent of Shareholders on 30 days' notice. The Operating Agreement does not
currently contain a provision that allows the Company to redeem or convert
Preferred Shares or Preferred Capital Distribution Shares without the consent of
their holders. Term Growth Shares must be redeemed, but only when no Preferred
Shares or Preferred Capital Distribution Shares remain outstanding. If adopted,
this part of the amendment would allow the Company to require Shareholders to
sell their Shares to the Company or convert them to Common Shares whether or not
the Shareholders wished to do so. Shareholders would be required to accept
either cash, Common Shares or a combination thereof, at the Company's option. If
only a portion of the Preferred Shares, Preferred Capital Distribution Shares or
Term Growth Shares are to be redeemed, such Shares will be redeemed pro rata
from each holder of such Shares or in any other manner that the Board of
Directors determines to be equitable. The Company believes that this amendment
is in the Company's best interest because it provides the Company with
flexibility in its capital structure that will permit it to deal with changes in
capital markets and the Company's ongoing funding needs. Shareholders should
understand, however, that this amendment means that they may not unilaterally
decide to hold on to their Shares until 2004 since the Company may now redeem or
exchange them at any time.
Payment For and Terms of any Tender. The amendment provides that the Board
of Directors will make all determinations with regard to tenders. These
determinations include whether cash, Common Shares or a combination of the two
should be given to Shareholders in exchange for tendered Shares. The Preferred
Shares and the Preferred Capital Distribution Shares to be redeemed as a result
of a manadatory tender by the Company will be valued at a percentage of the book
value per Preferred Share or Preferred Capital Distribution Share: 110% of book
value for redemptions in 1999; 108% of book value for redemptions in 2000; 106%
of book value for redemptions in 2001; 104% of book value for redemptions
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<PAGE>
in 2002; 102% of book value for redemptions in 2003; and 100% of book value for
redemptions in 2004 and thereafter. Conversions of Preferred Shares and
Preferred Capital Distribution Shares at the option of the holders will be
valued at 100% of the book value of such shares. The exchange value would be
calculated as of the end of the most recent fiscal quarter for which public
information has been made available, recorded on the Company's books and
records, adjusted for (i) expenses that would be incurred if the assets were
actually sold, (ii) any distributions to holders of Preferred Shares or
Preferred Capital Distribution Shares declared since the end of such quarter or
(iii) any sales or refinancings of the assets. The Term Growth Shares will be
valued by Robert A. Stanger & Co., Inc. an independent third party, as of June
30, 1999 and adjusted on each distribution date to reflect changes in the
Company's cash distributions since the valuation. The valuation will be
determined by discounting the anticipated cash flow available for distribution
to holders of the Term Growth Shares, excluding the tendering of any Preferred
Shares or Preferred Capital Distribution Shares. 1,000 Term Growth Shares
originally issued to an affiliate of Merrill Lynch, Pierce, Fenner & Smith
Incorporated will also receive $2,963 per share (adjusted for previous
distributions) as required by the Operating Agreement. If Common Shares are to
be offered as a result of a redemption, Shareholders will receive a number of
Common Shares equal to the value of their tendered Shares (or the portion to be
exchanged for Common Shares) divided by the average daily closing price for the
Common Shares for the 30 trading days ending on the April 30 or October 30 when
such Shares were required to be tendered.
Amendment No. 2
This amendment seeks to approve an amendment to the Operating Agreement in order
to permit the Company to repurchase or redeem shares of its outstanding equity
securities in certain circumstances.
Summary. The following discussion of the amendment is only a summary.
Shareholders are encouraged to read the complete text of the amendment attached
to this consent solicitation statement as Annex A.
o The Operating Agreement could be interpreted to prohibit redemptions
of shares other than Preferred Shares and Preferred Capital
Distribution Shares while Preferred Shares and Preferred Capital
Distribution Shares are outstanding.
o This amendment will clarify the Company's right to redeem other
shares.
o Redemptions will be allowed only when the Company meets a minimum
capital standard.
