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 Under Rule 14a-12
MUNICIPAL MORTGAGE & EQUITY, LLC
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
X No fee required.
___ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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 cal-
culated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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___ Fee paid previously with preliminary materials:
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___ 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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(4) Date Filed:
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MUNICIPAL MORTGAGE & EQUITY, LLC
Baltimore, Maryland
June 14, 2001
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of the holders of Common
Shares and Term Growth Shares (the "Shareholders") and holders of Series I
Preferred Shares, Series II Preferred Shares, Series I Preferred Capital
Distribution Shares and Series II Preferred Capital Distribution Shares (the
"Preferred Shareholders") of Municipal Mortgage & Equity, LLC, a Delaware
limited liability company (the "Company" or "MuniMae"), will be on June 14,
2001, beginning at 9:00 a.m. at the offices of the Company:
Municipal Mortgage & Equity, LLC
218 N. Charles St., Suite 500
Baltimore, Maryland 21201
THE PURPOSE of the Annual Meeting will be:
1. To elect three members of the Board of Directors to hold office for three-
year terms expiring at the annual meeting held in 2004 or until their re-
spective successors are duly elected and qualified;
2. To consider and act upon a proposal to approve the Municipal Mortgage &
Equity, LLC 2001 Incentive Plan as adopted and recommended by the Board of
Directors;
3. To consider and act upon a proposal to approve the Municipal Mortgage &
Equity, LLC 2001 Non-Employee Directors' Share Plan as adopted and recom-
mended 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 or postponement thereof.
All Shareholders and Preferred Shareholders are cordially invited to attend
the Annual Meeting in person. The record date for determining those Shareholders
and Preferred Shareholders entitled to vote at the Annual Meeting is April 3,
2001. A review of the Company's operations for the year ended December 31, 2000
will be presented. A proxy statement, form of proxy and a copy of the 2000
Annual Report to Shareholders is enclosed.
By Order of the Board of Directors,
Thomas R. Hobbs
Secretary
Baltimore, Maryland
April 9, 2001
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.
MUNICIPAL MORTGAGE & EQUITY, LLC
Corporate Office and Mailing Address:
218 North Charles Street, Suite 500
Baltimore, Maryland 21201
(410) 962-8044
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation of
proxies by Municipal Mortgage & Equity, LLC (hereinafter the "Company" or
"MuniMae") from holders of Common Shares and Term Growth Shares (the
"Shareholders") and holders of Series I Preferred Shares, Series II Preferred
Shares, Series I Preferred Capital Distribution Shares and Series II Preferred
Capital Distribution Shares (the "Preferred Shareholders") voting as a single
class, for the Annual Meeting of Shareholders to be held on June 14, 2001.
The cost of the solicitation of proxies will be paid by the Company. In
addition to solicitation by mail, proxies may be solicited in person by
directors, officers and employees of the Company without additional
compensation, and by telephone, telegram, facsimile or similar method. Brokers
and other persons will be reimbursed for their reasonable expenses in forwarding
proxy materials to Shareholders who have a beneficial interest in Common 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 or Preferred 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 share transfer records were
compiled on April 3, 2001, the record date set by the Board of Directors for
determining the Shareholders and Preferred Shareholders entitled to notice of,
and to vote at, this meeting and any adjournment or postponement thereof. On
that date, there were 21,499,018 outstanding Common Shares (no par value), 2,000
outstanding Term Growth Shares, 14,933 outstanding Series I Preferred Shares,
7,226 outstanding Series II Preferred Shares, 7,798 Series I Preferred Capital
Distribution Shares and 3,164 Series II Preferred Capital Distribution Shares.
The holders of the outstanding Common Shares and Term Growth Shares at the close
of business on April 3, 2001 will be entitled to one vote for each share held by
them as of such date. The holders of outstanding Series I Preferred Shares and
Series I Preferred Capital Distribution Shares at the close of business on April
3, 2001 will be entitled to 38.10 votes for each share held by them as of such
date. The holders of the outstanding Series II Preferred Shares and Series II
Preferred Capital Distribution Shares at the close of business on April 3, 2001
will be entitled to 43.95 votes for each share held by them as of such date.
The presence of the holders of a majority of the issued and outstanding
Common 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"). The
Exchange rules prohibit member firms of the Exchange from voting on Proposals 2
and 3 without specific instructions from the beneficial owners. Accordingly, if
your shares are held of record by a broker or some other entity, and such entity
indicates that it does not have authority to vote such shares on Proposals 2 and
3, those shares will not be voted and will have the same effect as votes AGAINST
Proposals 2 and 3.
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 shareholder abstains are included in determining whether a quorum is
present.
This proxy statement and the enclosed proxy are first being sent or given
to Shareholders on or about April 9, 2001.
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 ten, with
(i) nine of the directors divided into three classes, the members of which are
elected by the holders of the Common 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 three
directors, Messrs. Jews, Stearn and McGregor, expire in 2001 and Messrs. Jews
and Stearn, directors since 1996, and Mr. McGregor, a director since October
1999, have been nominated for re-election at the Annual Meeting.
The names, ages, terms of office and certain other information as of March
31, 2001 with respect to the persons nominated for election as directors and
other persons serving as directors are as follows:
Information Concerning Nominees for Election for Terms Expiring in 2004:
William L. Jews, age 49, 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. From 1993 until the merger,
Mr. Jews was President and Chief Executive Officer of Blue Cross/Blue Shield of
Maryland. Since March 2000, Mr. Jews has also been the Chief Executive Officer
of Carefirst Blue Cross Blue Shield of Delaware. Mr. Jews serves on the boards
of directors of National Blue Cross/Blue Shield Association, MBNA Corporation,
Choice Hotels International, Inc., The Ryland Group, Inc. and EcoLab, Inc. He is
also a board member of the Baltimore County Revenue Authority and the Maryland
Health Care Foundation Board of Trustees and a governor of The Federal Reserve
Bank.
Carl W. Stearn, age 68, has been a director of the Company since August
1996. Mr. Stearn is Chairman of the Executive Committee of Provident Bankshares
Corporation. From 1990 until 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. Mr. Stearn serves on the
boards of directors of the University of Maryland School of Medicine Board of
Visitors, Project Life and the Maryland Science Center.
Douglas A. McGregor, age 59, a director of the Company since October 1999,
is Vice Chairman and Chief Operating Officer for The Rouse Company. Mr. McGregor
has been with The Rouse Company since 1972 and assumed his current position in
1998. Mr. McGregor has extensive experience in real estate development and
management. Mr. McGregor is a trustee of the International Council of Shopping
Centers.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR THE ELECTION OF THE NOMINEES AS DIRECTORS.
Information Concerning Directors whose Terms Expire in 2002:
Mark K. Joseph, age 62, 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 six 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 59, a director of the Company since August 1996, has
been Chairman of the Morgan Group, Inc., in 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 Secretary/Treasurer of United Holdings Co., Inc. and its
predecessors. United Holdings was involved in the metal business until 1990 when
it shifted its focus to become a firm that primarily invests in real estate and
securities. Mr. Baum is also a director of Gabelli Group, Inc., Shapiro Robinson
& Associates (a firm that represents professional athletes) and Shapiro
Negotiations Institute.
Robert J. Banks, age 56, a director of the Company since October 1999, is
the Chairman and Chief Executive Officer of The Midland Companies ("Midland"), a
wholly owned subsidiary of the Company, and has been a Senior Vice President of
the Company since October 1999. Mr. Banks was hired by Midland in 1973 and
became President and Chief Operating Officer in 1988. In 1993, Mr. Banks became
the Chairman and Chief Executive Officer of Midland. Mr. Banks has been involved
in real estate lending and mortgage banking since 1970 and is an investment
advisor registered with the Securities and Exchange Commission and holds four
different securities licenses. Mr. Banks is a trustee for the Midland Affordable
Housing Group Trust ("MAHGT"), a pension fund that provides debt financing for
the Company's customers and is also a board member of United Bank & Trust and
the National Multifamily Housing Council.
Information Concerning Directors whose Terms Expire in 2003:
Richard O. Berndt, age 58, a director of the Company since August 1996, has
been the managing partner of the Baltimore law firm of Gallagher, Evelius &
Jones, LLP since 1976. Mr. Berndt has extensive experience in corporate and real
estate law. Mr. Berndt serves on the Board of Mercantile Bankshares, Financial
Administration for the Archdiocese of Baltimore, Mercy Medical Center, Inc. and
Johns Hopkins Medicine. Gallagher, Evelius & Jones, LLP provides corporate and
real estate related legal services to the Company.
Robert S. Hillman, age 61, a director of the Company since August 1996, is
a director and president of H & V Publishing, Inc. since 1999 and is a labor
relations consultant for the City of Baltimore and the University of Maryland
Medical Systems Corporation. Prior to his position at H & V Publishing, Inc.,
from 1986 to 2000 Mr. Hillman was a member of the law firm of Whiteford, Taylor
and Preston, L.L.P., which has offices in Baltimore, Maryland and Washington,
D.C. 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 and the Babe Ruth
Museum and is a trustee of the Enoch Pratt Free Library.
Michael L. Falcone, age 39, a director since October 1999, has been the
President and Chief Operating Officer of the Company since 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
operations of the Company focusing on strategic planning and business
development as well as the management of 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. Mr. Falcone is
a trustee for the MAHGT.
During 2000, the Board of Directors held six regular meetings (one
telephonic). There were two committee meetings (one telephonic) during 2000.
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 McGregor, did not meet in 2000; the
Compensation Committee met in late 1999 and acted upon certain
recommendations that affected 2000. 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, and Baum, met twice during 2000 (one telephonic). Its
duties are to assist the Board of Directors in fulfilling its financial
oversight responsibilities, to select an independent accountant for the
Company and to oversee the work of such independent accountant.
3. Share Incentive Committee. The Share Incentive Committee, a subcommittee of
the Compensation Committee, typically meets immediately following each
Compensation Committee meeting. Its functions are to determine awards under
the Company's Share Incentive Plans. The Share Incentive Committee is
composed of Messrs. Hillman and Baum.
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 Common
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 three 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. From time to time, the Board of Directors may
change this compensation by resolution. During 2000, the directors received
annual compensation of $16,000 plus a fee of $1,000 for attendance at each
meeting of the Board of Directors including committee meetings and $500 for
telephonic board meetings. Officers of the Company who are directors are not
paid any director fees.
In addition, non-employee directors are granted options for Common Shares
and may elect to receive Common Shares or deferred Common 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 Common Shares following the merger of the Predecessor with the
Company. In addition, the Directors' Plans provide that each non-employee
director will receive an option to purchase 2,500 Common Shares (i) upon his
initial election or appointment, and (ii) on the date of each Annual Meeting of
Shareholders. Effective January 1, 2000, the Directors' Plans were amended to
provide that each non-employee director receive an option to purchase 7,000
Common Shares upon his initial election or appointment and an option to purchase
5,000 Common Shares on the date of each Annual Meeting of Shareholders. These
options have and will have exercise prices equal to the fair market value of
Common 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. Options received upon initial election or appointment will become
exercisable in three equal installments commencing at the earlier of: (a) the
next anniversary of the director's initial election, or (b) the next Annual
Meeting of Shareholders. Options received on the date of each Annual Meeting of
Shareholders become exercisable at the earlier of: (a) the next anniversary of
the option grant, or (b) the next Annual Meeting of Shareholders. These options
are subject to earlier exercisability in the event of death, disability, or a
change in control (as defined in the Director' Plans), 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 Common Shares or deferred Common
Shares ("Deferred Shares"). A director who makes the election to receive Common
Shares will receive Common Shares having a fair market value at the time of
issuance equal to the amount of fees he has elected to forego, 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 Common Shares having an
aggregate fair market value at that date equal to the fees that otherwise would
have been payable at such date. Whenever distributions are made, the deferral
account of a director who elected to receive Deferred Shares will be credited
with distribution equivalents having a value equal to the amount of the
distribution paid on a single Common Share multiplied by the number of Deferred
Shares credited to his deferral account as of the record date for such dividend.
These distribution equivalents will be credited to the deferral account as a
number of Deferred Shares determined by dividing the aggregate value of the
distribution equivalents by the fair market value of a Common Share at the
payment date of the distribution. A total of 50,000 Common Shares are reserved
for grants under the 1996 Directors' Plan and a total of 50,000 Common Shares
are reserved for grants under the 1998 Directors' Plan. As of December 31, 2000,
there were no shares available under the Directors' Plans. The number and kind
of shares reserved and automatically granted under the Directors' Plans are
subject to adjustment in the event of share splits, share distributions and
other extraordinary events.
PROPOSAL TO APPROVE THE MUNICIPAL MORTGAGE & EQUITY, LLC
2001 SHARE INCENTIVE PLAN
(Proposal No. 2)
The following is a brief description of the material features of the 2001 Share
Incentive Plan. The description is qualified in its entirety by reference to
such plan, a copy of which is attached hereto as Appendix A.
In 1996 and 1998 the Company established the 1996 Share Incentive Plan (the
"1996 Plan") and the 1998 Share Incentive Plan (the "1998 Plan" and together
with the 1996 Plan, the "Plans"), respectively, to provide a means to attract,
retain and reward executive officers and other key individuals of the Company,
to link individual compensation to measures of the Company's performance, and to
promote ownership of a greater proprietary interest in the Company. The Board of
Directors believes that the Plans met each of its stated purposes. However,
1,514,269 of the 1,722,033 Common Shares (the "Shares") reserved for issuance in
connection with awards under the Plans have been awarded.
Accordingly, the Board of Directors has adopted and recommends the approval
by Shareholders of a new 2001 Share Incentive Plan (the "2001 Plan") providing
for the issuance of up to 1,000,000 Shares to executive officers, other key
employees and key independent contractors. Approximately 188 employees and key
independent contractors will be eligible to participate in the 2001 Plan. The
terms of the 2001 Plan will be generally the same as those of the 1996 and 1998
Plans. Subject to approval by the Company's Shareholders, the 2001 Plan will
become effective as of June 14, 2001 and expire when either the Board takes
action to terminate the 2001 Plan or when no Shares remain available for
issuance under the 2001 Plan and the Company and those who have been granted an
award under the 2001 Plan (the "Participants") have no further rights or
obligations under the 2001 Plan. The Board of Directors believes the amount of
shares available under the 2001 Plan is reasonable and fair to the current
Shareholders of the Company and represents less than 5% of the total outstanding
shares as of March 31, 2001.
The 2001 Plan authorizes grants of a broad variety of awards, including
non-qualified stock options, stock appreciation rights, restricted shares,
deferred shares, and shares granted as a bonus or in lieu of other awards. Any
restricted Share or deferred Share awards would need to be approved or ratified
by the Share Incentive Committee (the "Committee"). The 2001 Plan will be
administered by the Committee. The Committee is authorized to select from among
the eligible participants 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. The Committee is also authorized to adopt, amend and
rescind rules relating to the administration of the 2001 Plan. Awards may be
settled in cash, Common Shares, or other property, in the discretion of the
Committee. The Committee may adjust the number of Shares reserved under the 2001
Plan and the number of Shares relating to outstanding awards and related terms
to reflect share splits of the Common Shares and other extraordinary corporate
events. No member of the Committee will be eligible to participate in the 2001
Plan.
Initially, 1,000,000 Shares are reserved for issuance in connection with
awards under the 2001 Plan, except that Shares issued as Restricted Shares and
Shares issued as Awards other than Options (including Restricted Shares) will
not exceed 20% and 40% of the total reserved under the 2001 Plan, respectively.
Shares subject to forfeited or expired awards, as well as shares relating to
awards settled in cash or otherwise terminated without issuance of Shares to the
Participant, again become available under the 2001 Plan.
The price to be paid by Participants for Shares issued under the 2001 Plan
will be determined by the Committee in its sole discretion. The Exercise price
of Share options ("Options") granted may be equal to, greater than or less than
the fair market value of Common Shares on the grant date. As of March 30, 2001,
the fair market value of the Common Shares was $22.40 per Common Share. The
Committee, in its sole discretion, determines the time of Option exercise and
the method and form of payment of the Option.
The Committee is also authorized to grant Share Appreciation Rights (SARs).
The Committee, in its sole discretion, determines the time at which a SAR may be
exercised, the method of exercise, the method of settlement, the form of
consideration, the method by which Shares will be delivered, whether or not a
SAR is granted with any other award, and any other terms and conditions of any
SAR.
Participants receiving Restricted Shares under the 2001 Plan will have all
the rights of a Shareholder (including voting and dividend rights), except that
all such Shares will be subject to such restrictions on transferability and
other restrictions, if any, that the Committee may impose. If a Participant's
employment or contract terminates during the applicable restriction period,
Restricted Shares that are at that time subject to restrictions are forfeited,
unless the Committee determines otherwise, and reacquired by the Company.
Participants receiving Deferred Shares under the 2001 Plan will be issued
the Shares upon the expiration of the deferral period specified in the award.
The Deferred Shares are subject to any restrictions, including forfeiture
conditions, the Committee may impose. The Committee may also provide for
dividend equivalent payments to be credited in respect of Deferred Shares.
Unless the Committee determines otherwise, if a Participant's employment or
contract terminates during the applicable deferral period, all Deferred Shares
subject to forfeiture are forfeited.
Generally, a Participant receiving an Option under the 2001 Plan will not
recognize taxable income as a result of the grant. However, a Participant will
recognize ordinary income at the time of exercise of the Option in the amount
equal to the excess of the fair market value of the Shares at the time of
exercise over the Exercise Price. The amount of ordinary income recognized by a
Participant is generally deductible by the Company. The deduction will be
limited, however, to the extent it represents an expense attributable to the
production of tax-exempt income. In addition, the Company may recognize taxable
gain at the time a Participant exercises an Option.
New Plan Benefits
The number of Shares and other awards that may be granted under the 2001
Share Incentive Plan is undeterminable at this time, as such grants are subject
to the discretion of the Committee.
Vote Required for Approval
The affirmative vote of a majority of the holders of the outstanding Common
Shares, Term Growth Shares, Series I Preferred Shares, Series II Preferred
Shares, Series I Preferred Capital Distribution Shares and Series II Preferred
Capital Distribution Shares (voting as one class) is necessary for the approval
of the 2001 Share Incentive Plan. Shares represented by an executed proxy in the
form enclosed will, unless otherwise directed, be voted for the adoption of the
2001 Share Incentive Plan.
The Board of Directors unanimously recommends that you vote FOR this proposal.
PROPOSAL TO APPROVE THE MUNICIPAL MORTGAGE & EQUITY, LLC
2001 NON-EMPLOYEE DIRECTORS' SHARE PLAN
(Proposal No. 3)
The following is a brief description of the material features of the 2001 Non-
Employee Directors' Share Plan. The description is qualified in its entirety by
reference to such plan, a copy of which is attached hereto as Appendix B.
In 1996 and 1998 the Company established the 1996 Non-Employee Directors'
Share Plan (the "1996 Directors' Plan") and the 1998 Non-Employee Director'
Share Plan (the "1998 Directors' Plan" and together with the 1996 Directors'
Plan, the "Directors' Plans"), respectively, to provide compensation to
non-employee Directors of the Company, and to link Director compensation to
measures of the Company's performance. The Board of Directors believes that the
Directors' Plans have achieved its stated purposes. A total of 100,000 Common
Shares (the "Shares") were reserved for issuance in connection with awards under
the Directors' Plans. As of December 31, 2000, there were no Shares available
for issuance under the Directors' Plans.
Accordingly, the Board of Directors has adopted and recommends the approval
by Shareholders of a new 2001 Non-Employee Directors' Share Plan (the"2001
Directors' Plan") providing for the issuance of up to 150,000 Shares to
non-employee Directors. Approximately six non-employee directors will be
eligible to participate in the 2001 Directors' Plan. The number and kind of
shares reserved and automatically granted under the 2001 Directors' Plan are
subject to adjustment in the event of share splits of the Common Shares and
other extraordinary events. The terms of the 2001 Directors' Plan will be
generally the same as those of the 1996 and 1998 Directors' Plans. Under the
2001 Directors' Plan, non-employee directors will be granted options for Shares,
and may elect to receive Shares in lieu of fees. Subject to approval by the
Company's Shareholders, the 2001 Directors' Plan will become effective as of
June 14, 2001 and expire when either the Board takes action to terminate the
2001 Directors' Plan or when no Shares remain available for issuance under the
2001 Directors' Plan and the Company and those who have been granted an award
under the 2001 Directors' Plan (the "Participants") have no further rights or
obligations under the 2001 Directors' Plan.
Options
Effective January 1, 2000, the Directors' Plans were amended to provide
that each non-employee director receive an option to purchase 7,000 Common
Shares upon his initial election or appointment and an option to purchase 5,000
Common Shares on the date of each Annual Meeting of Shareholders. Such options
will have exercise prices equal to the fair market value of Common Shares on the
date of grant. As of March 30, 2001, the fair market value of Common Shares was
$22.40 per Common Share. The full exercise price may be paid in cash (including
check) or by surrender of Shares already owned by the Participant (except for
Shares acquired from the Company by exercise of an Option or other award less
than six months before date of surrender) having a fair market value at the time
of exercise equal to the exercise price, or by a combination of cash and Shares.
The options will expire at the earlier of 10 years after the date of grant
or one year after the optionee ceases serving as a director. Options received
upon initial election or appointment will become exercisable in three equal
installments commencing at the earlier of: (a) the next anniversary of the
director's initial election, or (b) the next Annual Meeting of Shareholders.
Options received on the date of each Annual Meeting of Shareholders become
exercisable at the earlier of: (a) the next anniversary of the option grant, or
(b) the next Annual Meeting of Shareholders. Such options are subject to earlier
exercisability in the event of death, disability, or a change in control (as
defined in the Directors' Plans), and will be forfeited in the event of
cessation of service as a director within 10 months after the date of grant. If
an option expires for any reason without having been exercised in full, the
Shares subject to the unexercised portion of such option will again be available
for issuance under the 2001 Directors' Plan.
Generally, a non-employee director receiving an option under the 2001
Directors' Plan will not recognize taxable income as a result of the grant.
However, a Participant will recognize ordinary income at the time of exercise of
the option in the amount equal to the excess of the fair market value of the
Shares at the time of exercise over the exercise price. The amount of ordinary
income recognized by a non-employee director is generally deductible by the
Company. The deduction will be limited, however, to the extent it represents an
expense attributable to the production of tax-exempt income. In addition, the
Company may recognize taxable gain at the time a non-employee director exercises
an Option.
Share or Deferred Shares in Lieu of Fees
The 2001 Directors' Plan permits a non-employee director to elect to be
paid any directors' fees in the form of Common 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 or on a deferred basis.
Whenever dividends are paid or distributions are made with respect to Shares, a
Participant to whom Deferred Shares are then credited in a deferral account
receive dividend equivalents. The interest of each Participant in any fees paid
in the form of Common Shares or Deferred Shares (and any deferral account
relating thereto) at all times will be nonforfeitable.
New Plan Benefits
The number of Shares that may be granted under the 2001 Non-Employee
Directors' Share Plan to non-employee directors as a group is 150,000.
Vote Required for Approval
The affirmative vote of a majority of the holders of the outstanding Common
Shares, Term Growth Shares, Series I Preferred Shares, Series II Preferred
Shares, Series I Preferred Capital Distribution Shares and Series II Preferred
Capital Distribution Shares (voting as one class) is necessary for the approval
of the 2001 Non-Employee Directors' Share Plan. Shares represented by an
executed proxy in the form enclosed will, unless otherwise directed be voted for
the adoption of the 2001 Non-Employee Directors' Share Plan.
The Board of Directors unanimously recommends that you vote FOR this proposal.
IDENTIFICATION OF EXECUTIVE OFFICERS
The following table identifies the executive officers of the Company and
provides certain information about each of them.
Name and Age Current Position(s) with the Company
and Past Business Experience
Mark K. Joseph, 62 Chairman of the Board and Chief Executive Officer
of the Company since August 1996. (See description
of past business experience in the preceding sec-
tion.)
Michael L. Falcone, 39 President and Chief Operating Officer of the Com-
pany since December 1997 and a board member of the
Company since October 1999. Prior to his appoint-
ment 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.
(See description of past business experience in the
preceding section.)
Gary A. Mentesana, 36 Senior Vice President of the Company since May 1997
and Chief Financial Officer since January 1998.
Before being appointed Senior Vice President, Mr.
Mentesana served as Vice President from August 1996
to May 1997. Mr. Mentesana is responsible for the
financial operations of the Company and manages
the capital market activities of the Company. Be-
tween 1988 and 1996, he performed similar func-
tions for the managing general partner of the Pre-
decessor. Mr. Mentesana is a certified public
accountant.
Robert J. Banks, 56 Senior Vice President and a board member of the
Company since October 1999 and Chairman and Chief
Executive Officer of The Midland Companies since
1993. (See description of past business experience
in the preceding section.)
Keith J. Gloeckl, 50 Senior Vice President of the Company since October
1999 and President and Chief Operating Officer
of The Midland Companies since 1993. Mr. Gloeckl
is primarily responsible for the originating of
debt and equity financings primarily related to
multifamily apartment communities.
Thomas R. Hobbs, 60 Senior Vice President and Secretary of the Company
since August 1996. Mr. Hobbs directs the admin-
istrative, board relations and investor services
of the Company. Mr. Hobbs chairs the Credit Com-
mittee, providing direction on loan policy and
product development. From 1986 to 1996, Mr.
Hobbs was Senior Vice President and General Mana-
ger of the managing general partner of the
Predecessor.
Earl W. Cole, III, 47 Senior Vice President of the Company since November
1998. Before being appointed Senior Vice Presi-
dent, Mr. Cole served as Vice President of the
Company from August 1996 to November 1998. Mr.
Cole directs the portfolio management and loan ser-
vicing operations of the Company. Mr. Cole served
in a similar capacity for the managing general
partner of the Predecessor from 1989 to 1996.
EXECUTIVE COMPENSATION
Employment Agreements
Each of Mark K. Joseph, Michael L. Falcone, Gary A. Mentesana, Robert J.
Banks and Keith J. Gloeckl (each an "Officer" and collectively, the "Officers")
entered into employment agreements with the Company during 1999. The specifics
of the agreements are as follows:
The terms of the agreements for Messrs. Joseph, Falcone and Mentesana are
three years. The agreements provide for annual base compensation in the amounts
of $250,000, $250,000 and $160,000, respectively, with allowance for cost of
living adjustments and annual cash bonuses (or incentive compensation) of up to
150% for Mr. Joseph and 100% for Messrs. Falcone and Mentesana. The agreements
further provide for total compensation goals equal to $675,000, $650,000 and
$350,000 for Messrs. Joseph, Falcone and Mentesana, respectively, based on
achievement of certain performance goals by the individual and the Company. Each
of the employment agreements provides for certain severance payments in the
event of disability or termination by the Company without cause equal to base
compensation for the longer of the balance of the employment term or 36 months
for Mr. Joseph and 18 months for Messrs. Falcone and Mentesana. Additionally,
upon an employee's death, his estate shall receive two years' base compensation.
The agreements also contain provisions which provide such officers with
substantial payments should their employment terminate as a result of a change
in control.
The terms of the agreements for Messrs. Banks and Gloeckl are four years.
Each of the agreements provides for annual base compensation in the amount of
$250,000, with allowance for cost of living adjustments. Annual cash bonuses (or
incentive compensation) for Mr. Banks and Mr. Gloeckl are based on the Company's
incentive compensation plan; however, no incentive compensation will be paid in
any year in which Midland does not achieve certain earn-out target goals for
such year. Messrs. Banks and Gloeckl were also awarded options to purchase up to
87,500 Common Shares. Each of the employment agreements provides for certain
severance payments in the event of disability or termination by the Company
without cause equal to base compensation for the balance of the employment term.
In addition, all earn-out shares (as defined in the Stock Purchase and
Contribution Agreement dated September 30, 1999 by and between the Company and
Messrs. Banks, Gloeckl and Mr. Ray F. Mathis, the "Stock Purchase Agreement")
which have been earned through the date of termination and may become payable,
shall be immediately and irrevocably issued to them in the event of disability
or termination by the Company without cause. In the event of death, an
employee's agreement is terminated; however, his estate shall be entitled only
to the balance of the earn-out shares described in, and earned pursuant to, the
Stock Purchase Agreement.