Redemption of other shares. The proposed amendment would allow the Company
to redeem other shares of the Company, including Common Shares and Term Growth
Shares, while Preferred Shares and Preferred Capital Distribution Shares remain
outstanding, so long as any redemption or repurchase would not cause the ratio
of the shareholders' equity of the Company to the aggregate liquidation
preference of the Preferred Shares and the Preferred Capital Distribution Shares
to be less than 8.7 to 1, which was the ratio of the shareholders' equity of the
Company to the aggregate liquidation preference of the Preferred Shares and the
Preferred Capital Distribution Shares when originally issued. Although unclear,
the Operating Agreement currently could be interpreted to permit the Company to
redeem or repurchase shares of the Company, other than Preferred Shares and
Preferred Capital Distribution Shares, only after the Company has redeemed or
repurchased all of the outstanding Preferred Shares and Preferred Capital
Distribution Shares. This constraint on redemptions and repurchases limits the
ability of the Company to make efficient use of its capital, particularly at
times it believes its equity securities are undervalued. Shareholders should
note that if such repurchases were not permitted the Company might have
additional capital available for all corporate purposes, although those funds
could, without restriction, be paid out as distributions on the Common Shares.
Therefore, the Company believes
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this flexibility does not adversely affect holders of Preferred Shares,
Preferred Capital Distribution Shares or Term Growth Shares, while it improves
the Company's overall flexibility to manage its capital structure.
Effect of Amendments on Preferred Shares
and Preferred Capital Distribution Shares
As a result of the adoption of these amendments, Preferred Shares and
Preferred Capital Distribution Shares are expected to become more liquid, as the
holders thereof would have the option to sell them to the Company semiannually.
Preferred Shares and Preferred Capital Distribution Shares, however, would
become redeemable at the option of the Company, without any consent of the
holders of the Preferred Shares or the Preferred Capital Distribution Shares.
Thus, at the Company's option, your investment could be turned into cash or an
investment in Common Shares at any time.
Effect of Amendments on Term Growth Shares
As a result of the adoption of the amendments, Term Growth Shares would
become more liquid, as the holders thereof would have the option to sell them to
the Company semiannually. Term Growth Shares, however, would become redeemable
at any time at the option of the Company, without any consent of the holders of
Term Growth Shares. The holders of Term Growth Shares may receive a higher value
in an optional exchange, when the Term Growth Shares are valued by Robert A.
Stanger & Co., Inc., than if redeemed pursuant to the Operating Agreement as
currently in effect.
Vote Required for Approval of the Amendments
The affirmative vote of a majority of the holders of the outstanding
Preferred Shares and Preferred Capital Distribution Shares (voting together as
one class) and Term Growth Shares (voting as a separate class) in favor of each
proposal is necessary in order to effectuate each amendment.
Description of Common Shares
The Operating Agreement does not limit the number of Common Shares that the
Company's Board of Directors may cause the Company to issue. The Company had
16,803,662 Common Shares outstanding at June 3, 1999. The Company pays
distributions to holders of Common Shares on a pro rata basis when declared by
the Board of Directors out of legally available funds. Distributions to holders
of Common Shares are subject to preferences on distributions on the Company's
outstanding Preferred Shares and Preferred Capital Distribution Shares, and any
other preferred securities which may be issued by the Company in the future.
Price Range of Common Shares and Distributions
The Common Shares (formerly known as Growth Shares) began trading on the
American Stock Exchange ("Amex") on August 30, 1996 under the symbol "MMA." On
June 25, 1998, the Common Shares ceased trading on the Amex and began trading on
the New York Stock Exchange ("NYSE"). The table below sets forth the quarterly
high and low closing price per share of the Common Shares as reported on the
Amex and NYSE, respectively for the quarters indicated.
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Closing Price
Quarter Per Growth Share
------- ------------------------
High Low
--------- ---------
1996
Third Quarter(1) $16.0000 $14.1250
Fourth Quarter 16.7500 13.8750
1997
First Quarter 17.8750 15.5000
Second Quarter 17.3750 16.2500
Third Quarter 19.8750 17.0000
Fourth Quarter 20.8750 19.0000
1998
First Quarter 21.7500 19.6250
Second Quarter 22.1250 20.6250
Third Quarter 21.8750 18.3750
Fourth Quarter 19.2500 16.2500
1999
First Quarter 20.0000 17.2500
Second Quarter (through June 10, 1999) 20.7500 18.5000
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(1) Beginning August 30, 1996
On June 10, 1999, the last reported sales price of the Common Shares on the
NYSE was $20.125 per share. On June 10, 1999, the Company had 3,346 holders
of record of its Common Shares.
On April 7, 1999, the Company's Board of Directors raised the Company's
regular quarterly dividend from $0.390 to $0.395 per Common Share payable on May
3, 1999 to Common Share holders of record on April 19, 1999. This represents an
annualized dividend of $1.58 per Common Share and an indicated annualized yield
of 7.85% based on a closing price of $20.125 for the Common Shares on June 10,
1999. Approximately 82% of the Company's income in 1998 was tax-exempt,
including capital gains.