Pursuant to the employment agreements, the Company generally will have
"cause" to terminate an Officer 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 non-competition 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 Messrs. Banks and Gloeckl shall
continue to be entitled to earn-out shares to the extent provided in the Stock
Purchase Agreement regardless of whether such Officer has been terminated for
cause.
Each Officer 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. Each of Messrs. Banks
and Gloeckl shall be entitled to all earn-out shares which have been earned
through the date of termination and may become payable and such shares shall be
immediately and irrevocably issued to each of them.
As part of their employment agreements, each of the Officers is bound by a
limited non-competition covenant with the Company which prohibits each of them,
without prior written consent of the Board of Directors, 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
for Messrs. Joseph, Falcone and Mentesana and 24 months following the
termination of employment with the Company for Messrs. Banks and Gloeckl;
provided, however, if such Officer's employment is terminated by the Company
without "cause" or by the employee for "good reason," the covenant not to
compete will terminate upon termination of employment. Certain of the agreements
may contain other exceptions.
In addition to the above, Mr. Thomas R. Hobbs also has an employment
agreement with the Company for an initial term of three years with an automatic
renewal of successive one-year periods after the end of the initial term. On
August 1, 1999, the initial term expired. As provided for in the agreement, the
Company is required to provide at least 30 days notice of its intent to
terminate such agreement. As of that date, the Company did not provide such
notice. The terms of his agreement provide for annual compensation in the amount
of $125,000 adjusted annually for cost of living adjustments and for certain
severance payments equal to base compensation for the longer of the balance of
the employment term or 18 months in the event of disability or termination by
the Company without cause or by the employee with "good reason," and contains
provisions which will provide substantial payment should Mr. Hobbs' employment
terminate as a result of a change in control. Mr. Hobbs' agreement contains the
same non-competition covenant as Messrs. Joseph, Falcone and Mentesana.
Summary Compensation Table
The following table sets forth the annual compensation paid or accrued by
the Company during the last three years to the Chief Executive Officer and to
each of the Company's other four most highly compensated officers.
Long-Term
Compensation
Annual Compensation Awards
-------------------------------------------- ---------------
Other Annual Share All Other
Name and Principal Position Year Salary ($) Bonus ($) Compensation (1) Options (#) Compensation
---------------------------------- ------ ----------- ----------- ------------------- --------------- -------------------
Mark K. Joseph ................... 2000 $ 248,077 $ 100,000 $ 10,506 - $ 774 (2)
Chairman of the Board and Chief 1999 150,000 150,000 8,282 - 2,026 (2)
Executive Officer 1998 157,769 108,000 7,253 - 2,176 (2)
Michael L. Falcone ............... 2000 248,711 90,000 10,590 - 2,939 (3)
President and Chief Operating 1999 183,000 150,000 8,288 - 2,026 (3)
Officer 1998 183,885 73,000 7,554 - 2,017 (3)
Gary A. Mentesana ................ 2000 159,731 80,000 8,560 - 2,804 (4)
Senior Vice President and Chief 1999 120,000 100,000 7,009 - 2,026 (4)
Financial Officer 1998 109,231 48,000 6,245 - 1,569 (4)
Robert J. Banks .................. 2000 252,897 90,000 - 87,500 3,516 (5)
Senior Vice President 1999 47,400 - - - 13,500 (5)
1998 - - - - - (5)
Keith J. Gloeckl ................. 2000 252,897 90,000 - 87,500 3,245 (6)
Senior Vice President 1999 47,462 - - - 13,500 (6)
1998 - - - - - (6)
(1) The amounts indicated for each officer are reimbursements during the fiscal
year for the payment of taxes.
(2) The amounts indicated include $2,000 for both 1999 and 1998 related to the
Company's contribution to Mr. Joseph's individual retirement account and
$99, $26 and $176 for 2000, 1999 and 1998, respectively, for the dollar
value of insurance premiums paid by the Company with respect to term life
insurance that benefits Mr. Joseph and $675 for group long-term disability
insurance in 2000 that benefits Mr. Joseph.
(3) The amounts indicated include $2,250, $2,000 and $2,000 for 2000, 1999 and
1998, respectively, related to the Company's contribution to Mr. Falcone's
individual retirement account; $14, $26 and $17 for 2000, 1999 and 1998,
respectively, for the dollar value of insurance premiums paid by the
Company with respect to term life insurance that benefits Mr. Falcone; and
$675 for group long-term disability insurance in 2000 that benefits Mr.
Falcone.
(4) The amounts indicated include $2,250, $2,000 and $1,555 for 2000, 1999 and
1998, respectively, related to the Company's contribution to Mr.
Mentesana's individual retirement account; $14, $26 and $14 for 2000, 1999
and 1998, respectively, for the dollar value of insurance premiums paid by
the Company with respect to term life insurance that benefits Mr.
Mentesana; and $540 for group long-term disability insurance in 2000 that
benefits Mr. Mentesana.
(5) The amounts indicated include $2,250 and $13,500 for 2000 and 1999,
respectively, related to the Company's contribution to Mr. Banks'
individual retirement account, $685 for 2000 for the dollar value of
insurance premiums paid by the Company with respect to term life insurance
that benefits Mr. Banks and $581 for 2000 for group long-term disability
insurance that benefits Mr. Banks.
(6) The amounts indicated include $2,250 and $13,500 for 2000 and 1999,
respectively, related to the Company's contribution to Mr. Gloeckl's
individual retirement account, $685 for 2000 for the dollar value of
insurance premiums paid by the Company with respect to term life insurance
that benefits Mr. Gloeckl and $310 for 2000 for group long-term disability
insurance that benefits Mr. Gloeckl.
Options/SAR Grants in Last Fiscal Year
The following table sets forth information regarding grants of stock
options to the Company's executive officers under the Company's 1998 Share
Incentive Plan during fiscal year ended December 31, 2000.
Individual Grants
--------------------------------------------------------------------------- Potential Realizable
Value at Assumed
Number of % of Total Annual Rates of Share
Shares Options/SARs Exercise Price Appreciation for
Underlying Granted to or Base Option Term (2)
Options Employees Price Per Expiration --------------------------
Name Granted (#)(1) in Fiscal Year Share ($) Date 5% ($) 10% ($)
----------------- --------------- -------------- --------- ---------------- ------------ -------------
Robert J. Banks 87,500 20.8% $18.75 January 10, 2010 $ 1,031,780 $ 2,614,734
Keith J. Gloeckl 87,500 20.8% $18.75 January 10, 2010 1,031,780 2,614,734
(1) These options were granted pursuant to the 1998 Share Incentive Plan. The
options become exercisable up to one-fourth of the total number of shares
commencing one year after the date of grant, up to one-half of the total
number of shares commencing two years after the date of grant, up to
three-fourths of the total number of shares commencing three years after
the date of grant and all remaining shares commencing four years after the
date of grant. Options shall become fully exercisable in the event of death
or disability; and provided further, the options shall be exercisable after
termination for any reason other than death or disability only to the
extent that the option was exercisable at such date. In the event of a
change in control of the Company (as defined in the 1998 Share Incentive
Plan) at a time that the employee is employed by the Company, the option
shall become immediately and fully exercisable. In addition, the Company
may, in its sole discretion, at any time, upon written notice to the
employee, accelerate the exercisability of all or a specific portion of the
options. Generally, options expire ten years from the date of grant.
However, options will expire immediately upon the termination of employment
for cause and three months after termination of employment for reasons
other than death, disability or normal or early retirement. In the event of
death, disability or retirement, options will expire one year after such
event.
(2) The Potential Realizable Value is the product of (a) the difference between
(i) the market price per share at the grant date and the sum of (A) 1 plus
(B) the assumed rate of appreciation of the shares compounded annually over
the term of the option and (ii) the per share exercise price of the option
and (b) the number of shares underlying the option at December 31, 2000.
These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on share option exercises are dependent on a variety of
factors, including market conditions and the price performance of the
share. There can be no assurance that the rate of appreciation presented in
this table can be achieved.
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
The following table sets forth for the CEO and the other four most highly
compensated executive officers of the Company: (i) the total number of
unexercised options held at the end of fiscal year 2000; and (ii) the aggregate
dollar value of in-the-money unexercised options held at the end of fiscal year
2000.
Number of Value of Unexercised
Unexercised Options In-The-Money Options
Held at Fiscal Y/E (#) At 12/31/00 ($) (1)
---------------------------- ----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
-------------------- ----------- -------------- ------------ -------------
Mark K. Joseph 179,815 - $ 988,983 $ -
Michael L. Falcone 134,862 - 741,741 -
Gary A. Mentesana 67,431 - 370,871 -
Robert J. Banks - 87,500 - 317,188
Keith J. Gloeckl - 87,500 - 317,188
(1) Value of unexercised "in-the-money" options is the difference between the
market price of the shares on December 31, 2000 ($22.375 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.
Report of the Compensation Committee of the Board of Directors
In 1999 the Compensation Committee hired independent consultants to assist
in the determination of executive compensation. The Compensation Committee
determined executive compensation in accordance with recommendations based on
survey data prepared by nationally recognized real estate compensation
consultants. Based on discussions with the Compensation Committee and the
acquisition of Midland, the consultants decided that each position within the
Company's organization should be benchmarked against its own unique peer group,
depending upon the roles and responsibilities of the position. The consultants
established custom peer groups from two categories of companies; multifamily
REITs and specialty finance and investment companies. As a result, the CEO,
Chief Operating Officer and Chief Financial Officer of the Company were compared
to the multifamily REITs, while the other executives of the Company were
compared to the specialty finance and investment companies. For 2000, the
Compensation Committee concluded that the 1999 study was still appropriate for
these executive officers.
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 are
currently within the competitive ranges of the Company's peer groups. The
Company has reviewed and will continue to periodically review the benchmark
salary ranges to maintain continued market competitiveness.
Annual Incentive. The Company paid incentive compensation to the officers
listed above during 2000. 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 2000, the Company achieved target performance, and therefore, annual
bonuses were paid to the executives, as well as employees, for performance under
the plan in the target 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
Plans authorize 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 and 839,000 Common 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 Common 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 become available again under the Plans. As of December 31, 2000
there were 207,764 shares available under the Plans.
The Plans are administered by the Committee, which consists of two or more
independent directors. As of the date hereof, the Board has appointed Robert S.
Hillman and Charles C. 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, Common 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 Common 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.
During 2000, the Company awarded stock options to acquire up to 420,000
common shares and a total of 93,500 Deferred Shares to certain executives and
employees based on their overall performance and contribution to the success of
the Company.
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 CEO's custom peer group. As a result of the 1999
survey, the Compensation Committee determined that the CEO's base salary of
$150,000 ranked in the lowest quartile among the Company's peer group. As a
result, the CEO's base salary was increased to $250,000. The CEO is eligible to
receive awards under the Company's share incentive plan and incentive
compensation plan.
For the year ended December 31, 2000, the CEO received total cash payments
of $348,077 in salary and bonus (as shown in the Summary Compensation Table on
page 8). The Compensation Committee considered these 2000 payments appropriate
in light of Mr. Joseph's leadership and contributions to the overall long-term
strategy and growth of the Company.
RESPECTFULLY SUBMITTED,
COMPENSATION COMMITTEE
Mr. Robert S. Hillman, Chairman
Mr. Carl W. Stearn
Mr. Charles C. Baum
Mr. Douglas A. McGregor
Compensation Committee Interlocks and Insider Participation
No person who served as a member of the Compensation Committee during the
2000 fiscal year has ever been an officer or employee of the Company or any of
its subsidiaries. During fiscal year 2000, 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.
Performance Graph
The following table compares total shareholder returns for the Company at
December 31, 2000 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.
1996 1997 1998 1999 2000
MuniMae $ 100 $ 132 $ 124 $ 145 $ 180
S&P 500 100 133 170 205 187
NAREIT 100 119 96 90 114
Lipper Bond 100 110 116 112 117
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Shares and Term Growth Shares as of March 31,
2001, 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 Common 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.
Common Shares Term Growth Shares
----------------------------- -----------------------
Number of Percent of Number of Percent of
Name Shares Class Shares Class
-------------------------------------------- -------------- ----------- ---------- -----------
Mark K. Joseph 1,171,865 (1) 5.45 740 37.00
Michael L. Falcone 189,415 (2) * - -
Gary A. Mentesana 90,009 (2) * - -
Robert J. Banks 469,754 (2) 2.18 - -
Keith J. Gloeckl 170,935 (2) * - -
Thomas R. Hobbs 73,910 (2) * - -
Earl W. Cole, III 52,769 (2) * - -
Charles C. Baum 24,000 (3) * - -
Richard O. Berndt 15,571 (3) * - -
Robert S. Hillman 17,700 (3) * - -
William L. Jews 15,550 (3) * - -
Douglas A. McGregor 7,500 (3) * - -
Carl W. Stearn 64,906 (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 (18 persons) 2,462,595 11.45 740 37.00
--------------------------------------------
*Less than one percent.
(1) Included in Mr. Joseph's beneficial ownership of Common Shares are: (a)
179,815 Common shares subject to options granted under the 1996 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
Gary A. Mentesana 11,758 Common Shares
Thomas R. Hobbs 31,819 Common Shares
Earl W. Cole, III 9,618 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 and 1998 Plans as follows:
Shares Subject
To Options
----------------
Michael L. Falcone 134,862
Gary A. Mentesana 67,431
Robert J. Banks 21,875
Keith J. Gloeckl 21,875
Thomas R. Hobbs 59,731
Earl W. Cole, III 44,954
(3) Included in each board member's beneficial ownership of Common Shares are
Common Shares subject to options granted under the 1996 and 1998 Directors'
Share Plans as follows:
Shares Subject
To Options
--------------
Charles C. Baum 15,000
Richard O. Berndt 10,000
Robert S. Hillman 15,000
William L. Jews 15,000
Douglas A. McGregor 7,500
Carl W. Stearn 15,000
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 Common 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 an independent third party to render an opinion that
the allocation of the Common 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 that 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 Common 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 Common 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 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, 2000, the Company received approximately $0.3
million in mortgage servicing fees and $1.7 million in additional bond interest
as a result of the contribution of the mortgage servicing fee activities to the
Company.