The Company has a policy of distributing not less than 80% of the cash flow
allocable to Common Shares. However, this policy may be changed at any time by
the Board of Directors and future distributions by the Company will be at the
discretion of the Board of Directors and will depend on the Company's financial
condition, capital requirements and such other factors as the Board of Directors
deems relevant.
For more information on the Company and the Common Shares, see the Annual
Report that accompanied this Consent Solicitation Statement.
Federal Income Tax Consequences
The following summary of material federal income tax considerations that
may be relevant to a Shareholder is based on current law, and is not intended as
tax advice. The following discussion, which is not exhaustive of all possible
tax considerations, does not discuss any state, local or foreign tax
considerations, nor does it discuss all of the aspects of federal income
taxation that may be relevant to a Shareholder in light of his or her particular
circumstances.
This discussion is based on current provisions of the Internal Revenue Code
of 1986, as amended (the "Code"), existing, temporary and currently proposed
Treasury Regulations under the Code, the legislative history of the Code,
existing administrative rulings and practices of the Internal Revenue
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Service ("IRS") and judicial decisions, all of which are subject to change,
possibly with retroactive effect. No assurance can be given that legislative,
judicial or administrative changes will not affect the accuracy of any
statements in this Consent Solicitation Statement.
Tax Consequences Upon Conversion or Redemption. Amendment 1 will enable
Shareholders to convert their Shares into cash, Common Shares or a combination
thereof on specified dates. In addition, Proposal 1 will enable the Company to
redeem Shares, at any time, for cash, Common Shares or a combination thereof.
The tax consequences to a Shareholder upon a conversion or redemption of Shares
will depend on whether the Shareholder receives cash pursuant to a conversion or
redemption.
In general, any conversion or redemption of Shares in exchange for Common
Shares should be a non-taxable event under Section 721 of the Code. As described
in the Operating Agreement, the Shareholder will be deemed to have contributed
the Shares being converted or redeemed to the Company in exchange for the Common
Shares received.
Any partial conversion or redemption of Shares in exchange for cash
generally will not be taxable, but will reduce the Shareholder's basis in his or
her Shares. To the extent the cash distribution exceeds a Shareholder's basis in
his or her Shares immediately prior to the distribution, the Shareholder will
recognize the amount of the distribution as capital gain. Such gain will be a
long-term capital gain if the Shares have been held for more than one year at
the time of conversion or redemption.
If all of a Shareholder's Shares are converted or redeemed for cash, such
Shareholder should be treated as receiving a liquidating cash distribution and
will recognize capital gain or loss equal to the difference between (i) the
amount of cash received (including a Shareholder's share of the Company's
liabilities under Section 752 of the Code, if any), and (ii) the Shareholder's
adjusted basis in the converted or redeemed Shares. Such gain or loss will be
long-term capital gain or loss if the Shares have been held for more than one
year at the time of conversion or redemption.
Notwithstanding the foregoing, a Shareholder could recognize some ordinary
income upon a conversion or redemption of Shares to the extent the Company's
assets include unrealized receivables (e.g., accrued but unrecognized market
discount) or "inventory" within the meaning of the Code. Because the Company
does not currently have, and does not expect to have, more than a de minimis
amount of unrealized receivables or inventory, the Company believes the
potential for ordinary income recognition should be minimal.
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Certain Beneficial Owners and Management
<TABLE>
<CAPTION>
Common Shares Term Growth Shares
------------------------------- --------------------------------
Number of Percent of Number of Percent
Name Shares Class Shares of Class
- ---------------------------------------------------------- -------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Mark K. Joseph ........................................... 1,067,061(1) 6.35% 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) * -- --
Richard A. Monfred ....................................... 25 *
James K. Lowe ............................................ 1,000 *
Angela A. Barone ......................................... 15,488(2) * -- --
Charles C. Baum .......................................... 16,500(3) * -- --
Richard O. Berndt ........................................ 7,500(3) * -- --
Robert S. Hillman ........................................ 10,000(3) * -- --
William L. Jews .......................................... 8,050(3) * -- --
Carl W. Stearn ........................................... 43,952(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).... 1,451,251 8.64 740 37.00
========= ==== ========= =====
</TABLE>
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*Less than one percent.
(1) Included in Mr. Joseph's beneficial ownership of Common Shares are: (a)
119,876 Common Shares subject to options granted under the 1996 Share
incentive Plan and (b) Common 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 Common Shares
Thomas R. Hobbs........................... 31,819 Common Shares
Earl W. Cole, III......................... 9,618 Common Shares
Gary A. Mentesana......................... 11,758 Common 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.