Mr. Joseph controls the general partners of 20 of the Operating
Partnerships whose property collateralizes the Company's bonds and Mr. Thomas R.
Hobbs, a Senior Vice President of the Company, serves as a director of such
general partners. Mr. Michael L. Falcone serves as a director in three such
general partners. Ms. Angela A. Barone, the Company's Vice President of Finance
and Administration, serves as an officer in one such general partner. 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 income, 13 of the 19 Operating Partnerships were created as
successors to the original borrowers. With respect to the other seven Operating
Partnerships, an entity controlled by Mr. Joseph was designated as the general
partner of the original borrowing entities. However, such entities could have
interests that do not fully coincide with, or even are adverse to, the interests
of the Company. Such entities could choose to act in accordance with their own
interests, which could adversely affect the Company. Among the actions such
entities could desire to take might be selling a property, thereby causing a
redemption event, at a time and under circumstances that would not be
advantageous to the Company. Also, Mr. Joseph owns an indirect interest in the
general partners of the Southgate Crossings and Poplar Glen operating
partnerships.
In 1998 and 1999, the Company sold certain taxable demand notes related to
11 of the 20 Operating Partnerships controlled by Mr. Joseph in the aggregate
principal face amount of $7.4 million and $8.8 million, respectively. 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 an entity that 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
affiliates receive property management fees pursuant to management fee
contracts. Consistent with the Company's Operating Agreement, each affiliate
property management contract is presented to the independent members of the
Board of Directors for approval with information documenting the comparability
of the proposed fees to those in the market area of the property. During 2000,
there were 12 affiliated property management contracts for properties that
collateralize the Company's investments with fees at or below market value.
During the year ended December 31, 2000 these fees approximated $1.3 million.
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, 2000, the Company paid $100,000 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. Richard O. Berndt, a
director of the Company, have ownership interests in the partnership that leases
the office space to the Company. For the year ended December 31, 2000, the
Company paid $178,000 in rental lease payments under the lease agreement.
At December 31, 2000, 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 six directors of the Shelter Foundation. In addition, a company of which
Mr. Joseph owns an indirect minority, serves as property manager of the related
apartment project for a fee of $13,750 per month payable out of available cash
flow.
At December 31, 2000, the Company owned a $2.2 million B bond, a $2.1
million C bond and a $1.2 million taxable loan collateralized by the Winter Oaks
Apartment Community. The borrower of the bonds and the taxable loan is Winter
Oaks Partners, Ltd., (L.P.), a Georgia limited partnership whose 1% general
partner is MMA Successor I, Inc. and whose 99% limited partner is Winter Oaks,
L.P. The 1% general partner of Winter Oaks, L.P. is MMA Successor I, Inc., and
the 99% limited partner of Winter Oaks, L.P. is the MuniMae Foundation, Inc., a
private non-profit entity organized to provide charitable purposes on behalf of
the Company. Mr. Joseph is the President and one of three directors of the
MuniMae Foundation. Mr. Falcone and Mr. Gary A. Mentesana, the Company's Chief
Financial Officer, are also directors of the MuniMae Foundation. In addition, a
company of which Mr. Joseph owns an indirect minority serves as the property
manager of the related apartment project for a fee of 3% of gross rent collected
payable out of available cash flow.
At December 31, 2000, the Company owned a $15.1 million bond (face amount)
collateralized by the Santa Fe apartment community. The borrower of the bond is
MMA SFS Apartments, L.P., a Maryland limited partnership whose 1% general
partner is MMA Successor I, Inc. and whose 99% limited partner is the MuniMae
Foundation, Inc. Mr. Joseph is the President and one of three directors of the
MuniMae Foundation. Mr. Falcone and Mr. Mentesana are also directors of the
MuniMae Foundation. In addition, a company of which Mr. Joseph owns an indirect
minority interest, serves as property manager of the related apartment
community.
At December 31, 2000, the Company owned a $19.2 million bond collateralized
by the Lake Piedmont apartment community. In December 2000, the Company
negotiated a transfer, by deed in lieu of foreclosure, of the Lake Piedmont
property to MMA Affordable Housing Corporation, a 501(c)(3) non-profit entity
organized to provide charitable donations on behalf of the Company. Mr. Joseph
is the Chairman and one of five directors of the MMA Affordable Housing
Corporation. Mr. Falcone, Mr. Mentesana, Mr. Earl W. Cole, III, Senior Vice
President of the Company and Mr. Hobbs are also officers and directors of the
MMA Affordable Housing Corporation. In conjunction with the transfer of the
ownership, the Company made a $500,000 taxable loan to the property. The Company
established a valuation allowance equal to the principal outstanding of the loan
at December 31, 2000.
Mr. Berndt, a director since 1996, is the managing partner of the law firm
Gallagher, Evelius and Jones, LLP ("GEJ"), which provides corporate and real
estate related legal services to the Company. For the year ended December 31,
2000, GEJ received $1.3 million in legal fees generated by transactions
structured by the Company of which $0.7 million was directly incurred by the
Company. The total amount of $1.3 million represented 11.5% of GEJ's total
revenues for 2000.
An affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") owns 1,250 Term Growth Shares of the Company and 128,367
Common 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.
A subsidiary of the Company functions as a real estate advisor for pension
funds and the MAGHT. The MAGHT is a professionally managed portfolio of
diversified income producing real estate mortgage investments for pension funds
and profit-sharing trusts. Mr. Michael L. Falcone, Mr. Robert J. Banks and Mr.
Keith J. Gloeckl, Senior Vice Presidents of the Company, are trustees of the
MAGHT.
For the year ended December 31, 2000, a subsidiary of the Company received
administrative service fees of approximately $1.0 million from the MAGHT. As of
December 31, 2000, a subsidiary of the Company had a $5.0 million line of credit
available to the MAGHT, with no outstanding balance. The line matured on
December 31, 2000, and bears interest at the rate of 10.25%. The collateral for
the line is the net assets of the MAGHT. At December 31, 2000, the Company has
notes payable with an outstanding balance of $104.1 million due to the MAGHT.
The notes were made to finance construction loans and are collateralized by the
related construction loan receivables.
At December 31, 2000, a subsidiary of the Company has a $50.0 million
warehouse facility provided by the MAGHT, with an outstanding balance of $5.7
million. This warehouse facility is provided for interim funding of permanent
loans and completed construction loans until funded by permanent lender or
security holder and is collateralized by a security interest in the loans. The
facility bears interest at various rates based upon collateral. Individual
borrowings mature separately.
At December 31, 2000, a subsidiary of the Company had a $30.0 million line
of credit with the MAGHT to finance working capital and carryover loans, with an
outstanding balance of $11.5 million. Interest on the line of credit is 0.25%
under money center bank prime. The line is collateralized by a security interest
in the related loan receivable. Principal on the line is due in 2001.
At December 31, 2000, a subsidiary of the Company had a $15.0 million line
of credit with the MAGHT to fund syndication advances of limited partnerships.
At December 31, 2000 the balance due on the line was $6.5 million. Interest on
the line of credit is equal to money center bank prime. The line is
collateralized by a security interest in a promissory note given by a limited
partnership. Principal on the line is due in 2001.
At December 31, 2000, a subsidiary of the Company had a $10.0 million line
of credit with the MAGHT to fund syndication advances of limited partnerships
with an outstanding balance of $2.5 million. Interest on the line of credit is
equal to money center bank prime (9.50% at December 31, 2000). The line is
collateralized by a guarantee from the Company. Principal on the line is due in
2001.
On October 20, 1999, the Company acquired Midland Financial Holdings, Inc.
from Messrs. Banks, Gloeckl and Mathis for approximately $45 million. Of this
amount, the Company paid approximately $23 million in cash and approximately $12
million in Common Shares at the closing of the transaction. In addition, $3.33
million in Common Shares is payable annually over a three year period to Messrs.
Banks, Gloeckl and Mathis if Midland meets certain performance targets,
including minimum annual contributions to cash available for distribution. The
acquisition is being accounted for as a purchase. The total purchase price
incurred during 1999 and 2000 was $39.3 million, which includes acquisition
costs but excludes contingently issuable MuniMae shares over the next two years,
as discussed above. The results of operations of Midland are included in the
consolidated financial statements of the Company subsequent to October 20, 1999.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Company's audited financial statements for the year ended December 31,
2000, 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 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, 2001 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.
AUDIT INFORMATION
The Company's Board of Directors has adopted a written charter for its
Audit Committee, a copy of which is attached hereto as Appendix C. The Audit
Committee consists of Messrs. Stearn (Chairman), Jews, and Baum, all of whom are
independent, as independence is defined in Sections 303.01(B)(2)(a) and (3) of
the New York Stock Exchange's listing standards.
Fees of Independent Public Accountants
Audit Fees. The aggregate amount of fees billed by PricewaterhouseCoopers
LLP for professional services rendered for the audit of the Company's annual
financial statements for the fiscal year ended December 31, 2000 and the review
of the financial statements included in the Company's quarterly reports on Form
10-Q for that fiscal year was $415,500.
All Other Fees. The aggregate amount of fees billed by
PricewaterhouseCoopers LLP for all other non-audit services including tax
reporting and compliance and other services was $248,500. There were no fees
billed for the design and implementation of financial information systems.
Leased Employees. PricewaterhouseCoopers LLP has informed the Company that
none of the hours expended on its engagement to audit the Company for the fiscal
year ended December 31, 2000 was attributed to work performed by persons other
than full-time, permanent employees.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Company's Audit Committee has reviewed and discussed the audited
financial statements with management. The Company's Audit Committee discussed
with the independent auditors matters required to be discussed by Statement on
Auditing Standards No. 61 (Communication With Audit Committees). The Audit
Committee has received the written disclosures and the letter from the
independent auditors required by Independence Standards Board Standard No. 1,
and has discussed with the independent auditors the auditors' independence from
the Company and its management. Additionally, the Audit Committee has reviewed
fees charged by the independent auditors and has monitored whether the non-audit
services provided by the independent auditors are compatible with maintaining
the independence of such auditors. Based upon its reviews and discussions, the
Audit Committee recommended to the Company's Board of Directors that the audited
financial statements be included in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2000 for filing with the Securities and
Exchange Commission.
RESPECTIVELY SUBMITTED,
AUDIT COMMITTEE
Mr. Carl W. Stearn, Chairman
Mr. Charles C. Baum
Mr. William L. Jews
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 Common 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
Common 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 2000. Based solely on a review of copies of such reports of
ownership furnished to the Company, the Company believes that a late report on
Form 5 was filed by Mark K. Joseph due to travel.
OTHER BUSINESS
The Board of Directors is not aware of any other matters which may come
before the meeting. It is the intention of the persons named in the enclosed
proxy to vote all shares represented by proxies in accordance with their best
judgment if any other matters do properly come before the meeting.
Whether or not you attend the Annual Meeting in person, it would be
appreciated if you would fill in, date and sign the enclosed proxy and return it
promptly. If you attend the meeting, you may vote your shares even though you
may have sent in your proxy.
UPON WRITTEN REQUEST OF ANY SHAREHOLDER WHO WAS A BENEFICIAL OWNER OF THE
COMPANY'S COMMON 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 FOR THE FISCAL YEAR ENDED DECEMBER 31,
2000 INCLUDING THE FINANCIAL STATEMENTS AND THE SCHEDULES THERETO, AS FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION.
SHAREHOLDER PROPOSALS FOR THE 2002 ANNUAL PROXY STATEMENT
Proposals by Shareholders intended to be presented at the Company's 2002
Annual Meeting, in order to be included in the 2001 Proxy Statement and proxy,
must be received by the Company at its principal corporate offices no later than
December 3, 2001. If a Shareholder notifies the Company after February 20, 2002
of an intent to present a proposal at the Company's 2002 Annual Meeting, the
Company will have the right to exercise its discretionary voting authority with
respect to the proposal, without including information regarding the proposal in
its proxy materials.
Any Shareholder who intends to submit a proposal at the Company's Annual
Meeting in 2002 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 4, 2002 and not earlier than the close of
business on February 4, 2002.
MUNICIPAL MORTGAGE & EQUITY, LLC
218 N. Charles Street, Suite 500
Baltimore, Maryland 21201
Dated: April 9, 2001
APPENDIX A
FORM OF MUNICIPAL MORTGAGE & EQUITY, LLC
2001 SHARE INCENTIVE PLAN
1. Purpose.
--------
The purpose of this 2001 Share Incentive Plan (the "Plan")
of Municipal Mortgage & Equity, LLC, a Delaware limited liability company (the
"Company"), is to advance the interests of the Company and its shareholders by
providing a means to attract, retain, and reward executive officers and other
key individuals of the Company and its subsidiaries, to link compensation to
measures of the Company's performance in order to provide additional share-based
incentives to such individuals for the creation of shareholder value, and to
promote ownership of a greater proprietary interest in the Company, thereby
aligning such individuals' interests more closely with the interests of
shareholders of the Company.
2. Definitions.
------------
The definitions of awards under the Plan, including
Options, SARs (including Limited SARs), Restricted Shares, Deferred Shares, and
Shares granted as a bonus or in lieu of other awards are set forth in Section 6
of the Plan. Such awards, together with any other right or interest granted to a
Participant under the Plan, are termed "Awards." The definitions of terms
relating to a Change in Control of the Company are set forth in Section 8 of the
Plan. In addition to such terms and the terms defined in Section 1, the
following are defined terms under the Plan:
(a) "Award Agreement" means any written agreement, contract, notice to a
Participant, or other instrument or document evidencing an Award.
(b) "Beneficiary" means the person, persons, trust, or trusts which have
been designated by a Participant in his or her most recent written beneficiary
designation filed with the Committee to receive the benefits specified under
this Plan upon such Participant's death. If, upon a Participant's death, there
is no designated Beneficiary or surviving designated Beneficiary, then the term
Beneficiary means the Participant's estate.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended from time to
time. References to any provision of the Code include regulations thereunder and
successor provisions and regulations thereto.
(e) "Committee" means the Share Incentive Committee, or such other Board
committee as may be designated by the Board to administer the Plan.
(f) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time. References to any provision of the Exchange Act include rules
thereunder and successor provisions and rules thereto.
(g) "Fair Market Value" means, with respect to Shares, Awards, or other
property, the fair market value of such Shares, Awards, or other property
determined by such methods or procedures as shall be established from time to
time by the Committee. Unless otherwise determined by the Committee, the Fair
Market Value of a Share means, as of any given date, the closing sales price of
a Share reported in the table entitled "New York Stock Exchange Composite
Transactions" contained in The Wall Street Journal (or an equivalent successor
table) for such date or, if no such closing sales price was reported for such
date, for the most recent trading day prior to such date for which a closing
sales price was reported.
(h) "Participant" means a person who, as an executive officer, key employee
or key independent contractor of the Company or a subsidiary, has been granted
an Award under the Plan which remains outstanding.
(i) "Rule 16b-3" means Rule 16b-3, as from time to time in effect and
applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.
(j) "Share" means a Common Share of the Company and such other securities
as may be substituted for such Share or such other securities pursuant to
Section 4.
3. Administration.
---------------
(a) Authority of the Committee. The Plan shall be administered by the
Committee. The Committee shall have full and final authority to take the
following actions, in each case subject to and consistent with the provisions of
the Plan:
(i) to select Participants to whom Awards may be granted;
(ii) to determine the type or types of Awards to be granted to each
Participant;
(iii)to determine the number of Awards to be granted, the number of Shares
to which an Award will relate, the terms and conditions of any Award
granted under the Plan (including, but not limit- ed to, any exercise
price, grant price, or purchase price, any restriction or condition,
any schedule or performance condi- tions for the lapse of restrictions
or conditions relating to transferability, forfeiture, exercisability,
or settlement of an Award, and waivers, accelerations, or
modifications there- of, based in each case on such considerations as
the Committee shall determine), and all other matters to be determined
in connection with an Award;
(iv) to determine whether, to what extent, and under what circumstances an
Award may be settled, or the exercise price of an Award may be paid,
in cash, Shares, other Awards, or other property, or an Award may be
canceled, forfeited, or surrendered;
(v) to determine whether, to what extent, and under what circumstances
cash, Shares, other Awards, or other property payable with respect to
an Award will be deferred either automatically, at the election of the
Committee, or at the election of the Participant;
(vi) to prescribe the form of each Award Agreement, which need not be
identical for each Participant;
(vii)to adopt, amend, suspend, waive, and rescind such rules and regula-
tions and appoint such agents as the Committee may deem necessary or
advisable to administer the Plan;
(viii)to correct any defect or supply appropriate text for any omission or
reconcile any inconsistency in the Plan and to construe and interpret
the Plan and any Award, rules and regulations, Award Agreement, or
other instrument hereunder; and
(ix) to make all other decisions and determinations as may be required
under the terms of the Plan or as the Committee may deem necessary or
advisable for the administration of the Plan.
(b) Manner of Exercise of Committee Authority. Unless authority is
specifically reserved to the Board under the terms of the Plan, the Company's
Amended and Restated Certificate of Formation and Operating Agreement, or
applicable law, the Committee shall have discretion to exercise authority under
the Plan. Any action of the Committee with respect to the Plan shall be final,
conclusive, and binding on all persons, including the Company, subsidiaries of
the Company, Participants, any person claiming any rights under the Plan from or
through any Participant, and Shareholders. The express grant of any specific
power to the Committee, and the taking of any action by the Committee, shall not
be construed as limiting any power or authority of the Committee. To the extent
permitted by applicable law, the Committee may delegate to officers or employees
of the Company or any subsidiary the authority, subject to such terms as the
Committee shall determine, (i) to perform administrative functions, (ii) with
respect to Participants not subject to Section 16 of the Exchange Act, to
perform such other functions of the Committee as the Committee may determine,
and (iii) with respect to Participants subject to Section 16, to perform such
other functions of the Committee as the Committee may determine to the extent
performance of such functions will not result in the loss of an exemption under
Rule 16b-3 otherwise available for transactions by such persons.
(c) Limitation of Liability. Each member of the Committee shall be entitled
to, in good faith, rely or act upon any report or other information furnished to
him by any officer or other employee of the Company or any subsidiary, the
Company's independent certified public accountants, or any executive
compensation consultant, legal counsel, or other professional retained by the
Company to assist in the administration of the Plan. No member of the Committee,
nor any officer or employee of the Company acting on behalf of the Committee,
shall be personally liable for any action, determination, or interpretation
taken or made in good faith with respect to the Plan, and all members of the
Committee and any officer or employee of the Company acting on behalf of the
Committee or members thereof shall, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any such action,
determination, or interpretation.
4. Shares Available Under Plan; Individual Award Limitations; Adjustments.
----------------------------------------------------------------------
(a) Shares Reserved for Awards. Subject to adjustment as hereinafter
provided, the total number of Shares reserved and available for issuance to
Participants in connection with Awards under the Plan shall be 1,000,000 Shares;
provided, however, that the number of Shares issued as Restricted Shares shall
not exceed 20% of such total; the number of Shares issued as Awards other than
Options (including Restricted Shares) shall not exceed 40% of such total; and
the number of Shares with respect to which Awards of Options and SARs may be
granted to any Participant shall not exceed 500,000 during any 12 month period.
No Award may be granted if the number of Shares to which such Award relates,
when added to the number of Shares to which other then-outstanding Awards
relate, exceeds an applicable limitation on the number of Shares then remaining
available for issuance under this Section 4. If all or any portion of an Award
is forfeited, settled in cash, or terminated without issuance of Shares to the
Participant, the Shares to which such Award or portion thereof related shall
again be available for Awards under the Plan, and such Award or portion thereof
shall not count against the percentage limitations applicable to Restricted
Shares and Awards other than Options; provided, however, that Shares withheld in
payment of the exercise price of any Option or withholding taxes relating to any
Award and Shares equal to the number of Shares surrendered in payment of the
exercise price of any Option or withholding taxes relating to any Award shall,
for purposes of this provision, be deemed not to have been issued to the
Participant in connection with such Awards under the Plan. The Committee may
adopt procedures for the counting of Shares relating to any Award to ensure
appropriate counting and avoid double counting (in the case of tandem or
substitute awards). Any Shares issued pursuant to an Award may consist, in whole
or in part, of authorized and unissued Shares, treasury Shares, or Shares
acquired in the market for the account of the Participant (which treasury Shares
or acquired Shares will be deemed to have been "issued" pursuant to such Award).
(b) Adjustments. In the event that the Committee shall determine that any
recapitalization, reorganization, merger, consolidation, spin-off, combination,
repurchase, exchange of Shares or other securities of the Company, stock split
or reverse split, extraordinary dividend (whether in the form of cash, Shares,
or other property), liquidation, dissolution, or other similar corporate
transaction or event affects the Shares such that an adjustment is appropriate
in order to prevent dilution or enlargement of each Participant's rights under
the Plan, then the Committee shall, in such manner as it may deem equitable,
adjust any or all of (i) the number and kind of Shares remaining reserved and
available for issuance under Section 4(a), (ii) the number and kind of
outstanding Restricted Shares or Restricted Shares relating to any other
outstanding Award in connection with which Restricted Shares may be issued,
(iii) the number and kind of Shares that may be issued in respect of other
outstanding Awards, and (iv) the exercise price or grant price relating to any
Award (or, if deemed appropriate, the Committee may make provision for a cash
payment with respect to any outstanding Award). In addition, the Committee is
authorized to make adjustments in the terms and conditions of, and the criteria
included in, Awards in recognition of unusual or nonrecurring events (including,
without limitation, events described in the preceding sentence) affecting the
Company or any subsidiary or the financial statements of the Company or any
subsidiary, or in response to changes in applicable laws, regulations, or
accounting principles.
5. Eligibility.
------------
Executive officers, other key employees and other key
independent contractors of the Company and its subsidiaries, including any
director who is also an executive officer or employee, are eligible to be
granted Awards under the Plan; provided, however, that members of the Committee
are not eligible to be granted Awards under the Plan.
6. Specific Terms of Awards.
-------------------------
(a) General. Awards may be granted on the terms and conditions set forth in
this Section 6. In addition, the Committee may impose on any Award or the
exercise thereof, at the date of grant or thereafter (subject to Section 9(f)),
such additional terms and conditions, not inconsistent with the provisions of
the Plan, as the Committee shall determine, including terms requiring forfeiture
of Awards in the event of termination of employment by the Participant or upon
the occurrence of other events. In addition, the Committee shall require, as the
condition of the issuance of Shares in connection with any Award, that
consideration be received by the Company which meets the requirements of the
Delaware Limited Liability Company Act.
(b) Options. The Committee is authorized to grant Options (which are not to
be treated as incentive options under Section 422 of the Code) to Participants
(including "reload" options automatically granted upon the occurrence of
specified exercises of options) on the following terms and conditions:
(i) Exercise Price. The exercise price per Share purchasable under an
Option shall be determined by the Committee without regard to the Fair
Market Value of a Share on the date of grant of the Option.
(ii) Time and Method of Exercise. The Committee shall determine the time or
times at which an Option may be exercised in whole or in part, the
methods by which such exercise price may be paid or deemed to be paid,
the form of such payment, including, without limitation, cash, Shares,
other Awards or awards granted under other Company plans, or other
property (including notes or other contractual obligations of
Participants to make payment on a deferred basis, such as through
"cashless exercise" arrangements, to the extent permitted by
applicable law), and the methods by which Shares will be delivered or
deemed to be delivered to Participants.
(iii)Forfeiture. Except as otherwise determined by the Committee, upon
termination of employment or contract during the applicable term of
the Options, unexercised Options shall be forfeited and again be
available for Award by the Company; provided, however, that the
Committee may provide, by rule or regulation or in any Award
Agreement, or may determine in any individual case, that forfeiture
conditions relating to the Options will be waived in whole or in part
in the event of terminations resulting from specified causes.
(iv) Dividend Equivalents. The Committee may provide that payments in the
form of dividend equivalents will be credited in respect of an Option.
The amount of the dividend equivalent shall be credited on the
dividend payment date in any of the following forms: in cash, or in
unrestricted Shares having a Fair Market Value equal to the amount of
such dividends, or in options to acquire additional shares under the
Option at no cost based on the dividend payments, or in a reduction of
the exercise price of the Option. If the Committee provides for
crediting dividend equivalents in the form of additional Options or
Shares, such dividend equivalents must be approved by the Committee
before such Options or Shares can be credited to the Participant.
(c) Share Appreciation Rights. The Committee is authorized to grant SARs to
Participants on the following terms and conditions:
(i) Right to Payment. A SAR shall confer on the Participant to whom it is
granted a right to receive, upon exercise thereof, the excess of (A)
the Fair Market Value of one Share on the date of exercise (or, if the
Committee shall so determine, the Fair Market Value of one Share at
any time during a specified period before or after the date of
exercise), over (B) the grant price of the SAR as determined by the
Committee as of the date of grant of the SAR.
(ii) Other Terms. The Committee shall determine the time or times at which
a SAR may be exercised in whole or in part, the method of exercise,
method of settlement, form of consideration payable in settlement,
method by which Shares will be delivered or deemed to be delivered to
Participants, whether or not a SAR shall be in tandem with any other
Award, and any other terms and conditions of any SAR. Limited SARs
that may only be exercised upon the occurrence of a Change in Control
(as such term is defined in Section 8(b) or as otherwise defined by
the Committee) may be granted on such terms, not inconsistent with
this Section 6(c), as the Committee may determine. Such Limited SARs
may be either freestanding or in tandem with other Awards.
(iii)Forfeiture. Except as otherwise determined by the Committee, upon
termination of employment or contract during the applicable term of
the SARs, unexercised SARs shall be forfeited and again be available
for Award by the Company; provided, however, that the Committee may
provide, by rule or regulation or in any Award Agreement, or may
determine in any individual case, that forfeiture conditions relating
to the SARs will be waived in whole or in part in the event of
terminations resulting from specified causes.
(d) Restricted Shares. The Committee is authorized to grant Restricted
Shares to Participants on the following terms and conditions:
(i) Grant and Restrictions. Restricted Shares shall be subject to such
restrictions on transferability and other restrictions, if any, as the
Committee may impose, which restrictions may lapse separately or in
combination at such times, under such circumstances, in such
installments, or otherwise as the Committee may determine. Except to
the extent restricted under the terms of the Plan and any Award
Agreement relating to the Restricted Shares, a Participant granted
Restricted Shares shall have all of the rights of a shareholder
including, without limitation, the right to vote Restricted Shares and
the right to receive dividends thereon.
(ii) Forfeiture. Except as otherwise determined by the Committee, upon
termination of employment during the applicable restriction period,
Restricted Shares that are at that time subject to restrictions shall
be forfeited and reacquired by the Company; provided, however, that
the Committee may provide, by rule or regulation or in any Award
Agreement, or may determine in any individual case, that restrictions
or forfeiture conditions relating to Restricted Shares will be waived
in whole or in part in the event of terminations resulting from
specified causes.
(iii)Certificates for Shares. Restricted Shares granted under the Plan may
be evidenced in such manner as the Committee shall determine. If
certificates representing Restricted Shares are registered in the name
of the Participant, such certificates shall bear an appropriate legend
referring to the terms, conditions, and restrictions applicable to
such Restricted Shares, the Company may retain physical possession of
the certificate, and the Participant shall have delivered a stock
power to the Company, endorsed in blank, relating to the Restricted
Shares.
(iv) Dividends and Distributions. Dividends paid on Restricted Shares shall
be either paid at the dividend payment date in the form the dividends
are paid to other shareholders, in cash, or in unrestricted Shares
having a Fair Market Value equal to the amount of such dividends, or
the payment of such dividends shall be deferred and/or the amount or
value thereof automatically reinvested in additional Restricted
Shares, other Awards, or other investment vehicles, as the Committee
shall determine or permit the Participant to elect. Shares distributed
in connection with a Share split or Share dividend, and other property
distributed as a dividend, shall be subject to restrictions and a risk
of forfeiture to the same extent as the Restricted Shares with respect
to which such Shares or other property are distributed.