(2) Included in each officer's beneficial ownership of Common Shares are Common
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 Common Shares are
Common Shares subject to options granted under the 1996 Non-Employee
Directors' Share Plan as follows:
9
<PAGE>
Shares Subject
to Options
-----------------
Charles C. Baum........................... 7,500
Richard O. Berndt......................... 7,000
Robert S. Hillman......................... 7,500
William L. Jews........................... 7,500
Carl W. Stearn............................ 7,500
10
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1998, its Proxy Statement dated April 12, 1999 and its Quarterly Report on Form
10-Q for the quarter ended March 31, 1999 are incorporated by reference herein.
Proposals for Next ANNUAL MEETING
Proposals by Shareholders intended to be presented at the Company's Annual
Meeting in 2000, 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.
Any Shareholder who intends to submit a proposal at the Company's Annual
Meeting in 2000 without including the proposal in the Company's proxy statement
for such Annual Meeting must notify the Company of such proposal not later than
the close of business on March 6, 2000 and not earlier than the close of
business on February 4, 2000 or, in the event that the date of the Company's
Annual Meeting in 2000 is advanced by more than 30 days or delayed by more than
60 days from the anniversary date of the Company's Annual Meeting in 1999, then
pursuant to the Company's By-laws.
MUNICIPAL MORTGAGE & EQUITY, LLC
218 N. Charles Street, Suite 500
Baltimore, Maryland 21201
Dated: June , 1999
11
<PAGE>
ANNEX A
Text of Proposed Amendments
Amendment 1. New Section 5.2(d).
[The underscored text will be added to the caption of Section 5.2 and
an entirely new paragraph (d) will be added. There will not be any
changes to paragraphs (a), (b) or (c) of Section 5.2.
We have omitted the text of these paragraphs from this Annex A.]
5.2. Redemptions; Distributions Relating to Redemption Events; Certain
Permitted Conversions and Redemptions of Preferred Shares, Preferred
Capital Distribution Shares and Term Growth Shares; Mandatory Redemptions
at the Election of the Company.
* * *
(d) (i) Holders of Preferred Shares, Preferred Capital Distribution Shares
or Term Growth Shares may elect, by written notice to the Company received by
April 30 or October 30 of any year, to have their Shares redeemed by the
Company. The Company will redeem any shares validly tendered by May 15 of such
year (November 15 for tenders by October 30), or as soon thereafter as
commercially practicable.
(ii) The Company may at any time, upon 30 days' notice to the holders of
Preferred Shares, Preferred Capital Distribution Shares and Term Growth Shares,
redeem any or all of such Shares at the Redemption Price or as soon thereafter
as commercially practicable.
(iii) The Board of Directors shall make all determinations with respect to
redemptions pursuant to this paragraph (d), including, but not limited to,
determining whether to redeem Preferred Shares, Preferred Capital Distribution
Shares and Term Growth Shares for cash, Common Shares or a combination thereof.
(iv) The redemption price of the Preferred Shares and the Preferred Capital
Distribution Shares for mandatory redemptions by the Company shall be 110% of
book value for redemptions in 1999; 108% of book value for redemptions in 2000;
106% of book value for redemptions in 2001; 104% of book value for redemptions
in 2002; 102% of book value for redemptions in 2003; and 100% of book value for
redemptions in 2004. The conversion price of the Preferred Shares and the
Preferred Capital Distribution Shares tendered at the election of the
shareholders shall be 100% of the book value of such shares. The exchange value
shall be calculated as of the end of the most recent fiscal quarter for which
public information has been made available, as recorded on the Company's books
and records, adjusted for (x) Permitted Selling Expenses, (y) any distributions
to Shareholders declared since the end of such quarter and (z) any proceeds of
sales or refinancings of the underlying assets consummated since the end of such
quarter. The redemption and conversion price of the Term Growth Shares, in
addition to any amounts payable pursuant to this Agreement, shall be the value,
determined to be fair by Robert A. Stanger & Co., Inc., or another third party,
as
<PAGE>
of the date of the adoption of this subsection, adjusted to reflect the
Company's cash distributions in respect of the Term Growth Shares since the
third-party appraisal, as shown on the most recent financial statements filed by
the Company with the Commission. The redemption price (the "Redemption Price")
may be paid at the Company's election in cash and/or by delivering Common
Shares. Common Shares shall have a value determined as described below.