(e) Deferred Shares. The Committee is authorized to grant Deferred Shares
to Participants, subject to the following terms and conditions:
(i) Award and Restrictions. Issuance of Shares will occur upon expiration
of the deferral period specified for an Award of Deferred Shares by
the Committee (or, if permitted by the Committee, as elected by the
Participant). In addition, Deferred Shares shall be subject to such
restrictions as the Committee may impose, if any, which restrictions
may lapse at the expiration of the deferral period or at earlier
specified times, separately or in combination, under such
circumstances, in such installments, or otherwise as the Committee may
determine.
(ii) Forfeiture. Except as otherwise determined by the Committee, upon
termination of employment during the applicable deferral period or
portion thereof to which forfeiture conditions apply (as provided in
the Award Agreement evidencing the Deferred Shares), all Deferred
Shares that are at that time subject to such risk of forfeiture shall
be forfeited; provided, however, that the Committee may provide, by
rule or regulation or in any Award Agreement, or may determine in any
individual case, that restrictions or forfeiture conditions relating
to Deferred Shares will be waived in whole or in part in the event of
terminations resulting from specified causes.
(iii)Dividend Equivalents. The Committee may provide that payments in the
form of dividend equivalents will be credited in respect of Deferred
Shares, which amounts may be paid or distributed when accrued or
deemed reinvested in additional Deferred Shares.
(f) Bonus Shares and Awards in Lieu of Cash Obligations. The Committee is
authorized to grant Shares as a bonus, or to grant Shares or other Awards in
lieu of Company obligations to pay cash under other plans or compensatory
arrangements; provided, however, that, in the case of Participants subject to
Section 16 of the Exchange Act, the amount of such Shares or Awards shall be
determined by the Committee in a manner conforming to then-applicable
requirements of Rule 16b-3. Shares or Awards granted hereunder shall be subject
to such other terms as shall be determined by the Committee.
7. Certain Provisions Applicable to Awards.
---------------------------------------
(a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards granted
under the Plan may, in the discretion of the Committee, be granted either alone
or in addition to, in tandem with, or in substitution for, any other Award
granted under the Plan or any award granted under any other plan of the Company,
any subsidiary, or any business entity to be acquired by the Company or a
subsidiary, or any other right of a Participant to receive payment from the
Company or any subsidiary. Awards granted in addition to or in tandem with other
Awards or awards may be granted either as of the same time as or a different
time from the grant of such other Awards or awards. The per Share exercise price
of any Option, grant price of any SAR, or purchase price of any other Award
conferring a right to purchase Shares granted in substitution for an outstanding
Award or award may be adjusted to reflect the in-the-money value of the
surrendered Award or award.
(b) Term of Awards. The term of each Award shall be for such period as may
be determined by the --------------- Committee.
(c) Form of Payment Under Awards. Subject to the terms of the Plan and any
applicable Award Agreement, payments to be made by the Company or a subsidiary
upon the grant or exercise of an Award may be made in such forms as the
Committee shall determine, including, without limitation, cash, Shares, other
Awards, or other property, and may be made in a single payment or transfer, in
installments, or on a deferred basis. Such payments may include, without
limitation, provisions for the payment or crediting of reasonable interest on
installment or deferred payments or the grant or crediting of dividend
equivalents in respect of installment or deferred payments denominated in
Shares.
(d) Rule 16b-3 Compliance. It is the intent of the Company that this Plan
comply in all respects with applicable provisions of Rule 16b-3 in connection
with any grant of Awards to or other transaction by a Participant who is subject
to Section 16 of the Exchange Act (except for transactions exempted under
alternative Exchange Act Rules or acknowledged in writing to be non-exempt by
such Participant). Accordingly, if, at such time, any provision of this Plan or
any Award Agreement relating to an Award does not comply with the requirements
of Rule 16b-3 as then applicable to any such transaction, such provision will be
construed or deemed amended to the extent necessary to conform to the applicable
requirements of Rule 16b-3 so that such Participant shall avoid liability under
Section 16(b).
(e) Loan Provisions. With the consent of the Committee, and subject at all
times to, and only to the extent, if any, permitted under and in accordance
with, laws and regulations and other binding obligations or provisions
applicable to the Company, the Company may make, guarantee, or arrange for a
loan or loans to a Participant with respect to the exercise of any Option or
other payment in connection with any Award, including the payment by a
Participant of any or all federal, state, or local income or other taxes due in
connection with any Award. Subject to such limitations, the committee shall have
full authority to decide whether to make a loan or loans hereunder and to
determine the amount, terms, and provisions of any such loan or loans, including
the interest rate to be charged in respect of any such loan or loans, whether
the loan or loans are to be with or without recourse against the borrower, the
terms on which the loan is to be repaid and conditions, if any, under which the
loan or loans may be forgiven.
8. Change in Control Provisions.
----------------------------
(a) In the event of a "Change in Control," as defined in this Section, the
following acceleration provisions shall apply:
(i) any Award carrying a right to exercise that was not previously
exercisable and vested shall become fully exercisable and vested,
subject only to the restrictions set forth in Sections 7(d) and 9(a);
and
(ii) the restrictions, deferral of settlement, and forfeiture conditions
applicable to any other Award granted under the Plan shall lapse and
such Award shall be deemed fully vested, and any performance
conditions imposed with respect to any Award shall be deemed to be
fully achieved, subject to the restrictions set forth in Sections 7(d)
and 9(a).
(b) For purposes of the Plan, a "Change in Control" shall have occurred if,
after consummation of the Transaction:
(i) Any "Person," as such term is used in Sections 13(d) and 14(d) of the
Exchange Act (other than the Company, a subsidiary, any trustee or
other fiduciary holding securities under an employee benefit plan of
the Company or any corporation owned, directly or indirectly, by the
shareholders of the Company in substantially the same proportions as
their ownership of shares of the Company), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 25%
or more of the combined voting power of the Company's then outstanding
voting securities;
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board, and any new director
(other than a director designated by a person who has entered into an
agreement with the Company to effect a transaction described in clause
(i), (iii), or (iv) of this Section 8(b)) whose election by the Board
or nomination for election by the Company's shareholders was approved
by a vote of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved,
cease for any reason to constitute at least a majority thereof;
(iii)the shareholders of the Company approve a merger, consolidation,
recapitalization, or reorganization of the Company, or a reverse share
split of any class of voting securities of the Company, or the
consummation of any such transaction if shareholder approval is not
obtained, other than any such transaction which would result in at
least 75% of the total voting power represented by the voting
securities of the Company or the surviving entity outstanding
immediately after such transaction being beneficially owned by persons
who together beneficially owned at least 75% of the combined voting
power of the voting securities of the Company outstanding immediately
prior to such transaction, with the relative voting power of each such
continuing holder compared to the voting power of each such continuing
holder not substantially altered as a result of the transaction;
provided that, for purposes of this paragraph (iii), such continuity
of ownership (and preservation of relative voting power) shall be
deemed to be satisfied if the failure to meet such 75% threshold (or
to substantially preserve such relative voting power) is due solely to
the acquisition of voting securities by an employee benefit plan of
the Company or such surviving entity or of any subsidiary of the
Company or such surviving entity; or
(iv) the shareholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets (or any
transaction having a similar effect).
9. General Provisions.
-------------------
(a) Compliance With Laws and Obligations. The Company will not be obligated
to issue or deliver Shares in connection with any Award or take any other action
under the Plan in a transaction subject to the registration requirements of the
Securities Act of 1933, as amended, or any other federal or state securities
law, any requirement under any listing agreement between the Company and any
stock exchange or automated quotation system, or any other law, regulation, or
contractual obligation of the Company, until the Company is satisfied that such
laws, regulations, and other obligations of the Company have been complied with
in full. Certificates representing Shares issued under the Plan will be subject
to such stop-transfer orders and other restrictions as may be applicable under
such laws, regulations, and other obligations of the Company, including any
requirement that a legend or legends be placed thereon.
(b) Limitations on Transferability. Awards and other rights under the Plan
will not be transferable by a Participant except by will or the laws of descent
and distribution (or to a designated Beneficiary in the event of the
Participant's death), and, if exercisable, shall be exercisable during the
lifetime of a Participant only by such Participant or his or her guardian or
legal representative; provided, however, that such Awards and other rights may
be transferred to one or more transferees during the lifetime of the Participant
in connection with the Participant's estate or tax planning, and such
transferees may exercise rights thereunder in accordance with the terms thereof,
but only if and to the extent consistent with the registration of the offer and
sale of Shares on Form S-8, Form S-3, or such other registration form of the
Securities and Exchange Commission as may then be filed and effective with
respect to the Plan and permitted by the Committee. The Company may rely upon
the beneficiary designation last filed in accordance with this Section 9(b).
Awards and other rights under the Plan may not be pledged, mortgaged,
hypothecated, or otherwise encumbered by a Participant and shall not be subject
to the claims of a Participant's creditors.
(c) Taxes. The Company and any subsidiary is authorized to withhold from
any Award granted or to be settled, any delivery of Shares in connection with an
Award, any other payment relating to an Award, or any payroll or other payment
to a Participant amounts of withholding and other taxes due or potentially
payable in connection with any transaction involving an Award, and to take such
other action as the Committee may deem advisable to enable the Company and
Participants to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any Award. This authority shall include
authority to withhold or receive Shares or other property and to make cash
payments in respect thereof in satisfaction of a Participant's tax obligations.
(d) No Right to Continued Employment; Leaves of Absence. Neither the Plan,
any Award Agreement, or any action taken hereunder shall be construed as giving
any Participant the right to be retained in the employ or contract of the
Company or any of its subsidiaries, nor shall it interfere in any way with the
right of the Company or any of its subsidiaries to terminate any Participant's
employment or contract at any time. Unless otherwise specified in the applicable
Award Agreement, an approved leave of absence shall not be considered a
termination of employment for purposes of an Award under the Plan.
(e) No Rights to Awards; No Shareholder Rights. No Participant or employee
or independent contractor shall have any claim to be granted any Award under the
Plan, and there is no obligation for uniformity of treatment of Participants,
employees or independent contractors. No Award shall confer on any Participant
any of the rights of a shareholder of the Company unless and until Shares are
duly issued or transferred and delivered to the Participant in accordance with
the terms of the Award or, in the case of an Option, the Option is duly
exercised.
(f) Changes to the Plan and Awards. The Board may amend, alter, suspend,
discontinue, or terminate the Plan or the Committee's authority to grant Awards
under the Plan without the consent of shareholders or Participants, except that
any amendment or alteration will be subject to the approval of the Company's
shareholders at or before the next annual meeting of shareholders for which the
record date is after the date of such Board action if such shareholder approval
is required by any applicable federal or state law or regulation or the rules of
any stock exchange or automated quotation system on which Company securities may
then be listed or quoted, and the Board may otherwise determine to submit other
such amendments or alterations to shareholders for approval; provided, however,
that, without the consent of an affected Participant, no such action may
materially impair the rights of such Participant with respect to any Award
theretofore granted to him. The Committee may waive any conditions or rights
under, or amend, alter, suspend, discontinue, or terminate, any Award
theretofore granted and any Award Agreement relating thereto; provided, however,
that, without the consent of an affected Participant, no such action may
materially impair the rights of such Participant under such Award.
(g) Unfunded Status of Awards; Creation of Trusts. The Plan is intended to
constitute an "unfunded" plan for incentive and deferred compensation. With
respect to any payments not yet made to a Participant pursuant to an Award,
nothing contained in the Plan or any Award shall give any such Participant any
rights that are greater than those of a general creditor of the Company;
provided, however, that the Committee may authorize the creation of trusts or
make other arrangements to meet the Company's obligations under the Plan to
deliver cash, Shares, other Awards, or other property pursuant to any Award,
which trusts or other arrangements shall be consistent with the "unfunded"
status of the Plan unless the Committee otherwise determines with the consent of
each affected Participant.
(h) Nonexclusivity of the Plan. Neither the adoption of the Plan by the
Board nor its submission to the shareholders of the Company for approval shall
be construed as creating any limitations on the power of the Board to adopt such
other compensatory arrangements as it may deem desirable, including the granting
of awards otherwise than under the Plan, and such arrangements may be either
applicable generally or only in specific cases.
(i) No Fractional Shares. No fractional Shares shall be issued or delivered
pursuant to the Plan or any Award. The Committee shall determine whether cash,
other Awards, or other property shall be issued or paid in lieu of such
fractional Shares or whether such fractional Shares or any rights thereto shall
be forfeited or otherwise eliminated.
(j) Governing Law. The validity, construction, and effect of the Plan, any
rules and regulations under the Plan, and any Award Agreement will be determined
in accordance with the Delaware Limited Liability Company Act and other laws
(including those governing contracts) of the State of Delaware, without giving
effect to principles of conflicts of laws, and applicable federal law.
10. Shareholder Approval, Effective Date, and Plan Termination.
-----------------------------------------------------------
The Plan will be effective upon June 14, 2001, subject to its approval by the
shareholders of the Company. Unless earlier terminated by action of the Board,
the Plan will remain in effect until such time as no Shares remain available for
issuance under the Plan and the Company and Participants have no further rights
or obligations under the Plan.
As adopted by the Board of Directors: March 21, 2001
APPENDIX B
FORM OF MUNICIPAL MORTGAGE & EQUITY, LLC
2001 NON-EMPLOYEE DIRECTORS' SHARE PLAN
1. Purpose.
--------
The purpose of this 2001 Non-Employee Directors' Share Plan (the "Plan") of
Municipal Mortgage & Equity, LLC, a Delaware limited liability company (the
"Company"), is to advance the interests of the Company and its shareholders by
providing a means to attract and retain highly qualified persons to serve as
non-employee directors of the Company and to promote ownership by such directors
of a greater proprietary interest in the Company, thereby aligning such
directors' interests more closely with the interests of shareholders of the
Company.
2. Definitions.
------------
In addition to terms defined elsewhere in the Plan, the following are defined
terms under the Plan:
(a) "Code" means the Internal Revenue Code of 1986, as amended from time to
time. References to any provision of the Code include regulations thereunder and
successor provisions and regulations thereto.
(b) For purposes of the Plan, a "Change in Control" shall have occurred if,
after consummation of the Transaction:
(i) Any "person," as such term is used in Sections 13(d) and 14(d) of the
Exchange Act (other than the Company, a sub- sidiary, any trustee or
other fiduciary holding securities under an employee benefit plan of
the Company or any corp- oration owned, directly or indirectly, by the
share- holders of the Company in substantially the same proportions as
their ownership of shares of the Company), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 25%
or more of the combined voting power of the Company's then outstanding
voting securities;
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board, and any new director
(other than a director designated by a person who has entered into an
agreement with the Company to effect a transaction described in clause
(i), (iii), or (iv) of this Section 2(b)) whose election by the Board
or nomination for election by the Company's shareholders was approved
by a vote of at least two- thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved,
cease for any reason to consti- tute at least a majority thereof;
(iii)the shareholders of the Company approve a merger, consolidation,
recapitalization, or reorganization o the Company, or a reverse share
split of any class of voting securities of the Company, or the
consummation of any such transaction if shareholder approval is not
obtained, other than any such transaction which would result in at
least 75% of the total voting power represented by the voting
securities of the Company or the surviving entity outstanding
immediately after such transaction being beneficially owned by persons
who together beneficially owned at least 75% of the combined voting
power of the voting securities of the Company outstanding immediately
prior to such transaction, with the relative voting power of each such
continuing holder compared to the voting power of each other
continuing holder not substantially altered as a result of the
transaction; provided that, for purposes of this paragraph (iii), such
continuity of ownership (and preservation of relative voting power)
shall be deemed to be satisfied if the failure to meet such 75%
threshold (or to substantially preserve such relative voting power) is
due solely to the acquisition of voting securities by an employee
benefit plan of the Company or such surviving entity or of any
subsidiary of the Company or such surviving entity; or
(iv) the shareholders of the Company approve a plan of complete liquidation
of the Company or an agreemet for the sale or disposition by the
Company of all o substantially all of the Company's assets (or any
trans- action having a similar effect).
(c) "Deferred Share" means a credit to a Participant's deferral account
under Section 7 which represents the right to receive one Share upon settlement
of the deferral account. Deferral accounts, and Deferred Shares credited
thereto, are maintained solely as bookkeeping entries by the Company evidencing
unfunded obligations of the Company.
(d) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
References to any provision of the Exchange Act include rules thereunder and
successor provisions and rules thereto.
(e) "Fair Market Value" of a Share means, as of any given date, the closing
sales price of a Share reported in the table entitled "New York Stock Exchange
Composite Transactions" contained in The Wall Street Journal (or an equivalent
successor table) for such date or, if no such closing sales price was reported
for such date, for the most recent trading day prior to such date for which a
closing sales price was reported.
(f) "Option" means the right, granted to a director under Section 6, to
purchase a specified number of Shares at the specified exercise price for a
specified period of time under the Plan. All Options will be non-qualified stock
Options.
(g) "Participant" means any person who, as a non-employee director of the
Company, has been granted an Option or Deferred Shares which remain outstanding
or who has elected to be paid fees in the form of Shares or Deferred Shares
under the Plan.
(h) "Rule 16b-3" means Rule 16b-3, as from time to time in effect and
applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.
(i) "Share" means a Common Share of the Company and such other securities
as may be substituted for such Share or such other securities pursuant to
Section 8.
3. Shares Available Under the Plan.
--------------------------------
Subject to adjustment as provided in Section 8, the total number of Shares
reserved and available for issuance under the Plan is 150,000. Such Shares may
be authorized but unissued Shares, treasury Shares, or Shares acquired in the
market for the account of the Participant. For purposes of the Plan, Shares that
may be purchased upon exercise of an Option or delivered in settlement of
Deferred Shares will not be considered to be available after such Option has
been granted or Deferred Share credited, except for purposes of issuance in
connection with such Option or Deferred Share; provided, however, that, if an
Option expires for any reason without having been exercised in full, the Shares
subject to the unexercised portion of such Option will again be available for
issuance under the Plan.
4. Administration of the Plan.
---------------------------
The Plan will be administered by the Board of Directors of the Company;
provided, however, that any action by the Board relating to the Plan will be
taken only if, in addition to any other required vote, such action is approved
by the affirmative vote of a majority of the directors who are not then eligible
to participate in the Plan.
5. Eligibility.
------------
Each director of the Company who, on any date on which an Option is to be
granted under Section 6 or on which fees are to be paid which could be received
in the form of Shares or deferred in the form of Deferred Shares under Section
7, is not an employee of the Company or any subsidiary of the Company will be
eligible, at such date, to be granted an Option under Section 6 or receive fees
in the form of Shares or defer fees in the form of Deferred Shares under Section
7. No person other than those specified in this Section 5 will be eligible to
participate in the Plan.
6. Options.
--------
An Option to purchase 7,000 Shares, subject to adjustment as provided in Section
8, will be automatically granted to a person who is first elected or appointed
to serve as a member of the Board of Directors of the Company at or after the
effective date of the Plan, on the date of such election or appointment, if such
director is eligible to be granted an Option at that date and an option to
purchase 5,000 Shares to each member of the Board of Directors (which may
include a director who also will receive a grant under clause (i) of this
sentence), on the date of the final adjournment of the Company's Annual Meeting
of Shareholders each year, if such director is eligible to be granted an Option
at that date.
(a) Exercise Price. The exercise price per Share purchasable upon exercise
of an Option will be equal to 100% of the Fair Market Value of a Share on the
date of grant of the Option.
(b) Option Expiration. A Participant's Option will expire at the earlier of
(i) ten years after the date of grant or (ii) one year after the date the
Participant ceases to serve as a director of the Company for any reason.
(c) Exercisability. No Option may be exercised unless and until it has
become exercisable in accordance with this Section 6(c). A Participant's Option
received upon initial election or appointment will become exercisable in three
equal installments commencing at the earlier of : (a) the next anniversary of
the director's initial election, or (b) at the next Annual Meeting of
Shareholders; Options received on the date of each Annual Meeting of
Shareholders become exercisable at the earlier of: (a) the next anniversary of
the option grant, or (b) at the next Annual Meeting of Shareholders; provided,
however, that a Participant's Option will become immediately exercisable in full
at the time the Participant ceases to serve as a director due to death or
disability or upon a Change in Control; and provided further, that a
Participant's Option may be exercised after the Participant ceases to serve as a
director for any reason other than death or disability only to the extent that
the Option was exercisable at the date he or she ceased to be a director or has
become exercisable pursuant to this Section 6(c) within two months after the
date he or she ceased to be a director.
(d) Method of Exercise. A Participant may exercise an Option, in whole or
in part, at such time as it is exercisable and prior to its expiration, by
giving written notice of exercise to the Secretary of the Company, specifying
the Option to be exercised and the number of Shares to be purchased, and paying
in full the exercise price in cash (including by check) or by surrender of
Shares already owned by the Participant (except for Shares acquired from the
Company by exercise of an Option or other award less than six months before the
date of surrender) having a Fair Market Value at the time of exercise equal to
the exercise price, or by a combination of cash and Shares.
7. Receipt of Shares or Deferred Shares In Lieu of Fees.
------------------------------------------------------
Each director of the Company may elect to be paid fees, in his or her capacity
as a director (including annual retainer fees for service on the Board, fees for
service on a Board committee, fees for service as chairman of a Board committee,
and any other fees paid to directors) in the form of Shares or Deferred Shares
in lieu of cash payment of such fees, if such director is eligible to do so
under Section 5 at the date any such fee is otherwise payable. If so elected,
payment of fees in the form of Shares or Deferred Shares shall be made in
accordance with this Section 7.
(a) Elections. Each director who elects to be paid fees for a given
calendar year in the form of Shares or to defer such payment of fees in the form
of Deferred Shares for such calendar year must file an irrevocable written
election with the Secretary of the Company no later than December 31 of the year
preceding such calendar year; provided, however, that any newly elected or
appointed director may file an election for any year not later than 30 days
after the date such person first became a director, and a director may file an
election for the year in which the Plan became effective not later than 30 days
after the date of effectiveness. An election by a director shall be deemed to be
continuing and therefore applicable to subsequent Plan years unless the director
revokes or changes such election by filing a new election form by the due date
for such form specified in this Section 7(a). The election must specify the
following:
(i) A percentage of fees to be received in the form of Shares or deferred
in the form of Deferred Shares under the Plan; and
(ii) In the case of a deferral, the period or periods during which
settlement of Deferred Shares will be deferred (subject to such
limitations as may be specified by counsel to the Company).
(b) Payment of Fees in the Form of Shares. At any date on which fees are
payable to a Participant who has elected to receive such fees in the form of
Shares, the Company will issue to such Participant, or to a designated third
party for the account of such Participant, a number of Shares having an
aggregate Fair Market Value at that date equal to the fees, or as nearly as
possible equal to the fees (but in no event greater than the fees), that would
have been payable at such date but for the Participant's election to receive
Shares in lieu thereof. If the Shares are to be credited to an account
maintained by the Participant and to the extent reasonably practicable without
requiring the actual issuance of fractional Shares, the Company shall cause
fractional Shares to be credited to the Participant's account. If fractional
Shares are not so credited, any part of the Participant's fees not paid in the
form of whole Shares will be payable in cash to the Participant (either paid
separately or included in a subsequent payment of fees, including a subsequent
payment of fees subject to an election under this Section 7).
(c) Deferral of Fees in the Form of Deferred Shares. The Company will
establish a deferral account for each Participant who elects to defer fees in
the form of Deferred Shares under this Section 7. At any date on which fees are
payable to a Participant who has elected to defer fees in the form of Deferred
Shares, the Company will credit such Participant's deferral account with a
number of Deferred Shares equal to the number of Shares having an aggregate Fair
Market Value at that date equal to the fees that otherwise would have been
payable at such date but for the Participant's election to defer receipt of such
fees in the form of Deferred Shares. The amount of Deferred Shares so credited
shall include fractional Shares calculated to at least three decimal places.
(d) Crediting of Dividend Equivalents. Whenever dividends are paid or
distributions are made with respect to Shares, a Participant to whom Deferred
Shares are then credited in a deferral account shall be entitled to receive, as
dividend equivalents, an amount equal in value to the amount of the dividend
paid or property distributed on a single Share multiplied by the number of
Deferred Shares (including any fractional Share) credited to his or her deferral
account as of the record date for such dividend or distribution. Such dividend
equivalents shall be credited to the Participant's deferral account as a number
of Deferred Shares determined by dividing the aggregate value of such dividend
equivalents by the Fair Market Value of a Share at the payment date of the
dividend or distribution.
(e) Settlement of Deferred Shares. The Company will settle the
Participant's deferral account by delivering to the Participant (or his or her
beneficiary) a number of Shares equal to the number of whole Deferred Shares
then credited to his or her deferral account (or a specified portion in the
event of any partial settlement), together with cash in lieu of any fractional
share remaining at a time when less than one whole Deferred Share is credited to
such deferral account. Such settlement shall be made at the time or times
specified in the Participant's election filed in accordance with Section 7(a);
provided, however, that a Participant may further defer settlement of Deferred
Shares if counsel to the Company determines that such further deferral likely
would be effective under applicable federal income tax laws and regulations.
(f) Nonforfeitability. The interest of each Participant in any fees paid in
the form of Shares or Deferred Shares (and any deferral account relating
thereto) at all times will be nonforfeitable.
8. Adjustment Provisions.
----------------------
(a) Corporate Transactions and Events. In the event any recapitalization,
reorganization, merger, consolidation, spin-off, combination, repurchase,
exchange of Shares or other securities of the Company, share split or reverse
split, extraordinary dividend (whether in the form of cash, Shares, or other
property), liquidation, dissolution, or other similar corporate transaction or
event affects the Shares such that an adjustment is appropriate in order to
prevent dilution or enlargement of each Participant's rights under the Plan,
then an adjustment shall be made, in a manner that is proportionate to the
change to the Shares and otherwise equitable, in (i) the number and kind of
Shares remaining reserved and available for issuance under Section 3, (ii) the
number and kind of Shares to be subject to each automatic grant of an Option
under Section 6, (iii) the number and kind of Shares issuable upon exercise of
outstanding Options, and/or the exercise price per Share thereof (provided that
no fractional Shares will be issued upon exercise of any Option), (iv) the kind
of Shares to be issued in lieu of fees under Section 7, and (v) the number and
kind of Shares to be issued upon settlement of Deferred Shares under Section 7.
The foregoing notwithstanding, no adjustment may be made hereunder except as
will be necessary to maintain the proportionate interest of the Participant
under the Plan and to preserve, without exceeding, the value of outstanding
Options and potential grants of Options and the value of outstanding Deferred
Shares.
(b) Insufficient Number of Shares. If at any date an insufficient number of
Shares are available under the Plan for the automatic grant of Options or the
receipt of fees in the form of Shares or deferral of fees in the form of
Deferred Shares at that date, Options will first be automatically granted
proportionately to each eligible director, to the extent Shares are then
available (provided that no fractional Shares will be issued upon exercise of
any Option) and otherwise as provided under Section 6, and then, if any Shares
remain available, fees shall be paid in the form of Shares or deferred in the
form of Deferred Shares proportionately among directors then eligible to
participate to the extent Shares are then available and otherwise as provided
under Section 7.
9. Changes to the Plan.
--------------------
The Board of Directors may amend, alter, suspend, discontinue, or terminate the
Plan or authority to grant Options or pay fees in the form of Shares or Deferred
Shares under the Plan without the consent of shareholders or Participants,
except that any amendment or alteration will be subject to the approval of the
Company's shareholders at or before the next annual meeting of shareholders for
which the record date is after the date of such Board action if such shareholder
approval is required by any applicable federal or state law or regulation or the
rules of any stock exchange or automated quotation system as then in effect, and
the Board may otherwise determine to submit other such amendments or alterations
to shareholders for approval; provided, however, that, without the consent of an
affected Participant, no such action may materially impair the rights of such
Participant with respect to any previously granted Option or any previous
payment of fees in the form of Shares or Deferred Shares.