Tendering Shareholders will not be entitled to dividend payments on tendered
Shares for the quarterly dividend period which begins on that April 1 or
November 1, as applicable. If the Board of Directors chooses to pay all or part
of the Redemption Price in Common Shares, the number of Common Shares delivered
in exchange shall equal the number that is the value of the redeemed Share (or
the portion being exchanged for Common Shares) divided by the average daily
closing prices for the Common Shares on the New York Stock Exchange or other
exchange or quotation system on which the Common Shares are listed or quoted for
the 30 trading days ending on the related tender deadline date (April 30 on
October 30). In the event the Common Shares are not listed or quoted, then the
Board of Directors shall determine in good faith the value of the Common Shares.
(v) In the event that such redemption is for less than all of the Preferred
Shares, the Preferred Capital Distribution Shares or the Term Growth Shares,
Shares shall be redeemed pro rata with reference to the number of Shares subject
to redemption then held by each holder or in such other manner the Board of
Directors determines to be equitable.
(i) Any redemption in exchange for Common Shares pursuant to this Section
5.2(d) shall be deemed, for federal income tax purposes, as a contribution to
the Company of the Preferred Shares, Preferred Capital Distribution Shares or
Term Growth Shares, as the case may be, by the holder of such Shares in exchange
for Common Shares.
* * *
Amendment 2. Additions to Section 5.3(a).
[The underscored text will be added to the caption of Section
5.3 and paragraph 5.3(a). There will not be any changes
to paragraph (b) of Section 5.3.
We have omitted the text of paragraph (b) from this Annex A.]
5.3. Priority; Share Redemptions and Repurchases.
(a) Notwithstanding the above Sections of this Article 5, the Company shall
not declare or pay any distribution of any kind on any Shares other than the
Preferred Shares and Preferred Capital Distribution Shares, unless at such time
full cumulative distributions have been paid with respect to the Preferred
Shares and Preferred Capital Distribution Shares, as provided for under this
Agreement, through the most recent Dividend Payment Date; and, subject to
Section 13.7 hereof, no Shares other than Preferred Shares and Preferred Capital
Distribution Shares may be redeemed or repurchased by the Company while any
Preferred Shares and Preferred Capital Distribution Shares remain outstanding
if, after giving effect to such redemption or repurchase, the ratio of the
equity of the Company calculated in accordance with GAAP to the aggregate
liquidation preference of the Preferred Shares and the Preferred Capital
Distribution Shares would be less than 8.7 to 1.
<PAGE>
MUNICIPAL MORTGAGE & EQUITY, LLC
218 North Charles Street, Suite 500
Baltimore, Maryland 21201
CONSENT TO AMEND OPERATING AGREEMENT
THIS CONSENT IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
AND MUST BE RECEIVED BY 5:00 P.M. LOCAL TIME ON JULY 15, 1999,
UNLESS EXTENDED BY THE BOARD OF DIRECTORS
The undersigned, revoking all previous consents, hereby votes his shares in
Municipal Mortgage & Equity, LLC (the "Company") as directed by this consent. If
no direction is made, this consent will be voted NO for Proposal 1 and NO for
Proposal 2. Shareholders shall vote on the amendments as two separate proposals,
unless the Board of Directors determines otherwise.
Receipt of the Company's Consent Solicitation Statement is acknowledged.
(IMPORTANT -- TO BE MARKED, SIGNED AND DATED ON REVERSE SIDE)
<PAGE>
|X| Please mark your votes as in this
example.
1. To approve the amendment of the Yes No Abstain
Company's Amended and Restated
Certificate of Formation and
Operating Agreement (the
"Operating Agreement") to add |_| |_| |_|
language to the caption of
Section 5.2 and to add a new
Section 5.2(d) as described in
the Consent Solicitation
Statement.
2. To approve the amendment of the Yes No Abstain
Company's Operating Agreement to
add language to the caption of
Section 5.3 and to add language
to Section 5.3(a) as described in |_| |_| |_|
the Consent Solicitation
Statement.
NOTE: Please sign exactly as name
appears hereon. When shares are held by
joint tenants, both should sign.
Executors, administrators, trustees and
other fiduciaries should so indicate
when signing. If a corporation, please
sign in full corporate name by president
or other authorized officer. If a
partnership, please sign in partnership
name by authorized person. This consent
may be mailed, postage-free, in the
enclosed envelope.
__________, 1999 _________________ __________, 1999 _________________
Signature/Title Signature (if
(if required) held jointly)
----------------------------
PLEASE MARK, SIGN, DATE
AND RETURN THIS CONSENT
CARD PROMPTLY USING THE
ENCLOSED ENVELOPE
----------------------------