10. General Provisions.
-------------------
(a) Agreements. Options, Deferred Shares, and any other right or obligation
under the Plan may be evidenced by agreements or other documents executed by the
Company and the Participant incorporating the terms and conditions set forth in
the Plan, together with such other terms and conditions not inconsistent with
the Plan, as the Board of Directors may from time to time approve.
(b) Compliance with Laws and Obligations. The Company will not be obligated
to issue or deliver Shares in connection with any Option, in payment of any
directors' fees, or in settlement of Deferred Shares in a transaction subject to
the registration requirements of the Securities Act of 1933, as amended, or any
other federal or state securities law, any requirement under any listing
agreement between the Company and any stock exchange or automated quotation
system, or any other law, regulation, or contractual obligation of the Company,
until the Company is satisfied that such laws, regulations, and other
obligations of the Company have been complied with in full. Certificates
representing Shares issued under the Plan will be subject to such stop-transfer
orders and other restrictions as may be applicable under such laws, regulations,
and other obligations of the Company, including any requirement that a legend or
legends be placed thereon.
(c) Limitations on Transferability. Options, Deferred Shares, and any other
right under the Plan will not be transferable by a Participant except by will or
the laws of descent and distribution (or to a designated beneficiary in the
event of a Participant's death), and will be exercisable during the lifetime of
the Participant only by such Participant or his or her guardian or legal
representative; provided, however, that Options and Deferred Shares (and rights
relating thereto) may be transferred to one or more trusts or other
beneficiaries during the lifetime of the Participant for purposes of the
Participant's estate planning or at the Participant's death, and such
transferees may exercise rights thereunder in accordance with the terms thereof,
but only if and to the extent then permitted under Rule 16b-3 and consistent
with the registration of the offer and sale of Shares related thereto on Form
S-8, Form S-3, or such other registration form of the Securities and Exchange
Commission as may then be filed and effective with respect to the Plan. The
Company may rely upon the beneficiary designation last filed in accordance with
this Section 10(c). Options, Deferred Shares, and other rights under the Plan
may not be pledged, mortgaged, hypothecated, or otherwise encumbered, and shall
not be subject to the claims of creditors of any Participant.
(d) Compliance with Rule 16b-3. It is the intent of the Company that this
Plan complies in all respects with applicable provisions of Rule 16b-3.
Accordingly, if any provision of this Plan or any agreement hereunder does not
comply with the requirements of Rule 16b-3 as then applicable to a transaction
by a Participant, such provision will be construed or deemed amended to the
extent necessary, to conform to the applicable requirements with respect to such
Participant.
(e) No Right To Continue as a Director. Nothing contained in the Plan or
any agreement hereunder will confer upon any Participant any right to continue
to serve as a director of the Company.
(f) No Shareholder Rights Conferred. Nothing contained in the Plan or any
agreement hereunder will confer upon any Participant (or any person or entity
claiming rights by or through a Participant) any rights of a shareholder of the
Company unless and until Shares are in fact issued to such Participant (or
person) or, in the case of an Option, such Option is validly exercised in
accordance with Section 6.
(g) Nonexclusivity of the Plan. Neither the adoption of the Plan by the
Board of Directors nor any submission thereof to the shareholders of the Company
for approval shall be construed as creating any limitations on the power of the
Board to adopt such other compensatory arrangements for directors as it may deem
desirable.
(h) Governing Law. The validity, construction, and effect of the Plan and
any agreement hereunder will be determined in accordance with the Delaware
Limited Liability Company Act and other laws (including those governing
contracts) of the State of Delaware, without giving effect to principles of
conflicts of laws, and applicable federal law.
11. Effective Date and Plan Termination.
------------------------------------
The Plan will be effective if, and at such time as, the Company's 2001 Share
Incentive Plan has become effective, subject to its approval by the shareholders
of the Company. Unless earlier terminated by action of the Board of Directors,
the Plan will remain in effect until such time as no Shares remain available for
issuance under the Plan and the Company and Participants have no further rights
or obligations under the Plan.
As adopted by the Board of Directors: March 21, 2001
APPENDIX C
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
OF MUNICIPAL MORTGAGE & EQUITY, LLC
I. Mission
-------
The audit committee will assist the board of directors (the "board") in
fulfilling its financial oversight responsibilities. The audit committee will
review the financial reporting process, the system of internal control, the
audit process, and the company's process for monitoring compliance with laws and
regulations. In performing its duties, the committee will maintain effective
working relationships with the board, management, and the external auditors. To
effectively perform his or her role, each committee member will obtain an
understanding of the detailed responsibilities of committee membership as well
as the company's business, operations and risks.
II. Organization
------------
A. Size - The committee shall be composed of a chairman and two members of
the board.
B. Membership
1. Members of the committee shall be independent members of the
board.
2. Members shall be appointed by the board.
3. Members shall be financially literate, as such qualification is
interpreted by the board in its business judgment, or become
financially literate within a reasonable period of time after his
or her appointment to the audit committee. At least one member
shall have a background in accounting or related financial
management expertise.
4. Members shall not be currently employed and shall not have been
employed by the Company or any of its affiliates in the three
years prior to appointment to the committee.
5. No Member shall be a partner, controlling shareholder or
executive officer of an organization that has a business
relationship with the Company, and no Member shall have a direct
business relationship with the Company, in either case, unless
such business relationship is deemed not to interfere with the
independent judgment of such Members, as determined by the board
in its business judgment.
6. No Member shall be an executive of another company where any of
the Company's executives serve on that company's compensation
committee.
7. No Member shall be the spouse, parent, child, sibling, mother
in-law, father in-law, brother in-law or sister in-law, or share
a house with a person who is or was within three years an
executive officer of the Company.
C. Term - Members shall serve on the committee for one year, subject to
annual reappointment by the full board.
D. Meetings - The committee shall meet regularly during the year, the
number and length of meetings to be determined by the committee to
be appropriate to ensure that the committee meets its objectives and
responsibilities.
III. Roles and Responsibilities of the Committee
-------------------------------------------
A. Internal Control
1. Evaluate whether management is setting the appropriate corporate
tone by communicating the importance of internal control and
ensuring that all individuals possess an understanding of their
roles and responsibilities.
2. Focus on the extent to which internal review and external
auditors evaluate computer systems and applications, the security
of such systems and applications and the contingency plan for
processing financial information in the event of a systems
breakdown.
3. Gain an understanding of whether internal control recommendations
made by internal reviews and external auditors have been
implemented by management.
4. Ensure that the external auditors keep the audit committee
informed about fraud, illegal acts, deficiencies in internal
control and other material matters.
B. Financial Reporting
1. General
a) Review significant accounting and reporting issues, including
recent professional and regulatory pronouncements, and understand
their impact on the financial statements.
b) Ask management and the external auditors about significant risks
and exposures and the plans to minimize such risks.
2. Annual financial statements
a) Review the annual financial statements and determine whether they
are complete and consistent with the information known to
committee members and assess whether the financial statements
reflect appropriate accounting principles.
b) Pay particular attention to complex and/or unusual transactions
such as restructuring charges and derivative disclosures.
c) Focus on judgmental areas such as those involving valuation of
assets and liabilities.
d) Meet with management and the external auditors to review the
financial statements and the results of the audit.
e) Consider management's handling of proposed audit adjustments
identified by the external auditors.
f) Review the MD&A and other sections of the SEC Form 10-K before
its release and consider whether the information is adequate and
consistent with members' knowledge about the company and its
operations.
g) Ensure that the external auditors communicate with the committee.
3. Interim financial statements
a) Be briefed on how management develops and summarizes quarterly
financial information, the extent to which the external auditors
review quarterly financial information and whether that review is
performed on a pre- or post-issuance basis.
b) Meet with management to review the interim financial statements.
c) To gain insight into the fairness of the interim statements and
disclosures, obtain explanations from management on whether:
1. Actual financial results for the quarter varied significantly
from budgeted or projected results.
2. Changes in financial ratios and relationships in the interim
financial statements are consistent with changes in the com-
pany's operations and financing practices.
3. Generally accepted accounting principles have been consistent-
ly applied.
4. There are any actual or proposed changes in accounting or fin-
ancial reporting practices.
5. There are any significant or unusual events or transactions.
6. The company's financial and operating controls are functioning
effectively.
7. The interim financial statements contain adequate and appro-
priate disclosures.
C. Compliance with Laws and Regulations
1. Review the effectiveness of the system for monitoring compliance
with laws and regulations and the results of management's
investigation and follow-up on any fraudulent acts or accounting
irregularities.
2. Periodically obtain updates from management and its corporate
counsel regarding compliance.
3. Be satisfied that all regulatory compliance matters have been
considered in the preparation of the financial statements.
4. Review findings of any examinations by regulatory agencies such
as the SEC.
D. Internal Review
1. Review the activities and organizational structure for the
internal monitoring and evaluation.
2. Review the effectiveness of the internal monitoring and
evaluation.
E. External Audit
1. Ensure that the external auditor is ultimately accountable to the
board and the audit committee, which have the authority and
responsibility to select, evaluate and, where appropriate,
replace the external auditor.
2. Review the external auditors' proposed scope and approach.
3. Review the performance of the external auditors and recommend to
the board the appointment or discharge of the external auditors.
4. Review and confirm the independence of the external auditors by
reviewing the non-audit services provided and the auditors'
assertion of their independence in accordance with professional
standards.
5. Ensure that the outside auditor submits on a periodic basis to
the audit committee a formal written statement delineating all
relationships between the auditor and the Company and that the
audit committee is responsible for actively engaging in a
dialogue with the outside auditor with respect to any disclosed
relationships or services that may impact the objectivity and
independence of the outside auditor and for recommending that the
board take appropriate action in response to the outside
auditor's report to satisfy itself of the outside auditor's
independence.
F. Other Responsibilities
1. Meet with the external auditors and management in separate
executive sessions to discuss any matters that the committee or
these groups believe should be discussed privately.
2. Ensure that significant findings and recommendations made by the
external auditors are received and discussed on a timely basis.
3. Review, with the Company's counsel, any legal matters that could
have a significant impact on the Company's financial statements.
4. Review the policies and procedures in effect for considering
officers' expenses and perquisites.
5. Perform other oversight functions as requested by the full board.
6. Review and assess the adequacy of the committee charter annually.
7. Update the charter as needed; receive approval of changes from
the board.
IV. Reporting Responsibilities
--------------------------
A. Regularly update the board about committee activities.
B. Make appropriate recommendations to the board.
REVOCABLE PROXY
MUNICIPAL MORTGAGE & EQUITY, LLC
COMMON
X Please Mark Votes As In This Example
Proxy for Annual Meeting of Shareholders
Thursday, June 14, 2001
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Revoking all prior proxies, the undersigned, a Shareholder of Municipal
Mortgage & Equity, LLC (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 Common 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.
Charles St., Park Charles Building, Suite 500, Baltimore, Maryland 21201, on
June 14, 2000, 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):
WILLIAM L. JEWS
DOUGLAS A. MCGREGOR
CARL W. STEARN
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 THE MUNICIPAL MORTGAGE & EQUITY, LLC 2001 SHARE
INCENTIVE PLAN as adopted and recommended by the Board of Directors.
For Against Abstain
_____ _____ _____
3. PROPOSAL TO APPROVE THE MUNICIPAL MORTGAGE & EQUITY, LLC 2001 NON-EMPLOYEE
DIRECTORS' SHARE PLAN as adopted and recommended by the Board of Directors.
For Against Abstain
_____ _____ _____
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
REVOCABLE PROXY
MUNICIPAL MORTGAGE & EQUITY, LLC
TERM GROWTH
X Please Mark Votes As In This Example
Proxy for Annual Meeting of Shareholders
Thursday, June 14, 2001
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Revoking all prior proxies, the undersigned, a Shareholder of Municipal
Mortgage & Equity, LLC (the "Company"), hereby appoints Thomas R. Hobbs, Michael
L. Falcone and Angela A. Barone, and each of them, attorneys and agents of the
undersigned, with full power of substitution, to vote all Term Growth Shares, no
par value (the "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. Charles St., Park Charles Building, Suite 500, Baltimore, Maryland 21201,
on June 14, 2001, 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):
WILLIAM S. JEWS
DOUGLAS A. MCGREGOR
CARL W. STEARN
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 THE MUNICIPAL MORTGAGE & EQUITY, LLC 2001 SHARE
INCENTIVE PLAN as adopted and recommended by the Board of Directors.
For Against Abstain
_____ _____ _____
3. PROPOSAL TO APPROVE THE MUNICIPAL MORTGAGE & EQUITY, LLC 2001 NON-EMPLOYEE
DIRECTORS' SHARE PLAN as adopted and recommended by the Board of Directors.
For Against Abstain
____ ____ _____
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 corp-
oration, 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
REVOCABLE PROXY
MUNICIPAL MORTGAGE & EQUITY, LLC
PREFERRED
X Please Mark Votes As In This Example
Proxy for Annual Meeting of Shareholders
Thursday, June 14, 2001
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Revoking all prior proxies, the undersigned, a Shareholder of Municipal
Mortgage & Equity, LLC (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 Series I Preferred
Shares, Series II Preferred Shares, Series I Preferred Capital Distribution
Shares and Series II Preferred Capital Distribution Shares, no par value (the
"Preferred 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.
Charles St., Park Charles Building, Suite 500, Baltimore, Maryland 21201, on
June 14, 2001, 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.
1. ELECTION OF DIRECTORS - NOT APPLICABLE TO PREFERRED SHAREHOLDERS.
2. PROPOSAL TO APPROVE THE MUNICIPAL MORTGAGE & EQUITY, LLC 2001 SHARE
INCENTIVE PLAN as adopted and recommended by the Board of Directors.
For Against Abstain
_____ _____ _____
3. PROPOSAL TO APPROVE THE MUNICIPAL MORTGAGE & EQUITY, LLC 2001 NON-EMPLOYEE
DIRECTORS' SHARE PLAN as adopted and recommended by the Board of Directors.
For Against Abstain
_____ _____ _____
If no choice is indicated above, this proxy shall be deemed to grant authority
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